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 - 20th July to 24th July 2009

Friday's Review
Indian stock markets had a great run on Friday with benchmark indices going up by yet another 3-4%. Among the sectors, Bank Nifty was up by 4.5%. Leading the pack was ICICI Bank which has again roared back to 750 Rs levels. Overall, the entire week has been a memorable one for the markets as it covered up all the losses that it had made during the last week. Further upside from hereon would largely dependent upon monsoon and the global factors.

Apple and Yahoo are due to announce their results on Tuesday which would impact our markets on Wednesday. Crude Inventories data is also due on Wednesday. Crude has again picked up on Friday and trading at around 63 USD per barrel. In domestic markets, no major cap will be announcing their results on Monday / Tuesday, so no major cues other than monsoon.
FII View
FIIs on Friday were net buyers, albeit not the drivers of the rally. In the cash segment, FIIs were net buyers by around 150 crores. The buying, though a positive one, but not so great in the current rally. It seems valuations are the ones that stopping them to participate.

In the Index Futures segment, FIIs made net purchases of 700 crores, adding about 25000 new contracts. In the Index Options segment, FIIs were net sellers by about 330 crores, adding 30000 new contracts. The Open Interest for 4300 Put has increased the maximum by 45% on day-to-day basis. Similarly, the Open Interest for 4300 Call has decreased by 20%, primarily on account of profit-booking.

The above cues indicate range bound markets for the first few days of the markets. Traders can go short on Nifty around 4425 with stop-losses @ 4460 and target levels of 4350.

Stocks Ideas
Satyam Computers and Jp Hydro hit their target prices on Friday, giving gains of around 15% from recommendation levels. The current level do not justify the new recommendations, except for one which is given below:

Scrip Name - Buy/Sell - Recommended Price - Target Price - Stop Loss Price
Infosys Tech - Buy - 1825 - 1930 - 1770

Wishing you a great trading day ahead!!

Weekly Outlook on Indian Stock Markets - 29th June to 3rd July 2009

Last Week Highlights
The last week marked the expiry of June series. The June series was a lukewarm with indices remained range-bound and closing around May levels itself. During early June, indices once looked to break major psycological levels, but then later sucumbed to profit booking.

Now budget is just right at the corner, and markets are again gaining strength on hopes that new government would take positive measures towards reviving the growth. On Friday, we have seen strong buying by domestic and foreign institutions and this is likely to continue during the next week as well.

The sectors that really look promising is the Banking and Power. Banking stocks have been seeing good accumulation over the last few days, especially mid-sized PSUs like Andhra Bank, Central Bank, UCO Bank, etc. Similarly, Power stocks, except NTPC (as it is fighting legal battle with Reliance), are also seeing some good appreciation in last few days, including PTC, PFC, Power Grid and Reliance Power.

FII View
FII on Friday have been strong buyers in the derivatives segment. In the cash segment, Foreign Institutions purchased stocks worth 550 crores. Domestic Institutions, too, were net buyers by around 330 crores.

In the Index futures segment, FIIs were net buyers of about 1100 crores. Nifty and Bank Nifty have seen some long positions being created. In the Index Options segment, FIIs were again net buyers by 370 crores. Several out-of-money calls seen some good Open Interest build-up and premiums for those have also increased, indicating positive sentiments from the institutions.

In the stocks futures segment though, FIIs were net sellers by 285 crores. It might be done to hedge their index long positions.

The cues indicate further upside in the markets from the current levels, which can be considered as pre-budget rally. It is advised to the traders to keep booking profits at the higher levels and simultaneusly, buy out-of-money call options to hedge their positions on the long side. We might see profit booking coming in the markets after the budget.

Stock Views
On Friday, buy recommendations for Network18 and IVRCL Infra saw their target prices being hit. Those who have not booked profits in IVRCL can remain keep their positions open, by taking target price (364) as stop-loss. We expect this stock to remain bullish till budget.

