Yes..thats what they say in EW language when a triangle develops in the charts subsequent to a steep fall or steep rise. Triangles develop because prices have fallen or risen too fast and the time factor plays out in a triangle. Triangles precedes the end of that cycle wave. So the next down move whenever that takes place will be the end of this fall for some time to come.
So "if " Nifty is playing out the "triangle" after the fall to 2253, it is in its "e" or the final segment of that triangle. How far this "e" wave can go is not certain. So a channeling of this up move from the low of 2662 should help in reversing the trade.
And there are those who feels that the 4th wave ended at 3147 as a "Flat - abc" and the 5th wave down has started with its first fall ended at 2662 and the second up is on and poised to move down in its 3rd down...confirmation of the same will be a fall below 2775 or 2662.
And then there is another view from "Mr.Vivek Patil's" last week write up where in he has hinted at the last leg("g") up of a "Bow Tie Diametric" scenario as a "X" wave after which the last fall to happen. He has also detailed on various other possibilities which require further confirmations of future price movements.
He states furthermore as below:
As I already mentioned, “Once the “x” gets over, the 3rd corrective would preferably develop as a Triangle. The ‘a’ leg of a Triangle is usually a violent action, which would threaten the low of 7697 made in Oct, creating the lowest value, preferably near 6150-6500 as the final sell-off of the bear phase. Remaining legs of the ending Triangle, b,c,d,e, would appears as a sideways basing action to complete the Triple Combination from ‘Jan high of 21206.”
This, I said, “would support the theory that some kind of catastrophic event would be seen in the 3rd corrective, creating the lowest value. Creation of a permanent bottom value needs such an event, and is simply a matter of history of the stock market at least during the previous two bear cycles I know of.”
I had said, “ending ‘x’, in effect, would mean that such a catastrophic event can occur within the next 5-10 days, whereas, the Diametric scenario, with ‘g’ leg developing upwards/sideways (as ending leg of ‘x’) before the big fall, is a way to postpone such event to a future date, probably to the end of ‘Feb-09.”
As I said, “‘g’ leg would be the last effort to protect ‘Oct lows, which can preferably develop in a failure wave appearing as a sideways consolidation.” Clarity on whether "x" is still forming as Diametric or is over at 10470 would be expected in the next week or two.
Following is his commentary on a monthly scale:-
“Triple Combination can occur only as the largest leg of a Triangle (or Terminal). Therefore, the fall from ‘Jan highs is likely to be the “a” or first leg of the larger Triangle.”
A Triangle always has exactly five legs, to be marked as a-b-c-d-e. Once “a” of Triangle is over, configuring as a Triple Combination, “b” leg should move higher to about 50% of “a” leg. Of the four retracing legs of a Triangle, 3 out of 4 should retrace at least 50% of their respective previous legs. Since “a” leg would have consumed about 13 months since Jan’08, the entire Triangle, consisting of five legs, could consume 3 to 5 years.
I had, accordingly, targeted sub-10k levels for Sensex price-wise, and a minimum of 13 months into bear phase time-wise. Though the price targets have been achieved, the time targets are yet to be achieved. Remember, in technical analysis, both time and price forecasts must be achieved. Long-term investors should, therefore, wait till then. As long as Sensex keeps on making lower highs, the bear phase continues.
Besides price \ time damage, I have been mentioning scam as a usual occurrence after 8-year cycle top. In the current cycle, this may have, or will unfold further in the Global financial markets. The size of the figures will, therefore, be much larger than the earlier ones, and so will be the number of people involved in it.
Furthermore, the history shows that the bull always goes to jail. (Raju did).
Another parameter that leads to the actual lowest value of the bear cycle is the catastrophic event. Such event would be a terrible disaster or accident, especially the one that leads to a great loss of life. The last two cycles had seen terrorist activities, serial blast in Mumbai during ‘1993 and WTC tower collapse during ‘2001.
