Struggle to make money from stocks

Some tips for better and safer investing

2011-06-01T02:55:00.000-07:00

• If the stock falls and you were expecting it to rise, drop it. Don't hold onto a stock just in terms of trying to average out something if you don't have confidence.
• Never trade with money you can't afford to lose. Don't take loans for the purpose of investing in the stock market.
• Always have a plan of action for your trading. People who have a plan and follow it (and modify the plan from time to time depending on the market situation) make more money from the stock market.
• Always follow your plan of action.
• Don't hold on to losing stock. It's termed as catching a falling knife, which can cause more damage to your investment.
• Even if your stock continues to rise, you should still sell in accordance with your plan.
• Don't hold on to winning stock longer than you planned; things can all too easily turn against you. Greed is something that needs to be controlled.
• Set a limit for how much you can afford to lose in a day. Use a stop loss judiciously.
• If you lose your limit, get up and walk away; stop trading. If you continue, you could even lose your shirt.
• Accept that you will lose money sometimes and be prepared.

India stock market update - 13 Jan 2011

2011-01-13T10:34:00.000-08:00

It's been some time since I wrote in this blog, and things have changed a lot since then. The overall political environment in the country has taken a deep turn for the worse in the past couple of months, with scams affecting the image of the Government to a great degree, implicating the even honest image of the Prime Minister. Further, the economic and monetary policies seem to be moving in a direction that is not very conducive to growth, such as a high rate of inflation, and a result, the Reserve Bank seems to want to limit money supply by raising interest rates, which in turn will lead to a contraction in the amount of capital available for companies to finance their growth and lead to a reduction in the growth rate of many companies.
As a result of all this, and because there seems to be a slight positive movement in the economy of the United States, FII's seem to be selling in the domestic market, and are also repelled by the amount of the scams, which increases the perception of a high degree of corruption in India as a whole, something that is seem as harmful to the working of companies.
In the past 2-3 months, there has been a sharp fall in the value of mid-caps with many portfolios falling by 20-25%, a sharp drop that is not fully mirrored by the value of the Sensex. So what does one do about stocks ? If you believe (as I do) that in the next 2-3 years, there will be a continuing fast growth, then a drop in mid-caps and some large caps is a good opportunity to buy, so am tracking stocks such as:
1. Elecon Engineering
2. Reliance Industries
3. Bharti Airtel
4. Pipav Shipyards
5. Hindustan Construction

India stock market update as of 15 October 2010

2010-10-16T20:27:00.000-07:00

Contrary to most expectations, the Indian stock market has been on a rise, going up and up. This is inspite of the fact that the most recent index of Industrial Production (for August) has seen a downturn (with the most recent rate being 5.5%, compared to a much higher level just a couple of months back). Further, the market has seen a huge influx of money from Foreign Institutional Investors, to the extent that the Government is contemplating putting some curbs on this inflow. The Sensex is reaching levels that were last seen in December 2007 - January 2008, and we all know what happened to the market after that.
Inspite of the fact that past statements of caution and doom seem to have been defeated by the market, we should continue to remain cautious and be careful with putting more money in the market. Stocks that remain fundamentally safe are fine to hold, but if there are stocks that have jumped up significantly, then cashing out for atleast a portion of such profits is the sensible approach. Some of the shares that I am currently tracking:
Western Shipyards
KNR Constructions
Action Construction Equipment
Coromandel Fertilizers
Andhra Sugar
Bajaj Finserve

India stock market update as of 23 September 2010

2010-09-23T07:45:00.000-07:00

As predicted, the Indian stock market is becoming much more volatile. In the last couple of days, we have seen the usual conditions of volatility such as the large cap going up, while the middle caps have been extremely volatile. The Reserve Bank is predicting some increase in inflation, and hence has raised some of its rates by a small amount.
For the last many weeks, most retail investors have actually tried to increase their cash levels by selling out those scripts where there is a profit, and trying to stay on the sidelines in this volatility. This is what is recommended to most investors, unless they are confident of their involvement in the market, and about the script they are holding and can take the losses that may occur. At the same time, there is news about sugar scripts that may be worth buying, given some losses in sugar crops and a potential hardening of the prices.
Some scripts that I am actively tracking:
Voltas
United Phosphorus
Jyoti Limited
Punjab Woolcomber
Ponni Sugar

Indian stock market update as of 16 September 2010

2010-09-16T11:38:00.000-07:00

The Indian stock market is getting very volatile nowadays. It reminds me of the days near January 2008 when the market was very volatile, with the Sensex going up by large numbers or falling, but with most stocks remaining where they were or sometimes even falling. There is still money to be made in specific scripts, but it is a high risk / high gain approach. If there is a fall due to liquidity inflow into the system being reduced, then even scripts that seem safe can fall pretty fast (we have seen the effect of what a reduction in liquidity and bad sentiment can do to all stocks in the multiple falls that happened in 2008). Right now, DII's (domestic financial institutions are selling) while FII's are pumping in money; but this inflow is always volatile. Every expert says a couple of things - India has a good economic growth ongoing, and Indian stocks are expensive. The possibility of a small sharp correction is pretty high right now, so be careful about the stocks that you are going in for.
There are positive news for the medium and long term - the figures for industrial growth were higher than expected, which means that Indian industry will pick up; at the same time, there will be a need for more credit and working capital, as a result, most predictions are that the Reserve Bank will increase interest rates to head off the expected increase in inflation.
Some stocks that I am currently tracking:
Reliance Industries - the stock remains a safe bet, and has shrugged off some recent weakness where there were predictions that the stock could fall to 600 levels
Uflex - the stock has run up sharply in the last couple of months, but the company remains a fundamentally good company in a good sector
Kirloskar Pneumatics - Run up a bit in the last 1 month
Rajesh Exports - Looking good technically
Rama Newsprint - A turnaround story
Shanti Gears
Cosmo Films

Indian stock market update as of 08 September 2010

2010-09-08T08:54:00.000-07:00

The market has been oscillating a bit in the past few weeks. After doing increases in the past few months, there is a lot of speculation that the market is over-heated, and it is only the inflowing liquidity that is causing the market to go up. At the same time, the Government and the economy are all giving positive signals for the overall condition of the economy, which boosts sentiment (although it must be admitted that all the sentiment is overall feeling that a crash is imminent and is healthy for the market).
The US economy seems to be taking a slight up for the better, and that is a good sign overall. The Indian economy needs to hear that the talk of a double-dip recession is not going to happen, and that things will remain good and that the Indian economy will continue to have a good rate of growth. If this continues, there will be periodic dips in the market but the overall trend will be positive, which is what the stock investors of the country need.
Some stocks that I am tracking:
Action Construction Equipment
Ashhiana Housing
Jindal Poly (has gone up hugely in the last few weeks, but some scope still remaining)
Rama Newsprint (more long term)
Talwarkars
Western India Shipyards

Indian stock market update as of 29 August 2010

2010-08-28T12:48:00.000-07:00

The Indian stock market is right now pretty directionless. The overall sentiment is more towards caution, wait and watch, and see whether there are any drivers towards increasing market movement. There are a lot of people screaming for a correction to happen, talking about it news articles, in blogs, updates, and so on.
The world economic situation is also fairly unstable; the 2 largest economies - the US and China both have their own problems. The US is being threatened by a dip back into recession, and China (even though it still posts huge increases in the economy) is starting to face its own problems in terms of some amount of social discord, more openness threatening to showcase some of the problems that China has hidden away. The EU zone is not doing so well either, and there is a movement in the EU to clear their debts through austerity measures, which are good for finances but do have an effect on consumption.
In India, the Government finally cleared the long pending Direct Tax Code, but no major changes in it; the Government kept on giving up on most of the reform measures, and has kept a number of exemptions in the code which was something that was supposed to be cleared from the DTC.
In terms of stocks, given the uncertainty in the market, if you are holding more volatile stocks, you should really get out of them unless you are able to take the risks. Invest in stocks you feel strongly about. Some of the stocks that I am currently tracking:
1. Reliance - I continue to feel enthusiastic about this stock in the long term
2. Action Construction Equipment - A small player, but seems to be well managed
3. Balaji Amines - Well posed to increase in value
4. Elecon Engineering
5. Uflex India
6. Jindal Poly

India stock market update - 20 July 2010

2010-07-20T12:41:00.000-07:00

Interesting times in the Indian market. The Sensex is dancing near the 18,000 mark, even as the overall global economic indicators are none too good. There are already articles that are again talking about a decoupling of India and China (and we knew what happened the last time there was a of talk about decoupling of India and China from the overall economic situation, the pullout by FII's decimated the Indian indexes).
There is speculation in the market that the next couple of weeks could see a period of slowness, and maybe some amount of pulldown, so am evaluating all my current stocks to see which of these I can cash out and stay in atleast anywhere between 30-40% cash.
Stocks that I am currently tracking:
1. Action Construction Equipment (CMP Rs. 53)
2. Camlin (Rs. 34)
3. Bartronics (Rs. 150)
4. Exide Industries (Rs. 106)
5. Hind Rectifiers (Rs. 69)
6. Vimta Labs (Rs. 36.5)

One group that uses mathematical calculations to determine the technical targets for investing (link)

Stock market update as of 06 July 2010

2010-07-05T19:32:00.000-07:00

I have been not been updating this post for as much as 6 months (been very busy), but now that I am back to investing on a regular basis in the market, I will be much more regular in updating this post.
The overall economic situation the world over remains fragile, with the biggest economy, the US, still not seeing broad positive signs. Unemployment is still high, does not show signs of changing dramatically for the better; the housing and consumer markets are so-so, with worries that things will get worse. In addition, due to political pressures over too much money being spent which is distorting the budget deficit, the major stimulus problems are now in threat with Obama not being given the level of money he desires.
In Europe, even with some of the economies worried about defaults, including Italy, which is a G7 country and a large economy, there is an opposing argument that is gaining ground, which is that the budget deficits and overall debt are getting unsustainable, and the Governments will have to go in for belt-tightening, something that the British Government is now going in for.
What does this mean for India ? Well, even though the Indian economy is doing great, and the monsoon seems okay for now, we have seen in the past that when the world economy goes through strain, the investments in the Indian stock market get affected and can cause lowering of the index, affecting all stocks. So, the prognosis right now is, buy stocks that you see are fundamentally good, in sectors that are not going to be directly affected due to any export problems (so avoid IT), and be careful in your investments.
Some stocks that I am currently tracking along with current market price (and I do not do price targets, just stocks that I am interested in):
- Action Construction Equipment (Rs. 49)
- Camlin
- HEG
- Patel Airtemp
- Polyplex Corporation
- Supreme Industries (an old favorite)
- Western India shipyards

India stock market update as of 09 January 2010

2010-01-09T02:38:00.000-08:00

The Indian stock market has seen a recent high, even though there are sporadic days when the market drops (although the drops have not been of the type that we would see earlier) when the market would suddenly drop by 200-400 points in the last one hour of the market. The growth rate in the Indian economy seems to be on the higher level, the Government is making all the right noises about continuing the growth stimulus and disinvestment of PSU's. However, the global economy still has a long way to go. China seems to be going strong, but a recovery in the US still is in fits and starts, and not a clean recovery.
Right now, the market has jumped up a bit, and there are fears of a correction imminent, but the trend overall seems to be that the market will keep on going higher (but one should have the courage to take the roller-coaster ride that comes with such a movement). For the past several weeks, I have been also looking at studying more technical indicators so that can see stocks for the short 2-3 weeks, as well as for longer periods.

Fundamental based stocks:
Mahindra Ugine - Rs. 60
JBF Industries - Rs. 102
Indiabulls Securities - Rs. 36
Sharyan Resources - Rs. 88
Walchandagar - Rs. 225
Rishi Lazer - Rs. 55

Technical trends upwards:
Andhra Bank
Asista
Maral Overseas
Bajaj Finserv
Financial Technologies

Indian stock market update as of 22 November 2009

2009-11-22T03:43:00.000-08:00

So what happens next in the Indian stock market ? There are different predictions about what the future holds for the Indian stock market, but the different predictions are more about the short term. There are different indicators on whether for the short term, the markets have climbed up to a bubble level, or whether there are indeed reasons for such a jump. It is predicted that part of the growth in the US (the so called green shoots) have been over-inflated, and that growth in the US right now is nebulous, with it being a jobless recovery.
For the middle and long term however, things are much more positive, with the overall global economy having seen an uptick, and both India and China looking much more positive. India seems to have overcome the worry of a failed monsoon, although it is likely to impact Government policies in terms of foodstocks and its food imports. So what are the stocks to be watched out ?
1. Mahindra Ugine Steel Company Ltd (good for the medium and long term, but needs patience)
2. Ashiaana Housing (if housing market is not a bubble, then very good for the long term)
3. JBF Industries
4. Shilpa Medical (risky, but can grow multiple fold)
5. Elecon Engineering
6. Central bank of India

Also, started to look at more technical information. What is the difference between Technical and Fundamental Analysis (very briefly) ?
Fundamental Analysis is the study of the fundamentals of the market. Fundamentals are all things that affect the supply and demand of the underlying commodity.
Technical Analysis, on the other hand, is the study of the market based on a chart of its price data, and assumes that you can do some amount of prediction of the price and volume movements based on past trends.

Finding the right company to invest in

2009-10-07T12:18:00.000-07:00

This post is about a tool available on the BSE website (link to actual tool) that allows you to find companies having a specific criteria. There are people who only want to invest in small size companies (betting on a higher quantum of risk), and there are others who want the safety of large caps. People also have criteria based on the EPS for the company (it tells you whether the company has a good return), and also the PE ratio (since a correlation between PE of a company and that of its industry indicates whether the company share price could increase).
You can select the following parameters:
LTP
Market Cap
EPS
PE
From the site:

This section will enable you to fine tune your search of stocks. Here you can search stocks based on the 4 fundamental parameters of the company's performance.

Recommendations for the Indian stock market as of 29 Sept 2009

2009-09-29T08:30:00.000-07:00

We are approaching a stage where the market is seemingly over-heated. Quite a few mid-caps have shows levels that are 3-4 times what they were just a few months back, and even with improvements in the overall market, there is a sense of uneasiness. I was speaking to somebody who does deals (M&A), and he was of the opinion that this resurgence has already gone to promoters head, they are back to asking for high rates for their companies capital that was seen before the melt-down, and this was substantiated by a report in the Economic Times that claimed that deal makers are headed off to China rather than India since they do not see too many deals happening in India.
The US economic data seems better, but there are blips when the economic data seems to suggest that one needs to watch signs of recovery carefully, and not assume that everything will go fine. What this translates into for the retail investor is that you should be careful, do not start to again assume that stocks will only go up. If you have made a lot of profit, then remove some of that profit and put into safer instruments, and use the remainder to play in the market. One thing we learnt from last time is that there is no easily defined floor below which the market would not fall - it kept on falling for many months, and retail investors kept on waiting.
Stock that I am current tracking (or buying):
1. Rishi Lasers
2. KLG Systel
3. Supreme Industries
4. Patel Airtemp
5. Nilkamal
6. VST Tillers
7. Reliance (long term)

Indian stock market update as of 25 September 2009

2009-09-24T12:21:00.000-07:00

Overall, there is a mood of optimism. Even though exports have been falling, there is a feeling that it is only a matter of time for the market and the economy to be a upward trend. The plentiful rainfall of the past few weeks has reduced the rain shortfall this year to a much lower level, decreasing the potential problem caused by drought and lower drop output.
The Index of Industrial Production has gone up slightly, realty and consumer goods are starting to pick up, and so on. At the same time, the market has jumped to good heights in the last few months, and there is an over-whelming feeling that the market may be due for a correction, with a contra statement that times are going to be better, and the market is just factoring that in. At these times of high, it is good to get rid of junk and penny stocks.
Stocks that I am currently tracking:
1. Divis Laboratories (more stable, long term)
2. Jaihind Projects (more risky)
3. Nirlon (risky)
4. Unity Infra (risky)
5. Rishi Laser (long term)
6. Godrej Industries (short term)
7. Asahi India Glass

Indian stock market recommendations as of 13 September 2009

2009-09-13T04:15:00.000-07:00

If you look at what analysts are recommending (that is, if you believe what analysts have to say after the events of the past few months), then the recommendations are never simple. The overall market situation remains complex:
- The rainfall over the past few weeks has reduced the overall rainfall deficit for the year drastically, as a result, the Government is now feeling a lower negative impact on overall growth
- The market has gained over the past few months, to the extent that there is a feeling that the market is now over-heated and a correction is now impending. If you read economic and equity stories, you will hear about how stock are now seen as expensive, and that fund managers are feeling pressure to invest else they will feel left behind, even though they feel stocks are now expensive
- The overall world economy seems to have stabilised and seems to be on the road to recovery, and this has been stated by many top economists and others (even if some of them are trying to make optimistic projections, there is a touch of reality)
- In India, the IPO market has suffered a setback because 2 recent issues of Adani Power and NHPC did not leave any value for investors, and hence the stock is already below the issue price. At the same time, there are huge institutional investments into IPO's, signifying that money is available to invest.
With all this information, what should the retail investor do ? This is really not the time to take too much risk, so be careful about bringing fresh money into the equity market. I, am going to keep evaluating certain stocks to see whether there is potential to invest in these stocks, and also trying to sell a portion of other stocks that have jumped a lot.
1. Nirlon: This is a risky stock. If the market goes down, this stock also goes down. However, if the realty sector and commercial rents pick up, then Nirlon is a good stock to own.
2. Ashiana Housing. Another realty company. The company share has been oscillating for the past few days, and I am looking to own these shares for atleast a period of 1-3 years, and hence am picking up shares on a gradual basis.
3. Mawana Sugar. In India, sugar is a difficult area right now, with sugar being in shortfall and overseas price high because of expectations of imports by India.
4. Cairns. It's oil wells in Rajasthan have started producing oil, and on the back of a global recovery, there is an expectation that oil prices will start increasing to ever higher levels.
5. Sharyans resources. The company's share took a major hit with the economic downturn, but now looks to be again regaining hope.

