Weekly Outlook for Indian Stock markets - 22th October to 26th October 2007

One of the most fascinating aspect of the stock markets, albeit most dangerous as well, is the uncertainty that it carries. Especially, if we look at the way markets have fared in the last two weeks.

Two weeks back, markets were looking apprehensive on the anticipation of mid-term elections and despite these concerns, markets closed the week with approximately 4% gains. The last week performance was again no less than a surprise. The markets expected to remain range-bound on the anticipation of half-yearly results, but suddenly out of nowhere, news on P-notes emerged and took markets down very badly.

Well, let’s do introspection on P-notes and its possible implications. First of all, there are strong signals that current draft on P-notes will be amended to an extent that it regains the confidence among Foreign Institutional Investors (FII). There are chances that government may increase the 40% cap to 60% on Thursday when SEBI meeting is scheduled. Also, there are reports of increasing the sun-set period to 24 months. Hence, long term investors can breathe easy. Markets will not going to crash, albeit can go down in a short term.

Though, this week could be a tricky one and there are ominous chances that volatility in the market may increase around 25th October when SEBI sits on P-Notes draft. Thus, the advice for this week is to be a stock specific and that too for a longer duration of time. Nobody knows which way market will be headed in the going in a month’s time or so.

Wish you a very happy investing!

Weekly Outlook for Indian Stock Markets - 15th October - 19th October, 2007

Lovely Surprise Indeed!!
If a word that could perfectly explain the last week performance of the Indian stock market, it is none other than “Surprise”. Amidst political uncertainty and threat of mid-term elections, the stock markets were able to find new highs for themselves. SENSEX and NIFTY were up by 5% each during last week trading.

Honestly speaking, my mind raises some questions pertaining to current state of Indian stock markets. Aren’t we ignoring the threats facing by the economy overall? Isn’t currency appreciation a threat for our IT and other export oriented companies? Aren’t we seeing a slowdown in the economy overall due to various restrictions imposed by RBI? Don’t you think that mid-term elections next year will pull the brakes on the reforms?

Wide Angle – Wide Perspective
If these concerns are real, then why markets are going in just one direction, which is UP? Before we discuss the coming week outlook, it is important to discuss the reasons behind this steep rally that started after Fed cut in mid-September. For this, let’s take an example. Let’s suppose, you have 100 Rs to invest and there are three companies to choose from.

Company A is a peer in its segment. It has delivered to his investors in the past. But currently, it is unable to find new ways, new paths to grow due to which its growth trajectory has become flat. Company B is an upcoming company, latching on every new venture. Its growth is very fast in last few years. Though, the company policies are not investor friendly. It doesn’t appoint independent directors in the company and promoters have the only say on the company’s issues. Company C is also an upcoming company and growing rapidly like Company B. But its policies are investor friendly. The company has several independent directors in its board and holds the reputation of encouraging talented people within the ranks of the company.

Now in most likely scenarios, you will be putting your money in Company C, since it is growing as well as known to be investor friendly. Somewhat Indian economy is the Company C for the investors worldwide. It has its real concerns, yet it asserts the confidence of a brighter future. The political structure in our country is democratic where people have a say. Our media is free. The reforms are currently on track. Infrastructure is improving, albeit slowly. The educated class is very big. On the other side, if we look at other countries, including China, the economic setup is not as vibrant as India has.

Thus, when an investor decides to allocate the funds, it will definitely put some money in Indian economy as well. And today, when there is ample liquidity available globally, Indian markets are getting the good share out of it. Thus, if we complete the whole cycle, recent Fed cut has increased the liquidity in the global markets and in turn, led to major investments in Indian companies as well.

Markets this week – Profit Booking
Now, once we are clear about the long-term perspective, let’s try to evaluate the coming week. The coming week will see half-yearly results announcements by major companies including Reliance, TCS, and Wipro. There are chances that one may see profit booking in these companies on the day of announcement or there after. Hence, those investors who are unable to enter these quality stocks can find the opportunity at lower levels in these stocks.

Hence, the word that can indicate the weekly outlook for Indian stock markets is “Profit-booking”. Though, the good thing for markets is that threat to the government is largely over. The comments from both sides have shown temperament, which indicates some kind of patch up between the parties. Thus, investors will not be wary of putting their money at the current levels.