These events happen suddenly, without any warning, and their catastrophic proportions are not known even while they are happening. During ‘1993, one blast would have been normal, but 13 serially proved catastrophic. During ‘2001, 1st hit could have been an accident, but two in succession was catastrophic.
These events led to such desperation that the lows created thereafter were never ever broken again, Sensex low of 1980 during ‘1993 and 2584 during ‘2001.
Ironically, therefore, such events did, and will provide the best of the investment opportunity to an investor, who is able to take it when it comes. If so, we could be on watch, from now till whenever it occurs. Perhaps, the 13th month, i.e. February’2009 could be the focused time zone.
With last week’s accounting scam from Satyam, one more parameter of bear market has unfolded as was argued for. The last remaining parameter would the catastrophic event, which we are waiting for. At 8600/7700, having seen the required 62% cut from high of 21206, we need such an event to take the Index lower, in which case, I am expecting 6150-6500 to be the lower target.
So "if " Nifty is playing out the "triangle" after the fall to 2253, it is in its "e" or the final segment of that triangle. How far this "e" wave can go is not certain. So a channeling of this up move from the low of 2662 should help in reversing the trade.
And there are those who feels that the 4th wave ended at 3147 as a "Flat - abc" and the 5th wave down has started with its first fall ended at 2662 and the second up is on and poised to move down in its 3rd down...confirmation of the same will be a fall below 2775 or 2662.
And then there is another view from "Mr.Vivek Patil's" last week write up where in he has hinted at the last leg("g") up of a "Bow Tie Diametric" scenario as a "X" wave after which the last fall to happen. He has also detailed on various other possibilities which require further confirmations of future price movements.
He states furthermore as below:
As I already mentioned, “Once the “x” gets over, the 3rd corrective would preferably develop as a Triangle. The ‘a’ leg of a Triangle is usually a violent action, which would threaten the low of 7697 made in Oct, creating the lowest value, preferably near 6150-6500 as the final sell-off of the bear phase. Remaining legs of the ending Triangle, b,c,d,e, would appears as a sideways basing action to complete the Triple Combination from ‘Jan high of 21206.”
This, I said, “would support the theory that some kind of catastrophic event would be seen in the 3rd corrective, creating the lowest value. Creation of a permanent bottom value needs such an event, and is simply a matter of history of the stock market at least during the previous two bear cycles I know of.”
I had said, “ending ‘x’, in effect, would mean that such a catastrophic event can occur within the next 5-10 days, whereas, the Diametric scenario, with ‘g’ leg developing upwards/sideways (as ending leg of ‘x’) before the big fall, is a way to postpone such event to a future date, probably to the end of ‘Feb-09.”
As I said, “‘g’ leg would be the last effort to protect ‘Oct lows, which can preferably develop in a failure wave appearing as a sideways consolidation.” Clarity on whether "x" is still forming as Diametric or is over at 10470 would be expected in the next week or two.
Following is his commentary on a monthly scale:-
“Triple Combination can occur only as the largest leg of a Triangle (or Terminal). Therefore, the fall from ‘Jan highs is likely to be the “a” or first leg of the larger Triangle.”
A Triangle always has exactly five legs, to be marked as a-b-c-d-e. Once “a” of Triangle is over, configuring as a Triple Combination, “b” leg should move higher to about 50% of “a” leg. Of the four retracing legs of a Triangle, 3 out of 4 should retrace at least 50% of their respective previous legs. Since “a” leg would have consumed about 13 months since Jan’08, the entire Triangle, consisting of five legs, could consume 3 to 5 years.
I had, accordingly, targeted sub-10k levels for Sensex price-wise, and a minimum of 13 months into bear phase time-wise. Though the price targets have been achieved, the time targets are yet to be achieved. Remember, in technical analysis, both time and price forecasts must be achieved. Long-term investors should, therefore, wait till then. As long as Sensex keeps on making lower highs, the bear phase continues.