Few new stock ideas for the week are:

Scrip Name - Buy/Sell - Recommended Price - Target Price - Stop Loss Price
M&M - Buy - 695 - 740 - 684
ABAN - Buy - 895 - 945 - 854
Moserbear - Buy - 93 - 102 - 86

Options Strategy
Buy Nifty 4200Put, 4700 Call and Sell two 3800Puts, 3600 Put - the combined strategy would give losses if Nifty remains range-bound between 4200 and 4600 levels. It will give unlimited profits, if Nifty goes above 4800. On the downside, it comes into losses, if Nifty goes below 3600.

The strategy can be viewed by clicking here...

Wishing you a great trading week ahead!!

Weekly Outlook for Indian stock markets - 4th to 8th May 2009

April Highlights
The April series has been exceptionally well for the Indian stock markets. The benchmark indices - Nifty and Sensex have risen up by more than 10% each during last month. Another encouraging indicator for the markets have been continuous buying by FIIs since last month. They have now become "Net Buyers" for 2009, which should be bring positive sentiments into Indian equities as of now.

The last week has been a truncated one for the Indian stock markets. We remained closed on Thursday and Friday and hence, have missed the rally that other Asian markets went through on Thursday. This might help the Indian stock markets in better opening on Monday than its Asian peers.


The next week outlook
Despite some encouraging cues, there are few worrying signs as well. DLF results, announced on Friday, have come as a shocker with its net profit declining by 93% year-on-year basis. This migh put pressure on other real-estate stocks as well.

Another worrying factor was the exports-imports data released on Friday. The exports shrank by 33%, while imports fell down by 32%. Though both exports and imports fall is syncronized, but it indicates the slow down in global trade. This might put pressure on IT and other export-oriented stocks.

Technically speaking, we may see a range-bound market in the coming days. Markets are likely to open gap-up on Monday, but may face its first resistance at around 3580. The next resistance level comes moderate at 3615-3630. Nifty then, face strong resistance at 3670, which could act as a show-stopper.

On the support side, the first support level comes at around 3360-3380. If this level is breached, the next support level comes at 3280-3300 which could provide strong support to the falling bourses.


FII View
Foreign Institutional Investors (FII) are trading heavily in derivatives markets since last few days, but are hedging their poitions quite well. If they are buying in Index futures, they are hedging their positions by selling Calls or buying Puts (to cover for the downside).

Hence, my view is the range-bound market till outcome of elections. One can build long positions when Nifty comes down in 3300 range, with a stop-loss at around 3250. Similarly on the upside, one can build short-positions around 3570-3600 on Nifty, with a stop loss around 3670.


Stock Ideas
On friday, Renuka Sugars and Austral Coke have hit its stop-loss targets, while ABG Shipyard, Tata Elxsi and M&M hitting its target prices. Few more stock ideas are given below:

Scrip Name - Buy/Sell - Recommended Price - Target Price - Stop Loss Price
Dish TV - Buy - 32.5 - 35 - 29.65
Balaji Telefilms - Buy - 43.75 - 54 - 39.65
Adlabs Films - Sell - 225 - 212 - 238
Sterlite Industries - Buy - 415 - 450 - 375
Aban Offshore - Sell - 417 - 365 - 438
Allahabad Bank - Sell - 53 - 50.65 - 55.45
Aurobindo Pharma - Sell - 223 - 209 - 235
Ballarpur Industries - Sell - 16.2 - 15.25 - 16.75
Bank of India - Sell - 241 - 231 - 251

Wishing you a great trading week ahead!!

Weekly Outlook for Indian Stock Markets - 20th April to 24th April 2009

Last Week Roundup
The last week had been a pretty range-bound for the markets, with benchmark indices gaining just 1% each. The markets have been facing tough resistance around the current levels and hence, one needs to tread cautiously from now on. The traders need to follow strict target prices / stop-loss prices on the open positions.


Key events for next week
There would be flurry of results that are expected to be announced during next week. TCS and Axis Bank will be announcing their annual results on Monday. Tuesday will see HCL Tech, Hero Honda, Rolta and Ultratech coming up with their annual results. These results could bring about the next trigger for the stock markets, either on the upside or on the downside.

Globally, the next week will bring some key events from US. On 22^nd April, we will see Crude Inventories data coming from US. On 23^rd, we will see release of initial claims data and home sales data from US government.


