Monday 23 September , 2013

After the dramatic postponement of the tapering by US Fed Reserve  on Thursday 19th  and the increase in the rate by 25 basis points by RBI - the sensex went thru a 1000 point dance.

RBI was quite right the postponement of the tapering is just that - postponement. Can US indefinitely go thru the $ 85 billion QE each month ? The federal reserve already has over $ 3.5 trillion balance sheet and even the tapering by 50% to around $ 45 billion will mean that the US feds are are going to end up with the balance sheet of over $ 4.1 trillion by end of next year , Dec 2014.

Is this really sustainable ? Is it even going to help much longer ?
I think sooner or later the tapering has to happen. The earlier it happens - the better for the everybody around.

RBI was very right is in increasing the rates - inflation and CAD are a major issue that needs to be tackled on a immediate basis . Now is the best time to take all the tough and painful measures  . As any amount of rate reduction is not going to translate into growth or additional investment - till the elections to the Parliament is over some time middle of next year. And consumer INFLATION can not be allowed to rise any further.

All credit to RBI for its determination to address the CAD and Inflation issues.

As for the markets ? - any tough measure to ensure reduction in CAD and Inflation should be seen as a positive sign. And buying on declines or panic selling would be best way to invest in the current equity market. 

Bank stocks in the past 2 weeks have lost anywhere between 25 % (yes bank) to 7 % (SBI) .
Private banks like ICICI (down 15%) and HDFC bank (down 9%) .
The bank Nifty has  lost substantially  in July - down from 11500 to 10500.- (around 10%).
The bank Nifty also went down last month in June  by around 7% (12400 to 10500).

Most of the Banks are trading around 15 % to 35 % below their peak prices recorded in the last 2 months.

Yes there is going to be a lot of pain - and all the Banks are likely to loose further from these levels.

But the level to which a Bank stock would depend on son many factors including the FII holding , apart from its own performance.

Banks would necessarily have to face the prospect of higher NPA , higher interest cost for deposits and general liquidity squeeze.

In these circumstances - I personally think that one is better off buying the Bank Nifty (equivalent to the value of divested amount) and selling the existing Bank stocks from the portfolio. By this the surplus cash of around 75% ( 11% margin + say another 9% for MoM losses) may be placed in deposit Account or debt fund to earn some definite income .
If the Banking stocks recover then selective buying can be made in individual banking stock (by selling the bank nifty slowly) after actual results for the 3rd quarter is published by the banks .

Yeah , sounds too much of work Right ??   -
I just might as well hold the existing bank stocks in the portfolio and keep wondering as to how come SBI and BOB have lost less than 5% in the last 15 days and the Private banks stocks have depreciated anywhere from 11% to 25%.

I might as well rationalise and keep saying to myself that my core portfolio is for long term and so not really worried about short-term continuous fall in stock prices.
Who am I kidding ??
  

Sensex tanked 460 points (Nifty down 140) to 19760 and 5985 respectively.

All due to (if you believe the TV experts) the rupee falling to its lowest level in the past one year to around 56.80 - 57.  and the RBI talking about a very high CAD.

One really thought that RBI has always been talking about the dangers of high CAD and inflation levels.
And there definitely was no big surprise in the GDP for the last quarter at 5%.

It was pretty interesting to hear these experts talking only the previous day of buying in this market - totally changing the tune to  sell sell.

I really admire these experts - they sure can talk and sell their views.

As for me - I am going back to listening to the endless and repetitive discussions on TV about IPL and BCCI and the IMD forecast of rain next week,  Phew - it sure is hot.

May 30 Expiry

The market closed at 20147 (nifty 6105) on Wednesday. A very lacklustre trading day with the Nifty range bound 6085 - 6110.
Apparently the c/f of open position seems to be around 40% - the market view is the Long positions are being carried forward - hoping for a better than expected GDP numbers for the 4th qtr (Jan- March).
Expected to be around 5% (the lowest in a decade).

So what is the expectation ? The market experts talk about bottoming out etc etc
But the obvious reason for the market to be so bullish seems to be the continuous flow of foreign funds.

