"GETTING MARRIED TO A MARKET OUTLOOK ENDS IN A BAD DIVORCE"
# WORLD MARKET
> U.S. MARKET
DOW : +142 NASDAQ : +28
> ASIAN MARKET (AT 8 AM)
NIKKEI : +230 HANG SENG : +350 SANGHAI : +10
# ADRS (POSITIVE) : INFOSYS, SATYAM, WIPRO, TELCO, HDFC
# ADRS (NEGATIVE) : ICICI, MTNL, PATNI
POINTS TO WATCH FOR TODAY'S TRADING
# U.S. MKT. SHOWED SMART RECOVERY.
# ASINA MKT. IN GREEN
# CRUDE AFTER TOUCHING 91 $/BBL, NOW RISING
# FII SELL FIGURE AND DII BUY FIGURE
# SGX NIFTY 4160-4200. UP BY 76 POINTS.
# FED KEEPS RATES UNCHANGED.
# RBI STARTED STEPS FOR INCREASING LIQUIDITY.
# TODAY'S STRATEGY :
> U.S. MKT. SHOWED A SMART RECOVERY. VARIOUS STEPS TO SAVE "AIG" ARE TAKEN.
> CRUDE SHARPLY DOWN TO 91 $/BBL & NOW SHOWING UP MOVE.
> LOCALLY THE FUND OF ICICI BANK AT LEHMAN BROTHERS HAS CREATED THE PROBLEM AND RUMORS OF SELLER CIRCUIT YESTERDAY. ICICI BANK CLARIFY IT IS ONLY 0.1% OF THE ASSETS.
> CURRENCY MARKET 46.91/95 RS. IS THE STRONG RES. FOR RS. IT MAY RISE AGAINST $
# APPRECIATE LOCAL DII. AND THE FUND THEY ARE HAVING. IF THEY WOULD NOT HAVE TAKEN STEPS FOR BUYING, SURELY SELLER CIRCUIT PLAN WAS THERE.
> I TOLD TO BUY DELV. STOCKS SINCE LAST TWO DAYS. IF YOU HAVE BOUGHT NOW START BOOKING PROFIT IN STEP. I ALSO TOLD TO BUY 4400 CALL WHICH WAS AVAILABLE AT 6/7 RS. AND WENT UP TO RS. 12 AT CLOSING.
> NO OVER NIGHT POSITION. NO TRADING
> I HAVE BEEN WRITING CONTINUOUSLY THAT DO NOT RELAY ON SGX NIFTY. SEE YESTERDAY SGX NIFTY MADE LOW OF 3882 AND OUR LOCAL NIFTY FUT. MADE LOW OF 3930
Market may open up. Market may up between 11.45 and 12.10 Market may steady or up side between 12.47 and 13.09. Market may close at up to previous closing.
SHARE YOUR THOUGHTS! LEAVE A COMMENTS
Opening Bell Call
Buy
RELIANCE - Reliance Industries Ltd
LUPIN - Lupin Limited
SBIN - State Bank of India
BANKBARODA - Bank of Baroda
RPL - Reliance Petroleum Limited
NTPC - NTPC Limited
On 16th September 2008 - The BSE Sensex closed at 13518 (down 12 points) while the NSE Nifty closed at 4074 (up 2 points).
Opening Bell Call
Sell
ACC - ACC Limited
BHARTIARTL - Bharti Airtel Limited
CARBORUNIV - Carborundum Universal Ltd
ZEEL - Zee Entertainment Enterprises Ltd
LIQUIDBEES - Benchmark Asset Management Company Private Limited
Technical Analysis for 17th September 2008
BSE-SENSEX - Major Support - 13375, 13284, 13194, 13032, 12870, 12617, 12365
BSE-SENSEX - Major Resistance - 13537, 13699, 13789, 13880, 14132, 14385, 14537
NSE-NIFTY - Major Support - 4027, 3996, 3965, 3911, 3856, 3771, 3685, 3600
NSE-NIFTY - Major Resistance - 4082, 4136, 4167, 4198, 4284, 4369, 4455, 4540
IIFL - glenmark 596, IDFC 78, Sep 16 2008
Prabhdas Liladher - MintStreet- 15-Sep-08
Angel - Lanco Infratech - Trgt 413, Sep 12 2008
Goldman Sachs on Satyam 15 09 08
Hi ,
Have updated two new videos on http://nooreshvideo.blogspot.com
1) Sensex -- 14100 to 13100 - Head and Shoulders
2) Reliance Inds - 2000 to 1850 and 1800-1850 to 2040 + probably.
Put in your comments and pass it on if you like it.
Sensex Technical View :
Head and Shoulders pattern achieves target and gives a good bounce yet again from the 13100 zone. Sensex made a low of 13050 in opening bell but covered up all losses by end of the day. Now there is a gap left at 13660-13930 which should ideally get filled. Resistance on upsides are placed at 14100/14400 above the gap zone. As suggested about support around 13100 some traders would have taken index and stock specific longs which one should start booking partially arnd 13900 and above to conserve and lock gains.
Market Observations :
Crude at 90 . !!! Waah now every analyst/street chap etc will be boasting of talking about a fall. Well every trader in the world knew that crude could not stay around 150 for a long time !! ... But it was clearly mentioned that its a long term topping out formation and a big fall to come with updates on every level . Wont be surprised if we hear reports of 75 !! ... Technically 85 is the next important zone ...
Stocks to watchout for :
Reliance makes a low near 1800 , RPL a low of 140 exactly at the levels suggested and bouncec back sharply . Investors those who have bought around 1800-1850 and 140 can take some profits out around 1980-2040 and 153-155 which would be 8-10 % bounce and then hold rest as investment and make provision to add more on dips.
IFCI looks good for investment at 40 levels with a long term view . Investors can continue to add on dips.
