The Art of Appraisal

Big Boss: This year your performance was good, excellent and outstanding. So, your rating is "average".

Kumar: What? How come 'average'?

Big Boss: Because...err...uhh...you lack domain knowledge.

Kumar: But last year you said I am a domain expert and you put me in this project as a domain consultant.

Big Boss: Oh is it? Well, in that case, I think your domain knowledge has eroded this year.

Kumar: What???

Big Boss: Yes, I didn't see you sharing knowledge on Purchasing domain.

Kumar: Why would I? Because I am not in Purchasing, I am in Manufacturing.

Big Boss: This is what I don't like about you. You give excuse for everything.

Kumar: Huh? *Confused*

Big Boss: Next, you need to improve your communication skills.

Kumar: Like what? I am the one who trained the team on "Business Communication", you sat in the audience and took notes, you remember?

Big Boss: Oh is it? Errr...well..I mean, you need to improve your Social Pragmatic Affirmative Communication.

Kumar: Huh? What the hell is that? *Confused*

Big Boss: See! That's why you need to learn about it.

Kumar: *head spinning*

Big Boss: Next, you need to sharpen your recruiting skills. All the guys you recruited left within 2 months.

Kumar: Well, not my mistake. You told them you will sit beside them and review their code, and most resigned the next day itself. Couple of them even attempted suicide.

Big Boss:*stunned* (recovers from shock) Err...anyway, I tried to give you a better rating, but our Normalization process gave you only 'average'.

Kumar: Last year that process gave me 'excellent'. This year just 'average'? Why is this process pushing me up and down every year?

Big Boss: That's a complicated process. You don't want to hear.

Kumar: I'll try to understand. Go ahead.

Big Boss: Well, we gather in a large room, write down the names of sub-ordinates in bits of paper, and throw them up in the air. Whichever lands on the floor gets 'average', whichever lands on table gets 'good', whichever we manage to catch gets 'excellent' and whichever gets stuck to ceiling gets 'outstanding'.

Kumar: (eyes popping out) What? Ridiculous! So who gets 'poor' rating?

Big Boss: Those are the ones we forget to write down.

Kumar: What the hell! And how can paper bits stick to ceiling for 'outstanding'?

Big Boss: Oh no, now you have started questioning our 20 year old organizational process!

Kumar: *faints*

The Art of Appraisal

Big Boss: This year your performance was good, excellent and outstanding. So, your rating is "average".

Kumar: What? How come 'average'?

Big Boss: Because...err...uhh...you lack domain knowledge.

Kumar: But last year you said I am a domain expert and you put me in this project as a domain consultant.

Big Boss: Oh is it? Well, in that case, I think your domain knowledge has eroded this year.

Kumar: What???

Big Boss: Yes, I didn't see you sharing knowledge on Purchasing domain.

Kumar: Why would I? Because I am not in Purchasing, I am in Manufacturing.

Big Boss: This is what I don't like about you. You give excuse for everything.

Kumar: Huh? *Confused*

Big Boss: Next, you need to improve your communication skills.

Kumar: Like what? I am the one who trained the team on "Business Communication", you sat in the audience and took notes, you remember?

Big Boss: Oh is it? Errr...well..I mean, you need to improve your Social Pragmatic Affirmative Communication.

Kumar: Huh? What the hell is that? *Confused*

Big Boss: See! That's why you need to learn about it.

Kumar: *head spinning*

Big Boss: Next, you need to sharpen your recruiting skills. All the guys you recruited left within 2 months.

Kumar: Well, not my mistake. You told them you will sit beside them and review their code, and most resigned the next day itself. Couple of them even attempted suicide.

Big Boss:*stunned* (recovers from shock) Err...anyway, I tried to give you a better rating, but our Normalization process gave you only 'average'.

Kumar: Last year that process gave me 'excellent'. This year just 'average'? Why is this process pushing me up and down every year?

Big Boss: That's a complicated process. You don't want to hear.

