Archive for the 'Indian Stock Market' Category

Market Matrix – India saw one of the worst market downfall

October 24, 2008

Friends,

RBI has not met expectations of markets and India saw one of the worst downfalls and Nifty closed down 359 at 2520 points. There was no further release of money into market by RBI while it was observed by RBI that Indian economy is on track. The other markets did not help either, after weak Asia and weak European advices the US markets have also tumbled down today. While there is no limit to up side down side should have some limit. How in the world would one sell assets worth much more, far cheaper, just because these assets happen to be marketable ie represented by equity shares.

I find govt lacking in its duty today, back in eighties and early nineties, the govt used to direct the institutions to come for support of market, when ever there was undue pressure. Mr Pherwani of UTI used to be called big bull. He had contributed a lot to the development of capital markets. Such directives from govt are missing today.

Govt should direct banks to pick up good quality stocks without hitch. Any enlargement of crisis will make matters worse for all finance sector entities. One reassuring sign is that there is no payment crisis in markets. The banks are doing business as usual and this is a great thing.

I was surprised last year at all asset classes going up simutaneously and deducted that the world would face some crisis. Today reverse is happening while all asset classes are going down. This may be due to the rewinding action and may be this would make world healthy again. Why should all this happen, is some thing that should be found an answer for. I maintain that the supply and contraction of money in hands of central banks is the cause of it.

In India, so far, the credit off take is normal, banks are lending. The crude is further down to 64 dollar/bbl, the inflation number in coming down and only gradually, the infrastructure funding is increasing.

There hasn’t been redemption of mutual funds on an alarming scale. FIIs have sold just Rs 1450 crs worth of equities today and under what design they are selling it so cheap is again a question. While picking stocks they were seen to be doing thorough home work and why while selling no home work is being done.

The cash rich companies should have announced their ‘buy back shares’ plan. They should have done it in hoards, a few have done to. Isn’t it just proper for every good management to postpone the expansion plans and utilise cash for the share buy back. This will reward the shareholder very handsomely. But it is not being done because may be the smart management are happy for the falling markets and would pick stock for themseleves at these prices.

If only the right things were done by right people at the right time,the world would be much more prosperous. Since this does not happen, the reverse is that some in position are out to profit at the cost of general public. It is a relief that India’s 80 pc population is still in traditional style exchanges and not entangled with the new age trading style.

The fall without a matching event taking place is surprising enough. How will the truth come out?. Since the abnormal times were in every body’s knowledge, the excessive trading is not there in any case to warrant such falls.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

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Market Matrix – Fall of US market by 36 pc and UK market by 39 pc over the year

October 20, 2008

Friends,

In the aftermath of the second week of bad performance by all world markets, there is loss of thinking power to some extent for the logic is being defied by the fear psychosis in the thinking space of mind. Let us recount some of the facts of the day.

The UP govt has declared SAP (state advised price) for sugar cane for this season as 140 rupees/qtl (up Rs 15). This should be digestible rate for the mills because the sugar rates this season are pretty high and would remain so because the sugarcane production this year is going to be only 120 m/t against 160 m/t in previous year. The unorganised sector is already offering price of cane purchase nearly at the level of SAP or more. There are 132 sugar mills in UP which were operational last year. There will be fierce fighting amongst some of the leading ones to have greater share of cane-crop although there are some rules specifying the area for each mill. The industry would be back in black, and there is no doubt. You should buy your sugar scrip before its too late (please refer to my earlier posts).

Those involved in the accident seem to be hurt less than the bystanders otherwise how would one justify fall of US market by 36 pc and UK market by 39 pc over the year while Japan losing 48 pc and emerging Asian markets losing close to 55 pc. The reverse is going to happen, today or tomorrow. Asian stock will out perform the other markets. I told you earlier and say it again with supporting numbers.

Asian markets performed poorly (26 pc) over the last week while the UK and US markets went up by 3 pc and 4 pc. Shouldn’t therefore markets in India be better this week after losing more than 50 pc from peak. The RBI will have a formal occasion to bring back cheap money policy because loss of jobs and lower economic activity are worse than some extra dose of inflation. As I have been telling time and again, it is utmost necessary to let unearned incomes go down in value but the earned income can not be given a worse treatment. The pensioners too can only share, in whatever proportion, when there is going to be production. The whole economic tension the world over is on account of this factor. Those who follow this site would recall that this analogy was put forth long back and is finding endorsement all this while.

Asian markets have been mixed this morning, may be India performs with some strong opinion favouring bulls.