As advised investors would have taken positions of around 30-50 % should now look for booking partial profits at 15-25 % gains to lock and conserve gains and be able to add more on dips.
the FED has not given its descision as i m writing this, so mostly the opening would depend upon FED's descision.
the technical levels for the day are - support exists at 4065 breaking tht, we may see 4015-3994.
crossing 4099, nifty will hit 4172 before any further downfall.closing below 4015 will be weak
Nifty :: We clearly mention in yesterday post. Avoid selling at lower level. Intraday chart looking extremely in oversold condition. And a result Nifty last candle made Long Legged Doji, Thrusting line bullish pattern at support. But at higher side too many resistances is there, that’s why avoid buying at higher level, Momentum turns strong only above 4241, Strong support zone (4110 to 4150) also works as strong resistance zone in upward move. Our strategy for 17th Sep. Buy only at deep (S.L 4022) Sell at high (S.L 4241).. Resistance for up move at 4126/4131/4165/4200/4241.. Supports at 4062/4022 /3971/3942/3930….
The Indian market opened on weak note but sharply bounces from lower levels and saw short covering at the last trading session and indices close near to days high. For coming session if nifty trade above 4100 we can test 4160-4193 levels On the lower side 3930 will act as support zone .The markets in India are undoubtedly out-performing the rest, especially in the emerging markets. The US financial sector turmoil making the global equities to accept the carry forward effect falls in tune with that effect. The tails spin movement of the equities eroding the trader’s net worth by triggering the stop losses. The likely wood of the bail out of Merrill Lynch in US has eaten away the BOA capitalization and no takers for Lehman Brothers are a serious concern to the global markets.
If we start recollecting the series of happing right from the first signs of Sub-prime issue surfaced in July-aug-07, the investment Gurus like Buffet has warned the serious consequences of the Sub-prime as it is was compared with a sleeping volcano.
Back to home the out look for the BPO & software services has become bleak to dark. The opportunity may arise only after April-June-09. The Investment in reality sector will be badly affected as the fund inflow will be drastically reduced.
The only hope that can survive our markets is the self sufficient infra development investments from the Govt and a little bit support from the ADB loan and World Bank. The promising sectors for at these crises are Power including the Nuclear power, Pharma & CRAMS and the ever green FMCG. The falling rupee can save our export oriented cotton, ready-mades and the tea sector.
Never Forget: I may be wrong, You may be wrong but markets always RIGHT.
If we start recollecting the series of happing right from the first signs of Sub-prime issue surfaced in July-aug-07, the investment Gurus like Buffet has warned the serious consequences of the Sub-prime as it is was compared with a sleeping volcano.
Back to home the out look for the BPO & software services has become bleak to dark. The opportunity may arise only after April-June-09. The Investment in reality sector will be badly affected as the fund inflow will be drastically reduced.
The only hope that can survive our markets is the self sufficient infra development investments from the Govt and a little bit support from the ADB loan and World Bank. The promising sectors for at these crises are Power including the Nuclear power, Pharma & CRAMS and the ever green FMCG. The falling rupee can save our export oriented cotton, ready-mades and the tea sector.
Never Forget: I may be wrong, You may be wrong but markets always RIGHT.
Use it learn & Learn to make money and convey the same to others.
1. State Bank of India can be bought for short term target of Rs 1599 andif stock crossed the level of Rs 1601, than the stock has a final target of Rs Rs 1720.2. State Bank of India stock has to maintain above the levels of Rs 1554 and one can see a sustained move in the stock.
Attached above is the daily chart of Nifty with the Relative Strength Index (RSI) at the bottom. As seen from the chart, the Nifty has displayed a large head and shoulders pattern formed over a period of almost two months. This bearish head and shoulders pattern gives us a target of 3800 on the charts and it is quite possible that we may achieve that. Looking at the candles formed over the last two days. Both these candles have long lower shadows and today’s candle was a doji with a very long lower shadow. This should be bullish for the market in the short term. And, technically too, in all patterns which witness a breakout, on a number of occasions there are pullbacks. In this head and shoulders breakout too, we may see a pullback which means that the prices may retrace back to 4200 or nearabouts before continuing on their way to 3800.
A few days back I received, on my blog, a comment from Krishnamurthy, who said that he is short in Nifty since 4500 levels because he believed that Nifty had completed the 2nd wave zig zag and that had started the 3rd wave down. Krishnamurthy once sent me an e-book on Elliott Waves and gave me a couple of helpful tips. While I am a novice in Elliott Waves, Krishnamurthy has done a lot of research on it. Krishna, if you are reading this may I please invite you to contribute on my blog from time to time so that not only me, but all my readers too may benefit from your analysis. Please send in your articles to me by e-mail and I’ll post them on to the blog.
First of all I would like to apologise to my readers for not being able to post my comments on the markets yesterday. Though, I love writing and sharing my technical views with my readers, but there are days when I have meetings with clients in the evening and sometimes over dinner and those days it becomes difficult for me to post my views. Anyways, I am back today.
Saturday evening, Delhi was rocked by serial bomb blasts. By opening on Monday morning there was news that Lehman Brothers had filed for bankruptcy and that Merrill Lynch was being sold out to Bank of America. The US government confirmed today that Lehman Brothers would not be bailed out. Insurance giant, American International Group (AIG), has asked the Fed for a loan of $40 billion and it is uncertain as yet whether it would help or not. With such news floating around in the market, the markets were bound to go down and the trading range between 4200-4650 was finally broken, but on the downside.
As of today, the London FTSE closed 120 points down losing 2.3%, the German DAX lost 1.12% while the French CAC was virtually unaffected losing only 0.81%. The Asian markets were much worse today (Tuesday) with the Hong Kong Hang Seng losing 5.44%, the Japanese Nikkei 4.95%, the Shanghai index 4.47% and the Korean Kospi losing 4.6%. Compared to them, the feat which the Nifty accomplished was mind boggling. After losing more than 153 points at one point during the day, the Nifty still managed to close in the green, albeit only 2 points.
