NEWSLETTER

Sensex Technical View :
The preferred technical view that Sensex may take a bounce back from 10900-11500 has not gone in tandem with market moves. The next important technical levels are 9700-9500 which is the 61.8% correction which was a scenario taken in case there is much more selling seen and possibly we could give a bounce before going there. Sensex has touched 10200 almost and needs to be seen whether it goes to 9500-9700 or lower zones or gives a bounce from here and then consolidate at lower levels. On the long term charts 8799 the low made around 2006 and 2600 on Nifty are of supreme importance for the long term bull run. Continue to watch these levels and reactions.Once we see a bottom formation or hints of it we can cover views on how recovery periods were historically.

Although the timing of buying must have not been appropriate at 11k-12k levels, but as being repeated we have confined our investments to 50-60 % max which does leave us a good scope to buy on lower side in bargains or reduce investments at bounce backs for more comfort. Many stocks picked up would be down 10-30 % from acquisition pricce as buying has been looked in a staggered manner,small lots and we still do have some more apetite to buy and have strictly avoided real estate , pvt banks, capital goods in our preferred stocks and the selected ones do have the more chances of participating well in any bounce backs.

Majority of the value erosion has been seen in Real estate down 80-95 % , Pvt Banks and Capital goods have also seen major erosions. I have been very strict on avoiding these as these stocks may take lot of time to even give decent bounce backs and in real estate stocks total value erosion. In other stocks invested at sub 13k levels investors maybe seeing notional losses for the partial quantities but these stocks have good chances of coming back in stable times. But in real estate stocks the risk is going the 2000-2003 IT way. But high risk investors can take a risk buy 3-5 stocks of real estate companies like DLF,HDIL,Unitech,JP Associates etc at 15-5 % of peak slowly as somehow i feel these companies remain in business in next 2-4 years at least one or two may end up giving such returns to sidetrack losses of those who dont , and yes it will require patience and Risk.

Stocks to watchout for :

Stocks that have just made new lows have more chances of going further down technically so should wait for them to settle .

Axis Bank,BHEL,LNT, Lupin,ABB ...

Highly Oversold stocks which can give a bounce technically so one should wait for them to consolidate or bounce.

ICICI Bank,Sterlite , RCOM , RIL , Bombay Dyeing , IFCI , IDFC etc .

Fundamentally one can now look for stocks which have high cash reserves and maybe in certain cases reserves could get much higher then market-cap. Fundamental trackers can contribute on the same through mails or comments.

Market Observations and Thoughts :

Crude no more seems a consideration for market moves like before as it has already gone below and achieved a tgt of 85 which was our consistent view so no more updates on it unless something unusual comes in.

Gold :
Gold technically had been seeing good resistance around 920 + zones and has taken a quick beating as money seems to be coming out of it. On the lower side 815-820 is an important range zone if it breaks could lead to 780 also.


The glossary of economics,inter-relations, coupling is just getting huge in size .

Can CRR cuts of 50 and 150 bps be followed by a repo rate cut ?? , Crude staying below 80s for months impact GDP ?? , Inflation to dip quickly by next year , Lower GDP growth targets , Are IIP nos conclusive, MFs ,Pension Funds , long term stable FIIs waiting for stability to pump money, Low delivery volumes but high M2M settlements in FNO why so , Futures still not settled by delivery in India , Bailout for Airlines and other industries , Real estate market to see a major meltdown and freebies already given, FD rates will soon peak make some for long term etc etc ... Long list for India.

US ,UK , Europe , IMF to take unusual steps to increase liqudity , unfreeze credit , Inter-Bank rates zooming can they be cooled of , collateral damage to be insured , capital injections in return of equity , Shorting malpractices found , De-leveraging of high positions in Gold to pull out cash , Scams to be found etc etc Longer list for world .

Randomn Sunday Thoughts :

The markets have tanked heavily in the last one week and suddenly there are many economists who are predicting an economic depression and some who prefer a 12-18 months recession. I am not a good judge of economics though but the view of Sept/Oct to see all skeletons out was biased with technicals and we have seen that happen to an extent more then what we thought. I do read a bit on global economic views but all the time the economist come out with excellent views but timing dont seem to match with market movements and appear prophetic in hindsight. 2006-2007 saw lot of critics of credit scenario and the boom is over but we saw the market continue to boom to get over months or a year later and then came the slowdown. Crude was a blockbuster at 120-140s with tgts of 250 and super spikes which actually got finished at 150 as per price and at 80-100s tgts of 50 as demand drop came up so maybe a demand drop is almost getting over .

Now suddenly am reading a lot of economists speaking on recession is in place and a recovery may take 12-18 months but not many give a starting point so havent understood when the rough weather ends. Can we say that the recession in market prices is almost over as the lag or early view by economists seen historically. But we may see effects of the slowddown in the industry , economy , jobs and other scenarios as generally markets factor in things before they happen. Although we are not looking from a depression point of view coz i havent seen it in my lifetime and neither know anything about it so cant discuss on it or whether we should even think about it. But yes in a slowdown or recession the best way to stay comfortable to live prudently, make contigency provisions and be ready for some temporary consequences like job layoffs, salary cuts or other difficulties which may or may not be seen but precaution helps.