Battle of Bs’ – Bulls and Bears
The next week could see a break-out, either on the upside or the downside. The momentum that markets had built over last few weeks is finally losing its steam. It can be seen from the trading behavior on Thursday and Friday when markets have seen some serious profit booking coming at higher levels. Also, elections are just around the corner and everyone might like to sit on some cash before the elections outcome, which means we may see the up-side remaining cap at around the current levels.

Though, the encouraging factor remains the strong institutional buying coming from foreign players, which indicates that they are hopeful about a possible turnaround in the Indian economy in next 6-12 months. Most of this buying is coming from Asia specific hedge funds, which pulled out the cash from the emerging economies, in the aftermath of Lehman collapse. These funds are now using the huge cash surplus to invest in the Asian economies and broken-down stocks and hence, chances do exist that these funds may actually able to bring about next wave of buying coming into the Indian stocks.


Stock Views
The banking sector has seen some good buying coming throughout the last week. The Bank Nifty index has given the returns of more than 5% during the last week, while the benchmark Nifty index has given the returns of mere 1%. This trend is likely to continue during the next week as well.

Some stocks from mid-cap IT space have also seen some good open-interest build-up, especially in HCL Infosys that has seen the rise in Open Interest of more than 450%. One can buy some mid-cap IT stocks with a trading perspective.

On the other side, we might see some profit booking coming in those stocks that have risen tremendously in last few weeks and hence, advise to stay out of such stocks for a while.

Some stock views that I would like to share are given below:

Scrip Name – Buy / Sell – Recommended Price – Target Price – Stop Loss Price
Core Projects – Sell – 101 – 90.5 – 108.65
Skumarsynf – Sell – 29.15 – 26.5 – 30.5
Patni – Buy – 163 – 175 – 152
Nav Bharat Ventures- Sell – 187 – 173 – 197.65
ABG Shipyard – Buy – 116.5 – 125 – 107.75
BEML – Sell – 480 – 455 – 506
Cummins India – Sell – 212 – 195 – 222
Dish TV – Buy – 29 – 31- 27
Federal Bank – Buy – 173 – 182 – 166
GDL – Buy – 73.5 – 79 – 68
HCL Infosys – Buy – 85 – 97 – 78.35
Hindustan Zinc – Sell – 505 – 477 – 527
Indian Bank – Buy – 115 – 123 – 106
SREINTFIN – Buy – 38.05 – 42 – 34

Wishing you a great week ahead!!

Weekly Outlook for Indian Equity markets - 23rd to 27th March 2009

General Elections hold the key
The last week has been a good one for Indian equity markets. The benchmark indices have gained by more than 3% each, led primarily by Banking and Auto space. Mid-cap index too showed great deal of activity with many stocks gained by more than 50% within this week.

But the given rally is not due to any fundamental shift in the economy. It is primarily due to positive global cues in last fortnight and short-covering seen in the markets after re-testing the October lows.

The next fortnight could be critical for the equities worldwide. Whether the current rally consolidates around the current levels and then moves forward or it again fizzles out like what happen in the typical bear market, is to be seen.

Fundamentally, Indian stock markets are in disarray. General Elections are due in April and May, which might keep the markets within a range, even if global markets show some strength. On the contrary though, weakness in the global markets may actually accentuate the pain in the stock markets. Hence, investors may remain in sidelines till the time elections get over. The clean majority for either Congress or BJP would give strength to the markets, whilst third-front majority could be a troubling sign for the markets.

The coming week could be range-bound
The coming week may see Indian equity markets consolidating around the current levels. For Nifty, support again lies at 2680-2700, whilst it may show very strong resistance at 2950-3000 levels. Typically for Sensex, the support lies at 8500 levels whilst it may show resistance around 10000 levels. Also the expiry is due this week, which may further put markets under pressure.

Sector-wise, Finance and auto sectors may see some profit-booking coming during the week. One can pick some quality stocks in this space at lower-levels. HDFC Bank is always a pick at Rs. 800 levels. Maruti is also a good stock to buy around Rs. 680 with a long-term perspective.

