Weekly Introspection
The bloodbath on the Wall Street continues. First it was the turn of financial giants like AIG, Lehman Brothers, Washington Mutual, Merrill Lynch and many more that either became nationalized or were taken over by another financial institution. Now, it is the turn of Automobile players like General Motors, Ford, and Chrysler who are now knocking the doors of the Government and the Federal Reserve to bail them out of bankruptcy.

Amidst such uncertainty, financial markets could continue to remain volatile. Hence, investors should remain vigil and prepare to remain invested for long term in case markets behave contrary.

The markets look oversold at the moment. Almost every trader has taken position on the short-side on account of threats prevalent in the world markets. Similarly, the long-term investors remain on the sidelines, anticipating more fall in the equities during the days ahead. The combination of both the factors is making the market vulnerable and weak. Thus, even a marginal selling pressure results in complete collapse of markets during various days.

This has been happening for last two months and taken the markets on the over-sold territory. Hence, we may see a sudden buying in the markets, in the form of short-covering by FIIs, as we have seen late Friday in our Indian stock markets.

Trading Strategy
It is vitally important that as a trader don’t take one side view of the markets, say experts. Try to build positions on both sides of the markets and wait for the one-side movement to take place. The international factors will keep the markets volatile. Any bad news on General Motors / Citibank side could lead to free fall in the markets. On the contrary, policies actions in US and India will keep giving the markets hope on the recovery side. Markets have already started factoring in RBI rate cut, which can now come any time. Inflation figures also look encouraging in the coming weeks. Similarly, US government may announce some concrete steps to step up the confidence level in the financial system, which is badly shaken due to sudden collapse in the US banking system.

If you are a trader who trade in Options, try to take a closer Call option and far Put Options for the current week. Chances of recovery are high in this week of expiry, after continuous downtrend seen in the week, passed by. One of the Options strategies that can be adopted is to buy Nifty 3000Call and 2300Put for December. 3000Call comes at the premium of about 100-110 Rs. 2300Put comes at the premium of about 80 Rs. Thus, the total outflow comes out to be Rs.200.

Now, let’s suppose bad news on Citibank comes during the week. In this scenario, markets may go down till 2300-2400 levels. In this scenario, 2300Put could trade at around 220-230 Rs. One can sell Put at that time and take Call premium as profit.

On the contrary, let’s suppose RBI announces rate cut. We have already seen short-covering coming into the markets. The combination of both these factors could take markets up to 3000-3100 levels. Under this scenario, 3000Call could give a premium of 220-250 Rs. One can sell Call and take Put premium as profit.

Investing Strategy
On the long-term play, there are many good stories that are available at take-away prices. The most attractive sector is “Power” sector. Stocks like Powergrid, Reliance Power, NTPC, and PTC are trading at attractive levels and can be bought by those who believe in India growth story. On the Infrastructure front, stocks like GMR Infra, IDFC (financial institution that lends to Infrastructure companies), IRB infra, and L&T look an attractive buy.

The base of future India growth story will be in the hands of Power and Infrastructure sectors. Without both of these, India can’t hope to become a developed nation in future and hence, we may see encouraging steps taken by coming government towards these sectors.

The third and fourth most attractive sectors are “Information Technology” and “Telecom”. IT companies have accumulated huge funds reserve in the past, thanks to robust demand for outsourcing. This will now help them roll over this rough patch and one may see many of them consolidating through various acquisitions.

Telecom sector is another sector which is based on India growth story. The telecom sector is going through the consolidation phase and is an ideal sector for long-term.

Wishing you a great week of investing!!!

Weekly Outlook for Indian Stock Markets - 24th to 28th November, 2008

The sub-prime crisis is no less than Tsunami. It has swept every country, every continent, every company that dared to touch, left alone those who attempt to ride it.

The early victims were the financial institutions who were directly involved in the mortgages business in US. Then came those financial institutions across Europe and Asia who bought boxes of exotic sub-prime mortgages, pasted with AAA credit ratings on them.

And now, this tsunami is taking its toll on almost every sector- linked directly or indirectly with it. It seems the next on the target is Auto Industry. GM bankruptcy news is getting louder with each passing day. Ford is feared to follow soon as well. If these two companies go bankrupt, it will be a huge setback for the US economy and for the world as well.

Amidst such gloomy atmosphere, there are some positive news as well. Warren Buffet, the world’s greatest investor, has shown his faith in US economy. His company, Berkshire Hathaway, has bought stakes in various companies. The ongoing financial crisis has brought together every economy across West and East together to tacke it. Also, there are talks about making stringent guidelines and regulations which will be common across all countries and hence, in the long term will build a road path for global free trade.

Isn’t “Bright Day come after a Dark Night??”

Inflation close to RBI comfort levels
RBI, in its Aug Monetary policy, had talked about 5-6% inflation by March-end. The current financial crisis has helped RBI in this regard. The global slowdown, which pulled down the crude prices, has helped in cooling off the inflation. Good Kharif crop has also helped in taming the food product prices across country.

The provisional figures for Inflation for the first week of November came at 8.98%, down by almost 2% from the preceding week. This will now encourage RBI to shift its priority to growth. It is now expected to cut both CRR and Reverse Repo rates in the coming weeks to stimulate the growth.

But consistent FII outflows are a concern ...
The FIIs have been consistently pulling out money from the equities. After the October mayhem which saw indices tumbling more than 40%, November has so far sober. The selling continues but intensity is much less. Nonetheless, it remains a concern, since FIIs are still net sellers for this month as well. Thus, markets are expected to remain range-bound this month as well. At every rise, we may see FIIs selling to take cash out from equities.

And that will put pressure on Re ...
Rupee has been under severe pressure for last few months due to consistent FII outflows from the markets. RBI, at its end, is trying its best to stem the Re depreciation. It has cut the CRR rates by 250 bps, cut reverse repo rates, reduce SLR to 24%, which has released more than 1 lakh crores rupees into the financial system, yet the pressure on Re remains intact.

Long-term story is still buoyant
India’s concerns are largely external. The problems in global economy have restricted the tremendous inflows which it was enjoying until last year. Fiscal Deficit, which rose for the first two quarters on account of high crude prices, are now expected to reduce for the remaining quarters since crude has fallen down considerably since then.

The concern regarding high growth will remain, till the time global economic conditions revive. Yet, our economy is expected to grow by 5-6%, as compared to negative growth rates expected in Europe and US.

Stocks at attractive valuations...
The price-earnings ratio for Sensex companies has reached single-digits, which makes them a compelling buy for long-term. IT companies like Infosys, TCS, Wipro, Mphasis are at long-term buying levels.

Another sector that can be bought is the telecom sector. Telecom companies like Bharti, Idea, RCOM have high cash reserves ratios, which enables them continue with high CAPEX plans. Also, the sector is continue to enjoy favor among consumers as they move into rural pockets of India, which is seeing a bit of revival on the back of good monsoons and loan waiver this year.

But the coming week may see another meltdown...
The coming week is expected to see another meltdown, on account of concerns regarding GM bankruptcy. Another negative trigger could be lack of strong steps taken during G-20 nation summit, called upon in Washington to discuss the ongoing financial crisis.

If no concrete decisions come this week, then we might see another round of selling coming into the markets worldwide.