Besides price \ time damage, I have been mentioning scam as a usual occurrence after 8-year cycle top. In the current cycle, this may have, or will unfold further in the Global financial markets. The size of the figures will, therefore, be much larger than the earlier ones, and so will be the number of people involved in it.
Furthermore, the history shows that the bull always goes to jail. (Raju did).
Another parameter that leads to the actual lowest value of the bear cycle is the catastrophic event. Such event would be a terrible disaster or accident, especially the one that leads to a great loss of life. The last two cycles had seen terrorist activities, serial blast in Mumbai during ‘1993 and WTC tower collapse during ‘2001.
These events happen suddenly, without any warning, and their catastrophic proportions are not known even while they are happening. During ‘1993, one blast would have been normal, but 13 serially proved catastrophic. During ‘2001, 1st hit could have been an accident, but two in succession was catastrophic.
These events led to such desperation that the lows created thereafter were never ever broken again, Sensex low of 1980 during ‘1993 and 2584 during ‘2001.
Ironically, therefore, such events did, and will provide the best of the investment opportunity to an investor, who is able to take it when it comes. If so, we could be on watch, from now till whenever it occurs. Perhaps, the 13th month, i.e. February’2009 could be the focused time zone.
With last week’s accounting scam from Satyam, one more parameter of bear market has unfolded as was argued for. The last remaining parameter would the catastrophic event, which we are waiting for. At 8600/7700, having seen the required 62% cut from high of 21206, we need such an event to take the Index lower, in which case, I am expecting 6150-6500 to be the lower target.
Nifty rallied from the short term avg(5 & 10 DMA) at 2775 and closed above the critical "2860" after a halt at 2880.
The weekly TA has given a buy. As there is no clarity in the wave structure, Market can suddenly snap its uptrend and reverse too. So keep some SL as you buy this market. For safety a "2-day low" can be kept as SL or exit/lighten at the sign of "OB" or seeing any -ve div.
Only reliable way, I have been able to figure out this market is by reading the "OB" & "OS" conditions with divergences. At times, EW is helpful.
If cues are +ve, a range of 2850/2860 to 2920/2945 is likely.
Have a great weekend.
The weekly TA has given a buy. As there is no clarity in the wave structure, Market can suddenly snap its uptrend and reverse too. So keep some SL as you buy this market. For safety a "2-day low" can be kept as SL or exit/lighten at the sign of "OB" or seeing any -ve div.
Only reliable way, I have been able to figure out this market is by reading the "OB" & "OS" conditions with divergences. At times, EW is helpful.
If cues are +ve, a range of 2850/2860 to 2920/2945 is likely.
Have a great weekend.
| WEEKLY | ||||
| S2 | S1 | Pivot | R1 | R2 |
| 2,650 | 2,763 | 2,822 | 2,934 | 2,993 |
| DAILY | ||||
| S2 | S1 | Pivot | R1 | R2 |
| 2,736 | 2,806 | 2,843 | 2,913 | 2,950 |
February is the uncertain but crucial month for global economy. Results season ended on positive note despite bad results as investors prepared for worst in Q3. Indian Government has little time to announce stimulus package due to election code from March. UPA Government will announce “popular interim budget” in February from which stock markets may gain nothing if not lose. RBI may announce rate cuts in late February or in early March.
Important decision: SEBI gave just 7 days for promoters to disclose their pledged shares. This disclosure rule will apply to all cases where promoters have pledged over 25,000 shares or more than 1 per cent of the equity of their companies. 150-200 stocks may see new lows due to these disclosures.
Barack Obama has prepared ground for massive stimulus package and he is already taking stern measures against “careless managements”. China and Canada will soon announce big bailout packages. Economists have divided opinions on the outcome of these bailout packages. Irrespective of outcome, these bailout packages may help to improve sentiment in the stock markets. If they fail to yield desired results, there will be huge negative implications. Read this post in New York Times on stimulus package.
But biggest problem for India is elections. When all the Governments are busy in tackling economic crisis and announcing stimulus packages, our leaders are busy with elections means no action which may keep FIIs to stay away from Indian markets.
