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November 5, 2008

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Market Matrix – Prevent markets from free fall in times of crisis

October 30, 2008


The beauty of the market is in its being free. The stock markets are supposed to be left free and here the flow of information is also supposed to be unhindered and made available to all. There are still some impediments in the free flow of information due to some technical difficulties and some obstructions deliberately put in place by the interested.

What ever the case be the markets should be left without intervention but is there a need to control the markets when prices tend to hugely deviate from the seemingly normal price for the day?

In my opinion the intervention by govt should never be by any such rule. There is ,however, an implied obligation on the part of govt to see that the market does not attack the price levels beyond the reasonable level in a short time. It is necessary from the point of view of not letting any body unduly suffer just because market condition coincides with ones requirement of withdrawing cash. It is also necessary from the angle of not making the risk capital pooling to difficult or too costly. The participants would account for higher risk in the pricing if such times come about in markets or may come. This is a cost best saved by having some mechanism by which the absurd pricing on the up or down side is prevented. If an economy can reduce the risk element in risk capital due to abnormal conditions, it will be a great economic service to the nation at far lower cost than by any other means. I think these should be the only purposes and none else while the govt does something to stabilise the market. I repeat that intervention in free trading by rules will be negative.

How can it be done? In India it is very easy to do. The state owned banks should have some pocket where they have stocks and funds ready for use in terms of their researcher’s advice. The second is that RBI can have sovereign fund allowed to be funded in times of such need by RBI’s large kitty at the shortest notice while its stocks related economic researchers should be updating the applicable action plan on a regular basis.

There is a further need of having a board which may order entry into market when need arises. Top secrecy should be maintained about the intended size of fund deployed for the purpose . It should best be done by wide speed buying rather than in a concentrated fashion.

Another point that would save the markets is that there should be no funding by the banks for share purchase. The risk capital should be from out of only the owned funds and not borrowed funds. On private basis people may do whatever. In fact promoters also should not be funded on the strength of share holding in their own companies, neither the shares should be accepted as security for other advances. This will bring a balance and put a premium on the shares. The present day world crisis is due to faulty home mortgages, what would have happened had there been large scale lending backed by stocks. Since there always is necessary liquidity available one should meet his short term need selling stocks and buying back when the funds are spare.

The leverage obtained in market in ‘F and O’ section is not based on financing by institutions and is mostly private arrangement through the mechanism and hence it is Okay. The lending and borrowing of shares for sale etc should also be restricted
to individuals and direct owners like corporates and not be done by institutions who are not direct owners of shares like MFs and other such entities.

In fact leverage is mostly a tool in the hands of organised cartels in markets who try and take advantage by manipulation. There scheming goes to the extent of either perishing themselves or perishing those on the other side.

The US Fed has reduced rate by 50 bps with assurance that more will be done if required. It was a unanimous decision.The US market has not reacted up as it was already a known thing. However, the Asian stocks have shown good jumps as every passing day the stability is returning. The interest rate cut is the best medicine for ailing stocks, it works at many levels about which I have explained earlier. With rate cut here, our economy can enter in fast lane overnight but the RBI always wants to be seen as an elephant taking turns slowly while if Indian economy has to be tiger like the RBI will behave in a tiger like fashion. I despise Reddy’s raising of CRR and had raised alarm then itself. If he had been slightly imaginative India would have maintained its edge on the world scene. The present chief should at least see the light of the day.

These outpourings may seem scholarly but in fact are just for the purpose of giving back ground idea to the young.

Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Nifty and Sensex lost 33 pc in Oct 08 series

October 29, 2008


The Oct 08 series has closed today in a quiet manner but the losses seen by it are enormous. Market turnover is good for the day at Rs 69000 cr. The loss in a single month have been between 20 to 70 pc even for the leading corporates some of which by the way posted the best ever quarterly profits. The Nifty and Sensex lost 33 pc in Oct 08 series.

Unitech has arranged to sell 60 pc stake in its wireless business arm to Telenor through further issue of capital for Rs 6120 crs and will see debt of Rs 1900 cr paid back by the subsidiary.

US Fed is likely to cut rate by 50 bps and probably will follow up with another 50 bps later.

BoJ would consider cutting rate in its next Friday meeting.

China has cut rates by 27 bps on both ie deposits and advances.

SBI says it is receiving Rs 1000 crs a day as deposits for last 10 days.

Auto loan growth is 6 pc against 12 pc last year.

The European markets are trading higher but DAX is an exception.

Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Those who follow ‘panch-tattva’ will not get into wrong situations

October 29, 2008


The US markets were up last day by not less than 10 pc. DOW is now back at over 9000 and NASDAQ at 1650. These seem to be very respectable figures. The Asian have a the second day follow up rise today. All markets have become very firm. The Diwali session last day was a rewarding one for those who relied on ‘panch-tattva’. I am lucky to have critics who rubbish what I say but they are people who put me on right course. I am pleased in no small measure about the correctness of my various writings. What may have come to you as surprise, was seen by me as writing on the wall. I pray to you that don’t ever listen to a view which can not be substantiate with numbers,history and logic and most of all it should not defy the theory of proportions.

That there was a calculated move by some is some thing sure and their campaign was responsible for the gyrations in the Indian markets specially. SEBI may cry foul after the horse has bolted but it was simply discernible. If high and mighty are involved, it will just be that all is possible.

The ADRs have been up by more than 20 pc. Sensex and Nifty would create history today, I think so because it happens to be last day of settlement under ‘F and O’ section. Remember the line I gave you yesterday that the markets were wrong at 5500 Nifty in Oct 07 against right level of 4100 and also that markets are wrong at under 3000 while they should between 4100 to 4500.

Now, would you not like to be on the long side of market. Here I may give you a warning that please follow ‘panch-tattva’ recommendations for entry, exit and maintenance. In times when the moves are fast and unpredictable, those who follow ‘panch-tattva’ will not get into wrong situations. I may tell you again that its based on purely scientific study of every aspect governing the stock prices and economy. It has capacity to clearly see the manipulation in market.

Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market


October 28, 2008

BHARATFORG @ 95 (271008) gets 1046 pancha-tattva points and may be bought for long term.

ADANIENT @ 299 (271008) gets 841 pancha-tattva points and consider it after next qly.

KSOILS @ 39 (271008) gets 975 pancha-tattva points and should be bought in few strokes, book partial profits on surges.

BIRDINFO Stock Rx – A prescription for stock market