Kumar: I'll try to understand. Go ahead.

Big Boss: Well, we gather in a large room, write down the names of sub-ordinates in bits of paper, and throw them up in the air. Whichever lands on the floor gets 'average', whichever lands on table gets 'good', whichever we manage to catch gets 'excellent' and whichever gets stuck to ceiling gets 'outstanding'.

Kumar: (eyes popping out) What? Ridiculous! So who gets 'poor' rating?

Big Boss: Those are the ones we forget to write down.

Kumar: What the hell! And how can paper bits stick to ceiling for 'outstanding'?

Big Boss: Oh no, now you have started questioning our 20 year old organizational process!

Kumar: *faints*

Yet another Yen-Carry-Trade?

Past Week

Largecap indices have closed positive for the eighth week in a row. Sensex & Nifty ended marginally positive on weekly basis at 17693.39 & 5291.10 respectively with more action shifting to mid-caps and small-caps. Firm global trends, robust FII inflows and hopes of a strong rebound in the economy were the key for the underlying bullish momentum in the market. There are speculations that another round of Yen-Carry-Trade has begun. Realty stocks were the top gainers during the week followed by Consumer Durables and Metal stocks. IT stocks were the major losers this week on account of rising rupee against dollar. Rupee was at 18-month high to its strongest level since September 2008 on speculation that the nation’s pace of economic growth is attracting overseas funds to local equities. DQ Entertainment and ILFS Transportation got listed on the exchanges this week with significant gains.

WEEK AHEAD

We expect a stock specific action next week wherein quarterly corporate results will dominate the market sentiments. Forecast for the southwest monsoon for 2010, Greece and other Euro-zone countries’ fiscal woes, global trends and FII inflows will be the other triggers for the market.

TECHNICAL VIEW

During the week nifty has crossed its previous intermediate top of 5303 but failed to sustain decisively higher above respective level. All short to medium term technical indicators are still showing positive trend to continue in the coming days. However, the rally may be terminated around 5400 levels due to profit booking and tiring of the bulls.

We advise caution and profit booking around 5400 levels.

Have a great week ahead.

LISTING OF PERSISTENT SYSTEMS LTD - GREY MARKET PREMIUM

Shares of Persistent System are going to be listed on 06.04.2010. The current Grey Market premium is said to be around Rs.100.00 per share.

NTPC – AN INTERESTING OPPORTUNITY

The stock is has broken a long term downtrend and closed just above the 50-day moving average. However, the break-out has not been decisive and one requires following up the stock action in the next few days. If there is any decisive technical break out, NTPC may move towards its next targets of 215, 225 and 235.

As per the technical chart, NTPC is in an interesting point.

The stock is having a strong support around 185-196 levels and one can keep stop loss limits around these levels.


With best wishes

Areva T&D India Ltd - Technical Break Out

The Company belongs to Electric Utilities Industry. It has given an important technical break out in the last week.

DQ Entertainment – Listing on 29 March 2010

Allotment in the Block Buster IPO stock DQ Entertainment has been done last week and the listing is to be on 29.03.2010. There are strong expectations of a good amount of premium on listing. Grey market websites indicate a premium up to Rs.60.00 per share.

With best wishes

Persistent Systems Ltd – IPO – Invest at Cut-off

Persistent Systems is a pure play Outsourced software Product Development (OPD) services company. The company is different from other IT companies as it caters to Independent Software Vendors (ISV) as well as smaller product development companies. Persistent Systems offers its customers OPD services that help them reduce time-to-market, better the quality of their products, improve predictability and reliability of the engineering process and helping them lower their over-all product engineering costs. As a result, client stickiness is higher than other IT companies.

Investment Arguments

Healthy balance sheet

Aggressive expansion plans

Continued interest from VC firms

Dedicated client base

Key Risks

Dependence on US market

Expiry of tax holidays


I feel that the company has the management expertise and the necessary cash to pave the path for aggressive growth in the years to come. Persistent Systems continuously spends in R&D to better its technical skill sets. It appears to be attractively priced considering the potential upside due to capacity addition and earnings in the long term. Even from a long-term perspective also, the company can provide significant returns.