Highlights of the Q3 results:
1. Public Sector Banks like SBI, PNB, Union Bank and Bank of India announced superb results along with private banks like Federal Bank, Axis and IndusInd bank. But ICICI Bank and HDFC Bank announced disappointing results and with poor outlook. Rising NPAs is a big problem in the coming days. Many banking analysts are thinkings that Banks are hiding their non-performing assets (NPAs). How long can they do it?
2. L&T announced good results but BHEL disappointed investors.
3. NTPC announced good results but Reliance Infra and Tata Power declared poor results.
4. It is waste to talk about companies like DLF, Unitech, Suzlon, Videocon and Tata Motors.
5. Cipla, Sun Pharma and Dr Reddys announced good results but Glenmark, Divis and Lupin shocked investors.
6. Hero Honda is the only saving grace in auto space while Tata Motors, Mahindra and Maruti declared worst results.
7. PSU companies like Indraprastha Gas, GAIL and ONGC declared poor results.
8. Despite operating in a tough economic environment, Mundra Port surprised with excellent results. But port may find it difficult to maintain this kind of growth in this environment.
9. Domestic consumption theory failed. Stocks like Pantaloon, Vishal Retail and Titan announced worst results in this quarter. Multiplex stocks also suffered similar fate. But UTV Software is a positive surprise.
10. Retail, Auto, Real Estate, shipping and Commodities are out. Telecom and IT are on edge. Infrastructure is unpredictable. Can Banks save earnings outlook?
11. Niche companies in education sector like Educomp, Everonn and Core Projects announced good results. Companies like Praj Industries, Navin Flourine, RS Software, Bartronics, OnMobile, JP Hydro, Jain Irrigation, ISCA, Opto Circuits and Compact Disc also announced good results. But these companies may not give returns in bear market.
12. Many sugar companies announced good results along with some seeds companies. But Renuka sugars is a disappointment.
13. Shree Cement, Saskan, SELAN Exploration and NMDC etc are some of the stocks that are positively surprised me in this quarter while Gujarat NRE Coke, Bhushan Steel and JSW Steel declared worst results.
Note: How many companies which posted positive results will continue their growth run? How many companies which posted negative results will turnaround in the next 2 quarters? I have some doubts.
Positive Stock Market news:
1. RIL: the Bombay High Court allowed the sale of gas from the Krishna-Godavari basin at $4.20 per million mBtu and reserved final judgment. RIL is free to sign contracts with gas purchasers under the terms of the EGoM decision for up to 5 years. RIL will start production by the end of this month but RNRL may go to Supreme Court for stay order.
2. SBI announced bumper package for home loan takers.
Bad news for Banking sector:
1. Moody’s downgraded the fundamental credit outlook for the Indian Banking sector over the next 12-1 months. Where to invest?
Economic Statistics of the day:
1. India’s core infrastructure sectors expanded by 2.3% in December 2008. It is 3.2% in December, 2007.
2. 1,300 companies failed to file Corporate Governance reports. SEBI is still waiting to take action on them.
3. S&P suffered worst sell off in January, 2009 since Great Depression.
4. Both Japan and South Korea are expecting more than 9% fall in industrial output. Thailand reported 20% fall in manufacturing output.
5. Gold is now trading at an all-time high of Rs 14,400 per 10 gram.
6. Total number of failed banks in USA in 2009: 6 bank failures in 30 days.
7. Indian software companies which registered a growth of 34% CAGR in IT exports over the period of FY2000 to FY2008, to register 6-8% growth rate in revenues in FY10. Huge fall mainly due to cut in billing rates along with volumes. Global outsourcing industry will face more troubles despite assurances.
8. India: 2008-09 is likely to end with a combined fiscal deficit of over 10 per cent of the GDP. No scope for big-bang stimulus packages.
Q3 results analysis:
1. PNB: Excellent results. Punjab national Bank announced 50% increase in sales and 85% increase in net profit. If there will be a rally, it is banking sector that will hog limelight. SBI, PNB and BOI are my picks in the banking sector.
