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

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!!