And providing opportunities to buy quality stocks...
As discussed above, IT stocks like Infosys, Wipro, Mphasis can be bought at every correction. Similarly, telecom stocks like Bharti, RCOM, Idea can also be accumulated. A mid-cap stock, worth mentioning, is Karuturi Networks. The stock has fallen down to Rs. 7 from Rs. 23 in September. Yet the stock has seen FII shareholding increased to 37% from 34% a quarter back.

An interesting trading strategy is to buy 2500 Put and 3000 Calls. The accumulated premium will be around 150 and has the potential to give you more, once it takes a definite turn.

Wishing you a great week of investing!!!

Remote-controlled Indian markets
For last few weeks or months rather, we have seen a great deal of uncertainty and unexpectedness coming into the Indian stock markets. During the days, when markets across the world collapse, we usually see Indian markets outperforming. On the contrary though, during the good days in global markets, we see muted response from Indian stock markets.

The last week trading carried both the instances. Monday morning has seen markets across the globe collapsing one after another on account of recessionary fears. Asian markets, including India, were down by more than 10% at one point before we see a strong buying support coming into Indian markets at lower levels and markets finally closed down by just 2% down, while the peers closed down by more than 10%.

On the flip side, the Indian markets gave a muted response on Wednesday, when Asia made a strong recovery on the back of tremendous rally in US markets overnight. The Indian markets closed down just a percentage up, while the other Asian markets were up by more than 8%.

What are the reasons behind such behavior? Is our markets totally governed by few institutions, who at will, can change the direction at any given day or we have started to run ahead of the curve?

The former has a strong case, since FIIs have been ruling our markets for last few years. If they sell, the markets fall. During the days, they don’t sell or do cherry picking, the markets go up. Currently, our Domestic Institutions and Life Insurance companies are not strong enough to compete with Foreign Institutions. Hence, a long term policy must be envisaged by the government to promote the equity route through Mutual Funds route and life insurances. Also, the young generation which doesn’t have any financial cushion in the form of pension, can be encouraged to save for longer term through equity route, since the best returns that any mode of investments can provide is the equity, provided it is done with knowledge and with a long term horizon.

RBI Rate Cut
Let’s come back to the stock markets. RBI has announced three major policy decisions on Saturday which will bring cheers to the banks and the stock markets. First, it has reduced the CRR ratio by 100 bps to 6%. Thus, it has provided around additional liquidity of 40000 crores Rs into the financial system. Secondly, it has decreased the repo rate by 50 bps. This step would ensure that banks can now borrow from RBI at lower rates, hence relieving them from desperate liquidity crunch.

Third step is the reduction of SLR (Statutory Liquidity Ratio) by 100 bps to 24%. SLR is the percentage of total funds that banks need to keep in the form of liquid instruments like Cash, Government bonds, and other safe mode of investments. It is said that the high SLR ratio in Indian Banking System saved the domestic banks from the sub-prime mess, since they never left with enough funds to invest in exotic overseas instruments after fulfilling the domestic needs. Now, RBI has reduced the SLR ratio to help banks tide over the extra-ordinary liquidity crunch, which was evident from the fact that Call Money rates shot to 22% in Inter-bank lending on Friday.

Strengthened Global Markets
The bulls worldwide have shown tremendous come back during the last week. The Dow Jones and Nasdaq have seen the biggest weekly gains since 1974 during the last week bull run. This also helped the Indian markets making a recovery of more than 14% during last week, despite some disappointing quarterly numbers.

For Indian stock markets, this would come as a big relief, since the fear of global recession and redemption pressure on hedge funds were putting the selling pressure on stocks. The stronger global markets will help in rebuilding the investors’ faith in equities and one might see less selling pressure on the equities than before.

US Recession
The fear of US recession is now clear in sight. Earlier, there were only reports of forthcoming recession but now the data about jobs, consumer spending, Inflation has clearly suggested that recession has finally arrived on US shores.

And it seems like a long path of consolidation for US before it can really stand up and start spending. First, the US people need to clear their outstanding debts on credit cards, homes, personal loans, before they can again storm the markets and hence for spending, hence boosting the other economies. Thus, it would be good that US exporting economies must now learn to live in an era of lower growth and lower inflation as well.

Economies Delinking
Till now, USA was driving the economies worldwide through exhaustive consumer spending and almost every ship moved towards US shores. But housing bubble burst has put brakes on the relentless, rather reckless spending. This may now force emerging economies like India, China or Brazil to look out for alternative grounds to sustain their growth rate. The first target could be Europe, which will now see more attention in the Sales and marketing Division of big corporate residing in Asia.

Another scenario which is emerging out is the bilateral trade agreements between countries. Every country exports things that it carries and imports things that it lacks. For instance, India has IT expertise that no other country has. Similarly, India doesn’t have sufficient Oil. Now, India may try signing bilateral agreements with Middle-East countries to push their IT into their regions and in return, buy Oil from these countries. This will help both the economies to grow together. If this indeed happens, would end the US monopoly in global trade and will ensure, more sustainable and long term growth for various countries.

Nervous Stock Markets
The stock markets, though, have been trying to revive, may continue to remain nervous due to various uncertain factors like US recession, sub-prime impact, increased raw materials cost, etc. Hence, one may continue to see the volatility prevalent in the market for some more time.

In Indian stock markets, the sector that may outperform in the longer term is the Information Technology sector. The sector was among the early ones to get the beating due to rich valuations that the companies had been enjoying. But things have changed now and IT stocks look attractive now.

The biggest advantage with IT companies have been the strong business model, they carry. The companies like Infosys or TCS may face some quarters of slowdown but are most likely to recover from it. These companies are sitting rich on cash and also they have the required capability and the expertise to survive this slowdown.

Also, we have seen many IT companies diversifying themselves across regions as well as domains. The US is no longer an attractive destination to work with. Similarly, BFSI domain (Banking and Finance) is not the only domain to serve with. Undoubtly, it will take some time to diversify, but once it happens, we will see rich valuations coming back again into this sector.

Book Profits at regular Intervals
It is said that “Markets behave irrational before it becomes rational again. The only problem is that they remain irrational for days more than you can remain solvent”.

Hence, one is advised to book profits and losses at regular intervals. Do not try to emulate Warren Buffet or George Soros. These guys have ample money to remain sleepy for longer time duration that I or you can remain. Hence, if you bought something a week back when Nifty was at 2200, the time to book partial profits is today.

Wishing you a great period of investing!!!
Sayonara

Weekly Outlook for The Indian Stock Markets - 21st September to 26th September

Volatile last week
The last week had been a phenomenal for the stocks markets worldwide including India. It would have been terrible, had not emergency steps taken by US government given a new lease of life to the stock markets. Otherwise, the remaining week saw just one side movement and that is downwards.

Though Indian markets looked resilient at times. Nifty which went down almost to 3799 on Thursday came back strongly to close the day at 4050 and then went up by another 200 points on Friday to close at 4250 mark.

But again the concerns for the markets are real and grave. Where would markets be drifting to in the future? Will US survive the financial turmoil created by its own? Will Indian economy, which has been otherwise quite resilient will be affected greatly by the global financial mess. And amidst such hazy atmosphere, what should investors like you and me do???

Come; let us review the events that have shaken the global financial space and its possible impact on the markets. Also, let’s look at the steps taken by the governments to overcome those events.

Collapse of Wall Street Giants
The fear of Lehman bankruptcy started surfacing after Bear Sterns collapse. But somehow everyone was silent about it on the street. And hence, when it happens, the fear changed to panic all across the Wall Street. Within hours of Lehman collapse, we have seen some of the quickest reactions by the companies on the Wall Street to prevent themselves of becoming the next victim– Merrill Lynch merger with Bank of America, AIG 88 Billion US$ bailout by the Fed, Morgan Stanley hectic searching for the soul mate to get itself merged.