Saturday evening, Delhi was rocked by serial bomb blasts. By opening on Monday morning there was news that Lehman Brothers had filed for bankruptcy and that Merrill Lynch was being sold out to Bank of America. The US government confirmed today that Lehman Brothers would not be bailed out. Insurance giant, American International Group (AIG), has asked the Fed for a loan of $40 billion and it is uncertain as yet whether it would help or not. With such news floating around in the market, the markets were bound to go down and the trading range between 4200-4650 was finally broken, but on the downside.
As of today, the London FTSE closed 120 points down losing 2.3%, the German DAX lost 1.12% while the French CAC was virtually unaffected losing only 0.81%. The Asian markets were much worse today (Tuesday) with the Hong Kong Hang Seng losing 5.44%, the Japanese Nikkei 4.95%, the Shanghai index 4.47% and the Korean Kospi losing 4.6%. Compared to them, the feat which the Nifty accomplished was mind boggling. After losing more than 153 points at one point during the day, the Nifty still managed to close in the green, albeit only 2 points.
Attached above is the daily chart of Nifty with the Relative Strength Index (RSI) at the bottom. As seen from the chart, the Nifty has displayed a large head and shoulders pattern formed over a period of almost two months. This bearish head and shoulders pattern gives us a target of 3800 on the charts and it is quite possible that we may achieve that. Looking at the candles formed over the last two days. Both these candles have long lower shadows and today’s candle was a doji with a very long lower shadow. This should be bullish for the market in the short term. And, technically too, in all patterns which witness a breakout, on a number of occasions there are pullbacks. In this head and shoulders breakout too, we may see a pullback which means that the prices may retrace back to 4200 or nearabouts before continuing on their way to 3800.A few days back I received, on my blog, a comment from Krishnamurthy, who said that he is short in Nifty since 4500 levels because he believed that Nifty had completed the 2nd wave zig zag and that had started the 3rd wave down. Krishnamurthy once sent me an e-book on Elliott Waves and gave me a couple of helpful tips. While I am a novice in Elliott Waves, Krishnamurthy has done a lot of research on it. Krishna, if you are reading this may I please invite you to contribute on my blog from time to time so that not only me, but all my readers too may benefit from your analysis. Please send in your articles to me by e-mail and I’ll post them on to the blog.
Lehman Brothers is no more. Merrill Lynch has gone down the Bank of America maw. AIG too could go belly up. With a doubt, these developments in America are the most shocking events to have hit global financial markets. So where did it all begin? And what does it mean for the Indian stock markets? Find out. . .
What is (or was) Lehman Brothers?
America's fourth-largest investment bank Lehman Brothers Holdings Inc has filed the biggest bankruptcy petition known to mankind.
The 158-year-old firm was founded by brothers Henry, Emanuel and Mayer Lehman, Jewish immigrants to the US from Germany, in 1850. Henry set up a general store in Alabama in 1844 and was later joined by his brothers. In 1850 they set up the merchant bank in New York after having made money in railway bonds. So what went wrong?
Lehman Bros, which till June 2008 had not reported a quarterly loss even once, had earlier survived many an economic crises, like railroad bankruptcies of the 1800s, the Great Depression in the 1930s, and the collapse of Long-Term Capital Management in the 1990s.
Thus the collapse of the giant investment bank came as a major shock for the entire world markets that plunged after Lehman filed a Chapter 11 petition with US Bankruptcy Court in Manhattan.
The $613 billion (some estimates put the size at $639 billion) bankruptcy thus throws up the question: why did the Wall Street giant go bust? Here's why. . .
Why did Lehman Brothers go bankrupt?
The giant investment bank succumbed to the sub-prime mortgage crisis that has rocked the United States and the global economy. Lehman was strangled by a massive credit crisis and fast plummeting real estate prices.
The gargantuan $60 billion loss in bad real estate loans forced the bank to file for bankruptcy.
However, the fall of the 158-year-year institution that started cotton trade in US before the American Civil War and financed the railroad that built a nation, got hit by a large dose of bad luck, pride, arrogance and greed. Primarily, the pride of its chief executive office Richard Fuld.
But there were more reason. Check out what they were. . .
Lehman's collapse was also triggered by the refusal of other banks to do business with it because of its complex and, at times, opaque ways of trading. Housing loans made by the bank to people with little support made these loans very risky, and when interest rates rose, these borrowers could no more repay Lehman. This led to huge losses, the extent of which is not yet clear.
Thus other banks stopped trading with Lehman. This led to it losing almost all business and triggered its fall.
The final straw for Lehman was the fact that both Barclays Plc of the United Kingdom and Bank of America Corp pulled out of takeover talks. BofA bought out Merrill Lynch for $50 billion.
However, Barclays has now said that it is in discussions with Lehman Brothers about buying certain assets of the stricken US investment bank.
"Barclays confirms that it is discussing with Lehman Brothers the possible acquisition of certain Lehman Brothers assets on terms that would be attractive to Barclay's shareholders," Britain's third largest bank said in a statement.
When other banks do not want to buy Lehman, why is Barclays interested?
Barclays wanted to buy Lehman out at a discount, so to speak. But when Lehman CEO Fuld decided that his bank was worth much more than what Barclays had apparently offered, Barclays stepped back.
Now that Lehman has filed for bankruptcy, its assets are available fairly cheap. However, the biggest problem is to take on Lehman's enormous liabilities.
How far is the CEO of the company responsible for Lehman's fall?
Wall Street analysts believe that it was the 'hubris' of Richard Fuld, the 62-year-old CEO of Lehman, who did not take the telltale signs of impending doom very seriously. Fuld, nicknamed The Gorilla for his foul temper, intimidating presence and tough talk, rejected many bids to save Lehman because he thought that the sinking giant was much bigger than Wall Street was giving it credit for, and wanted to get more price for the sale of the company.
Analysts say if the bank was sold just a week before it went kaput, it could have been saved the ignominy of a bankruptcy, but Fuld was far too adamant to see reason. Result: the end of a 158-year-old financial giant.
