Quo vadis

After a pretty long time I am going to post on this web page. It is the time when many people are quite confused with market direction. Indices are still searching for their bottoms and stock prices are breaking their lows each day.

Personally, in last few months, I have gone through a series of experiences, which has changed my perception regarding trading, investment and money-management in share market. I have inclined more towards trading and more precisely – day trading. I would try to write regularly on this page on my daily planning and idea on market movement. This would in a way help me to document my ideas in constructive manner and allow me to learning this market in more disciplined way. I would also try to upload charts from time to time.

Guru through a different glass

This was the second time I saw the movie “Guru”. Many people say, its on the life of famous industrialist Dhirubhai Ambani. Despite the official denial from the director-producers’ front I must say its the cinema that I enjoyed both the time, I saw. It has something that never fail to touch those who owns a vision and those who dream.

Our India has walked a long way since its independence. Lot many policies, five-year plans, budgets and governments have shaped the economy in its recent form. Licensing was the rule of the land even a few years back. Objective is not to get into the debate of justification of such policy-supported regulations. There are reasons to support such acts and there are logics to argue against those licenses. Despite all these, can any body deny a simple fact that these government backed barricades have actually given birth to the most deadliest evil of our time – CORRUPTION.

Corruption is a virus. It never shows off any symptom until the process of infection is well-finished. And once the infection is complete the growth of the disease becomes self-sustaining. It rots the basic health of human nature as well as social composure. We Indians are today enjoying excellent journey of SENSEX, people are talking about double digit economic growth, our roads are getting crowded by four wheelers of newer models and we are steering those vehicles on newly built multi-lane express-ways. Never we think about the wealth that remains sterile due to unaccountability. Unaccounted black economy comprises more than 20% of total Indian GDP according to conservative official estimation and is growing at a full pace. This much wealth, if added to the main-stream economy, can feed few more people, it can build up few more schools or it can open up quite a few health centres in remote places of our country. That will not only make those people’s life worth-living but will also educate them to defend themselves against the the clutch of CORRUPTION.

Truly,

We Don’t need No-Education

The week ahead : Market plugged, Writing Unplugged

Through last few days I haven’t seen you coming to my pages. And that off course is not your fault. You got no new stuff to read. But I must convey that author also has some compulsions. Blogging to its purist form is spontaneous. If author hits any literally blockade, that spontaneity gets hurt. And the result is my absolute absence from writing. I do not wish to feed you rubbish.

In my last post, you read that market might taste new highs and that high would be in the range of 4400 to 4500 for Nifty50. And market is moving in the same direction. Suddenly by the end of last week, a concern got spread regarding further Cash-Reserve ratio hike. And the reason, explained, was influx of extra liquidity due to timely maturity of G-Sec series and RBI intervention in Forex market.

RBI preferred to use Market Stabilization Bond(MSS) to shed any extra pound. But in near future is it possible to witness another CRR hike? And the answer has flip sides.

First of all, monsoon is going to touch coastal India within a few days. Farming activity will start in most of the parts in India. Working capital requirement will remain steadily high. Any CRR hike will push the fund cost up for agri-community. Government should not like to risk farm-production or political credibility before strong agri-lobby.

Opposite side is, during monsoon season prices of primary commodities increase in some parts due to supply side problem. That would effect the inflationary composure. If central bank start intervening forex market to restrict rupee appreciation, rupee liquidity will increase. And that might encourage speculative activity in both of the financial and commodity markets. So, CRR hike would become inevitable along with MSS activity.

Now central bank have to choose any of these options and market will react to both.

For the sake of soothsaying, market will remain positive for few more days but not expected to show any swift rally. So start preferring tortoise over rabbit. Any prominent correction should be visible only after mid-June or July due to first-quarter result related issues.

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The Week Ahead 14/05/2007 to 18/05/2007 – The Road Ahead

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This Friday people skeptically remembered the day on which many investors lost their shirts – the 11th of May 2006. And from the morning only, market-players were suspecting another horrific Black Friday. Back stage was ready as international markets were quite down in the opening. But things turned opposite as day proceeded. And after quite a volatile movement market settled for a slightly positive closing.

