Correction to continue, but provides good buying opportunity - Indian Stock Markets bulletein for 27th Jan to 29th Jan 2010

The last week has been a pretty tough one for the Indian Stock Markets. First Barack Obama suprise announcement regarding curb on properitory trading and then, China's tightening norms hit the equities market badly. Indian benchmark indices fell by more than 5% after these announcements. Mid cap and Low cap stocks fell much deeper which indicates that correction is likely to continue.

The much needed correction is now on the cards and will give long term investors enough scope to invest into the Indian markets. The fundamentals remain strengthen, but one needs to remain cautious on the sector / company where one is putting its money. The domestic sectors like paper, media, FMCG, are fundamentally good one and less affected by global factors. Whilst the sectors like Information Technology, Oil, Pharma, should be avoided as these are more closely aligned with international events.

Technically also, NIFTY has break the major support levels. It is below 34 days exponential average which indicates that medium term outlook is not good. The next strong support is seen at 4700-4725 from where the markets can make annother attempt towards 5100.

Option traders can safely take bear spread strategy, buying 5000 Put and sell 4800 Put. One may also safely sell 5300 Nifty Calls Feb and keep 5250 as stop loss to move out of the strategy.

An interesting stock that is worth mentioning is "Valson Industries" It is a textile company with consistent profit records. Also, the company is giving 2.5 Rs dividend every year on Face value of Rs. 10. The stock is currently trading at 25 Rs which indicates dividend of 10% which is always more than bank rates. The stock is only traded in BSE.

Weekly Outlook for Indian Stock Markets - 13th April to 17th April 2009

Just few encouraging statements from US financial space and stock markets rallied as if nothing happened... The global markets, including Dalal Street have rallied almost 30% in last two months.

But the real test is just about to begin when the renewed optimism will be tested against the actual financial results due to be announced this month. US companies will see their first quarter results of this financial year, whilst, Indian companies will announce their annual results for 2007-08. These results will determine the financial health of the companies.

The changes in accounting standards in USA might also help companies in displaying healthier balance sheet than what it is actually at the moment. It is widely speculated that comanies may be allowed to defer the notional losses on the open liabilities / assets that they are carrying on the balance sheet for next few months.

Hence, on the backdrop of these events, we might see increase in volatility in the global week in the coming week(s). The coming week will see 1st quarter results announcements by GE (17th), Citi Group (17th), Intel (14th), Johnson and Johnson (14th) in US. The good and bad of these results will have an impact on the markets.

Similarly, in India, Infosys is due to announce the results on Wednesday (15th). The results will give an indication on how badly IT sector has been hit by the problems in US. Also, its guidance for the coming quarter / year will determine the prospects of IT sector in the coming quarters.

Hero Honda will announce its annual result on Friday and it is expected to announce the healthy results for this year. This company has been exception in Auto sector, due to its presence in robust rural sector.

The just concluded week has been a good one for us as well. Most of our stocks views have gone well. On Friday, SCI, Dish TV, have hit their target levels. The long term target for Jain Irrigation System has also hit its target price. Few new stock views are given below:

Scrip Name - Buy / Sell - Recommended Price - Target Price - Stop Loss Price
JP Hydro - Sell - 41.45 - 37 - 44.65
Yes Bank - Buy - 62 - 71 - 53
Meghmani Organics - Buy - 8.75 - 9.85 - 7.6
Jet Airways - Sell - 224 - 203 - 241.5
ABB - Sell - 463 - 438 - 480
Amtek Auto - Buy - 93 - 103 - 83
CESC - Buy - 248 - 264 - 229
GTL Infra - Sell - 31.3 - 29.55 - 32.55
IRB - Buy - 103.5 - 113.5 - 97

Few Options strategies for the coming week are as follows:
1. Sell Ashok Leyland 20 Call and Buy 22.5 Call - this is a bear spread strategy which is taken with a view that Ashok Leyland may trip on profit-booking this week.

2. Sell GVKPIL 27.5 Call and Buy 30 Call - this is again a bear spread strategy which is taken with a view that this stock may come down on account of profit booking.

3. Sell ICICI Bank 380 Put and 430 Call - this strategy is taken with a view that stock may move within a range in the coming days. This will be short term strategy in which one can move out, once you get 4-5 Rs. per pair. One can move out with loss if scrip able to cross 450 mark on downside / 350 Rs. on downside.

Wishing you a great trading week ahead!!!

