LEVEL FOR MARKET TWO CLOSE BELOW 8100 NEXT LEVEL WILL BE 5100 GET READY IF MKT BREAK 8100 ALSO WHEN MKT AT 18000 I WAS THE FIRST TO INFORM YOU THAT MKT WILL CORRECT UPTO 50-56% FROM UPSIDE AND THIS IS 8 YEAR CYCLE.. NOW SENTIMENT CHANGES ALL ARE COMPARING WITH 1992-2000 BEAR MKT.. BUT THEY WILL START FINDING BOTTOM WHY MKT IS FALLING.. AND THEN THEY REALIASE THAT MKT IS FALLING AND START COMPARING WITH 1929 BEAR MKT,, WHICH I THINK NO ONE HAD SEEN. SO TAKE NOTE AND KEEP IN MIND MKT MAY FALL UPTO SENSEX 2332... THIS WILL BE WORST SENIORIO... AND WE WILL BE BEAR MKT FOR 5 YEARS.. EVEN WE BREAK BELOW 6100 WE ARE IN BEAR MKT FOR 5 YEAR... ALL MAY OF YOU THINK I AM GONE MADE AND GAVING TGT FOR SENSEX 2332,, WHICH IS UNBELIVABLE... TIME WILL TELL YOU WHAT IS REASON WHY I AM TELLING ALL TO SIT QUITE... 3 REASON MAKE MKT FALL HEAVILY ( BANKCRUPCY,RECEISION,UNEMPLOYEMENT) AND TO SOLVE THIS REASON NEED LIQUIDITY... WHICH IS NOT THERE AND NOT POSSIBLE TO SOLVE THIS STOP BEAR MKT... ( PL. NOTE I MAY GO WRONG BUT THIS IS MY VIEW AND THIS IS POSSIBLE DONT IGNORE AS NO ONE HAS THOUGHT AND PREDICT SENSEX BREAK 10000 AND NOW COME TO 8600.. WHICH IS POSSIBLE TO COME AT MAY'09 AND REACHED IN OCT'08...
BSE Sensex :: Due to Global Recession, heavily selling pressure seen in our market.. Last Friday Nifty break down important long term channel support but still Sensex hold above it..(Dow Also made double bottom on last Friday)..All Daily, Weekly and Monthly indicators are in oversold level.. Watch three Important supports 8600/8125/7925.. If Dow hold last low and Sensex hold 8125/7925 then we see small short covering due to FNO expire.. Now for coming month Nifty must be hold above 2678 other vise we see last Sensex long term strong support 6050 in next month.. Till then avoid shorting at support level..As per our last Sunday post metal also enter in strong support zone.. Its time to buy A group strong fundamental stock in small-small quantity (10 % to 20%) for mid term prospective with ready to average it out at lower level ..
SELLHDFC BELOW 1553 TGT 1501>1424 STOPLOSS 1587
SELL CANARA BANK BELOW 154 TGT 146>141 STOPLOSS 159
Last week nifty lost 15.95% as global uncertainty and selling from FII closed in deep red zone .Nifty had register highest ever weekly fall in history .For coming session nifty had broken all major support on Friday we can find next support near 2536 if we break 2539 it will drift near 2289 mark on the other side 2780 will act resistances zone if nifty able to cross 2782 and close above we can test 2923 -3053 zone.
Happy Diwali
The mayhem in stock markets is not spelling doom for all and Diwali could still be a festival of light for investors in as many as 65 companies, which have added more than Rs 10,000 crore to their collective market value since the downslide began early this year.
The irony is that this meltdown-defying club includes not a single Sensex blue-chip and they are mostly small and little-known companies, barring a few like Hero Honda, Sun Pharma, Zandu Pharma, Lupin, Nestle India and BOC India.
Moreover, the total gain registered by these companies in their market capitalisation together is less than the individual losses for as many as 69 companies during the same period.
Besides, the gain of about Rs 10,700 crore for these 65 companies since January 10 -- the day when the benchmark Sensex scaled its record high of 21,206.77 points before embarking on its downhill journey --- pales in comparison to a collective loss of more than Rs 44 trillion registered by the remaining companies.
During this period -- when the benchmark Sensex has slipped to nearly one-third of its value to close at 8,701.07 points on Friday -- close to 2,450 companies have seen plummetting their market values with a collective loss of about Rs 44,50,000 crore.
The collective market cap of these companies, which include virtually all the big names of India Inc such as Mukesh Ambani-led Reliance Industries, public sector giants ONGC, NTPC, SAIL and SBI as well as other corporate majors such as ICICI Bank, Anil Ambani-led RCOM, Sunil Mittal-led Bharti Airtel and realty majors DLF and Unitech, has dropped to near Rs 26 trillion from close to Rs 70.5 trillion on January 10.
However, the saving grace for the market in this over 10 months of the meltdown has been the 65 companies that have seen their collective market cap growing to nearly Rs 80,000 crore, from about 70,000 crore as on January 10.
The gain has been maximum at over Rs 4,500 crore for Sun Pharma, followed by about Rs 2,500 crore for Sterling International. While Hero Honda has added about Rs 815 crore to its market cap during this period, the gains have been between Rs 100-400 crore for eight other companies -- Bosch Chassis, Lupin, Zandu Pharma, Suntek Realty, Panyam Cement, Panoramic Unilever, Sterling Biotech and Suashish Diamond.
Others which have seen their market cap growing during this period include Kohinoor Foods, BOC India, Coromandel Fertiliser and Nestle India. The addition have been between Rs 30-90 crore only for them. Nine of these bear-hug defying companies have in fact added less than Rs 1 crore each during this period.
In comparison, Reliance Industries has lost close to Rs 2,80,000 crore in this meltdown, while DLF, ONGC, RCOM, ICICI Bank, NTPC, NMDC and MMTC have seen their market values plummetting by more than Rs 1,00,000 crore each.
Besides, Bharti Airtel, Unitech, L&T, SAIL, BHEL, Reliance Petroleum, Suzlon, Sterlite, SBI and Reliance Capital have also lost more than Rs 50,000 crore each.
Companies like Reliance Infrastructure, Tata Steel, TCS, HDFC, Jaiprakash Associates, Indian Oil, Jindal Steel, Wipro, Kotak Mahindra Bank, PGCIL, GMR Infra, Hindustan Copper, Neyveli Lignite, Mundra Port, Essar Oil, Reliance Natural, Siemens, Idea Cellular, HDIL, ITC, Hindustan Zinc, Grasim Industries, Adani Enterprises, Tata Motors, Jai Corp, Cairn India, Infosys, HDFC Bank, Tata Power, Indiabulls, PFC and Hindalco are among the other major losers
I am pasting here an interview which I read at Moneycontrol.com
Hope readers will get enlightened by it while reading it and trying to read the finer lines which I had highlighted......
Vallabh Bhansali, Chairman, Enam Financial believes that the massive sell-off seen is mainly due to panic and not due to fundamentals. He advises investors not to panic, wait on the sidelines, and not sell unless they have to. "This is not a regular market, but an auction market and people must understand this clearly. Today, those who are desperate for cash because they fear redemption or have redemptions are forced to sell. Those who do not have any reason to raise cash should not try and value their stocks based on the prices that they are seeing today."
Bhansali said the world is going into recession and demand is shrinking but stock prices have shrunken a lot further. "People are hurting themselves by panicking beyond reason whether it is fixed maturity plans, stocks, or other asset classes."
Here is a verbatim transcript of the exclusive interview with Vallabh Bhansali on CNBC-TV18. Also watch the accompanying video.
Q: In your career have you seen a day like this, a more than 1000 points drop on the Sensex with absolutely no big evident trigger?