Markets are a great indicator of the economic scenario is what i feel. Just looking back when markets corrected in Jan we saw corporates like ICICI and others cut bonuses , promotions in March later on further drops we saw mid cap IT cos go on a layoff mode and pink slips. So at a further correction now can we see salary cuts, layoffs in other industries, lesser job options ?? ( things to ponder on )to stabilize the over growth of opportunities we had before and then we can embark on much better times after this normalization and faster if India gets a much softer landing into this rough weather .

Although such a scenario could be beneficial for IT cos and other Manpower businesses with high attrition rate as that may slowdown and man power costs may get in control to stem business downfall. Also historically in such normalizations we do see better and bigger growth opportunities i remember in 2001-2003 IT engineers saw huge probs in job opportunities and placements ( engineering time personal experience of seniors ). But later we saw super-placements in 2004-2008. Can this cycle happen for MBAs/CAs or some other professions who got high growth ?? coz of financial boom and see a little dip then bigger growth ?? ( things to ponder on) .

All above thoughts are randomn thoughts which just came out without adequate research and could be highly amateurish and may not be conclusive enough.

Best Regards,

Last week i had mentioned that "dow had made a double bottom around 10,260, and if broken can creat HAVOC in the world markets", and yes thats exctly what we saw last week. Now dow has support around 7450 levels, thats apprx 1000 points from here. for any positive moves, dow has to close above 8881, which may bring in a relief rally.

For Nifty, it looks like it got support at one of its medium term trendline which may or may not hold.as of now if nifty holds friday's low of 3216, it can pull back to 3389-3517-3610 levels for the week, breaking it would mean 2890 on the cards. Closing above 3389 may quickly take nifty to 3517 levels

Now for intraday, again supp around 3216, if broken, may see 3140 levels.if 3216 is held, nifty may pull up to 3335-3389 levels, where it will face strong resistence.

Nifty :: We plot here long term Nifty chart. Nifty given breakout of long term channel in middle of year 2005.. Now again heading towards channel top support ..Channel top works as strong support near 2676/2600.. In between too many strong supports comes on the way. Strong supports 3192/3147/3058/2900/2796... May be any of this level works as short term bounce beck level from extreme over sold zone..

Well I posted to buy on Friday...I dont know how many bought in that panic with me...I see a very good possibility of an intense rally. I do not know if this is THE bottom - In answer to some of the comments and emails I got - BUT odds are we get a very strong rally maybe to 4140 area....Above 4140 and the bears will die big time...But one step at a time...The roadmap should be 3600 first...Evaluate there...Then 3800...Again evaluate...Then 4000-4100...Again reevaluate...Above 4140, and then we have something big on our hands...But as I said, one step at a time...I think we have had a washout...Capitulation...Still I see people calling for 2600, 2000, 1800, ZERO...lol...Well maybe we will get 2960 on this round but it looks unlikely to me...If we do get it, I will still be buying in cash...These opportunities do not come often...I will compare this crash we have just had to what happened when the commies came to power with the Manmohan Singh government...God I wish I had the guts to buy at that time....Instead I sold...Everything I had...Now with the experience I have..And all the bearishness I see around, I think this is the time to buy. Maybe its just 3-4 months of rally...But still its a rally...Buy the dips is my advice...If you are risk averse throw in some PUTs to hedge your risk.

On the charts, I see that weekly stochastics is way down...An up week will probably turn it up and if so we will be on a longer term buy...

On EWI scale, we may have completed a BIG wave A down with a monster B wave rally to follow into the mid of next year before we have another major decline...

But now is the time to buy...I expect we will have a retest of the lows - But its not a big probability...I am lessening my futures trades and accumulating in cash...I bought heavily on Friday and today we will have a big gap up and then an attempt to fill the gap...I will watch this and probably buy the dip today afternoon...

All the best. These opportunities come once in a lifetime. I dont profess to be a trading god or anything..Others are there here like that...But I can recognize good odds when I see it.

Some good stocks - Infosys, Bhel, NTPC, SBI, Mosar Baer, KSOIL, LnT. Other welcome to add to the list..I am still digging for gems amongst the carnage.

Charts will follow later.

