Archive for the 'India' Category

Market Matrix – Right level for Nifty is somewhere between 4100 and 4500

October 28, 2008


Wish you all a very very happy Diwali and growth of what you invest in today’s ‘Moorat Hours’ at bourses.

The world’s indices are trying to regain a new respective real parity in terms of strengths they have with foreseeable future in sight, all in the aftermath of, US created and largely confined to US, financial crisis (partnered by those smaller economies of the west which sought expansion in overly internationalised economy of US). The rest of the world is also facing problems but more account of the loss of benefit that they were drawing form US markets and less on account of financial break-down. They are having to sigh more just in sympathy as they do not want to be seen drawing comfort out of the US and western losses. While their comfort is related to that only and is an ugly fact. The crude is an essential item to ensure continued growth of emerging market economies particularly India and China. These countries have all other advantages but less of oil. The most important advantage is large local market (more perfectly developed in India than in China). The requirement of a big unified market brought the European nations together who in fact don’t see eye to eye, in the most matters.

If deeply analyse, it turns out that in the near future times the China which integrated its economy with US in a large measure, will face some grave crisis. It may be that nothing comes out in terms of doctored statistics but the Shanghai Index is telling it all. The DOW is confused and goes up and down in an directionless manner as if there are some things known to few but unknown to the most. Those who are in the know may have to correct their view and those who would come to know may have to take fresh view of things. Did it not happen that the facts have taken a whole 12 months and more to come out and get assessed. What would have been discounted much earlier is still bothering and that is the reason I think the whole bundle of facts is yet to unfold. Either way, the US will have to face times of lesser advantage and will have to put up with lesser share of consumption of worlds riches. The high value of dollar is making China richer due to high dollar reserves with it but its edge will be lost, the US will import less and try and develop its real economy with lesser stress on financial industry which is pass-time of rich only. India on the other hand is seeing the turmoil in market because it is more integrated there but none of the severe ill effect any where is felt. The crude price drop is a real shot in arm. The recession will be taken care of by increased govt spending. Our PM confirmed it on Chinese soil saying that what we have done by way of govt spending without revenue is OK by Keynesian remedy in such times. Very much so but his team should make the markets go way up otherwise how else the seed (risk capital) will be raised for the fresh projects.

I have recounted only recently the strengths India carries viz a viz other economies of the world, I would skip it here.

There is a spate of good news, if only good news would start having positive effect. I recounted the possibilities about Nifty and related matters. The SEBI has, in fact in a surprise move, allowed the promoters to keep acquiring in open market up to five percent equity in one year till it reaches the 75 pc ceiling. This will not even trigger a public offer requirement. A reasonable announcement in good time. SEBI is initiating a probe into markets’ odd behaviour on 24th and 27th Oct. Power Minister said that global slump would not affect capacity creation of around 90000 MW by end of eleventh plan. A lay out of Rs 10 lac crs will be required and debt /equity ratio will be 70:30.

Porsche has bought nearly all free-stocks of VW and the stock vaulted up by 98 pc. Honda has upped production of fuel efficient cars. Electrolux AB has beaten estimated profit figures. FED chief may push overnight rate to zero (when borrowers have trouble and the lenders have danger of loosing capital, what better alternative can be found than making interest zero). US house prices are lower by twenty pc from peak and foreclosures are growing. This is not a very bad thing to happen unless accompanied by some other oblique arrangements between the involved entities. In any case the end to trouble shouldn’t be far. There are signs of thawing out in banking sphere. The rates paid by banks for borrowing are only half of what the most intense moments of panic saw them offer. The rescue package has been put to practice, banks have had money flowing it to US.

Those who follow this site would recall me having said in Oct 07 that the then Nifty level was wrong at 5500 and should have been at 4100, earlier when it was 1000 in 2002 I had estimated its value at 1700. In the same way I have reason to say that the right level for Nifty is somewhere between 4100 and 4500.

I commit myself rather too early but how can you not speak what you see or perceive. Also if you are not from the first ones to give a glimpse in to future, what are you of worth!

The learned should excuse me but my readers are of all ages and of all backgrounds. I have to some times repeat the points, say it in a different manner. Yet more is thrown into my writings because I want to give a piece of old history and record new history.

Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Strength of India at present time

October 17, 2008


The markets in last 48 hrs have demonstrated that there would be no more movements in a similar way all over the world markets. There has been some weakness displayed in some like Russia and Japan particularly. Indian and US markets have displayed some strength. The European markets and rest of Asia have shown somewhat lesser degree of strength. I love India but it’s not out of this love that I say it would be performing best in the next two to three foreseeable years. This may continue till about a decade from now but who would venture to say this in the present day mercurial behaviour in all sections and sectors of economy around the world.

The reasons for what I said above are easy to see:

-Indian demographic make up is just right at the moment.

-Indian saving practices are ingrained.

-Indians have conservative outlook but the entrepreneurs here have flare,experience,wisdom and courage besides having organisational expertise.

-India has a large pool of managers and technicians who are better trained now and many of them have exposure to international practices.

-Indians are docile and moderate in behaviour. Some politically motivated undisciplined behaviour is noticed but that is a window for venting out the feelings as otherwise the suppression of the same would have far worse implications.

-Every political party , more or less, adopts a middle of the road approach in respect of economic policies and there is no serious difference in foreign policy approach.

-The democracy has become far deep rooted and the change of govt happens as matter routine.

-Nehru model of mixed economy has not been given a good-bye entirely and is some how maintaining a better balance while the entirely free economy of US has exposed its weaker links and USSR’s demise proved the fallacy of communism. China’s case is different, may be its sitting on some kind of political volcano.

-India has a reasonably sized domestic market and gives it a kind of stability that is a dream for smaller economies.

-The design and engineering talent here has proved that any product is possible to be indeginously produced.

-Our cost-effectiveness is now an established factor.

-Indian industry has shown to withstand the threat of so-called mass produced and cheap items from China. It has only expanded the market which is now more suitably being catered by local producers.

-Natural resources abound and the arable land is sufficient to take care of food needs.

-There is yet not fully tapped potential of harnessing cheap and clean power through hydro-power projects. Europe has done it beautifully and India has to emulate.

-Our weather conditions are such that there no need hold back productive activities, the year round.

-The economies of scale are such the any mass-transportation project is possible to be undertaken. Our density of population leaves us with need for far lower road network per capita outlay which is already a proven fact. On such strength only our railways offer cheapest fares.

-We are not too deeply in to consumerism and do not splurge on goodies out of borrowed funds.

-We have a possibility that the Indian sub-continent becomes a unified market like EU.

-Education is going to be universal in coming years.

-A large work force is added every year which is also expanding market for goods and services.

-Indian society is pretty stable on account of family orientation.

-India has weathered many a crises in the past and has come winner out of every crisis.

-Indian households have always have had the wisdom to keep enough of gold for emergency needs. Indians have also shown wisdom of not buying bullion at very high prices and even sold it when there has been a unreasonable manipulation (like when Hunt Bros created a speculative buble in 1979-80).

The present turbulence in markets is only a temporary phenomenon. The serious investors should have no reason to keep cash. There are some other ratios that have also to be kept in mind:

-The PE and BV ratio of Indian markes are almost under 12 and under 3 and historicaaly happen to be safe at this level.

-The real rate of interest is negative in respect of govt securities and therefore is positive for equity markets. 10 yr paper yield is just 7.7 pc and inflation is 11.44 for the latest week.

-The pressure on markets is due mainly to FII selling, it is more to do with their problem than the problems of Indian industry.

-The high crude prices are bad for India as it has to import more than 70 pc of its requirement but luckily its price post crisis in west is very nominal at 70 dollar/bbl. This is the cost of production for some of the world producers.

-The govt and RBI are easing the money supply and interest have been lowered else where in the world and would be lower here too. The previous bull run happened after the rates were lowered.

-The govt is going to raise FDI investment limit Insurance sector and would be taking such other reformist steps.

-NRIs would be more than happy to look towards India as the Western banks have given them gift of nightmarish times Chinese (non-residents) also had poured in inumerable dollars into China which made China progress faster.

-Infrastructure can not be ignored by any govt.

-The Indians take to virtual world like fish take to water also Indians have advantage of learning English.

-The average of Indians is increasing along with decreasing death rate and birth rate.

-The rural youth gets exposure through TV and willingly adopts modern methods of farming.

-India has moved beyond worrying for foods horticultural initiative has supplemented food availability.

-India is rightly placed on globe and has vast coast lines which enable it access markets of west and east with ease.

-Its in such a time zone that it can easily become hub of trading in future beginning the day with Japan’s late hours and ending the day with USA’s early hours.

-Cheap labour and cheap managerial talent keep it one of the most competitive places for business and industry.