Stocks Pick
Last week, Mcleod Russell, Akruti and Aptech Technologies have given us the maximum profit, whilst Aditya Birla Nuvo and PFC have given us the maximum loss.

Let’s look at some picks for the current week:

Scrip Name – Buy / Sell – Recommended Price – Target Price – Stop Loss Price
Canara Bank – Buy – 146 – 153 – 141
SREI Infrastructure Finance – Buy – 32 – 41 – 27
Jet Airways – Sell – 161 – 140 – 168

The coming week marks the expiry for the current month. Hence, it would be better to wait till Wednesday before discussing the Options segment.

Wishing you a great 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 - 16th to 20th Feb, 2009

Union Budget holds the key for next three months

After weeks of anticipation and speculation, the B-day has come. With elections coming by and economy facing global head winds, this budget holds the key. Almost every sector wants some favor from the government to help itself sustain in the current turbulent conditions, especially the real estate & infrastructure and export-oriented sectors. Another crucial aspect is that this will be the last chance for the government to encourage the economy. Once elections are announced in a weeks’ time, then the government might not be able to take any major policy decision / provide a stimulus package. All the other measures will be through RBI only till elections get over.

Amidst such scenario, this year’s Union Budget holds significance and may decide the movement of the markets for next 3-4 months. Hence, investors should attempt to resist the temptation that may come in near future and it is prudent to wait till the outcome of elections to invest. Traders should move with strict stop-losses and target prices to ensure they are able to book profits / losses at regular intervals.

Promising sectors for future
Some of the sectors that look promising are the infrastructure, cement, engineering and IT sector. These sectors have seen the worst and now available at attractive valuations. Also, these sectors could be the pillar of Indian economy on its revival course. Also, the successive governments will be emphasizing on spending the revenues in improving the Infrastructure, which would help Infrastructure, Engineering and Cement sector. Information Technology has been the sunshine sector of the Indian economy and expected to receive government’s continuous support. Hence, few stocks that can be picked from long term perspective are IDFC, Aditya Birla Nuvo, BHEL, Punj Lloyd, Infosys, Mphasis.


Short-term Views
Out of last few recommendations, Gujarat NRE Coke has hits its Stop Loss, whilst, Amtek Auto and Welspun Industries have hit their target levels. Few stock specific recommendations for the coming week is as follows.

Scrip Name – Buy / Sell – Target Price / Stop Loss
Kamat Hotel – Sell – 30 / 37
Hotel Leela – Buy – 23 / 17.5
Reliance Capital – Sell – 410/468
Sintex – Buy – 125 / 108
Sterlite – Buy – 205 / 265
Radico Khaitan – Buy – 74 / 68
Akruti – Sell – 1010 / 1085

Some Option based strategies are as follows. All are Buy specific strategies:

Sterlite 280 Call with Bharti Airtel 620 Put Or,
ICICI Bank 460 Call with Bharti Airtel 620 Put
Unitech 32.5 Call with Unitech 30 Put

Wishing you a great week ahead!

Weekly Outlook for Indian Stock Markets - 9th Feb to 13th Feb 2009

Learning from the past
Let’s dwell the past see what happened in last one year… Since January 2008, the stock markets have seen one of its worst phases. Every month, we went down by few percentage points and finally October seen the worst when stock markets fell down by almost 50% in one month.

Since then, we have seen some kind of support levels coming in the markets worldwide. For instance, we have seen strong support levels between 7500-7800. We have seen Dow Jones rebounding from these levels at least 4 times since November. Similarly, we have seen strong institutional support coming in Sensex in 8000-9000 range. Even the worst quarterly results and Satyam fiasco failed to break these support levels.

Another trend that we have seen in Indian stock markets is the formation of upper support levels creating after every correction. During the first fall in October, we saw strong support coming in 2300 levels in Nifty and 7800 in Sensex. The next test came in November when markets after coming down to 2550, rebounded again to 2800. The next fall in December took markets down to 2650 and from those levels rebounded to 3100. In January when Satyam episode rocked the markets, markets went down to 2700 and from thereon, we again saw markets rebounded back.