We all love surprises, especially if they bring something good. No wonders! The last week performance of Indian stock markets was no less than “lovely surprise”. And hopefully we continue to receive such surprises quite often in the future as well.

Wish you a happy investing this week!!!

Weekly Outlook on Indian Stock Markets - 8th October - 12th October, 2007

Oops! This week post is late by two days. Well, all blame goes to the projects and their never ending deadlines :)

Anyways, we all have seen the tremendous run on Tuesday by the stock markets and the way bulls are faring, there is not stopping by for them. Markets are all set to touch 18500 this week, may be today itself and from thereon, one can see a minor correction coming in the markets.


Events Passed By
Before we discuss the outlook for the remaining three days, let’s evaluate some important events that impacted the stock markets in last 10 days.

Last week, markets had a good run, except on Friday when Political Instability looked really threatening. Comments by Sonia Gandhi at a rally intensified the tu-tu-main-main between both the parties and the separation looked imminent. This led to the correction on Monday. Tuesday didn’t opened good as well, but as soon as news regarding the next round of discussions came, the markets buzzed to new highs.


Reliance Power
The recent rally was full of Reliance Power. It never mattered whether it is ADAG group or Flagship Reliance companies, all shares that carry the Reliance tag scaled new highs. It shows the kind of reputation Reliance has among domestic and foreign investors.

If we look closely at the various bull rallies that occurred in last 3-4 years, Reliance pack of stocks always participated in them, but rarely were they seen as ones who are leading such rallies. But this time they have proved it wrong. According to a news clip in moneycontrol, reliance stocks contributed the most in the current rally of Sensex from 17000 to 18000.


What’s next?
“Despite all the glories and the triumphs, I have to fight the new battles & conquer new lands, tlll I breathe my last.” These words by a famous Roman Emperor say it all.

The million dollar question is whether market will halt here or will be touching 19000 mark in the near future? You ask this question to any investor on Tuesday evening and he will say “yes’, because he is overjoyed from the tremendous run.

But tide may turn the other way as soon as correction comes. Thus, the mantra for any investor is “caution”. One must not forget that the problems within the government are only delayed, but not resolved. The two major triggers could be CPIM Politburo meeting on 18th October and UPA Coordination meeting on 22nd October, where one can see allegations resurfacing again.

Also, the results won’t be as encouraging as anticipated. RBI monetary tightening policy has done the damage to the growth prospects of various companies, especially those which are interest rate-sensitive. Hence, one can see bouts of profit-booking at the regular intervals by the institutions.

The only soothing factors for Indian Stock Markets are the optimism and the euphoria that investors across the world has for Indian economy. This is what fuelling the growth despite all the concerns like Political Instability, currency appreciation, tighter monetary policies, etc.

So, my advice to every investor is to stay cautious and keep a tab on every news clipping that could impact the markets.

Indian Cynicism
Sometimes, I feel that Indian public is skeptical about everything. When Indian cricket team wins, we applaud them, shower them with advertisements, make them our idols. And as soon team loses one match or series, the same team is portrayed as useless bunch of men who care more about endorsements than playing well on the field. In other words, the time span between optimism and pessimism is very short.

The same hold true for Indian investors. The moment markets go up, everyone on Dalal Street talked about new levels, robust economy, high earnings, etc. Alternatively, when market goes down, everyone on Dalal Street becomes a critic of government policies, Hedge funds, RBI policies, etc.

I think the time has come when Indian investors need to grow mature. And the best way to do is to do extensive research on the scrip in which you are putting your hard-earned money. Visit the company’s website, read experts’ views, visit financial websites like www.moneycontrol.com, www.ndtvprofit.com, view the technical charts.

It is not so difficult, but only thing that lack is effort on our part. Be an aware investor and trust me, you will come out as a winner most of the times.

Wish you all a great week ahead!!

Weekly Outlook on Indian Stock Markets - 1st October - 5th October, 2007

The last two weeks gone by were no less than Diwali celebrations for Indian stock markets, with both Sensex and Nifty crossing the psychological levels of 17000 and 5000 respectively. There was no point in the current rally where one can see the profit booking or correction ticking in the stock market. BULLS ON THE RAMPAGE… Isn’t it?

Now what’s next? That’s the million dollar question. Will we see another week of relentless buying by the FIIs and Mutual Funds? Or, will we see correction taking the markets below the 17000 mark for Sensex and 5000 for Nifty?

