IIP nos - October 2009 - MY TAKE

IIP nos - OCTOBER 2009
ANALYSIS - my take

pl look at following points ......

1... gross no 290.1 is lower than july 2009 no which is a comparable month .... first month of a new quarter

this can not be ignored as this is contra-trend and needs to be watched carefully.

2... consumer non durable no of 264.1 is lowest since nov 2007 ( excluding aberration of oct 2008 ). inbetween we hv hit a high of 323 and 331 in dec 2008 / jan 2009 respectively.

this is alarming. whole FMCG sector could be under stress. i will not be surprised to see 6 to 8 % cuts in stock prices in this sector. looks like drought is taking its toll.

3...intermediate goods no of 284 is lower than may 2009 ..... is it a precursor of a slowing economy ? ? ? watch auto component stocks .... they could be in some trouble imdtly ......

4.... basic goods no is at 246 .... nearly at the peak ..... if this no was to be at sept level .... we wud hv shown a gross no around 286/87 ... which wud hv been a disaster ...

never the less, i dont expect a much stronger no in the coming months since this is dominated by mining and electricity - about 60/70 % contribution - .... that means alsthough the YOY gross nos still may look good .... we r going to struggle to show a strong MOM performance ..... which shud be there if economy is really getting strong . this also means we may struggle to reach 9 % IIP growth that is being projected.

the corollary is that we may reach just about 6 to 6.5 % GDP growth .... considering marginal de-growth in agriculture. the fig of closer to 7 % may remain a pipe dream.

the scenario is absolutely reallistic and barring unprecedented liquidity from FIIs , this paints a bearish picture for equities in coming months. there may not be collapse of markets like in begining of 2008 and 2009 but they will be soft.

any thoughts / comments from your side are welcome ......

september IIP nos - my take .....

we are currently in the midst of re-surrection of the economy after a terrible 6/9 month period. i think in such a stage YOY comparison is rather futile and serves no purpose. at times it gives a distorted view of the scenario due to low base effect.

what i will like to do in MOM comparison. i will be very happy to see consistent uptick on MOM basis without too much zigzag or volatility in all the components that make the IIP nos.

if we analyse the nos on MOM basis what stands out is consistent performance of consumer durable sector since JAN 2009. it can not be just co-incidence that this period matches with the huge payouts made to the govt employees by way of 6th pay commission arrears.

contd....

first instalment was paid in feb / march and second / final instalment was paid in sept 2009. this money in hands of millions of employees has boomed into demand for all kinds of white goods and small cars / two wheelers etc. this effect should wane in the next two / three months time.

6th pay commission has also put some additional money in the housewife's purse by way of monthly increase in salaries. but somehow consumer non durables are not doing so well. infact we hv seen sectoral downticks in aug and sept IIP nos. this shud get reflected in FMCG nos in dec qtr. the reason could be draught in many parts of the country.

capital goods sector normally does very well in sept and march and in dec to lesser extent. this is due to depreciation policy. but normally apr/ may and oct / nov is disater. but this is a sectoral problem not limited to any one company etc. since we hv seen bumper nos in sept 2009 ( better than march 2009 ) we hv to see how big the downtickin oct / nov.

basic goods had an uptick in aug and downtick again in september. but overall performance over last 6 months is just average. it wl remain like that in next quarter as well.

intermediate goods gave a downtick in september but overall performance over 6 month period is encouraging.

on the whole, we r bound to see a downtick in october on MOM basis while we will see a 10 %+ performance on YOY basis. i will be happy as long as we hv atleast 1 % more than aug value but it looks difficult ..... unless basic goods pick-up in a big way.....

PSU divestment .....

PSU divestment

now govt has changed the course ...... the proceeds will be used to fund social benefits of capital nature instead of putting them in NIF ...... what it actually means some revenue deficit will be made good by these sale proceeds ....

effect ... it reduces pressure on govt to make some excise changes which wud hv otherwise become necesary ....... that is why u wl see auto stocks running particularly ..... but these changes will happen ... to a lesser extent in feb budget ... - nov schedule of changes will be scrapped ........ the auto stocks still continue to be overvalued .....