This formation of upper levels at 2300 à 2550 à 2650 à 2700 are good indications for the markets… But these are only indications!!! As an investor / trader, we must watch these levels closely and one can safely go long till the time these indicators go false.

The purpose behind this discussion is to observe the institutional response in each correction and formulating a strategy. The above discussion indicates that we can go long as far as this trend remains true.

Last week indicators
The fag end of last week had seen markets again finding good support at around 2750-2800 Nifty levels. The hopes of Stimulus package in USA and possible RBI cuts have again given strength to the markets. This trend may continue during the next week and we may see Nifty again attempting to breach 3000 mark. Amidst such scenario, one can go long safely on Nifty with a Stop Loss of 2750. Option traders can buy 2800 Call and Sell 3000 Call with maximum profit of Rs. 8000 on each lot-pair and maximum loss of Rs. 4300.

Few Trading Strategies
Scrip – Buy / Sell –Target Price / Stop Loss
Syndicate Bank – Buy –70 / 56
Noida Toll – Buy – 26 / 22
GTL – Buy – 235 / 208
Indotech Transformers – Buy – 315 / 280
Mcleod Russell – Buy – 55 / 45
Ruchi Soya – Sell – 19.5 / 24.5
Finolex Cables – Sell – 18 / 22
KS Oils – Sell – 38 / 45
United Phosphorus – Buy – 105 / 89
GVK PIL – Buy – 21 / 17
Vijaya Bank – Buy – 31 / 27
Ashapur Minerals – Buy – 21.4 / 18.5
Dr Reddy – Buy – 469 / 427
Gujarat NRE Coke – Sell – 21.5 / 24

Wishing you a great week ahead!!!

Weekly Outlook for Indian Stock Markets - 19th Jan to 23rd Jan 2009

The last week has once again concluded un-conclusive. The markets were clearly lacking direction and slowly platform is getting set for another fierce battle between the bulls and the bears.

The quarterly results are so far good. The strong numbers posted by HDFC Bank and Infosys have re-ignited the faith among the bulls that things are not so bad at the fundamental level. Similarly, bears are closely watching the events occurring in fragile global economy. Filing of bankruptcy by Nortel Networks, splitting of Citi group were the major blows for the bulls in last one week. It is also widely speculated that once dust around Obama regime settle down, bears may again attempt to gain hold over the markets. Amidst such scenario, volatility is likely to increase in the coming days. Hence, traders must keep strict stop-losses to prevent sharp losses in their portfolio.

Long-term investors must keep a hold the temptation for a while. Obama hopes are yet to turn into a major action. He is having loads of problems in its kitty and how he deals with it, will decide the final outcome of the markets. Also, elections in India are round the corner as well, As of now, neither of the two parties hold the clear chance of attaining majority. The mixed government could further strain our growth. Hence, long term investors can wait for a while or invest partially. It is better to keep the cash for further downside, if problem in USA or India escalates.

Let’s look at some of the trading opportunities below:

Scrip – Buy/Sell – Recommended Price – Target / Stop Loss

WIPRO – Sell – 245 – 215/255
UNIPHOS - Buy – 107 -120/98
RECLTD – Buy – 77 – 83/73
STER – Buy – 261 – 295/245
SESAGOA – Buy – 73 – 83/68
INDIACEM – Buy – 105-115/97
RENUKA – Buy – 65 – 73/61
GTLINFRA – Buy – 29 – 32/28
ERAINFRA – Buy – 69 – 72/67
RADICO – Buy – 69 – 74/65
ASHOKLEY – Buy – 14.5 – 16/13.5
GAMMONIND – Buy – 77 – 83/74
BALRAMCHIN – Sell – 55 – 47/59
AMBUJACEM – Buy – 71 – 78/67

Wishing you a great week ahead!!

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 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

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 - 05th May - 09th May, 2008

Hey!!!! Is everyone back???

Well, the most important thing about which every investor is concerned about is the re-emergence of FIIs in the stock market.