Well, if we look closely, there are several factors arising that may disrupt the upward journey of the Indian stock markets.

The most important one is the “Political Instability”. Sunday’s newspapers were filled with Left hard stance on the nuclear issue and a renewed threat on government stability. West Bengal wing of Left, which till recently, looked sympathetic towards reforms and nuclear issue is now singing the same tune as others in The Left. These signs look ominous for the Congress government and stock markets will surely not ignore it. Thus, there are chances that stock markets may not open in cheerful mood on Monday.

The sector that is expected to do well is the “Sugar”. The government is all set to announce the relief package for sugar industry in the cabinet meeting on Monday and it may set the platform for the sugar stocks to go upwards. Also, the coming festival season will also give the much required boost to the sugar industry. So, if any of you is holding sugar stocks, three cheers for you.

Another sector that can help market in sustaining their present levels is “Information Technology”. The sector was hammered down quite a lot in last three months. But one must not forget that this sector has been the darling of every government – be it was BJP government or the current Congress government. The government will surely try to support the sector by giving some kind of tax exemptions or a relief package. There are chances that government may announce some relief on Monday when it sits down to discuss various economic issues.

In nutshell, markets are expected to be range-bound this week. So, it is better to be stock-specific this week. One can pick sweet sugar stocks like Renuka Sugars, Gulshan sugars, Dwarikesh, and Balrampur Chini for short-term gains. Besides, one can also buy quality Information Technology stocks, especially Satyam and TCS. Both these companies took early action towards currency appreciation than others through hedging and have less exposure in US markets than Infosys or Wipro.

Another IT stock that looks interesting is Vakrangee Software. It is a Banglore based Software Company that develops and maintains software for various government agencies like Election Commission and Railways. It is a debt-free and rent-free company, which makes it very attractive. Thus, one can see such IT companies which work domestically and hence, are insulated from currency fluctuation. The stock was trading at around 190 on Friday.

Be aware, Be cautious and Be an informed investor! Only invest in a company after thorough research. There is a wide spread notion about Stock markets that these are speculative. But is it speculative only for those who buy stocks without research and hence, find themselves in a tough situation. If you know that the company in which you are investing your money is good, you will not live in fear and will take every correction as the opportunity to enter at lower levels. Hence, you will be buying at times when feared and ignorant investors will be selling.

Wish you all a profitable week ahead!

Weekly outlook on Indian stcok markets - 24th September - 28th September, 2007

The week gone by was tremendous for the stock markets, especially since Wednesday, when Fed announced 50 basis point cut. Since then, the only way markets are going is only UP. Sensex is almost touching 17000 mark and Nifty is just 150 points away from magical 5000 mark.

Now, the million dollar question is how the current week will go? Will we see another week of resurgence in the stock markets? Or, will we see markets go into corrective mood to book some profits? Well, the fact is nobody is ready to predict on it. Hence, the word that can rightly align with the coming week is “volatility”.

The last few weeks had touched almost every nerve of the stock markets. July was the month of euphoria in terms of liquidity. Then came August and we saw the sub-prime taking away all the gains made in July. Then came September and every investor was watching Fed like an Avid cricket fan watching the last ball of India-Pakistan match. Somehow, it seems that markets are looking for cues that can give them the direction for the future. And till, this scenario persists, we will only see volatility arising every now and then.

The major factor that can influence the Indian stock market this week is the “F&O expiry”. Markets may remain strong till Wednesday and can go into serious corrective mood from then on. And hence, it is advised to keep 60% of your money in stocks and 40% in cash.

Another major concern is the “Hot money” that is coming into the Indian stock markets. We all know how this money goes out as quickly as it enters into the markets. The way stocks have moved up after Fed announcement is really astonishing. RBI must be thinking of its relevance in Indian markets, since the news on interest rates increase didn’t impact the markets so much than what the impact cut rates reduced by Fed has made in Indian stock markets. Man!! What am I doing in Indian stock markets?

Ok… cutting things short, let’s see some factors that can influence the Indian stock markets this week:

1) F&O Expiry – as discussed above, F&O expiry is expected to bring volatility in the markets, as positions start squaring off. Watch out friends!! Especially those stocks which are present in F&O and have run quite a bit last week.

