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.

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!

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.

Currency is the King

Last week, US Federal Reserve announced that it would buy back over 1 trillion dollar of government debt. Though it is a bad move for the global economy in the long run, global markets rejoiced the move with the hope that thus increased dollar flow would help in reviving the world markets in the short run. Our market also joined the global party with a second consecutive positive weekly close, which is rarity nowadays.

Buy back plan resulted in weakening of US Dollar against all other major global currencies. Gold and other commodities went up in dollar terms. Crude Oil crossed psychologically important $50 levels. Reports that China was piling up base metal inventories helped base metals to post gains.

In addition to the above, positive data on housing and employment from USA resulted in a global rally in equity markets too.

Indian markets also joined the rally on the hope that FII inflows would go up here onwards. Beaten down sectors like metals and realty were the major gainers for the last week. Barring Capital Goods, almost all sectors had a positive week. Highlight of the last week was the surge in small and midcap stocks outsmarting their largecap peers.

Though the fall of headline inflation to new low levels (0.44%) raised fears of a deflationary environment, there were fresh hopes of further cutting in interest rates also.

Thanks to the huge stimulus packages announced by governments/ central banks across the globe, there is a lot of money flow into the economy and some part of it may find its way into markets also helping them to stage a relief rally.

At the same time, Nifty closing below the crucial mark of 2810 points and the Dow Jones closing below 7500 levels show that the markets are not yet fully convinced about any major revival in the equity markets. Surge in CBOE Vix also indicates that we may expect some more volatility in the market in the coming week.

As there is no major economic event in India on account of General Elections, our markets may follow the global trends particularly from USA. There is a lot of economic data going to be published in US coming week, which may set the tone for the global markets.

As we told earlier, 2810 levels (Nifty) will continue to be a strong resistance. Traders may take long position once Nifty breaks 2850 decisively however with a strict stop loss limit.

F&O expiry for March series, due for this week, may add to the volatility of the individual stocks.

Rupee may follow the global trends and it will be difficult for it to break 50 mark because of surge in crude oil prices.

Happy week ahead.

Obama - The Change

Coming week is going to witness a historic occasion of Mr.Obama, swearing in as the President of United States of America. For quite some time, we have been only hearing bad news, from USA, such as recession, job losses, bankruptcies, liquidity crisis etc. This is the first good news for the world from USA after a long time not just because a person, from the community that has been exploited for centuries, is becoming the head of the most powerful country of the earth but also because he is the person who won the elections by promising a “Change”.

Week that was

Market opened negative this week because of worse than expected US labour data and indecisiveness of our government in bailing out Satyam. Further, poor results from Bank of America and the decision of Citibank to sell its own parts had a negative impact on the global markets. Many Global markets being down this week on account of recessionary fears and financial crisis were not going well with our markets.

At the same time, to the surprise of many pundits, our markets found strong support at around 9000 points for Sensex (2700 points for Nifty) thanks to the strong rumours that Ambani brothers are nearing a settlement in the KG Gas sharing issue. Further, speculations of KG gas production starting any time soon and supply of gas to NTPC helped the markets to cap the losses for the week. Reliance Pack was the star performer for the week. IT stocks did well mainly because of the positive surprise by Infosys quarterly results. Sharp fall in inflation raised fresh hopes of one more round of rate cuts. However, Realty stocks continued their downfall. Bank stocks did badly during the week despite good results because of the negative outlook on the global financial sector. FIIs were the net sellers for the week.

Week Ahead

As said earlier, Obama factor may help the markets to have a small rally in the beginning of the week. However, the gains may be limited because of the strong underlying bearish sentiments across the globe. Satyam Scandal and doubts of Corporate Governance of the Indian Companies may haunt our markets for some more time. Resumption of FII outflows may also hit the sentiments of the market. To sum up, our market is likely to be highly volatile this week with the indices moving wildly on either side.