PSU DIVESTMENT - to fund revenue deficit ......

is it like selling family silver to fund daytoday expenses ..... yes and no .... if it is done to support draught relief or drinking water projects etc .... where the benefit is trickling to the poorest of poor ..... the cause is justified ...

if it is only used to cover revenue deficit which will happen due to reduced excise ...... then it is not at all justified as the corporates dont need that kind of support now - as can be seen the results of last two quarters ...... govt has passed an enabling resolution .... now it remains to be seen how the proceeds are actually utilised ........

WHETHER INDIAN MARKET HAS SUBSTANTIAL UPSIDE ? ? ?

i have looked at this point from two angles which are elaborated below -

1...
most of the major world markets topped out in oct 2007. at that time we were around 5400 nifty level. thereafter we continued to move up - the reasons like a large business house / FII / local brokerages cartel etc have been explained several times - by another 900 points.

THIS WAS A CLEAR BUBBLE AND SHOULD NOT BE CONSIDERED IN FUTURE DISCUSSION.

we hit a level of 4700 couple of weeks ago and the the protagonists of unbridled bullish fervour were then predicting 'kissing of the old high' of 6300 etc etc. we were just about 15 % away from a realistic high level of 5400 which was prevailing when the world markets secularly topped out.

THAT IS WHY I WAS ALWAYS VERY SKEPTICAL ABOUT ANY FURTHER UPSIDE IN IMMEDIATE FUTURE AS IT WOULD HAVE BEEN GOING AGAINST THE GRAIN OF MY THEORY OF 'COUPLED RESONANCE'.

the movement in last 2 weeks including yesterdays fall has corroborated my viewpoint / predictions.

2...
if you compare the performance of our market with other major markets, a few things come out -

A... except china all other markets have underperformed by nearly 25 % over one year time frame. india and china are more or less at the same levels - 10 % above year ago levels.

B... over a two year time frame, all the world markets are down by 35 to 40 % . china is down by about 20 % and india is at same level which prevailed two years ago.

C ... over longer timeframe like 5 yrs, the outperformance by our markets is even more pronounced.

the above points bring out that we have outperformed every other market by nearly 35/40 % over one year and two yer time frames (except china ).

DOES THAT LEAVE ANY TANGIBLE CHANCE FOR FURTHER OUTPERFORMANCE ? ? ?

i feel the answer is a BIG NO as we are now fully coupled with international economy ( which we were probably not 5/7 yrs ago - remember in asian currency crisis we did not have much problem.) and we have hit the limit of outperformance already.

generally this percentage will come down as the euphoria about a particular even based reaction wanes and that is what we are already witnessing.


now let us consider both angles presented by me collectively and you will see that it is going to be extremely extremely difficult to breach the wider range of 3700/4600 - ON OUR OWN . we will need some external impetus like dow crossing 9000/9500 zone convincingly etc.

the strength of our economy / single party govt etc may not be enough to break the range on the upside. however these two points will help us in cushioning any severe fall that may happen in the world markets and restrict the damage to the lower end of the band of about 3700.

i was waiting to put forward this hypothesis but i delayed it purposely since the marketmen were in euphoric mood and they would not have listened to any contrary but sane viewpoint.

i will appreciate your comments.

three cheers to UPA ........

KUDOS to indian electorate and THREE CHEERS TO UPA ! ! !

to everyone's utter surprise ..... the elephant left the living room without any damage .... not only that - like in the old fairy-tales, it has moved the magic trunk all over while leaving .... converting all wood, copper and steel into GOLD and SILVER .....

just yesterday evening, everyone was talking about hung parliament and the long summer nights - trying to forge a workable coalition etc - but the UPA pre-poll allies themselves have got a near simple majority .....

the left front will like to forget today as a bad dream .... hoping it never happened .... all the regional satraps who felt like king-kongs and did not bother to align with either the BJP or the CONGRESS are lying on the wayside .....in the gust of the passing bullet train - UPA.

today is the day when all the world should stand up and salute the matured indian democracy and the indian electoral system .... the process as well as the electorate itself ..... which has been many times ridiculed as illiterate, easy to manipulate, overly emotional, herd mentality etc etc.

today we have seen the never before example of TACTICAL voting. when elctorate as large as 600 million responds tactically .... just with the sense of purpose /duty and no other external impetus ... THE WORLD HAS TO STAND-UP AND TAKE NOTE.

now the new government has just blue skies above with no dark clouds of the left or the samajvadis of different hues and the moral responsibility of loads of expectations of the matured electorate which has done its job brilliantly.