A: I have not seen anything like this. I have been in the ring when the market fell 15-20% but there was never as much panic as there has been today. Normally we would have the circuit filter but because of technical reasons, the filter is higher. Fortunately, the market did not close.
This is unprecedented because this has been accompanied by bloodshed around the world, this is terrible.
Q: What you ascribe this to – everyone has been broadly swiping this under the global situation but there really was no key trigger today. We have been through worst situations when it comes to the credit crunch in the past two-four weeks, is it just an excess of fear in the system?
A: There are two aspects to this; one is this is not a regular market. This is an auction market and people must understand this very clearly. Today those who are desperate for cash because they fear redemption or have redemptions are forced to sell. Those who do not have any reason to raise cash should not try and value their stocks based on the prices that they are seeing today. This is very important because someone who is desperate for a glass of water will take off his diamond ring and exchange it for water. Those who do not have to should not look at that as any establishment of price either of that water or for that drink.
Secondly, to the extent that the stock exchange is a leading indicator of things to come, the market is probably scaling down earnings forecast for 2009 and even 2010. But the most important thing for the investors to see is the prices. Prices of 80% of the stocks are down at least 70%, 60% of the stocks are down 80% from their peak. 1930 has already been built into this price. People are imagining 1930; no one sane is alive today to tell us about what exactly happened in 1930. ( This I have been writing many times here that no one knows what happened in 1930 and the situtaion was different) India has no case to experience 1930. So except for those people who have to sell under compulsions should just wait on the sidelines and interpret the prices in any manner.
Q: It was a very brave word, but when you are sitting there watching your portfolio decline by value like today it did by 30-50% how can you not – and the news seems to be only getting worse. There is a lot of rumour mongering on the mutual fund side and we have heard all kinds of regulatory noises about the FMP (fixed maturity plan) system and how they want more disclosures, how that could potentially be ridiculous exposure of FMP mutual funds to the real estate market, how long is this going to last? Where do you stop being fearful?
A: There is something very strange and sad that is happening — those who took a twelve month call and bought into FMPs are now trying to review their portfolio on a 15 day or a one month basis. You will create a run on any bank if you try and break your fixed deposit and demand money, I think some of that is happening.
Mutual fund schemes had exposures to real estate companies and some of them – we heard about one company defaulting yesterday there would be some panic. But I wish mutual fund industry would come out and put up a white paper on what exactly is happening because that would probably staunch the panic lot more then letting people imagine. I think while there is no denying whether the world is going into recession and there is demand shrinking but the prices have shrunken lot further, people are hurting themselves by panicking beyond the reason whether it is FMPs whether it is stocks or whether it is other asset classes.
Q: What is your assessment of how badly of the mutual fund industry especially the FMP portion is when it comes to its exposure to real estate and how much worse could the whole redemption pressure get and therefore what kind of collateral impact it could have on the markets?
A: Promoters, the government and institutions hold 80-85% of the total holdings, a very small portion is held by retail at large and that is probably a few USD 100 billion. The same is the case with the amount of assets held in the mutual funds by retail investors and that would be a few thousand crores.
So if I were to put this into perspective; of the total wealth of the country, this is not a large amount. Today we have the Finance Minister (FM) who is monitoring this situation twenty-four hours, he has virtually become an anchor person on media channels, he is assuring people everyday – given the situation, I think the moment there is something that can be tackled I am sure the Reserve Bank of India (RBI) and the ministry will tackle it very adequately.
Q: Are you saying that you are not worried about the FMP and the larger mutual fund exposure to the real estate industry and you do not think it will have a dramatic impact on the markets if things go worsen from here onwards?
A: Whole point is stampede is caused not by causes as much as by panic. Today you are seeing a stampede. What I am urging the ministry and the mutual fund industry particularly is to come out openly and explain that and then we can have a solution. Unfortunately, today that is not happening. I am not fully aware of the reason why that is not happening but clearly if some of the banks in Europe, particularly, went to the government and said they had trouble they would be nationalized, get protection and things could be handled a lot better. Depositors would then not have panic.
There has been trouble; but my guess is that of the total assets held under the FMP schemes, the amount that could be exposed to real estate could be really in trouble and cannot be that large as to cause a panic all around. That will damage our economy unnecessarily.
Q: We do have news from Sebi that it has asked for more disclosures on FMP allocation, so hopefully that will help straighten out that system, but while talking about regulatory action we also saw Sebi come out this week and clamp down on practice of overseas lending of stocks that were underlying assets to P-notes. Do you in your assessment think that will help reduce the short positions in this market and therefore help shore the market up?
A: Today given the enormity of the challenge that any regulator is facing. One is not sure as to what results one would get from a particular action. But if one realizes that in these troubled waters, you cannot allow people who are sitting on the sidelines to fish. I think it’s absolutely alright to take whatever action based on data that any regulator would have. We have seen that around the world.
The whole point is not to come in the way of short seller, when you have a regular market or don’t have a regular market. I don’t think one can take a classical view about it. I am the last person who would ever say stop the short-seller but today you are not seeing a regular market and therefore if you had to take emergency action based on data, based on transparency as to when these things will reverse, under what conditions, I am not so averse to considering such action.
Q: The Monetary Policy that took place was a completely inactive or non-action policy as many are calling it. Were you disappointed, do you think either this stance of the RBI could have been more reassuring towards the current market situation or should they have taken more action when it comes to either liquidity measures or reducing interest rates?
A: The RBI has almost made it a habit to come out with the monetary policy a few days or a week before the actual date. So I think lot of action took place already. I did not expect any particular action. I think today’s (October 24, 2008) meltdown was more in response to what was happening in Asia and early opening of Europe than monetary policy.
So I think the RBI did quite a lot in the last few days or a week or so. I would urge the Sebi (Securities and Exchange Board of India) to temporarily lift all limits on promoter holdings whether it is buyback, whether it is open offers, whether it is creeping up position for the next two-three months. I think companies and the shareholders are bleeding because of this panic selling. What actually is happening is that of the total hedge fund industry, which is of USD 2.5 trillion; exposure to India of all FIIs (Foreign Institutional Investors) hedge funds put together is somewhere between USD 50-60 billion. Out of this USD 5-6 billion of panic selling can ruin this market for a long time to come. So I think today those promoters who have cash and who want to buy in the market should be permitted to do that. This is something that is within Sebi’s powers and I would urge it to take drastic action on this front.(Does this mean Vallabh Bhansali has blasted SEBI or Fin Ministry? he need not write this ? or should come out and appreciate SEBI or Fin Min when these steps are taken?)
Q: Do you think that will help provide some sort of support to many of these stocks that are falling especially blue-chip stocks because many of the promoters we hear also are either out of cash and may have had to pledge their previous shares to be able to raise money to either subscribe to some sort of previously subscribe to warrants or things like that or many promoters do not want to buy because everyday prices are going down by 10-30%?
A: We are doing a number of buyback offers and going to several clients to tell them to come and support their shares if the creeping limits are open.
Today the stocks are available at 30-40% of replacement cost. I can assure you we will continue to breed children, we will marry, build homes, educate and the economy will be absolutely normal, we will grow at at least 5-6% for next two years. Our stocks are cheap based on any valuation and people must understand that.
Q: Do you expect any kind of direct government intervention or even indirect government intervention in these markets and any kind of Sovereign fund that the government might set up to help shore up levels in this market or to create some sort of reassurance- I am talking in vague terms because it is a vague idea but you think it could extend to reality?A: I don’t think it’s impossible. This country has shown the capability to pledge its gold, to swim differently from rest of the world in Asian crisis, so I would not rule that out.
But what the government can do more easily is to give relief on dividend distribution tax, on STT, reinterpret the capital gains tax, so at least those long-term investors who were driven out by short-term speculation in the last November-December-January period, those strong hands will be strengthened by those measures.(Another case in point.....)