2. L&T: Company announced 25% increase in net profit (exclude one time gain). Don’t give any importance to these results. Company’s future will depend on Satyam outcome which will decide the sentiment in the counter. Naik created unnecessary headache (Satyam) for a great company. Company announced 600 crore profits (exclude one time gain) which is almost equal to its investment in Satyam Computers. Company gave slowdown guidance.
3. Mundra Port: Excellent results. Must have stock in the next bull market but not at current valuations. Can it able to continue its growth in this bear market? Mundra announced 46% increase in sales and 92% increase in net profit.
4. Allcargo Global Logistics: Positive surprise. Company announced 64% increase in sales and 197% increase in net profit. Can it weather the storm in this tough environment?
5. GMR Infrastructure:
42% increase on standalone basis but 36% fall in consolidated net profit. I failed to understand this stock price for the last 6 months. I don’t know who are buying this stock at such unreasonable valuations and why are they buying this stock which has no visible strong growth prospects in the short term to justify such valuations. I faced similar problem with Maytas Infra in October but Ramalinga Raju solved it. Some people may know something about GMR Infra.
CMP: 73.5; P/E: 100; EPS: 0.8
GMR Infra target price:
A. 45-50 for growth investors.
B. 30-35 for value investors.
6. Niche companies like OnMobile, Navin Flourine, ICSA, Jain Irrigation and Geodesic announced excellent results despite tough environment. OnMobile announced 88% increase in net profit. Tanla failed but OnMobile succeeded in the same environment.
7. Tata Motors and Mahindra: Worst results. Tata Motors reported first quarterly loss in 7 years. There are 50 other companies per day that are announcing poor results. But I am not quoting them.
8. Titan Industries: Domestic consumption shock. 70% fall in net profit.
9. IVRCL Infra and Tube Investments: Negative surprises.
10. Unitech, GVK Power, Videocon, JSW Steel, Jai Corp and Suzlon: Worst results. JSW Steel announced Rs 378 crore loss in this quarter Vs a profit of 50 crore in the last fiscal.
Statements of the day:
1. Global economy will take 4 years to return to positive growth means escape from recession – Bill Gates at Davos.
2. USA is responsible for global crisis and the world financial system needs radical reforms – China and Russia.
3. China PM: "Inappropriate macro-economic policies of some economies and their unsustainable model of development and the failure of financial supervision and regulation are the reasons for current economic crisis. Blind pursuit of profit and a lack of self-discipline which have landed the world economy in the most difficult situation since the Great Depression".
4. Russia PM: "Excessive dependence on what is basically the only reserve currency is dangerous for the world economy is the cause of the crisis".
5. “It is sudden collapse. We had expanded rapidly. Most of the growth was debt-led. We had built on a tiny equity base of just Rs32 crore, and even including share premiums, etc., the company had risen only a total of Rs180 crore as shareholder funds.” R. Subramanian, Subhiksha’s founder and managing director.
Good articles:
1. How bad is the current credit crisis going to get?
2. How US investors are feeling after January results?
3. How economic crisis is affecting/will affect world trade?
4. Excellent article on the future prospects of outsourcing and Morrison Foerster's Sourcing Practice report on outsourcing.
5. Excellent article on American economy.
Recession news:
1. Japan: Country is heading for worst recession since Second World War. Official data showed a record fall in industrial output, a big rise in joblessness (4.4%) and sharp fall in inflation (0.2%). Honda announced 90% fall in net profit. Electronics giant NEC announced 20,000 lay offs. Technology companies are in big trouble.
2. USA: GDP in Q4 declined by 3.8% but it is a good figure than estimates. But don’t be fooled by the figure. Country counted unsold inventory as part of the nation’s output. Steep fall in 27 years.
3. USA: This is the second time; sale of goods fell so drastically in the American history since 1947. 1 lakh people lost jobs in the last 1 week.
