Diwali Discount Sale

During last week, Stock Market was very much generous to its customers unheard in any other market to offer many stocks at huge discount (80-90%) to their previous year’s prices. For instance, one can buy entire pack of real estate stocks (one each) within the price that was paid for one single real estate stock last year i.e. DLF Ltd. I was telling my friend that he could buy many big names at the cost of a biscuit packet for his child.

What went wrong?

There was a short break in the downtrend for the first two days taking the Sensex to the intra-week high level of around 10,800 points after which the market fell like there is no bottom. Persistent selling by FIIs and global melt down made the market to have an unprecedented fall.

Repo Rate cut, fall in inflation numbers and melt down of commodity and Oil prices did not enthuse the market. A tragedian anti-climax waited for the last day of the week wherein Sensex fell by more than 1000 points thus closing just below its crucial support line of 8800 points.

Index stocks like Unitech (cash crunch), Suzlon (blade breakage) and ICICI Bank (financial crisis) fell prey to romours and faced huge correction in their prices. Reliance pack also continued its downfall.

Real Estate stocks were the worst hit for the week followed by metal stocks.

Rupee went above 50 levels for the first time in its history. Strengthening of US Dollar across the globe and stock market crash were the main reasons for such fall.

What’s ahead?

Currently, Panic rules the market. There is an insufficient liquidity support in our market, which makes it difficult to absorb the huge FII outflows (outflows have been to the extent of Rs.50,000 crores during the calendar year alone).

Our market will be keenly looking for global cues for the direction hereafter. In particular, there is a series of economic data to be released in US in the coming week which will be closely watched our markets also.

There is an oversold position in the F&O segment and short covering may be expected this week during the F&O expiry will happen.

Next support for Sensex comes around 8600 followed by 8200 points. There is a possibility of a sharp recovery (as it happened in the first two days of the previous week) taking the index to around 9800 levels. Breaking 9800 levels will be key to further upside.

Rupee may continue its downfall and the next support comes around 51.00-51.50 levels. Rupee will be closely tracking global movement of US Dollar and stock markets.

Traders are suggested to be cautious in view of high volatility and those with high risk appetite may trade in options taking contra view i.e. when the market is extremely negative buy Nifty Call Options and vice versa.

Investors with an investment horizon of over 5 years may start invest in ETF (Sensex and Nifty) schemes in small quantities.

Wish you Very Happy. May this light festival bring new light to the stock market.

Enough is Enough!

Fear, Panic, Pessimism, Exotic Derivatives turning Toxic, Economies darkened by Eclipse, Credit Crisis, Liquidity Squeeze, Sensex Sinking to Four-Digits, Closure of American Banks, Layoffs, Bail outs, Job Losses, Recession etc. The business and mainline media is full of such gloomy headlines these days.

Week that was

As expected by us there was a technical bounce back in market taking the Sensex up by 1000 plus points in the first two days of the market. The rise was due to the positive global sentiments and the confidence of stability returning to the financial system.

However, the last three days witnessed sharp fall in the market despite the cutting of CRR by RBI by full 100 bps (to 6.50%) that too with a retrospective effect and Sensex plunged below 10000 points after two years. The fall was mainly attributed to the exit of FIIs and weak sentiments in our market.

Sensex and Nifty declined by 553 points (-5.25%) and 206 points (-6.27%) to close at 9,975 and 3,074 respectively.

There was a heavy selling in the Reliance Pack and capital goods sector.

FIIs continued to sell. Rupee was trading below 50 mark thanks to the measures initiated by the government to ease the Forex inflows.

The annual inflation, calculated on a point-to-point basis, fell to 11.44% in the week ended Oct. 4 as against 11.80% in the previous week.

What’s ahead?

Sensex at four-digit level is highly depressing. If the downtrend continues, panic may be spreading across the Indian investors’ minds also and redemption pressure will be huge on mutual funds.

However, with the governments and monetary authorities across the world having initiated many measures to restore the balance in the financial system, there may be a brief pause in the falling trend. Also, fall in inflation rates, fall in oil prices and easing of interest rates are positive factors for Indian macro economy.

There is a technical support for the Sensex between 9700-9800 points breaking which 8800-8900 levels will form a stronger support.

In case of positive news flows and pause of FII outflows, we may witness a short-term bounce back to 11500-11800 levels.

However, the volatility in the market is going to remain

RBI is expected to cut Repo Rate in its mid term monetary policy announcement (24.10.2008).

Investors are suggested to look into relatively safer sectors like Banking, Pharma and FMCG. Investment in ETFs (of large cap indices) is also a good option.

Traders may initiate long position at falls however with strict stop loss limits.

Rupee is expected to continue to trade below well below 50 mark and the general demand for US Dollar is expected to slow down.

Weekly Review as on 12.10.2008

Week that was…

As expected, equity market continued to plunge down during the last week also, mainly due to the worsening global situation.

Technical support of 12500 (Sensex) was broken on the first day of the week itself and then, there was a fall of around 2000 points (-16%) in just four trading sessions making it one of the worst ever week.

Cutting of CRR by 150 bps (and also Fed Rate) did not help in improving the sentiments either.

Relaxation of P-Note norms also did not help the market.

The De-coupling theory losing its sheen as the IIP data for the last month was a shock to market.

Still, the fall in inflation is a positive sign but market ignored it.

Even though, Infosys results were on the expected line, its lower guidance for the year brought the stock down before managing to recover at the end.

FIIs continued their selling spree.

Rupee broken 47 levels and fell further down to near 50 mark.


What’s ahead?

There is war like situation across the globe and the international leaders are now trying to solve the deep trouble by mutual coordination. Our government and RBI are also doing their part.

Sensex has now corrected by around 50% from its peak at 21000 levels. Next support for the Sensex is around 9800 levels. Stronger support comes around 8800 points.

Technically, the market appears to be in an oversold zone and a short covering may be possible any time in the immediate future.

At the same time, there has been so much of fall, by which, the back of the market has already been firmly broken and hence immediate recovery to the earlier high levels appears to be near impossible.

Also, even in case of a recovery, it will be a long-term process as well as a painful one.

Traders may avoid short positions, as there is a possibility of a swift recovery of at least 1000 plus points in Sensex in case of any positive clues from global markets. Long positions may be initiated however with strict stop-loss limits.

Investors are advised to exercise caution in picking stocks for long term as it is still not very clear which stock is having more FII exposure and which company is exposed to Foreign Currency risks. Investors are requested to look into Sensex or Nifty ETF schemes wherein the exposure is against a group of blue chip stocks rather than investing an individual stock in the current turbulent period of time.

Rupee may test the levels of 50. However, with the measures already initiated by the government as well as RBI with regards to easing the norms on Forex inflows, further fall may be arrested around 50 level.

There is a saying.


“The bull market ends with a euphoria and the bear market ends with a panic”

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.