Q: What form could this sovereign or market intervention fund take?
A: It could be done in two methods. Hong Kong sometime back created a USD 16 billion fund to stem the rot. This was during the Asian crisis. They came forward to do that and made a huge amount of money doing that. So, you could say that you are going to buy certain good stocks. The financial sector, for example, is one good place to begin and they could do that.
They could also put a floor on the Sensex or Nifty. They say alright here we have a huge position very similar to what Warren Buffet did. He bought 2018 Dow Jones saying that look I take a bet that the Dow Jones will not go below that, so it requires some imagination because it is beyond current regulations. One doesn't have to worry about regulations, but given our exchange reserve, the time is to use all of that.
Q: How long is this pain going to last? Where do you think this market could potentially find its bottom?
A: The USD 2 billion or USD 3 billion of stocks held by the hedge funds are loosing value much faster than the Sensex. Some of the stocks are falling about 20% to 25% and there is a huge amount of capitulation. Some of these hedge funds may go bankrupt or they will have sold out without damaging the overall market. Over a period these hedge funds will be bailed out or they will go to some different route in the world, one doesn’t know.
A lot of this troubled is borrowed and it is not home grown. We are very close on putting a cap on all these problems it’s a matter of few weeks according to me and not a few months that you are going to see the world come to some kind of order that all the regulatory affairs will be ahead of the curve, they started late but they are constantly pressing ahead to get the curve of the problem and I hope that in a few weeks we will be ahead of the curve.
Q: Fundamentally the economic data across the world is looking like it will at take least 6-8-12 months for there to be any positive news, is that how long it will take for our markets also to find a bottom and stabilize?
A: Stock market is a leading factor; which means it discounts things way before those causes appear.( That I have reiterated many times here) You will see economic data become adverse for several months but it is all got built into prices, when 80% of the stocks are down its already discounted in the prices. Investors often forgot to look at prices. They looked for justifications when the index was at 20,000 and yet again trying to look for justification when the index is around 8,000. Please don’t look for justifications and just look at the prices. I could give you hundreds of examples that the stocks have already discounted all the trouble that will get recorded over the next few months is all done.
BSE Sensex :: Due to Global Recession, heavily selling pressure seen in our market.. Last Friday Nifty break down important long term channel support but still Sensex hold above it..(Dow Also made double bottom on last Friday)..All Daily, Weekly and Monthly indicators are in oversold level.. Watch three Important supports 8600/8125/7925.. If Dow hold last low and Sensex hold 8125/7925 then we see small short covering due to FNO expire.. Now for coming month Nifty must be hold above 2678 other vise we see last Sensex long term strong support 6050 in next month.. Till then avoid shorting at support level..As per our last Sunday post metal also enter in strong support zone.. Its time to buy A group strong fundamental stock in small-small quantity (10 % to 20%) for mid term prospective with ready to average it out at lower level ..
Fear of the Unkown...
Long Term Technical Chart and View :
There were lot many supports got broken in the past few weeks without a decent bounce and indicators are at lowest ever zones. So in the short term lot of technical expectations have not been met for example a bounce from 11k or 9.5k ( we went wrong at 11k and dint get a chance to rectify so waiting with rest cash ). Suddenly the basic fundamentals or value investing have gone for a toss with stocks quoting at 1/4th of book value in P/E the earnings is a ?. Economists/experts predicting a doom 2-5 years back are suddenly jumping after being wrong till now , experts who predicted a big run 2-4 years back are in the background and the cycle continues.
Recession / Slowdown / collapse /depression /crisis / bear hug /cycle etc and there are lot of questions and no answers ...............FEAR of THE UNKNOWN ....
I am a young technical chap and technical analysis is the only tool i have to make some interpretations/projections which may or may not go well but the endeavour to do so continues.... So lets look into the long term chart .
Sensex Long term Chart :
1) As we see on the long term chart a major breakout confirmation took place at 8k. The 13 year range of 3k-6k broke but the major channel breakout took place after a couple of tries at the higher end. This was the point at 8k we came out with the 13 year bull cycle and big tgts which not many could think of .We have already seen the best 3 + years .
2) An ideal correction of such a major bull wave should have been 50/61.8 % at 11900/9700. These levels have been broken for now and the next level comes to 76.4 % which is not that significant as it goes below into the channel.
3) The previous falls in 1992 and 2000 were in the extent of 57-58 % . So taking similar calculations 57-58 % dip would be 8900-9100. So if its following the same cycle then a 3-5 % deviation on closing basis can be taken,
4) If we see the long term charts the 13 year flag/channel breakout is a major one and ideally the prices should not test the channel again ( so i was expecting 11k to hold ) . The pattern would get negated if we see a monthly close inside the channel and we could see a very prolonged sideways movement and dent the prospects of a bigger bull run or the 13 yr cycle . This has been the reason for my view that we may not see a sustaining monthly close below 8k-8.8k. Some sessions below could be seen in such highly volatile scenario. Say 5-25 sessions below this level would negate the strong breakout and its a very long term call so need to wait for confirmation.
5) Although support levels of 12500, 11200 broke of quickly and on brink of sustaining below 8800 what could be next. This is where it gets tricky as the next logical support would be 7600 ( not major or strong ) and 6200-5900 ( most strong after 8800 ) . The lower level of 6200 is scary as it confirms the negation of the long term breakout and a very very long sideways move.
6) Concluding the technical observations i continue to mention a sustained weekly/monthly closing below 8800 is not what i am looking at as it scares me technically and below that we may have to worry about lot more assets , work etc as the Sensex could go to 6k or lower technically. Its a personal view point that there could be lot of trouble if such a thing has to occur and i would remain positive in the long run for big tgts till 8000-8800 remains on monthly basis.
The current market movements have negated lot of possible technical expectations and comparisons to historical patterns havent been fruitful. The basic assumption of technical analysis is History is repeated and if we have a major recession or new history made then technical projections may not be the best guide.
Market Observations and Thoughts ( Few lines would be there in this section now onwards which is not a recommendation but a view which is speculative , take your own call )
Some of the sentences which i read from experts,economists,gurus seem to confuse me more.
The bear phase may last for 12-18 months...... ( same line for last 6 mths when did the bear phase start so at least i know the end ).
I said it USA is going to be doomed in 2006 itself ( went wrong on 30 % upside for 2 -2 1/2 years and now right 20 % downside in last 3 mths).
Suddenly there are lots of depression theories over the media , doomsdayers in every corner of the world and being repeated day-after day. At the same time there would be a contra view of the best opportunity of a decade etc etc. Media is not supposed to be right but to be at it !!! ...
This is a very new wave of fall , panic or an unknown thing which according to the oldies of the market has never been seen before. Sentiments and panics can really do weird things in the market so best thing to do now would be to silently watch the next 1-4 weeks or take smaller exposures only with a 2-3 year view if you have not been stuck at sub 12k levels.
For the 20k levels many stocks may have gone down by 60-90 % and in such a scenario pulling out residual money would not make much of a difference unless there is a desperate need or over-leverage. So wait and watch for the next few weeks any further falls would not make a major difference as not much has been left in the value.
Well, daily the lower side target gets exhausted, and we keep falling.
after analysing the Long term charts, i feel that 2380 spot is the level,which will hold in this down fall, and nifty MIGHT MIGHT MIGHT not break this level.
but yes, nifty is defntly expected to go there, before any big upmove can come.well, can it happen today????
for intraday crossing 2650, nifty will hit 2693 atleast.below 2650, thr is no hopes, and nifty may tgt 2380 levels
****************big fall of may 2004.
this is first example of big fall of may 2004.
volatility reduces immediatly after big fall.
here nifty trades sideway for 3 months with little upward bias.