NOW IT IS TIME TO PERFORM .....

exit poll vortex .......

the exit polls have ruled out NDA govt virtually ..... but the prospects of a MINORITY govt are extremely extremely damaging .....

this idea is muted by the left parties just to keep BJP out of power and congress may find this soft option acceptable .... any way they remain in power and that is what matters to them ......

but that means inspite of getting lower or say nearly half the seats - the left will continue to call shots .... and that is not a good news for market .....

FIIs will not like the idea of minority govt ... as it is extremely unstable .... and that too supported by left ...... this will be the worst they would have expected .... and they will make their intentions clear ..... by their feet ...... by walking out ....

anyway all that is speculation still ..... but i have painted a possible scenario .... which shud force you to cash ...... it is still not too late ......

unjustified euphoria ......

yesterdays rally came out of nowhere - on the back of prospects of NDA govt .... that is what i hear ... and FIIs were the drivers

was it justified ? lets look threadbare .....

what do you think ? who knows indian polity best ? the phirangs with their computer simulated models or people like you and me who have lived here for decades and know all the colours these political chameleons can show ?

personally i am thrilled with the prospect of NDA government - due to my political leanings ..... but at the same time i will not throw caution to the winds and recommend all out TEJI.

the dice is loaded against NDA govt as they are political untouchables to many .... far too many .....this means that the NDA govt becomes a reality if BJP on their own move closer to 180 .... which to me looks a farfetched scenario ...... i have also not forgotten the 13 day govt experience of BJP 12/13 yrs ago .......

so - even if exit polls indicate a NDA scenario - a lot more drama has to unfold between today evening - the official results and the coronation of LKA as the prime minister ...
there will be huge huge swings both ways ..... and only the speculators thrive in such a scenario .... the average investor gets cut both ways .....

so we shud do the most obvious and most logical thing .... sit out this uncertain period .... if you hv moved to substantial cash - as told several times in last 10 days - deploy 20/30 % on big downswings .... only in quality stocks .... that is our objective .... isnt it ?

for heaven's sake, dont chase prices ...... be patient - because like swiss trains which come at the station - every hour - on the dot - you wl get several opportunities to get back into the market and that is inspite of NDA govt .....

governing with mistresses like jaylalita or mayavati - or even both - is not easy .... not at all easy .......

elephant in your living room ........

i like this first global duo --- shankar sharma / devina ..... somehow their investment philosophy and line of thinking is very similar to mine ....... i have never met them ... i dont know them at all apart from seeing them on TV .......

today devina talked about elephant in your living room syndrome ..... just imagine if that happens to you ...... what can u do ? really nothing ...... so u do the next best thing ...... u try to ignore it and hope that it will go away as it came in .... and with least damage to the house ......

this is exactly what the market is doing to election outcome .... just hoping that everything will be alright next week ... we will hv a stable government and continuation of reforms ......

but this is wish ful thinking ...... and there is something you can do in this case which u cant do in case of an elephant ...... sell out - mostly everything and move to cash ....... exactly what i have been preaching for last 5/7 days ....... be atleast 85/90 % in cash ..... sell what is saleable ...... or what can lose value substantially ......

we will have exit polls out on 13th evening and all hell will break lose on 14th itself ....... so dont wait till last minute ..... ACT NOW WHEN IT STILL NOT TOO LATE .........

election special ......

Today we will review the possible outcome of the general elections. To me it looks apparent that BJP + Congress will get just around 230 / 240 seats throwing open all kind of possibilities. No other single block like CPI / CPM, SP , BSP, RJD + LJP + NCP will get more than 40 seats.

So I feel the third front supported by Congress or Congress + third front ( with a different leader than manmohan ) are the possible governments. Some quarters are speculating over Chiddu ( though I have my own reservations beause of left parties ) as a possible front runner if congress will lead the government. If the third front will form the government with congress support – the leader could be anyone and name of Sharad Pawar can not be ruled out.

Fortunately 16th may is a Saturday – otherwise we would have had two lower circuits ( 10% + 5% ) for sure. 48 hours are not going to be enough to have clarity about the form of the government that we will have and I will envisage a 10% circuit or closer on Monday 18th morning.

As usual many pivotals will take deep cuts but momentum brigade will be massacred again.