Resistance levels are

Sensex - 9500-9600, 9900-10100,
Nifty- 2900-2930, 3000-3030

Support levels are

Sensex - 8950-9050, 8400-8500,
Nifty - 2700-2725, 2475-2525

Traders may initiate short position in case Nifty closes below 2700 levels and long position above 2700 levels on a closing basis however with strong stop loss limits.

Investors may consider investing in top Public Sector Banks and Public Sector Companies with proven credentials (in case of market fall) on a long-term basis.

Rupee is expected to weaken further against the US Dollar and move between 48.00 and 49.50 on renewed FII outflows. Its direction will depend on the factors discussed above.

Happy Week Ahead

Satyam Shivam Scandalism

Just when it appeared as if everything is all right for the New Year 2009 and the market heading for a solid recovery, Satyam Scandal spoiled the party. Sentiments of the market were totally shattered by the Satyam disclosure which is evident from the 1000 points fall in just two trading sessions. Government initiated certain measures to revive the Company after the trade hours on Friday. Hence, the market reaction for the measures will be closely followed in the next week.

Week that was

Market opened positive for the week because of stable global outlook and bullish local sentiments. Sensex hit a seven-week high and more importantly the small and midcap stocks were performing quite well. As said earlier, Satyam Scandal came as a shock to the market and the Sensex lost as many as 1000 points in no time. Breadth of the market turned extremely negative. Market started looking suspiciously many companies who are on the edge. Delay by the Central Government in initiating action against Satyam Promoters has further dampened the market sentiments. 10-month low inflation data and fall in crude oil prices did not get noticed by the market. Realty sector was the worst hit for the week followed by Consumer Goods sector and IT sector. Cement sector and Auto sector were the better performers for the week. Satyam stock was the worst hit which lost more than 86% in just one week.

Week Ahead

I expect that the arrest of the Satyam ex Chief and formation of new Board of Directors by the Government may improve the market sentiments to some extent. However, worse than expected labor data in US may not go well with the market. Resumption of FII outflows may also hit the sentiments of the market. Quarterly corporate results will be viewed hereafter with distrust only. IIP data due to be announced next week may have a limited impact unless there is a positive surprise. To sum up, market is likely to be heading downside next week unless there is any miracle.

Resistance levels are

Sensex - 9650-9750, 10200-300,
Nifty - 2940-2970, 3130-60

Support levels are

Sensex - 9100-9200, 8650-8750
Nifty - 2780-2800, 2675-2700

Traders may initiate short position in case Nifty closes below 2780 levels and long position above 2950 levels on a closing basis however with strong stop loss limits.

Investors may consider investing in top Public Sector Banks and Public Sector Companies with proven credentials in case of market fall on a long term basis.

Rupee is expected to weaken further against the US Dollar and move between 47.50 and 49.00. Its direction will depend on the factors discussed above.

Happy Week Ahead

India Resilient?

Rescue Packages announced by the Government of India and Reserve Bank of India helped our market to post significant gains during the last week despite the negative IIP growth and Rejection of “Bail-out Auto Package” by the US Senate. Global cues particularly US cues were generally negative during the last week.

Week that was

Market opened positive for the week because of rate cut announcements by RBI and the stimulus package of the central government, which included some tax relief measures and incentives for exports. Inflation falling to 8.00% and contraction in IIP has given fresh hopes of some more rate cuts by RBI and more action from government to revive the economy. Sensex and Nifty gained around 8% for the week. Realty sector was the biggest gainer during the last week on the hopes of some more rate cuts and relaxation of bank norms on lending to housing sector. Banking sector was also one of the major gainers for the week. Metal stocks went up sharply because of the strong results from Tata Steel and export relief measures announced by the government. Oil and Gas sector was also up because of the speculations that the KG gas issue may be amicably settled soon.

Week Ahead

As we expected in the previous week, Sensex closing well above 9350 points is positive news for the market. Rise in the market with strong F&O open interest is another positive factor for the market. Net FII inflows for the week has also improved the sentiments of the market. Hence we may expect that the market will be positive during the next week also. Fate of Auto Relief Package in US Congress, Federal Reserve’s decision on further rate cuts, fresh RBI/Government measures to revive our economy will impact the overall direction of the market.