Could the United States government helped, like it helped Bear Stearns in May this year, and Fannie Mae and Freddie Mac earlier this month?
The US government could have helped, but US Treasury Secretary Henry Paulson said that it would not use up any more taxpayer dollars to bail out Lehman Brothers as it would lead to investment banks getting away with their gambling ways. Paulson had bailed out Fannie Mae, Freddie Mac and Bear Stearns, saying that if the government had not done so, the US housing loan market would have collapsed leading to gigantic losses for hundreds of banks all over the globe that have invested in US property.
Paulson, however, believes that a brokerage major like Lehman, which does not have a direct connection with ordinary people who have taken on home loans, need not be bailed out as it would not cause any systemic damage to the US economy.
Will everyone in Lehman lose their jobs?
The bankruptcy administrators, PricewaterhouseCoopers, feels that as Lehman's operations were essentially centralized at New York, the folding up of the investment banker in the US will have a telling impact on all its operations globally.
Over 5,000 employees in the UK have already lost their jobs, while about 20,000 in the US might as well forget going back to their work stations. About 2,500 Lehman employees in India too face the axe.
Will the whole bank be liquidated?
Unlikely, at least for now. The US Chapter 11 that deals with bankruptcy says that PwC, the administrators, can go about taking its time to find good offers and buyers for Lehman's 'least affected businesses.'
The entire exercise can take months before all of Lehman's assets are sold, given the complexities linked to the bankruptcy.
What about the Bank of America and Merrill Lynch deal?
Merrill Lynch's buy out by Bank of America is also a shocking development. ML, saw the writing on the wall once it guessed that Lehman was going bust, and decided to sell out before it actually has to file a bankruptcy petition..
What about the insurance giant AIG?
The world's largest insurer, American International Group, has been downgraded by credit rating agencies and is racing against time to find a multi billion dollar infusion to stay afloat. US Federal Reserve officials and two leading banks, JPMorgan Chase and Goldman Sachs, were negotiating to put together $75 billion package to save the insurance giant to stave off crisis.
AIG has sought $40 billion in bridge loan to stave off the crisis. But the Fed rebuffed the request. AIG's ills came to fore, when three leading credit rating agencies - Standard and Poor's Moody's and Fitch - lowered the company's credit scores.
Who could be the next to fall?
Some Wall Street analysts, reports The Guardian, name Washington Mutual as the next financial major to 'find itself in serious trouble.'
However, the even bigger worry is whether the world's largest securities firms, Goldman Sachs and Morgan Stanley, would be able to survive this brutal financial crisis. But many say that these two gaints will not melt down as they have 'done a better job of spreading their bets across world markets and are also more diversified, less leveraged and have managed such risks much better.'
What do Indian markets fear?
The fall of two global financial behemoths -- Lehman Brothers and Merrill Lynch -- is expected to dent India Inc's ability to raise resources via the equity route.
Experts feel that such events significantly increase the risk perception, which in turn will put all future investments by institutional investors such as pension or endowment funds, on the back burner.
While the public issue market has already dried up, the private equity funds are also becoming conservative in terms of pricing. This is resulting in either inordinate delays in concluding deals or transactions being called off.
There are many instances of private equity fund managers refusing to go ahead with deals after signing the term sheet. Sources said that a leading fund conducted due diligence on two companies in the last fortnight but did not close either deal primarily because of the developments in the US, their home country.
The crisis faced by Merrill Lynch and Lehman Brothers is expected to have a cascading effect on PE firms too.
Will it hit the Indian growth story?
The ongoing financial sector crisis in the United States and its repercussions on developed markets worldwide will result in lower capital inflows into emerging markets like India, economists and government officials said today.
At the same time, they called for the government to make it easier for Indian companies to borrow overseas by easing the restrictions that have been imposed in the past to reduce excessive liquidity in the system and control inflation.
This will, in turn, lead to a slowing in investment growth in the months ahead. As lending gets tighter and investment flows dry, corporate India will find it more difficult to raise both equity and debt.
Technology firms are shivering
Lehman Brothers' bankruptcy filing may well prove to be the last straw for Indian IT firms, which were expecting the second half of FY09 to be better. As a result of the US financial market crisis, analysts do not expect Indian IT firms to sign any significant contracts in the banking, financial services and insurance (BFSI) space in the months to come.
While IT firms do not disclose client-specific details, it's estimated that Lehman Brothers has outsourced deals amounting to anywhere between Rs 550 crore and Rs 700 crore (annually) to numerous IT firms, including majors like Tata Consultancy Services, Satyam Computer Services and Wipro. Lehman Brothers, say sources, works with 14 services providers in India - Wipro and TCS being the largest. It also has investments in a few IT firms. It's not clear if these holdings will be liquidated to raise funds.
Moreover, the sources add that Lehman Brothers' unit in India has issued termination letters to a majority of its 2,500 employees.
What kind of investment does Lehman have in India?
Lehman does not have direct large holding in the Indian stock markets. These holdings are estimated at around $200 million, including Participatory Notes. This figure is not enough to cripple the Indian stock markets.
But Lehman has exposure to the Indian stock market through special purpose vehicles. This exposure to real estate stocks is said to be of about $1.5 billion, enough to shake up the markets.
0542 hrs: AIG provided a 85 Billion dollars loan, Fed keeps the interest rate unchanged, US ends in green - Dow +1.3%, Nasdaq up 1.28% and S&P up 1.75%. So a strong possibility of green opening as had written yesterday.
2249 hrs: The US markets oscillating around the flat line waiting for the Fed decision to cut or maintain the Rates.
2102 hrs: I believe there is opportunity hiding in every nook and corner. But the problem is that it is we who fail to see it. I too am a culprit on this account -- I see the charts, I see their magic, I do not have the guts to take cognizance and then I spend time in repentance. Well, I believe, that is the part of the game.