4. UK: Job losses are at fastest rate in the small businesses.
5. India: Retail chain “Subhiksha” is now in big financial trouble due to lack of liquidity. But Amazon announced good results in this quarter.
6. Violent protests against the Governments of France and Russia – for their handling of economy in this crisis period. Worst affected countries like UK and USA are still not seeing such protests.
Sensex targets for next 12 months:
Image courtesy: Kotak.
In FY 2008-09:
BSE Sensex is expected to achieve an EPS of 830-850 in this financial year.
1. At extreme crisis: Sensex commands P/E of 8 -9 in the worst of times. So bottom for Sensex is 6,640-7,650.
2. In bearish environment: Sensex generally commands P/E of 10-12. So Sensex target is 8,300-10,200.
3. In good Bear market rally: Sensex is expected to command P/E of 12-15. So maximum upside for Sensex is 10,200-12,750.
In FY2009-10:
According to current economic situation (expected GDP growth rate of 5%), Sensex EPS for FY2010 will be around 720-740.
1. At extreme crisis: Bottom for Sensex will be around 5,760-6,660.
2. In bearish environment: Sensex target is around 7,200-8,880.
3. In good Bear market rally: Sensex will touch 9,000-11,000.
These targets will change according to the changing economic fundamentals. Closely monitor the earnings and change the final target. I am providing all the data along with pros and cons. It is up to you to take a final call.
Important decision: SEBI gave just 7 days for promoters to disclose their pledged shares. This disclosure rule will apply to all cases where promoters have pledged over 25,000 shares or more than 1 per cent of the equity of their companies. 150-200 stocks may see new lows due to these disclosures.
Barack Obama has prepared ground for massive stimulus package and he is already taking stern measures against “careless managements”. China and Canada will soon announce big bailout packages. Economists have divided opinions on the outcome of these bailout packages. Irrespective of outcome, these bailout packages may help to improve sentiment in the stock markets. If they fail to yield desired results, there will be huge negative implications. Read this post in New York Times on stimulus package.
But biggest problem for India is elections. When all the Governments are busy in tackling economic crisis and announcing stimulus packages, our leaders are busy with elections means no action which may keep FIIs to stay away from Indian markets.
Highlights of the Q3 results:
1. Public Sector Banks like SBI, PNB, Union Bank and Bank of India announced superb results along with private banks like Federal Bank, Axis and IndusInd bank. But ICICI Bank and HDFC Bank announced disappointing results and with poor outlook. Rising NPAs is a big problem in the coming days. Many banking analysts are thinkings that Banks are hiding their non-performing assets (NPAs). How long can they do it?
2. L&T announced good results but BHEL disappointed investors.
3. NTPC announced good results but Reliance Infra and Tata Power declared poor results.
4. It is waste to talk about companies like DLF, Unitech, Suzlon, Videocon and Tata Motors.
5. Cipla, Sun Pharma and Dr Reddys announced good results but Glenmark, Divis and Lupin shocked investors.
6. Hero Honda is the only saving grace in auto space while Tata Motors, Mahindra and Maruti declared worst results.
7. PSU companies like Indraprastha Gas, GAIL and ONGC declared poor results.
8. Despite operating in a tough economic environment, Mundra Port surprised with excellent results. But port may find it difficult to maintain this kind of growth in this environment.
9. Domestic consumption theory failed. Stocks like Pantaloon, Vishal Retail and Titan announced worst results in this quarter. Multiplex stocks also suffered similar fate. But UTV Software is a positive surprise.
10. Retail, Auto, Real Estate, shipping and Commodities are out. Telecom and IT are on edge. Infrastructure is unpredictable. Can Banks save earnings outlook?
11. Niche companies in education sector like Educomp, Everonn and Core Projects announced good results. Companies like Praj Industries, Navin Flourine, RS Software, Bartronics, OnMobile, JP Hydro, Jain Irrigation, ISCA, Opto Circuits and Compact Disc also announced good results. But these companies may not give returns in bear market.