For few day, I am voting for a range bound market. And the range, I wish, market would follow is pretty narrow, 4000 to 4200 for Nifty50 with some plus/minus error factor. You can argue that how long market will abide
by such a limited range. I do ask myself this question. And indirectly, the answer to this question will be ” as long as fresh follow through buying is not coming”. And follow through buying is possible only when new outlook opens up in valuation front. Till date Nifty50 is trading at around a PE of 19.35 times. If we consider that historically PE resistance for Nifty stands at around 22 then upside is limited to 4650 at fair value. So upside is of 400-450 points only or rather of 11% approximately.

Add to that the currency risk and risk regarding Monsoon. Last week Met Department forecasted an early arrival of Monsoon. But as fate of many sectors like, FMCG, Cement, Consumer durables, Auto depend directly and indirectly on the Monsoon, market might become volatile as response to Monsoon updates.

So, ultimately risk adjusted return is lower then our previously calculated possible upside of 11%. And this can be a spoil-sport.

Primarily, I feel market will try to breach 4200 and taste a new high very soon. But market time is not my forte. Only thing I wish to do is to wait and watch. I would prefer your company.

The Week Ahead 07/04/2007 to 11/04/2007

During my professional hours, often come across people who want to make money from share market but lack basic sense of the market. When share price goes down they get panic and when price rallies they inactively keep thinking, how far price will go up. Thus waste precious time. Problem is not that they are scared to take position rather they don’t understand rule of the game. If you feel yourself as one of them then I am coming with a series very soon that will give you some “sense of the market“.

Coming back to the actual fact, last week market remained as per our expectation. It moved in certain predictable range. I have earlier said that boring days are ahead. And that’s the fact. Strong rupee is keeping exporters’ stocks down, no immediate solution is visible. But I must say, this situation is giving some splendid opportunity to accumulate front line IT stocks.

Other than ITs, you can also go for sectors like, telecoms, fmcg, and banks. True, telecoms are quite fair valued now but ranged market often offers values at discount!

Credit policy turned out as quite liberal and private banks can skim
the benefit of this liberal policy.

FMCGs do not have much downside unless monsoon turns up really bad. So you can opt for that even.

Apart from these, you can look for mid-cap even but certainly with bigger time frame.

Unless I am seeing no big change in the picture I will go with my previous outlook regarding market.

See you on next post.

The Week ahead 30/04/2007 to 4/05/2007

Market is wisdom…market is knowledge. Its a debatable fact that cumulative knowledge is more accurate and effective. But following cumulative knowledge often hint us regarding whats actually happening on the street. The theory of technical analysis stands on this simple fact.

Recently, our share market took another downturn on Friday and settled after a solid and steady decline. There were reasons behind this move. SEBI took regulatory move against some scrips following some alleged manipulatory rally in those scrips. Besides, Asian markets were not in good shape either. Resultant was Friday’s fall.

But apart from these news and facts, market players were not either much desirous of unabated rally. Matter of fact is that continued rally from 3600 made many players skeptical. They are much ready for ranged market. And thats what we are going to see in coming days.

Downside for spot Nifty would be 3900-3950, because results that corporate houses are delivering are not disappointing in any extent. Besides, annual credit policy for 2007-08 is quite encouraging. Accommodative monetary policy would boost market players and companies in coming days.

Appreciating rupee will ease RBI’s job of tackling inflation as strengthening rupee would make importables cheaper. Supply constraints of primary goods could be less chaotic. And price volatility should subdue.

Overall, picture ahead is less suffocating and bumpy. Market will remain stick to its range and continue testing our patience. Monday opening should be less dramatic. And After today’s of trading holidays, there should not be much hue & cry, visible, in last two trading days of this week. As we know, market keeps on fooling us around, any sudden irregularity won’t be difficult. But core tone of the market should be intact and ranged!!!

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The Week Ahead 23/04/2007 to 27/04/2007

Before anything, I must say sorry to my readers for a discontinuity in “ the week ahead” series. Due to some personal compulsion I failed to come out with the last week’s post. Despite my ever-increasing professional preoccupations, I would love to blog regularly.

Anybody, familiar to my viewpoint in February and March, would have recognized that I was expecting a bear phase at least for medium term, potentially for rest of this year. I even several times, indicated possible factors behind such potential bear run – technically and fundamentally.

But market is no easy game. Here, the most unexpected often becomes inevitable. And people see themselves in wrong foot. I must confess my bearish explanation didn’t performed well in reality. After several weeks’ of submissive move last week market shrugged off its weakness and once again enjoyed some power boosters.

