It is time to believe in India Story and put your money into Nifty and Sensex

With rising reserves of Forex,
With so many companies going for Capex,
It is time to believe in India Story and,
put your money into Nifty and Sensex

With listed companies forced to make disclosures in detail,
With big boys like Reliance foraying into retail,
It is time to believe in India Story and,
put your money into Nifty and Sensex

With many board considering share buyback,
With market showing resilience and sharp bounce back,
It is time to believe in India Story and,
put your money into Nifty and Sensex

With global community worried about rate hikes,
With emerging market falling like 9 pins whenever crude spikes,
It is time to believe in India Story and,
put your money into Nifty and Sensex

With Indian economy marching ahead on growth path,
With Dalal street witnessing scenes of bloodbath,
It is time to believe in India Story and,
put your money into Nifty and Sensex

With dividend yield falling below the bond yield,
With world's focus moving from stocks to footer field,
It is time to believe in India Story and,
put your money into Nifty and Sensex

With most of analysts predicting US stagflation,
With people concerned about rising inflation,
It is time to believe in India Story and,
put your money into Nifty and Sensex

With Indian economy's splendid growth one can't ignore,
With fundamentals of companies which one can only adore,
It is time to believe in India Story and,
put your money into Nifty and Sensex

By Satnam

Time to sit back and evaluate the opportunities

I think currently our market is in its highest entropy state which (if I remember my thermodynamics fundaes correctly) stands for a state of total madness. Otherwise how can one describe a 10% fall in CNX Nifty Index on one day and then an equally strong 10% bounce back on the very next day. On last Thursday we witnessed one more session of complete bloodbath on dalal street and as soon as the pundits started saying that we are in bear market, we have breached the 200 EMA levels and hence the markets will fall further, and what not, we had a great comeback on Friday. Bulls were back in action with equal vengeance on Friday. Friday witnessed one of the strongest rallies we have seen in recent times. As any techincal analyst would say, it was mainly a techinal pull back as on Thursday our market ventured into the oversold terrioty.

The global picture still remains mirky and the nebulous environment of interest rate hikes across the globe will not allow equity markets to settle down in near term. RBI's rate hike on repo and reverse repo rate on Thurday will act as the last nail in the coffin of already struggling equity markets.

The way the market cracked in the later part of the day is really a matter of concern. Just at the moment when we were about to come into green the utter lack of buying and large short selling by institutional investors pulled the market down heavily. Huge selling pressure was evident across all the sectors and especially banking as all sectoral indices lost more than 3 to 4 % each. So all in all it was once again a painful session for dalal street with nearly no place to hide from the carnage. Our markets are particularly vulnerable to more correction as even after this correction, most of the analysts believe that our market is still overvalued. So some more pain is clearly there in the system and it is better to be on sideline for the moment rather than to try and bottom fish etc. So let the market setlle down and in the meantime evaluate the good companies ideas which are now available at great prices.

Quote : "The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable." -- Warren Buffet

Take a break from Market and watch the World cup

I think the best thing which one could do at this point is take a break from stock market and enjoy the world cup scheduled to begin from today. Markets are expected to bounce back today as technically speaking it is in oversold zone. But most of the people believe that it will be just a technical bounce back and investors should use that as an opportunity to exit. Marc Faber in his recent report has said that markets are expected to fall further even from these levels and he has suggested his clients to be on a holiday till this October. US markets were also down by almost 1.4% in the after but a technical bounce back later in the day lead to a smart recovery towards the end and the dow jones and Nasdaq closed almost flat. Yesterday global markets were also falling like nine pins as Russia corrected by 5% etc. One should keep in mind that this correction or meldowm in equity markets is lead by changes happening at global levels like hike in interest rate which most of the central banks are currently doing. Our RBI has also followed the suit and all of suddedn it increased the interest rates by 25 basis points yesterday. Bank of Japan is also expected to raise interest rate from current zero percent which is there at that level for the past 5 years. Also, global inflation is at 10 year high at the moment and this has made all the banks across the various countries to hike interest rates. This may definitely hinder the growth of their economies. Gotta go for lunch... so I would suggest you also take a break from markets and get a life.