India stock market recommendations as of 1 September 2009

2009-09-01T08:04:00.000-07:00

For the last couple of days, the Indian stock market has not been reacting as one would have liked. After a good upward move on mid-cap stocks in the past few weeks, there has been a small correction in the last 2-3 days, with the market falling around 100-200 points per day. One can hope that this is just a consolidation phase. The overall trend for the future in terms of growth looks impressive, with GDP growth being higher than in previous quarters, although one has to worry about what the failure of the monsoon means for the country.
Mid-caps seem to be again the flavour of the season, and some of my mid-caps (risky ones though) have gained a bit in the last one month, atleast 15-30%, which is good growth. These are across sectors. Some of these stocks are:
Nirlon- This is a real estate story, with the company having developed some good commercial real estate, and if commercial rents pick up, then the company has a good story on its hands.
Ashiana Housing - the revival of the realty story means that well regarded companies do well, and Ashiana Housing is one of these companies. The company has gained from a low of 45 to currently 62.
Hindustan Constructions - The company has yet to gain significantly, but I am cautious about the long term prospects of the company.
JMC Projects - The company is doing well, and is a well regarded small player in the construction / engineering area
KLG Systel - The company has seen a massive fall in its valuations since January 2008, but is now on the recovery path, having increased to 2.5 times its value of last October. It is a well regarded provider of solutions to the Government.

Indian stock market recommendations as of 22 August 2009

2009-08-22T06:46:00.000-07:00

The Indian projections in the short and medium term (6 months) for the stock market are in a bit of a flux. The US recession has been declared to be on its last legs by the Fed Chairman, Bernanke; however the facts on the ground are a bit uncertain. The housing market (where the entire problems started) seem to be looking up, but the same is certainly not true for the jobs market where the joblessness claims in the US have only gone up in the last couple of months, confounding experts who expected that signs of a recovery would come with fewer jobs getting lost.
Even other critical parameters such as consumer purchasing (critical for an economy like the US) are not delivering on the promise of a improved recovery. In addition, there is some real bad news coming out from China where the market has reacted pretty adversely, giving jitters to the market overall. However, and this is the most confusing part, it would seem that the markets worldwide (especially in the US and India) seem to be fore-casting a recovery in the next 6 months to 1 year.
In India, there are some reasons to be cautious about such a recovery, even though India never went into a recession; the growth got reduced, sentiment was very badly hurt, and the stock market had a literal collapse. Right now, the drought has complicated matters, and both the drought combined with the still increasing swine flu will knock a couple of points off the growth rate and cause severe jitters to the Government.
The time is not bad to make investments in some stocks, and here are some stocks that I am tracking:
Whirlpool - With more Indians entering the middle class, the growth rate of consumer appliances is only likely to go up in the long term, and Whirlpool is poised to join in that growth
Bartronics - The company had shown a lot of promise in the year 1998, but the crash had crushed any positive news of the company. However, now reports are increasing the prospects of the company being able to gain from projected boon in RFID usage
Companies in the infra-structure area will increase as the rate of GDP growth increases, even though there remain concerns about stretching themselves thin, and having working capital problems. Companies in this area include Gayathri Projects, Core Projects, Kalindi Rail, Hindustan Contstruction, Gujrat Apollo, Jaihind Projects, JMC Projects
I am also starting to evaluate more risky areas, such as when companies are seen as potential targets, and you get multiple companies fighting for these. There is some good short term money to be made if you can identify.

Individual finances: How to manage when loans are killing you

2009-08-19T12:49:00.001-07:00

I read an article that took a situation where a person was in real trouble financially, and what the person can do in such a situation that could help. The situation was one that many of us can relate to - in times of good money and a good job, your finances and projections for the future are good, and you decide to invest for the future. You take a loan for the house that will be an asset for the future, you invest the remaining money in stocks (after all, equity is the way to grow your money for the future), and you get a car to travel in comfort along with your family. And then disaster strikes - your house loan amount was high (higher as a percentage of monthly take home salary that you would like - should not be more than 40% of take home after taxes and other deductions), and it got higher as interest rates went up, the stock market collapsed, and then the worst of all, you lost your job. So, what do you do ? (link to article - read it till the end, the situation may not be exactly the same, but there will be similarities)

He decided to approach a debt counseling centre for his financial hassles. They showed him the right way to manage his finances. They also mediated between him and his bank. He also obtained written consent from the bank that he would resume repaying his loan once he got a job. In such situations banks do oblige you if you manage to repay most of the money or part of the money if not all as it was a better deal than no money at all.
1. Try to lower your interest rate. Negotiate with your bank. One other way is to convert your credit card debt into a personal loan debt. It will definitely be lesser than the credit card interest rate.
2. Calculate your net worth and see if any of your investments could help you prepay a part of your loans.

More tips are there in the article. The main point is that you should be careful of your finances rather than falling in this trap, and if you do, then get help, speak to the bank and explore other means of financing (except for high-interest loans).

Mistakes commonly made by equity investors

2009-08-09T11:13:00.000-07:00

Everybody makes mistakes in the equity market, so one cannot blame retail investors for making many mistakes. Even acclaimed mutual fund and hedge fund investors have made mistakes over the years, but that does not excuse the retail investors from trying to learn about the mistakes that they keep on making so that they reduce the number of mistakes they make in the future. At the minimum, investors should learn about these mistakes so that they can try and learn from these mistakes. Some of these mistakes are:
1. Investors typically join the herd. So, when the stock market crashes, people run to liquidate their holdings, even at a loss. For example, when the market was really down in October, companies that were fundamentally sound were picked up by people who believed in the long term.
2. People look at tips, and even do investment based on tips even if they know nothing about the company or stock.
3. People do not read about the fundamentals of the companies that they are investing in. Typically, company valuations follow the projections of the sectors that these companies belong to, and after that, the company performance also plays a role. However, people do not bother finding out these facts.
4. People invest and forget. There are a number of people who invest in companies or mutual funds and do not re-evaluate the nature of their investments and the performance over a regular period, say every 6 months or every year
5. Diversify your portfolio: Do not invest everything you have in the stock market. Invest in mutual funds, some in debt funds, some in PPF, some in realty, and so on. Make sure that you are properly diversifying your investments, at the same time, make sure that you invest only where are you comfortable in your level of knowledge. Even consider things such as investments in gold and art.
6. Don't get caught up in greed. When people lost out in January 2008 after markets had climbed to record highs, people were not willing to consider that the market could go down. People were not willing to take some of their investments out of the market, and lock that money in safer investments.
7. Invest for the long term. Don't get scared by short term movements. Even while tracking them, make sure that if you have invested based on fundamentals, and for the long term, you don't lose patience.
8. Don't get tricked by other people. You will always hear people say that they made incredible amounts of money in investing in the stock market, and there is a feeling of being left behind. Remember, you only hear the stories that are positive, and you should never let such stories guide your actions.

Finance: Safety vs. risk in terms of investments

2009-08-09T10:36:00.000-07:00

One typically hears of cases where people have invested money in dubious investment schemes run by scheming and smooth investment gurus who actually end up duping people of their hard-earned money. These smooth operators typically get caught, but this is no consolation for those people who lose their money in these schemes. Similarly, people end up losing their money when they invest in stocks and mutual funds, either if the entire market collapses or if they invest in very risky stocks. So does this mean that people should invest in risk free investments ? No, because there is a ratio between risk and return. It is for every individual to decide their risk - return paradigm based on their comfort levels, and their ability to take risks. Read this article to learn more:

The rating scale starts with AAA (lowest credit risk) and ends at D (default grade, highest credit risk). Going by the normal yardstick, one should always go for the best. So, should all the investors invest only in AAA rated issues? To fathom this paradigm, we have to understand the riskreturn relationship. Risk-return & risk aversion. It is because of the relationship between risk and return — higher the risk, greater has to be the expected return on that investment and vice versa. An investor hoping for higher returns has to embrace the risks that are attached to it.
But how does an investor decide how much risk to be taken? In reality, there is nothing like optimal risk-return trade off. It is often a derivative of various factors like time horizon, liquidity, and some investor specific circumstances. The risk-return trade off is extendable to equities as an asset class also. The relative safety of investing in blue chips may not result in highest returns. In case of IPOs also, the IPO grading is an opinion on the relative fundamentals of the company. The investor decision is guided to a large extent by the valuation and risk tolerance.

So, as they say, the ability of a person to take some risk in their investment is guided by multiple factors. The only thing one should do is to ensure that one has thought through the investment carefully.

Obtaining duplicate copy of documents

2009-08-09T10:20:00.000-07:00

People encounter this problem once in a while. You have invested money in a Fixed Deposit, or in Mutual Funds, or some other such investment method (including investing in a private company). Suddenly you find that you cannot locate the proof of such an investment (you could have lost it, it could have got destroyed in a fire or similar accident, or any other such reason). Panic sets in, after all, what do you do now ? Visions of losing your money come to mind.
The best method to prevent such an occurrence from happening is to make a copy of all your important finance documents and keep them in a safe location so that you have a backup. However, what happens when you have not taken this precaution ? Read this article to learn more (link to article):

To make sure you don’t have to dig deep in such a situation, here’s a guide on the process you can follow to get a duplicate copy of key documents such as NSC, FD, Form 16, Pan Card, mutual fund scheme, insurance policy and home loan papers. “If the papers, however, cannot be traced after reasonable efforts and you suspect they may have been stolen, a report at the nearest police station must be filed immediately,” advises Amitabh Singh, partner — tax & regulatory services at Ernst & Young.
To ensure there is no misuse, instantly inform the respective departments about the loss of original papers/document/policy. The next procedure should be to apply for a duplicate. As a policy, most financial schemes allow for issuance of duplicates on payment of a nominal fee. According to post office regulations, you can get a duplicate certificate issued if loss of the certificate has arisen out of theft, mutilation, defacement. You would be required to send an application to the post office where the NSC was issued.

Similarly, for Mutual Funds, you should contact the AMC. The advantage for Mutual Funds is that they issue statements every few months as per their pattern, and those are equally valid. As recommended, make sure that you keep a duplicate copy beforehand. To get a copy later takes more effort and running around multiple locations, but it is possible and something you should work through.

Indian stock market update as of 4th August 2009

2009-08-04T13:10:00.000-07:00

The market is behaving a bit unpredictably, with sudden ups or downs, even though the fundamentals have remained roughly the same. Many people would argue that this is exactly how the market behaved in the last few years, so this up and down is actually consistent. One needs to consider the different factors involved in taking the market up or down:
1. World wide market moves
2. Indicators of the recession worldwide and in India
3. Macro economic situation in India, such as whether monsoons will be good or deficient, whether the Government is hoping for a improvement in growth, changes in overall economic mood
4. Policy measures by the RBI or by the Government, such as interest rate movements, monetary and fiscal policies, disinvestment and reform, or the blocking of such reforms
5. Overall political scenario, where the Government is seen as stable, or too dependent on its allies and hence prone to instability
6. Influence of the Communists and Leftists
7. Overall sentiment, such as if the market has moved too much in the recent past, time for a correction, or vice versa
And so on, but these are the chief reason for the movement of the stock index.

Now, what is the current position. India is not in a recession, but growth is very sluggish and the monsoon shows every chance of being deficient in the northern states, leading to an effect on the economy. At the same time, the Government keeps on stirring up the path of policy reform from time to time, even when it is pumping huge amounts of money into poverty alleviation schemes, but without proper oversight (and hence spending more than it should normally do).
The market has moved up a bit, to almost 16K, and there are 2 contradictory advices coming in; one is that there are no fundamental reasons for the market to rise, and the other mentions that overall economy is looking better, realty is improving, production seems to be on an upward jump.
From my side, the mantra remains to be cautious, and look for opportunities. I have invested in the following for the past few weeks, and would be investing more from time to time:
KLG System
HCC
JMC Projects
Bharti Airtel
Cairns
Ashhiana Housing
DLF (this and Unitech are dependent on housing market looking up)
Unitech
GRAUER & WEIL
Nirlon
Satyam Computers (riskier than the others)
Supreme Industries

Market not happy over the Budget - Sinking and then rising a bit

2009-07-11T22:45:00.000-07:00

What does a deficit mean ? There are many terms such as fiscal deficit, monetary deficit, revenue deficit, but the differences between are them are relevant for people involved in the field of economics. For the normal person on the street, a deficit means that you are spending more than you earn. A normal person cannot do this without getting into serious money problems, but a Government can (and in almost every case the world-over), does do this. How can a Government spend more than it can earn ? A Government does this through means of a deficit, that it either finances by printing more money, or by borrowing funds from the market.
Both cases cause problems for the economy as such, since if the Government prints more money, this essentially means that more money is being put into the system. More money, but the same amount of production means in simple terms - if you wanted something, and many others want the same thing, then the thing you want gets more expensive. In terms of the economy, if more money comes into the system, then things get more expensive and inflation rises.
If the Government borrows more money from the market, that is less money that is available to private companies to get from their market to meet their funds requirement, or if they need loans for capacity repair or expansion. Such reduction in the availability of funds means that loans for companies get more difficult and has an effect on the ability of private sector to rise above these bad economic times.
Why did the Government need so many funds that it was willing to increase the fiscal deficit to a point where it would be pointed out by economists as a risk ? Well, these are bad economic times and it is at these times that Governments the world over are putting more money into the economy to try to get out of these struggling times. In addition, the Government realized that politically, it has benefited through such measures such as the National Rural Employment Scheme, and it wants to make sure that it is pumping money into the rural sector, the agriculture based sector.
Why did the market react negatively to the Budget, and why am I writing about it after so many days ? Well, the market had been expecting some relief measures, or at least token gestures such as the removal of the Securities Transaction Tax. Instead what it got was no new seemingly market or industry oriented measures and no removal of the STT. Instead it got a much higher fiscal deficit and a seeming reversion to populism. And hence the initial bad reaction to the budget.
However, every year, there are more voices gaining ground that industry should stop looking to the budget as an earth-shaking event, instead treating it as a simple Profit and Loss statement of the Government. In addition, the initial depression of the market has subsided as it looks like there are faint signs of revival, and the realization that the budget did not make things worse, and if rural consumers get more income, that is a new market.
What should you do ? Unless, there are some earth shaking events, the long term prospects look good and you should stay invested for the medium to long term in fundamentally safe companies. Avoid risky companies unless you know what you are doing and you know the risk involved.

Not a totally easy path ahead for divestment, aim for strategic sales

2009-06-14T01:23:00.000-07:00

When the Congress Government came back to power with an enhanced mandate and higher numbers (and consequently, a less dependence on allies to make up its numbers), the markets welcomed the step, with people talking about a re-start of the earlier stalled divestment process. In fact, with the amount of money that the Government has committed towards its ambitious social welfare programs, it needs to arrange for large sums of money to fund these programs. The disinvestment program seems a good way to arrange money for these programs. However, not everything seems to be going the same way for the Congress; even though the allies are lower in number, the opposition from them is still prevalent.
Right now, the 2 main allies of the Congress, the Trinamool Congress of Mamta Banerjee, and the DMK of Karunanidhi seem to have problems with the policy of disinvestment. The DMK is opposed to the policy of disinvestment for those Public Sector Units that are located in Tamil Nadu (these PSU's are a source of public patronage, and the DMK needs to ensure that continuous patronage opportunities remain). The poltician belonging to DMK and Karunanidhi's daughter, Kanimozhi, made a statement against the process of disinvestment as well (link to article):

In the Rajya Sabha, the Congress-led government's new agenda for disinvestment faced opposition from its key ally DMK. The DMK's opposition to the government's disinvestment policy echoed in the Upper House with party MP Kanimozhi arguing that generating revenue by divesting the PSUs would not help. "I welcome that the UPA government has laid a lot of emphasis on welfare schemes and on social sector spending. But we also have to keep away from the temptation of generating revenue by disinvesting our PSUs," Kanimozhi said
Another important ally, Trinamool Congress, has already made it clear that it would not allow rampant disinvestment of the PSUs. Though the party has not yet made its stand clear in the House, party chief Mamata Banerjee opposed some of the `radical' ideas when the draft of the President's address was discussed among the cabinet ministers, Trinamool sources said.

Principally, the Government has no role to play in many of the sectors of industry ? After all, why is the Government in the business of running airlines and having to spend huge amounts from taxpayer's money to prop up Air India, or be in the business of telecom, or in financial industry, or many other similar areas. These are then totally dependent on the whims and fancies of the Minister (even for a critical area such as Road building where the previous Minister had a big hand in the slow down of road expansion).
Further, when the Government does want to disinvest, for sectors of industry where the Government should have a zero role, it should get optimum return. This is not possible through the normal case where the Government disinvests its shares while maintaining a 51% stake in some of the PSU's. For PSU's where a Government stake is not critical, it is better to follow the earlier Government (NDA) policy of strategic sale whereby the Government sells its controlling stake to bidders. This results in a much higher return, and is the optimum way to get returns from the disinvestment process.