*******************big fall of may 2006
this is recent big fall of jan 2008.
this is first example of big fall of may 2004.volatility reduces immediatly after big fall.
here nifty trades sideway for 3 months with little upward bias.
*******************big fall of may 2006
second big fall of may 2006.
here also volatility reduces immediatly.
here nifty further went down then trades sideway with upward bias.
**********************big fall of jan 2008
this is recent big fall of jan 2008.here also volatility reduces immediatly.
here nifty trades sideway for 4 months.
************************latest fall of oct 2008
and now latest fall of oct 2008.
and now latest fall of oct 2008.let us hope that nifty atleast trades sideway and volatility reduces.
SELLHDFC BELOW 1553 TGT 1501>1424 STOPLOSS 1587
SELL CANARA BANK BELOW 154 TGT 146>141 STOPLOSS 159
Last week nifty lost 15.95% as global uncertainty and selling from FII closed in deep red zone .Nifty had register highest ever weekly fall in history .For coming session nifty had broken all major support on Friday we can find next support near 2536 if we break 2539 it will drift near 2289 mark on the other side 2780 will act resistances zone if nifty able to cross 2782 and close above we can test 2923 -3053 zone.
Happy DiwaliThe mayhem in stock markets is not spelling doom for all and Diwali could still be a festival of light for investors in as many as 65 companies, which have added more than Rs 10,000 crore to their collective market value since the downslide began early this year.
The irony is that this meltdown-defying club includes not a single Sensex blue-chip and they are mostly small and little-known companies, barring a few like Hero Honda, Sun Pharma, Zandu Pharma, Lupin, Nestle India and BOC India.
Moreover, the total gain registered by these companies in their market capitalisation together is less than the individual losses for as many as 69 companies during the same period.
Besides, the gain of about Rs 10,700 crore for these 65 companies since January 10 -- the day when the benchmark Sensex scaled its record high of 21,206.77 points before embarking on its downhill journey --- pales in comparison to a collective loss of more than Rs 44 trillion registered by the remaining companies.
During this period -- when the benchmark Sensex has slipped to nearly one-third of its value to close at 8,701.07 points on Friday -- close to 2,450 companies have seen plummetting their market values with a collective loss of about Rs 44,50,000 crore.
The collective market cap of these companies, which include virtually all the big names of India Inc such as Mukesh Ambani-led Reliance Industries, public sector giants ONGC, NTPC, SAIL and SBI as well as other corporate majors such as ICICI Bank, Anil Ambani-led RCOM, Sunil Mittal-led Bharti Airtel and realty majors DLF and Unitech, has dropped to near Rs 26 trillion from close to Rs 70.5 trillion on January 10.
However, the saving grace for the market in this over 10 months of the meltdown has been the 65 companies that have seen their collective market cap growing to nearly Rs 80,000 crore, from about 70,000 crore as on January 10.
The gain has been maximum at over Rs 4,500 crore for Sun Pharma, followed by about Rs 2,500 crore for Sterling International. While Hero Honda has added about Rs 815 crore to its market cap during this period, the gains have been between Rs 100-400 crore for eight other companies -- Bosch Chassis, Lupin, Zandu Pharma, Suntek Realty, Panyam Cement, Panoramic Unilever, Sterling Biotech and Suashish Diamond.
Others which have seen their market cap growing during this period include Kohinoor Foods, BOC India, Coromandel Fertiliser and Nestle India. The addition have been between Rs 30-90 crore only for them. Nine of these bear-hug defying companies have in fact added less than Rs 1 crore each during this period.
In comparison, Reliance Industries has lost close to Rs 2,80,000 crore in this meltdown, while DLF, ONGC, RCOM, ICICI Bank, NTPC, NMDC and MMTC have seen their market values plummetting by more than Rs 1,00,000 crore each.
Besides, Bharti Airtel, Unitech, L&T, SAIL, BHEL, Reliance Petroleum, Suzlon, Sterlite, SBI and Reliance Capital have also lost more than Rs 50,000 crore each.
Companies like Reliance Infrastructure, Tata Steel, TCS, HDFC, Jaiprakash Associates, Indian Oil, Jindal Steel, Wipro, Kotak Mahindra Bank, PGCIL, GMR Infra, Hindustan Copper, Neyveli Lignite, Mundra Port, Essar Oil, Reliance Natural, Siemens, Idea Cellular, HDIL, ITC, Hindustan Zinc, Grasim Industries, Adani Enterprises, Tata Motors, Jai Corp, Cairn India, Infosys, HDFC Bank, Tata Power, Indiabulls, PFC and Hindalco are among the other major losers
I am pasting here an interview which I read at Moneycontrol.com
Hope readers will get enlightened by it while reading it and trying to read the finer lines which I had highlighted......
Vallabh Bhansali, Chairman, Enam Financial believes that the massive sell-off seen is mainly due to panic and not due to fundamentals. He advises investors not to panic, wait on the sidelines, and not sell unless they have to. "This is not a regular market, but an auction market and people must understand this clearly. Today, those who are desperate for cash because they fear redemption or have redemptions are forced to sell. Those who do not have any reason to raise cash should not try and value their stocks based on the prices that they are seeing today."
Bhansali said the world is going into recession and demand is shrinking but stock prices have shrunken a lot further. "People are hurting themselves by panicking beyond reason whether it is fixed maturity plans, stocks, or other asset classes."
Here is a verbatim transcript of the exclusive interview with Vallabh Bhansali on CNBC-TV18. Also watch the accompanying video.
Q: In your career have you seen a day like this, a more than 1000 points drop on the Sensex with absolutely no big evident trigger?
A: I have not seen anything like this. I have been in the ring when the market fell 15-20% but there was never as much panic as there has been today. Normally we would have the circuit filter but because of technical reasons, the filter is higher. Fortunately, the market did not close.
This is unprecedented because this has been accompanied by bloodshed around the world, this is terrible.
Q: What you ascribe this to – everyone has been broadly swiping this under the global situation but there really was no key trigger today. We have been through worst situations when it comes to the credit crunch in the past two-four weeks, is it just an excess of fear in the system?
A: There are two aspects to this; one is this is not a regular market. This is an auction market and people must understand this very clearly. Today those who are desperate for cash because they fear redemption or have redemptions are forced to sell. Those who do not have any reason to raise cash should not try and value their stocks based on the prices that they are seeing today. This is very important because someone who is desperate for a glass of water will take off his diamond ring and exchange it for water. Those who do not have to should not look at that as any establishment of price either of that water or for that drink.
Secondly, to the extent that the stock exchange is a leading indicator of things to come, the market is probably scaling down earnings forecast for 2009 and even 2010. But the most important thing for the investors to see is the prices. Prices of 80% of the stocks are down at least 70%, 60% of the stocks are down 80% from their peak. 1930 has already been built into this price. People are imagining 1930; no one sane is alive today to tell us about what exactly happened in 1930. ( This I have been writing many times here that no one knows what happened in 1930 and the situtaion was different) India has no case to experience 1930. So except for those people who have to sell under compulsions should just wait on the sidelines and interpret the prices in any manner.
Q: It was a very brave word, but when you are sitting there watching your portfolio decline by value like today it did by 30-50% how can you not – and the news seems to be only getting worse. There is a lot of rumour mongering on the mutual fund side and we have heard all kinds of regulatory noises about the FMP (fixed maturity plan) system and how they want more disclosures, how that could potentially be ridiculous exposure of FMP mutual funds to the real estate market, how long is this going to last? Where do you stop being fearful?
A: There is something very strange and sad that is happening — those who took a twelve month call and bought into FMPs are now trying to review their portfolio on a 15 day or a one month basis. You will create a run on any bank if you try and break your fixed deposit and demand money, I think some of that is happening.