If we look closely at the FII investment data for the last few weeks, the data is not so encouraging but it is not discouraging either. The outflow of funds was severe in the months of January, February and March. But in April, the situation is somewhat good. Even if we look at Friday’s data, FIIs have been the Net Buyers in the tune of Rs 600 Crore., which indicates that they are again back on the streets hunting for good quality stocks.

The sector that has rebounded strongly after the January meltdown is the Information Technology (IT) sector. Almost all the frontline stocks like TCS, Infosys, HCL, Satyam, Wipro, have gained by almost 20-30% in the last two months. There are several reasons for it:

Dollar Appreciation
Last year, Information Technology had got a severe hit due to Rupee Appreciation. The Rupee appreciated to 39.30 / dollar in January, 2008 from around 44 Rs. /dollar in January 2007, which impacted the profitability of these companies a lot, since the revenues for these companies are in dollars.

The major cause of this appreciation was the tremendous inflow of funds into Indian stock markets, which put extra pressure on the local currency. But since January, the scenario has changed completely. The months of February, March and April have seen net FII outflow from Indian stock markets and that helped the Dollar in rebounding to somewhat higher levels. Currently, Dollar is trading around Rs. 40.50 a piece.

The temporary rise of Dollar from 39.30 levels to 40.50 levels will help IT companies in their revenues. Also, the companies will get some more time to adjust themselves in the new global conditions pertaining to currency.

Most of the IT companies now, are signing new deals either in the local currency or at the fixed currency price to save them from currency fluctuation. Many companies have also taken the route of derivatives to hedge their future revenues. In other words, IT companies are now trying to come back on track and the dollar appreciation will help them doing it.

Revival of BFI space
Sub-prime has hit the most to Banking, Finance and Investments (BFI) space and markets feared that companies in this space will resort to cost-cutting by reducing their technology bills. This factor prompted many experts to announce a bleak future outlook for the IT companies who have major clients in BFI space.

But till now, no major organization in BFI space has announced any major cut in Technology spending. And this has revived hopes among IT companies that the impact of sub-prime will not be much on them.

Support from Indian Government
Indian Government is giving its active support to the IT companies. The government has recently announced that it is extending the tax holiday for IT companies till 2010, which was earlier due to over in 2008. This announcement could be a major relief for IT companies, since the tax burden will be less for these companies and will help in earning more profits.

IT Stocks to look out for
This week, we will look at some of the stocks belonging to IT sector. One of the stocks that will definitely do well in coming days is TCS. The company has good mixture of products for various domains including BFI, telecom and retail. Also their clientele include big companies from Europe, US, Middle-east. Some of the Indian banks have also been using TCS product for their operational needs.

Also, the company has hedge its revenues to around 40 Rs/ dollar levels, which make them almost immune to currency fluctuation. Hence with such diversified range of products and clientele, the company will probably fare much better than its peers.

Also one can have a look at the companies that are working for local clients only and are doing quite well. Two such companies are Vakrangee Software and Tera Software.

Vakrangee Software works primarily in the area of digitization of records and has clients like Election Commission. It ensures safe and steady revenues from them. The company is also expanding in the telecom domains offering bill-digitization products to the companies.

Major FIIs have bought this stock around Rs 180-200. Currently, it is trading at around Rs 250 levels and has the strength to up to 400-450 levels in a years’ time.

Similarly, Tera Software offers educational products to government companies and is bound to do well in future, since the government is now actively looking to promote education in the rural areas. Kotak and other major Financial Institutions have purchased this stock around 80 Rs. It is currently trading at Rs 60.

Be the original
In the end, equities investments are always subjected to risks. It is better to listen to everybody, but follows what’s your mind says. Please do not use your heart, use your knowledge and logic before buying any stock.

A very good poem by Harivansh Rai Bachhan teaches a lot. In his poem called Madhushala, there are four lines:

Madiralaya Jaane ko Ghar Se Chalta hai peene waala,
Kiss path pe jaaoon, asmanjas mein hai who bhola-bhala
Alag Alag path batlaate sab, par main yeh batalata hun
Raah pakad tu ek chala chal, paa jaayega Madhushala

(To attain wisdom, you will be shown various paths by various people, but is better that you pick one path and follow it whole-heartedly. By doing this, you are destined to succeed because every path takes you to one destination and that is Almighty, the God)

If we mix this philosophy with investment, it can be said:
While investing, you will read various ideas, and various views, but it is better to build your own logic which your mind creates and then just follow it. In the end, you will end up with good returns from your investments. On the contrary, if you keep changing your investment style, you will end up with nothing, but only the wisdom.