The scenario described above does not warrant anyone to hold long term investments as CASH WILL BE KING. May be I will be wrong but the form of the government is definitely not going to be such as to spark a strong rally. So if you have moved to cash – you will definitely get an opportunity to get back in to the market at similar or even slightly lower levels.

I ALWAYS PREFER TO ERR ON THE SIDE OF CAUTION AND STRONGLY RECOMMEND MOVING TO CASH.

SO, TRADE WITH ABUNDANT CAUTION AND KEEP MOVING TO CASH.

Please remember CAPITAL is always scarce and needs to be respected.

weekly musings .......

4th april 2009

My monthly levels are out and the charts are looking by far the best in last twelve months. US daily charts are looking extremely overbought and DOW and S&P are not showing very high strength on weekly charts. This leaves room for a substantial correction in the coming weeks unless the markets continue to plough forward this week as well.

Our markets are showing much more strength than the US markets. Generally our markets normally follow strong trending patterns as the markets are dominated by operators unlike US where the institutional investors call the shots. We may continue to move upwards even-though the US markets may dip or move sideways. But the moot point is that this leaves us vulnerable to very deep / sharp correction possibilities which knock the winds out of the individual traders in one go.

Many of the pivotals are overextended. They are due for a correction and just waiting for a trigger. In such a situation it is prudent to trade in options than in naked futures. Option premiums have also moved up so better to play in spreads – bull or bear – depending on an individual view.

SO, CAUTIOUS BUT BULLISH, SHUD BE THE TONE OF TRADING.

Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.

Archives of what I wrote in The Economic Revolution - 21st and 28th March 2009

28th March 2009

Obama is putting all his might and he is doing it in rapid steps. On last Monday, he further announced one trillion dollar public / private partnership programme to buy toxic assets from banks / financial institutions. The steps taken by him so far are such that he dare not go to congress for any additional funds. So this time the gun is on the shoulders of FED and FDIC as well as 350 billion dollars from earlier congress approved TARP funds.

His 8,000 dollars tax rebate for new house buyers seem to be working as February sales figures were a tad better than expected. Mondays announcement + better housing figures + further short covering gave more than 10/12 % boost to DOW in first four trading days followed by a small profit booking on Friday.

According to me the coming week will be a make or break week for this rally as well as further course of this 17 month old bear market. So I am going to watch with lot of interest.

Back home the US rally was replicated one to one and for the time being market seems to feel that the worst is over and this is the beginning of atleast a medium term bull run. Politics is not giving good signals at all and making may bear spreads – which are still cheap - will be the order of the day.

My monthly levels will be out on 1st April which should give a better clue to what the next two months hold out for the markets. They have rarely failed to gauge the mood.

I will recommend profit booking on any trading / investment positions that you may have. It is too late for a fresh long entry.

Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.


21st March 2009

Obama fired one more salvo on Wednesday – 1.3 trillion dollar liquidity infusion by way of FED buyback of mortgage based securities issued by Freddy Mac and Fannie May – both govt-owned reinsurers as well as other gilts / govt bonds . This resulted in surge in govt bond prices - weakening of US Dollar and corresponding huge spike in all commodities.

US equity markets also surged on the day of the announcement but retreated on the two following days on the back of the fear of inflation. Meanwhile certain quarters in US congress and the corporate auditors are resenting the changes mooted to mark-to-market rules existing now. The developments on this MTM front need to be watched carefully as the fate of the entire bear rally witnessed so far is hanging on this one thread.

Back home, we are now staring at ‘deflation’ as WPI will soon move in negative territory. This is worrying some economists since deflation normally reduces borrower’e repayment capacity further. Unfortunately, no further stimulus by way of increased government spending can be envisaged as we are now in election mode and ‘code of conduct’ is in place. I must reiterate that our macro-economic problems are overwhelming and political scenario is getting murkier by the day.

I will not recommend any serious investment in the coming 4/6 weeks till all political alignments and its implications become clear. We have a hope if Congress / BJP led government is in place but the case is lost if we have to face a third front experiment.

Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.

Archives of what I wrote in The Economic Revolution - 7th March and 14th March 2009

14th March 2009

US markets are in the midst of a strong bear rally. This rally has two major underpinnings – 1…. Up-tick rule is likely to be re-instated next month 2… major changes are expected in mark to market rules applicable to banks and financial institutions.