Mutual fund schemes had exposures to real estate companies and some of them – we heard about one company defaulting yesterday there would be some panic. But I wish mutual fund industry would come out and put up a white paper on what exactly is happening because that would probably staunch the panic lot more then letting people imagine. I think while there is no denying whether the world is going into recession and there is demand shrinking but the prices have shrunken lot further, people are hurting themselves by panicking beyond the reason whether it is FMPs whether it is stocks or whether it is other asset classes.
Q: What is your assessment of how badly of the mutual fund industry especially the FMP portion is when it comes to its exposure to real estate and how much worse could the whole redemption pressure get and therefore what kind of collateral impact it could have on the markets?
A: Promoters, the government and institutions hold 80-85% of the total holdings, a very small portion is held by retail at large and that is probably a few USD 100 billion. The same is the case with the amount of assets held in the mutual funds by retail investors and that would be a few thousand crores.
So if I were to put this into perspective; of the total wealth of the country, this is not a large amount. Today we have the Finance Minister (FM) who is monitoring this situation twenty-four hours, he has virtually become an anchor person on media channels, he is assuring people everyday – given the situation, I think the moment there is something that can be tackled I am sure the Reserve Bank of India (RBI) and the ministry will tackle it very adequately.
Q: Are you saying that you are not worried about the FMP and the larger mutual fund exposure to the real estate industry and you do not think it will have a dramatic impact on the markets if things go worsen from here onwards?
A: Whole point is stampede is caused not by causes as much as by panic. Today you are seeing a stampede. What I am urging the ministry and the mutual fund industry particularly is to come out openly and explain that and then we can have a solution. Unfortunately, today that is not happening. I am not fully aware of the reason why that is not happening but clearly if some of the banks in Europe, particularly, went to the government and said they had trouble they would be nationalized, get protection and things could be handled a lot better. Depositors would then not have panic.
There has been trouble; but my guess is that of the total assets held under the FMP schemes, the amount that could be exposed to real estate could be really in trouble and cannot be that large as to cause a panic all around. That will damage our economy unnecessarily.
Q: We do have news from Sebi that it has asked for more disclosures on FMP allocation, so hopefully that will help straighten out that system, but while talking about regulatory action we also saw Sebi come out this week and clamp down on practice of overseas lending of stocks that were underlying assets to P-notes. Do you in your assessment think that will help reduce the short positions in this market and therefore help shore the market up?
A: Today given the enormity of the challenge that any regulator is facing. One is not sure as to what results one would get from a particular action. But if one realizes that in these troubled waters, you cannot allow people who are sitting on the sidelines to fish. I think it’s absolutely alright to take whatever action based on data that any regulator would have. We have seen that around the world.
The whole point is not to come in the way of short seller, when you have a regular market or don’t have a regular market. I don’t think one can take a classical view about it. I am the last person who would ever say stop the short-seller but today you are not seeing a regular market and therefore if you had to take emergency action based on data, based on transparency as to when these things will reverse, under what conditions, I am not so averse to considering such action.
Q: The Monetary Policy that took place was a completely inactive or non-action policy as many are calling it. Were you disappointed, do you think either this stance of the RBI could have been more reassuring towards the current market situation or should they have taken more action when it comes to either liquidity measures or reducing interest rates?
A: The RBI has almost made it a habit to come out with the monetary policy a few days or a week before the actual date. So I think lot of action took place already. I did not expect any particular action. I think today’s (October 24, 2008) meltdown was more in response to what was happening in Asia and early opening of Europe than monetary policy.
So I think the RBI did quite a lot in the last few days or a week or so. I would urge the Sebi (Securities and Exchange Board of India) to temporarily lift all limits on promoter holdings whether it is buyback, whether it is open offers, whether it is creeping up position for the next two-three months. I think companies and the shareholders are bleeding because of this panic selling. What actually is happening is that of the total hedge fund industry, which is of USD 2.5 trillion; exposure to India of all FIIs (Foreign Institutional Investors) hedge funds put together is somewhere between USD 50-60 billion. Out of this USD 5-6 billion of panic selling can ruin this market for a long time to come. So I think today those promoters who have cash and who want to buy in the market should be permitted to do that. This is something that is within Sebi’s powers and I would urge it to take drastic action on this front.(Does this mean Vallabh Bhansali has blasted SEBI or Fin Ministry? he need not write this ? or should come out and appreciate SEBI or Fin Min when these steps are taken?)
Q: Do you think that will help provide some sort of support to many of these stocks that are falling especially blue-chip stocks because many of the promoters we hear also are either out of cash and may have had to pledge their previous shares to be able to raise money to either subscribe to some sort of previously subscribe to warrants or things like that or many promoters do not want to buy because everyday prices are going down by 10-30%?
A: We are doing a number of buyback offers and going to several clients to tell them to come and support their shares if the creeping limits are open.
Today the stocks are available at 30-40% of replacement cost. I can assure you we will continue to breed children, we will marry, build homes, educate and the economy will be absolutely normal, we will grow at at least 5-6% for next two years. Our stocks are cheap based on any valuation and people must understand that.
Q: Do you expect any kind of direct government intervention or even indirect government intervention in these markets and any kind of Sovereign fund that the government might set up to help shore up levels in this market or to create some sort of reassurance- I am talking in vague terms because it is a vague idea but you think it could extend to reality?A: I don’t think it’s impossible. This country has shown the capability to pledge its gold, to swim differently from rest of the world in Asian crisis, so I would not rule that out.
But what the government can do more easily is to give relief on dividend distribution tax, on STT, reinterpret the capital gains tax, so at least those long-term investors who were driven out by short-term speculation in the last November-December-January period, those strong hands will be strengthened by those measures.(Another case in point.....)
Q: What form could this sovereign or market intervention fund take?
A: It could be done in two methods. Hong Kong sometime back created a USD 16 billion fund to stem the rot. This was during the Asian crisis. They came forward to do that and made a huge amount of money doing that. So, you could say that you are going to buy certain good stocks. The financial sector, for example, is one good place to begin and they could do that.
They could also put a floor on the Sensex or Nifty. They say alright here we have a huge position very similar to what Warren Buffet did. He bought 2018 Dow Jones saying that look I take a bet that the Dow Jones will not go below that, so it requires some imagination because it is beyond current regulations. One doesn't have to worry about regulations, but given our exchange reserve, the time is to use all of that.
Q: How long is this pain going to last? Where do you think this market could potentially find its bottom?
A: The USD 2 billion or USD 3 billion of stocks held by the hedge funds are loosing value much faster than the Sensex. Some of the stocks are falling about 20% to 25% and there is a huge amount of capitulation. Some of these hedge funds may go bankrupt or they will have sold out without damaging the overall market. Over a period these hedge funds will be bailed out or they will go to some different route in the world, one doesn’t know.
A lot of this troubled is borrowed and it is not home grown. We are very close on putting a cap on all these problems it’s a matter of few weeks according to me and not a few months that you are going to see the world come to some kind of order that all the regulatory affairs will be ahead of the curve, they started late but they are constantly pressing ahead to get the curve of the problem and I hope that in a few weeks we will be ahead of the curve.
Q: Fundamentally the economic data across the world is looking like it will at take least 6-8-12 months for there to be any positive news, is that how long it will take for our markets also to find a bottom and stabilize?
A: Stock market is a leading factor; which means it discounts things way before those causes appear.( That I have reiterated many times here) You will see economic data become adverse for several months but it is all got built into prices, when 80% of the stocks are down its already discounted in the prices. Investors often forgot to look at prices. They looked for justifications when the index was at 20,000 and yet again trying to look for justification when the index is around 8,000. Please don’t look for justifications and just look at the prices. I could give you hundreds of examples that the stocks have already discounted all the trouble that will get recorded over the next few months is all done.