I feel that one can invest in this company at cut-off price (Price Band Rs.290-310)

NMDC LTD – SUBSCRIBE AT LOWER BAND PRICE

NMDC Ltd, a navaratna Public Sector Company, has come out with a Follow-on Public Offer. The issue details are hereunder.

Issue Period - March 10, 2010 to March 12, 2010
Issue Size - 33,22,43,200 Equity Shares
Issue Type - 100% Book Building
Face Value - Rs. 1/-
Price Range - Rs.300 to Rs.350
Tick Size - Re. 1/-
Market Lot - 20 Equity Shares
Minimum Order Quantity - 20 Equity Shares
Maximum Subscription Amount for Retail Investor - Rs.100000
IPO Market Timings - 10.00 a.m. to 5.00 p.m.

The pricing is considered to be aggressive and the market would have been happier had the price been fixed in the range of Rs.250-Rs.300. There has been a poor response for the issue so far.

I am of the view that one can look into the issue with a long term perspective and bid at the lower band price considering the facts that NMDC is a low cost producer of Iron Ore having strong competitive advantages and the prospects of the iron ore industry which will benefit from a strong economic growth. The company is having a high RoNW and consistent growth in earnings. Future plans of NMDC to indulge in steel and power production, though associated with risks, may add to the earnings of the company.

Happy Investing

Disc: The ideas on market are for sharing purpose only. Investments should be done on own risk.

Unanswered Questions Remain!

It is still a big question whether the global economy will return to its glorious past as was in 2006 & 2007. But, stock markets are now quite convinced so and returned to their peak levels of 2007, if not 2008. Many individual stocks have gone even above their life time high levels tested in those years.

Generally, stock markets are the leading indicators and can visualize the future to some extent. However, stock market need not be 100% correct in its every assumption. Even though, there are certain greenshoots visible in the global economy, it is too early to assume that economic life will turn back to its glorious past any time soon.

Hence, it is prudent to be cautious in the future rallies of the stock market. One should take position in equity market only after visualizing the probability of global economy returning to normalcy, the ability of the individual companies to survive unscathed till that time and the earnings of the company once the normalcy returned.

As many would have noticed, Nifty crossed the all-important resistance level of 4730 levels last week comfortably thanks to the surge in giant caps like Reliance, SBI and ICICI Bank. However, broader market did not rally once after this remarkable success was achieved as anticipated by many analysts. In fact, there was a huge profit booking in the smaller stocks even while the giant caps were hitting their new highs for the year 2009.

I expect the same trend to continue in the coming week also. I suggest the traders to exercise caution while picking the smaller stocks which have run up miles since March 2009. 4700 points for Nifty can be taken as a pivot point while taking trading positions in larger stocks.

Wishing a great week ahead!

Green Shoots and Yellow Weeds

Markets continued to be indecisive and volatile during the last week also. Markets started the week with lot of negativism thanks to poor jobless claims data from US however ended with great optimism thanks to the record rise in homes sales in US and better than expected industrial data from the Western Europe.

As witnessed in the earlier weeks, our market continued to ignore the local happenings and was always looking for the direction from the west. For a change, markets are now looking east also particularly China which evoked great interest in the recent times, thanks to the “China Bubble and the its ripples in Asian markets.

Locally, Adani Power failed to impress with a lackluster debut on the bourses. There was no big premium on listing as expected by its IPO investors. However, it is a reminder for those, who do not want to leave any thing on the table for the IPO investors that such issues may not evoke great interest from the investors in future.

Coming week, NHPC’s listing will be viewed curiously as there are many government company issues lined up for IPO. In case of NHPC also, government has not left much on the table for IPO investors. Still, there are hopes in the market that the company may get listed with a decent premium. Any failure on the premium part may hurt the future IPO plans of government companies.