This has resulted in massive short covering – thus the sharp rally. Both these measures were contemplated in October 2008 and later dropped. Obama administration has revived this ‘ BRAHMASTRA’ as nothing else seems to be working.

Revival of Up-tick rule is a technical matter and it is intended to moderate ‘bear raids’ but the changes in mark to market rules have dangerous fundamental implications. It is akin to overlooking patient's internal hemorrhage. If not treated / arrested immediately, this will kill the patient when the blood starts oozing from some hole. It is like taking a chance that, given the time, the rupture will self heal. But all of us no efficacy of such ‘wishful thinking’.

Back home we have replicated the rally with a bit of lag and that indicates markets reluctance to make a meaningful up-move. Macro-economic problems are overwhelming and political scenario is getting murkier by the day.

I will not recommend any serious investment in the coming 4/6 weeks till all political alignments and its implications become clear. We have a hope if Congress / BJP led government is in place but the case is lost if we have to face a third front experiment.

Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.


7th March 2009

Our market is in a hole and the hole is getting deeper. RBI announced a Repo and a Reverse Repo rate cut mid-week but market in-fact slid further on the following day. This clearly implies that the bulls are on the back-foot and market is firmly controlled by the bears. We have a reason to believe that whatever small rallies that are happening are engineered by the bears just to get better levels to sell.

US markets are in deep trouble with all three indices at more than a decade old lows and still falling. President Obama has lost popularity and the republicans are complaining that he is taking left of the centre stance on economic issues. Instead of leading the economic think tank, he is getting guided by them.

The US problems are persisting while the whole of eastern Europe funded by West European banks is on the verge of bankruptcy – threatening to pull down most of the European banking system.

The macro problems faced by our economy are also so huge that there is no quick-fix solution and we should be reconciled to have weak to moderate growth in the coming 6 / 8 quarters – irrespective of the form of the government the April / May elections may throw-up.

Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.

RIL / RPL merger - my take ......

RIL / RPL merger - my take ......

all of you must have heard on most business channels that about 65/70 % profits of the merged entity will now come from refining activity ...... if that is so - then why not discount the stock like any other refineries .....

and i am not talking of other indian refineries .... many of them are govt owned / old and may be inefficient .....

i am comparing with international competitors .... who all hv fairly advanced technology and most of them also have E&P arms as well as petrochemical production facilities ... so that is more like to like comparison ......

yes - i am talking of chevron / exxon mobil / BP / total / royal dutch shell etc etc .....

how many of you know that all these are getting P/E discounting of 5 to 8 maximum ...... so even if we are charitable and give merged RIL discounting at highest level of 8, then at the earnings level of 127/130 - indicated by some experts on channels ...... the share price can be atmost 1000 /1050 ......

and it takes care of all plus points like complexity and ability to process any dirty / cheap crudes etc etc ..... all that is reflected in earnings and we hv looked at P/E while arriving at this price ......

now what remains to be added is a political premium - if any - that you wud like to add ..... and even then the price can not go beyond 1100/ 1150 .....

CLSA has just downgraded ONGC and it is only to be expected that some firangi wl downgrade RELIANCE also .....

so act now when you are still likely to be the first ......

if ONGC and RELIANCE will take say 10 % knock from current levels ..... i think we r destined to see 2500 levels .... this month itself ........

JAY HOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO .......

Archives of what I wrote in The Economic Revolution - 21st feb and 28th feb 2009

28th February 2009

Pranabda is nothing less than an Indian magician. On Monday, 16th February he refused to oblige the Indian corporate sector with any mercy under the guise of propriety but come Thursday the 26th, all that mask melted as butter melts in the hot sun. We had fresh excise and service tax cuts and a small dose of incentives to exporters on Friday.

The quarterly GDP figure of 5.3 % is in-fact better than my expectation and we must be ready to face even worst figures in the coming quarters. I say this in-spite of some popular charitable views declaring this figure of 5.3 % as the worst that we have seen.

What we are facing today is crisis of confidence and unless that is restored all these dollops of thousands of crores of rupees will vanish in the proverbial black hole with nothing to show.

Yesterday, we had all three US indices – the Dow / Nasdaq and S&P closing at a new 52 week weekly closing lows. We are staring at 6,000 on Dow and 600 on S&P and that is not a good feeling. This does not give any confidence whatsoever to trade on the long side and I must repeat over and over again that all bounces must be used to exit longs.