Just to keep my minds off these crazy markets I am trying to read about the markets, and one of the books that I've picked up has wonderful interesting notes and quotations. Today, before I go ahead, I would like to quote a few of these quotations-
" no matter what information you have, no matter what you're doing, you can be wrong"
" sellers of greed and buyers of fear -- the contrarians mantra: sell what the crowd wants to buy and buy what the crowd shuns."
"insanity is doing the same thing over and over while expecting different results."
So, if you are wise enough now after reading the above let us start with today's analyses. before I talk about the markets in proper I would like to share some information about Lehman Bros. When Lehman Bros filed for bankruptcy on Monday, it became the latest but surely not the last victim of sub-prime mortgage collapse. Lehmon owned more than $ 600 billion in assets. Financial institutions around the world have already reported more than half a trillion USD worth of mortgage related losses, and that figure will most likely double or triple before the crisis itself gets exhausted. But there is a bigger potential failure lurking in the background -- the American International group, the insurance giant. It poses a much larger threat to the financial systems than Lehman Bros ever did, because it plays an integral role in several key markets: credit derivatives, mortgages, corporate loans and hedge funds. There is a substantial possibility that American International group, will not be able to meet its obligations and will also be forced into liquidation. A side-effect - its collapse would be as close to an extinction level event as the financial markets have ever seen since the great depression. AIG does business with virtually every financial institution in the world. Nobody knows this market size for real. Who owes what to whom, or from whom -- this is so because there is no central clearing house or a regulator for it. So, the exact effect that it will have on stock markets will only be known once this hits the fan.
The Asia was expected to be weak, and it came as no surprise when Asia opened well into red and thereafter showed no signs of recovery whatsoever. Nikkei finely ended 4.95% down, Hang Seng 5.44% down and straight times 1.01% down. As far as the day is concerned we out performed these markets. The nifty begin its journey from 4072 -- dropping till mid-afternoon to 3919 and finally closing two points in Green at 4090. what a run-up it had. More about it later. Europe too opened in red and has now traded almost the entire day to the closing in red. In fact, dropping a wee bit. FTSE is about to close and is trading 2.32% in red. DAX as trading 1.12% down. Cac is trading 0.82% in red. Considering what we now know about AIG, it was no surprise when US opened red. However, with some reassurance coming from the government for AIG, the stocks recovered and in fact, briefly went green. It is not yet midsession in US and there is a strong possibility that finally they end in green.
On our candlesticks -- are charts are looking exciting for a number of reasons. Firstly, the Bollinger bands have been violated on the lower side and there is a Doji on the candles. It is a dragonfly Doji. it spells a strong reversal to the black candles that we have been having for last five days now. So expect a session, where we bounce back, and cover some of our losses in the recent times. The volumes to were a shade higher than yesterday. On MACD the gloom remains with the red line below the blue line, and divergences increasing. Slow stochastic, the Red Line has crossed above the blue line and is well poised to cross the 20 marker, giving a buy signal. The TRIX is looking down, falling below one marker. The mass index too does not look good, with the line now touching 25 marker. The RSI has stopped dropping, and now runs parallel to 30 marker - not really encouraging. All in all we have two bullish indicators, and all the rest indicators are beer-ish or at the maximum neutral.
The crude oil is at USD 92.51 a barrel. Taking help of the global indications that I hope to be positive tomorrow, the crude oil price and the few bullish indicators that we have - I feel that we should open green and recover some of the losses that we have been having at last few days. I am at the moment, neither bearish now bullish. Because, though the indications are bearish -- I'm a bull at heart
Lehman brothers has filed for Chapter 11 bankruptcy after Barclays and Bank of America abandoned talks to buy the company. Following the news, the IT space felt a fair bit of pressure. With Lehman Brothers filing for bankruptcy and Bank of America taking over Merrill Lynch; the key question would be - do these companies have significant exposure to the Banking, Financial Services and Insurance (BFSI) space and what would be the impact?
Lehman Brothers, which has filed for bankruptcy, seems to have very little outsourcing done as of now and the exposure remains with Wipro and Tata Consultancy Services (TCS). Wipro has given a statement that Lehman Brothers is not such a significant client and they are not worried about it. Extrapolating what Wipro has said, TCS may not see much of the impact.
But one needs to watch out for what happens with Merrill Lynch because Merrill Lynch was a significant client for both Satyam and TCS. The one which is going to suffer from Merrill Lynch’s takeover is going to be Satyam because it was a significant top client for them. Where TCS gains over Satyam is it has in relationship with the acquiring company Bank of America, which gets more outsourced work. Infosys and Bank of America have a very steady relationship. So Infosys maybe one of the gainers.
S Mahalingam, CFO, TCS has said that the company has a very steady-state relationship with both Merrill Lynch and Bank of America. So he is expecting no impact coming from this part of work at least.
HCL Technologies has done a little bit of work for Lehman Brothers but the management has clarified that it is over and they are not going to be impacted by it. EDS does a lot of work for Bank of America globally. So one needs to wait and watch of what kind of shape this takes and whether any work pours down to Mphasis.
When one puts all of this together, there is some loss but given that most of our top five companies have over 40-45% exposure to BFSI space, then mood is worried and concerned right now. Everybody is calling their relationship manager and trying to figure out what is happening officially because normally there is a two-three months' time, by when the impact actually flows down to the offshoring vendors.
It is learnt from the previous sessions that Market goes by the structure and not by sentiment, especially at important turning points. Positive news of NSG waiver on Monday not only succeeded in creating a Double Top at 15107
From 15107 on Monday, the action retraced the 6-day move from 14002 to 15107 (“e” leg) within 4 days. Such a faster retracement is indicating completion of “e” segment.We know that “A faster retracement to ‘e’ would finish off the extracting structure as an ‘Extracting Triangle’ & If it doesn’t, then ‘f’ and ‘g’ legs moving in an up-down fashion would complete it as a ‘Diametric Whether the final structure for the bear market rally post-12514 completed as a 5-legged "Extracting Triangle", or will ultimately complete as a 7-legged “Diametric” is, however, not clear. If it is already complete as an Extracting Triangle at 15107, then the bear market rally is over, and journey below 12514 has begun. though this bear market rally (which, on one higher degree, was labeled as “b” of 2nd corrective) has now consumed exactly equal time compared to the previous fall (“a” of 2nd corrective) if “a” is measured from 17054, it is still time-wise lesser if we measure the “a” leg from 17735. Protracted Diametric could be a way to consume more time within “b”.the neckline joining 13727 and 14002, with the structure post-12514 appearing like a Head and Shoulders formation.