Congress the grand victor of the 2009 Indian elections: Reforms should get back on track

2009-05-16T12:22:00.000-07:00

So, the bitterly contested election results of the Indian Lok Sabha (Parliamentary elections) are out, and it is the incumbent party, the Congress Party that is the decisive winner. During the course of the campaign and even during the month long multi-stage voting process, it seemed that there was a tight fight between the Congress and the BJP led camps. It was also projected that there would be an incredible fight for support from the smaller parties all over the country. This prospect saw these parties salivating over the prospect, and over the demands they would make from the major parties for this support.
So there was a constant tussle about whether existing partners are viable or not, and some parties made gambles. The Biju Janta Dal gambled that it would come back to power without the support of the BJP, the Congress gambled that it would need to build long-term in Bihar and Uttar Pradesh (and in Bihar, it did not have much of a choice, since Lalu gave the party only 3 seats). The Congress gambled about going with the DMK even though Jayalalitha seemed to be the one riding the victory wagon. However, as the election result day came closer, nervousness gripped the Congress and it talked about changing partners, soliciting the support of the Left, looking to Nitish and Jayalalitha for support, and even trying to get closer to the Samajwadi Party.
The exit polls that started getting published once the stay on them was removed after the 13th (the last phase of election) were again off the mark, since they all projected that the Congress will have a narrow lead over the BJP and would need support from many parties. The BJP of course refused to believe such polls and stood fast in projecting that they will be the victors.
And then came the election results - and they were shocking to everyone. The Congress led poll, the UPA, is almost at the point of having half the seats, while the BJP led alliance, the NDA, is way behind. The Congress gained seats all over the country, with the party looking to reach 200 seats on its own (its best result since it started declining in the 1989 polls); it trounced the BJP in many states that the BJP should count as core constituencies such as Haryana, Rajasthan, Delhi, Uttranchal, and made gains even in states such as Madhya Pradesh and Gujrat. The Congress made real good in states such as Andhra Pradesh, with the partners, the DMK, in Tamil Nadu.
However, the major surprises in this election happened in multiple states; in Uttar Pradesh, the Congress needs to get back its core constituency and it seems that the gamble it took seems to have paid off (it has got 20 seats on its own), in Maharashtra, the MNS seems to have bitten into the seats of the Shiv Sena and the BJP and led the Congress to victory. The biggest surprise has been the Left strongholds of Kerala and West Bengal. Kerala frequently changes between the Congress and the Communist, and in this election, the fight between the different factions of the Communist party propelled the Congress to victory. The biggest surprise seems to have been in West Bengal where the Congress combination with Mamta Banerjee blew away the Communist party in the state where the Communists have held sway since 1977.
What are some of the conclusions from this election:
- Manmohan Singh re-emerges as the Congress Prime Minister with a much stronger support and with less interference from supporting parties
- The BJP leader LK Advani will slowly fade away - he is already 81 years old and unlikely to be the leader in the next election
- Rahul Gandhi and Sonia Gandhi are the unquestioned leaders of the country now - even people such as me who do not believe in dynastic based leadership have to acknowledge that they have led their party to a genuine victory
- Nitish Kumar and Naveen Patnaik are new emblems of victory, with strong shows of performance and low individual corruption levels
- The Left, having been used to a much stronger influence in the last Parliament will be a pale self with questions about the leadership becoming much stronger
- Mayawati has faced a severe setback in her quest for national leadership; the same goes for former influential leaders such as Mulayam Singh Yadav (who suffered after inducting Kalyan Singh), Lalu Prasad Yadav and Ram Vilas Paswan
- Economic policies and world related policies should remain the same and in fact become more clear and without the holding back due to the Left

This is great news, and the hope is that stock markets (and in due course), the overall economy will welcome stability news and more economic reforms. The negative influence of the Left will go away now.

Information about Senior Citizen's Scheme, 2004

2009-03-26T19:55:00.001-07:00

As the time for income tax comes close, investment into the right instruments is critical. As events of the past one year have shown, investment into the stock markets have a factor of risk that needs to be factored in. This is even more important for senior citizens who are more averse to this risk, given that capital protection remains an important goal for them. Towards this end, one major investment instrument for Senior Citizens is the Senior Citizens Saving Scheme 2004. Some of the salient features of this scheme are:

The scheme is available for citizens above 60 years of age; however a provision has been put in place for individuals who have crossed 55 years of age. Such individuals may invest subject to the conditions that,
* The person has retired under a voluntary retirement scheme or a special voluntary retirement scheme on the date of making the investment,
* The investment is made within three months of the date of retirement,
* And a certificate from the employer, indicating the fact of retirement, retirement benefits, along with period of such employment with the employer, is attached with the application form.
* Non-Resident Indians and Hindu Undivided Families are not permitted to invest in the scheme. If a depositor becomes a Non-resident Indian subsequent to his opening the account and during the currency of the account under the SCSS Rules, the account may be allowed to continue till maturity, on a non-repatriation basis and the account shall be marked as a Non-Resident account [Rule 13 and GOI letter F.No.2/8/2004/NS-II dated June 19, 2006)
* Senior Citizens Savings Scheme (SCSS) is a Government of India Product.
* 9% interest offered to depositors.
* Since the product is offered by Govt of India, this product is one of the most Safest Investment Option.
* Premature closure of account is possible after one year from the date of opening the account.
* Mode of holding: The depositor can hold an account either individually or jointly with his/ her spouse
* Maturity: The scheme has a tenure of 5 years. The account can be extended for a 3 year period by making an application.
* Tax benefits: The interest income from the scheme is fully taxable.
* Senior Citizens Saving Scheme 2004 and the Post Office Term Deposit Account have been added to the basket of saving instruments under Section 80(C) of the Income Tax Act.

A lot more questions are answered in the FAQ available on the RBI page (link)

India stock market - what is the future

2009-02-21T19:28:00.000-08:00

What should a person look for when to invest in the stock market ? The stock market is always said to be a reflection of the economic future of the country, and in the view of many experts, seen to be an indicator of the next 6 months to 1 year. So what does the future say for the country ? You need to be cautious, monitor the sectors of the economy that are not so affected by the company, look at market value of companies as opposed to their book values, look at their future potential, and so on.
Well, the last few months have been a major shakeout. The world economy is projected to have an overall negative growth or zero growth with most developed economies contracting (in fact, China and India are supposed to be among the few countries that are still growing). Scratch the details, and you see how things are pretty bad. The United States is going through a recession not like what it has seen for decades, with consumer sentiment way down. Jobs are being shed on a huge scale, industries are down, and major corporations are reporting losses or sharply reduced profits. Obama is pushing huge packages in order to try and turn around sectors such as finance, housing, auto, etc, but the economy is very slow to respond.
The slow-down in these developed economies has had a ripple effect on economies that are export led, such as China, East Asia, and even India. Sectors such as textiles, IT, gems, etc have been impacted pretty badly. At the same time, the overall sentiment is badly negative, and this has impacted growth in sectors such as Finance, Realty, Construction, Auto, name it, and the sectors are impacted. Industry is looking at getting good encouragement from the Government, but in an election year, populism is the key. At the same time, since inflation is down below 4%, one can expect some key monetary steps such as reduction of interest rates to try and boost the economy. One needs to evaluate companies that are well run, fundamentally sound, and does not indulge in unsound practices.

The Satyam probe

2009-01-27T09:23:00.000-08:00

The scandal about Satyam just refuses to die down. There are so many questions that remain open, and there is the major feeling that even though the Central Government took quick action once Raju had come out with his confessional statement, the state Government of Andhra Pradesh is not being so open. Before Raju had made his statement, the Chief Minister, Rajshekhar Reddy had made a statement to the effect that the aborted merger was over, and people should get on with their lives. No reassurance about watching out for a company that was the star of Andhra Pradesh and employed 50,000 people. And just a few days after the Chief Minister dismissed all warnings, the Satyam Chief went ahead and wrote his confessional note. And after this, the Chief Minister had nothing to say.
Now, there are so many open questions that it seems that there are so many mysteries to resolve, and the former Satyam Chief is sitting in jail, with some police investigators getting access to him. For some arcane reason, SEBI investigators are unable to get access to Raju, currently in jail (The Andhra High Court has refused SEBI the permission to do so even though a huge amount of investor money went down the drain).
- How many employees does Satyam have ? There are multiple reports about whether it has 53,000 employees or it has a lower number of employees with contradicting statements from the board and from the public prosecutor
- How did Raju divert money away from Satyam to the extent that a software company that has a large margin is very low on money ?
- What are the exact details of the Andhra Government support to Maytas (a company also run by Raju and his family) ? It has a huge amount of Government contracts that are now in jeopardy. In fact, the contract for the Metro was so controversial that the head of Delhi Metro (Mr. Sreedharan) stepped away as a consultant with a talk about this being an unfair contract (and the Andhra Government threatened him with a defamation lawsuit).
- Why has the investigation into this huge fraud case not yet handed over to a central agency with the ability to do a financial and criminal investigation both ?
- Will the money that has been diverted away from Satyam ever be recovered ?
- What was the level of interaction between Raju and the Congress Government of Y Rajsekhar Reddy ?
- What was the exact role of the auditors given that they appear to be grossly incompetent, and maybe involved in a criminal conspiracy ?
There are so many other questions, and yet there are no good answers. The investigation is continuing, but already questions are emerging about whether this is a fair investigation, or whether this is an attempt to try and protect Raju. For a scandal that is India's largest and casts a negative impression on the overall positive India story, the investigations needs to be time-bound and very thorough.

The Satyam case: major fraud

2009-01-07T11:07:00.001-08:00

India has seen corporate scandals in the past, but never one of this magnitude. A software company, touted as a success story, the 4th largest software company in India and one that services around 1/3rd of the Fortune 500 companies, the events of the past one month have been a total shock. They have called into question the entire range of issues related to ethics, corporate governance, fiduciary responsibilities, professional auditing, and so on. There will be a lot more soul-searching that will happen, a lot more inspection and suspicion of other companies, search for more skeletons in the cupboard, and so on.
What has Mr. Raju brought forward. Starting from the surprise news about Satyam trying to buyout the realty companies, Maytas (run by Mr. Raju's sons), this is almost like a film story. The news about Satyam using its huge estimated surplus of more than $1.2 billion to buy companies related to the promoter (especially when the promoter held only 8% shareholding in the company) was a huge blow to all norms of corporate governance and met with huge resistance. Seeing this resistance, the company decided to roll back this proposal, but things would not stop from that point onward.
The issue kept on snow-balling, and when a popular issue comes up in the press, they can push at all areas and get more secrets out. So, questions started being asked about respected board members such as Vinod Dham as to whether they asked the right questions and acted in the interests of the shareholders. Other news started disclosing that actually the promoters had already pledged all their shares and effectively could be actually holding no stake in the company. And then the World Bank announced that in continuance of an earlier investigation, Satyam has been found to have a great many security problems with their last work (including probable sniffer tools and a data hole), and hence Satyam has been banned from further World Bank contracts. By now the independent board members had started resigning.
There was a lot of news about how attractive Satyam could be because of its huge holdings of cash and high book value vs. the value of shares, and then there were even more reports questioning whether Satyam really did hold onto these reserves.
And now, finally the CEO of Satyam has revealed all. The company was cooking its books, and once started, there was no going back, and hence the company eventually has declared reserves to be $1.5 billion more than what they actually hold.
All this came as a huge shock to the people of the country; how can such respected promoters actually commit this huge fraud, can one really believe them now when they say that they did not benefit ? What were the independent auditors (Price Waterhouse Coopers) doing when they were doing audits since 2001 ? There are already too many jokes about lawyers and accountants, so maybe this was another reason why accountants cannot be trusted. Is it possible that only a few board members and CEO knew about this, and no one else ? This was money that was supposed to be coming into the company, how can senior management (besides the promoters) claim that they did not know ? There are too many questions, and one wonders as to whether all this will really become clear ?
Now what happens ? Well, it is not like Satyam is bankrupt - it still has a large number of clients (although some of them would want to bail out), it has a huge number of people on its rolls (50,000), it is a huge part of the reputation of Hyderabad as a big IT city, and there are still institutions who hold a huge amount of the company's shares. It is difficult to let such a company go out of business, and one expects that there will be pressure to ensure that while the investigation goes on, the company is retained as a going concern. However, the US has a law where auditors and the company's management are responsible for the accounts of the company, and this is a blatant violation.

Satyam and its aborted plan

2008-12-18T20:01:00.000-08:00

If you have been reading the financial papers for the past 2 days, you would have realized that suddenly something seemed to be happening at Satyam, and if you were more interested, you would have read that suddenly Satyam seemed to be in the eye of a storm regarding issues of corporate governance. It all started when Satyam announced that it was planning on spending $ 1.3 billion on diversification, and that too, this amount would have been spent on buying Maytas, a company in which the promoters of Satyam hold a 35% stake. This was not a deal that was approved by shareholders, and apparently not even by the board.
The shareholding of the promoters in Satyam is only 8%, with institutions holding a majority, and this action by the promoters saw an incredible reaction on the stock exchange. Immediately after this move, there was a reaction from shareholders, with the ADR on the US market falling by 52%. The next day, financial newspapers unanimously denounced this move as a gross violation of all norms of corporate governance, and in moves that would have scared the promoters, institutions threatened to review whether there is a trust in the management of the company.
Now, this proposed move has been withdrawn, but has left a mark on the management of the company that is difficult to get away; it will take time before the trust quotient can be restored:

Even as Satyam's deal to buy Maytas had to be hastily annulled in the wee hours of Wednesday morning as the company lost 52% on its ADR listed on the New York Stock Exchange (NYSE), a credibility crisis has begun to grip India's fouth largest IT company. "How can we trust the management of this company and its board of directors after it tried to enter into a deal that prime facie would benefit only the promoters who just own 8% of Satyam ? We have to examine whether the management needs to be changed," cried analysts in a reflection of the deep anguish caused by the now stymied move.
"58% of Satyam is owned by FIIs and they had no inkling that such a deal was in the works. There were questions about the future of Satyam after acquiring these companies when it doesn't have any experience in these businesses. It makes more sense to deploy your funds in related businesses or pay your investors," said Sourav Mahajan, analyst with Karvy.

The company is doing fire-fighting, but this is not the US. In the US by now, with a company promoters holding 8% and with such a move, there would have a far more critical reaction. Here, institutions typically do not show much emotion even when they hold a majority of the stake in the company; in fact, the public and private displays of reaction is unprecedented. This reaction is obviously not what Satyam was expecting.
However, one expects that with the share buyback announced after this as an attempt to mollify shareholders, there may not be much beyond what has been stated; the management of Satyam (and other companies) would be a bit wiser about what they can do or cannot do. What remains true in this case is that the board of the company proved ineffectual, and needs to be looked afresh.

Things will take time to look up

2008-12-14T08:26:00.000-08:00

The recession in the world economy will take time to look up. The US is right now a year into recession, with unemployment rates reaching scary rates, not seen for many many years. The Big 3 automakers are in real trouble right now, fighting for getting funding from the US Government, and right now, that funding looks in trouble since the US Congress has refused to grant such a funding. Companies have been firing people left right and center, forcing much more instability into the entire economy.
The market in India has also been severely impacted, with growth in many industries and sectors very badly impacted - the realty market is down, rentals are down, auto industries are down, consumer durables are impacted, and so on.
The market remains depressed, and even the announcement of a reduction in petrol and diesel prices, along with a Government push to go against its fiscal responsibility norms and push more money into trying to pump up the economy and growth in the infrastructural area has not had much of an effect to the market. Even when the market goes up to some extent, there is always the worry about how transient this growth is, and there is always an expectation that the market would again fall down. Right now, the sentiment remains negative, and people who have invested money in the recent past have also lost market, making people apprehensive about investing more money in the market.
Typically, as per all market literature and investment books, this would be a good time to invest in fundamentally good companies, but the upside will take time to achieve (maybe upto an year).

US Government takes a stake in Citibank

2008-11-25T10:58:00.000-08:00

This was something that would have been deemed impossible even a few months back. A Government and system that believes in the free market philosophy, bailing out a massive bank with tax-payer money; that too when the President is from the Republican Party ? This just goes to show that ideology and dogma don't stand a chance when a country's interests and well-being are challenged. Citibank is too big a bank, with too heavy an involvement in the economy. A collapse of Citibank would have been seen as disastrous failure, and causing a lot of shocks in the financial world; already the US economy is in recession, sales are down, unemployment is high. One can imagine how bad the state of the economy is when you consider that such a massive step such as providing financial support to Citibank has not been opposed by anyone - most people are shell-shocked and without a clue as to how to improve things. In such a state, using the funds allocated for saving the economy to pick up a state in Citibank is like showing the market that the Government will not let such a big player such as Citibank go down; this is what the US Government has also done earlier for troubled institutions such as the Mortgage companies, for the big brokerages, for other banks, for AIG, and so on.
What does this mean ? It means that by the time this entire bad period ends, the happenings now will be a case study of the power of the Government and Central Banks to try and ward off a massive downturn while letting the recession and bad news stand. In addition, the Government will end up with stakes of so many financial institutions that it will seem like a command economy to some degree, like a back door nationalisation.

Ominous news overall on the economy

2008-11-16T10:25:00.000-08:00

The recession word is haunting markets the world over. The US was already in recession, and given its status as the driver of the world economy, it is not a good portent for the rest of the economies all over the world. Other economies are starting to get badly affected; the collapse of an economy such as Iceland typically is of concern only to the natives, but a recession in countries such as Germany (the largest powerhouse of the European Union), slow growth in Japan, reduced growth in China, all of these are very bad portents that the situation will get much worse before it gets better.
In India, things are getting bad. Reduction in inflation to less than 9% is the only bit of good news, else the shake in consumer confidence has had a drastic effect. Entire industries such as textiles (hit by loss of exports), IT (because of reduction in IT spending in the US), Consumer Goods / Auto (because of loss in confidence and hence reduction in spending), Realty (massively hit because people are unwilling to commit), Airlines (massive losses so far), and numerous other industries are being hit.
So, in the space of a few months, the Government and the RBI are trying to reverse all the measures they took earlier, such as a tight credit scene (they were trying to cut inflation, but also cut industrial growth due to the tight credit squeeze), the Government is willing to give measures to improve the lot of airlines, banks, mutual funds, and so on; with this being an election year, the Government will also try to ensure that they will do what they can to bring back the good times. The biggest question is about whether the Government can do anything substantial, other than wait for these recession times to pass over.