2) Liquidity – it could be interesting to watch whether the inflows into the stock markets will be as strong as the last week or not. The gut feeling is it will persist, since huge chunk of money was waiting due to fed announcement and it will now be raring to enter into the stock market.

3) Currency fluctuation – Rupee has moved up against dollar and surely it will have an impact on technology stocks, textiles, and other export oriented industries. Stay away from such stocks friends!!!

Well, before I finish this article, I would like to share some of my concerns.

Why Federal Reserve news has so much bearing on Indian stock markets? What would have been the scenario if fed announced just 25 basis point cut – a free fall? Will there be a significant impact on Indian industries from fed cut or no iut?

Retail investor is an innocent and honest chap!! He doesn’t understand economy much. You can see him scratching his head if asked about Fed-Indian economy co-relation. Still, every stock market follower will tell you that Fed is going to meet on 18th September and will impact the Indian stock markets. And he will only pray that Fed take the step what markets want it to take.

This time around!!! It seems God has listened to his prayers. But will almighty keep saving him from such factors? Only my and your god knows and it is better to leave our destiny in his hands...

Ameen!!!!
Wish you all a very happy investing!!!

Weekly Outlook on Indian Stocks Market -17th September to 22th September, 2007

So… where are we heading the next week? Are we going to see a range bound market before 18th September when Fed sits down to discuss the US economy? Or, probably a correction or will we see a strong markets before 18th?

Currently, nobody on the Dalal Street is ready to predict on this front. Hence, why not you and me sit down and analyze the various factors first that can impact the Indian stock markets in the near future.

Let’s take it issue-by-issue:

1. Sub-prime crisis – The sub-prime crisis has not dissolved completely, as if now. After the BNP Paribas and Goldman Sachs chapter, another bank called Northern Rockland in England was stuck in sub-prime issue. On Friday, Northern Rockland borrowed emergency funding from Bank of England to remain solvent, which it indicates that the sub-prime crisis is still not over as yet. Even stock markets didn’t take it in good light and were immediately down by 2% in Europe. Indian stock market also lost all its morning gains on Friday and closed flat. Thus, it seems that sub-prime issue may erupt from time to time to jolt the stock markets.

Some other such incidents can also occur in the future also, since the US has very cleverly passed on the sub prime crisis to the other countries. When there was a boom in the market the US companies has smelled the issue far earlier and has sell out the doubtful debts to the European Banks and other Asian Banks who were coming up fast. So in future also, such echo can be heard from various banks of Europe and Asia that may keep the markets volatile.

2. Possible US recession – the way economic data is coming from time to time, it is not entirely wrong to say that US markets are already facing the recession. Un-employment rate is increasing fast, GDP growth is not much, Fed trying hard to control inflation and slower consumer demand are all indicators that US economy is already under recession. Now, if one is expecting any government or Central Bank to openly acknowledge the recession in its markets, he is wrong. Isn’t it?

3. Currency Appreciation – despite hard measures taken by Reserve Bank of India (RBI), The Rupee has appreciated against The Dollar again. And these are ominous signs for services sector, which bet hard on currency parity for profits.

4. High commodity prices – the crude oil is at all time high and only reason it is not affecting the Indian economy much is the currency appreciation, which makes the dollar cheaper and hence, softens the impact on Indian crude basket. So, it’s more like “loha lohe ko kaat ta hai” (Iron can only cut the iron) situation. One concern is acting adversely against another concern.

5. Political Instability – I must say that Indian economy is well capable of handling all the threats, but the political instability is the major area of concern. There is an inner fear among those who favors the reforms that what happens if this government collapses and India see a coalition government of Third-front ruling the country. Also, the current government is looking to buy time by putting the reforms into the backburner, which again are a deterrent for Indian economy.

6. Robust Indian Economy – this is the only feel good factor for Indian economy and also for the stock markets. Today, Indian companies are competing globally. If we see the Corus buy-out or seeing Tata pitching for Jaguar or any other international brand, it shows that India has arrived strongly on global front. Every week we see few global takeovers by Indian companies. And when I look into the darkness of above mentioned corners, I see a bright light of Indian economy soothing my eyes that everything is well and comfy.

So, once we have discussed these concerns, let’s look at Indian stock markets and how they going to fare in the coming week or near future.

