Google
 

28 September, 2007

INDIAN STOCK MARKET: DEFYING LAW OF GRAVITY:

Many pundits are baffled to see the pace at which Indian market is going up. Surpassing 1000 Sensex points at a record time (6 days) and still the market is not showing any let up. The much predicted profit booking session on this Friday was found to be elusive. The market has some discerning buyers. But interestingly not many dead wood were floating around this time, it is a selective surge forward.

To me the Indian stock market is actually behaving as it should behave, going up. I have my reasons and I am giving you only three

1. The Indian stock market is still accounting for a small fraction what the overall Indian economy actually is. Imagine a few public sector companies listed in Stock market; here I am throwing only two among lots BSNL and Railways. We should not forget the small scale industries which are not only profit making but also contributing a good fraction to GNP. What about cottage industries, unorganized transport industries, distribution network and so on. There are still lots of spaces to spread our legs.
2. We Indians are used to play it safe; we have some good savings tucked in bank fixed deposits, insurances or small saving accounts which do not fetch substantial return. Imagine the Indians discover the potential of stock market; our regulatory bodies are in right direction to prove that stock market is also a viable media to save or grow even for small investors.
3. Most of the developed markets are in a shabby condition, the investors are not very comfortable there and they are coming in flocks to emerging condition. The growing interest of them in Indian stock market is evident in the present rally.

So what is the optimum speed our market should go up? At an average 100 points of Sensex per day or 50 points or even 250 points to make our pundits comfortable. No one can have an answer.

So let us stop being Faberish till our fear over take our greed and bask in the rays of rising Sensex sun.

27 September, 2007

SPARK IN THE BANKING STOCKS-II

The recent news of ING Vysya trying to acquire stakes in Centurion Bank of Punjab and Kotak Bank and the subsequent denial (or no comment) from ING Vysya indicates that there are some activities going on in Indian Banking Sector. After some subdued session the Benkex is actively participating in the present rally. State bank of India is already shining with all the news of stock split, bonus and preferential allotment of shares. ICICI Bank is trading at all time high. The growing interest of foreign banks to have foothold in our capital market certainly needs some vehicle. The mid cap private banks are the best bet for them.

How and where the FIIs have their exposure is a fascinating study. I have come across such a study in the Hindu Businessline (link-here); it sported a table on some prominent FII moves. FIIs are following some stock specific strategy not the sector specific buying. However it was noted the FIIs avoiding the oil refining sector and is going slow in pharma and health care sector (exception Glenmark, Glaxo and Nicholas Piramal).

Coming back to our context the FIIs raised their stake in Yes Bank from 15.3% in June-06 to 52.51% in june-07, i.e. a raise of 37.21%. It certainly is a substantial increase. Yes Bank has already established a niche model of banking which is different from other banks and seems it has all the support from Rabo Bank. Mr. Rana Kapoor is an ex-Rabo Bank Executive and Rabo Bank has a substantial stake. The above presents some rosy picture for the stock holders of Yes Bank.

The Centurion Bank of Punjab and Kotak Bank will definitely qualify to get a hold from Brokers if not outperformer.

Earlier post: SPARK IN THE BANKING STOCKS

25 September, 2007

HOW TO TRACK BULK DEALS IN INDIAN STOCK MARKET

The small investors have many disadvantages in Indian stock market. They seldom get the correct news at correct time. Getting news late is equal to getting no news at all or at times results in negative action. Stock market in most cases reacts sharply to news and small investors left gaping in the dark and wondering why the stock price has reacted in a particular manner. (My earlier posts, here, here, here)
 
It is a known fact that the market mostly reacts to the tunes of big investors. The FIIs generally accounts for around 33-35% of total market turnover, domestic mutual funds around 10-12% and HNI have their mixed share. Stock price reacts positively if a particular stock is picked by these big investors and negatively if a stock is off loaded by them for the sheer volume traded.
 
It is also important to know how much big investors are holding a particular stock, or if the big investors have increased their holding in that particular stock.
 
There are few sites from which the above information can be accessed. These sites will serve the small investors better if utilized judiciously
 
 
Words of caution: It seems easy to piggy-ride the big institutional investors but actually not so. These information are available only after the deals are made, at the end of the trading hours and by the time most of the benefits generally erode away. For small investors so there is every chance of being in the wrong side of a particular trade.  One should remember that the mere presence of institutional investor in a particular stock does not necessarily enhance the intrinsic value of that stock. Big institutional investors may stay invested in any stock for many other reasons.


Download prohibited? No problem. CHAT from any browser, without download.

24 September, 2007

GREAT MONTHLY RETURN IN STOCK MARKET

It is heartening to see the present Bull Run of Indian Stock Market propelled some stocks to new highs. I have come across the following table in the Paisa Builder portal of IDBI, and found the portal is beautifully designed and many features are free (link here). Only hic-up for me till now, is the charting centre, which is Java based. It look me some time to download the charts, may be connection was slow at that time. The site is worth trying.
I have included the PE of the stocks in the table for our benefit.

The fast moving scripts generally poses a problem to small investors; we tend to book profit as the earliest. Part profit booking is the prescribed method here. I generally take out the cost of my total investment and be safe (i.e. I sell 50% of my holding if the stock appreciates 100% in three month time). One can think about his own way to be in safer position as the volatility of the market will be there for some more time.

Today’s Slogan: Better to be Safer.

18 September, 2007

SHAKY MARKET: BARTON BIGGS PERSPECTIVES

The world stock market is behaving weirdly since mid July. There has been extreme volatility at times which is infusing fear into the minds of small investors.

Why this volatility? Barton Biggs, the famous Wall Street strategist has the answer and has lucidly put in Newsweek (p-35, September 17, 2007).