The immediate impact of Lehman Brothers was felt on those stocks where it has direct and indirect investments. For instance, it has invested extensively in the projects of real-estate companies like DLF, Unitech, etc. The shares of both these companies have almost collapsed in last one week. Though, there has been no indication of any liquidation in investments by Merrill Lynch. But Morgan Stanley has sold the stake of around 3000 crore in last one week to other financial institutions, mostly to Deutsche Securities and Goldman Sachs.

The impact of this event could be felt on growth, since these companies have been the easy source of funds for many who are looking to expand themselves. Also, the boost in equities came due to extensive buying and selling by the Wall Street giants. After the collapse of many, merger by some and survival of few, the equities will continue to suffer in the near future, till the time new companies take over their place.

The party seems over on the Wall Street.

Liquidity Crunch
Aftermath of Lehman collapse, the banks refused to lend and borrow in the money market, fearing that who will collapse next. This led to severe dearth of funds and overnight bank rates increased exponentially. During these times, the central banks across the world had to intervene and open their treasuries to provide the liquidity that many banks have been craving for.

Few months back, every small and medium financial institution was looking to expand, hoping to become a financial giant in a few years. But the times have now changed and many of these financial institutions are exploring the options to merge themselves.

One can see several mergers and acquisitions happening in the near future. Morgan Stanley has few days left only. Washington Mutual is another institution that will be acquired soon. Federal Reserve will remain busy for some more months trying to broker several deals to prevent another chain of panic reactions on the Wall Street.

Its impact on the equities will be sizeable since equities have always deemed as high risk-high gain investments. Now with weaker balance sheets, the financial majors will be averse investing in equities and rather move to safer havens like Govt Bills, Gold, etc.

Oil and Inflation remains a threat
The Oil has subdued in the recent past due to slowdown in the US. Also China which heavily bought Oil at the time of Olympics has also slowed down now. Hence, Oil seemed like cool-off. But it is still not out of danger.

Any new threat of war in the Gulf will propel the Oil again. The developing economies like India, which import more than 50% of Oil from international markets, will suffer in the backdrop of High il prices. Also, High Oil prices will have an impact on the Inflation as well, which is already in 2-digits.

The future-tense
The future for the equities doesn’t look good. All the factors that were behind the great equity boom are now over. The interest rates have increased, thus making equities less attractive. The Financial Institutions, who were behind the boom, have either collapsed or merged with a bank. Oil is at all-time high, which is fuelling the inflation too and subduing the growth rate.

Amidst such tough times, who will invest in equities? Will you take a risk at times when you have money only for food, cloth and shelter? Similarly, the financial institutions who have weak balance sheets will not be investing in equities, for sure.

Coming Relief rally
The coming week could see some relief rally in the Indian markets. Also, announcements by the Reliance Industries on Sunday regarding the Oil discovery in Godavari basin will be a positive trigger for the battered Indian markets.

Hence, one can be geared to book some profits in the stocks during the week. The stocks that one may buy are the power stocks like NTPC, Ppower Grid, and Reliance Power. The signing of nuclear deal during Manmohan US visit could boost these stocks. Reliance Industries will also be a good stock to buy at the current levels. It is the only firm that looks rock solid in the aftermath of financial distress.

It is advised to keep booking profits. Do not anticipate the great boom so soon. Let the things start rolling out before taking a long-term call.

Wishing you a great week of investing!!!

Weekly Outloot for the Indian Stock Markets - 15th to 19th September, 2008

Unforgettable last week
The last week has been a trying one for the Indian Stock Markets. After a tremendous surge on Monday on account of NSG deal, markets fell down like nine pins and closed beaten down to the weekly lows. Nifty, which surged to 4500 on Monday, fell down below 4300 mark at the time of close on Friday.

The current volatility provides ominous signs for the Indian equities. The most worrying factor for the markets is their inability to discount the good news. Low Inflation, Low Crude oil, NSG deal were strong enough signs for the markets to gain and make new higher levels. Yet the FIIs relentless selling pulled down the markets every time an attempt is being made to reach new highs.

Some reports have indicated that the current bout of selling is made by Lehman group and its associates to cash out their holdings in their final attempt to save themselves from bankruptcy. If this report has some strong base, then these must be worrying signs for Indian markets, since Lehman & Co. have substantial stake in various Indian companies. The investors must be hoping that Lehman Brothers sell their entire stakes in Indian equities along with other assets to the acquiring company because if it doesn’t happen and Lehman is forced to sell their stake in the open markets, then the share prices of these companies could touch new lows, which will further dent the bruised sentiments of the investors.

Let’s analyze and gauge various indicators that may influence the Indian markets in the days ahead…

Re-$ movement
Rupee has depreciated steeply against the dollar, which has neutralized the gains that oil marketing companies may have on lower Crude oil. The Greenback is currently trading at 45.60 Rs. Levels.

IT companies, which would have gained on account of higher dollar, are unable to do so because of worries that US based financial companies will be spending less on IT in the next 2-3 years. Though, the silver lining could be the BPO / ITES companies, which will stand to gain on higher dollar. There is a strong hope that Outsourcing concept will again come into shore as overseas companies will be transferring some of their non-critical tasks to India to further reduce their input costs.

Double-digit Inflation
Despite the low inflation numbers for last 3 weeks, the inflation is still in double-digits, which remains a worrying factor. Any novice can understand that equities will not perform, till the time; inflation goes below 10% mark.

We must also remember that inflation going down on account of higher base effect is not the solution of this problem since it will be the setting of a new benchmark of prices for the essential products. There should be a genuine effect to either reduce the demand or increase the supply of products. The government should also reduce the prices of fuel to stimulate the companies whose input costs have risen due to high oil prices.

Hence, the inflation should come down to 6-7% mark, before it can make a positive impact on the markets. Any hope of change in long-term view from “sell” to “buy” will only occur if inflation comes to 5-6% levels.

High Interest rates
Looking at the historical figures, equities never had a genuine long term rally in the shadow of high interest rates. Also, the companies debt cost will rise on account of high interest rates. The maximum hit was suffered by Finance and Real-Estate companies. Real-Estate companies, who received doubly-hit due to high material costs and interest rates, have depreciated maximum in every round of selling.

Hence, any investor who holds real-estate stocks need to be patient enough to earn something out of their investments. Any chance of averaging out could be as risky, as having a fresh purchase, since downside still exists in these stocks.

Crude Oil
Two months back, Crude was the major threatening factor. Sadly though, even after falling near to 30% from their all-time highs, the equities have not responded at all. The markets are still trading at the same levels or lower, as were of two months back.

Personally though, I still feel that Crude can provide a big impetus to the markets in the near-term, especially when it sustains below 100$ a barrel.

Financial Turmoil in US
It has been more than a year since the US financial problem has come into shore. We must not forget that the roots of these problems lie in Greenspan era and it will surely take more than 3-4 years to amend the mistakes. Bear Sterns and Lehman Brothers have been the victims of the problem. Various reports indicate that Merill Lynch could be the next victim. These US based financial institutions have a major stake in the Indian bourses. Hence, markets will remain under pressure till the time financial sky gets cleared.