The biggest factor that can influence the Indian stock markets in near future is the Fed meeting, due to held on 18th September. Apart from the interest rate cuts, the markets will be eyeing the steps Fed is due to take to curb the sub-prime menace. The markets will be also anticipating Fed remarks on possible US recession.

The other factors may see its off-shoots from the fed meeting only. If the Fed does not cut rates by 50 basis points, as everyone is anticipating, we may see heavy selling in the markets by FIIs. On the contrary, if Fed acts aggressively against sub-prime and recession, then we can see a renew round of buying that could take markets to a new high.

There is a chance that the FED may not react as positive as is expected since as discussed in para I, till date no US bank has faced any liquidity crunch and on Friday when all the European market were felling down due to the crisis in the Northern Rockland, the US DOW has closed almost flat with a little positive side. I do not feel any reason for the Indian Market to react so severely as the European markets as not much of the funds of the European FII’s are involved in the INDIAN MARKETS. So, it would be better if investors can remain cautious till 18th but not over cautious.

On the local front, there are fresh statements from within the government circles that reforms will not be stopped and India may participate actively in IAEA meeting which is due in the last week of September. The Left Front is also holding a rally on 18th and flexing their muscles. One thing that is not in the favor of Left is the West Bengal Unit where the Left front Government is facing a popular movement against them in Nandigram and Singur. The Congress government in the Center is also in crisis due to Ram Setu and the opposition has got an issue that they were in need of. So if the government fell down at this movement then nobody knows in which way the winds will blow.

So it is advisable that one should not keep the very heavy position out standing as though there is not an immediate threat seems to be rocking the UPA Government. Even LEFT withdraw support the Minority Government, it is expected to remain working for few more months with the support of some other parties like SP and BSP from outside. Like Congress, SP cannot afford elections in the UP and BSP wants to consolidate it position at ALL INDIA level for becoming a decisive force in the next Government after elections. But in next 5-6 months the General Elections seems to be inevitable as no opposition party or party giving out side support will allow Congress to give a Popular and People friendly budget.

Amidst such factors, Markets are expected to remain range-bound this week as well. Even if Fed takes an aggressive stance, the markets may not accelerate much as one may expect. It is because markets are almost near to their all-time high, which was earlier touched in July. It is widely speculated that many positions are still stuck at those levels, which investors would like to square-off.

Let’s look at the other side. Let’s suppose, Fed is not able to match with the expectations of the markets. Now what I believe that under those circumstances, markets may not fall steeply as one may fear. The reason is the huge chunk of funds lying with the domestic institutions who may invest in Indian stock markets at somewhat lower levels. Even during the last correction, Indian stock markets fell least as compared to other markets and even then domestic institutions support the markets quite good.

So, keep all your fears and expectations close to your heart because this 20-20 match has reached its climax. Do not remove your eyes till the last ball is bowled on 18th.

Wish you all a very happy investing!!!
Chak De India!!!

Weekly Outlook on Indian Stock Markets - 9th September to 14th September, 2007

Oops!! Speed breaker again… When the markets are looking set to accelerate, we are watching yet another meltdown in US.

Dow Jones was again down 250 pts on Friday, on anticipation that Fed may not cut interest rates as much as markets wants. The unemployment data released by the USA Employment commission saw the unemployment levels touching the 4 year peak. Also, the oil prices are almost near to its all-time highs.

It seems that these factors may again keep the US markets range bound this week. And chances are omnious that this bearish trend may spill over to European and Asian markets. Thus, as an investor, it is better to sit on sidelines and watch the trends as they unfold.

The major cause of such volatility is "uncertainity". Nobody knows how deep the sub-prime factor is. Nobody knows about the fate of Indian Government. Nobody knows whether USA economy get slowdown or not. And if it slowdowns really, then nobody knows the extent of its damage to the Asian economies. Everyone, be he an expert or an investor like you and me, we are just living on assumptions.

Amidst such scenarios, it is likely that markets will remain range bound this year. Thus, the best option would be to invest cautiously and take positions only after the broader picture clear a bit. Put your money in quality stocks on every dip and stay invested.

Anyways, let come back to the coming week. The current week may see some correction due to weak global factors. Also, Indian stock markets have seen uptrend for 2 weeks continuously and small correction is always round the corner. Though, my gut feeling is that Indian stock markets may not fall too much and one can see domestic institution buying this week.