Market may just start showing relief rally now

It was a scary fall in indian market last week and the begining of this week may show some relief rally though global cues are still negative.The Dow lost 128 points, giving the blue chips an eight-day loss of just under 2,400, or 22.1 percent. On Friday, the Dow was down 468 points at 3 but rocketed 790 points and was up 322 points just after 3:30. It then sold off but closed down only 128.The Dow Jones industrial closed at 8,451.49-128 points down from the previous close.Most major central banks around the world slashed interest rates this week after continuing problems in the credit market triggered concerns that banks will run out of money.Meanwhile the US government has decided to buy stake in banks, first time since Depression.The purchase of stakes in companies would be in addition to the main thrust of the $700 billion rescue effort, which is to buy bad mortgages and other distressed assets from financial institutions.Moreover the Finance officials from the world's top economic powers endorsed a plan Friday to stem the worst financial crisis in more than a half-century.On Friday, the Reserve Bank of India (RBI) said it would make a deeper-than-expected 150 basis point cut in cash reserve requirements on Saturday, to release 600 billion rupees ($12.4 billion) into the system.The stock market may take some positives on these news now.For today, even if there is gap down opening buying wil come from lower levels and nifty above 3340 will face resistance at 3400 and on downside below 3250 might go till 3220-3200.Watch out for volatile day of trading again.



BSE Sensex(10527.85) and Nifty(3279.95) closed 16% and 14.1% down last week.Inflation was at 10.88 v/s 11.99 last week.Indusrial Production nos.came 1.3%v/s 10.9%.Crude oil was at 79$.ReserveBank had cut CRR by150 basis point to boost the liquidity..Support for sensex is 9750 and for Nifty 3050.Resistance for Sensex is 11000 and Nifty is at 3450. Selling of FII continued this week also.Nifty put-call ratio was 0.50.Nifty 3700 call added open interest.Hindalco and NTPC added open interest.

Strategy for Future Option players.

1)NIFTY(3279.95) Lot Size-50 Shares.
Buy one call option of October month strike price 3300@205 Rs.
Sell one call option of October month strike price 3500@115 Rs.
Premium Paid=205*50=10250.00 Rs.
Premium Received=115*50=5750.00 Rs.
Net Premium Paid=10250-5750=4500.00 Rs.
Maximum Profit=3500-3300=200*50=10000-4500=5500.00 Rs
Maximum Loss=4500 Rs.
Break-even=3390 Rs.

2)Ranbaxy(292) October month future-Lot Size 800 shares.
Buy one lot of Ranbaxy October month future@292
Sell one call option of Ranbaxy October month strike price320@10.25 Rs.
Premium Received=10.25*800=8200.00 Rs.
Max Profit=320-292=28+10.25=38.25*800=30600.00 Rs.
Max loss=Unlimited.

Trading Idea

1)UnionBank(145.95)Buy this stock in decline and trade.
2)IOB(87.35)Buy this stock in decline and trade.

The crisis that is prevalent world over now, is not a very unexpected one. Being a gold bug for a long time, something of this kind was expected by every columnist on Kitco / Daily Reckoning / Financial Sense. What I did not know, however, was its prefix of "credit".

The magnitude of the crisis somehow is much less than total calamitous financial and social Armageddon that was imprinted in my mind. Thankfully, I have lived these nightmares before. Again, it is very different to read about Dracula and a different experience meeting one! People may have anticipated these nightmares, now the wish is fulfilled; we got to live through it now. The crisis does not look 'economic' anymore. We knew it would affect lives, every body's, and to a much deeper extent than ever thought, but nothing prepared us to its actual existence. Its like being proved that ghosts do exist or that we are not alone and ETs are cannibals. Proving something, or being right about something, does not alleviate any fears or console us or anybody.

Till date, this thing has been very interesting. Being an analyst, it gave me a new glimpse and perspective of finance. Being a trader, I very well know how important the experiences of bear-markets are. And hence, yes, this has been very interesting and illuminating.

We are finally seeing the stuff of legends, that several prophet economists had prophesied in past. We knew the problem, but we dint know how-to live through the problem. The real problem is, prophets foretold the problem, no body ever gave a solution. So, now we have a massive problem and not a hint of solution.

So the problem is to now live with this. All these days there was excitement in the air. A kind of fiendish glee. Lehman Brothers going bust was a talk that was always accompanied with a Cheshire grin.

Not any more.

It was exciting to see bullets flying past you. Its very exciting because it is rare sight, a rare experience. You know one of them is bound to hit you, but as long as it zips past, the thrill-seeking adventurer enjoyed. Not anymore. Bullets are starting to scrape the skin. Bullets are flying too close for comfort. They are starting to hurt; the guys next to me are wounded and getting hurt. This crisis is not fun anymore.

Frankenstein is not funny anymore, he is becoming a liability. I finally wish, out of unknowns, that nobody had opened Pandora's Box, just to prove what was in it.

Crisis, has hurt and is going to hurt a lot of people. It’s not going to be fun anymore. War had turned bloody. This Quake and Doom episode, is getting played out in real life.

As an analyst, I can no longer enjoy. As a person, friend and colleague, I no longer feel happy and unconcerned. Yes, I am wiser off by learning some lessons, which will save the skin when the bigger-badder-worse-armageddonish “War 2” begins. But if there is one thing that this event has thought us, it is this: you can run, you can hide but there is a bullet for you.