So who bothers about weak GDP numbers or the raising NPA with banks or the empty real estate at the new malls or the increasing inventory of unsold apartments or the reduced and cautious  projections  by most corporates  .

the answer to the above is Nobody.

Every one is waiting for: a)  the monsoon to arrive next week ; b) RBI to reduce the interest rates  ; c) the government to accelerate the pace of reform in the last few months before the elections ; and d) expecting US and Japan to continue with the QE.

While waiting , everybody seems to be enjoying  the IPL and BCCI discussions on TV.
Right now I find these discussions on BCCI and IPL more interesting than the market talks .

Reluctant retail investors

The market reversed the 450 points fall on May 2013 and ended higher for the week at 20286 (nifty 6187) .
This is a new 30 months high.

Most retail investors are yet to participate in this rally .
And the FII have invested over $ 16 bn into India so far this year.
Inflation is at the lowest .
S&P  has maintained the rating BBB- long term sovereign rating - the lowest investment grade.
The commodity prices are still making new lows this year.

with the next general election less than 12 months away and the Government is more likely to follow electoral friendly message than taking any tough stance -so what are the chances of the market rally sustaining.

My view is the market will continue to rally till the reluctant retail investors are back in the market and make their investments at the top. 

may 13, 2013

The market tanked nearly 2 % today Sensex @ 19670 (down 450) and Nifty 5980 (down 126) .

Most global markets also lost around 1% . Apparent trigger for the fall was the talk by the FEDs  of not buying further bonds from the market - some kind of method to unwind QE without spooking the market.

The remarks by Ben Bernake last week that there are signs of excessive risk taking - affecting the asset prices and their relationship with fundamentals - is being seen by the market as an indication that the Feds are keen are exit from the stimulus (the $ 80 + billion a month on bond buying).

This is definitely a bad news for Indian market - the massive FII inflow has helped the government to fund the record CAD. So any sudden stop to such inflows would mean a bit of anxious moments in tackling the CAD situation.

The markets seem to recognise this problem
Or is it just the profit booking after a continuous run up to 20K from 18k.

May 2013 - sensex at 20 K

Nifty closed yesterday at 6069 (Intra-day high 6083) and Sensex  at 19990 (high 20037).
After Jan 31. this was the first time Sensex has crossed 20 k. This year the sensex has crossed 20 k 3 times. Twice in January and now on May 8.

So is this the turnaround time ?

Facts :

a) Since July 2012 -till March 2013 - FII investments was on an average around $ 2.5 bn. In April for the first time the investments were less than $ 1 bn. And in May again the flow of funds has been high (so far).
b) The Met Dept has predicted normal monsoon , this year also.
c) Commodity prices (crude , gold ) are down considerably . And looks like this trend will continue.
d) Inflation is down to around 6%
e) Interest rates reduced by RBI 25 basis points recently. So RBI reference rate at 7.25% is the lowest for the last 2 years.
f) Scepticism is still high regarding equity prices.

BUT (yeah there is always a but)

a) The Current Account Deficit (CAD) is still high at over 6%
b) The Political turmoil is still around..
c) corruption allegations are still fast and furious
d) Corporates are still not investing in a big way on Capex,
e) Retail investors are yet to participate in the equity market
f) No meaningful IPO in the horizon,

Traditionally May has been a bad month for investments (except in 2009 and 2004 where the returns were in excess of 15% - election months).

So is it time to invest ?

Friday 8 July

The market closed @ 5652 (down 76) sensex 18832 (down 245)

so for the week the market after just was up 0.4% from 5627 to 5652 (up 25) & sensex from 18762 to 18832 (up 70 points 0.37%).

Q1 result for HDFC was announced Net profit up 22% to 844cr and the share price fell by 2% from 730 to 715.
So what is the expectation for the other major results to be announced next week ??

So it would  be interesting to see what the analysts would say during the weekend (they have been  predicting 5900 - 6000 levels (sensex 20,000) after the positive moves the last two days .

Tuesday 28 June

The market closed about 0.3% up Nifty @ 5542 (up 15) and Sensex 18484 (up 71).

