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.