12. Many sugar companies announced good results along with some seeds companies. But Renuka sugars is a disappointment.
13. Shree Cement, Saskan, SELAN Exploration and NMDC etc are some of the stocks that are positively surprised me in this quarter while Gujarat NRE Coke, Bhushan Steel and JSW Steel declared worst results.
Note: How many companies which posted positive results will continue their growth run? How many companies which posted negative results will turnaround in the next 2 quarters? I have some doubts.
Positive Stock Market news:
1. RIL: the Bombay High Court allowed the sale of gas from the Krishna-Godavari basin at $4.20 per million mBtu and reserved final judgment. RIL is free to sign contracts with gas purchasers under the terms of the EGoM decision for up to 5 years. RIL will start production by the end of this month but RNRL may go to Supreme Court for stay order.
2. SBI announced bumper package for home loan takers.
Bad news for Banking sector:
1. Moody’s downgraded the fundamental credit outlook for the Indian Banking sector over the next 12-1 months. Where to invest?
Economic Statistics of the day:
1. India’s core infrastructure sectors expanded by 2.3% in December 2008. It is 3.2% in December, 2007.
2. 1,300 companies failed to file Corporate Governance reports. SEBI is still waiting to take action on them.
3. S&P suffered worst sell off in January, 2009 since Great Depression.
4. Both Japan and South Korea are expecting more than 9% fall in industrial output. Thailand reported 20% fall in manufacturing output.
5. Gold is now trading at an all-time high of Rs 14,400 per 10 gram.
6. Total number of failed banks in USA in 2009: 6 bank failures in 30 days.
7. Indian software companies which registered a growth of 34% CAGR in IT exports over the period of FY2000 to FY2008, to register 6-8% growth rate in revenues in FY10. Huge fall mainly due to cut in billing rates along with volumes. Global outsourcing industry will face more troubles despite assurances.
8. India: 2008-09 is likely to end with a combined fiscal deficit of over 10 per cent of the GDP. No scope for big-bang stimulus packages.
Q3 results analysis:
1. PNB: Excellent results. Punjab national Bank announced 50% increase in sales and 85% increase in net profit. If there will be a rally, it is banking sector that will hog limelight. SBI, PNB and BOI are my picks in the banking sector.
2. L&T: Company announced 25% increase in net profit (exclude one time gain). Don’t give any importance to these results. Company’s future will depend on Satyam outcome which will decide the sentiment in the counter. Naik created unnecessary headache (Satyam) for a great company. Company announced 600 crore profits (exclude one time gain) which is almost equal to its investment in Satyam Computers. Company gave slowdown guidance.
3. Mundra Port: Excellent results. Must have stock in the next bull market but not at current valuations. Can it able to continue its growth in this bear market? Mundra announced 46% increase in sales and 92% increase in net profit.
4. Allcargo Global Logistics: Positive surprise. Company announced 64% increase in sales and 197% increase in net profit. Can it weather the storm in this tough environment?
42% increase on standalone basis but 36% fall in consolidated net profit. I failed to understand this stock price for the last 6 months. I don’t know who are buying this stock at such unreasonable valuations and why are they buying this stock which has no visible strong growth prospects in the short term to justify such valuations. I faced similar problem with Maytas Infra in October but Ramalinga Raju solved it. Some people may know something about GMR Infra.
CMP: 73.5; P/E: 100; EPS: 0.8
GMR Infra target price:
A. 45-50 for growth investors.
B. 30-35 for value investors.
6. Niche companies like OnMobile, Navin Flourine, ICSA, Jain Irrigation and Geodesic announced excellent results despite tough environment. OnMobile announced 88% increase in net profit. Tanla failed but OnMobile succeeded in the same environment.
7. Tata Motors and Mahindra: Worst results. Tata Motors reported first quarterly loss in 7 years. There are 50 other companies per day that are announcing poor results. But I am not quoting them.