Weekly Outlook for Indian Stock Markets - 16th to 20th March 2009

The power of the powerful can be judged from one of the events occured last week. Just one statement by Citibank CEO Vikram Pandit stating that Citibank is profitable for last two months brought a rally in the stock markets worldwide.

Does it indicate the end of the problem that US or the entire world is facing? No, it only indicates that future might not be as bad as the present. The main culprit behind the current situation are the financial institutions based in USA. When one of these institutions have shown profits, it brings along the hope in the world fraternity that things may be coming into normal. But we must not forget that these are only hopes. Whether these contain some substance is yet to be seen.

Skeptical experts still see pain in the economy. The optimism in the economy is at all-time low throughout the world. The jobs have been lost, companies have been reeling under the pressure of over-leverage, consumers in any part of the world have been cutting their spendings and concentrating more on savings which has further stranded the global trade and hence health of the economies.

Another cause of concern is the worsening situation in Eastern Europe countries. Recent IMF report suggested that these countries are facing serious debt and have asked for immediate help from International Monetary Fund (IMF).

Anyways, lets come back to the coming week. The coming week may carry the momentum in the first part of the week, which can push the Indian bourses to previous support levels. Nifty may again attempt to breach 2800 which can provide tough resistance. This level would indicate whether the given rally has some substance or not.

One can buy 2700 Nifty Put along with 2750 Nifty Call. This would cost the premium of 95 Rs, which could be maximum loss of around 5000 Rs per pair. If Nifty actually breaches 2800 levels, then it would go up to 2900 and this would bring the profits of atleast 5000 Rs. On the contrary, if Nifty fails to cross 2800, then we may see Nifty again attempt to go below 2600 and it may bring the profit of around 4000 Rs.

Few stock specific strategies for the coming week are given below:

Scrip - Buy / Sell - Target Price - Stop Loss Price
Indotech Transformers - Buy - 310 - 279
Kalindee Rail Nirmaan - Buy - 100 - 80
South Indian Bank - Buy - 50 - 42
Cummins India - Buy - 165 - 146
Hind Dorr Oliver - Buy - 38 - 31
Akruti City - Sell - 1025 - 1255 (One can also attempt to buy Akruti Options Put for 1100 for Rs. 10.)
LITL - Sell - 125 - 115
Jindal Irrigation Systems - Buy - 375 - 330

Wishing you a great week ahead!!!

Weekly Outlook for Indian Stock Markets - 24th Feb to 27th Feb, 2009

Introspection
The past week has not been good for the Indian equity markets. First, the lukewarm interim budget and then the renewed concerns of recession in US pulled down the Indian bourses. Both Nifty and Sensex ended the week, down approximately 7%.

Now, how's the road ahead looking like… With elections coming by, the government may not take any major policy decisions, and hence we might not see any support coming from the diplomatic front. There are certain reports in the media regarding yet another fuel price cut, but it might not help the companies much as the prices have already reduced substantially from higher levels.

At the financial front, Reserve Bank of India (RBI) is expected to cut the benchmark rates by another 50 bps to 100 bps, as inflation is already down to less than 4%. RBI may also force the banks to reduce the lending rates which will further ease the pressure from the companies and may stimulate the consumption cycle.

Globally, things are bad, which we all have understood and know by now. It took us more than an year to accept this fact. Now, further negative news may only trigger immediate downside, but it seems limited now. Dow is already sitting at six year low. It may go another 500 points, but fear of further downside is a more of a pessimistic view.

The ailing financial institutions have already go bankrupt and the government in US will not allow further destruction at the economic front. It is now actively putting in the money in the companies, buying stakes in troubled companies and ensuring that conditions do not deteriorate much.

Hence, this is my personal view that we are now in second phase of bear market where we may see "consolidation" happening for sometime. After about 13 months of destruction, we may see another 6 months of consolidation where we may see some negative news flowing in form of recession / bankruptcies or some positive announcements coming from the governments and central banks to stimulate the economy. The stock markets too may follow these events and can remain range-bound.

Amidst such scenario, an investor must learn to be patient and remain invested for at least one year. The traders should trade with strict stop-losses and must book profits at regular intervals.

Sectors to look out for in long term…
In this year of stimulation, the focus will be on Infrastructure and related sectors. The government would be spending money to prop up the infrastructure and invite the global players to invest in Indian economy. In the just concluded Bull cycle, the foreign players often complained of poor infrastructure in the country. The government will surely have a look at this weakness and improve the same as well. Hence, one may see some buying coming in Infrastructure stocks like GMR Infra, Reliance Infrastructure, JP Associates, etc.