Technically the Resistance levels are

Sensex - 9750-9850, 10200-300,
Nifty - 2980-3030, 3140-60
Technically support levels are

Sensex - 9350-9450, 8700-8800
Nifty - 2800-2810, 2675-2700

Traders may initiate long position at current levels and at around 9350 levels and short position around 10200 levels. Trading positions should be with strong stop loss limits.

Rupee is expected to strengthen further against the US Dollar and move between 47.50 and 49.00. Its direction will depend on the factors discussed above.

Happy Week Ahead

Sleepless Nights

Crisis in the “Never sleeping Citibank” brought sleepless nights for the equity markets across the globe. There were speculations in the markets that Citibank was about to become bankrupt any time soon. Such speculations were not without reasons. Citibank announced that it would downsize its workforce by 53,000. Its share price crashed in US markets in the last week. Announcement by the US President elect Mr.Obama that the Head of Federal Reserve Bank of New York would be the Treasury Secretary of his cabinet brought some cheers in the market on the last day of the week.

Week that was

Our markets were showing negative trends throughout the last week except for the last day’s surge taking cues from Global markets. Major global markets were very much negative during the week and many of them hit fresh lows of the year. Official confirmation of recession in Japan and few other countries helped the bears to have a complete grip over the market.

In India, Rate cut talks and moderation of inflationary expectations did not help our markets much that closely tracked the global events. Prime Minister’s request to the corporate to cut the prices to revive the economy did not go well with the market. Even though crucial line of 8900 points was broken during the week, the last day’s last hour surge helped the Sensex to close above the line of 8900 points bringing in some hopes.

For the week, Sensex lost around 470 points (5.10%) and Nifty lost around 120 points (4.16%). Once again, the Realty sector was the worst hit followed by Banking and Metal sectors.

Crude Oil prices went below $50 during the week. CBOE Vix peaked at 80 during the week and then had a fall during the last trading session of the week.

FIIs continued to sell in Indian markets and our Forex Reserves further came down to $246 billion dollars. Inflation had fallen to 8.90% from the previous week level of 8.98%. Indian Rupee weakened further against US Dollar because of FII selling, surging import needs and NDF market arbitrage.

Week Ahead

Last day of the previous week witnessed a rise for the indices with a high F&O volume indicating that the short-term trend will be positive. Fall in CBOE Vix (US) also supports the view as the global volatility may come down in the immediate future. Even though there are fears of a possible Citibank bankruptcy, markets are now in an oversold zone and there may be short covering and bottom fishing at every lower level.

There are strong bets in our market on a possible rate cut by RBI, as there is a moderation of inflationary expectations, which may help our indices to stage a brief relief rally.

This week, Sensex may march towards 9400 levels breaking which to 9800 levels. In case of any bad news from US, the downside targets are 8400 and 7800 points.

Rupee may consolidate around 50 levels with a positive bias, as the immediate expectations on our equity markets are positive. Further direction will depend on the movements in NDF markets and Equity markets.

Investors may look into stocks of public sector banks, which may be benefited by the probable rate cut with a long-term view. Similarly, Oil Marketing Companies, which are going to be benefited by the fall in international crude prices, may also be good bets for long-term call.
Wishing you a happy week ahead.

Slope of Hope?

A classical Bear market always keeps the “Hopes of Recovery” alive by not allowing them to become a reality.

Week that was

Every thing looked fine at the start of the previous week. There was a massive stimulus package announced by China. Dollar demand across the globe had eased down. Pace of FII outflows from Indian markets had slowed down. Global cues were better. Local sentiments improved. Helped by the above factors, Sensex rallied to the levels above 10500 points at the start of the week itself.