Markets to remain weak

US markets were down almost a percent during the afternoon with Dow down about 100 points and Nasdaq down by almost 24 points. But later in the afternoon, because of some bottom fishing and value buying emerging at below 11K mark the markets recovered a bit and ended in red with Dow and Nasdaq down about 0.45% each. All European Indices also closed in deep red with each index losing about a percent and half. Today morning also Asian markets have opened lower and trading weak. So all in all today morning also we are getting negative global cues but they are not as bad as they were yesterday. Yesterday we saw a gap down opening but market moved up in the afternoon because of "short covering" happening at lower levels. This was clearly evident from the way "discount" between Nifty Futures and the Cash market fluctuated throughout the day. We opened the day with a 40 point discount on Nifty futures and during the afternoon when the short covering happened the discount was reduced to a mere 17 points. But because of lack of any buying emerging at higher (or these) levels, the discount again started to widened and by the end of the day it came to 57 points. So lots of people started shorting the market again during the later half of the day. It is important to note that we have breached some crucial technical levels yesterday. Nifty closed below the crucial level of 2950 and Sensex below the 10K mark. Technically speaking, we are at an extremely crucial level at this point of time. If we manage to hold above the previous low of 2896 made on Nifty, then the medium term bullish trend will remain intact. Otherwise below this 2896 level on Nifty, the next support is at 2700-2750 levels which most of the analysts believe is the strongest support which we can find throuhout this correction.

So markets continue to remain weak with a negative bias and unless and untill the global picture on interest rates,inflation,slowing American economy etc become clear we will continue to see a high amout of volatility in days to come. The only silver lining is that our economy is doing great at this point of time and this may be the time to pick good companies at great prices.


Quote of the day : Corporate financial statements are like bikinis .. what they are show are very interesting ; what they hide is vital"

It is 6/6/6 today. Market to correct more.

US economy is showing signs of a slow down, rising core inflationd data and the hawkish tone used by US Fed chairman Bernanke spooked the equity markets world over. Analysts believe US Fed is clearly signalling one more 25bps hike in interest rates. Dow closed down almost 200 points or 2 % and Nasdaq was down 50 points or 2.5%. Clearly markets world over didn't like such commentary by the fed chairman. This has led to a meltdown in all the emerging markets across the world. Brazil was down 3.5% , Mexico was down 2.5% etc. This cleary indicates that we will open gap down in today's trade. The crucial thing to watch out for is whether we close below the magical figure of 10K mark or not. Many institutional investors believe that if Sensex closes below the 10K mark then we may see lower levels in days to come. Also the Sensex has a 200 day EMA at around 9800 levels and many institutional investors will try their best that Sensex doesn't breach this level. The importance of 200 day EMA is that markets trading below this level are considered as "bear markets". Therefore this level is of utmost importance for technical analysis. Similar level to watch out for Nifty is 2900. Many institutional investors are saying that they will consider buying Indian stocks again at 9000 levels. Given that Indian economy is doing great at this point of time and valuation of some stocks have really reached mouth watering levels, I think people can start putting in some money in drips and drops and if this correction continues then they may average out by buying more and more at lower levels.

Quote of the day : "It's only when the tide goes out that you learn who's been swimming naked." -- Warren Buffet

Market update

I expect market may move up because of short covering and mixed global cues we are getting this morning. Data from F&O segment shows that still there are substantial amount of shorts present in the market and any upmove from here may force them to cover their shorts which will lead to a more sharper and stronger rally. It would be great if we can end the day with atleast little bit of green on the screen. On Friday, Nifty retraced back sharply before touching or testing the previous low of 2896. This is good bullish sign for our market and it may lead to a rally upto 3250 levels initially. What will happen of June 29th is still not clear and any news which may suggest that Fed may pause the rate hike for the moment will cheer up the market and vice versa. As our market has been doing in recent past, our market will move more or less in tandem with the global emerging markets.

My personal opinion is that the valuations of some stocks have really reached mouth watering levels and they present a good amout of value like SREI,TII etc. But the only thing which needs to be seen is that whether we will see lower levels or not. I think one can start buying every dip from these levels and invest around 15-20% of their cash holdings. In any case most of the analysts don't see 9000 level broken on Sensex and on the upside people are predicting levels anywhere from 12000 to 13500 by year end. The risk reward ratio seems to the favorable at this point of time.