Going back to global scenario, Obama is expected to raise the projection for the fiscal deficit (US) for the next 10 years from $7.1 trillion to $9.0 trillion. Such projection may lead to the impression that the American government may continue to flood the markets with dollars for many more years to come.

As mentioned earlier, hopes of persistent dollar flooding and visibility of green shoots have been taken well across the board, currencies commodities, gold, oil and stock markets.

Euro strengthened against the US Dollar as the appetite for riskier assets went up due to the new found optimism for a quicker recovery in the global economy.

At the same time, it is notable that the INR failed to join the global rally against dollar and in fact, INR lost against USD in a big way. FIIs withdrawing their investments in India and higher import demand may be the reasons for such Rupee weakness.

Crude Oil was a stunner for the last week. It had a big rally and broke the crucial resistance of $72. Even though many analysts put expectation of higher demand rising from the global recovery as the reason for the surge in oil prices, personally I am not convinced. I feel that the dollars are now flowing towards the commodity markets particularly oil and gold as a new avenue of investment as stock markets are appearing as overvalued.

There are good chances for a big rally in oil and gold in the coming days provided that the economic data continues to be good.

In India, even while the largecap indices were struggling to make new highs, many stocks are started to make merry thanks to the renewed interest from the operators and small traders. Many stocks witnessed dramatic rallies in the last week.

To sum up, green shoots are more visible as of now but there are yellow weeds too. It is the duty of the governments and the central bankers to protect the green shoots and weed out bubbles. If they fail to do so, bubbles would impact the global economies badly.

Wishing you a great week ahead

Easy Money Policy for an Extended Period

Sudden fall in unemployment numbers in US had raised speculations that Federal Reserve may end its easy money policy sooner. Accordingly, US Dollar started gaining against other major currencies including Indian Rupee. Poor monsoon data and negative FII inflows also put pressure on INR in the beginning of the week.

Gold and other commodities were also seen losing against US Dollar. Bursting of bubble in Chinese markets also added pressure on the metals.

However, Federal Reserve, in its FOMC minutes on Wednesday, said that the easy money policy will be continued for an extended period of time and it would pump in $300 billion dollars (around Rs.15,00,000 lacs) into the market by October 2009. This statement revived positive sentiments in the global markets.

Positive GDP numbers in Germany also added to the bullish sentiments of the markets. Euro gained in a big way against US Dollar. Gold also had a spurt against USD rising to $963. Fall in South African Gold production also helped the Gold prices to firm up against US Dollar.

Indian Rupee also turned into positive trend and went below 48 levels. Surprise rise in IIP numbers (India) for the last month also helped INR to strengthen against USD. However, heavy demand for Dollars from the importers checked any major appreciation for Rupee.

Worse than expected US Consumer confidence data released in US on Friday indicated that the recession is far from over and the US Dollar gained against other major currencies accordingly. Gold also fell to $948 levels.

US Dollar may begin the next week with some gains against other major currencies including Indian Rupee. Local currency markets will also look for the trend in the equity markets particularly the FII inflows. For the next week, Rupee may trade between 48 and 49 levels.

There is a major risk of downgrading of Indian Rupee in case our government increases its borrowing programme for the current fiscal year to accommodate the possible drought relief measures.

Gold may face a strong resistance around $963 & $ 980 levels. Breaking the above two levels may take the prices to $1000 levels. In Rupee terms, MCX Gold may face resistance around 15020 and 15200 levels.

Indian stock markets are now cautious about the impact of poor monsoon on the overall GDP. It is expected that there may be an impairment of around 1.00% in the overall GDP for the current year due to poor monsoon. Further, reduced crop production will add to the pressure on the food inflation which is already at a high level.

Overall outlook for a normal monsoon seems to be a distance dream now and the short fall is likely to be over 25%, sounding weakness for rural demand prospects.