Huge sell-off came thereafter. Sensex lost more than 1000 points from the top it formed for the week and ended with a net loss of 580 points (5.81%) for the week. Better than expected IIP numbers (4.90%) for the first half-year (2008-09) and surprise fall of Inflation rate to single digit (8.98%) failed to arrest the losses for the week. Realty Sector was the worst affected with a weekly loss of 14% followed by Capital Goods Sector.

US economic data released during the week confirmed that US is in the grip of recession. Also, there were doubts in the minds of investors regarding the continuity of support to the Wall Street after the regime change. Nasdaq lost as much as 8% and Dow Jones lost 5%. Other major Global Indices barring China also faced big correction during the week.

Rupee witnessed one more fall because of renewed demand for US Dollar. Crude Oil continued its downslide.

Week Ahead?

G-20 meeting has come out with a set of sweeping plans to revive the world economy. Efficacy of these plans is yet to be known as an outgoing US President headed the meeting and the incoming US President did not participate in the meeting.

Surge in CBOE Vix (Volatility Index) and NSE Vix indicate that there will be huge volatility in the coming week also. Technically (as we mentioned in the previous week) Sensex has already broken the important support line of 9600 points and closed well below it. Other technical indicators also point out that the downtrend may continue in the coming week also. However, with the Inflationary expectations moderating, any RBI action in bringing down the interest rates may be a positive factor for the market.

Sensex may find a technical support around 8900 points and a resistance around 10200 points. Traders may consider taking opposite position on extreme situations however with strict stop losses. Investors may consider entering into ETFs (Sensex and Nifty ETF) at the levels around 9000 points with a long-term view.

Rupee is expected to be consolidating around 50 levels and much will depend on FII action and RBI intervention.

First Phase of the Downtrend is Over?

Till some times back, every thing looked all right. Stock markets were scaling new highs. Real Estate prices were hitting the sky. Employees were enjoying hefty bonuses and huge pay hikes. India was talking about double-digit growth.

Whatever happened then looks like a dream now because of the Subprime crisis and the consequent global recession.

Since then, stock indices have crashed out. Metals have plunged down. Real Estate prices have been brought down to earth. Multinational (Investment) Banks went bankrupt. Jobs are being lost. Governments are supporting the Banks by providing capital. Central Banks are cutting interest rates drastically and pumping in billions of dollars into the system to ease out liquidity crisis.

As of now, panic level has come down in the financial markets, which appear to be finding a bottom for the time being. Dollars are more freely available in the international markets and LIBOR level has come down significantly.

Experts feel that the first phase of the downtrend is over for the time being. The second phase will be impacting more on the economies rather than the financial markets.

Second phase of the downtrend may witness the bankruptcy (i.e. not able to service the Debt and support the imports) of countries like Argentina, Hungary and Pakistan. IMF has already stepped in to save these countries. Global economy will be slowing down in the immediate future.

Now let us review our markets.

Week that was

As we expected, there was a sharp rally in the in the equity market for the first two days supported by cutting of interest rates by the central banks across the globe and FII inflows. However with the global markets turnig negative after the US elections were over and our weekly Inflation (10.72%) being much higher than the market expectations, Sensex was not able to cross the resistance level of 10750 points decisively. Huge sell off was then witnessed taking the index back to 9600 levels. Still, Friday’s small rally of 230 points helped the Sensex to close positive for the second week in a row. The positive news for the week was the return of FII flows into our markets. Bad news is that the series of economic data released in USA confirmed that USA is grip of recession.

Rupee rallied against US Dollar after hitting a historic low of 50.15 levels in the previous week. However the bad news is that the Forex Reserves of the country dipped by another $5.5 billion for the week ended 30.10.2008.

Week Ahead

As we mentioned earlier, the panic level has come down and there is some sort of stability returning to the markets across the globe.

Arrest of FII outflows and rather some inflows into our markets too have improved the underlying sentiments

Technically, Sensex can again rise to the levels of 10800 points breaking which it may move towards 11800 points. Only precondition is that it should hold above 9600 points and in case of any fall below that level it may retest 8900 levels once again.