The latest week did confirm that value buying is emerging as BSE Bankex went up by 4 pc and FMCG,Healthcare and Realty did not lose any further ground in the week gone by.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Angle of value in shares quoting low

October 14, 2008

Friends,

There is some change in the scene today, at least for India. Nifty is trading at 3430 and Nifty futures command premium of 40 points. I am happy to have put forth the angle of value in shares quoting low. If overseas (European) advices show positive movement and the effect is carried forward to USA, there can, perhaps, be an equal and opposite action in market against what happened last last week. The gloom will further disappear with the results of companies that would be coming out in a flood in about a week.

There were some people making hey while the sun was under the cloud last week, I mean the acts of bear cartel at spreading rumours. ICICI Bank was targeted by some entities related with Motilal Oswal Group. It has been clarified that it was doing of some individuals but many a names are being spoilt in this way. In fact people lending ears to rumours should be blamed more for they put life in to rumour. The ICICI Bank has even gone to the extent of filing a police complaint.

It may be that there is overplaying of the tune of disaster and something is being orchestrated by some groups. It is for this reason that at the end of such big drops the further trading happens to be at higher levels even if the bearish times continue. In present case I perceive no weakness of the sort that is being made out for the Indian corporate sector. I would dread only the nose diving of the profitability continuing in to loss making over a year or two. If there is slight drop in earnings and no other technical threat to a company of the type that its technology is getting obsolete,its products are going out of fashion and use or there is rot in management, there should be not much worry.

This however is true when the prices are at low point already. When the stocks sell for fancy prices and at high PE discounting level I do not consider it wise to stay for a minute. Those who care to read my posts in Oct 07 and later would see it as statement of fact and not just a claim after the event.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – There is some change in the scene today

October 13, 2008

Friends,

There is some change in the scene today, at least for India. The Nifty is trading at 3430 and Nifty futures command premium of 40 points. I am happy to have put forth the angle of value in shares quoting low. If overseas (European) advices show positive movement and the effect is carried forward to USA, there can, perhaps, be an equal and opposite action in market against what happened last last week. The gloom will further disappear with the results of companies that would be coming out in a flood in about a week.

There were some people making hey while the sun was under the cloud last week, I mean the acts of bear cartel at spreading rumours. ICICI Bank was targeted by some entities related with Motilal Oswal Group. It has been clarified that it was doing of some individuals but many a names are being spoilt in this way. In fact people lending years to rumours should be blamed more for they put life in to rumour.The ICICI Bank has even gone to the extent of filing a police complaint.

It may be that the overplaying of the tune of disaster tune is being orchestrated by some groups. It is for this reason that at the end of such big drops the further trading happens to be at higher levels even if the bearish times continue. In present case I perceive no weakness of the sort that is being made out for the Indian corporate sector. I would dread only the nose diving of the profitability continue in to loss making over a year or two. If there is slight drop in earnings and no other technical threat to a company of the type that its technology is getting obsolete, its products are going out of fashion and use or there is rot in management.
This however is true when the prices are at low point already. When the stocks sell for fancy prices and high PE discounting level I do not consider it wise to stay for a minute. Those who care to read my posts in Oct 07 and later would see it as statement of fact and not just a claim after the event.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – May be there is some method in madness

October 7, 2008

Friends,

The t/o at NSE was at a low point for the fortnight at Rs 47 K crs (derivative) and Rs 10 K crs (cash). FIIs have pulled out Rs 39 K crs from market during 2008 so far. The FII t/o is on the higher side, meaning thereby that they have greater comparative share in trading volumes for the day. At a time of lower rates its implication is much greater. May be there is some method in madness.

Surprisingly, when the liquidity crunch is talked about the call rates have come down to 11 pc from high of 15 pc. Not only this the 1 year govt paper yield is now way lower at 8.10 pc. The negative rate of return for the purchaser of the dated security is now higher as the inflation is no less than 12 pc. A very stark situation is reflecting today ie there is no pocket where you could have positive returns, be it commodity futures, bullion, stocks, property or debt. Last year I had expressed my surprise at all asset classes moving up together and was certain that some tsunami type of situation will be faced by the world. I think it was due to last ditch attempt by the trapped investment bankers of US who hoped that rising prises will bring forward buyers. The reverse happened, it brought seller as usually happens. The situation is just the reverse today. All asset classes are losing values. This will not bring in new sellers but will bring in buyer. The best asset class in today’s times would be, at least in India, to go for equity investment. It is any easy asset to hold, has productive use of assets, is immune to inflationary damage and gives post tax returns by way of dividend and capital gains. It has historically given best of returns too. Its cyclical behaviour makes making fortunes easy, if the entry is at low point, which is the case here. Its owner ship does not require any expenditure, its liquid enough asset and does not require redeployment of funds on maturity as is the case with debt instruments. The risk between debt and equity is only one step ahead or behind. When there is corporate failure.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market