Hence, I would like to buy the good quality stocks, especially in Mid-cap on the dips. That’s why I have refilled my trading account with cash to lap up on every good opportunity.

Monday and Tuesday can see some correction. Late Tuesday and Wednesday may again see some buying in the market. Thursday and Friday may depend upon the global factors persisting at that time.

Let’s look at some important factors that may affect the markets this week:

1. Bullish Asian Currencies– Yen is again looking bullish and it may rise this week. Ditto can be seen in Rupee as well. If indeed it happens, then it will have an adverse affect on the market.

2. Redemption threat – If the period of volatility persist in equities for some time, then there are chances that investors will start shying from this mode of investment. Hence, the chances may occur when hedge funds have to redeem some cash from the equities to fulfill the redemptions.

3. Fed meeting – Fed is scheduled to meet in the third week of September to decide on interest cuts. There is a wide spread rumor in the market that if markets remain stabilize till the time Fed meets, the interest rates cut won’t be much. Hence, proponents of interest cut rates may wish / act to des-stabilize the markets worldwide to pressurize the Central bank to reduce interest rates.

4. Good inflation numbers- India Inflation numbers are coming good for last two weeks and hence, it may boost the sentiments in the market that RBI policies have acted well for the Indian economy. Hence, long-term investors may again start pouring money in Indian stocks with a view of good and stable Indian economy.

5. Pre-results activities – the half yearly results are due to come soon. Hence, one can see renewed activity in Indian stocks and shuffling in the portfolio of Mutual Funds and FII investors.

Thus, the word for this week could be “Speed-breaker”. Friends!! Drive your investment vehicle car carefully. Watch out for the speed-breakers early and slow down the vehicle accordingly. Anyone can drive vehicle on expressways, but driving the car on roads with potholes is the test of your driving skills.

Come; let’s test our skills this week. :)

Weekly Outlook on Indian Stock Markets - 3rd September to 7th September, 2007

If the word to explain the sentiments of the last week’s trading was “consolidation” then, the word that may see its glory in the coming week is “volatility”.

The last week was good for the traders as well as the investors, with Indian Stock markets trying to create a platform to accelerate upwards. Though, it does not seem like an easy ride and I give you a reason for this.

The markets were at all-time high a month back and there were no indications of a deep correction. Thus, many traders had taken long positions in the anticipation of another bullish month. Though, things didn’t turn out the same way and sub-prime crisis spoilt the party.

Now, these sudden changes of events lead to various long positions stuck at that moment. Thus, as and when markets will try to achieve the high levels once again, the traders may take this opportunity to offset / marginalize their losses. And this may bring volatility in the market.

Also, the concerns at the domestic level and international level are not subdued completely. There is no doubt in anyone’s mind that The Left will try to block every reform that will be pushed by the government. Also, the tough stance taken by both the parties with respect to nuclear deal will also create an unhealthy atmosphere within the ambit of a government. Amidst such scenario, there is little doubt that FDI and FII inflows will slow down in the coming year, and hence will keep the markets range bound for the moment.

At the international level also, the concerns on sub-prime mortgage crisis have not diffused completely. Everyone is looking at the Fed Meeting on 19th September with anticipation that Fed will cut the interest rates to control the mortgage crisis.

US President George Bush has announced some tax sops for the mortgage owners to lend them some helping hand, which seems like a positive step.

Now, if we look at Indian stock markets among these factors, a small rally can be seen from Monday onwards, thanks to the relief measures taken by the USA government on the sub-prime crisis. The announcements by the US government will be taken in good light by the investors.

But, the profit booking and offsetting of previously stuck positions could be seen at upper levels. Hence, the middle or later part of the week could be crucial and hence, I will probably like to sit on cash more than the exposure during that period.


Well, let’s now discuss some major events that can impact the stock markets this week:

1) Relief measures like tax sops, etc announced by the Bush Government can pacify the sub-prime concerns and hence, could act as a boost for the stock markets.

2) The concerns over the sub-prime have not diminished completely and hence, the news of any hedge fund suspension can cause jitters in the stock markets worldwide.

3) Due to last month’s deep correction, some stocks are now available at very attractive valuations, especially in the Mid-Cap. So, one may see a renewed action in these stocks

4) The recent correction has made the traders’ wary of taking positions for a longer duration. Hence, one can see regular profit booking by them.