Left claims that they predicted economic problems ..

2008-11-03T10:05:00.000-08:00

The Left is waxing eloquent over the current economic problems sweeping all over the globe. The Left parties, represented primarily by the CPM in India, claim credit for opposing FDI in insurance upto 49%, for preventing full capital convertibility, for banking sector reform, and so on. In addition, they claim credit for such social alleviation schemes such as the National Employment Guarantee Program, the farmer loan waiver, prevention of expansion of the SEZ Act, etc. In this, the Congress has also come to the forefront, claiming that it was the slow and measured pace of implementation of reform that led to the country being reasonably insulated from the global mayhem, and by preventing pension fund deposits into the stock market, they prevented loss of money in the pension funds (due to the stock market crash). As further proof of the re-emergence of their way of thinking, they quote the recent interest in Marx and his books.
What a lot of bull. If you compare India with other countries around the globe that were in a similar situation just 20-30 years back, many of them would have suffered much greater economic turmoil than in India, but, and mark this point, even with all this turmoil, these countries have a per capita standard of living which is much better than that afforded to a majority of Indian citizens. For decades after independence, India used a socialist state-controlled approach to growth, and ended up with a small incremental growth level of 2-4 %. Combine this with a population growth of a similar percent, and you end up with a continued high level of grinding poverty.
It is only when the state let go of some of its controls and allowed private enterprise to grow did we start seeing a higher rate of growth and a trickle down effect of the growth starting to reach lower sections of the population (by lower, I mean lower on the economic plane). What India needs is more release of the merits of private enterprise, more openness. What one needs to recognize is that the economic turmoil growing through the US is the result of the regulators failing in their duty, and not the failure of capitalism. Currently, everything seems bleak, and that is because this seems like a terrifying recession. However, every recession comes to an end, and when the next growth phase starts, we will all be enjoying the merits of free enterprise and a faster rate of growth.

India stock market update as of 02 November 2008

2008-11-02T05:00:00.000-08:00

The last 2 months have seen sheer mayhem on the Indian (and global) stock markets. Share prices have plunged sharply, with some companies now quoting at book value levels. This is the case with large caps, companies with fundamentally good records such as Hindalco, Tata Motors, etc. So, you can imagine the case of mid and small caps. Shareholders in smaller companies have seen their share value plummeting massively, with a massive pullout by FII's from the Indian market. Till January, there was a talk about decoupling of the Indian economy from the US and global economy, but no one talks about that now. The overall credit squeeze that started from the US economy has impacted the Indian economy now.
Now the important question is about what to do now ? There are many negative indicators in the Indian market right now:
- There are no sustained indicators about FII's stopping their selling
- The US economy is now in recession, and there are no quick trends on when the economy will pull out, and how deep this recession will be
- The Indian economy has started slowing down, with companies reporting results that are not as buoyant as you would expect
- The realty market is almost at a standstill with the number of deals having reduced significantly
- Overall consumer spending has started falling, with even the Diwali period not displaying the expected pickup
At the same time, the market is very volatile. The last session of the market saw a major jump, but no one should take this to be the pattern. At the same time, there are 2 sayings:
- The time to buy is when everybody is selling
- Fundamentally good companies are always worth buying
So, what will I do next ? I am starting to buy, at very small levels, the following companies:
Hindalco, Reliance, Suzlon (a contrarian play), Unitech (high risk, and high potential upside), Tata Motors (even though the company's results have not been so good)

World markets continue to fall

2008-10-17T01:05:00.000-07:00

Things look bleak currently on the world economic scenario. The sudden and heated debated plan of $700 billion, meant to shore up US sentiment through the Government buying up the bad mortgage loans and letting credit again flow into the markets, seems to have not done much to help the US and world markets. The sentiment is so negative that the economy seems to have gone into a spiral that will only increase the chance that this downturn will be painful and long. As a result, bank credit is becoming much more difficult to get, customers (with reduced sentiment) are slowing down retail sales (and for the American economy, retail sales is a huge chunk of the economy).

The jitters were prompted by a dismal report on retail sales, a bleak outlook by the Federal Reserve and sober remarks by Fed Chairman Ben Bernanke. A government report showed that retail sales suffered their biggest drop in three years last month. With consumer spending making up two-thirds of GDP, the retail sales data stoked recession fears.
The Federal Reserve's new snapshot of business conditions showed economic activity weakened across all of the Fed's 12 regional districts. Separately, Bernanke said the government has all the "tools" it needs to fix the problems in the financial and credit markets. But he cautioned that the recovery will take time.

The economic issues have been rattling the world economy, and the responses have been a bit varied. It is hard to coordinate a response for such a grave economic issue, especially when every country wants to take a decision that is in its best interests. However, finance systems the world over are much more complex and integrated than the decision making. Funds and sentiment are currently moving much faster than individual Governments can respond, and the initiative of a few days back where the finance officials of many countries along with central bankers have been trying to get a common response to these problems. They have so far not managed to improve global sentiment, and are still searching for finding tools that would work to stop this downward spiral of the global economies.
The political scenario in the US, with a heated Presidential election ongoing, has been complicating the overall response to this situation.

US bailout plan rejected; worldwide impact on stocks

2008-09-30T07:04:00.001-07:00

Ever since the sub-prime crisis came to the fore November- December of 2008, there has been a lot of worries about where this will eventually take the US economy. And this looks like a slow-action horror movie whose climax is coming. So, there was the shock when Bear Stearns went down, and then for some time it looked like the worst was over; the worst that could happen was a recession, but the sub-prime was over. And then happened the next round of corporate disasters that decimated the investment banking community on Wall Street; Lehman Brothers was allowed to die a quick and painful death, Merrill Lynch was bought up whole by a bank, Morgan Stanley and Goldman Sachs turned into normal banks, AIG got a lifeline from the Government that decided it was too big to fail without much impact, and then the banks started toppling - Washington Mutual and Wachovia, both not so small banks were sold for a song.
Current situation in the street ? Panic since there is a lot of holding in these reduced value mortgages, and as a result, banks are not able to decide whether the money they lend to other banks will return since there is no guarantee about the finances of the other banks and other institutions. As a result, lending to other banks and companies, the life-blood of the finance system of the economy is down massively. Lending, and the ability to get money from banks through loans and working capital requirements are what lets an economy work. The solution ? Take on these tainted mortgages till the credit system starts reviving, and then sell these mortgages (they still have value) when the economy has recovered. This will give confidence to the economy and its institutions. However, this runs into multiple problems.

- Ordinary citizens worried about being able to payback the loans and repay the mortgage are outraged that no one cares about them, and everybody is instead worried about some Wall Street gents who already have too much money. How does a collapse affect the ordinary Joe on the street ?
1. Tainted assets means that banks are unsure about the value of assets they hold, and make it more difficult for them to estimate their losses; this in turn causes a loss in confidence about the financial status of the bank and prevents the bank from being able to get capital - this in turn will surely and steadily lead to the bank going down the disaster bank
2. It is not just Wall Street that is affected, mainline banks in which Americans hold their deposits, are getting affected
3. The finance sector is so closely integrated with the overall economy (and is in fact a major glue of the whole economy); a crash will bring the economy down to its knees
4. People do not realize, but they are heavily involved with the stock market. Pension funds and retirement plans are typically heavily invested into the market, and downturns in the market affect the overall value of these funds

- Republicans believe that the Government needs to be small,and the market should be free. Such a bailout plan is likely to reverse both of these concepts, and this is a matter of principle
However, right now the US economy is on a major precipice, and it badly needs sentiment to be reflected. The overall aim of any ruling structure is to take measures such that it improves the life and condition of citizens, and the current situation is that a recession needs to be avoided and the economy is brought back from the brink (as stated by any number of economists and finance experts).

However, in a major setback to the President, and to the leadership of both parties, a majority of Congressmen rejected the bill. It is the treasury secretary who is responsible for ensuring that the economy remains purring, and he (and a number of experts) believe that such a plan is necessary to prevent the economy from going into a severe crisis; unfortunately a majority of the elected representatives don't agree.

Banks in US in serious problem

2008-09-27T11:02:00.000-07:00

Things have been happening in the US finance sector that have not happened before for a long time. The US Federal Government is proposing that it is the essential guarantor of most mega-finance companies; only allowing some of them such as Lehman Brothers to fail. The US Government has so far saved or intervened in the affairs of Bear Stearns, AIG, Fannie and Freddie, Merrill Lynch (no direct financial involvement), and the latest domino, Washington Mutual. It is the case of Washington Mutual that is different from the others since the others are involved either directly in investment banking or exposed to the mortgage industry; WaMu was a clear Main Street bank, and yet it collapsed like a house of cards, following the same script as the others (exposure to mortgage industry, liquidity problems, and then a sudden downgrade to 'junk' status by credit rating agencies that decimated its ability to raise more funds). It is also the way of takeover of WaMu that is seemingly setting a precedent. Given its precarious existence and risk of failure, Federal regulators seized the bank without even consulting with the board, and sold it off to JLMorgan Chase & Co for a much lower price than they would have to pay just a few months back. The Federal Deposit Insurance Corp. (FDIC) benefited from this transaction since JPMorgan is now responsible for the bank liabilities, and not the FDIC. However, given the method employed in this case, banks looking to get hold of another ailing bank, Wachovia, may be looking for a similar process (it proves much cheaper to buy through this method rather than an open purchase):

Wachovia Corp.'s suitors may use a template honed by JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon last week: Wait to see whether regulators will seize the bank, then buy the best assets and let the government sort out the rest, according to analysts. The bidders may try that tactic again at Charlotte, North Carolina-based Wachovia following its 27 percent plunge in New York trading yesterday, according to analysts at Goldman Sachs Group Inc. and Egan-Jones Ratings Co. They may get help from regulators, who said the U.S. benefited from seizing and selling WaMu because the Federal Deposit Insurance Corp. didn't have to tap its $45 billion insurance fund.
Wachovia dropped $3.70 to $10 in New York Stock Exchange composite trading yesterday and lost $1.50 more in extended hours. Yields on Wachovia's bonds soared to 24 percent, from 7.5 percent on Sept. 5, an indication that investors are concerned about default. Analysts questioned Wachovia's ability to stay independent after seeing loan losses tied to WaMu. JPMorgan is taking on $176 billion in mortgage-related assets and taking writedowns of about $31 billion, the New York bank said. Some of those were option ARM loans, which are prone to default because they let borrowers defer some interest and add it to the principal.

Given that Wachovia also has huge exposures to mortgage loans, other banks are licking their chops at the sidelines, waiting for the Bank to run into more problems, and begin the downward spiral of liquidity problems -> credit problems -> credit rating downgrades -> unable to raise funds. And given the financial deal to take on the massive bad mortgage assets of depressed companies is under active discussion among the politicians, but no immediate solution yet seems to be coming out, sentiment will only go worse.
What does this mean for Indian markets ? As liquidity problems arise among top US companies, they will try and get funds from wherever they can, including liquidating their stock holdings in the Indian market, causing more downturns.

End of the road for investment banking ?

2008-09-22T11:44:00.000-07:00

It has been decades now that Wall Street has been run by big investment banks. The exact names may keep changing as some of the smaller firms became bigger, and some of the bigger firms fall (and of course, names keep on changing with mergers and acquisitions), but the basic structure of large investment firms that handled investments for individual depositors as well as large institutions (as distinct from banks who depend on deposits for their cheap source of capital) has more or remained constant for so long that most people do not know of any other mechanism on Wall Street. And then suddenly, in the space of an year, Poof!, it all disappears. It started late last year when reports started coming in of problems in the category of non-collateral high-risk loans known as sub-prime. And these loans were in turn converted by financial magic into a range of investment instruments (explaining at more this level of detail will make this a highly technical discussion !) that were traded by a variety of financial institutions including banks and investment firms. When these sub-prime loans started collapsing, the sheer extent of these loans the subsequent losses caused huge losses for those holding these instruments.
Once people sensed that these investment firms were in danger, further credit to them was slow in coming, people started withdrawing their investments, and then the credit rating agencies started declaring them as various shades of high-risk, junk status. Once this happened, for all practical purposes, these institutions were finished, with the actual spiral of destruction collapsing very fast. And, now with the Administration and Federal Bank of the USA very worried, they have taken steps to prevent some of the more huge ones:

Federal regulators converted Wall Street's remaining stand-alone investment banks - Goldman Sachs and Morgan Stanley - into bank holding companies Sunday night. The move allows Goldman and Morgan to scoop up retail banks and to streamline their borrowing from the Federal Reserve. But it also puts Goldman and Morgan under the Fed's supervision, increasing the agency's regulatory oversight and possibly forcing them to raise additional capital. As banks, Morgan and Goldman will be forced to take less risk, which will mean fewer profits.
And it brings to a close the era of the Wall Street investment bank, a storied institution that traded stocks and bonds, advised mergers and showered lavish bonuses on its executives. In the past eight days, the federal government announced a $700 billion plan to rescue the financial sector by buying up troubled mortgage assets and an $85 billion emergency loan to insurance titan American International Group. Also, Lehman filed for bankruptcy and Bank of America took over Merrill Lynch.

So, even though both these huge huge firms were not in immediate financial danger, they were sensing that they were in grave danger of running afoul of sentiment. In a scenario where investment banks were automatically assumed to be in danger, neither of these firms would have wanted to be the next company picked up for speculation; once in the target of negative public sentiment, even a profitable investment bank could quickly reach the edge of collapse.
This action goes against the normal distance that the US Government would like to maintain from the private market, but politicians of all shades have realized the extreme danger to the economy, and are willing to run with this. Making these investment firms as companies that will act like normal banks will give far more stability.

India stock market update as of 19 September 2008

2008-09-19T11:20:00.000-07:00

Topsy-turvy is the sign these days, and the market is doing its best to make sure that the market remains topsy-turvy (climbing up or down very rapidly and suddenly); analysing the market remain a difficult job. What irritates me about some analysts is the absolute certainty with which they make their predictions. Right now, for anybody investing in the market over the previous many years, the market just proves that nobody can predict what can happen.
I was just reading an article in the New York Times web page about how the US Congress was informed about the sudden fall of the financial titans, and how the US Government will have to pump in huge amounts of money; the credit environment is so bad, and the sentiment is so low, that this needs to be done else the financial economy will fall, and that too very suddenly.
All this affects the Indian stock market immensely as well. Many of these institutions own chunks of the Indian market, and in a crisis they start liquidating everything they own. At the same time, sentiment overall should not fall so badly since it is clear that central banks the world over will intervene to keep the economy from falling drastically.

India stock market update as of 16 September 2008

2008-09-16T10:12:00.000-07:00

The Indian stock market is getting very badly caught up in the global problems. If you look at the overall trends that affect the market, rising inflation and increasing commodity prices (especially foodstuffs and crude oil) were the critical factors that were affecting the economy. Those seem to be slowly on the way down now, with crude temporarily falling below the $100 mark, and the rise in the commodity market slowly coming to an end. These are all good signs for the economy.
However, when the US economy sustains problems, these cause problems for everybody. The rapid decline of some of the largest financial corporations such as Lehman Brothers, Merrill Lynch and AIG have both a direct and indirect effect. They have cross investments in many Indian companies, and can be trusted to sell these as soon as they can. In addition, they are a harbringer of a long term problem in the economy, and leave people with a bad feeling, something that translates into a bad sentiment.
Overall, I know people who are slowly gaining small shares in the market, but at the same time, they are also worried, since even investments bought a few weeks back have fallen. The textbook approach is to keep on making small investments into fundamentally sound companies such as Airtel, Reliance, Tata, and for a risky touch, into some companies that have fallen very badly; they are the ones who are expected to rise within a few months of a recovery and can promise high returns (but I repeat again, this is risky).

India stock market update as of 27 August 2008

2008-08-27T02:07:00.000-07:00

The market is right now in a zone where people with courage (and a hint of bravery / foolishness) in their blood will go all out to try and invest in. There are many contradictions galore right now - most books mention that periods of slump are the best timings for buying good scripts (and even for buying volatile scripts that have heavily declined in value). So the current time should be a very good time for buying such scripts. At the same time, there are many problematic signs still there on the horizon - crude oil is currently low, but it takes a bit of geo-political tension to get it high again; inflation rate has gone down slightly but is still over 12%, and the RBI will still continue with its growth-throttling mechanisms; on the political economy front, the Government has still not come out with the proposed new economic reforms law; overall, the current horizon still has a lot of grey clouds.
The positive thing is that company results are still coming out good and the expected drastic drop in profits has not yet happened. Many individual sectors such as auto, airlines, stock broking, etc have suffered, and stocks in those areas are still to take a lot of pain. However, the overall scenario is looking slightly better.
Time to resume active buying ? A tough call. The market is supposed to be an active reflection of the situation 6 months into the future, and by then, things would have improved; so the advice remains to be buying slowly into fundamental companies, and think about investing small amounts into the more volatile companies (if you want to play the risk game).

India stock market update as of 12 Augist 2008

2008-08-12T02:04:00.000-07:00

For the past couple of weeks, we have seen the market rise from the lows of mid-12,000 that were seen a short time ago, and the Sensex has been above the 15,000 mark for some time now. This has not been because there has been an improvement in the economic situation over the last few weeks; the inflation rate is beyond 12%, something that will scare most governments to death. Instead, the stock market seems to be doing better primarily because of 2 reasons:
- Results have not been so bad and the advance tax collections seem to remain good
- Oil has been coming down for some time now, and is now 30 dollars below its all time high of $148
However, these remain bad times for the market. It is very difficult to predict as to how long the situation will remain like this. There are regular reports in the newspaper now about the bad situation of many sectors such as automobile, airlines, financial sectors (because of loans reducing), realty, and so on. At such times, it is difficult to stick your neck out and make a prediction that things will get better (and you should be skeptical of anybody who does make such claims without proper reasoning).
So what does one person do in such a situation ? The best possible approach is to continue to make small investments in companies such as Reliance, Airtel, L & T, HLL, Infosys, and other such companies that have good management, sound fundamentals, and the ability to ride out bad phases that the economy goes through.