My Commnets:
Ravi alias Deepak alias Shankar Sharma! ,I hope either you are Shankar Sharma himself as I see no reason for you to get perturbed when I write anything against anyone.Remember there are many blogs where these chartist and analyst are lamblasted like anything.
How SS feels is not the readers business and tell me what I should do and explain me what I need to do.Let SS himself come here and tell me what he wants from me and whether I should appreciate him or not?Why you become the judge?It is just like you yourself is SS and asking for that! Is it so?Shankar Sharma visiting my site?That is great...for me......Lol.....
I have kept my blog open for readers to write commnets where many blog has no such tabs but that doesn't mean they become impolite to me.....If you do not like me or say hate me.....please stop reading me, that's all......
The Panic of 1907, also known as the 1907 Bankers' Panic, was a financial crisis that occurred in the United States when the New York Stock Exchange fell close to 50 percent from its peak the previous year. Panic occu
rred during a time of economic recession, when there were numerous runs on banks and trust companies. The 1907 panic eventually spread throughout the nation when many state and local banks and businesses entered into bankruptcy. Primary causes of the run include a retraction of market liquidity by a number of New York City banks, loss of confidence among depositors, and the absence of a statutory lender of last resort.
The crisis occurred after the failure of an attempt in October 1907 to corner the market on stock of the United Copper Company. When this bid failed, banks that had lent money to the cornering scheme suffered runs which later spread to affiliated banks and trusts, leading a week later to the downfall of the Knickerbocker Trust Company—New York City's third-largest trust. The collapse of the Knickerbocker spread fear throughout the city's trusts as regional banks withdrew reserves from New York City banks. Panic extended across the nation as vast numbers of people withdrew deposits from their regional banks.
The panic would
have deepened if not for the intervention of financier J. P. Morgan, who pledged large sums of his own money, and convinced other New York bankers to do the same, to shore up the banking system.When the chaos began to shake the confidence of New York's banks, the city's most famous banker was out of town. J.P. Morgan, president of the eponymous J.P. Morgan & Co., was attending a church convention in Richmond, Virginia. Morgan was not only the city's wealthiest and most well-connected banker, but he had experience with crisis—he helped rescue the U.S. Treasury during the Panic of 1893. As news of the crisis gathered, Morgan returned to Wall Street from his convention late on the night of Saturday, October 19. The following morning, the library of Morgan's brownstone at Madison Avenue and 36th St. had become a revolving door of New York City bank and trust company presidents arriving to share information about (and seek help surviving) the impending crisis
Morgan and his associates examined the books of the Knickerbocker Trust, but decided it was insolvent and did not intervene to stop the run. Its failure, however, triggered runs on even healthy trusts, prompting Morgan to take charge of the rescue operation. On the afternoon of Tuesday, October 22, the president of the Trust Company of America asked Morgan for assistance. That evening Morgan conferred with George F. Baker, the president of First National Bank, James Stillman of the National City Bank of New York (the ancestor of Citibank), and the United States Secretary of the Treasury, George B. Cortelyou. Cortelyou said that he was ready to deposit government money in the banks to help shore up their deposits. After an overnight audit of the Trust Company of America showed the institution to be sound, on Wednesday afternoon Morgan declared, “This is the place to stop the trouble, then."
As a run began on the Trust Company of America, Morgan worked with Stillman and Baker to liquidate the company's assets to allow the bank to pay depositors. The bank survived to the close of business, but Morgan knew that additional money would be needed to keep it solvent through the following day. That night he assembled the presidents of the other trust companies and held them in a meeting until midnight when they agreed to provide loans of $8.25 million to allow the Trust Company of America to stay open the next day. On Thursday morning Cortelyou deposited around $25 million into a number of New York banks. John D. Rockefeller, the wealthiest man in America, deposited a further $10 million in Stillman's National City Bank. Rockefeller's massive deposit left the National City Bank with the deepest reserves of any bank in the city. To instill public confidence, Rockefeller phoned Melville Stone, the manager of the Associated Press, and told him that he would pledge half of his wealth to maintain America's credit.
At the time, the United States did not have a central bank to inject liquidity back into the market. By November the contagion had largely ended, yet a further crisis emerged when a large brokerage firm borrowed heavily using the stock of Tennessee Coal, Iron and Railroad Company (TC&I) as collateral. Collapse of TC&I's stock price was averted by an emergency takeover approved by anti-monopolist president Theodore Roosevelt. The following year, Senator Nelson W. Aldrich established and chaired a commission to investigate the crisis and propose future solutions, leading to the creation of the Federal Reserve System.
There are some interesting historical incidences of extreme volatility & what happened subsequently.
There is a consensus on nearing a bottom around 2370 to 2450 levels by Monday or by settlement day. The EW internals also suggest a similar scenario. Resistances at 2650 to 2750 and a likely support between 2370 to 2450. So the strategy for traders should be to sell near the resistances when the shortterm is overbought and buy near the supports when the short term is oversold.
But for investors...Keep buying into every falls some great scrips in sectors such as infrastructure, power..(My knowledge in individual scrips is limited).
As per our "5-Minute chart" posted above, Nifty is expected to complete a 4th and then a 5th down(If it has a "abc" structure, then the fall may end at the completion of 3rd itself), mostly by Monday and position itself for a sharp bounce by Tue/ wed. Monday's Asian market moves will provide further clues.
The charts above are self explanatory, however CHART1 is the extension/progression chart from 5298-3750-4649 giving the targets till date.. .. The CHART 2 shows that speed lines connection 5298 to 3790 which is showing support around 2450 area , In hindsight it looks as if that When markets could not hold above 3250 and then failed repeatedly to cross 3300, it was as if waiting to test this SPEED LINE AREA..Also please note that the fall from 5298-3790 took 52 days(red line/days) & the fall this time from 4649 to 2525 is already 49 days old..(blue line days), so looking at the markets from any angle in the above two charts gives me a understanding that despite that fact that we are at all time lows.... the supportlines/time cycle/support areas ..& we could be near a end..Do study the charts , make your own anlysis, and take your call..This carnage too will end abruptly as the euphoria ended rudely in january..cheers.
rred during a time of economic recession, when there were numerous runs on banks and trust companies. The 1907 panic eventually spread throughout the nation when many state and local banks and businesses entered into bankruptcy. Primary causes of the run include a retraction of market liquidity by a number of New York City banks, loss of confidence among depositors, and the absence of a statutory lender of last resort.The crisis occurred after the failure of an attempt in October 1907 to corner the market on stock of the United Copper Company. When this bid failed, banks that had lent money to the cornering scheme suffered runs which later spread to affiliated banks and trusts, leading a week later to the downfall of the Knickerbocker Trust Company—New York City's third-largest trust. The collapse of the Knickerbocker spread fear throughout the city's trusts as regional banks withdrew reserves from New York City banks. Panic extended across the nation as vast numbers of people withdrew deposits from their regional banks.
The panic would
have deepened if not for the intervention of financier J. P. Morgan, who pledged large sums of his own money, and convinced other New York bankers to do the same, to shore up the banking system.When the chaos began to shake the confidence of New York's banks, the city's most famous banker was out of town. J.P. Morgan, president of the eponymous J.P. Morgan & Co., was attending a church convention in Richmond, Virginia. Morgan was not only the city's wealthiest and most well-connected banker, but he had experience with crisis—he helped rescue the U.S. Treasury during the Panic of 1893. As news of the crisis gathered, Morgan returned to Wall Street from his convention late on the night of Saturday, October 19. The following morning, the library of Morgan's brownstone at Madison Avenue and 36th St. had become a revolving door of New York City bank and trust company presidents arriving to share information about (and seek help surviving) the impending crisisMorgan and his associates examined the books of the Knickerbocker Trust, but decided it was insolvent and did not intervene to stop the run. Its failure, however, triggered runs on even healthy trusts, prompting Morgan to take charge of the rescue operation. On the afternoon of Tuesday, October 22, the president of the Trust Company of America asked Morgan for assistance. That evening Morgan conferred with George F. Baker, the president of First National Bank, James Stillman of the National City Bank of New York (the ancestor of Citibank), and the United States Secretary of the Treasury, George B. Cortelyou. Cortelyou said that he was ready to deposit government money in the banks to help shore up their deposits. After an overnight audit of the Trust Company of America showed the institution to be sound, on Wednesday afternoon Morgan declared, “This is the place to stop the trouble, then."