The prediction by Japanese fund Nomura of Sensex's fair value at 7000 levels is "RIDICULOUS". The expected earnings for the Sensex comapnies is around Rs 735 for FY07 and going by histotical data we should atleast give a P/E multiple of 12 to our market and it lead to 735 * 12 = 8850 .

Quote of the day :

"Our experience has been that pro-rata portions of trulyoutstanding businesses sometimes sell in the securities markets at very large discounts from the prices they would command in negotiated transactions involving entire companies.Consequently, bargains in business ownership, which simply are not available directly through corporate acquisition, can be obtained indirectly through stock ownership" --- Warren Buffet

An article worth reading for any investor

The keys to investment success

"To invest successfully, you need not understand beta, efficient markets, modern portfolio theory, option pricing, or emerging markets. You may, in fact, be better off knowing nothing of these. That, of course, is not the prevailing view at most business schools, whose finance curriculum tends to be dominated by such subjects. In our view, though, investment students need only two well-taught courses: How to Value a Business, and How to Think About Market Prices. "Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher 5, 10, and 20 years from now. Over time, you will find only a few companies that meet these standards -- so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist the temptation to stray from your guidelines: If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value."


Ignore macroeconomic factors

"We try to price, rather than time, purchases. In our view, it is folly to forego buying shares in an outstanding business whose long-term future is predictable, because of short-term worries about an economy or a stock market that we know to be unpredictable. Why scrap an informed decision because of an uninformed guess?

"We purchased National Indemnity in 1967, See's in 1972, Buffalo News in 1977, Nebraska Furniture Mart in 1983, and Scott Fetzer in 1986 because those are the years they became available and because we thought the prices they carried were acceptable. In each case, we pondered what the business was likely to do, not what the Dow, the Fed, or the economy might do. If we see this approach as making sense in the purchase of businesses in their entirety, why should we change tack when we are purchasing small pieces of wonderful businesses in the stock market?"


"We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%.

"But, surprise: None of these blockbuster events made the slightest dent in Ben Graham's investment principles. Nor did they render unsound the negotiated purchases of fine businesses at sensible prices. Imagine the cost to us, then, if we had let a fear of unknowns cause us to defer or alter the deployment of capital. Indeed, we have usually made our best purchases when apprehensions about some macro event were at a peak...

"A different set of major shocks is sure to occur in the next 30 years. We will neither try to predict these nor to profit from them. If we can identify businesses similar to those we have purchased in the past, external surprises will have little effect on our long-term results."


Keep it simple!

"Our investments continue to be few in number and simple in concept: The truly big investment idea can usually be explained in a short paragraph. We like a business with enduring competitive advantages that is run by able and owner-oriented people. When these attributes exist, and when we can make purchases at sensible prices, it is hard to go wrong (a challenge we periodically manage to overcome).

"Investors should remember that their scorecard is not computed using Olympic-diving methods: Degree-of-difficulty doesn't count. If you are right about a business whose value is largely dependent on a single key factor that is both easy to understand and enduring, the payoff is the same as if you had correctly analyzed an investment alternative characterized by many constantly shifting and complex variables."


Argument for buying great businesses

"We continually search for large businesses with understandable, enduring and mouth-watering economics that are run by able and shareholder-oriented managements. This focus doesn't guarantee results: We both have to buy at a sensible price and get business performance from our companies that validates our assessment. But this investment approach -- searching for the superstars -- offers us our only chance for real success. Charlie and I are simply not smart enough to get great results by adroitly buying and selling portions of far-from-great businesses."


Welcome market declines

"[Many] investors who expect to be ongoing buyers of investments throughout their lifetimes... illogically become euphoric when stock prices rise and unhappy when they fall. They show no such confusion in their reaction to food prices: Knowing they are forever going to be buyers of food, they welcome falling prices and deplore price increases. (It's the seller of food who doesn't like declining prices.) Similarly, at the Buffalo News we would cheer lower prices for newsprint -- even though it would mean marking down the value of the large inventory of newsprint we always keep on hand -- because we know we are going to be perpetually buying the product.

"Identical reasoning guides our thinking about Berkshire's investments. We will be buying businesses -- or small parts of businesses, called stocks -- year in, year out as long as I live (and longer, if Berkshire's directors attend the seances I have scheduled). Given these intentions, declining prices for businesses benefit us, and rising prices hurt us.

"The most common cause of low prices is pessimism -- some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer.