A strong break below 14K breaks the neckline of this traditional formation. However, since H&S is a “commonly known” pattern, its implications may be possible but doubtful.Prior to this bear current rally, “x” completed at a “failure” point of 17054. The “a” of second corrective completed at a low of 12514, exactly within our targeted downside between 12316 and 12671.
The current bear market rally would be the “b” leg of the second corrective, which I said, can occur despite the fact that the market remains open for a protracted bear phase as per the 8-year cycle. As per the Wave logic, corrective phases should consume more time than the wave getting corrected. Corrective phase consuming lesser time is allowed only in Triangle / Terminal / Diametric, which are exceptions to virtually all rules. In our case, it would indicate 2nd corrective (post-17054) developing as an Extracting Triangle or Diametric.
What is (or was) Lehman Brothers?
America's fourth-largest investment bank Lehman Brothers Holdings Inc has filed the biggest bankruptcy petition known to mankind.
The 158-year-old firm was founded by brothers Henry, Emanuel and Mayer Lehman, Jewish immigrants to the US from Germany, in 1850. Henry set up a general store in Alabama in 1844 and was later joined by his brothers. In 1850 they set up the merchant bank in New York after having made money in railway bonds. So what went wrong?
Lehman Bros, which till June 2008 had not reported a quarterly loss even once, had earlier survived many an economic crises, like railroad bankruptcies of the 1800s, the Great Depression in the 1930s, and the collapse of Long-Term Capital Management in the 1990s.
Thus the collapse of the giant investment bank came as a major shock for the entire world markets that plunged after Lehman filed a Chapter 11 petition with US Bankruptcy Court in Manhattan.
The $613 billion (some estimates put the size at $639 billion) bankruptcy thus throws up the question: why did the Wall Street giant go bust? Here's why. . .
Why did Lehman Brothers go bankrupt?
The giant investment bank succumbed to the sub-prime mortgage crisis that has rocked the United States and the global economy. Lehman was strangled by a massive credit crisis and fast plummeting real estate prices.
The gargantuan $60 billion loss in bad real estate loans forced the bank to file for bankruptcy.
However, the fall of the 158-year-year institution that started cotton trade in US before the American Civil War and financed the railroad that built a nation, got hit by a large dose of bad luck, pride, arrogance and greed. Primarily, the pride of its chief executive office Richard Fuld.
But there were more reason. Check out what they were. . .
Lehman's collapse was also triggered by the refusal of other banks to do business with it because of its complex and, at times, opaque ways of trading. Housing loans made by the bank to people with little support made these loans very risky, and when interest rates rose, these borrowers could no more repay Lehman. This led to huge losses, the extent of which is not yet clear.
Thus other banks stopped trading with Lehman. This led to it losing almost all business and triggered its fall.
The final straw for Lehman was the fact that both Barclays Plc of the United Kingdom and Bank of America Corp pulled out of takeover talks. BofA bought out Merrill Lynch for $50 billion.
However, Barclays has now said that it is in discussions with Lehman Brothers about buying certain assets of the stricken US investment bank.
"Barclays confirms that it is discussing with Lehman Brothers the possible acquisition of certain Lehman Brothers assets on terms that would be attractive to Barclay's shareholders," Britain's third largest bank said in a statement.
When other banks do not want to buy Lehman, why is Barclays interested?
Barclays wanted to buy Lehman out at a discount, so to speak. But when Lehman CEO Fuld decided that his bank was worth much more than what Barclays had apparently offered, Barclays stepped back.
Now that Lehman has filed for bankruptcy, its assets are available fairly cheap. However, the biggest problem is to take on Lehman's enormous liabilities.
How far is the CEO of the company responsible for Lehman's fall?
Wall Street analysts believe that it was the 'hubris' of Richard Fuld, the 62-year-old CEO of Lehman, who did not take the telltale signs of impending doom very seriously. Fuld, nicknamed The Gorilla for his foul temper, intimidating presence and tough talk, rejected many bids to save Lehman because he thought that the sinking giant was much bigger than Wall Street was giving it credit for, and wanted to get more price for the sale of the company.
Analysts say if the bank was sold just a week before it went kaput, it could have been saved the ignominy of a bankruptcy, but Fuld was far too adamant to see reason. Result: the end of a 158-year-old financial giant.
Could the United States government helped, like it helped Bear Stearns in May this year, and Fannie Mae and Freddie Mac earlier this month?
The US government could have helped, but US Treasury Secretary Henry Paulson said that it would not use up any more taxpayer dollars to bail out Lehman Brothers as it would lead to investment banks getting away with their gambling ways. Paulson had bailed out Fannie Mae, Freddie Mac and Bear Stearns, saying that if the government had not done so, the US housing loan market would have collapsed leading to gigantic losses for hundreds of banks all over the globe that have invested in US property.
Paulson, however, believes that a brokerage major like Lehman, which does not have a direct connection with ordinary people who have taken on home loans, need not be bailed out as it would not cause any systemic damage to the US economy.
Will everyone in Lehman lose their jobs?
The bankruptcy administrators, PricewaterhouseCoopers, feels that as Lehman's operations were essentially centralized at New York, the folding up of the investment banker in the US will have a telling impact on all its operations globally.
Over 5,000 employees in the UK have already lost their jobs, while about 20,000 in the US might as well forget going back to their work stations. About 2,500 Lehman employees in India too face the axe.
Will the whole bank be liquidated?
Unlikely, at least for now. The US Chapter 11 that deals with bankruptcy says that PwC, the administrators, can go about taking its time to find good offers and buyers for Lehman's 'least affected businesses.'