Next Week could be volatile
The coming week will see a renewed attempt by Bulls to take the charge. Also FIIs, who have been selling consistently for last few days may pause a bit to gauge the situation. Though, any bad news from US, especially regarding Hurricane Ike or Lehman Brothers, may see another round of selling coming into bourses all over Asia including India as well.

Hence, traders can hedge by buying Nifty 4000 Puts and buy quality stocks that are in offing at low prices. For instance, ICICI Bank, REL, Ranbaxy are trading at interesting levels and can see gaining in the short term.

In the mid cap space, MIC Electronics, DCB, Axis Bank, Karuturi Networks, TTML can see making gains.

Another interesting strategy for the week is to buy Nifty 4000 Puts and 4400 Calls. Somehow, it seems that almost every bad news has been discounted by the bourses and any positive news will be welcome by the markets. If it doesn’t react to the good news and goes down, then 4000 Puts will put into play. Alternatively, any good news on Crude Oil front (below 100$), Lehman Sale out (finally!!), Low Inflation (around 11%) can give a stimulus to the market and it may re-attempt to touch 4400 /4500 levels on Nifty.

What are your views on the Indian stock markets, do you have any stocks that one can buy, do you agree / disagree to my views, then please feel free to write in your comments by clicking Comments below.

Wishing you a great week of investing!!

Weekly Outlook for Indian Stock Markets - 08th September to 12th September, 2008

Better Late than Never
As discussed during last week as well, Indian Stock Markets have been celebrating too much about low inflation, rather than taking a rational outlook on the broader picture. The global cues have been weak, Europe has been slowing down, US is under pressure, the central banks all across the world have been raising interest rates to cushion their economies from inflation.

Amidst such negative cues, expectation of Indian Stock Markets outperforming others had been too much of asking? And this was reflected last week as well when Lower Oil, Lower Inflation failed to propel the markets.

Hence, the realistic view at the moment is to “stay caution”. It is better to wait till the clouds of financial turmoil gets clear before one can start investing because days have gone when markets used to give you chances to come out of wrong investments. Now, one wrong investment could be enough to wipe out everything that one has earned over the past few months or at worse, years…

Last Week suggest more pain
The last week started with whole host of positive triggers like Lower Inflation, no major impact of Gustav hurricane on US refineries and good GDP numbers from US. Asian indices traded higher on Monday and Tuesday. US markets which were closed on Monday, hoped to rise on Tuesday. But financial turmoil in US pulled the DOW and NASDAQ down, despite the lower crude. That fall was a clear evidence of the intensity of financial turmoil that US is having at the moment. For the past few times, we have seen that every positive sentiment is quickly wiped out by one of the problems that US financial sector is facing at the moment.

Indian Equities did get another chance on Friday to regain the lost ground on lower inflation numbers for two consecutive weeks. But weak global cues again played a spoilt sport and markets surrendered meekly in front of them. Bears had a great party on Friday pulling down the Sensex by 500 points and Nifty by over 100 points respectively. Technically though, Nifty had rebounded many a times from 4350 which now look like a strong support levels for the Nifty.

Hence, the last week has suggested that until the US financial sector comes under control, the chances of equities outperforming any other investment class look remote.

NSG Outcome
Nuclear Suppliers Group has finally given its consent to India, which could have a positive impact on Indian economy in a longer term. But its short-term benefit is second to none, hence markets which may rise on Monday on the outcome of the deal, may yet to find a strong base to consolidate. Those who have bought equities last week at lower levels could find Monday as an opportunity to move out with good profits.

Crude below 100$ could be a strong trigger
The crude oil, which is hovering around 105$ / barrel mark, could go further below 100$ in next 2 weeks. If this actually happens, the markets will have a strong relief rally for sure. Also, government may have a relook at the oil prices and could reduce it to further tame the inflation.

So, Lower Crude could have a positive multiplier effect on the economy, where it will reduce the operational costs of various industries, and will also help government in taming the inflation.

Trading Ideas of the Week
The next week may see a rally in Power and Infrastructure stocks like REL, NTPC, Reliance Power, DLF, Unitech, etc. Also, one may continue to see good rally in stocks of Oil Marketing companies like BPCL, HPCL, Indian Oil, etc.

An interesting idea for this week is to buy Nifty Put of 4500, if it goes above 4550. Also, one can buy 4700 Call to hedge the position, somewhat a bit.

Investing Ideas
A stock that currently looks at attractive levels is Vishal Retail. It is currently trading at 400 Rs levels. We must not forget that Vishal Retail is among very few stocks that did not touch their IPO levels, during the meltdown. The company is on expansion spree and plays in the segment that has huge potential i.e., lower and middle class sector of India. Hence, one can buy Vishal Retail around 400-420 levels for 1-2 years perspective.

Besides, some of my old favorites like Karuturi Networks (KNL), Vakrangee Software, DCHL, Balasore Alloys are also at buying levels. One can buy these stocks with 1-2 years perspective.

If you have any views or wish to share your thoughts on the stock market, please feel to write in your comments by clicking Comments link below.

Wishing you a great week of investing!!

Weekly Outlook for Indian Stock Markets - 01st Sept -5th Sept, 2008

Surprising Last Week
The week gone by was full of surprises, especially the market sentiments on Friday. One occasional drop in Inflation numbers was enough for the investors to have a round of renewed buying in the markets. Even the significant drop in Q1 GDP growth looked a weak downside trigger for the markets, which rather make me thinking on what kind of mindsets are trading in the Indian stock markets.

Equally surprising is the Government reaction on inflation. It makes me wonder on why the Government needs to issue a statement every week regarding the inflation? A week back, when inflation touched 12.63% from 12.44%, Government issued a statement that it is disappointed. This week, a marginal fall of 0.23% to 12.40% made the same government optimistic enough to suggest a fall in the inflation in the coming days. Whether this is an anxiety on the Government part or any foul play behind it, one needs to find the answers for these questions surely.

Coming days would be volatile
Coming days will be more challenging than before, especially when a robust and emerging economy fights the battle with a host of negative cues like Inflation, Higher Commodities, Global slowdown, High Interest Rates regime, financial turmoil, etc. Till the time a winner is declared, we will see markets moving both ways and remain volatile.

The inflation is still a big worry, especially when the government looks defeated on this front. The failure of a government can be seen from the fact that it is praying for higher base effects to have a moderate inflation, rather than fighting the causes from the front.

The prices of commodities are troubling the economy to a great extent. The whole basket of commodities like Crude, Gold, Silver, Steel, Iron Ore, Edible Oil, etc is trading at highest prices ever, which is putting further pressure on the inflation.

To counter the inflation, the central banks across the world had to increase the interest rates, which in turn slow down the economy. If Fed Reserve follows the same steps and increase the interest rates, then the consumption demand from US will reduce and will further slowdown the Global Economy.

Hence amidst such scenario, one should not be over-bullish on the equities, since the stocks already factor the future earnings of the companies. One should have stock-specific approach and try to buy the stocks which are rich in cash.

More downside can be seen next week
Nifty at the moment is tentatively poised. It is exactly in the middle of the 3800-4600 range and chances are ominous that it may try to re-test one of the levels soon. There is a bullish undertone in the market. Tonnes of money are waiting in the sidelines to enter the markets, but everyone is skeptical about the impact of the Global Slowdown on the Indian economy. Hence, people are still finding the levels below to invest their money.

Hence, the best thing to do under these circumstances is to “invest partially”, much like SIP mode to ensure you get the average value over the next one year.