At present stock markets are mainly dominated by hedge funds and trading desks. Those are run by people who are under extreme pressure to beat the benchmark or they may be shown the door by their intolerant clients. Most of them are not exceptionally brilliant and they mostly follow the simple method of momentum investing. They get panicked once the “market acts badly” or goes down and sell into the decline. “Selling begets more selling and vice versa”.
Conversely when the “market acts well” or goes up they are panicked again as they may miss the chance to make back their losses, the buying panic develops. Hedging of Indexes is another reason for the volatilities, the fund managers who held the illiquid bonds sold the major indexes short to safeguard themselves from falling income positions.

Barton Biggs is feels that “it is certainly healthy that the mortgage high yield debt bubble has been pricked”. The world economy is healthy and the developing economies are main driving force at present.

To him the small investors should not get swayed by the gyration of the stock markets and stay invested in reasonably valued good stocks in long term perspectives or in index funds. The big global companies and emerging market funds will serve the small investors.

Mr. Biggs is a respected name in American financial market.

17 September, 2007

INSULATED INDIAN STOCK MARKET

It seems that the Indian Stock Market has pulled up well from the global sub prime crisis faster than other developed markets, which prompted some pundits to state, that our market is well insulated from other major markets (ref). It needs some courage to come out with the above as the markets in the present context are inter-webbed as never before. If we look at the indices for the last three months we will have to agree to this theory. Lets look at our own Sensex against developed market indices….

We have a certain and definite advantage over them. Luckily we have our own well defined market for our products.

But what about our services sector? Let’s pick up the IT industries and check for their movement with Sensex, it is a bleak story over there.
Question can be raised how can our own index can overrule this vital sector, is our index is also manipulated (induction of Unitech in Nifty) to the disadvantage of small investors, who always look up at the indices for market guidance?

Should we be assured of that we are not insulated from the slow down of North American market at least for our flagship industry of IT solution providers. There will be certain growth in the other sectors.
But still it is a "India shining" story retold.

12 September, 2007

WAITING FOREVER TO BE DISCOVERED BY WORLD

Recently I have gone through a profile of Ramesh Damani (ET, 8th September,2007), the wily fox of Indian stock market. His conviction on the value of a stock impressed me. He is successful by any industry standard. His portfolio shows some unfancied stocks (like VST) which are giving a slow and steady run. His ability to identify the undervalued stocks has made him some fortune. Examples SBI (last market correction) and TISCO (after Corus deal), he picked them up not so long ago.
There are many undervalued stocks if you look into the market; they are also featured by any finance periodicals. The Outlook Money in their one of the August issue has identified six such stocks which are not fancied by the market though their valuations are very attractive. The author lacked conviction to suggest those stocks and recommended caution while investing in them. For our benefit let me list those stocks:

ANSAL HOUSING & CONSTRUCTION
FCS SOFTWARE SOLUTIONS
GIC HOUSING SOLUTIONS
SANGHI INDUSTRIES
SREI INFRASTRUCTURE FINANCE
TELEDATA INFORMATICS


Except Teledata and SREI all the other stocks were showing negative trends though on paper they have excellent credentials in them. They all have the potential to become multibaggers. But still they are unfancied by the market, they are waiting to be discovered for a long time. One will agree one year is a long time in a Bull Market like ours.
What matters is the visibility of a stock to be successful in the market. To me the stock should be visible to big players and which they can manipulate if required.
What is best for a small investor: to invest in a value stock like Mr. Ramesh Damani or in a visible fancied stock which has already started its run?
In the first case the investor may have to wait for some really long time because his thousands and lakhs will not impress other small investors.
In the second case he will make some quick bucks if he is careful and exit the stock well ahead of time. (Remember the greed and fear theory?)

The choice is on the Small Investors.

09 September, 2007

WHERE INDIAN STOCK MARKET IS HEADING

When I took a hiatus from this blog, the Indian market moved like a yo-yo. The whole world financial market was in a doldrums. Panic selling out weighted the actual problem. The reason, as aptly put up by George Wehrfritz in Newsweek is - "The force that tethers all of these debacles to the growing number of Americans who can not pay their mortgages is one that increasingly sets the cadence for global commerce: risk." Now-a-days the credit risks are spread as tradable product to the willing customers. This dispersion has a cascading effect to the whole world financial market.
 
Luckily the American Central Bankers pumped liquidity (a staggering $ 325 billion) into the system and the Fed raised hopes for a rate hike. The news simply pumped the much needed air into the Indian bubble. The stock market rallied for continuous eight days. It now seems that the market tank was the much needed correction. 
 
But there are words of caution flying around like – "fourth generation financial crisis", "US economy knocked into a serious recession", "crisis beyond today's bad debt", "cusp of a system changing crash" etc. But issues like how the plunging stock price will affect the large economies vis-à-vis emerging markets are not still very clear.
 
It seems the American market is certainly not over the hill. The ensuing crisis in Asian market raises question about the ability of Asian markets to stands of its own. Rise of China as manufacturing hub of the world and India as the global service provider was the answer to international financial reorientation. But both the economies are still heavily dependent on North American and European markets and will be so for at least for some time to come.
 
The complex web of international financial market is sure to leave some mark on Indian stock market. The use of complex securities as buffer to global turbulence leaves a question mark on the efficacy of the present financial system (here I means the Banks). There will be a contradiction between the old guards and the new evolving financial frameworks. It is better if the old guards viz. the financial institutions understands and prepare themselves for new financial order (sooner the better) they will survive and prosper, otherwise they will be doomed and with them the helpless and poorly informed small investors.


Did you know? You can CHAT without downloading messenger. Click here