8. Titan Industries: Domestic consumption shock. 70% fall in net profit.
9. IVRCL Infra and Tube Investments: Negative surprises.
10. Unitech, GVK Power, Videocon, JSW Steel, Jai Corp and Suzlon: Worst results. JSW Steel announced Rs 378 crore loss in this quarter Vs a profit of 50 crore in the last fiscal.
Statements of the day:
1. Global economy will take 4 years to return to positive growth means escape from recession – Bill Gates at Davos.
2. USA is responsible for global crisis and the world financial system needs radical reforms – China and Russia.
3. China PM: "Inappropriate macro-economic policies of some economies and their unsustainable model of development and the failure of financial supervision and regulation are the reasons for current economic crisis. Blind pursuit of profit and a lack of self-discipline which have landed the world economy in the most difficult situation since the Great Depression".
4. Russia PM: "Excessive dependence on what is basically the only reserve currency is dangerous for the world economy is the cause of the crisis".
5. “It is sudden collapse. We had expanded rapidly. Most of the growth was debt-led. We had built on a tiny equity base of just Rs32 crore, and even including share premiums, etc., the company had risen only a total of Rs180 crore as shareholder funds.” R. Subramanian, Subhiksha’s founder and managing director.
Good articles:
1. How bad is the current credit crisis going to get?
2. How US investors are feeling after January results?
3. How economic crisis is affecting/will affect world trade?
4. Excellent article on the future prospects of outsourcing and Morrison Foerster's Sourcing Practice report on outsourcing.
5. Excellent article on American economy.
Recession news:
1. Japan: Country is heading for worst recession since Second World War. Official data showed a record fall in industrial output, a big rise in joblessness (4.4%) and sharp fall in inflation (0.2%). Honda announced 90% fall in net profit. Electronics giant NEC announced 20,000 lay offs. Technology companies are in big trouble.
2. USA: GDP in Q4 declined by 3.8% but it is a good figure than estimates. But don’t be fooled by the figure. Country counted unsold inventory as part of the nation’s output. Steep fall in 27 years.
3. USA: This is the second time; sale of goods fell so drastically in the American history since 1947. 1 lakh people lost jobs in the last 1 week.
4. UK: Job losses are at fastest rate in the small businesses.
5. India: Retail chain “Subhiksha” is now in big financial trouble due to lack of liquidity. But Amazon announced good results in this quarter.
6. Violent protests against the Governments of France and Russia – for their handling of economy in this crisis period. Worst affected countries like UK and USA are still not seeing such protests.
Sensex targets for next 12 months:
In FY 2008-09:
BSE Sensex is expected to achieve an EPS of 830-850 in this financial year.
1. At extreme crisis: Sensex commands P/E of 8 -9 in the worst of times. So bottom for Sensex is 6,640-7,650.
2. In bearish environment: Sensex generally commands P/E of 10-12. So Sensex target is 8,300-10,200.
3. In good Bear market rally: Sensex is expected to command P/E of 12-15. So maximum upside for Sensex is 10,200-12,750.
In FY2009-10:
According to current economic situation (expected GDP growth rate of 5%), Sensex EPS for FY2010 will be around 720-740.
1. At extreme crisis: Bottom for Sensex will be around 5,760-6,660.
2. In bearish environment: Sensex target is around 7,200-8,880.
3. In good Bear market rally: Sensex will touch 9,000-11,000.
These targets will change according to the changing economic fundamentals. Closely monitor the earnings and change the final target. I am providing all the data along with pros and cons. It is up to you to take a final call.
RELIANCE (1270.10)
Sell with stop loss 1332 Target 1201/1165.
ICICI BANK (410.10)
Sell with stop loss 447 Target 376/332.
BHARTI ARTL (627.40)
Sell with stop loss 656 Target 555/469.
BHEL (1358.25)
Sell with stop loss 1402 Target 1315 /1265.
Stop losses are on closing basis.
Calls are on short term basis. (10 days).
All are spot prices.
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