Still the broader trend of stock prices has been inline with Dow futures and the net inflows from FIIs, who were once again net sellers in cash market except for Thursday. The gains were broad based and the mid and small cap stocks gained more than the large cap stocks. There was renewed interest from domestic institutions and they gave strong support at every low, absorbing most of the net sales from FIIs and public.

Stock markets are quite happy about the IIP data and there is view that impact of poor monsoon may be nullified by a strong growth in industrial sector. However, personally I would like to see the trend of IIP numbers for some more months to take a firm view on the revival in the industrial sector.

Next week, Indian Stock markets will be looking for direction from its Asian peers and US Dollar movement. As said earlier, Nifty may face resistance around 4610 & 4730 levels and find support around 4520 and 4480 levels. Firm breaking above 4730 levels may indicate a new bull cycle whereas a complete fall below 440 may point towards a steep fall.

Wishes for a happy week ahead.

Keep Swine Flu Away with Basic Precautions

Swine flu in India is spreading like wildfire, taking the toll to six. Officials say there are currently more than 800 cases of the H1N1 flu strain in India. Governments from all around the world are finding ways to combat this deadly disease. So what can you do to protect yourself?

Stay calm and practice these 10 effective prevention tips.

1. Wash your hands frequently

Use the antibacterial soaps to cleanse your hands. Wash them often, at least 15 seconds and rinse with running water.

2. Get enough sleep

Try to get 8 hours of good sleep every night to keep your immune system in top flu-fighting shape.

3. Keep hydrated

Drink 8 to 10 glasses of water each day to flush toxins from your system and maintain good moisture and mucous production in your sinuses.

4. Boost your immune system

Keeping your body strong, nourished, and ready to fight infection is important in flu prevention. So stick with whole grains, colorful vegetables, and vitamin-rich fruits.

5. Keep informed

The government is taking necessary steps to prevent the pandemic and periodically release guidelines to keep the pandemic away. Please make sure to keep up to date on the information and act in a calm manner.

6. Avoid alcohol

Apart from being a mood depressant, alcohol is an immune suppressant that can actually decrease your resistance to viral infections like swine flu. So stay away from alcoholic drinks so that your immune system may be strong.

7. Be physically active

Moderate exercise can support the immune system by increasing circulation and oxygenating the body. For example brisk walking for 30-40 minutes 3-4 times a week will significantly perk up your immunity.

8. Keep away from sick people

Flu virus spreads when particles dispersed into the air through a cough or sneeze reach someone else's nose. So if you have to be around someone who is sick, try to stay a few feet away from them and especially, avoid physical contact.

9. Know when to get help

Consult your doctor if you have a cough and fever and follow their instructions, including taking medicine as prescribed.

10. Avoid crowded areas

Try to avoid unnecessary trips outside. Moreover, avoid touching your eyes, nose or mouth. Germs spread this way.

Good News and Bad News

Our Equity Market is always sensitive to two important factors.

First one is the dollar inflows to our markets. There is always a strong correlation between the FII flows and our market’s direction. Our market believes that dollar weakness brings more inflows to the emerging markets including India.

There was an improvement in US Unemployment data published last week for the first time since April 2008. Unemployment rate fell to 9.4% from the previous month level of 9.5%. Even though the white house officials warned that the unemployment rate may peak at 10%, markets were convinced for the time being that the end to the American recession is nearer now and accordingly, there was a sharp rally in the US markets.

At the same time, there were fresh apprehensions that the Federal Reserve may exit its easy monetary policy sooner than later by hiking its key interest rates. Hence USD strengthened against other major currencies. Euro and GBP registered one of their sharpest falls against USD on the last day of the week.

As said earlier, our markets sensed in advance that the dollar inflows may become scarcer hereafter and duly witnessed a sharp correction in the last two sessions of the week.

The bad news was from our skies. Indian Meteorological Department has said that the rainfall was deficient in 27 out of 36 meteorological divisions of India. Now, there is a real threat of a drought like situation in India this year.