India stock market update 30 July 2008

2008-07-30T03:19:00.000-07:00

This has been a very strange month for the stock market and for the country as a whole. From the beginning of the month, the country has been debating the pros and cons of the nuclear deal (quite frankly, this deal would not have seen this controversy if the Left parties had not opposed it). With the Prime Minister finally standing firm and the Congress High Command standing right behind him, the month saw a lot of political tension. Amar Singh ran circles around the Left parties, and eventually the long running support of the Left was withdrawn to be reduced to a cobbled up support by the SP and many smaller such parties.
The stock market behaved along with these dips and rises. The market went up and down whenever it seemed like the Government was in a better position, and went down when the Government's position seemed to be doing down. Finally, when it seemed like the Government has the numbers, the market gave it a big thumbs-up. With the Left gone from its commanding position of choking the reforms process, and a reforms-friendly SP in (and the BJP being a supported of reforms), big money reforms seemed to be indicated.
Then the bomb blasts, and a measure by the RBI to bring down the inflation led to a further increase in interest rates. The economic outlook remains uncertain, so any buys need to be in safe and fundamental stocks such as Reliance, ITC, Infosys, ICICI, etc. No big money investment, but something like a regular SIP should be great.

India stock market update as of 08 July 2008

2008-07-08T07:27:00.000-07:00

I am writing this blog on a more infrequent basis, given that the market is really not doing anything great nowadays ? With the continued climb in the price of oil above $140 per barrel, and inflation crossing the 12%, there is a massive onslaught on the equity market, with almost confirmed speculation that the fast rise in the realty market over the past few years has come to an end; that real estate deals are down, and that many smaller players are having a harder time.
I am still holding on, given that I believe in 2 things:
1. All my education years wherever I have studied either finance or economics (and specifically the equity market), there has always been one standard logic. When the time is down, when people are not buying, then this is time to buy. I still believe in that, and so prefer to look out for some great scripts that are available at pretty reduced rates now (such as Reliance, Infosys, ICICI Bank, Tata group, etc)
2. Secondly, over a long term, equity market has always given the best results, and this crash has been happening for a period of 6 months so far. Previous crashes and downturns have gone on sometimes for much longer periods, but there has eventually been a recovery.
At the same time, I will not deny that the situation remains painful. Timing the bottom of the market in this situation is very hard (you buy a script, and then it can fall much further); and the participation of retails investors, FII's and domestic FI's are all very low.
So, I keep on watching and monitoring. What do you people think ? What is the future like in the short term and long term ?

India stock market update as of 17 June 2008

2008-06-17T10:48:00.000-07:00

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

Indian stock market update as of 03 June 2008

2008-06-03T08:25:00.000-07:00

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

India stock market update 15 May 2008

2008-05-15T08:26:00.000-07:00

For quite some time now, I have been watching the market without actively trading; primarily because I had some tax issues. Further, I was not at all sure about which way the market is going to head, and some of my natural optimism had reduced. However, the shares that I continue to hold remain with me, since I am convinced about their long term fundamentals, both for the individual shares and the sector in which they are.
We are hearing a lot of news about some severe problems in the realty market, what with property prices apparently falling in many cities across India, especially in areas that were away from the center of the city and which had seen an exponential rise in prices earlier. So, am carefully watching this sector and evaluating further progress.
There are many bad news currently in the market; the Government is going through the jitters because of inflation and the inability to do anything about this inflation; further, the credit squeeze that has been employed to control inflation is causing industry to slow down. This is apparent in the current rate of growth of Industrial Production, which is the lowest for some years now. It is difficult for the Government to reconcile high inflation as well as a slowing industrial production - it seems incapable of doing anything much about it in the short term.
As a result, my tracking is happening now for fundamentally safe companies such as Reliance, Bharti, companies from the Birla Group, as well as some finance companies such as ICICI, and surprise, IndiaBulls. The tech sector remains on a watch, although with some fall of the rupee, it may get better for them.

India stock market update 12 April 2008

2008-04-12T12:46:00.000-07:00

The market continue to remain range-bound with an immense amount of volatility, jumping up and down in alternate patterns. Sentiment remains bad; there are signs that the bottom may be approaching, but news remains bad. The over-whelming factor driving the market is sentiment, and that remains mostly negative. It is now the 4th month of the year, and the carnage started in the first month, so things have been bad for some time now. Of course, all the doom-sayers have crawled out of the places where they were hiding, and if you believe all the bad things that you hear, then you would totally exit the market.
However, there is plenty of bad news, that affects sentiment. The US is in a recession, and there is no sign yet that the recession could get lifted soon. In India, the Government is almost foundering in its attempt to save its political ass. It has not done anything significant to increase agricultural production, and hence is being forced into threatening decades old repressive measures to reduce prices.
Inflation is forcing an extension of the credit squeeze that is suffocating the industry and causing a lowering of overall growth; exporters are being squeezed so that enough is available domestically. Nothing right now seems to be going right for the Government, with all dividend from the dream political give-all budget having vanished.
However, all literature on equity advices to buy fundamentally sound companies, especially when they are down, so this is a good time to do small investments into companies such as Reliance, ITC, SBI, Infosys, etc.

India stock market update 14 March 2008

2008-03-14T10:12:00.000-07:00

These have been absolutely horrible times for investors in the Indian market and world-wide. Markets scaled their peaks in mid-January 2008 and have been in a disaster mode after that, with bad news all around. The sub-prime mess in the US market, although predicted, still led to a major fall in stock market indices that markets are still trying to recover from. Further fears of a US recession are spooking the market further, and causing further falls.
The Indian market has also collapsed along with the world markets, with a fall of 25% in markets in a matter of a few weeks. There are few good stories out there, and the budget did not exactly set the market on fire. It was known that this was going to be a populist budget, and so it proved. And to make matters worse, the budget increased short-term tax, increasing it by 50%. This has also impacted the market. And there is still not too much clarity on where the funds for the farm loan waiver program are going to come from.
Stock markets operate on fundamentals, but also on sentiment to a large degree. And sentiment remains negative, with not much hope of improvement. However, every finance book that you would read recommends contrarian investment logic, and it is only at such times when everything is negative that one should start to think about investing. Invest in small amounts, in fundamental mid and large caps that have good fundamental values, and invest for the long term. Inspite of the decrease in industrial production growth, India is still growing at a good rate for the long term and is a good economy to invest in.
No specific stocks to be recommended for this week, hold onto what you have.

India stock market update 05 February 2008

2008-02-04T21:41:00.000-08:00

Signs of the bloodbath on the stock market are everywhere. People are hesitant to invest anymore, and the fear of the US recession is scaring the wits out of everyone who is invested in this market. And then you have the long list of people claiming that this was what they always warned out; one word of advice if you start believing in somebody who claims to have predicted the fall. Out of the thousands of people who consider themselves competent to give advice on the market, most of them knew that the market was at a high position, but almost nobody would have predicted the severity of the fall. In addition, there were many other people predicting that the market would go higher, so take all claims with a pinch of salt.
The current situation is that there is a crisis of sentiment in the market, with the constant pulling out of funds by FII's scaring people. That trend seems to be slowly coming to a halt, and on the positive side, the liquidity crunch caused by the massive withdrawal of money for the Reliance Power IPO seems to be subsiding, money has been refunded to people.
What are the positives ?
- India is still growing (with the caveat that the high interest rate regime by the RBI is affecting credit and growth)
- Sectors of industry are affected by the gains of the rupee vis-a-vis the dollar, and it is likely that these sectors will continue to hurt (textiles, IT, and many others)
- Equity remains the best growth medium around in the long run
- Liquidity in the system needs to find an outlet, and those are typically either property or equity, or a combination of both
- All expert advice is normally that when people are selling is a good time to buy (especially when considering the above factors)
What to do now ? Evaluate stocks that are in a growth path or are not in an industry that is in a slow-down, and based on fundamentals of the stock, decide on whether you want to buy or not.
Stocks that I am currently tracking:
1. Hindustan Construction: Rs. 190
2. Nirlon - Rs. 112
3. Almondz Global Securities - Rs. 82
4. Assam Company - Rs. 36
5. English Indian Clays - Rs. 2100

India stock market update 21 January 2008

2008-01-20T21:12:00.000-08:00

As I write this, the Indian stock market has seen a decent correction (some would call it drastic). The sensex has fallen around 3000 points in around 2 weeks, which is a significant fall, but the severity of intra-day falls has been worrisome, and especially the weakness shown in the last 1-2 hours of trading. What typically happens is that the market does a bit of up or down, and may have been actually up till around 2 PM, and then a severe bit correction happens where the market may swing by around 200 points down. If you see a graph of the day's movements, then the sharpness of the line is visible.
There seem to be multiple reasons propounded for this drop:
1. The markets have gone up tremendously over the past few months, and a correction seemed imminent
2. The immense IPO of Anil Ambani's Reliance Power pulled in a huge amount of money from the market and decreased to a large extent the liquidity available in the system
3. The sub-prime crisis has been hitting Financial Institutions the world over pretty badly, with many of the US based ones showing heavy losses. In such cases, they have been selling in order to get some money back and improve their financials.
Currently, I am just sitting tight, not investing more money other than looking at what I own currently, since I am not sure about when the recovery will happen.

India stock market update 08 January 2008

2008-01-07T22:35:00.000-08:00

Today, the sensex touched 21,000 for a brief time, and then pulled back. Overall, the market has moved up on a fairly consistent pace, with many times, the large caps moving up faster, and many other times, the mid caps move faster. For the last several weeks, a worrying trend has again emerged, with many small caps and penny scripts moving up. Sometimes they may jump up several-fold in the matter of a few days, and is normally a sign that things are coming to a head and may decline soon after.
And so it happened today. One does not know whether it is a 1-day blip, or whether this is a sign to come. For some time now, most financial analysts are claiming that markets have risen up too much too fast, and the Indian market is fairly expensive now. Today saw a steep fall of the mid-cap and small-cap stocks. No one who was watching stocks today could have failed to notice the depth of the fall; officially it is 3.54%, but it feels more in the range of around 5% (depends on the scripts owned, I guess).
As always, be very careful when investing in penny stocks; they can be extremely risky, and even a tip from a place seemingly very safe could be just based on a rumour. There can be a lot of money to be made from small-cap stocks, but money can get lost pretty quickly also, hence be careful.
Stocks that I am currently tracking:
1. Reliance Ind: Rs. 3054
2. Yuken India: Rs 348
3. Supreme Industries: Rs. 350
4. TRF: Rs. 1956
5. P G Foils: Rs. 118
6. Patel Airtemp: Rs. 132
7. JMC Projects: Rs. 500

India Stock Market Update 22 Dec 2007

2007-12-22T08:14:00.000-08:00

Very mixed signals the market is giving. It shows signs of weakness once you go above 20,000 and starts to decline to the 19,00 range, and then again shows sign of strength to climb again. And the trends seem to be similar, with the midcaps and small-caps being strong when at the 19k level; but as you reach above 20k, the mid-caps seem to try to fight the first day of decline. However, as the market remains weak, the mid-caps start to lose and can typically lose upto 10% or more before the weakness ends.
There are a number of factors that are pushed to show-case as to why the market should be weak - the yen unwinding (reduction of available zero cost vast sums of yens), the continuing sub-prime mortgage weakness in the US and the predictions of trillion dollar losses (in spite of the Fed declaring that it will reduce interest rates to pump in more dollars to fight the projected weakness), continuing thoughts of the US slipping into recession, political weakness in India (with the Left continuously pushing down the throat of Congress Government). So, there is a lot to be said for the bears. What are the factors in favour ? - Corporates seem to be still doing good even though there was a massive credit squeeze, there is a lot of liquidity in the global system and the equity marked in developing countries still seems like the best bet. In addition, the Government routinely makes the right noises by pushing for SEZ's and a few other points (although they still get beaten over the head by the Left on most of their initiatives).
So what are the stocks that I am currently tracking ?

1. Reliance Industries - Rs. 2719
2. Supreme Industries - Rs. 381
3. Nirlon (risky) - Rs. 114
4. KLG SYstel - Rs. 826
5. Khoday India (risky) - Rs. 291
6. Hindustan Constructions - Rs. 194
7. Gontermann Peipers (I) - Rs. 110
8. JMC Projects - Rs. 508
9. XL Telecom - Rs. 480

India stock market update 28 November 2007

2007-11-27T19:47:00.000-08:00

I keep on thinking about whether the frequency of update of this blog is too infrequent, and then always come to the same conclusion that stock market tips, unless you are day trading and looking at momentum stocks, should always have some time for letting the stocks move and gain on their fundamentals. At some point in the past, I used to get impatient and either buy stocks that were operator driven, or sell a stock if it did not move in a month.
Now I know better. Unless I spend significantly more time on the stock market, I think my current strategy is a sound strategy. Buy stocks that are fundamentally sound and are not affected by low sentiment. As a result, I am out of hotel stocks, IT stocks and textile stocks since sentiment is against them (due to various reasons such as rupee depreciation, etc). I am more into engineering, capital goods, construction, some realty, and banking stocks (these are good sectors and one should look at companies that have been doing well in these sectors).
For the last couple of weeks, Indian markets have been sluggish with many days where there is a weakness, low volumes and drifting lower. In some cases, the sensex deceives the overall sentiment, since the sensex represents 30 shares, and the mid-cap and small-cap index may move differently from the sensex. Overall, with FII's not being very active, global weakness and threatened horror stories from the sub-prime problem still happening, one does not expect any immediate upsurge. However, the 'India' story remains on, and I plan to remain invested.

Stocks that I am currently tracking:
1. Supreme Industries: Rs. 350
2. Advanced Micronics: Rs. 89
3. Ion Exchange: Rs. 200
4. JMC Projects: Rs. 500
5. Khoday India: Rs. 294 (risky)
6. Nile: Rs. 357
7. PG Foil: Rs. 81

Indian stock market update as of 1 November 2007

2007-10-31T09:40:00.000-07:00

The market seems to be going into ballistic zone, with having touched the all-important 20,000 levels this week. At this point, with the amount of foreign (and domestic) money pouring into the system, there is no telling which way the market will move. There is an incredible amount of money flowing into the market here and that is pushing the market to go up. This places the market at huge risks since such flows are volatile; this is countered by the view that Indian companies and the economy continue to show strong growth and this sentiment will continue to attract money.
By the grace of God, I have held my nerve (some may call it being greedy) and have not yet cashed out, hence stocks have shown good growth. There are tremendous pushes for a correction, and if you just look at the maths, a 1000 point fall, however strong it feels, is a drop of 5% and the Indian market has shown such kinds of volatility. One thing is sure, this is a good time to try and get out of speculative and high risk stocks since they are the first ones to get impacted. And for all the good news about the sensex, many times it seems that the midcaps are under-performing the sensex, so that is also something to be factored in.
Stocks that I am currently tracking:
KLG Systel: Rs. 740
Adhunik Metaliks: Rs. 149
Hindustan Constructions: Rs. 215
Indiabulls Real Estate: Rs. 644
JMC Projects: Rs. 460

India Stock Market Update 17 Oct 2007

2007-10-17T08:57:00.000-07:00

Another incredible day. The previous day, on the 16th of October, SEBI issued a draft for discussion that talked about restricting the flow of money into the Indian equity market through Participatory Notes. The proposal was the following:
SEBI had yesterday invited public comments on its proposal to restrict with immediate effect, issuance of PNs in derivative markets by FIIs and their agents. As per the proposals, FIIs and their sub-accounts are required to wind up the current ODI position over 18 months, during which SEBI will review the position from time to time.
Even though this was a proposal and is due for a vote on the 25th of October, it seemed to be that a lot of institutions and foreign funds saw this as a very abrupt move and voted with their feet. The proposal is seen as a move towards cleaning up the funds flow into the country and ensuring that dirty money is reduced. However, as always SEBI likes to release things without notice and that disrupts the whole system. It required an intervention by the Finance Minister to cool the market, and it recovered from 1700 point down to around 340 points down.
A lot of stocks that were fundamentally good, and yet don't have much FII interests did not fall much. Some of the stocks that did well on this day were:
1. Walchandnagar - Rs. 6300 (has gone up massively recently, so approach with caution)
2. Hindustan Construction - Rs. 176
3. Adhunik Metaliks - Rs. 114
4. Grauer & Weil - Rs. 196
5. KLG Systel - Rs. 673
6. Supreme Industries - Rs. 170

India Stock Market Update 05 Oct 2007

2007-10-05T21:47:00.000-07:00

What a ride. The last 2 weeks have seen a movement in the market that have defied all pundits, all experts, and thoroughly confused any commentator as well as the retail investor. When the market was heading quickly to 17,000, there were lots of calls that an imminent correction was due, but those faded out as the market made its relentless climb to the 18,000 level. The market is now very close to the 18,000 level and it could take just one or two more days to reach there; however, in the midst of all this rosy feeling, there is the fact that a lot of stocks are not participating in this jump. At the same time, there are junk stocks that operators are starting to push again, and these are the ones that most impact retail operators. They get stuck in these junk stocks and are unable to come out from these.
What is a good course of action ? A strong recommendation is to review the stocks that you may own to evaluate as to how many of them are backed by fundamentals and how many are junk stocks that are climbing high without any apparent reason. Another option in such a heated market is to take out some of the profit that you may have made, and hold it for investing if there is a correction. I say 'if' because no one can predict whether the market will consolidate and rise, or whether there will be a correction. There are now articles appearing in the paper about how this rise is all artificial, and would soon be shaken out. On the other hand, there is an incredible amount of money coming into the market from foreign investors and from domestic mutual funds.
Stocks that I am currently tracking:
1. Shree Ram Mills: Rs. 425
2. TRF: Rs. 1100
3. Hindustan Constructions: Rs. 162
4. Yuken India: Rs. 248
5. Tayo Rolls: Rs. 289
6. Voltas: Rs. 168
7. KLG Systel: Rs. 595