5) The last week inflation data released by Reserve Bank of India has shown it going below the 4% level, which is again a major breakthrough. So, this will be a morale booster for the investors.

Weekly outlook on Indian Stock Markets – 27/08/2007 to 31/08/2007

Well, if “caution” was the word of the last week, “consolidation” could be explain the mood and the sentiments for the next week.

We all know how a car behaves when it starts initially. It makes lots of noises, vibrates and then gets ready for a ride. The same could be seen in the stock markets in the coming week. It may volatile initially during the week, but there are chances of sustain upward movement later during the week. For me, the corrections in last few weeks were tremendous and markets are now looking in a better shape to digest any bad news that may come from sub-prime issue.

So, the next week could be a week of consolidation. Some of the large cap stocks look pretty attractive in terms of valuation, especially Cipla, Reliance, Bharti and ONGC… Similarly, mid-cap segment are also looking geared up to see a phase of upward movement next week.

The coming week will also be bringing the F&O expiry and hence one can seen the unwinding of various short positions that investors have taken on account of huge fall in the last few weeks. Thus, the corresponding long positions will only support the market levels.

Globally, the concerns of sub-prime are again re-emerging. The Bank of China has just disclosed that it has invested around $8.2 billions in the US sub-prime market. Similarly, various hedge funds and financial institutions can also disclose their investments in USA prime and sub-prime. Such announcements could send jitters in the equities, but the impact is already discounted enough to cause any considerable trouble to the markets.

Nutshell, one can see the phase of consolidation. I think one can put some fresh funds into equities in the coming week. Those, who have stuck in long positions few weeks back, may also find the way to come out / within the permissible limits of their losses.

Below are some upsides and downsides for the coming week.

Upsides

1) Market Re-bounce - Re-bounce, shown by markets during the last two days, give an indication that market is creating the base to gear for upside again. Thus, one can see the upside in the coming week.

2) Catching up with Peers - Other Asian markets have gone up during this week. But Indian markets, lagged behind due to political uncertainty. This uncertainty has reduced considerably now, especially after Left announcement that they do not want to fall the govt in near future. Thus, one can see the Indian markets try to catch up its Asian peers in the coming week.

3) No major redemption - The hedge funds did not report any major redemption, which they feared of. Thus, the cash on which they are now sitting, can be invested in Indian equities in the coming weeks or months.

4) No exposure to sub-prime - Unlike Chinese bank who have invested in sub-prime, Indian banks have not any exposure in US sub-prime markets. Hence, one can see it no major threat of liquidity crunch in Indian financial systems and this can act as a morale booster for the Indian stock markets.

5) Robust Economy - Renewed Political Stability, Currency within the desired range, Moderate Inflation, No threat of Sub-prime issue… Overall, Indian economy is looking in good shape than its other Asian or European peers. What else, global financial heavyweights want from Indian economy?

Downside

1) Compromised Matrimony - Till now, Left has acted as a wife who controls her husband by threatening him to go to her parent's’ house if her desires are not fulfilled. In other words, UPA government is under the tight siege of Left, which does not favor reforms. Thus, there are chances that Indian as well as foreign companies may not like this compromise matrimony. And that will have an adverse impact on the sentiments of the investors.

2) Strengthening of Yen – As discussed last week as well, the yen has appreciated in recent past and has touched the levels where yen-carry trade may not be favorable proposition for Japanese investors. Now, if yen continue to strengthen against dollar, the markets could see unwinding of some positions in Indian markets as well.

3) Major loss reported by any global financial institution – The financial institutions have finally had a look at their balance sheets to identify the risky assets. Thus, any announcement of a major loss to any big financial institution can see market swiveling down.

4) Relative Instability in global equities – Despite re-bounced of Asian and European equities, the instability has not totally gone out of the financial system. Hence, any bad news on sub-prime could again imbalance the markets worldwide and hence, may trigger the corrections in equities world wide.


Well, these are my views on the mood that may prevail in Indian stock markets next week. You too can forward your views and comments on Indian stock markets.

Wish you all a happy investing!!!

Indian Stock Markets - weekly update 20 Aug - 24 Aug 2007

The markets are expected to open bullish on Monday and Tuesday due to Fed discount rates interest. On the other side, bears will try to decrease the momentum by discounting the political uncertainties prevailing in the country on the account of Nuclear-standoff between the Left parties and Congress. So the markets are expected to remain bullish somewhere between 15-350 points for the first two days of the week.