Though, agriculture forms a smaller part in overall GDP of India, majority of Indians is dependent on agriculture in India. Further, scarcer rainfall may badly impact the allied industries of agriculture particularly in rural India.

Failure of crops may add the pressure on prices of food articles which are already at high levels and the supply side hyperinflation is the last thing our market would like to have now.

Thus the combination of above said two factors have brought down the sentiments of our high flying market.

Hereafter, the direction of our market may depend on the FII inflows and the monsoon pattern.

As said in the earlier post, our market (Nifty) failed to break 4700 levels decisively. Now it finds support at around 4430 & 4320 & 4200 levels. It faces resistance at around 4550 & 4580 & 4700 levels.

Wishes for a happy week ahead!

Pace Of Recession Slowing Down?

Economic Data from US indicate that, at last, the pace of recession in their economy is slowing down. There is no major job losses reported last month. At the same time, authorities therein are in mood to tighten their monetary policy. They expect that the unemployment in US may peak little above 10%. It appears that they want to continue their policy “flooding the markets with dollars” for some more time till there are visible signs of recovery in US markets.

At the same time, such flooding of dollars in markets may create havoc in the world markets. To some extent, pegging the currencies of emerging countries undervalued against US Dollar by their respective central banks also disrupts the stability in the financial system.

We could witness the fragility of the global markets including India last week when Chinese authorities warned a bubble in their markets. In no time, our markets lost around 400 points in Sensex. However, continuous inflow of dollars made the traders to ignore these fear factors and surge ahead as usual for another weekly gain in the key indices.

Coming week, we may witness a strong but interesting fight between Bulls and Bears. Bulls may try to break the psychological resistance level of 4700 (Nifty) points and move the market into a momentum zone. At the same time, Bears may grip their hold at around 4700 points.

Resistance levels for Nifty are at around 4700 and 4800 points

Support levels for Nifty are at around 4475 and 4425 points

Wishing a happy week ahead

Another Super Bubble in the Making?

Our market continued its bull run last week also wherein the key indices gained around 4%. Benchmark Index, Sensex, is once again above the psychologically important 15000 levels. Global markets are not left far behind. HangSeng is close to an important 20000 levels. Dow Jones is above 9000 points once again.

Ben Bernanke’s assurance of continuing the soft rate policy for a longer period of time coupled with strong corporate results across the globe lifted the sentiments of the all the major equity markets. Positive US home-sales data has added fresh hopes that the recession would have a quicker end.

Our market’s rally has so far been a stunning one. It offered no chance to the people who were waiting on the sidelines to enter at lower levels. Abundant FII flows were the key reason for such rally. It is noteworthy that FIIs have put in more than 38000 crores during the current year alone. Union Budget was little disappointing for the market. However, it did not stop market’s upward rally. Market took excuse from the parliamentary speech of the Finance Minister and marched ahead as usual.

I expect that the sentiments of the market may turn more positive once the Sensex breaks 15600 levels and the left out so far, may be sucked into the market. Thus market may slip into a Super Bubble Zone wherein fundamentals would take a backseat.

One should not forget here that the macros are not very much convincing as of now. Poor GDP growth, meager credit growth, dropping exports, low IIP numbers, faulty monsoon and unclear global situation do not warrant for doubling of P/E within such a short time.

Even though the corporate results, in terms of bottom-line growth, have generally been good, the top-line growth has only been marginal. The profits were also more attributed to cost cutting and sharp rise in other income rather than core business profits.

Hence the investors may avoid entering into the market at the higher levels and rather wait for any major correction for an entry with a long term view. They may exit their holdings accumulated at the lower levels whichever achieved their target prices.

At the same time, traders have great opportunity to play according to sentiments of the market. They are advised to trade with strict dynamic stop loss limits.

