Tuesday, June 17, 2008

 

India stock market update as of 17 June 2008

The inflation figures that come in nowadays must be as scary for the industrial sector as it must be for the common people and the Government. If inflation remains high, then the Government, afraid of adverse political reactions, will try to curb money supply leading to a higher credit squeeze, something that has the effect of throttling industry. These measures do not lead to much benefit, since the rise of prices of commodities (and specifically oil) are global supply issues, not something that the Government can control from inside India.
So why does industry get scared ? Decrease in liquidity in the economy reduces purchasing overall, and combined with a credit squeeze, industrial growth starts to slip. However, a rapid pace of industrial growth is the only way for India to grow, and for more people to move away from poverty; so in that sense, the Government is willing to sacrifice growth and reduction in poverty for political measures that will indicate that it is desperately trying to cut prices. In such a economy, sectors that are dependent on commodities such as steel, oil, etc suffer the maximum. So steel sector is somewhat in a hole, and so are engineering and construction companies that reply on high working capital, low margins, and in many cases, cannot easily pass on raw material costs increases.
What can you do at this time ? Keep a watch out for sectors that continue to get impacted - steel, auto, brokerages and financial sector, realty, etc. The decrease in the value of the Rupee means that textiles, IT, etc are in a slightly better position. Shares that I am currently tracking:
1. TRF
2. Elecon Engineering
3. Walchandnagar
4. Reliance

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Tuesday, June 03, 2008

 

Indian stock market update as of 03 June 2008

The market just is not moving, leading to a lot of disillusionment among investors. Brokerage firms report that individual retail investing is going down, FII participation is down, and it's only the Mutual Funds that are still steady (they have to keep on trying, else how will they be able to get money pouring into their coffers). The macro-economic situation remains bad (and that is probably the reason why the market has refused to take off), with high inflation not coming under control, and the Government trying severe monetary measures including a credit squeeze to try to tackle this inflation (however, this squeeze is stifling the ability of industry to get funds). Further, with the loss in Karnataka, the government is trying to do what it can to retain a positive political picture, and that also means that the massive under-recoveries by the oil companies is not getting passed onto consumers.
The short to medium term remains gloomy, and most investors are sitting it out - the losses remains from the crash, and the market sometimes shows signs of climbing, and then drops again (which is exactly what has happened in the last 2 weeks). In addition, many sectors are hurting because of low consumer demand, with the auto sector coming under significant pressure. However, as always, there has to be a silver lining. The Rupee has dropped below the Rs. 42 mark (considering that it was at the Rs. 38 mark, this is a major drop in the value of the Rupee), and this should help some sectors such as the IT sector and the textile sector to somewhat improve margins. As always, evaluate companies that are fundamentally good and in a sector that is not likely to tank, and see whether you can get bargains (one good way is to read the articles in magazines such as Dalal Steet, Business India and Business Today - there are some good analysis of companies that are carried out in these magazines and should help in an improvement in understanding).
What are some of the stocks that I am tracking:
1. Sharyan (a brokerage)
2. The ever faithful Reliance (not Reliance Power)
3. Starting to evaluate IT sector stocks such as Infosys, Wipro
4. There are pharma companies that could be a good bet for the future, so looking at this sector
5. Engineering companies such as JMC Projects, Walchandnagar

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