Trading Strategy - 2:1 Put to Call Ratio
Traders can be best advised to keep their positions hedge with more downside bias. The oil can show some upward bias due to hurricane over Gulf of Mexico. If it indeed stops the oil production, then one may see rise in Crude prices. Also, the inflation data will always be a trigger point of nervousness on Thursday and Friday. Hence, one can now buy 4600 Calls and 4200 Puts in proportion of 1:2.

The traders can buy pharma stocks like Ranbaxy, and Glenmark Pharmaceuticals. Ranbaxy has the potential to reach 540 in next one week, on account of open buy back. Both the stocks have seen good amount of consolidation in last few days.

Another stock that looks interesting is the “Karuturi Networks”. This company is discussed in almost every post of mine. The company is looking to acquire a company in US sub-continent and is competing with various hedge funds for the same. If it indeed able to scrape through acquisition, then the stock may see some renewed action. The stock is currently trading below Rs 23 levels and is the best price to buy for both short-term and long-term.

Follow the Logic and not the Market
The markets remain volatile for 11 months in an year, hence one must to accept it and take it in its stride. Build your own logic and follow it whole-heartedly. Chances of success increases by manifold. Be knowledgeable on the companies where you are putting your money. Do consistent research and one will always sure of how his /her investments stand to fare in the future.

Wish you all a profitable investing!!!

Weekly Outlook for Indian Stock Markets - 25th August to 29th August, 2008

Struggling Last Week
The last week was a pretty bad one for the Indian bourses. Nifty and Sensex went down by around 2% during the week, on account of grim outlook for the Indian economy. Also, the inflation continued its upward march this week as well, climbing all the way up to 12.63% from 12.44% last week. The inflation for 30 essential commodities went up from 6.34% to 6.71%, which are not at all good indications or the Indian economy.

Amidst such atmosphere, what should an investor do?? Should traders go long or go short during the coming week? Will we again see the lows of mid-July in the coming days? Let’s introspect and find out the answers for these questions?

Sugar is sweet this season
The current levels are still above the current year lows and there are several indicators that are pointing further downside in the markets. But downside now could be limited to specific sectors like Real-estate, Banking, Capital Goods. Whilst on the other side, one may see some value buying coming into several sectors that are dependent upon domestic factors or provide niche edge to India Inc.

For instance, Sugar Sector is the one that can be picked for long-term investments. India is among the largest producers and consumers of Sugar. Indian Sugar companies have grown themselves in last few years and have become competitive in the International markets.

The coming festive season in October will also see demand for Sugar rising and hence, profits and margins are also expected to increase. Another factor that goes in favor of Sugar companies is the permission of using ethanol as an alternative fuel. Hence, one can invest in companies like Renuka Sugars, India Glycol, Bajaj Hindustan for a long term view.

Information Technology is our forte
The sector that brought along the change in the outlook of Indian economy was the Information Technology sector, led by Infosys, TCS, Wipro and Satyam. Though, the recent slowdown in the US has hit the sector badly, yet it carries the potential to do well in future.

After beaten badly due to turmoil in US financial sector, the Indian IT companies have been diversifying into other sectors like telecom, logistics, Manufacturing, etc to protect themselves. The strengthening of Dollar against Rupee will also provide them some cushion against reducing margins.

Another factor that goes in favor of Indian IT companies is that these companies are run professionally. Hence, chances of success in their quest for grow are higher. The top-rung counters in IT sector like Infosys, TCS, Satyam and Wipro can be picked for a view of around 24 months.

Real-Estate is not so Real
The era of low interest rates saw tremendous rush for real-estate investments. Many a people purchased houses, not for shelter but also as a mode for making quick gains.

Sadly though, with rise in interest rates, the plans for many have gone awry. People who had taken mortgage loans have been suffering the most due to rise in EMIs. Also, the high interest rates are dampening the spirits of new breed of house-seekers who do not comfortable paying higher EMIs.

Hence, one thing is definite. The real-estate sector is must-must avoid at this moment. Also, the outlook doesn’t look good either. With slowdown in growth of Indian Inc, the salaried class will not get higher pay packages, and could lead to low demand for real-estate.

Some interesting Trading Strategies
The coming week will see the expiry of August contracts and building up of September positions. Hence, one may see a range bound market in the coming week. One may see short-positions building up in September futures, and hence, Tuesday and Wednesday may see a fall in the bourses.

This the best time to play a straddle of buying the Nifty 4000 Put and 4500 Call. There are several indicators that will keep markets volatile during the week. Some major ones are NSG deal, US Congress resolution on Indo-US Nuclear deal, Inflation, and Crude movement. Hence, this volatility will help you gain good gains out of this position.

Some stock-specific ideas
The stocks that could see some action in the coming week are Karuturi Networks, Renuka Sugars, and DCB and Indiabulls Real-Estate. Karuturi Networks is expected to announce some major decisions in its Board meeting on Monday, which may see some upward movement in this stock.

Indiabulls Real-Estate is seeing accumulation around 300 levels. The stock is currently trading at 290 odd levels and could see some upward movement during the week.

In case you have suggestions or want to share your stocks ideas, please feel free to write in your comments by clicking Comments link below.

Wish you all a very Happy Investing!!

Weekly Outlook for Indian Stock Markets - 18th August to 22nd August, 2008

Reviewing the Past

Last Week, Indian Stock Markets have again turned into selling mode, after renewed concerns of low growth and high inflation emerged into the shore. The Industrial Output for the month of May have fallen to disappointing 5.4%. Besides, the inflation is not looking good either at 12.44%.

These negative triggers pulled the markets down, especially on Thursday. Nifty which had a major support at 4500 till now has fallen down to 4430 levels on Thursday. These are no good signs for the markets and the coming week may see further downside in the equities.

The Challenges
Amidst such uncertain environment, what an investors or traders should do? As we discussed last week as well, it is better to maintain “wait and watch” approach. The economy is going through a tough patch and there are more downside risks that the upwards.

Let’s look at some of the factors that can influence the stock markets in the near future.

Inflation
The Indian Economy has been hampered with dual concerns of High Inflation and Low Growth. The pay hike of Govt employees announced by the PM on eve of Independence Day will further fuel the price hikes of the essential commodities, hence taking the inflation upward.

Somehow, it seems that the steps taken by the government to tame the inflation are too naïve and shallow. The government has given emphasis towards implementing the monetary steps to control the inflation. No sincere effort has been taken by the government on the ground to control the hoarders who have been stacking up the stocks to artificially increase the prices.

Hence, investors would be advised to stay caution till the time we see any major success for the government towards controlling the inflation.

Money Supply
The initial India Story was written on the hopes of a developed economy. But the developed economy is based upon strong infrastructure, transparent public and private role and placement of regulators who can time-to-time remove the weeds out of the system.

The start was good but we somehow swayed away in the middle. If we see closely, the growth in last 2-3 years were more on account of aggressive lending by the banks, which in turn led to reckless consumption, hence fueling the sales of the companies and greater profit margins for them.

But the same cycle pushed more money into the system, thus increasing the inflation. RBI, on its own, had started taking steps since Last June (2007) towards tightening the money supply in the financial steps. Though, these steps are not enough but yet have somehow able to bow down one side of the inflation.

If inflation doesn’t come down, then we may see more stern actions taken by RBI to reduce it. But these steps will definitely reduce the growth rate of the country. Hence, one must need to keep an eye on the RBI future course of action towards the money supply problem.