Traders are suggested to take position according to the global movements however with strict stop losses.

Investors are suggested to buy some blue chip stocks and public sector banks with a 3-5 years time horizon at fall, as there is limited down side from here onwards.

Rupee may consolidate around these levels as (already mentioned) there is easing of dollar demand in the international markets.

Have a nice week ahead.

Interest Rate Cuts are in the Interest of the Nation?

Nowadays, RBI’s moves have become more predictable which appear to be just following the signals from the finance ministry. There has been a cut of 3.50% in CRR (the money, banks have to keep with RBI in cash), 1.50% in Repo Rate (the rate at which Banks borrow from the Central Bank) and 1.00% cut in SLR (the money, banks have to keep in statutory liquid assets) in the last few weeks alone.

Let us discuss hereunder whether these monetary measures can actually help the country in coming out of its economic slow down blues or these measures are simple paracetemol doses given to cure (tranquil) the cancerous diseases.

First of all, let us understand the economic problems that we are going to face in the near future because of the (current) global recession.

Ø There will be a fall in demand across the globe and our exports may be hit. BPO and BFSI segments of our IT sector may also be hit.
Ø Rising of new capital funds by our corporate will become more difficult in the absence of vibrant stock markets and FII inflows (Capital formation is key to sustain growth of any developing country).
Ø Business confidence will come down because of fall in demand and difficulties in rising funds. New businesses as well as expansion of existing business may not take off in large scale. In fact, there are possibilities of downsizing/closure of many existing business units leading to job losses.
Ø Real Estate Sector will be affected because of lack of demand and Lifestyle Sector will also be affected, as the consumers may prefer to cut down their expenditures in uncertain times.

Coming back to the monetary measures as discussed in the first paragraph, pumping money into the system may not help by itself to improve the economic conditions like similar measures (not addressing to the core problem) failed in US. Throwing money into the problem is like adding fuel to the fire.

No corporate will come forward to put additional money (by borrowing) in to their businesses if they find investment is not going to be profitable because of the expected fall in demand. Also, commercial banks may not lend if they find that projects are not viable even if their margins are good. As the Money growth (M3) is already at very high levels, cutting interest rates may make it more difficult to contain inflation in the immediate future.

To sum up, the real problem of today is not the scarcity of money but the risk appetite among the investors because of the lack of confidence in the growth of the country.

On the other hand, there are certain positive factors for India rising out of the current global recessionary environment.

Ø India is basically an import-oriented country. Our growth is more of consumption oriented rather than export oriented like China. When there is a recession across the globe the price of basic goods such as oil, cement, steel and other metals will come down helping the country to reduce its import bill and indulge in more infrastructure building measures at lower cost.
Ø In case of cost cutting measures of businesses across the world, there is a possibility of more BPO business flowing to India. Indian industry can conquer new frontiers if they are able to come out with innovative products (like Nano Car) with high cost efficiency.

Further, there has been a huge economic imbalance created in the last eight years of our economic growth. Few sections of the society have been benefited much more than the masses of the country. Now we have a (forced) breathing time to think about taking the growth to the masses also.

It is the right time for the Indian government to come forward and increase its investment expenditure particularly in the infrastructure, public health, public utilities and primary education sectors, which will benefit both the masses and the industry. Further right mix of prudent monetary and fiscal measures can help us to come out of the difficult times.

Light at the End of Tunnel?

October 2008 has been one of the worst ever months for the Stock Market with its key index (Nifty) registering a huge loss of 26% on a monthly basis. FIIs sold around 15,000 crores worth of stocks during the month alone. However, the last week of the month has raised few hopes of stability returning to the stock markets.

What gives the hopes?

There was a smart recovery in the (last week) opening day’s trade after hitting a multi year low of 7697 points in the intra-day session. Diwali’s Muhurat trading witnessed the best ever Diwali day gain. Wednesday, market managed to hold the big gain with a smooth F&O expiry. Friday, market registered one of its best gains in its history. Thus there were sparklers on every day of the week, registering a gain of 1000 points on a weekly basis. The losing trend was broken in the last week.