From Wednesday onwards, there can be a threat of sub-prime issue again cropping up and if it occurs, its affect can be seen in European and Asian markets including that of India.

From the current facts, it seems that, the USA economy has successfully transferred its problems to the European and Asian Financial institutions and banks. Thus, the ultimate sufferers in the near future can be these economies who have invested substantially in sub-prime mortgages.

Even the steps taken by Fed and other central banks are just a small relief measure. It is like controlling the fever of the patient who is suffering from viral fever by injecting a dose. How big the problem is still unknown and this cause the major problem. It seems that by Wednesday onwards the effect of the temporary relief may largely reduced and hence, one can see a fresh bout of selling in the markets from thereon. Also domestic factors like the uncertainty within the government circle due to nuclear stand off may rub salt on the wounds of the bleeding Indian markets.

From Wednesday onwards, one can see a downside of about 600-700 points and hence, "caution" is the word that one can follow this week. Till one see a sustain upwards rally, the small investors must remain outside and remain cautious.

Below are the few upsides and downsides that can affect the Indian Stock markets this week:

Upsides

1) If the Central Bank takes further steps to resolve sub-prime issue, there could be a resurgence of renewed confidence among the investors worldwide.

2) If yen depreciates against the dollar, it will ensure the sustain yen-carry trades and hence, ample liquidity in world equity system.

3) Currently, Indian stock market looks attractive in terms of valuations and hence, one can see fresh round of funds entering into Indian equities.

4) If the stand-off between the left and Congress subsidises, the market can see huge upside on the account of it.

5) The hedge funds redemption is another area of concern. If this fear doesn't turn into a reality, then once can see the fresh investments into Indian equities by hedge funds operators.


Downside
1) If Fed does not take clear stand on sub-prime issue, then the market can again go into the moment of despair and uncertainty.

2) Yen appreciated quite substantially last week. If this trend continues, then one can see the unwinding of yen-carry trades, which will result in funds going out of markets.

3) Fresh Hedge Funds redemption can occur, since investors' confidence has gone down on the account of last week downside. Thus, if this fears turns into reality, the hedge funds will have to take out the money out from the markets.

4) If the stand-off between Congress and Left actually turns out to be really serious, the markets will surely seen a downside.

5) Any news regarding the collapse of any hedge funds / financial institution can cause jittery among stock markets.

Indian Stock Market - Weekly update 13th - 17th August, 2007

Last week has been extra-ordinary for the markets. Aftre the initial meltdown, markets seems to have recovered, till Thursday afternoon, when BNP Paribas sub-prime mortgage woes came into surface.

This acted as a trigger that took global indices to another low. It seems that markets have catched the sub-prime mortgage fever that may take another few weeks or months to recover.

One of the major concerns pertaining to this fall is the "uncertainity" - uncertainity on how deep the issue of sub-prime mortgage is and how many banks / financial insttutions have burnt their fingers in it?

Thus, it seems unlikely that markets will go up steadily this week. Though, some amount of short-covering is seen, which is common after such volatility. Long term and medium term investors can still wait as more correction can be seen in the markets. Intraday Traders need to
track local and global events quite carefully since every name dragging into sub-prime mortgage woes will trigger a fresh correction in the market. Hence, caution is the word one must remember. Till the time, the cloud of uncertainity about sub-prime clears a bit, the market expected to remain volatile.

Below are some of the upside and downside factors that are expected this week:

Upside
1) The current side last week may result in a bit of short-covering this week around.
2) The money from Middle-east, is yet to enter into Indian markets. Thus, this correction may result in some of this money coming in.
3) RBI annoucement that Indian Banks and FInancial Institutions are laregly unaffected from sub-prime woes
4) Hawkish stance by Fed and European banks on this issue.
5) Rate cut by Fed to infuse fresh liquidty into the equities.

Downside
1) Fresh names of banks and financial institutions coming into sub-pprime trap
2) yen appreciation against dollor will eject more liquidity from stock market.
3) Rupee appreciation against doller will invite more volatility in the stock market
4) Sub-prime turn out to be a global disease
5) fear of Global Recession due to US economy slowdown.

Wish you a very happy investing this week!!!!!