Infrastructure
If we remember, many domestic and international research reports have indicated in the past of “level below normal” infrastructure facilities currently available in the country. The reports also emphasized that infrastructure space needs heavy investment through Public-Private partnerships to ensure India remain a strong and sustainable growth story.

But it is a human tendency to ignore the weaknesses till the time they catch you. If the government would have spent money on Infrastructure, then we would have been in much better position to face the global slowdown today.

Now, in the era of low growth and high interest rates, there will always be shortage of funds to aggressively back the infrastructure projects. The funds cost will be high now due to high interest regime coming into the economy and hence, maintaining high growth will be a big challenge.

Looking Ahead
The investors should maintain “wait and watch” approach and only the selective buying should be done. There are some stocks in the mid cap and large cap space that look good and are better insulated from inflation than others. Also, one can invest in companies that have high cash reserves, since funds will be the one resource that is scarcely available.

For 1 year horizon, one can buy Vakrangee Software, Karuturi Networks, and Vishal Retail. Vakrangee software has domestic clientele, no foreign currency challenge, less debt on his balance sheets and almost no rental expenses. The stock is currently trading at 210 Rs and can be accumulated between 180-200 Rs for at least one year target of 350 Rs.

Karuturi Networks has been World’s largest supplier of Roses with plantations in India, Ethopia and Nigeria. The company has been expanding at good rate and among the few companies where FIIs have been increasing their stake in every quarter. The stock is currently trading at 23 Rs and can be accumulated around these levels for one year target of Rs. 35.

The major benefit with Vishal Retail is the market that it caters to. Unlike other companies in Retail sector, Vishal Retail serves the lower segment of the market with low cost products at low margins but high volumes. Due to slowdown, the middle class now has less money to spend and has will attract towards low cost products that can satisfy their needs. The stock is currently trading at 400 Rs levels and can be accumulated between 350-400 levels for a target of 500 Rs in one year’s time.

Trading Ideas
The traders who had bought 4400 Puts last week can reap good gains in the coming week. The markets can go down below 4400 on Monday and one can close these positions for good profits.

Another interesting strategy for next week is to buy Ranbaxy 540 Calls and 480 Puts at the same time. The stock till now has remained unaffected from the downpour due to Open offer initiated by Daichii which has started from 16th August.

Now, one can see some action in this stock in the coming week. 480 put is trading at around 6 Rs. and 540 calls for Rs. 4 odd. One can take positions on both sides for maximum benefit from the volatility.

In case, you have some views that you want to share about equities, please feel to write in your comments.

Wishing you a great trading week ahead!!!
Saayonara

A glimpse of the Past
Have good times come once again on the Dalal Street? The last week performance of Indian stock markets give indications of a possible revival, especially if we take a look at the Friday's trading. Despite the fall in US indices on Thursday night and bad inflation data, the markets managed to hold themselves pretty well on Friday.

What lies ahead?
Now what's next is the biggest question.

Has time come when one can start investing? Will markets able to consolidate and achieve new highs in the future? These are few questions that every investor must be asking himself.

My view is to "wait and watch" at this moment. One can invest but cautiously. Traders must book profits at the regular intervals. Because, there are several negative factors hovering around the equities that may pull it down.

Crude Oil has fallen sharply in last fortnight and chances do exist that Crude Oil may bounce back a bit to 120-125$ / barrel. If that indeed happens, then equities can see a sell-off once again because High Crude cannot live in harmony with high prices of equities.

Another negative factor is Inflation. Any sustainable bull run in equities cannot occur in the backdrop of high inflation and high interest rates. Hence, my view is that one should not build high hopes till the time, inflation cools down to below 8% levels.

Third negative factor are the elections in USA and India. The UPA government will be taking some steps towards reforms, but these initiatives will turn concrete only if UPA again comes to power. Hence, FIIs or MFs will only be putting money in equities, after seeing the outcome of the general elections next year. Hence, one is advised to maintain a "wait and watch" approach and closely monitor the movement of crude, inflation and elections.

Next week Scenario
The coming week may see some profit-booking. The indices have risen sharply, by about 15% in last 2 months and chances are imperative that some sort of profit-booking could be seen. Hence, my advice is to book some profits as well, especially in banking and real-estate sectors. Monday could be the day to do so, when markets are expected to open positive on account of sharp rally in Dow Jones.

Trading Strategy
Traders can buy 4400 Nifty Puts and 4900 Calls as a strategy. Nifty 4400 Put is trading at around 100 Rs, whereas, Nifty4900 Call is trading around 60 Rs. Thus, the total premium outlay comes out to be Rs 160.

Now, if crude oil goes below 110$ / barrel and no bad news come from US financial sector, then equities could see a fresh round of buying, which may take increase premium on Nifty 4900 Calls to 160-180 Rs. At that time, one can sell both the contracts to get the profit equal to premium in Nifty 4400 Puts.

Investment Mantras
I have been covering Karuturi Networks (KNL) for last few weeks. The stock is currently trading at 23 odd Rs. One can buy this stock with medium to long term perspective and target price of Rs 40-50.

Another stock is Balasore Alloys and Everest Kanto Cyclinder. Balasore Alloys is the subsidiary of Ispat Industries and generating more than expected profits for last few quarters. The stock is currently trading at Rs 55 and has a target of Rs 80-90 in next 6-9 months.

Everest Kanto Cylinder is another stock to look out for. The company is the niche market of manufacturing of cylinders for storing gases and inflammable liquids. The company Order Book is strong. The stock is currently trading at Rs 300 levels and can go till Rs 400 in next 3-4months.

Wishing you a Safe and Profitable Investing!!!

Weekly Outlook for Indian Stock Markets - 21st July to 25th July, 2008

The word “Deal” is buzzing everywhere in economic and political circles. Some deals are being called-off, some deals are put at stake and some deals are getting finalized behind the close doors. In this frenzy season of deals, the common man is losing his prestige as an investor as well as the voter.

First let’s discuss the deal which is being called-off. On Friday, Reliance Communication (RCOM) and MTM have called off the proposed deals between them after about 2 months of hectic negotiations due to legal and regulatory constraints. Surely, Anil Ambani would be a disappointed man, since he expected RCOM to be on a global stage after this deal. The biggest spoiler in this deal is none other than his own brother Mukesh Ambani who threatened to revoke ROFP (Right of First Proposal) if this deal actually goes through. Where this sibling rivalry head to in the coming days, it will be an event to watch out for…

RCOM stock may see some initial selling pressure due to failed negotiations, but unlikely to go below 400 levels, since it never went up in expectations of the deal. Rather, the scrip has declined from 600 odd levels to 450 levels during the time when negotiations were going on. Hence, the stock may see some bounce back like the sam way, Bharti share had shown after their negotiations with MTN were called off. Surely, I would compel to buy this stock at around 400-410 levels, if it goes down on Monday.

Another deal that is at stake this week will be “Nuclear Deal”. UPA Government after 4.5 years of failed political marriage has finally listened to his conscience and decided to pursue with the Nuclear Deal with USA. But before this deal finalize, the govt is required to pass the “No-Confidence” motion on Tuesday. If the government fails to win over “No-Confidence” motion, then this deal will definitely moved to the back-burner till the time new governments take over in USA and India. And surely, stock market would get a definite hit as well.

On the contrary if government wins the “No-Confidence” motion, then not only Nuclear Deal but various other reforms like Pension Reforms, Banking Reforms, etc would also be carried out by the government. And this will strengthen markets, which is currently down on knees due to global gitters. Hence, stock market will be praying for Manmohan Singh led UPA govt to win the majority and also, some of these deals.