Results are pouring in. Companies are not delivering bad numbers either. Some big-ticket companies have performed in line with the street expectation. Overall outlook is not plagued.

Inflation and interest rate are still not out of critical zone. But companies are seems like practicing to stand with these pressures. FCCBs and other external borrowings are providing some easy way outs for fund requirements. Inflation is still ruling above 6% level but recent monsoon forecast is in-line and satisfactorily steady. So, inflation expectation is not looking annoying even.

To sum it all, we are now out of danger (a tough call for me). And I feel I should grant leave to my bear-thoughts. But I am not steadily bullish either as I was in last few years. Level of participation has decreased in the market. People are not much confident. And after three consecutive crashes in a single financial year, investors are not feeling the mood to splurge easily in the market. So, no robust rally I am expecting in near future. Market will remain steady and will test our patience. Possibly, some ranged and flat moves ahead.

The Week Ahead 09/04/2007 to 13/04/2007

Technically speaking cash Nifty50 is going to build a head & shoulder pattern. It’s not fully built yet. Last shoulder is still in building phase. Whether a full-fledged pattern will form or not depend on the price movement in few coming days. Its possible that, price will take a positive break out. And in that case it might go up to 3900 or higher. If price trend forms an H & S pattern then 3600 or lower levels are on the card.

No positive impetus is around. This week two important news are due on Friday. Inflation data and Infosys result. They can leave potential impact.

On the other side, money market is easing. Call rate is going back to normal levels. Sudden appreciation in INR might get corrected. Some FIIs, mainly portfolio investors, who were earlier not taking money out, may choose to liquidate some part and buy dollar. If equity market continues poor performance than this can a good option, at least for the time being, for foreign portfolio investors.

This week, not much writing from my side. Expect, more posts through the week.

You can also visit me at: dipanksaha.instablogs.com

I do write there regularly.

The Week Ahead 02/04/2007 to 05/04/2007

RBI announced another hike in CRR along with an increased REPO rate and reduced interest payment on CRR balance. Inflation number has got stagnant at 6.46% level for last two weeks and no visible indication of it’s going down. Harvest season is almost at the door. Global production of food crop is not satisfactory and occurrence of speculative hoarding is pretty high.

On the other side, market sentiment is not exceptionally strong. In last few days volume was high when market was in positive territory, that might force people to think that sentiment has got back its strength, but actually most of the strength was rollover backed. Even, magnitude of rollover is poor this time compared to past experiences. People are just too averse to take risk. No direct indication of follow through buying.

From second week 2006-07 results will start coming in. Appreciating rupee continuously shadowing the prospect of IT sector. Recent monetary tightening will hit banking companies hard. Due to increased cost of raw material, steel producers are increasing steel price and that can be a positive factor in the market.

Tomorrow market will often at down side only, if everything remains same. And if market fails to sustain couple of hundreds points down side then we can expect some down slide. After that Infosys will publish 4th quarter result on 10th April, any below the expectation number can set the fire. Though, it’s also true that some real good number from Infosys and other companies can change the course overnight.

I beg your pardon for my pessimism, but I am seeing no sure reason to get engaged in festivity. Best of luck.

Crude oil crisis

2006 was the year of crude oil. The statement may look sarcastic but its true in literarily sense. Throughout the year speculators were optimist that in no time price of sweet crude oil will reach magic figure of 100$. Hedge funds, private commodity market funds and numerous small time investors queued to get a piece of that expected price appreciation. Then the time came and like any other overheated market crude price crashed. Some of the funds lost their shirts.

Inflation in crude price also raised question of economic vulnerability globally, many people chewed their nails in thinking what could be possible effect on business if situation persists. The reasons behind such international anxiety following any appreciation in crude price are mainly two folds –

· Alternative energy usages are still in nascent stage
· Price trend in crude oil hardly follows economic fundamentals

It’s the second factor that’s disturbing most. Nobody, out side the producing countries, has access to the actual database regarding actual storage of crude. These are recognized as safeguarded information. And that’s the major problem. As no body knows, how much of crude oil our planet is still holding, it becomes difficult to fathom actual supply potentiality and market moves on short-term political and geographical disturbances.

Same thing is again building up in Iran. Some small time political disturbance is again ready to heat up crude price. If Iran stays affirm on its stance and decline to accommodate UK authorities in military detention case, already politically disturbed West Asia may get into another air pocket. Crude price has already reacted positively to this issue and in future we can witness some more bumpy rides.