As a run began on the Trust Company of America, Morgan worked with Stillman and Baker to liquidate the company's assets to allow the bank to pay depositors. The bank survived to the close of business, but Morgan knew that additional money would be needed to keep it solvent through the following day. That night he assembled the presidents of the other trust companies and held them in a meeting until midnight when they agreed to provide loans of $8.25 million to allow the Trust Company of America to stay open the next day. On Thursday morning Cortelyou deposited around $25 million into a number of New York banks. John D. Rockefeller, the wealthiest man in America, deposited a further $10 million in Stillman's National City Bank. Rockefeller's massive deposit left the National City Bank with the deepest reserves of any bank in the city. To instill public confidence, Rockefeller phoned Melville Stone, the manager of the Associated Press, and told him that he would pledge half of his wealth to maintain America's credit.
At the time, the United States did not have a central bank to inject liquidity back into the market. By November the contagion had largely ended, yet a further crisis emerged when a large brokerage firm borrowed heavily using the stock of Tennessee Coal, Iron and Railroad Company (TC&I) as collateral. Collapse of TC&I's stock price was averted by an emergency takeover approved by anti-monopolist president Theodore Roosevelt. The following year, Senator Nelson W. Aldrich established and chaired a commission to investigate the crisis and propose future solutions, leading to the creation of the Federal Reserve System.
There are some interesting historical incidences of extreme volatility & what happened subsequently.
There is a consensus on nearing a bottom around 2370 to 2450 levels by Monday or by settlement day. The EW internals also suggest a similar scenario. Resistances at 2650 to 2750 and a likely support between 2370 to 2450. So the strategy for traders should be to sell near the resistances when the shortterm is overbought and buy near the supports when the short term is oversold.
But for investors...Keep buying into every falls some great scrips in sectors such as infrastructure, power..(My knowledge in individual scrips is limited).
As per our "5-Minute chart" posted above, Nifty is expected to complete a 4th and then a 5th down(If it has a "abc" structure, then the fall may end at the completion of 3rd itself), mostly by Monday and position itself for a sharp bounce by Tue/ wed. Monday's Asian market moves will provide further clues.
The charts above are self explanatory, however CHART1 is the extension/progression chart from 5298-3750-4649 giving the targets till date.. .. The CHART 2 shows that speed lines connection 5298 to 3790 which is showing support around 2450 area , In hindsight it looks as if that When markets could not hold above 3250 and then failed repeatedly to cross 3300, it was as if waiting to test this SPEED LINE AREA..Also please note that the fall from 5298-3790 took 52 days(red line/days) & the fall this time from 4649 to 2525 is already 49 days old..(blue line days), so looking at the markets from any angle in the above two charts gives me a understanding that despite that fact that we are at all time lows.... the supportlines/time cycle/support areas ..& we could be near a end..Do study the charts , make your own anlysis, and take your call..This carnage too will end abruptly as the euphoria ended rudely in january..cheers.RBI added salt to wounds by not cutting rates and high net worth individuals joined to FIIs in selling their holdings. BSE Sensex corrected by 58% in 2008 and many stocks are now trading at their all time lows. Q2 results failed to infuse confidence in the future prospects and Company managements gave negative or cautious guidance about future prospects. Real estate and aviation sectors are on the edge of bankruptcy while hotels, jewellery and textiles sectors are on the edge of meltdown. Commodities are in cyclical downturn. FIIs will continue to exit and rupee will continue to fall.
Significant statistics:
1. Investors lost Rs 45 trillion in stock markets since January.
2. RBI kept all interest rates unchanged. No cut in CRR and SLRs. Surprise decision.
3. 92.6% bank deposits are fully protected under the Deposit and Insurance and Credit Guarantee scheme in India- FM Chidambaram. In the event of liquidation, reconstruction, amalgamation of an insured bank, every depositor is entitled to repayment of his deposit up to Rs one lakh.
4. 350 BSE stocks hit all time low. Some of these scrips are JP Associates, Suzlon, Idea, Unitech, DLF, Cipla, Ranbaxy, REC, Gammon Infra, OnMobile, Power Grid, PFC, GMR Infra, Lanco Infra and Reliance Power etc.
Economic statements:
1. We have not defaulted to Noida Authority- Unitech Managing Director.
2. “30 countries whose balance of payments will experience a severe deterioration in the wake of financial crisis” – World Bank President.
3. Indian economy will grow at 7-7.5% - PM Manmohan Singh. My estimation for GDP growth is around 6.5-7%.
4. "Now everybody believes the price will go down. And the developers don't want to sell at a lower price. Nobody wants to sell, and nobody wants to buy" says William Xin, CFO of China Housing and Land Development.
5. Short term interest rates will remain stable for some time- SBI Chairman.
Negative news:
1. OPEC cuts production to stem price fall. Price rise will lead to further reduction in consumption. Global economies should encourage alternate energy sources.
2. RBI kept rates unchanged and decided to take “wait and watch policy”.
Recession news:
1. USA: Xerox will cut 3,000 jobs while Chrysler cut 25% of jobs. House prices will fall further 25% in 2009. New York Times reported 50% decline in net profit. AIG borrowed $90 billion from Federal Reserve. But home sales are picking up in US due to cheap prices.
2. America: 27 American states are in recession while 15 states are on the verge of recession. 2 million jobs will be lost in US and unemployment rate will touch 8% by late 2009. Healthcare and education jobs may escape from this crisis.
3. Asia will be severely affected due to decrease in consumption of western countries. Exports based economies and sectors will be impacted severely.
4. China Government is taking steps to contain crisis in real estate market.
5. IMF ordered Pakistan Government to cut military spending by 30%.
Quarterly results analysis: Negative surprises came from heavy weights like BHEL, Maruti and JSW Steel etc. Positive surprises are coming from mid caps and niche stocks. FMCG is a safe bet in any bear market.
1. Dolphin Offshore Enterprises: Bumper results. Company announced 148% rise in sales and 1452% increase in net profit. Good scrip for "growth portfolio".
CMP: 128; P/E: 4.8; Book value: 80.
2. Alstom projects India:
Wonderful results. Company announced 47% increase in sales while net profit rose by 143%. Very good performance. Punj Lloyd, Crompton Greeves and Larsen are other good picks. BHEL gave a negative surprise in Q2.
CMP: 210.5; P/E: 19
3. Shriram transport Finance:
Good results. NBFC reported 58% increase in sales and 79% rise in net profit. Keep it up.
CMP: 206.6; P/E: 8.8; Book value: 90.
4. Rural Electrification Corporation (REC):
Safe investment. PSU announced 35% increase in both sales and net profit. REC is a must have scrip in every “Value investor portfolio”.
CMP: 63.3; P/E: 6; Book value: 65.
5. Gujarat State Petronet: Good results. Sales rose by 24% while profit increased by 74%.
6. Tata Steel: Good results. Steel giant reported 43% rise in sales and 50% increase in net profit. Steel prices and demand will decline in the coming months. How will it tackle? Good performance but other income is the main reason.
7. PTC India:
Good results. PSU announced 38% increase in sales and 187% increase in net profit. PTC is a must have stock in every “value portfolio”.
