Archive for the 'RBI' 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

Market Matrix – Repo rate cut by 100 bps

October 21, 2008

Friends,

RBI has, in a surprise move though in line of expectation, reduced the repo rate cut by 100 bps. This will affect interest rate scene in good measure and the bank would be also moderating rates on advanced for house purchase and other purposes. This is first cut since 2003.

SEBI has not taken kindly to lending and borrowing of shares for short sale out side India. He thinks that this practice not right and needs to be curbed but after further study of the matter. Stock lending in India has not taken off as was expected. He seems inclined to stop short sales by FIIs. There has to be some thing black at the bottom for market do not ordinarily behave the way they have recently.

FM gets parliamentary approval for fertilizer subsidy and for oil bonds etc of more than Rs 1.05 lac crs.

Nalco cut aluminium prices by Rs 5000/ton.

Kotak Securities says market is at near bottom.

Manmohan Singh expects that economy will be affected but would be posting higher rate of growth of 9 pc once the matters settle.

Renuka Sugar buys 67 pc stake in Gokak Sugar for Rs 69 crs. On second thoughts the sugar scrips will be good investment.

Paswan says Sail expansion will be on track. Also there is a possibility of removal of export duty on steel.

Nifty close up at 3122 and Sensex is back at over 10000 mark. The Asian markets were better today and the European markets are also doing fine. The DOW futures are better today. All in all the sentiment is improving but slowly.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Repo rate cut by 100 bps

October 20, 2008

Friends,

RBI has, in a surprise move though in line of expectation, reduced the repo rate cut by 100 bps. This will affect interest rate scene in good measure and the bank would be also moderating rates on advanced for house purchase and other purposes. This is first cut since 2003.

SEBI has not taken kindly to lending and borrowing of shares for short sale out side India. He thinks that this practice not right and needs to be curbed but after further study of the matter. Stock lending in India has not taken off as was expected. He seems inclined to stop short sales by FIIs. There has to be some thing black at the bottom for market do not ordinarily behave the way they have recently.

FM gets parliamentary approval for fertilizer subsidy and for oil bonds etc of more than Rs 1.05 lac crs.

Nalco cut aluminium prices by Rs 5000/ton.

Kotak Securities says market is at near bottom.

Manmohan Singh expects that economy will be affected but would be posting higher rate of growth of 9 pc once the matters settle.

Renuka Sugar buys 67 pc stake in Gokak Sugar for Rs 69 crs. On second thoughts the sugar scrips will be good investment.

Paswan says Sail expansion will be on track. Also there is a possibility of removal of export duty on steel.

Nifty close up at 3122 and Sensex is back at over 10000 mark. The Asian markets were better today and the European markets are also doing fine. The DOW futures are better today. All in all the sentiment is improving but slowly.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Some evidence of bear cartel at work

October 15, 2008

Friends,

The RBI has further reduced by 100 bps the CRR on top of earlier cut and this will release Rs 40000 crs in hands of banks. This will be not only making some extra buck for banks, it will spur economic activity to some extent. Not stopping here, the RBI has also allowed higher interest rate payment to FCNR and NRI accounts. There is yet more, the banks can borrow from their foreign branches up to 50 pc of tier-I capital. All this would have real good effect in all the markets in India, may be after some time gap.

Since these announcements came after the market hours, the Nifty could not make up the losses and has closed with a fall of 180 points at 3338. The US markets at the moment, are displaying weakness in line with Asia and Europe. What to make of such moves in unison is difficult. The only thing that comes to mind is the possible fact that the fire fighting is more focused than having the comparative study of markets and the individual companies. Let us see if the US govt shows any ace that is still up its sleeves.

The farm waiver related Rs 25000 crs also would be released by RBI to the banking institutions. The corporate bonds investment limit also goes up to 6 billion dollars from 3 billion dollars. If there is discomfort in holding equities here, now there is room for the corporate bonds purchase for the FII.

These will see easing of call rate, bond values going up and rupee becoming stronger.

The size of liquidity infusion is no less, it is already going to be Rs 1.5 lac crs extra circulating. I think there should be some very welcome effect down the line.

The results so far have been just OK, neither down or up too much. It has been the business as usual for the Indian corporates while much has been out to be the case of down turn. Is it the same as the euphoria of Dec 2007 and the climb down of Jan 2008 , only its direction may be different. The oil is down to around 75 dollars/bbl. It was oil and the commodity related inflation which made markets look expensive. Now when there the possibility of both hurting is less we have markets ruling low. The interest and liquidity also have been favourable lately but to no avail.

I have atleast found some evidence of bear cartel at work in making business channels blabbering about the impending crisis in Indian economy but without building up logic. Only the voice doom-sayers is made to be heard, when companies are talked no figures relating to their sales, profits and the realisation are discussed. Only the possibilities are spoken that too in a chosen way. When ICICI Bank cried foul it was not without substance.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – RBI has acted on an emergency basis to cut CRR

October 10, 2008

Friends,

This is the first time probably that the RBI has acted on an emergency basis and has declared the lowering of the CRR cut by 150 basis points realising the situation. This will release a sum of Rs 60000 crs in to system. Now it is expected that RBI will not be relenting at a time to do further such acts. The cumulative impact of the monetary and fiscal measures taken by the central banks and particularly by RBI will be great. The only required thing is to instruct or advice the banks to buy stocks to the extent they have the permission. I think they have permission to go up to 5% of the deposits with them. This will be huge help to faltering markets and would be profit generators for the banks. Some body has to say enough is enough.

What I have wondered all this while is that when there is counter party risk in lending, there is no such risk in going for the value representing equities. There is no fear of losing capital and still having scope of getting returns by way of dividends and appreciation. The wonderful thing about the markets falling by a great margin is the fact that the asset values cover the down side risk and the productive assets represent the capacity to generate profits in bulk when the opportunity comes. The opportunity will have to come if the future capacity creation plans are not abandoned. In a growing economy like India’s this is great fortune in the making for the commodity players and others. The Sensex dropped close to 1000 points in early hour of trading and now at 10700 points (Nifty at 3350). These are levels which were visited yesterday too. Grit and patience should pay off. Those who have long term investment horizon have nothing to fear. The Asian markets have covered some ground back. They had very bad losses in the aftermath of DOWs very poor performance last day.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market