The entire exercise can take months before all of Lehman's assets are sold, given the complexities linked to the bankruptcy.
What about the Bank of America and Merrill Lynch deal?
Merrill Lynch's buy out by Bank of America is also a shocking development. ML, saw the writing on the wall once it guessed that Lehman was going bust, and decided to sell out before it actually has to file a bankruptcy petition..
What about the insurance giant AIG?
The world's largest insurer, American International Group, has been downgraded by credit rating agencies and is racing against time to find a multi billion dollar infusion to stay afloat. US Federal Reserve officials and two leading banks, JPMorgan Chase and Goldman Sachs, were negotiating to put together $75 billion package to save the insurance giant to stave off crisis.
AIG has sought $40 billion in bridge loan to stave off the crisis. But the Fed rebuffed the request. AIG's ills came to fore, when three leading credit rating agencies - Standard and Poor's Moody's and Fitch - lowered the company's credit scores.
Who could be the next to fall?
Some Wall Street analysts, reports The Guardian, name Washington Mutual as the next financial major to 'find itself in serious trouble.'
However, the even bigger worry is whether the world's largest securities firms, Goldman Sachs and Morgan Stanley, would be able to survive this brutal financial crisis. But many say that these two gaints will not melt down as they have 'done a better job of spreading their bets across world markets and are also more diversified, less leveraged and have managed such risks much better.'
What do Indian markets fear?
The fall of two global financial behemoths -- Lehman Brothers and Merrill Lynch -- is expected to dent India Inc's ability to raise resources via the equity route.
Experts feel that such events significantly increase the risk perception, which in turn will put all future investments by institutional investors such as pension or endowment funds, on the back burner.
While the public issue market has already dried up, the private equity funds are also becoming conservative in terms of pricing. This is resulting in either inordinate delays in concluding deals or transactions being called off.
There are many instances of private equity fund managers refusing to go ahead with deals after signing the term sheet. Sources said that a leading fund conducted due diligence on two companies in the last fortnight but did not close either deal primarily because of the developments in the US, their home country.
The crisis faced by Merrill Lynch and Lehman Brothers is expected to have a cascading effect on PE firms too.
Will it hit the Indian growth story?
The ongoing financial sector crisis in the United States and its repercussions on developed markets worldwide will result in lower capital inflows into emerging markets like India, economists and government officials said today.
At the same time, they called for the government to make it easier for Indian companies to borrow overseas by easing the restrictions that have been imposed in the past to reduce excessive liquidity in the system and control inflation.
This will, in turn, lead to a slowing in investment growth in the months ahead. As lending gets tighter and investment flows dry, corporate India will find it more difficult to raise both equity and debt.
Technology firms are shivering
Lehman Brothers' bankruptcy filing may well prove to be the last straw for Indian IT firms, which were expecting the second half of FY09 to be better. As a result of the US financial market crisis, analysts do not expect Indian IT firms to sign any significant contracts in the banking, financial services and insurance (BFSI) space in the months to come.
While IT firms do not disclose client-specific details, it's estimated that Lehman Brothers has outsourced deals amounting to anywhere between Rs 550 crore and Rs 700 crore (annually) to numerous IT firms, including majors like Tata Consultancy Services, Satyam Computer Services and Wipro. Lehman Brothers, say sources, works with 14 services providers in India - Wipro and TCS being the largest. It also has investments in a few IT firms. It's not clear if these holdings will be liquidated to raise funds.
Moreover, the sources add that Lehman Brothers' unit in India has issued termination letters to a majority of its 2,500 employees.
What kind of investment does Lehman have in India?
Lehman does not have direct large holding in the Indian stock markets. These holdings are estimated at around $200 million, including Participatory Notes. This figure is not enough to cripple the Indian stock markets.
But Lehman has exposure to the Indian stock market through special purpose vehicles. This exposure to real estate stocks is said to be of about $1.5 billion, enough to shake up the markets.
0542 hrs: AIG provided a 85 Billion dollars loan, Fed keeps the interest rate unchanged, US ends in green - Dow +1.3%, Nasdaq up 1.28% and S&P up 1.75%. So a strong possibility of green opening as had written yesterday.
2249 hrs: The US markets oscillating around the flat line waiting for the Fed decision to cut or maintain the Rates.
2102 hrs: I believe there is opportunity hiding in every nook and corner. But the problem is that it is we who fail to see it. I too am a culprit on this account -- I see the charts, I see their magic, I do not have the guts to take cognizance and then I spend time in repentance. Well, I believe, that is the part of the game.
Just to keep my minds off these crazy markets I am trying to read about the markets, and one of the books that I've picked up has wonderful interesting notes and quotations. Today, before I go ahead, I would like to quote a few of these quotations-
" no matter what information you have, no matter what you're doing, you can be wrong"
" sellers of greed and buyers of fear -- the contrarians mantra: sell what the crowd wants to buy and buy what the crowd shuns."
"insanity is doing the same thing over and over while expecting different results."
So, if you are wise enough now after reading the above let us start with today's analyses. before I talk about the markets in proper I would like to share some information about Lehman Bros. When Lehman Bros filed for bankruptcy on Monday, it became the latest but surely not the last victim of sub-prime mortgage collapse. Lehmon owned more than $ 600 billion in assets. Financial institutions around the world have already reported more than half a trillion USD worth of mortgage related losses, and that figure will most likely double or triple before the crisis itself gets exhausted. But there is a bigger potential failure lurking in the background -- the American International group, the insurance giant. It poses a much larger threat to the financial systems than Lehman Bros ever did, because it plays an integral role in several key markets: credit derivatives, mortgages, corporate loans and hedge funds. There is a substantial possibility that American International group, will not be able to meet its obligations and will also be forced into liquidation. A side-effect - its collapse would be as close to an extinction level event as the financial markets have ever seen since the great depression. AIG does business with virtually every financial institution in the world. Nobody knows this market size for real. Who owes what to whom, or from whom -- this is so because there is no central clearing house or a regulator for it. So, the exact effect that it will have on stock markets will only be known once this hits the fan.