Sensex faces a strong resistance at around 15600 levels and Nifty around 4600 levels. Any strong break out above these levels would give a big bang movement for the market. Monetary Policy announcement by RBI due for the next week will be keenly watched by the market. Quarterly results of Reliance, India’s most valuable listed company, are disappointing and the market may react negatively to it. F&O expiry may add to the volatility of the market.

Wishing for a happy week ahead

Stunned as ever?

It has been a stunning recovery once again witnessed by the market last week. After losing 1500 points in the previous week as the Union Budget failed to meet the ever growing expectations of the stock market players, market recovered 1200 points almost in the same speed.

Assurance from the Finance Minister on continuing reforms and divestment boosted the sentiments last week and the government siding with Reliance Industries in the KG appeal revived the heaviest among the index stocks. Persistant inflows from FIIs and positive global cues helped the market to sustain at higher levels.


As said earlier, it has been a stunning recovery. Many stock analysts and technical experts failed once again by expecting the largecap indices to cover the gap formed on the post-results day. As usual many who were waiting on the sidelines to invest at lower levels were sidelined.


Market turned to the bullish mode wherein every small positive news is rejoiced and bad news, however big, is ignored. Better than expected results from IT biggies have also helped to lift the street sentiments.


Sensex is back to 14500 plus zone wherein the valuations are little overstreched. Traders may take cues from global markets. Even though, US biggies are delivering better than expected results and stock markets are doing well, oil prices, a key indicator of global recovery, are not showing major upmove which is a cause of concern.


Investors can continue their cherry picking strategy as explained in the previous posts over a period of time with a long term view.


Happy week ahead!

Too Many Expectations?

Market has too many expectations from the forthcoming Budget ranging from tax cuts, tax holidays, special status for some industries, fresh government investment in infrastructure and divestment of public sector enterprises. Even though, electoral victory by the Congress is more attributed to its populist measures such as farm debt waiver, pay commission and NRGEP and Congress may not like a pro-corporate image ahead of elections in key states, many market participants still believe that Congress government will push for aggressive financial reforms in the coming budget.

However, I have my own doubts whether the budget will be able to fulfill all of the market expectations. With the fiscal deficit mounting to around Rs.4,00,000 crores and the first half yearly borrowings at Rs.2,54,000 crores, government’s ability to push through larger tax cuts is quite limited even though there may few reform measures here and there more expectedly in export oriented sectors.

Hence it will be very difficult for the budget to make a major positive impact on the market as many positive factors have already been discounted in the prices. At the same time, we can not underestimate the ability of certain market participants and media to derive great things from nothing make others to believe it.

In the short term, market is expected to track the global events. In fact, our recent rally is more attributed to the FII inflows which have been stupendous in the last three months. FII inflows were mainly attributed to their expectations of a ‘V’ shaped recovery in the global economy and the huge liquidity made available to the American banking system.

Last week, global market participants came to a new conclusion that even though the recession has come to a near-end as of now, the recovery may not be as swift as markets expected earlier. US economic data has been quite mixed in the recent times and the recent downgrading of American banks resulted in strengthening of US Dollar and JPY, the less risky currencies against other major global currencies including INR. World markets are now apprehensive of raising commodity prices and Federal Reserve’s probable monetary measures to tame the inflationary expectations. These speculations led to withdrawal of FII money from emerging markets including India. Such withdrawal coupled with some local negative sentiments rising from Bombay High Court’s judgment in RIL-RNRL case resulted in a big market fall last week.

I feel that delayed monsoon, revival of Indian industry and performance by the Indian Corporate and firm government action in continuing the financial reforms would carry more weight in the minds of FIIs, who may be waiting in the sidelines for some more time to get better clarity in the global scenario. Even though, negative inflation is bad news for the industry, as RBI Governor put it, India may not fall into a deflationary environment any time soon.

Traders are requested to exercise caution in the near term and initiate long position only in case of Nifty breaking 4400 levels firmly. Banking sector is expected to do well in the short run.

Investors may accumulate shares of fundamentally strong companies during fall. Banking stocks may perform well in the long run. Indraprashtha Gas may be considered as a long term investment option. Strong Government Companies’ stocks may also be considered.