India stock market update 25 September 2007

2007-09-24T20:12:00.000-07:00

Wow, what a ride. The market has fairly bounded up by leaps and bounds in the last few days, and is way over 16,500 not something that most people would have expected (they may have hoped, but not expected). Leading the charge is Reliance Industries, that has reached the dizzy levels of Rs. 2,300. Engineering companies are also taking advantage of this climb, with textiles and IT continuing to be way down.
Now the more important issue is about what to do now. There is a tremendous buzz in the market that such a climb is not sustainable, and even with additional liquidity in the market, a correction or profit-taking is inevitable; it's just that no one is willing to hazard a guess of what the correction will be like. I myself finally realized that some of the textile stocks that I have been holding on need to go; even though it is a contrarian principle to hold stocks that are down, I feel that this level of weakness of textiles will continue for some time.
I am also thinking of taking a major decision regarding the Infosys i hold. Infosys has been a huge disappointment, with almost no movement in the last 1 year; I would think that it has actually declined in the past year. Infosys over a 3 year return has under-performed the Sensex significantly, and with the pressure on the Rupee only growing, I really am not sure what the future of IT stocks is. Overall, even if a correction happens, the economy seems to be sound, and worth holding onto in the long term.
Stocks that I am currently tracking:
1. Ashiana Housing: Rs. 260
2. XL Telecom: Rs. 195
3. Yuken India: Rs. 265
4. Walchandnagar Industries: Rs. 4950 (this has run up significantly, so be careful)
5. Tata Teleservices: Rs. 41
6. Voltas: Rs. 161
7. Praj Industries: Rs. 235

India Stock Market Update 18 Sept 2007

2007-09-18T09:18:00.000-07:00

So today the market did a up and down climb, and was negative for some time today, but eventually closed up by 164 points. This is reversing the trend of the past few days where the market would go up in the morning but would decline due to profit booking. The index is still below 15700, and unless it can give a conclusive jerk and break the 16,000 barrier, there will be a lot of talk about downturn in the market.
The sub-prime crisis in the US market apparently still has to run its course, with persistent marker rumours about the financial impact on US firms still to be fully out (given that some of the financial transactions and holdings are very complex). A lot of people are waiting for the US Federal Reserve to make their important meeting statement about whether there will be any change in interest rates.
The Indian economy still appears to be a on a roll although the sharp rise in credit interest rates in order to squeeze inflation appears to be having an effect on industrial growth, and the Government and RBI may soon have to decide to lower interest rates in order to spur growth. But, the overall picture on the Indian market still remains positive, and that is the way that my investment horizon currently is.
Stocks that I am actively tracking:
1. Bartronics (this has risen a fair amount, but good potential) - Rs. 277
2. Hindustan Constructions - Rs. 135
3. JMC Projects - Rs. 340
4. KLG Systel - Rs. 526
5. Praj Industries - Rs. 215
6. Supreme Industries - Rs. 225
7. Tractors India Limited - Rs. 325

Indian stock market update 11 September 2007

2007-09-11T09:16:00.000-07:00

For some time now, I have been thinking about the frequency at which I update this site, with many times a number of days passing by. However, I am more of a long term player, and I don't believe that fundamentals can change in a few days, so am comfortable with the current frequency of updates.
The Indian stock market has shown itself to be fairly resilient over a period of time. After the sub-prime crash threatened to derail the market, the stock market has again crossed the 15,500 levels, but looks like there may be some minor corrections now and then. Minor corrections are healthy, since if the stock markets keep on rising, people get uncomfortable and are unwilling to invest further in anticipation. Also, with such falls happening now and then, people feel that scripts are moving up as per their fundamentals; if the markets keep on rising, it gives an opportunity for traders and operators to move up junk scripts (including penny stocks) and then when the fall happens, a number of retail investors also get hurt.
It looks like things are so so on the overall political front, with the deadlock with the left scaring the market earlier, and the current deadlock threatening the stability of the Government and putting a stop to many of the long-promised initiatives such as labour law reform, pension reform, etc. A lot of this has been discounted now, but even then, a sudden crash of the Government can badly affect the market. I remain invested, and will continue to evaluate and keep investing.
Stocks that I am currently tracking:
1. Adhunik Metaliks - Rs. 77.50
2. Bartronics - Rs. 236
3. Hindustan Constructions - Rs. 132
4. Tata Teleservices - Rs. 34.60
5. KLG Systel - Rs. 480
6. Reliance Petro - Rs. 128.50

India stock update 23 August 2007

2007-08-22T22:32:00.000-07:00

The last week and a half have seen a major period of volatility in the stock market. The sub-prime crisis in the US and its impact on major banks, Financial Institutions and Hedge funds had a major impact on liquidity and caused a downfall in sentiment world wide. This crisis showed how most major world markets are connected, primarily through the money invested in these markets. India has a sizeable dependency on Foreign Institutional Investors, and a fair amount of their money is in turn composed by US funds and Hedge funds. When this crisis broke, and sentiment was down, there was also a big pressure on redemption, and to pay out redemption, there was heavy selling in various world markets, including the Indian market.
So, the level of volatility displayed, with the market either showing big up or down jumps caused a big scare in the market. And that is what the market has been doing now for some time, either jumping way up or way down. So, it is tempting to invest say when the market is down, but you can never time the exact down of the market. I am right now holding still, trying to restrain myself, although I am investing a bit in some Mutual Funds such as Franklin Flexicap and SBI Magnum, and looking at shares such as Era Con, Reliance Industries, Walchandnagar, etc that have fallen.

India Stock Market Update 12 Sun 2007

2007-08-12T08:35:00.000-07:00

What a week. Stocks jumped up and down, but mostly down. With the global fears of the collapse of the sub-prime mortgage market along with the associated impact on financial institutions all over the globe who had funds linked in some way. With more and more complex instruments in the financial market for covering loans and mortgages, a lot more firms are now involved. The first impact was on Bear Sterns that found some of its funds badly hit, and then other institutions started getting hit. And then doom and gloom stories started appearing.
What seems like has happened is that central banks in the US and in Europe have decided to step in order to boost sentiment. There is nothing more important in the financial market than sentiment, since sentiment is what decides whether there is buying or selling. In the Indian market, after the blood-bath, I noticed one thing. Since as an experienced crash hit person, I am now less into risky instruments and more into firms that have good fundamentals. So, even though the crash has hit my shares left right and center, I am still not so badly hit, with many stocks still doing okay, and some of them even going up.
I am trying an experiment, with a gadget to the left that will have some of the shares recommended, at current price along with quantity of 100. As time goes by, I will add more. This will help me to see whether the shares that I list as tracking are actually doing well.
Shares currently tracking:
1. Adhunik Metalics - Rs. 76
2. Bartronics - Rs. 183
3. Era Constructions - Rs. 599
4. Hindustan Constructions - Rs. 127
5. KLG Systel - Rs. 432

Indian stock market update 05 August 2007

2007-08-05T12:23:00.000-07:00

Normally I don't update within a day of a previous post given that the market will have been closed and there is no change in stock positions over the week; however, I am somewhat worried over what I have read so far in the past 2 days.
Now, for the current rise of the Indian market, there are several reasons, all happening at the same time. India is finally growing, with a good >9 % rate, next only to China; there is a massive amount of money pouring in from FII's who want to get into a good market and this money in turn is also being sourced from some hedge funds; there are more people in the Indian retail market who want to invest, either directly or through Mutual Funds; and even with political warts, scandals, left pressure, the Government is overall shepherding the economy towards more openness and greater role of the private sector.
Having said all that, all of the above factors will be true except for the factor about funds brought in by the FII's. The sub-prime collapse in the US market, which is also impacting funds held by banks and hedge funds due to the inter-connectedness of the complex financial instruments in the US, is likely to suck out the liquidity in the market for some time. People are worried about where this will go to. Now, the movement could be purely localized in the sense that some firms holding sub-prime mortgages in the US market could go under, but overall money flows continue. Or, things could go haywire and with the inter-connectedness of the global markets, the quick upward march of the Indian market would stall or go onto decline. Most people are predicting that Monday will see a further fall in the Indian market due to the decline of the Dow Jones on Friday, in a continued impact of the sub-prime scandal.
Now what do I believe in ? The India growth story is real, but so is the reality of the liquidity driving the market movements. Maybe a time to hold, and if falling, and if willing to take a risk, to buy fundamentally strong companies such as Reliance, Bharti and Pantaloon that have fallen. I am waiting to decide on Infosys, so not targeting that now. But, the basic mandate would be to be careful and not get excited by stocks falling in anticipation of buying more.
A risky area that I am looking at (and have bought some of) is the area of green technologies and carbon credits, so have bought some of Praj Industries, SRF, and Navine Fluorine. All risky buys except for Praj, which is slightly better. I would be looking at more companies that are getting into the green area, since that should be a good growth area in the future.

Indian stock market update 04 August 2007

2007-08-03T23:04:00.000-07:00

What a week. The sensex took its 3rd biggest fall this week, of 615 points; a very scary day. And then it has bounced somewhat back after that. This level of volatility has been seen in the Indian market before, but it still can be very nerve-wracking for the retail investor. Of course, the opposite is that a regular investor is pretty much used to all this and will take such corrections in the stride, in fact equating such corrections with the need to have a regular corrections when the market has been climbing so as to let off steam.
Of course, one thing that can never be said enough is the need to be very careful about tips. Investing in speculative stocks is risky if you are not paying regular attention. Further, if enough profit has been made in a stock and you feel that based on fundamentals, it has reached where you wanted to, take the profit out. Invest it in FD's, MF's, or even for things such as increasing insurance on you. Don't let greed overtake you.
I have a smattering of some stocks that have not get mauled too much in the recent carnage, and this makes me want to buy more of such stocks, these stocks being: Adhunik Metaliks Limited, Ashiana Housing, Hindustan Constructions, Ion Exchange, JMC Projects, KLG Systel, Reliance Petroleum, Walchandnagar Industries.
I am still a believer in the Indian growth story, but need to watch what is happening in global indices. If liquidity comes under strain, the effect will also be on the Indian market.

India stock market update 29 June 2007

2007-07-28T21:28:00.000-07:00

The US market sneezed, and the rest of the world had a cold. Over Thursday and Friday, the US Down Jones and NASDAQ both had big falls, due to a combination of bad results, and fears that the mortgage crisis will take its toll on overall credit. Credit is the most important reason for the stock rise in the Indian market, Chinese market and numerous other developing markets. If the investments by FII's show any sign of collapsing, then things can get sticky for the Indian market. Indian FI's can be very hesitant, given that their base is Indian investors, who get very skittish when the market becomes volatile.
Overall, with a 540 point drop in the Indian sensex, things suddenly turned red after a decent upturn for the past 2 weeks. Things are somewhat scary now, although there is one good news that Indian companies overall gave a good earnings report. So, unless there is a major credit problem or liquidity crunch, the market will overall keep on gaining. So, keep a watch on stocks, sell the ones that seem to have gone up tremendously without a corresponding gain in fundamentals, and overall be watchful. Keep a SIP to invest part of the money in Mutual Funds, and also, for safety's sake, use these times of high interest to get some good Fixed Deposits.
Some stocks that I am currently tracking:
1. Era Constructions: Rs. 532
2. Ion Exchange: Rs. 162
3. JMC Projects: Rs. 285
4. Trigyn Tech: Rs. 31
5. Nirlon: Rs. 70.50

India stock market update 22 July 2007

2007-07-22T02:34:00.000-07:00

The stock market shows no sign of letting up, driven by a global liquidity charge and further driven by the promise of a continued high growth rate. So, even though we see corrections, the market remains on the promise of a continued growth, to reach 16,000 sometime this year. However, with the volatility of the market being what it is, a correction can happen anytime. The big question is about the extent of the correction. If it is a small correction of some few hundreds, then it will be shrugged off. However, we have seen in the past that slightly major corrections see analysts jump on the doom and gloom platform and quickly target 3000-4000 point corrections.
What am I doing ? I am reviewing my stocks to identify those that are slightly junk, or not based on fundamentals and liquidate them. I am also encouraging family members to diversify funds towards fixed deposits, getting 10% is not such a bad deal for some amount of money. Also putting money in my regular Mutual Funds such as HDFC Prudence, Franklin Flexicap, SBI Magnum, SBI Taxgain, and Reliance Equity Opportunities Fund.
Am I putting fresh money into the market? Yes, I am. I have a long term belief in the market, and as long as I am convinced in the fundamentals of the stocks that I am investing in, then I will continue to put money. I was reading some more about Reliance's quest for further oil and gas in the blocks that it holds for exploration, and it may make sense to continue investing in Reliance for the long term. The problem with Reliance is that it is very difficult to think in terms of selling the stock.
Stocks that I am currently tracking:
1. GSFC: Rs. 205
2. Era Constructions: Rs. 540 (with some care)
3. Schrader Duncan (ICICI Direct code SSDUNC): Rs. 309
4. Garnet Constructions: Rs. 58
5. Voltas: Rs. 150

India Stock Market Update 14 July 2007

2007-07-14T05:01:00.000-07:00

The market is now at all-time highs. The news by Infosys about the effect due to a declining dollar on its margins as well as the guidance failed to shake the market. It's not only the India effect which is guiding the market to all-time highs. It is also the massive liquidity available that is pumping the market to these new levels.
The problem with such levels is that the market tends to be very volatile; so for example, in previous jumps we have seen that the jump could be just in large caps and the midcaps remain where they are; or in the current case where large caps (and market movers) such as Infosys and Reliance have not moved much, most of the action being in engineering and real estate companies (part of mid-caps).
Be very careful at such levels. I am trying to ensure that shares I have bought earlier for speculation and that have jumped a lot are slowly getting sold so that if a fall comes, I am more invested in fundamentally safe companies that will fall less. It is a certain bet that if a fall comes, shares in junk companies fall so fast that investors don't know what hit them.
Some stocks that I am tracking are: (most of these are long term)
1. Yes Bank: Rs. 183
2. Adhunik Metaliks: Rs. 63
3. Bartronics Ltd: Rs. 163
4. Ion Exchange: Rs. 146
5. IVRCL Infrastructure: Rs. 421

India Stock Market Update 02 July 2007

2007-07-01T23:36:00.000-07:00

So finally the stock market has beaten the previous doom-sayers and crashes, and reached it's all time high, crossing the previous level of 14723. Now, a lot of retail investors are afraid to enter the market, worrying about a crash. I want to liquidate some of the stock that has not moved much over the past few weeks or months, so am going to be selling some stock such as ITC (I know, long term, but in one of holding, it has not moved), Accel Frontline (a promise stock, but somehow not getting a good feeling). Maybe it is time to also move some more profits to Mutual Funds (my favourties being SBI Magnum, Franklin Flexi-cap, and Reliance Equity Opportunities Fund - although I am open to more if somebody can suggest some good sector specific or diversified funds).
IFCI has been a good buy, having bought at 30 a few months back, and now has climbed to almost double that, with potential of going higher due to news of it planning to sell a stake at a higher price. Overall, market seems to be looking good, with good integration of Domestic and International Mutual Funds. On the policy side, the Government keeps on making right noises about reform, although whether we will see some good moves is uncertain, what with the left being a roadblock.
Looking to carefully evaluate cement stocks, they seem to be making a move upwards. Am also evaluating stocks that are 'green', that is, stocks that can make a benefit from the demands of overcoming global warming.
Stocks that I am currently tracking:
1. Yes Bank: Rs. 180
2. Praj Industries: Rs. 480
3. Reliance Industries: Rs. 1680
4. Reliance Petro: Rs. 114
5. Era Constructions: Rs. 395

India Stock Market Update 27 June 2007

2007-06-27T10:50:00.000-07:00

The market made a small down, but has been hovering up and down. There are a number of people who are worried that a correction is imminent, since small caps have started moving up, and large caps are slowly drifting down. Everything depends on how the earning numbers for the quarter looks like, but if things start falling because of say the high interest rates or because of the fall of the dollar, a medium correction could happen.
Long term, the growth story seems intact, but it will have a lot of twists and turns, with the market bouncing all over. There are still plenty of stocks with growth potential, but one should not get worried if a stock suddenly falls one day and up the next. Textile remains in the doldrums, and real estate is starting to get worrying because of the stagnation in the market and the fact that experts are calling a decline in the market. There was a story in the paper about smaller property builders trying to liquidate their holding because the market is not so good anymore.
Some of the stocks that I am currently tracking:
1. Bartronics: Rs. 141
2. Supreme Industries: Rs. 210
3. KLG Systel: Rs. 450
4. Yes Bank: Rs. 171
5. Nucleus Software: Rs. 1000

India Stock Market Update 24 June 2007

2007-06-24T03:55:00.000-07:00

Is there hope for the stock market right now? There are signs that with inflation down, things may seem to be better on the credit squeeze. The credit squeeze caused money to become more expensive, and if inflation remains down for some more time, we will stop hearing all the comments about the 'aam admi' hurting, and industries will get easier credit for their expansion plans. This is the chief way to get higher growth, and one should mostly ignore the left parties.
The Government seems to be making an effort to get some pension funds into the equity market (even under some tight controls), and if they manage to get past the obstacle of the left parties, there will be a lot more funds coming into the market.
At the same time, the Finance Minister is dropping hints about the floating of more PSU's into the equity market, but unless the PSU's are given more functional autonomy, it really would not benefit them too much. PSU's have been trailing private sector companies in growth of their share prices, and this is primarily because they take their policies from the government, and government policies are not dictated only on the basis of economic considerations.
Some stocks that I am currently tracking:
1. Ashiana Housing: Rs. 190
2. Reliance Capital: Rs 1088
3. Praj Industries: Rs. 489
4. JMC Projects: Rs. 255