US markets also closed positive on a weekly basis. More significantly, the volatility indicator CBOE Vix has come down indicating that the markets are calming down for time being.

There were interest rate cuts by almost all the (major) central banks. India’s turn came after the business week was over as last but not with the least number of cuts. There was a cut of 50 bps in Repo Rate, 100 bps in CRR and 100 bps in SLR releasing around Rs.80,000 crores to the system.

Inflation has also come down on a weekly basis to 10.68% and there are provisional reports indicating that FIIs were the net buyers on Friday. Beaten down stocks like Unitech were the major gainers for the week.

Rupee has marginally strengthened against US Dollar on a weekly basis first time since a month.

What’s ahead?

All the above factors give fresh hopes that market may stage a recovery in the near term, which can take the Sensex to 10750 levels breaking which to 11800 levels. At the same time, if the market is not able to sustain the opening day’s (Monday) gains there will be down trend which may take the Sensex to 8900 points breaking which to 8300 levels.

All depends on the FIIs’ activities, which have been selling in the market with venom thorough out the entire calendar year 2008. But the pace of FII selling may slow down in the immediate future.

I am still having the view that market may hit a fresh trough wherein the panic will set in the minds of Indian Investors (also) before taking any solid up trend. Till that time, market may be consolidating in the range of 9000-12000 levels.

Investors are suggested to look into large cap stocks that have given good September results and public sector banks at falls. Traders may take a position based on the support/resistance levels as mentioned above however with strict stop loss limits.

Rupee may consolidate around 50 levels and may have marginal appreciation in the light of monetary measures of RBI.

Wish You All Happy Investing Times Ahead.

New Investment Vocabulary

Bull Market:

Random market movement causing any investor (Layman) to mistake himself as a financial genius.



Bear Market:

A time period (duration unknown) during which, children get no pocket money, wife gets no jewels and the husband gets no sex.


Momentum Trading:

The fine art of buying high and selling low.



Value Investing:

The finest art of buying low and selling much lower.


Stock Editor:

The person who scratches his head wondering why his every prediction goes wrong.


Managing Editor:

The person, who does not know any thing and accepts that by telling every time, “I don’t know”


Rating Agency:

The firm, which has just downgraded your stock.



Analyst:

The person, who tells you to buy at higher levels and sell at lower levels.


Broker:

Earlier prosperous, now poorer than you.


Foreign Institutional investor (FII):

Last year investment bank, this year bankrupt.


Domestic Institutional Investor:

Last year investments, this year provisions


Mutual Funds:

Managing your funds in such a way that NAV always goes down regardless the market movement.


Retail Investor

Missing. Will be rewarded in case any one finds now.


CEO:

Chief Embezzlement Officer.

CFO:

Chief Fraud Officer.


Analysts/ Investors Meet

Events forgotten long back.


Large Cap Stocks

Stocks where fall is large.


Mid Cap Stocks:

Stocks behaving mad (Cap) way.


Small Cap Stocks:

Stocks getting smaller every day.


Multi-baggers:

Stocks that will make you (multi) beggar.


Future Stars:

Stocks you have to search for (in the sky) after some time.


Hidden Gems:

Stocks, which will be hiding from you (or you may hide from it) after some time.


Online Trading:

Internet Account of which, the password has been forgotten.


Tele Trading:

Phones switched off.

P/E ratio:

Percentage of price correction after your purchase.

EBITDA:

Earnings Before I (Industry) Tricked the Dumb Auditor.


Buy, Buy:

Taxi-wala giving tips.


Standard and Poor (S&P):

Lifecycle of an investor in a nutshell.


Stock split:

Your former wife and her lawyer split all your assets equally between themselves.




Market correction:

Day after you buy stocks.




Cash flow:

Movement of your invested money down the drain.