Another type of deals that were seen during the weekend” is the ones going behind closed doors in Political circles”. The troika of UPA, UNPA and NDA are doing hectic back door lobbying to win over the crucial votes for small political parties, independents and opposition party rebels. Some are offered as much as Rs 100 crores to vote for them during the “No-Confidence” motion. Seeing this kind of dirty power-play between the parties, my faith as a voter has shaken. Many of us would be contemplating whether to cast a vote in the coming elections or not.

Anyways, there is one good trading strategy that can be taken this week. In this volatile market, it is better to trade in the index. One can buy 3600 Puts and 4300 Calls on Monday. According to the outcome on Tuesday, the markets will take a definite one-side moment. If government wins the majority, the markets will see a definite upside turn towards 4300 levels. Similarly, if government fails to attain majority, markets could come down to as much as 3500 levels. Under both the circumstances, one can close the positions and get the profit (after accounting for losses on the other side).

Wishing you a week of Successful Deals!!!

Weekly Outlook on Indian Stock Markets - 14th July to 18th July, 2008

In the background of economic turmoil, the Indian politics has reached its climax. Within a week’s time, the Indian Government ruled by Congress will be facing No-Confidence motion in the Parliament. With dark clouds of inflation, interest rates and slowdown looming over Indian economy, Indian stock market is wishing that government doesn’t fall down at this juncture.

But the fundamental concerns still remain the same whether this government remains or falls down. The inflation is inching up week-by-week. The economy is showing considerable slowdown. The latest example is the IIP data for the month of May that released last Friday, which indicates the decrease in industrial growth to 3.3% viz-a-viz 11% lat year. And the most important is the Crude Oil, which is showing no signs of relent.

The government is taking monetary steps, which is not enough. The government must clampdown on the hoarders who have been accumulating the commodity and then pushing up their prices. Mint published on Friday that Salt prices have been going up too. In country like India, where Mahatma Gandhi initiated the freedom struggle against Britishers in the name of Salt, the people (especially lower class) are again deprived of the basic item called Salt.

Anyways, back to the stock markets. What could be the strategy for the coming week? The best investment strategy seem to accumulate stocks but by hedging the index. The primary reason is the market sentiments. When markets go down, they pull down every stock, without any reason. Hence, to ensure, one doesn’t suffer any major losses, it is wise to either sell the July Nifty or buy 3800 Nifty Puts in a proportion of 70:30%. In other words, for every 100 Rs of stock you buy; also buy 30 Rs of Nifty Put (30 Rs is the contract value).

Another strategy that seems interesting is to buy Reliance Communication 400 Put and 500 Call Option. 400 Put is trading at around 9 Rs and 500 Call is trading at Rs 5. One can buy both the contracts to generate profits. Reliance Communication and MTN negotiation deadline is 21st July and contracts are expiring at 31st July this month. It is very likely that the stock may see some action around 21st.July.

If the deal goes through at favorable equity swaps ratio, the stock will see some tremendous trend. We must remember that it came down from 600 odd levels to 440 levels. If deal goes though, it can re-test the 500-550 levels. Hence, the 500 Call could fetch you more than 20 Rs. In such case, the net profit will be 20 – (9+5) = Rs 6 * number of shares.

On the contrary, if deal doesn’t go through, the stock could come down to 400 levels. In such case, the Put could be trading around 20-25 Rs again. Hence, the profit will again be Rs 6 * number of shares. Hence, the key factor that can generate profit in this strategy is the volatility in this stock. And the history is evident that ADAG stocks have been pretty good in this regard.

Wish you all a great trading week ahead!!!

Weekly Outlook on Indian Stock Markets - 06th July to 10th July, 2008

Indian Stock Markets seem living dangerously at the moment, especially after witnessing the kind of movement they showed during last week's trading. Markets were up by 5% on Wednesday, then down 4% the next day and finally closed 2% up on Friday.

Such kind of volatility is interpreted in different ways by Bulls and Bears. Bulls are calling it a "Strong Resistance", whilst on the other side; Bears are calling it a "Final Resistance before 10000 mark". Well, who is right and who is wrong, only the future will decide, but as investors, we must keep hunting for good stocks. First let's look at some of the sectors that are in limelight now a days:

Real Estate (Stay Away)
The sector that hammered the most in last few weeks is the Real-Estate sector. And there are some voices raised in the markets about the attractive valuations for this sector. No doubt as a trader, the sector may see some pull back, but fundamentally the sector has more downside risks that upside potential. The economy slowdown will have an impact on pockets of everyone, especially in the Middle Class. At the same time, increase in interest rates has further pull people out of the housing markets. Besides, real-estate companies have been facing problems due to rise in prices of Cement and Steel that have further increased their input costs. In this vicious circle of less demand and increased input prices, the companies may put brakes on their expansion plans. Hence, it is better for investors like you and me to stay away from this sector.

Infrastructure (Hold)
Infrastructure Sector has also got a severe beating like Real estate but holds much more potential than its counter-part. The governments (both State and Center) have been emphasizing strongly on improving the infrastructure, and that is the strongest prospect for this sector. Another advantage is that this sector is insulated from consumer's behavior and rather more dependent upon the economy. Hence, any consistent downside in the growth rate of economy can hamper the prospects of this sector, whilst on the other side; consistent growth rate will push up this sector. As of now, the growth rate seems OK (without taking inflation into account). If inflation gets controlled, the sector will continue to grow. So, any investor who is looking in horizon of 2-3 years, can start putting money in this sector. Companies like GMR Infra, IRB Infra are good stocks to buy at these levels of below.

Information Technology (Buy)
Information Technology has been the blue-eyed boy of Indian economy for last few years and is expected to remain so in coming years as well. The IT companies have been performing well consistently, albeit, have faced the forex crisis last year. Their low-cost services due to currency parity (difference between foreign currency and Indian currency), quality labor, will help these companies in growing in coming years. As an investor, it is better to put money in those IT companies which are well-diversified into various domains (like Telecom, Finance, Logistics). For instance, Satyam and TCS are better than Infosys and Wipro in terms of domain diversification.

Trading Ideas for the week
This week is expected to see some buying interests in some of the real-estate and infrastructure stocks like DLF, REL, GMR, JP Associates. One can trade in these stocks. The best strategy, though, is to hedge the portfolio by buying a Nifty Put for 3800 in the proportion of 1:3 i.e., buying 10000 Rs value of Nifty Put {(LTP+ Strike Price)*50}, along with 30000 Rs of stocks in the Cash market.

The stocks which are at attractive levels and can be accumulated for long term are IRB Infra, Karuturi Networks, Vakrangee Software, Balasore Alloys, DCHL, NDTV. These companies have shown consistent growth in last 2-3 years and have seen FII interest, despite the slow down.

Wish you a great investing and profitable trading this week!!!

Weekly Outlook on Indian Stock Markets - 30th June to 4th July, 2008

Sometimes, I wonder whether one should really be listening to the stock experts, brokers and economists who just keep murmur the new targets that stock markets will touch in the near future.The reason for such doubt is the pace with which these experts change their views on the channels.

Whilst the markets were bullish last year, these experts set new targets of 25000-30000 for the Sensex in 2008-09, sighting Asia-decoupling, strong FII inflows, etc as the reasons. And now when markets are looking bearish, the same stock experts are narrating stories about new lows, possibly in 4 digits,which markets could touch by end of this year, giving rising crude, inflation, etc as the excuses.