India Stock Market Update 19 June 2007

2007-06-19T04:18:00.000-07:00

Been some time that I wrote about the Indian stock market, got somewhat busy. This was also the time when the DLF issue came and went. The price is near the high end of the range, Rs. 525. The sensex has been upto its usual tricks during this period, moving up and down. Today was a good day, with the market jumping up by 170 points. However, it is still some time away from the historic high of the sensex of 14,700 points, achieved a few months back.
Overall, how do things look ? On the inflation level, things are somewhat better now, but still have not hit RBI's comfort level, so the danger of a credit squeeze has not yet gone away. The Prime Minister and Finance Minister keep on making noises about reform, but the left promises to dispose of whatever these 2 propose, so things will remain fluid in terms of reform.
One major problems remains the tendency of the government to assume some things about what will hit the 'aam admi' (the common man). Hence, the Government wants to protect small retailers by proposing a cap on big retailers such as Reliance. This is crazy, and smacks of a license raaj kind of system. Similarly, the Government absolutely refuses to come out with a SEZ policy that can be stated as complete; due to pressures, whether from industry or otherwise, they keep on changing their policies.
Stocks that I am currently tracking:
1. Infosys Tech: Rs. 2000
2. Revathi: Rs. 797
3. Yes bank: Rs. 160
4. Torrent Cable: Rs. 167
5. IFCI: Rs. 50

India stock market update 31 May 2007

2007-05-31T11:00:00.000-07:00

Today was a day when the sensex moved up by more than 100 points, in fact by 133 points, to close near an all time high. It is above 14,500, and there is an incredible expectation in the air that a correction is due. People are delaying purchase into the secondary market, a number of people are actually doing profit booking so that they do not get caught when a correction happens. On the other hand, and this gets interesting, there are a number of people who are saying that the upmove also comprises of a movement by midcaps and such movement may be sustainable. No one knows what will happen, but the watch word for now is to be very careful and invest only when you are sure about the stocks that you are investing in. One good recommendation is to use profits to pay off loans, put into FD's (some of them offering upto 10%), and to move into more mutual funds. Of course, for those who have got the stock market taste, investment into the secondary market will continue.
Some of the sectors that I am staying away from is hotels, sugar and textiles. I am fairly invested in engineering, real estate and banking; although I could invest more into banking. As far as the stock market goes, I will continue to invest, although I am thinking of investing some more into these 2 mutual funds: Franklin Flexi-cap and SBI Magnum Global. I have been advised to do a bit of investment into some sector specific funds in addition to diversified funds, but I hesitate a bit over this.
Some stocks that I am currently tracking:
1. Nesco - Rs. 1185
2. Alphageo - Rs. 330
3. Era Construction - Rs. 370
4. IVRCL - Rs. 352
5. JMC Projects - Rs. 273

India Stock Market Update 23 May 2007

2007-05-22T23:21:00.000-07:00

The sensex is again reaching all time highs, and the buzz is that a correction is now overdue. So, it is a good time to take profits in some shares. Such times are always uncertain because you really don't know whether the market will continue to go high, or take a correction of anywhere between 300-500 points. Such a correction could reduce share prices, so I have taken profit in some shares, but am hopeful that the India story still continues.
I continue to remain very hopeful of the India story, given that the situation still remains conducive. The Government, as can be seen in the tussle over the SEZ's, continues to remain committed to some extent in the development model, and things should remain good for the long term; it is the short term corrections that make somewhat of a difference to our valuations. On the other hand, the government will be mindful of the elections in 200, and will start to hesitant to take the decisions that could come with political cost. If they don't do too much of this, Indian industry remains on a growth track.
Some of the stocks that I am currently tracking:
1. Reliance Industries - Rs. 1766
2. Yes Bank - Rs. 172
3. Indiabull Realty - Rs. 383
4. JMC Projects - Rs. 267
5. Mather Pumps - Rs. 269

India Stock Market Update 13 May 2007

2007-05-13T08:45:00.000-07:00

Uttar Pradesh elections have come and gone, and a major winner introduced. Mayawati managed to stitch together a grand coalition of forward castes, backward castes and Muslims, and blew away everybody else. Uttar Pradesh is the largest popuplated state in the country, and any administration that can spur economic development in the state would be good for the country as a whole.
Seems like inflation is on the spur of coming down marginally, and that could mean that the RBI will stop squeezing credit growth in the economy. It is necessary to combat inflation, but hurts a lot of people and companies, including people who believed in the booming economy and bought houses taking advantage of cheap loans. Such people are feeling the pinch of increase in their interest rates, and could do with moving to a as-previous low interest regime.
Stocks that I am currently tracking:
1. United Drilling: Rs. 23.15
2. IFCI - Rs. 47.20
3. Reliance Industries - Rs. 1593
4. Yes Bank - Rs. 154
5. Supreme Industries - Rs. 225

India Stock Market Update 08 May 2007

2007-05-08T10:47:00.000-07:00

Another day, another bout of volatility. It is such days that end up really sapping the will to keep invested in the market. I started out watching the morning sensex being slightly down, and then it rallied to move higher. The sensex stayed higher most of the day, and then profit selling happened again. The stocks that I had seen moving higher started dipping, and I started the day at a point lower than I started the day.
Do I still continue in the market, yes. I believe that the market is taking some time to gather momentum, and should shoot up. However, everywhere I read, the same articles - May is the month when people are away from the stock market, May is the month when everything crashes. Makes a person half want to believe all this and stay away.
The only change I make is that I watch the market more time per day, something that is not advisable. After all, we have other work to do, and unless a person is full time into the market, this is definitely not a good idea.
Stocks that I am currently tracking:
1. Hikal Chemical Industries: Rs. 409
2. Asian Oil Fields: Rs. 61
3. Indiabull Real Estate: Rs. 352 (risky)
4. Avery India: Rs. 58
5. Adhunik Metalics: Rs. 47

India Stock Market Update 04 May 2007

2007-05-03T23:56:00.000-07:00

The sensex still seems to be somewhat on the upswing. However, I keep on reading more doomsday stories in the papers and magazines about how things may be just on the edge of falling, and how this will be the last good quarter for corporate results. Why so ? Well, dollars are pouring into India at an incredible rate, pushing up inflation. The RBI cannot buy these excess dollars since that will release more rupees into the local economy (pushing up money supply and hence inflation), and hence has to sit by and watch while the dollar gets hammered down. It is already way down, reaching the likes of 41-42 rather than the 45 level it used to be some time back. This level in turn makes exports more difficult since exports get costlier. Equally, earnings in fixed dollars (for IT sector as well as others) fetches less rupees, and hence export earnings are down.
I have no doubt that this will make an impact. However, India has also a local booming market with its own consumption pattern and demand, and that remains unaffected to some extent by these changes. So, companies will adjust to these changes. Many exporters may start importing more raw materials if they start to get cheaper.
As the UP election gets over, the Government seems to be displaying a reformist tend again, with some corrections spoken after the budget, related to cement prices and to FBT for ESOP's. Plus, under pressure from corporates, the Government may amend the SEZ policy to again allow the state to atleast procure 10% of the land requirement. This is a good step.
Stocks that I am currently tracking:
1. Allianz Securities: Rs. 56
2. Ashiana Housing: Rs. 181
3. Adhunik Metaliks: Rs. 48
4. Era Constructions: Rs. 394
5. JMC Projects: Rs. 231

India Stock Market Update 29 April 2007

2007-04-29T07:27:00.000-07:00

After a number of days of rise, the stock market crashed on Friday, with the sensex crashing by more than 300 points to close below 14,000. This, in my opinion, is primarily due to profit booking, since there is a feeling that stocks have again surged sharply after the last low. This is actually wise, but a retail investor is always confused. Even if you do profit booking on shares that have increased a lot, what do you do with the money that you get.
One option is to put it back in the market, but unless you can identify stocks that are going to keep on going up, it is difficult to do profit booking and re-deploy funds. In addition, even though mutual funds are touted as the smart option for investors, they have been an acute disappointment. Funds have crashed in line with the sensex, not actually living up to the concept of funds that can beat the market. This has been my experience, and that too after investing in funds that are supposed to be the best in the India market.
However, right now, mid-caps are slowly catching fire again, and if you have the patience and energy (and the will power), investing in engineering and realty mid-caps is something that I am looking at. Keep in mind that these stocks are risky, and only do so if you are willing to bear the risk:
1. Era Constructions: Rs. 350
2. Garnet Constructions: Rs. 70
3. Bag Films (short term): Rs. 44
4. Navin Flourine (slightly long term): Rs. 315
5. JMC Projects: Rs. 234

India Stock Market Update 25 April 2007

2007-04-25T03:35:00.000-07:00

The last few days have been good for the investors in the Indian stock market. The market has gone on to hit a 2 month high of 14,200 for the sensex. In addition, the negative trends for liquidity as being pushed by the RBI and the Government in an attempt to control inflation seem to have worked and we can see inflation slightly tapering down. Still high, but no longer in full-blown panic mode. This could of course also be due to the elections having passed everwhere except in Uttar Pradesh where some phases of polling are still due.
With the Reserve Bank indicating loosening on controls on the sub-20 lakh loans, the realty companies and housing finance companies are back on a good roll, with their stock prices increasing in the past few days.
With all this, and with the sensex on a high, there is a need for caution. There will be an increasing tendency to do profit-taking, which could cause the same amount of volatility as we have seen in the past. This was on display even today, when the sensex was initially negative, but then closed in the positive.
Stocks that I am currently tracking:
1. Reliance Industries: Rs. 1600
2. IFCI: Rs. 39
3. Atlas Copco: Rs. 678
4. Infosys Tech: Rs. 2022

India Stock Market Update 20 April 2007

2007-04-20T12:32:00.000-07:00

So the market seems to be a on roll now. Inflation has declined which makes people hope that credit squeeze days are gone, although I am not so sure. The RBI may decide to keep rates up till it gets a definite signal that inflation has been down for some time.
So this week has been mostly up, except for a decline on one day. The rise has been mostly lead by Reliance Industries which continues to look like the stock that all long-hold buyers should have in their portfolio, capable of returning good growth.
Another eagerly awaited metric was unveiled this week. The monsoon is depicted to be around 95% normal, which is good news for the market, since it means that there will be money available with rural consumers for purchases, and the rural segment is now seen as a sizeable portion of the market for a large number of products.
Some stocks that I am tracking:
1. JMC Projects - Rs. 233
2. India Bulls Real Estate - Rs. 303
3. Ashianna Housing - Rs. 285
4. Nirlon - Rs. 69 (more risky)
5. Era Constructions - Rs. 356

India Stock Market Update 15 April 2007

2007-04-15T02:29:00.000-07:00

I guess I was wrong in my previous post. I thought that the Government would recognize that with an increase in FDI coming into the country, setting up centers of bustling economic growth in the country would be the way to go. However, the Government seems to have decided that the economic model of SEZ is not worth the problems it has to face in terms of political opposition and farmers agitations. There were imperfections in the previous policy, chiefly being the use of the state to buy land. The market is the way to go for buying land, and companies should do this directly.
But even with this, the Government buckled down, and stated that SEZ proposals received after April 5 will not be processed. This flies in the face of conventional logic. There is no country that progresses on the back of an agrarian economy, economic development only happens when countries move up the industrial / services ladder, and majority of the people are employed in these sectors. The agrarian sector, especially in India where plot sizes are small and do not generate food on a large scale is not the way to go. The hope is that this move does not reduce the general optimism in the sector.
The inflation level has reduced, and hence there is hope that the continued movement in the RBI trying to squeeze money from the economy should now reduce, and credit availability for the industrial sector should continue. The good results of Infosys should continue to keep the market in good humour, but if I want to speculate, I would think that the next week will continue to be slightly negative since there has been upturn in the market for the past few weeks (net), and profit taking may happen.
Stocks that I am currently tracking:
1. Hindustan Constructions: Rs. 96
2. Tele Data Informatics: Rs. 65.80
3. Marksans Pharma Limited: Rs. 66.75 (short term)
4. JMC Project: Rs. 220
5. Mather and Platt Pump: Rs. 232

India stock market update 13 April 2007

2007-04-13T02:01:00.000-07:00

This week has been a fairly good week for the Indian stock market. The sensex has been showing trends this entire week of going up, or going up and then being hit by profit booking, but overall sentiment has been positive. Is this likely to continue ? Million dollar question.
It is very apparent that the Government is going to try and to whatever it can do to fight inflation. The political cost of inflation is beating it black and blue. One can only hope that whatever monetary measures are taken to beat inflation do not end up throttling growth. For example, the RBI seems to be busy trying to mop up extra money out of the system, but growth is going to start getting hampered due to the credit squeeze (due to the increase in interest rates mandated by the RBI).
What sector seems to be doing well ? The IT sector should get a boost due to the good returns released by Infosys. The cement sector however is seeing what a determined government can do. The Indian Government wants to reduce cement prices, and after some non-cooperation by the cement majors, reduced the duty so that imports can under-cut the local prices. Not exactly a very happy trend. So cement sector is decidely on a wait and watch game.
Stocks that I am tracking:
1. Reliance: Rs. 1380
2. Infosys: Rs. 2094 (both are safe stocks)
3. Ramsarup industries: Rs. 148
4. Accel Frontline: Rs. 66
5. Voltas: Rs. 84

India Stock Market Update 08 April 2007

2007-04-08T11:04:00.000-07:00

The Government keeps on dropping little hints about still being on the reform track. In the midst of all the furore over the SEZ policy, the government released a modification to the policy such that some of the main objections were over-turned. The policy now mandates that Government agencies will not be involved anymore in the procurement of land from villagers, instead the SEZ building private company will have to get land. This is a good compromise, corporates buying land gets them out of the whole dispute about the villages not getting enough compensation. But the restriction on buying land more than a certain size seems unjustified. By setting up large industrial tracts, which will eventually form the basis for a city type of urban development with associated services, the SEZ policy could have resulted in more distributed urban growth areas, that may not happen for the time being.
On the stock market, right now, high interest rates are there for some time, although the long term outlook remains that interest rates will be low. The stock market seems to have accepted these policies geared towards reducing inflation, and more articles are getting posted about the need to take steps to control inflation. I remain in the market, although with caution.
Stocks that I am currently tracking:
1. Bharti Airtel
2. Mahindra Gesco
3. Peninsula Land
4. Bharti Shipyard

India stock market update 5 April 2007

2007-04-04T21:40:00.000-07:00

For the last 4 days, the Indian stock market has been doing a somersault of sorts, seriously testing the mental balance of investors. On Monday, the market reacted to the RBI money-tightening measures by the sensex dropping a jaw-dropping 616 points. There was a lot of chaos, and I would think that this single day did more to scare retail investors than the normal volatility. From talking with people, they are worried about whether their capital is safe.
My response to this has always been something like a deja vu, we have seen this in the past (as recently as last year), where after the May carnage, stocks were down for a few months and recovered to zoom past all previous highs. There is no guarantee of that happening, and if the growth level remains high, then things should remain fine.
However, with inflation being seen as important to reduce, the government is implementing measures to tighten credit and bring down inflation money supply and hence bring down prices. Such tightening on credit reduces the amount of free money available to corporations and hence lowers the money supply in the economy.
Stocks that I am currently tracking:
1. IFCI: Rs. 34.95
2. Bharti Airtel: Rs 744
3. Karnataka Bank: Rs. 165
4. Yes Bank: Rs. 142.55
5. IVRCL: Rs. 265.55

India stock market update 1 April 2007

2007-04-01T11:00:00.000-07:00

Even though I am posting this on the 1st of April, I am not going to say anything along the likes of an April Fool's joke. Dealing in the stock market is no joking matter, and the only time when I am really proud of my smile is when the market is crashing down a cliff edge, and my heart does no more than a couple of missed beats.
I would think Monday is going to be another day like that. With the rate hikes announced by the RBI after trading hours on Friday, Monday will be the first trading day after this hike, and common wisdom is that the market will open down. I wish I am brave (and hopefully not stupid) by hunting for bargains. I still believe that even the medium term outlook is positive, as long as these jokers ruling our country do not drag us down with some insane policies.
Selling in distress is not something that I am really looking at, and being realistic, if selling in distress is really happening, by the time my ICICIDirect account lets me trade, stocks will anyhow be at lower circuit. :-) It is pretty tempting for me to put more money into the market, but there is an element of caution to keep on watching things.

Stocks that I am currently tracking:

1. Accel Frontline: Rs. 60.50

2. Ashiana Housing: Rs. 172

3. Allianz Securities: Rs 58

4. Infosys: Rs. 2016

5. Bharti Airtel: Rs. 759

India stock market update 27 March 2007

2007-03-27T10:34:00.000-07:00

The Indian stock market has been meandering for a few days now; and there is a lot of thought about what a future course of action could be. There is prominent Guru Marc Faber of the Gloom and Doom report reports that he expects the Indian stock market to decline, and for the US market to actually out-perform the Indian stock market. There are a couple of points that make me unsure whether this is a realistic portrayal.