-India has good international relations and is moving forward to ease tensions with neighbours.

-RBI hold forex reserves of over 260 billion after meeting demand of dollars for oil purchase and investment repatriation. India has blemish free record of meeting international obligations.

-India is exporting ever larger variety of goods and services and has also shown greater ability to value-add on imported raw-material and components.

-India is endowed with coal reserves and iron ore reserves and other mineral reserves.

-India has enough scope with solar,wind,bio,hydro,coal and atom based harnessing of energy.

-India also has embarked on program of commercial forestry.

-It has ability to produce all types of machinery and capital goods including ships and aeroplanes.

-India has world class space technology.

-Indian entertainment and tourist industry has an unlimited potential.

-India cares for intellectual property rights and has rule of law.

-India telecom network is on par with the best in the world.

-Indian road network is fast catching up and the Airports have already become modern.

-Indian bourses are well organised and with proper regulation as also its banking system.

-Ours is an ancient civilisation and we imbibe values automatically.

-Let’s not forget a dollar for 49 rupees is such a rate which benefits exporters enormously while shelters domestic industry from competition by other nations. Did China not achieve by keeping its currency pegged at lower exchange value, the other nations cribbed about it also were enjoying cheaply available goods from China (now they are having to pay for the cheap lunch). Ours is not manipulated exchange rate and hence will be without adverse out come.

Please let me know of the unlisted strengths which I have missed out to make it comprehensive list. You are also invited to point out the negative factors which I have either not found or considered some of them unworthy of mention. However, the delivery of justice is routinely delayed, the land holdings are small, the health services are insufficient and corruption is rampant. If these shortcomings are removed along with the terrorism, I think India would acquire a status which will be envied by one and all.

Would you not hail such an India.

Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

World Matrix – Advantage India

October 11, 2008


The US President announced last day from the public platform and in no uncertain terms that the financial crisis will be set right, come what may. He meant to convey that the govt is besieged of the problem and has planned to take comprehensive action along with the G7 nations and also under consultation with G20 (India included). The G7 finance ministers have arrived in US, our FM has dropped plan to go there.

We have had trouble on our bourses due to portfolio investments by FIIs who have just one thing in mind and that is to get whatever they can for the stocks held as the need to meet obligation at home is over-riding (you may recall my warnings at the peaking market time last year that the FIIs exit is not normally done, it is done in a rush). When the exit is without evaluation of the item being sold, the panic naturally sets in. The settlements going smoothly in such scenario is for some to praise and the withstanding of the such windy times by the Indian banking and financial universe is going to make it a more preferred centre of financial exchange.

You may also recall that the shadow of the crisis was there last year itself and I had reported it while also admitting that the extent and the timing is difficult to judge. However, I maintain that troubling times in west will eventually have no bearing on India and if at all some thing happens it is going to be accelerating economic development of India and more particularly its being a nation worthy of absorbing the world’s saving surpluses which found no ‘safe parking places’ in developed nations of the world. The forced parking of such funds by the investment bankers is the root cause of trouble. When it will be analysed as to who got hurt the most, it will be noticed that while the investment banks got out of business and equity holders of the same institutions got nothing for their share-holding in some cases and got some pittance for the transfer of equity to the bailing out entity (govts included). The group suffering the most would be the ones who placed their money for management to these investment bankers who would get what ever is salvaged after making the borrowers (mortgage holders) some concessions and after suffering the loss on transfer of investment to new buyer (at current lower rates) after the market is established by the injection of funds by central bankers. These owners of funds under management kitty of the investment banker belonged to savers (the savings for future consumption). Such times came for the world order and did not allow the savers of yesteryear to have claim on future production of goods and services to the extent expected/desired or planned for (remember the adage ‘Laxmi is Chanchalaa’ ie riches are nimble footed). The greed to not only preserve value for the future consumption but also to grow it more on the strength of high interest albeit at high cost had to and did boomerang. The investment bankers created faulty atmosphere of optimism and all in the interest of earning hefty commission and fees by promising to increase wealth through sheer foolhardy and speculation.