Sometimes, I doubt that these experts are paid well for creating such an atmosphere. Because, the inflation and the crude started giving ominous signs in the latter half of last year. Yet these experts came on the channels and talked bullish about the markets. Hence, I am slowly, but surely, starting having my own view point about the stock markets and economy than listening to the experts'advices and I am sure that many of you all would be having the same views about them.

Come let's have a rational discussion on the future of the Indian economy and the stock market. My view is that USA is artificially passing the inflation to the other economies, especially the Asianeconomies and Europe. On one side, the central banks all across the world have raised the interest rates, while on the other side, US cut its rates, hence increasing the money supply in the world, and giving further air to the inflation. The US policy makers want to curb the growth of the emerging countries through rising crude and ensure these countries do not emerge as the counter-part to USA.

There is no denying that the US economy is in dire straits at the moment. The fiscal deficit is at all time high and there is serious threat to the dollar reputation. Though, at the moment, dollar is gaining strength, but one thing is for sure that the moment interest rates go up in USA, the dollar will go down very quickly. The US cannot keep the interest rates low for long since, the inflation has gone out of comfort zone there as well and Bernanke would not like slow rate of growth and high inflation to persist in the financial system.

Hence, my long-term view for India and other emerging economies look strong. There are some very good companies in India that have made their mark in International arena. Information Technology is one such sector where Indian companies have offered the best services at low cost. Indian IT companies will stand to gain, if the companies world-wide resort to cost cutting, because this cost-cutting is done in areas like Customer Care and other back-office departments and various IT companies offer products in these domains only. Hence, any investor who is eager to invest can look at Indian IT companies for longer term perspective.

Another sector where Indian companies can do well is the Telecom and Media sectors. Telecom sector will definitely grow under any government - Left, Right or Straight. Hence, one can safely put in his money in this sector for longer term. Indian Media has emerged out as another upcoming sector in the last year and half. Many investors world-wide have increased their stake in this sector. Even in the current meltdown, the foreign stake in these companies has not decreased much, which indicates the bullishness in this sector.

Some of the stocks that can be purchased in the coming week are Vakrangee Software, TTML, Karutu Global, NDTV and Deccan Chronicle (DCHL). Vakrangee Software is the Banglore based IT company with domestic clients (CMP – 190). The company's major client is Election Commission. With elections in last one year, the company's hands will be full of projects from Election Commission.

Tata Teleservices Maharashtra (TTML) is another telecom company, which is offering good valuation (CMP - 25 Rs). The stock can be purchased with minimum target of Rs 35 in next 3-4 months.

Karutu Global has emerged as very few companies where FIIs have shown interest during this meltdown. The company is growing rapidly in the florocist industry. The stock is trading at Rs 25 Rs. and can touch 50 in next one year or so.

NDTV and DCHL belong to media industry. These companies hold good reputation in the media industry in terms of content provider. Foreign Investors and Global media conglomerates have shown interests in these companies. Recently, New York Times has bought some stake in DCHL. In the end, just want to conclude with a reminder that equities will again emerge, in an year or so. It's just the time to stay cautious and increase your investment perspective from 3-4 months to at least 1 year or so.

Wishing you a great Investing!

Weekly Outlook for Indian Stock Markets - 22nd-26th June, 2008

OK… So, the worst nightmare that the Indian stock markets had, has finally happened.

inflation numbers have touched the double-digit mark and already speculations are rife that it may touch 15% mark in the near future, especially if crude oil resumes its upward journey.

Under such gloomy environment, the million dollar question is that what should investors do? Is India shining story under threat now? Will government fail to curb the inflation? Will the stock markets go down to as low as 4 digits in the near future? And hence, as an investor, should I put my money in the stock markets at the moment or not?

Let's put out all our fears and ration them logically. Right from our childhood, we are taught to follow the paths of great men at the time of adversity. If we talk same in the context of stock markets, no one comes near to Warren Buffet who, with his unique style of investing, has able to provide rich dividends to his shareholders in all good and bad times. The primary reason, as he says, for this success is VALUE INVESTING.

Stock Markets, at every stage – be it bad or good, will continue to offer some stocks at good values. As an investor, we must learn to identify them and buy such stocks at regular intervals.

Like its past golden days, stock markets will not remain in the bad days as well forever. Soon or later, it will again start buzzing with the voices of optimism. If we look at the past, Indian stock markets are able to tide over various adversities like Harshad Mehta Scam, Ketan Parekh Scam, South East Asian crisis and IT bubble bust and yet, it managed to touch new highs. Hence, the lesson that the past teaches us is to remain optimistic. Invest in the companies that hold future and are offering at good prices.

This week edition will look into such stocks and sectors.

One of the sectors that need mentioning is the Telecom sector. The sector is bound to succeed in coming future. The telecom revolution is bound to happen under any circumstances and under any government. Even the pure Leftist-government will continue to encourage rural telephony and broadband. On the contrary, Right wing parties will pitch for telecom more aggressively than their counter-parts. Hence, a long term investor can look at the companies that are into telecom sector or offering assistance to companies belonging to this sector.

For instance, TTML is one good telecom stock, which is coming at good price (28 Rs). Slowly and Steadily, Tata Teleservices are able to snatch a good pie of customer base. Though, it is not near to Reliance, Bharti or BSNL in terms of the customer base, yet it is able to fetch good chunk of customers through its low cost services. Also, one must not forget the strong backing of Tata conglomerate, which may help TTML acquire some other telecom company much larger than itself. If that actually happens, the shareholders could get rich dividends as well.

Another sector, which is worth mentioning, is the Information Technology. The last year has been a pretty bad one for the IT companies. But with Rupee again depreciating, the companies stand to gain extra in terms of currency parity. Though, the major risk that this sector is having is the slow down in US economy, which may have a bearing on their customer base. Personally though, I believe that US economy slow down may bring more business to the Indian IT companies, since US based customers will resort to cost-cutting and low-cost services of Indian IT companies will help them get extra business from their US customers.

The front-line company that holds well in this sector is Satyam Computer Services. Unlike Infosys and Wipro, who are having major US clientele from financial sector, Satyam clientele also comprises of companies from other sectors like Telecom, Courier, etc. Hence, the company will not face the brunt of mayhem in US financial sector as deeply as some of its peers like Infosys and Wipro may face.

In mid-cap space, companies like Nucleus Software and Patni Computers stand to gain as well. Last year, the investors completely exited from these stocks. But now with re-emergence of IT, these companies may see heavy bout of buying than other IT companies.

Besides, there are few Indian companies that are doing well, despite the slowdown. Take for Instance, Karuturi Global. This Banglore-based company is the World's largest producer of Roses. The company has recently acquired land in Africa and looking to expand itself in Europe as well. The company exports largely to Europe and is insulated from Dollar-Rupee fluctuation. Karuturi stock is trading at 25 Rs (Face Value =1 Rs) and going by various research reports, the stock is poised to touch 35 in the near term (3 months).

Despite the setbacks, I would like to end this week edition with the note of Optimism.

It is good that markets have corrected in last 6 months. Events like Inflation, Oil crisis, Sub-prime will continue to come and offer long term investors some good buying opportunities into the quality stocks. Though, one must not lose "Patience" and invest after "Thorough Research".

Wish you all a very Happy and Quality Investing.