1. Indian industry is still growing at a good clip; and after a few murmurs after the Budget, almost everybody has quietened down.
2. There has been a lot of buzz about liquidity drying out, but a lot of this liquidity is supposed to have been sucked out of the system due to interest rates increase in Japan. These interest rates hike in Japan and the US will be reduced if the Central Banks start feeling that the economy is again slowing down. This is a cyclical process. In fact, hedge fund money is starting to find its way in India, and this is a lot of high-risk money, which means that it can quickly come in and out.
3. Over time, it seems that the rate of investment in equity (even through Mutual Funds) is slowly starting to rise, and this augurs well for the market.

I am still cautiously optimistic about the Indian stock market, and have steadily been investing for the last 1 month, taking a risk that I can think will pay off this year.

Stocks that I am currently tracking:

1. India Cements: Rs. 163
2. Nirlon: Rs. 52 (more risky)
3. Yes Bank: Rs. 146
4. Bajaj Auto: Rs. 2,525
5. Reliance Capital: Rs. 662

India stock market update 22 March 2007

2007-03-22T09:08:00.000-07:00

For a fair amount of time, the Indian stock market sensex has been hovering in the 12000-13000 range, some days advancing and other days falling down. However, in the past 3-4 days, there has been a rally and the sensex has crossed the 13,000 level. In fact today, the sensex climbed by around 350 points. This increase though is accompanied by low volumes, and there has not been a corresponding increase in the mid-cap and small-cap indexes. This is consistent with past behaviour where large-caps get investor fancy, and then as the bullish feeling spreads, mid-caps and small-caps start getting investor interest.
Mutual funds have been a major disappointment for the past 1 year. If I compare NAV's from before the May 2006 crash with current values, they are roughly the same or even lower; this was actually more of a shock because the selling point about MF's is that they are run by experts; however, if they flat-line in times of stress, where is the expertise ?

Current stocks that I am tracking:

1. Atlas Copco - Rs. 729
2. Reliance Capital - Rs. 653
3. Tata Elxi - Rs. 285
4. Trigyn Tech - Rs. 27.80
5. Allianz Securities - Rs. 55.50

Indian stock market update 15 March 2007

2007-03-15T12:23:00.000-07:00

Why would people need to go to the amusement park ? All they need to do is be invested in the stock market. There are times of elation, when a stock you just bought jumps by 10%, times when the swings in the market make you think about a roller-coaster, and then there is the fear when you see the market opening by 400 point down, the same when the roller-coaster is dropping after being at the highest point.
I am a believe in the Indian story, so am investing in the market. However, after reading a fair amount about how much the liquidity story (global) fractionally gettting pumped into the Indian market is pushing up the market, there is some doubt that I have started having. Are we truly at the end of a boom phase, and will the Indian market be very disappointing ?
Something that has truly disappointed is the 1-year peformance of the mutual funds. These are supposed to be experts in the market, and yet so many of these funds are approx at the same NAV as they were last year. I might as well have remained in the primary market. So today, for the first time, I sold 2 of my mutual funds, the SMILE fund from Sundaram, and the SBI Emerging Business Fund. Till now, I have looked at the mutual funds as a sort of additional retirement scheme, I will keep on investing money in mutual funds as a percentage of total investment, and this should become a lump sum when I retire.
Some of the stocks that I have bought in the last few days have been Nirlon, Allianz Sec, Era Con, Mahindra Gesco, Ashiana Housing, and a couple of other construction and engineering stocks.

India stock market update 9 March 2007

2007-03-08T10:08:00.000-08:00

The Indian stock market has really been moving. An under-statement if there was one. Some major global events seem to have shaken the market to the core. Issues about the Yen easy availability, Chinese market crashing by 9% on one day, and an overall global weakening pushed the Sensex down, giving the familiar sinking feeling of a crash. In addition, the Budget did not exactly promise anything great.

I am however not so negative about the budget, and was looking at the positives. Fiscal reform in terms of deficit targets have been met, and about the budget promising incentives, we should be moving away from a stage where budgets decide the growth of the economy in terms of micro measures. Instead, the budget should just set the macro perspective. If we look at most developed economies, the budgets are more a funds allocation exercise to different programs and ministries.

As long as the government does not muck up the overall economic climate, I believe in India being a growth story, and will remain allocated to the Indian equity story.

Stocks that I am currently tracking:

1. Nirlon - Rs. 50 (risky)
2. Hindustan Construction - Rs. 100
3. Hinduja TMT - Rs. 510
4. Allianz Securities - Rs. 59
5. Aro Granite - Rs. 84
6. IFCI - Rs. 25
7. Bharti Tele - Rs. 749

Stock update 01 March 2007

2007-03-01T11:32:00.000-08:00

A crash, that too a fairly major one (neglecting the small crashes that have happened in the previous few months). The market has been falling, falling from 14000 + to below 13000, only recovering today to close above the 13000 level. What sort of strategies can one employ in such a market. One thing is for sure, when there is a sudden fall, a lot of people start claiming that this crash is the one, that the market is not able to find its feet.
What do I believe ? That right now sentiment is that the market was over-heated and that this pullback will bring it down to a lower level. In the midst of all the gloom and doom over how the budget was, I did not find it particularly bad. I was interested in seeing whether fiscal discipline was being maintained and that seems to be on target. This is very important as it gives a clear picture about what is the current state of the country's finances and the level of risk. If risk level is reduced, then Indian companies will find it easier to get loans, which is great for a country where companies are starting to buy more assets outside.
What has been my policy over the past few days ? I am looking at this fall as an opportunity and have been buying the following stocks: Trigyn Tech, Reliance, Era Constructions, Ashiana Housing, Walchandnagar.
I believe that India is continuing into a prolonged growth phase, and stocks are bound to go up again.

Stock update 25 Feb 2007

2007-02-25T00:25:00.000-08:00

The market has been going down and down for the past 1 week, and not is well below the 14k mark. It is not so low that a couple of days exubearance will not bring it back up, but there is a high degree of uncertainity in the market. People are mostly waiting on the sidelines, although there was one statistic that I saw which claimed that MF's and FII's are not selling, but they can take a decision anytime and no retail investor will be able to catch up with the speed their decisions.

A lot of retail investors would be wondering as to why they did not sell last week, before this drop happened. And as it so happens, even if the market drops by 5%, mid-caps will drop by more than 20-30% since they get impacted more at any selling impulse. At this point, there is a lot of pressure on realty stocks, as the rate hikes and statements by the Reserve Bank about an inflated property market are taking their toll. Is this temporary ? I would think realty will continue to increase again, and so next week, may take a look at some of the realty stocks such as Ansal Housing, Ashiana Housing, Unitech, Parsvnath, Mahindra Gesco, Peninsula, etc.

Some of the (few) stocks that I am currently tracking:

1. Bharti Airtel: Rs. 750
2. Allianz Securities: Rs. 60.60
3. Era Constructions: Rs. 382
4. Walchandnagar Industries: Rs. 1529
5. TRF: Rs. 519
6. Nucleus Software: Rs. 1107

Stock update 18 Feb 2007

2007-02-18T08:14:00.000-08:00

It seems like that there is an under-current of fear in the market. This week's sudden crashes sort of had a reason, that is the rate increase by the Reserve Bank of India, but then there is no sudden reason for the upswing of Thursday. Thursday was a day that saw quite a few of my shares hitting Upper Circuit, and these were the same shares that had suddenly dropped by lower circuits in the previous days. These sudden bouts of volatility make no sense, unless you accept the contention that daily changes in the market (and specific stocks) are driven by sentiment, and long term price movements are driven by stock performance and economy movement.
I am a believer in the long term growth of the Indian stock market, and will remain invested; but the watchword is to be vigilant. This is a time when a person needs to take a quick call on their holdings to cash out in the event of sudden crashes; or else, if in for the long term, then can afford to be somewhat less vigilant.

Stocks that I am currently tracking:

1. Bajaj Auto: Rs. 3000
2. Infosys: Rs. 2382
3. IVRCL: Rs. 377
4. Reliance Capital: Rs. 717

No more as of now, just watching and observing.

Stock update 16 Feb 2007

2007-02-15T20:59:00.000-08:00

The Indian stock market did yet another somersault, and after hesitating, and falling below the 14k mark, is now above it again, displaying handsome gains on Thursday (the 15th) and jumping above the 14,300 mark. This time the RBI was blamed for this sudden slump, with its decision to raise the CRR rates. This had the effect of sucking out more liquidity from the system, and was seen as the government being willing to sacrifice some amount of growth to control inflation. Inflation is seen as critical for the government. Realistically, a higher rate of inflation hurts the poor more, but an inflation rate of under 7-8% is statistically low for India. In the long term, a better growth rate is what will pull up everybody.
There is increasing disillusionment with reality stocks, and more advice is now coming to lock-out gains made in these stocks. I am somewhat of a mixed mind on this; after all, interest rates are going up, and these will make home loans more expensive, and depress demand. But with higher growth rates, demand for housing will only keep on increasing. And, sentiment in today's market does not necessary mean anything, since sentiment can quite literally turn around in a couple of days of trading.
I am pretty much done with hotel stocks for now, there have been long periods of no change, and my patience has come to an end.

Stocks that I am currently tracking:
1. Indiabulls - Rs. 422
2. Yes Bank - Rs. 150
3. Northgate - Rs. 1000
4. Infosys - Rs. 2410
5. Trigyn Technologies - Rs. 31.45

Stock update 07 Feb 2007

2007-02-07T19:26:00.000-08:00

The bumpy ride continues, but with an upward trend. Indian equitites had a good day on the 7th of February, and the sensex closed within kissing distance of 14,700. As always, predictions at this level (given past history) is that people are very careful of what they buy, and desist from being too speculative unless they are prepared to handle the risk. Stocks are at a high, and this is a good time to get out of stocks that seem speculative. And, with a twist, there are reports that FII's are buying in the market for the past few days, and that is an impulse to push the market sentiment up.

Some of the stocks that I am tracking are:

1. Jupiter Bioscience - Rs. 182 (more risky)
2. Garnet - Rs. 74 (more risky)
3. Voltas - Rs. 102
4. Northgate tech - Rs. 974
5. Surya Roshni - Rs. 73
6. Nucleus Software - Rs. 1013 (been jumping a lot already)
7. Futura Polyester - Rs. 28
8. Reliance Industries - Rs. 1393 (long term growth stock)

Stock update 02 Feb 2007

2007-02-02T11:32:00.000-08:00

The market seems to be going great guns. Hit the highest high in its history, and there is no telling what can happen. Sensex crossed the 14,400 mark, and yet in its high, there is an incredible amount of analysis that essentially states that it just cannot be so high. And to some extent, things are not the same as before. The sensex gyrates wildly, some days dropping 200 points, and recouping that within a couple of hours.
Some of the positives that seem to be driving this movement are a good sustained growth of the economy, good corporate results, and a hunger by FII's to invest in India. A negative is that the P/E levels are pretty high, and this results in a lot of doomsaying by experts who cannot believe this growth.
What can a person do ? It would be ideal to keep on locking profit in non-equity measures such as FD's, real estate, gold, or investing in some business. If you don't believe in all this, then a good way would be to setup a SIP for mutual fund investment on a regular basis. The one good point about Mutual Funds is that they promise (well, not a written promise) to give a FD beating return year on year, so if you invest a certain amount in a good fund, and leave it for a number of years, you can see the power of compounding.
This post is longer than usual, so let's get on with the stocks that I am tracking:

1. Zicom Electronic Security - Rs. 205 (not a short term gainer)
2. ANG Exports - Rs. 303
3. Trigyn Tech - Rs. 36
4. Accel Frontline - Rs. 104
5. Fluidomat - Rs. 16 (more risky)
6. Fortis Financial - Rs. 123
7. Kojam Fininvest - Rs. 229
8. JMC Projects - Rs. 265

There is a wonderful latin phrase "caveat emptor". Simple meaning - Let the buyer beware. Why this phrase here ? These stocks are not my research, I pick these up from what other people say, although I have a certain amount of confidence in listing these. But, anybody who buys stock based on a tip does so at his / her own risk.

Stock update 23 Jan 2007

2007-01-23T03:21:00.000-08:00

The ups and downs of the Indian stock market continues. Today the market suffered a 160 point drop. It however remains about 14,000 points (sensex). It is reported that for January so far, FII's have been net sellers. As usual, there are plenty of conflicting thoughts on what the future portrends. One line of thought is that FII's are worried that the market is at a high level and are waiting and watching. Additionally, thoughts about what the budget would contain are influencing the market. Another set of analysts are sure that the Indian economy are on a continous upswell, with the growth story still to fully unwind, and this will in turn make the market keep on moving, alebit with a very high level of volatility.

Some stocks that I am currently tracking:

1. Yes Bank - Rs. 155
2. Nucleus Software - Rs. 836 (has gone up a fair amount in the past, but I still believe in it)
3. Accel front line - Rs. 97
4. Axtel Industries Limited - Rs. 14
5. Zee Tele - Rs. 316

Stock update 13 Jan 2007

2007-01-13T04:13:00.000-08:00

So more fireworks in the new year. Market suffered from immense volatility, going down and then tremendously recovering in 2 trading sessions to the extent that it has reached an all-time high.
Talking with several retail investors reveals that there is a lot of concern about whether the market has moved up too high too quick. I personally believe that it is good to be very cautious, especially when investing in companies from a speculative touch rather than based on fundamentals. Even more so if one is investing in penny stocks; when they go up, they can go up very quickly and very high, however there is a very good chance of getting caught when the stock starts declining and volumes go very low. So, be careful if you are playing a risky game. If you want to play the speculative game, keep very clear targets and keep on removing profit from such stocks.
Some stocks that I am tracking:
1. Nucleus software - Rs. 685. I have already made some profit on this stock, but am currently evaluating whether to buy more
2. Donear Industries - Rs. 216
3. Hikal - Rs. 394
4. North Gate Technologies - Rs. 1015

At this time, I am also looking to deploy some of the funds from profits into Mutual Funds. This will help me to reduce the risk to a certain degree, of course not completely since they are also equity based.

Stock Market Update for 4th Jan 2007

2007-01-04T01:22:00.000-08:00

So the market has fallen a bit today (as I write this, the Sensex is down by 105 points), after closing above 14,000 the previous day. I have been speaking to other investors (not experts, just other investors, some of whom have done more research than me), and the feeling I get is that everyone is afraid that the party will pop; that there is a crash that is going to come.
The Indian stock market has crashed, sometime significantly, sometimes just doing minor gyrations, but each time it has recovered and surpassed previous highs. People compare the P/E for the Indian market with other emerging markets and believe that the Indian market is now more expensive.
As against this, the opposite opinion is that the Indian story is now emerging; Indian companies are giving good earnings growth, are aggressively courting other companies abroad and that consumption in India is growing at a good rate. This makes the country more attractive to FDI, and this also has a spin-off with FII's becoming more interested in the market. How long this will last is the question ? Is this just the start of a long increase ?
I have stayed put in certain stocks even after the May crash, typically construction and real estate stocks (Era Cons, Ashhiana Housing, Ansal Housing, Garnet, and so on), and even when these stock have gone up, they are still not so close to the previous levels. Will continue to hold onto these stocks. Some additional stocks that I am tracking and will purchase some of them are:
GHCL Limited - Rs 170
Lanco Infratech - Rs 260
Shree Ram Mills - Rs 542
International Combustion - Rs 350
Fortis Financial Services - Rs 124
Aro Granites - Rs 107
Walchandnagar Industries - Rs 1154
Asian Oilfield Services - Rs 36

Stock update Dec 30 2006

2006-12-30T09:43:00.000-08:00

The year is coming to an end (in fact ended for the stock market). One should relax for the last day of the year, and only pick up the threads of the stock market after this last day of the year.
The year has seen major volatility on the market, pretty much unprecedented. Markets have crashed and burned in the past, but they have not jumped up and down like yo-yo's in the past. I am sure that this past year has seen the exit of a number of investors who have not been able to bear the volatility. In my case, I have hardened my heart to the jumps of the market and am resolved to stick through the normal ups and downs.
Just yesterday, I, with a heavy heart sold off a stock from which I had high hopes, Noida Toll Bridge. Overall I made 10% gain in 1 year on this stock, which was too little given the opportunity that this year has provided.
The market has almost managed to climb back to the 14k peak, so it is a very risky zone, and any fresh purchases should be done with extreme caution.
Some of the stocks which I am currently holding or tracking are:
Era Constructions, Supreme Ind, Jaihind Projects, Ashiana Housing, Indiabulls, Voltas, Gallant Metals, Allianz Sec (although this one has gone up quite a bit and is now pretty risky), Fortis Financial, Aro Granite

Stock market update 20 Dec 2006

2006-12-20T09:22:00.000-08:00

Well, if you are still with the Indian stock market today, you are a brave person. The last few days have seen a renewal of the gyrations of the stock market, enough to make you dizzy. So you had 2 days having massive falls, followed by some climb-backs, and then the incredible spectacle of a local country specific decision (a move by the Thai bank to curtail movement of currency out of the country) making the Indian sensex fall by upto 400 points, not a small thing.
I have been watching stocks doing this gyrations, and the only plus point is, such changes breaks me of the habit of watching stocks at frequent intervals. No point in frequently watching the market if you just see things falling into the red.
What to do now ? I will continue to be involved in the Indian equity market since I do not see any alternative. Equity remains a good option for a long-term growth option, as long as there is a certain amount of care taken. What does this mean ? Keep invested in good stocks, do not get too speculative in risky stocks. I was not too sure about Mutual Funds. I have a fair percentage of my funds invested in MF's; but their performance in a crash is not so good. They crash and burn like any other part of the market, you would expect investments controlled by highly paid smart market wired people to be much more savvy about the market.
Some of the stocks that I hold that are fairly stable (they fall, but do not crash significantly this time) even in this crash are Ansal Housing, Ashiana Housing, Era Constructions, IVRCL, TRF, Walchandnagar. I remain invested in these and some other stocks.