So continuous 6 trading sessions market has closed higher - sensex from 17506 (on Monday 20/6) to 18484 - UP 978 points and Nifty from 5257 to 5542 UP 285.

Except last Friday increase of 500 points sensex or 150 points Nifty - the market has been fairly flat.
Yesterdays rise of  1% - sensex 180 points and Nifty 55 were more due to the price increase of all the oil marketing companies consequent upon the increase in the admin price of diesel & kerosene.

This increase in price of diesel is not going to reduce the short recovery fully and the govt cutting the excise/customs price on fuel also going to increase the fiscal deficit. Govt prog of disinvestment of 40,000 cr also may not happen without a major shortfall.

a)  the fiscal deficit is more likely to be around 5.4%
b) the inflation in the next few months unlikely to be less than 9% and
c) RBI is still going to increase the rates by another 0.5% in the next 2 months
d) Govt seems to be in some kind of paralysis - with hardly new meaningful action taking place
e) Monsoon - now predicted below normal (may not have major adverse effect) but will certainly dampen the chances of the food prices coming down soon.

So with all the above - one wonders if this run up in the market is precursor to   a major fall ??

Tell  me when is the good time to sell .

Friday 24 June

The market opened with an upside  gap and closed almost 3% up.

Nifty closed @ 5470 up 150 points and Sensex closed @ 18235 up 507 points.

There does not seem to be any particular reason for the up move other than the obvious oversold positions and the sudden buying in all the front line scrips by the institutions.

Good time to get out of the long positions slowly - No sense in buying into this market , as you will get them lot cheaper in a few weeks time. Wait for the Q1 results - expected in the next 3 weeks before making your new buying.

Thursday 23 June

The market opened a bit weak @ 5260 - but steadily gained thru the day and closed @ 5323 up 45 points
and the Sensex closed @ 17734 up 183 points.

During midday the market was above 5330 - but due to profit booking or fresh short sales the market reacted back to 5300 before closing above the psychological level 5320.

The market has now closed a tad above the first resistance 5320.
Tomorrow if the market trades above 5350 for a short while then - its likely that the market go up to around 5400 - mostly on short covering.

Any sharp rally tomorrow would be a good time to unwind any long position.

Monday 20 June 2011

The market decisively fell during the early part of the day - Sensex by over 500 points and Nifty by over 150 points.

Nifty closed @ 5263 (down 102) and Sensex @ 17523 (347).
If there is no recovery back to the level of 5400 and 17800 in the next few days - the long term trend would also seem to be down.

Almost all Nifty scrips were down - Reliance, Tatamotors , Grasim - over 4% down and ITC, Infosys, sesagoa, sterlite TCS down more than 2%.

The apparent reason touted by the experts about the apprehension that Govt was considering the taxing of the investment thru Mauritius - does not seem very logical.
The reason is - the risk averse attitude of most fund managers and the overall macro situation - inflation, interest rates and the policy paralysis of the govt.

Good time to buy selectively with a time frame of 3 to 6 months for a decent appreciation.

Friday 3 June

The market went up to 5608 and then sharply fell off to 5510 and closed @ 5525 (down 25).

Sensex 18495- 18650 - & closed @ 18385 down 108.

market has come down from the resistance of 5600 and has already testing the support around 5500.

Monday if the support of 5480 does not hold then we may see the next support level 5420.

in any case  the upside seems limited - and the down side seems to be 5%  to 10 %.

Thursday 2 June

The market went down by around 0.6% today Nifty ended @ 5550 (down 41) and Sensex @ 18497 (down 111).
Considering the sell offs in US & Europe around 2% and in Asian Markets around 1.5% - the fall in Indian market seems pretty low.
However - the volume for the past few days has been much below average 90000cr against 100000+ crores usually.
If tomorrow the market goes below 5420 then one can expect a further fall of 1-2% till 5350.
This time if 5350 does not hold then - there is likely to be a free fall to 5200 levels next week.

Wait for the correction before buying in to this market. 

Wednesday 1 June

Another positive day for the market today - the market closed @ 18615 (up 112) and Nifty @ 5592 (up 32).