Technically Sensex finds good support at around 14,500, 14200 and 13,600 levels. It faces strong resistance at around 14,700 and 15,200 levels.

Wishing you a happy week ahead

Tiring Bulls and Fearing Bears

Last week, there was a pause in the Bull Run that had continued for a record thirteen weeks. Still, Sensex managed to close the week with marginal gains. Nifty closed with a marginal loss. However, small and midcap stocks faced a big sell-off probably due to profit booking. Even though, Bulls are quite tired after running for quite some time without break, Bears are still uncertain of taking full control of the market.

Markets opened the last week with losses as there was a good amount of profit. Sensex faced a strong resistance around 15500 levels and the Nifty at around 4600 levels. It was widely expected at that time that the Bears would take control thereafter. However, Prime Minister’s statement in the Parliament that the country has a potential for 9% growth and the stunning profit made by Satyam changed the moods of market. Bears were marauded once again. Still, rising crude prices and indecisive global markets checked a repetition of previous weeks’ big show and in fact, small and midcap stocks could not recover their early losses like their largecap peers.

WPI Headline Inflation hit record low levels. Finance Minister impressing upon the PSU Banks to cut their lending rates hit the PSU banks hard. Positive IIP numbers cheered the markets. However, it triggered profit booking by the traders.

US data was a mixed one. There are fears of an inflationary environment choking the growth prospects. Rise in crude prices is negative news for the global equity markets. There are market speculations of rate hike by Federal Reserve sooner than later to moderate the inflationary expectations.

Sensex faces a strong resistance at around 15600 levels and Nifty at 4700 levels. Sensex has a good support at 14500 and 13500 points.

Even though India is a good long term story, the largecap indices appear to be fully priced-in in the short run. Market seems to be in an overbought position. At the same time, tireless FII flows may change every calculation.

Wishing a happy week ahead.

Betting On A Quick Recovery

It has been an amazing run continuing for the 12th week in a row surpassing even the most optimists’ expectations. Whether “India Shining” and “India Decoupling” stories are back in market? Even though, Indian story is quite intact in a longer run, whether stock markets deserve a valuation closer to the January 2008 peak levels with the economy crawling now just at a half the pace of that time? Let us introspect once again hereunder.

As we discussed earlier, market builds up lot of expectations over Manmohan Singh’s new government. It likes to safely ignore the facts that Congress is not known for speedy reforms and it has come back to power mainly because of its populist face as opposed to the corporate image of the previous NDA regime. It also ignores that the Head of Government is not the de facto political boss. He can not push through tough reforms either way as there are still many political, coalition and electoral compulsions to show a populist face.

Sensex now trades under a fair valuation given the gloomy economic indicators like negative IIP, manufacturing degrowth and GDP growth, lowest in five years, even though the business confidence is expected to improve because of the electoral verdict. Negative credit growth is a depressing factor and an important indicator that the current business confidence is quite low.

Hence, it will be too much on the part of the market to expect that miracles will happen in the short term and Sensex (Companies) earnings will move up drastically in no time. Hence, I am of the view that the any big move hereafter may be another bubble in making.

Hype is building up in the market that there will be a huge divestment of PSU companies in the short term which will take the market further up. It defies the fundamentals of supply and demand. Divestment is good for the small investors no doubt but there are hardly any reasons to chase the costly listed companies with weak fundamentals when there are plenty of fundamentally strong PSU companies are going to be available at much cheaper valuations.

I would suggest the readers to continue their value picking in small lots over a period of time. At the same time, there should not be any “there is no tomorrow” approach. There will be a plenty of opportunity for the small investors to participate in the PSU divestment process that is going to happen shortly.

Nifty may face some resistance between 4500 and 4600. Stronger resistance may be there around 4800 levels. There is huge build up in F&O position and hence it is safer to trade with strict stop loss limits.

Wishing a very happy week ahead