The other cross current was that the world represented by two big ancient nations ie China and India had woken up to have their rightful share in world’s mineral wealth and and retaining their own for self use by increasing productivity of labour and capital and through benefits flowing on account of size of market domestically. Isn’t India ready to be the hub of export of vehicle of every size and use in a span of fifteen years. It is the result of optimum level of production achievable here. This advantage is not going to go away and would increase so the slow down fears are basically un-founded in India. However, China may go with some years of adjustments and pains due to the need to organise the markets more based on natural exchanges and make them more free. There is only a muted resentment for its controlled exchange regime which will be openly decried by USA and the rest. We Indians have therefore an edge over every body else. The shot in arm has come in the form if the Nuke freedom is used for peaceful uses. There is an immense scope for absorption of world’s saving as every unit of capital invested here in infrastructure projects (like railways, roadways, air-ports, dams, power projects,sea terminals and the tourist sites related) at nominal rate of interest (not high) which will be generating surplus to be shared by all the stake-holders. It is for this reason that FDI has not slowed down even in face of such crises, the world over. Indian markets for the goods and services are not going to shrink due to millions in villages. It is going to form the buyers’ universe as opposed to city centres based demand. There may be a slow down like in 1998 and 2001 but it will only be for creating some gap for breathing after running at high pitch. This would not be bad for a marathon running spree.

Now, visualise that the sellers in markets were coming perforce and were selling willy-nilly while the buyer was coming reluctantly due to the atmosphere confusing him. Has there ever been such a grand opportunity for making an entry. Haven’t you wondered that more than the real decline in earnings it is possibility of slower growth that is weighing heavily on minds of people. Further, the crisis at hand of the world economies has created an atmosphere of sudden impulsive growth due to increase in money stock. As the normalcy will return, the case of too much money chasing too few goods and investibles will follow suit. Again I would say that the inflation in India is working as friend of investor not otherwise. The welcome gesture finally to happen is the lowering of bench-mark interest rates by RBI. Didn’t you read earlier that increasing money supply is easiest of task for the govts, it is taxing every pocket without having to collect it effort fully. When this is may save economies why would they think twice, no body is going to blame them for this for it will be for a noble cause.

Now, one thing is clear that we have to have central bank of the world and a world currency which should have some controlled issuance and which should be currency for international trade and local currencies may have there own conversion rates under guidance from the local central bank. Why do we need to base international trade in currencies of countries who have fragile financial systems themselves.

Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Have a good night sleep today

October 9, 2008


Emerging out of the cabinet meeting yesterday our FM said firmly that while India may suffer due to the world crisis, there is no dearth of instruments with RBI which may be used to do the necessary to impart required liquidity. There would be no shying away from the responsible proactive formulation of the financial policy.

He went to length of recounting the statistical numbers in the same breath. He said our banks have capital adequate ratios between 10 to 13.65 pc, well above the Basel norms. The indirect tax collections are over the target and growing by over 14 pc, the September custom collections are higher than average of Apr-Aug. Direct tax front shows personal income tax collections have grown by 23.4 pc and corporates have contributed 35.3 pc more, he added. The GDP numbers have not suffered too much loss of growth so far. The export performance is up 35.1 pc in apr-aug and the imports have kept pace at +37.7 pc. Railways have carried +9.4 pc revenue earning traffic. Liquidity is coming from many quarters. He has meant all is well here, the panic is misplaced. I think it may be by design of some in some ways.

The bear has had an edge but has not found opportunity to get out of his positions at profits so far, he will be a bigger bull by compulsion than the bull community.

Last day’s losses of US markets have been recovered in DOW Futures, Heng Seng has added 500 points to yesterday figure, the Nikkei was the biggest loser yesterday but today remains flattish, Kospi is up only slightly and Shanghai is confused in narrow range but Straits is straight up by 62 points while Taiwan is losing ground. We will have keenly watch the Euro zone performance today. The shallowness of trading in India should be making it oscillate in wider but positive territory.

The much awaited N-deal has been signed by Bush with fanfare, not out of love for India so much as out of necessity for the ailing US economy. If any thing, pseudoism is the main policy plank of America. Let us be magnanimous in our attitude after all the mantle will have to be borne by India eventually for at least the middle,south and far east Asia.

Would you now have a good night sleep today!

Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Debt to GDP ratio in India and US & Europe

October 7, 2008


The debt to GDP ration in USA,UK and European countries is in high range of 200 to 250 pc while in India it is just 60 pc. This makes us pretty immune to the crisis of similar nature that Western countries are facing. Further, the mortgage related debt to GDP is between 80 to 100 pc in USA and Europe while in India it is pretty less. this also is going to keep India from facing a similar crisis.

This is a kind of de-link which will keep India in good state. Another point in favour India is the increasing give and take between cities and rural areas. The companies are readily planning forays with the rural areas in mind.

Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market