Despite all the bad news around - GDP growth estimates revised downwards to 7.5% for FY 12; the confusion that seems to prevail in the Govt - and almost no proactive action by the govt to get things moving ; Europe still reeling under the Greek Banking crisis ; the public spat between the Govt and Civil Society (Anna Hazare) over the draft of the Lokpal Bill ; New Telecom scam involving another DMK minister (Maran & Sun TV) -
Ok the list is endless.

Good to see the market improving (across almost all good scrips).  Wait & watch - no new buying - despite all the SMS that you receive from the brokers these days. Buy recommendations in the last few days has increased substantially - and many of them have resulted in profits - since the market for the past 4 days seems to be going one way only.

Tuesday 31 May

After a pause yesterday (with hardly any change from Friday levels of 5476 to 5473 (sensex 18266 to 18232)
today the market gained over 300 points sensex and Nifty 95 points nearly 1.7%.. Looks like the onset of monsoon on Kerala shores have enthused the market. Any a good monsoon is not going to bring down the prices overnight. Inflation for the next few months is likely to be around the 8 to 9% range .

Nifty closed @ 5561 -up 88 and Sensex @ 18508 - up 276. Almost near the high for the day.

Almost all shares participated in the rally - specially the Banks . Surprising considering that RBI is likely to raise the rates once again in June - may be this was already factored in the price crash last week.

Wait for the index to cross 5650 before taking any buying decision.
The market crashes down faster than the speed at which it goes up - wait for the 5650 levels and the global cues before getting very excited about the gains in the market index.

This month F&O - has 5 weeks for expiry - so I guess it could be a good idea to go in for some put options after the index crosses 5600 levels to protect  your portfolio.

Friday 27 May

The market closed on a positive note with sensex @ 18275 (up 231) and Nifty @ 5476 (up 63).

Almost all shares participated in the up move. Notable exception was Tata Motors - which after announcing a not a bad result - went down by over 6% on analysts downgrades as well as the muted guidance given by the management for the next quarter.

Inflation is still up , the price increase in Diesel & LPG expected in the next 10 days and RBI likely to increase rate once again in June by .25%. So the move would be temporary - and one can invest now only for a very short term -say a week or so.

Thursday 26 May FO expiry

Market retraced the loss of yesterday and closed above 18000 and 5400 Nifty.

Nifty @ 5412 (up 63) and Sensex @ 18044 (up 197).

But the trading was pretty lackluster - nothing happening except that it was May F&O expiry - so there were some stock specific actions for carry forward.

Reliance on the news of the freeing of gas prices for non core customers and TISCo after announcing the result - which included some one off write backs of provision made earlier and a better than expected result for European operations  were both up by 2%.

Reliance likely to benefit from the above freeing of gas prices - only if it can ramp up its production .

Tisco - the price of gas to steel suppliers (as they are  non core by Govt definition)  are likely to go up and also the raw material prices are still rising - and Europe has  its own set of problems of economic slowdowns.

Unless the major Banking stocks and the IT stocks start moving up - the market definitely headed lower towards 17600 levels 5300 Nifty levels.

Wednesday 25 May

Not a very exciting day - the market went down steadily downhill by over 200 points (sensex) and Nifty by 60 points.

Market closed near the lows - Nifty @ 5349 (down 45) and Sensex @ 17838 (down 173).

The downside now seems to be not more than 2 or 3 % and the upside could be 8-10%.
SBI and ONGC now look good to buy @ 2280 and 260 resp. There can be further 3 to 5% downfall from here but this scrip looks for an appreciation of 20% in next 6 months.

Tomorrow - F&O expiry - can expect some unexpected movement - for now it seems that Nifty is headed for 5300.

Tuesday 24 May

Fairly a flat trading day.

Sensex 17970 - 18050 & Nifty 5380 -5420.

Closed near the lower end.

with two days left for May F&O expiry - Wednesday & Thursday sessions should be interesting.

The brokers seem to be betting on sub 5300 levels - have been recommending investors to buy the 5300 put @ Rs 7 - towards the close of session .