Also the related sectors like Infrastructure Finance, Cement, Steel, etc may also benefit from the same. Hence, one can also invest in stocks like IDFC, IFCI, Ambuja Cements, ACC, Tata Steel, etc.

Another sector which is to look out for is Energy and Power sectors, which has now become a priority for every government. Stocks like NTPC, Power Grid, and Reliance Power can also be bought with long term perspective.

The week ahead…
The coming week could again be a white-wash for the Indian stock markets, if provisional data is to go by. Derivative figures on Friday indicate a huge build up on sell-side by FIIs. There have been increase of Open Positions of more than 80000 in Index Futures side and net sell of more than 900 crores, which indicate that FIIs are anticipating further downside in the Indian stock markets.

The level of 2700 is crucial for Nifty. If Nifty closes below this level and remain there for 2-3 days, then we may see bear cycle coming in Indian markets with maximum upside of 2800 and downside of at least October lows of 2300. The chances of market bouncing back from these levels are also high.

Hence, one can safely adopt a strategy for buying 2600 Put and 2800 Call for March. The maximum risk according to Friday's closing will be around 8000 Rs. per lot-pair, whilst maximum gains are unlimited.

On the stocks side, stocks from Infra, Pharmaceuticals, and Cement looks strong. One can buy these sectors in the coming week.

Wishing you a great week ahead!!!!

Weekly Oulook for Indian Stock Markets - 2nd Feb to 6th Feb 2009

The last week had seen January expiry, which ended rather smoothly. It was widely speculated that the month of January may see re-touching new lows, since the Q3 results were expected to come as worse for the companies.

Fundamentally though, the results announced by the companies were not bad. The companies are still reporting profits, though, not as good as the last quarter or year. The only real areas of concerns are those companies which have taken leverage on their balance sheet, for instance, Unitech and Tata Motors. Both the companies are facing serious credit crunch at the moment. Tata Motors has the strong backing of Tata group of companies but Unitech only hope of survival is the funding from PE firms which may help the company from the immediate cash crunch. But long-term scope of the company remains weak.

The February series is expected to do well. Though I may sound optimistic, but my view suggest that markets may touch new highs for last three months i.e. Nifty around 3250-3300. Similarly, for the Sensex, we may see the range of 10500-11000.

If we look at some of the previous data, strong delivery based buying is seen in Banking stocks, especially in PSU banks. The recent cut announced by SBI will trigger a fresh war in the banking sector. This will surely prop up the markets when they open on Monday. At this juncture, one can buy mid-sized PSU banks like Bank of India, Dena Bank, Allahabad Bank. The traders can hedge their positions by selling the Bankex or Bank Nifty future or buying their Puts of Strike Prices of around 10% lower than the spot price.

Another sector that looks interesting is the Information Technology space. HCL technologies has bounced back from 100-105 Rs twice. We may see an upside in this stock till around 130. One can put a stop-loss of around 105 Rs. One can also buy Infosys Technologies and TCS at the current levels.

The long-term investors with a horizon of around 1-2 years can buy frontline IT and Bank stocks. But they should not invest more than 30% of their intended portfolio. In IT sector, Infosys and TCS remain a good bet for long term. Whilst in the banking sector, SBI and HDFC Bank could be a better choice.

Among the last week recommendations, Era Infrastructure, MIC and State Bank have touched their targets. The other recommendations remain intact. Few recommendations for the coming week are mentioned below:

Scrip Name – Buy / Sell - Target price / Stop Loss
Ruchi Soya – Sell – 19.5/24.35
Axis Bank – Buy – 446/413
Finolex Cables – Sell – 18/22
KS Oils – Sell – 38/45
Rolta – Sell – 81/102
Nifty – Buy – 3110/2700
Nifty CA 3100 – Buy – 30 / No stop loss

Wishing you a great week ahead!!!

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 - 22th October to 26th October 2007

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

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

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

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

Wish you a very happy investing!

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

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

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

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

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

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

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

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

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

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

Wish you a happy investing this week!!!

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

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

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


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

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


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

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


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

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

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

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

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

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

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

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

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

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

Wish you all a great week ahead!!

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

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

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

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

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

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

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

Below are some upsides and downsides for the coming week.

Upsides

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

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

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

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

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

Downside

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

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

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

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


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

Wish you all a happy investing!!!