RIL / RPL merger is announced and we will know the details like exchange ratio etc on Monday. I have some views on this matter which I will keep reserved for the time being and they will be published at an appropriate time. I can only say that I am not very sanguine about the prospects of the merged entity.

If Dow is going to 6,000 which is the next plausible target, we should be looking at 2,000 / 2,100 as possible nifty level. So all ULIP investors are better off switching to debt funds till this downslide has played out. MF investors hv to step aside and wait. I had given similar warning when nifty broke 3,550 early October and what followed is history.




21st February 2009

As expected, Pranabda’s interim budget was a non-event and the bulls have finally thrown in the towel and now they are at the mercy of the bears. The bears are still pulling their punches in view of the Monday - trading holiday in India – and will make the assault on Tuesday if the Dow is with them.

As I write the Dow has given a weekly close well below 7500. This now opens the gates for further substantial downside. It may happen over next 10 days or 10 weeks is anybodies guess but there are now more than 80 % chances that we will make firm downside move in the coming weeks and months. There may be sharp short term rallies but they will fizzle out even before average investor / trader can get in.

If Dow is going to 6,000 which is the next plausible target, we should be looking at 2,000 / 2,100 as possible nifty level. So all ULIP investors are better off switching to debt funds till this downslide has played out. MF investors hv to step aside and wait. I had given similar warning when nifty broke 3,550 early October and what followed is history.

Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.

The macroeconomic factors and the election jitters are bound to come forward in full force this week. Let us wait and watch ……

Archives of what I wrote in The Economic Revolution - 13th dec 2008 till 14th feb 2009

14th february 2009

Dow move of last Friday - promised a lot but failed to deliver a follow-up. In fact, the Dow ended the week giving the lowest weekly close in this bear run. This has changed all calculations and all prognosis of a medium term rally in our market. The bulls are holding on hoping for the lifeline that the interim budget may throw at them. This has enabled them to sustain the 2 % IIP fall which was accurately predicted by me a day before.

As mentioned last week our market has started showing a lot of maturity in reacting to strong Dow nos (good news ) and disastrous IIP nos ( bad news ). Alas, if same maturity was shown 15/18 months back ….. we would not have so many sob stories of boom to bust to hear.

Monday becomes a very important trading day of the next week. It will set the tone depending on the outcome of the budget speech of Pranabda. The old warhorse will be singing his swansong in front of packed parliament and multi-million TV audience – an opportunity he would have never thought possible to come his way. He will make the most of it with lot of election pointing rhetoric but not much substance.

So the bulls are bound to feel let down and then wind-down positions which will have its inevitable effect of starting a slide down. I hope the slope will be gradual and not off-the-cliff type. I will recommend to open fresh shorts on Monday morning prior to budget and wait ……..

The macroeconomic factors and the election jitters are bound to come forward in full force this week. Let us wait and watch ……

7th february 2009

Dow has made a 200 plus points up-move on Friday – the last trading day of the week. This is bound to have a big positive impact on our markets when they open for trading on Monday. But HOW MUCH is the big question …. It is entirely possible that we will have a fresh rally starting after the break-out from a tight trading range – that will be a normal response.

I feel that this time the market is more rational than euphoric and it will try to gauge the durability of the Dow up-move before it makes a decisive move.

We have to cut shorts and become neutral to get ready to latch on to 300/400 nifty point rally which may happen if Dow continues its march to 8400 and beyond.

Our own macro-economic problems are far from over and the forthcoming elections can give jitters till we have the next government in place. Then the contours of the coalition will take over.

So be ready for a small trading rally for short to short-medium term which is a period of about 2/3 weeks – max 4 weeks.


31st anuary 2009

We are moving in a very tight range and breakout is imminent - the direction is not known – that is the problem ? ? ?

Let us try to find a logical answer – 1…. Euphoria about Obama is over. Real economic worries are coming to the fore. 2… Result season is over – in India as well as USA. 3… Dates for our general elections are getting announced shortly – that anxiety can now take over.

Dow is at a cusp / inflection point – a decisive break below 8,000 can be extremely damaging. The overall results are in line and the big boys have done better than expected. Normally this should have given a big UPSIDE to the market but in the prevailing sentiment it is read as WORST IS YET TO COME. The election fever has started to set in and as of now, there is not even clarity about pre-election coalitions.