CMP: 47.8; P/E: 18; Book value: 65.
8. KSB Pumps: Good results. Company reported 26% rise in sales and 167% increase in net profit.
9. Meghmani organics: Wonderful results. This pigment company announced 47% increase in net sales while net profit rose by 67%.
CMP: 10.75; P/E: 6; Book value: 16
10. Lupin announced 53% increase in net profit. Safe pharma stock in bear market.
Decent results:
Hindustan Unilever, Zee News, Asian Paints, AP Paper Mills, Webel Sl Energy, Punjab Chemicals, Graphite India, SRF, Monsanto India, Sterling Bio-tech, PVR, Torrent Pharma, Colgate-Palmolive, Dishman Pharma, CRISIL, Aditya Birla Nuvo, Usha Martin, Tamilnadu Newsprint, Fulford and Jyothi Structures.
Disappointments: NTPC, BHEL, ABB, Maruti Suzuki and ITC.
Positive surprise: HCC and GE Shipping. Will they keep up this good performance? GE shipping may find it difficult.
Poor results: GSK Pharma, Rain Commodities, Jain Irrigation, GMDC, Kalyani Steels, HEG, Great Offshore, Gammon India, Nirma, JMC Projects, Greaves Cotton, Bank of Maharashtra, Balaji telefilms, Insecticides India, Tata Metaliks, Bharat Electronics, Garware Offshore, Ambuja Cements, JSW Steels, Shah Wallace, MIRC Electronics, Varun Shipping and Eastern Silk.
Must read:
1. 5 myths about the election and the stock market.
Where is the bottom?
1. Fundamentals and growth prospects justify 8,000-8,500 levels as most of the companies are announcing poor results and this bad performance will continue in the next quarter also. Only positive aspect is even good companies are also falling along with bad stockss. Concentrate only on those stocks. SIP based investment is better. One should not have a single bad stock in the portfolio.
2. FIIs: Fundamentals will not play any role in this market. Future market course will depend on FIIs. They are just selling with huge losses means they are in desperate need for money. They will sell whenever a opportunity is available. They just need money to pay back at home. Stock markets will find bottom when they stopped selling. When will they stop selling? No one knew including FIIs.
3. Gold: Generally gold rises when stock markets fell. But gold is also falling. It indicates either liquidity problems or crisis in confidence. Cash is king. People just want to sit on cash.
Final verdict: Don’t try to find logic in this market. Everything will depend on foreign investors and their desperate need for money. No new FII will enter into India when our rupee is at Rs 50 levels. Hedge funds are another problem. Things are changing at an alarming pace. Monitor the situation on day to day basis. New investors should stay from stock markets.
Stock Market prediction: BSE Sensex will touch 21,000 levels may be in late 2011. Those who entered at 21,000 levels in January, 2008 need to wait for another 30-40 months. We will get a clear picture by January, 2009. Except stock investors, Indians have not seen the real effects of current economic crisis. Real crisis will be unfolded on Indians in the next 2 months. Stock markets always act earlier than other investment segments. Lucky people who are sitting on cash and those who can wait for 2-3 years will get unbelievable investment opportunities across all financial segments in the coming months. These people are the next millionaires. Do you have cash?
Where is the investment opportunity?
Many niche stocks are corrected by more than 80% and these companies announced wonderful results in this quarter. FIIs will continue to sell their holdings in these stocks just out of necessity. Long term investors should concentrate on these scrips and accumulate them in SIP manner. When will you get outstanding companies at such a very low valuations? 100% growth stocks at a P/E of 4-5. But these scrips are only for long term investors. They will not participate in the short term rallies but provide good investment opportunities for long term.
Very few stocks in other sectors like Punj Lloyd, Crompton Greeves, Sintex, Titan, Texmaco and Axis Bank etc also announced good results in the September quarter. Closely follow the Q2 results and pick 20-30 best scrips that includes value stocks, growth companies and niche companies and build a great portfolio by accumulating on every fall.
Big hope: Indian Government asked LIC, UTI and other Public Sector investment institutions to buy stocks aggressively to arrest stock market fall. Will they succeed?
Big negative: There will be an unimaginable meltdown in the real estate sector which will erode the wealth of big and small investors. Speculative investors are the worst sufferers. Some people in this generation may pay heavy price for their greed or lack of knowledge on the cyclic nature of real estate sector. China is already suffering from real estate meltdown.
The daily chart (top) shows that a break above 320 is a *buy* and on the weekly chart watch the higher lows - a rare event these days !
Nothing much from the trade from US markets except that it was very volatile and it was not a washout as was in Asia , specially here in India. This OCTOBER MONTH will go down in history as the mother of CAPITULATION, for world financial markets and a huge watershed which decades ahead will be discussed by TAs, for clues and Analysis.
So whats in store next week, most people are seeking views and help of experts as to how to proceed...equity/commodities etc all giving no safe heaven????The fact is no one knows, but someone is buying..People looking ahead and with cash have bought in the last few days,including my wife, and will buy scrips if they dip more for trade and hold....People with Resource capacity & risk appetite only should buy here , otherwise just trade the trends with options ,NF, or one can do daytrades..The fact sadly is that most traders/investors world over play on the long side only as they do stocks ..and are not savvy in futures/options..thus their pain is more high as they dont play the short side of the market.
Coming back home S/R in NIFTY next week will be around 2800, with support at around 2350 & resistance around 3050.It being a Diwali week and also truncated , volumes maybe less..Take your call, will look at some charts tomorrow and try to make some sense out of them for future..cheers..
I have been looking at Nifty strangles for a while and the results seem to be very encouraging. Essentially it's about buying an option strangle - a lower strike put and a higher strike call - near the money, for a quick turnaround in these markets.
I'd mentioned last about a 50% return, and later a 38% return, on a September strangle, which were reasonable. Those were based on a hypothesis that the Nifty moves dramatically after being range bound for a few months. (And how that is true in October!)
This month, I decided to start off with a strangle. And then chickened out. A 4000 call/3800 put strangle cost me Rs. 287. I sold out for Rs. 249, incurring a 20% loss. In hindsight I would have got over 1400 for it if I had held till now - but that's teaching me a lesson. (Remember this is per lot of Nifty, size 50 each)
I then decided when the Nifty moved a lot, that implied volatilities were through the roof. the Nifty was around 3300 then - so I said, heck, the Nifty isn't sticking around here too long. So a 3300/3400 strangle was bought, for Rs. 135/123 - a total of Rs. 258 per Nifty - on a per-lot level, this is an investment of about 12500. (I usually buy larger quantities, and there is enough liquidity to take in enough)
The idea was to hit the strangles when the IV was very high and the market had just moved a considerable amount, and the target was around 30%.
Sure enough, the Nifty went down to 3050 in a couple days, netting me Rs. 335 on the return side - I cashed in, with a 30% return.
And today I saw the volatility going nuts again, and I bought yet another strangle - this time a November 2850 put, 2900 call - for a premium of Rs. 500 total. And that is up to about Rs. 570 today, though I still have a 30% target.
I'm now considering systematising this - a) buy strangles when the market stays rangebound for over two months, and b) buy strangles when the IV goes to ridiculous highs (like 55+).
I know the first part has had very good results in the recent past. I also know the second part has worked recently too. It will be interesting to see if the theories still hold.
Also need to investigate optimum profit targets (or a trailing stop loss) and an optimum holding period. Can't initiate a strangle in the last few days of expiry - that's one thing I've learnt.
Position sizing here is tough. Since premium is very very volatile, you can't put all your money in there - perhaps 10-15% of the money goes in each time. So even a 30% return is like a 3% return on your whole portfolio - still decent. I need to experiment with various levels. But the preliminary tests are very interesting.
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