"None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling. Unfortunately, Bertrand Russell's observation about life in general applies with unusual force in the financial world: 'Most men would rather die than think. Many do.'"


Don't confuse growth with sustainable competitive advantage

"The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.



Conclusion

Buffett's word's are often timely as well as timeless. If there's one sentence I'd urge you to keep in mind during these tumultuous times, it's this one, from the 1994 letter: "Fear is the foe of the faddist, but the friend of the fundamentalist."


PS: I just copy-pasted this stuff from some site as it is really worth reading for any investor.

FII's turning bearish on Sensex. Liquidity flows holds the key.

Yesterday market was falling like 9 pins and there was no buying support seen at all for any kind of stocks be it a bluechip counter like Bharti or be it midcaps like Ashok leyland etc. Worst hit was metal index as commodities kept on correcting on the LME also. All of this can be attributed to only one thing "Liquidity". Our market kept on scaling new highs because of this single factor (inspite of attaining premium to strechted valuations) and now they are falling because of this single factor. Most of the FII's have started pulling money back from our market. Noumara fund from Japan has given an year end target of "7000" for Sensex. So all this may just be the begining of a bear market which will remain for atleast 4-6 months. I dont want to sound hawkish but let me put some figures in perspective. To date FII's have pumped in somewhere around $4.2 Billion this year and they have just pulled out only $1.5 Billion. A lot worse can happen to our market if FII continue to pull out this money. Also mutual funds have also exhausted their cash surplus which they were sitting onto in the begining of May as they were net buyers on every single day in May 06. Also FII's which are shorting the market heavily are not willing to cover up their positions at even these levels. So they believe that this market will fall further. Fed rate hike picture is still not clear as analysts are not able to gauge anything from the minutes of FOMC meeting held on May 10 which were released on Thursday. All in all, things are still quite mirky there and it is better to be out of the market at this point of time untill this period of high volatility comes to an end. I believe that we will see a Sensex level of 9500 and Nifty of 2750 in near future.

We may for sure boune back today on the back of firm US markets and a rally in Latin American markets like Brazil was up 3.3 % etc. But I would suggest that people should use all these rallies to exit and then buy your portfolio again at lower levels.

Quote of the day: ``In bear markets, stocks return to their rightful owners.'' -- J.P Morgan

10 Midcap Gems to be picked up in this correction

Hi,

I can stick my neck out and say that these "gems" will outperform the market whenever this correction phase ends :

Sector : Banking and Finance

• SREI
• Federal bank

Sector : IT

• Nucleus Software Exports

Sector : Automobiles / Tractors

• Punjab Tractors

Sector : Telecom

• RCovL

Sector: Tyres

• Tube Investments of India

Sector: Power

• KEC International

Sector : Pipes

• Man Industries

Sector : Bulbs and Lamps

• Surya Roshini

Sector: Tiles

• Murudeshwar Ceramics
  

Sector : Travel and Tourism

• Indian Hotels

PS : standard disclaimer apply. Myself and some of clients may have vested interest in the shares mentioned above.

Quote of the day : Price is what you pay and value is what you get. -- Warren Buffet

Markets to Bounce Back Today

Markets will open gap up as all the Asian indices are almost 1 to 1.5 % up at the moment. Our market these days behave in complete tandem with what the global emerging markets do.

Also we saw some kind of recovery happening in Dow and Nasdaq yesterday as both the indices were up almost by 0.5 %.

Also in the figures released yesterday, our economy grew at 9.55% on QoQ basis. This will definitely give cheer to our markets and will boost the sentiment to some extent.

Another silver lining is that FII were net buyers in Cash as well as F&O segment on May 31. Also F&O statistics shows that currently market is in "oversold" condition and stage is all set for bounce back to happen today.

This rally may push Nifty to 3150 levels in the early morning trade.

FOMC meet minutes gives an clear indication that atleast a 25 bps hike in interest rate can't be ruled out at this moment. FOMC believes that inflation in under control but it is still at higher band of what it should be. Since we have breached so many crucial technical levels in the course of this correction, I believe that pain is not yet fully out of the system and we may test lower levels going forward. Since the potential upside is limited from these levels, as people are currently sitting on huge losses and there will be so many people who would like to exit, it is better to wait and watch for some days before making any directional call on the market.

Quote of the day: Bull market has no top, bear market has no bottom. -- Unknown