Generally situation is in a flux and right for a downside breakout testing the intermediate November low of 2500 or thereabouts.

24th january 2009

I am on the road and very busy - so much that I could not keep track of the market for last 3 trading session.

17th january 2009

Last week was a drab – on the face of it but we had 100/120 point nifty moves in either direction on last three days pointing to increased volatility. This does not augur well. To me, it looks like a desperate attempt by bulls to defend some key levels below which all hell will break loose.

Infosys has given results which were not disappointing but TCS results were sounding a note of caution. US results have been poor and banks are worrisome. We may have a next downleg commencing after euphoria about Obama’s coronation is over.

As I have been saying all thru, the economic problems the world has are beyond any single individual – even though he is US president – as they are systemic in nature and only natural cleansing process will unravel them.

Natural gas prices have caught a downward momentum – two / three more down weeks and both RIL / RNRL will be wondering why they are fighting. Time is a natural healer – right . . . ! ! !

Commodities are again looking down after a brief attempt to recover. Commodity stocks should catch chill again.

The old adage - CASH IS KING – comes to mind again …. Hold on to it for dear life . . .

10th january 2009

Last week was a tumultuous week. Everything looked better at the beginning – the global cues were much better compared to last several weeks and we were midst of a sweet pullback – but who knew about the SATYAM debacle . . . ! ! !

Then everything turned topsy-turvy and the basic trust in the ‘corporate governance’ itself was shattered. The de-rating was all pervasive and many dubious quality stocks took big knocks.

Some rumours are swirling about big-daddy RELIANCE and if there is any credence to it, we are doomed to see much lower levels. GRMs are slated to shrink drastically and the bottom-line will be affected.

Infosys / TCS will announce results next week and not much positive is expected but we should pray not to have any nasty negatives, otherwise that sector – which is an underperformer over a year now – will simply collapse.

Looks like we are going to have a very eventful and volatile week ahead . . .

20th december 2008

Last week, as expected, market did show positive bias in the wake of expectation of proactive government response. The sentiment was further aided by lower than expected inflation figure on Thursday. This has given rise to further rate cut hopes and this has given filipp to the sentiment to banking stocks and heavily beaten down real estate sector.
We have already entered into new year holiday zone and not much can be expected from FII front for next two weeks. This means as usual our operators will rule the roost and the ‘momentum brigade’ should thrive. In fact, I think that has already started.
Don’t get sucked into thinking that these are good times for investing short term in these stocks as levels have moved up. Aggressive and nimble footed traders only can grab these extreme sharp, short term but volatile price movements.
US markets have hardly moved over last two weeks and breakout seems imminent in the early in the new year. Unfortunately the direction can not be judged now. All will depend upon the fallout of the Madoff scandal.
I will be away for next two weeks and will be back with you on 10th January 2009.

13th december 2008

Last week, as expected, we saw a very muted response to ‘stimulus’ package in the beginning of the week but the market showed remarkable resilience towards the end of the week inspite of adverse newsflow by way of US news and disastrous IIP nos.

My analysis for this resilience is as follows - many a times a person gets bogged down in the web of his own utterances in the past …. I am referring to Chiddu as I see every possibility of his getting trapped into matters like FRBM / his stand on SEZs etc. Market has sensed that the finance ministry will now have no such hang-ups since it is directly under PM. That is why market is now expecting a more proactive role by finance ministry. No doubt, recent state election results have also improved the sentiment.

I also told you last week something about Chiddu and real estate lobby ….. just have a look at the performance of realty stocks after departure of Chiddu and I will not have to say anything further.

This raises another important point – if a senior cabinet minister can be manipulated and moved around by some not so influential industry groups, how do you expect other lesser mortals like government babus to withstand the pressure ? ? ? We always tend to blame the babus for everything that goes wrong but at times, they may have no choice …….

US markets have been ambivalent for the last week as well. The investors seem to be hoping Obama to wield a magic wand when he takes over. I think the problems are beyond any single person to make any substantive difference. Shanghai and Hong Kong markets are looking promising but I expect some nasty surprises to come from UK / Europe in coming few months.

I still maintain that CASH IS KING but it may be prudent to trade with a long bias till our position trading short level is decisively broken.