Wishing you a happy investing!!!

Weekly Outlook for Indian Stock Markets - 14th - 18th April, 2008

Its official! With sun shining bright in the sky, summer is out on the Indian shores.

Though on the contrary, Indian financial markets have been seeing an altogether different weather this year. Today, the sky over Dalal Street is engulfed with dark clouds of Inflation, Credit Crisis and Lower GDP. It rained heavily in Late January and since then; we have been seeing occasional thundershowers hitting the Dalal Street every now and then.

Will this rain going to stop or will it take a catastrophic shape of heavy floods on Dalal Street, only time has the answer… The best what we can do is to carry an umbrella and rain cover, while going out for investing.

In investing terminology, caution investing and regular loss / profit booking has become the key to survival. Do not expect your stock to get double in 3 weeks and do not ever think that your stock cannot reduce to half of your invested value in 3 weeks. The danger of downside is much more than the upside now.

If we look closely, last few years of bullishness has created a strong sense of resilience and optimism within ourselves. Even today, we have strong faith in the Indian economy and look optimistic enough to be among the top 5 economies in the next 10-15 years. Probably, this aura of sanguinity has helped us in bouncing back after every deep cut.

This is exactly what we have seen during last week as well. Technically though, the last week bounce looked more like a short covering than consolidation and fears of another cut look quite real and close. Inflation numbers have gone from bad to worse and government is unable to cure this disease, as yet. Also, if inflation remains high, RBI may be forced to increase CRR rate during its annual monetary review on 29th April. If this actually happens, it will be quite a dampener for Indian markets.

Amidst such scenario, retail and HNI investors have a tedious path to choose. The Caution Investing should be the mantra for them. Pick good value stocks and invest in them partially. The concept of Averaging-Out will help you fetch a stock at the good price, because whenever any downpour comes; all the stocks go down, no matter how attractive they may seem according to the valuations.

Telecom Sector
The sector that looks really attractive for long term is the telecom sector. On of the most important reason for this is the tremendous scope of growth in this sector. As of now, the private sector has not participated in a big way in encouraging the telephony in rural and semi-urban areas. With stagnation coming in metro cities, the companies will be forced to look at small pockets for customers.

Also, the government will also encourage it in a big way, be it Left, Right or straight Government. Since, the sector relies totally on domestic consumption, and with huge Indian population to cater to, the sector has the capacity to outperform others in the future.
After the recent downpours, the stocks which belong to this sector are available at attractive prices. Buying TTML (Tata Teleservices) at 27 Rs will always be a safe bet for long term. It can’t go worse than this. Bharti with its rich experience in this sector will always be a stock to buy for a long term perspective. Even it is a very good buy at 700-750 levels.

Mid Cap Stocks
There are some good mid cap stocks that are in the offering. Two such stocks are Karuturi Networks and Vakrangee Software. In both these stocks, FIIs have hiked their holdings in last few quarters. Vakrangee is the long term bet. The company operates for domestic clients and hence, is protected from global slowdown. It may remain range bound for weeks (between Rs 170-220), but has the potential to cross 400 Rs in a year’s time.

Karuturi has now become the World’s largest exporter of Roses after taking over Sher Exports (Kenya based company). The company has been exporting mainly to Europe and importing raw material from US. Thus, apart from normal margin, it also stands to gain extra on the account of Euro-Dollar movement.

In the end, Equities have always been the game of High-Risk and High-Gain where only 1 out of 10 people earns and that one person takes away the profit of remaining 9 persons. To be that one person, you must be smart enough to differentiate between a trap and an opportunity. Those, who are strong willed to take their chances, are always welcome. Rest; please learn to contend with Bank Interests and Fixed Deposits now.

Wish you all a Happy Investing!!
Saayonara