The Asia was expected to be weak, and it came as no surprise when Asia opened well into red and thereafter showed no signs of recovery whatsoever. Nikkei finely ended 4.95% down, Hang Seng 5.44% down and straight times 1.01% down. As far as the day is concerned we out performed these markets. The nifty begin its journey from 4072 -- dropping till mid-afternoon to 3919 and finally closing two points in Green at 4090. what a run-up it had. More about it later. Europe too opened in red and has now traded almost the entire day to the closing in red. In fact, dropping a wee bit. FTSE is about to close and is trading 2.32% in red. DAX as trading 1.12% down. Cac is trading 0.82% in red. Considering what we now know about AIG, it was no surprise when US opened red. However, with some reassurance coming from the government for AIG, the stocks recovered and in fact, briefly went green. It is not yet midsession in US and there is a strong possibility that finally they end in green.
On our candlesticks -- are charts are looking exciting for a number of reasons. Firstly, the Bollinger bands have been violated on the lower side and there is a Doji on the candles. It is a dragonfly Doji. it spells a strong reversal to the black candles that we have been having for last five days now. So expect a session, where we bounce back, and cover some of our losses in the recent times. The volumes to were a shade higher than yesterday. On MACD the gloom remains with the red line below the blue line, and divergences increasing. Slow stochastic, the Red Line has crossed above the blue line and is well poised to cross the 20 marker, giving a buy signal. The TRIX is looking down, falling below one marker. The mass index too does not look good, with the line now touching 25 marker. The RSI has stopped dropping, and now runs parallel to 30 marker - not really encouraging. All in all we have two bullish indicators, and all the rest indicators are beer-ish or at the maximum neutral.
The crude oil is at USD 92.51 a barrel. Taking help of the global indications that I hope to be positive tomorrow, the crude oil price and the few bullish indicators that we have - I feel that we should open green and recover some of the losses that we have been having at last few days. I am at the moment, neither bearish now bullish. Because, though the indications are bearish -- I'm a bull at heart
Lehman brothers has filed for Chapter 11 bankruptcy after Barclays and Bank of America abandoned talks to buy the company. Following the news, the IT space felt a fair bit of pressure. With Lehman Brothers filing for bankruptcy and Bank of America taking over Merrill Lynch; the key question would be - do these companies have significant exposure to the Banking, Financial Services and Insurance (BFSI) space and what would be the impact?
Lehman Brothers, which has filed for bankruptcy, seems to have very little outsourcing done as of now and the exposure remains with Wipro and Tata Consultancy Services (TCS). Wipro has given a statement that Lehman Brothers is not such a significant client and they are not worried about it. Extrapolating what Wipro has said, TCS may not see much of the impact.
But one needs to watch out for what happens with Merrill Lynch because Merrill Lynch was a significant client for both Satyam and TCS. The one which is going to suffer from Merrill Lynch’s takeover is going to be Satyam because it was a significant top client for them. Where TCS gains over Satyam is it has in relationship with the acquiring company Bank of America, which gets more outsourced work. Infosys and Bank of America have a very steady relationship. So Infosys maybe one of the gainers.
S Mahalingam, CFO, TCS has said that the company has a very steady-state relationship with both Merrill Lynch and Bank of America. So he is expecting no impact coming from this part of work at least.
HCL Technologies has done a little bit of work for Lehman Brothers but the management has clarified that it is over and they are not going to be impacted by it. EDS does a lot of work for Bank of America globally. So one needs to wait and watch of what kind of shape this takes and whether any work pours down to Mphasis.
When one puts all of this together, there is some loss but given that most of our top five companies have over 40-45% exposure to BFSI space, then mood is worried and concerned right now. Everybody is calling their relationship manager and trying to figure out what is happening officially because normally there is a two-three months' time, by when the impact actually flows down to the offshoring vendors.
It is learnt from the previous sessions that Market goes by the structure and not by sentiment, especially at important turning points. Positive news of NSG waiver on Monday not only succeeded in creating a Double Top at 15107
From 15107 on Monday, the action retraced the 6-day move from 14002 to 15107 (“e” leg) within 4 days. Such a faster retracement is indicating completion of “e” segment.We know that “A faster retracement to ‘e’ would finish off the extracting structure as an ‘Extracting Triangle’ & If it doesn’t, then ‘f’ and ‘g’ legs moving in an up-down fashion would complete it as a ‘Diametric Whether the final structure for the bear market rally post-12514 completed as a 5-legged "Extracting Triangle", or will ultimately complete as a 7-legged “Diametric” is, however, not clear. If it is already complete as an Extracting Triangle at 15107, then the bear market rally is over, and journey below 12514 has begun. though this bear market rally (which, on one higher degree, was labeled as “b” of 2nd corrective) has now consumed exactly equal time compared to the previous fall (“a” of 2nd corrective) if “a” is measured from 17054, it is still time-wise lesser if we measure the “a” leg from 17735. Protracted Diametric could be a way to consume more time within “b”.the neckline joining 13727 and 14002, with the structure post-12514 appearing like a Head and Shoulders formation.
A strong break below 14K breaks the neckline of this traditional formation. However, since H&S is a “commonly known” pattern, its implications may be possible but doubtful.Prior to this bear current rally, “x” completed at a “failure” point of 17054. The “a” of second corrective completed at a low of 12514, exactly within our targeted downside between 12316 and 12671.
The current bear market rally would be the “b” leg of the second corrective, which I said, can occur despite the fact that the market remains open for a protracted bear phase as per the 8-year cycle. As per the Wave logic, corrective phases should consume more time than the wave getting corrected. Corrective phase consuming lesser time is allowed only in Triangle / Terminal / Diametric, which are exceptions to virtually all rules. In our case, it would indicate 2nd corrective (post-17054) developing as an Extracting Triangle or Diametric.
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