Bizcues.com

The RBI move perhaps has changed the financial landscape quite significantly. All markets will react on Monday, but there is considerable surprise at what the RBI has done, in changing the CRR and the repo rate.

It is very bad news for markets. It is almost certain that stock markets and bond markets will both sell off on Monday morning. Being led by the rate sensitive sectors, Markets are in for a blood bath on Monday morning because this has come as a surprise, particularly because the markets were expecting that rates might actually start cooling down in the end of April as inflation cools down but the RBI has not even waited for its monetary policy meeting.

Continue Reading»

No comments »

Indian economy is a growth story which can easily go on for a minimum 10 years at an annual growth rate of 7.5-10%. This period is an enormous opportunity of earning through investments in equities. An investor is primarily concerned about the safety of his investments and maximizing his returns. These two are contradictory to each other, for high gains go hand in glove with high risk. However, a return of 20-25% per annum on your investments in equity markets is a reasonable expectation at little or no risk provided one follows the basic principles of investment elucidated below:

• Invest in companies whose P/E lie within 50% to 150% of overall market P/E with EPS of Rs.5.00 or higher for the last three consecutive years and a market cap of at least 1000 crores.
• Always have a diverse portfolio of 4-5 sectors with 2-3 companies in each sector.
• Be with market leaders of a sector.
  

In a large list of sectors such as oil & gas, energy, engineering, textiles, information technology, sugar, construction, infrastructure etc., it is important to make the right choice of preferred sectors.

Presently avoiding IT, textiles, exports etc. because of likelihood of rupee appreciation and slowing down of developed economies, is advisable. Shunning cement, oil & gas, sugar, fertilizer stocks is sensible as they are subject to government controls.

Infrastructure, power, construction, capital goods are the engines of growth and should be high on list of preferences. Real estate sector has been lagging behind all these years and is due for a lot of catching up and will grow at a rapid pace.

With crude prices rising and limited resources of all conventional energy sources, alternatives like wind power, solar energy, ethanol etc. will be in great demand. Investments in virgin fields of Logistics, Retail, Healthcare and Health insurance have stupendous growth potential in the coming decade. Prosperity will fuel up demand for banking, consumer goods, hospitality, tourism, media and entertainment industries.

1 Comment »

After months of mirroring the Wall Street (Indian markets going down with it), domestic markets ‘decoupled’ again this week from global markets (sadly, when the global markets were recovering). In the beginning of this year, the domestic markets were supposed to have ‘decoupled’ due to India’s high GDP growth trajectory. Continue Reading»

No comments »

Inflation numbers (at 7%) are still very much out of RBI’s comfort zone (of 5%) and show no signs of relenting. While the banking system is once again flooded with surplus cash flows, price levels too are rising to newer highs. CRR (Cash reserver ratio) hike seems to be next on the cards. This would help to reduce liquidity in the markets and hopefully in the process, lower inflation rates. Bad news for investors and retailers .. Stock markets may tumble further due to this news and the eventual liquidity crunch. Continue Reading»

1 Comment »

All human instincts are guided by the greed to earn more in quickest possible time span and various asset classes such as equity, commodities and real estate are the means to achieve such goals. Equity markets are generally a preferred mode because of possibility of investing in small amounts and easy liquidity.

Equity has its own risks and pitfalls made worse by experts, analysts and tippers guided by their own interests in the market and what a particular management would like them to say. Let us take the most recent case — when the market was at approx. 21,000, no one said that the market was over valued or there were excesses in the market. In fact, there were talks of market touching values of 30,000 and above and recommendations based on these projected values made investors pour in more money into the market. Now, all experts say that the market was grossly overvalued and had to correct. The same holds good for the IPO market. A recent case in point is that of Reliance Power. Before the IPO’s closing date, no expert said it was grossly over-priced. In fact, all along premiums of Rs 500 and above were being talked of. Was it for the good of investor or management or some High Net Worth Individuals? The naked fact is that about 70% of IPOs ultimately sell below their issue price for many, many years.

Let us be clear about one thing. The markets, experts, tippers and brokerages thrive on the Retail Investor for their shear numbers and accompanying investing capacity but work for company managements, HNI’s and organized sector of bulk investments which at best could account for 35-40 % of total market value. In every stock market boom, be it Harshad Mehta’s time, Ketan Parekh’s time or the recent one, more than 75% of the retail investors perish but in a nation of 1000 million, a few million newcomers appear after a gap of 2-3 years.

Does it mean that equity should not be considered as a means of earning money. No not at all. But one has to learn take one’s own decisions after considering both the speculative content and fair value appreciation content of the script under consideration. Dealing in equities with higher speculative considerations is a very risky approach and I am sure you would not like to be the unlucky buyer at peak of a boom for your buys may not be the favoured ones in the next up cycle of the sensex and you may end up with 75% erosion of your wealth.

No comments »

Its been a sorry state of affairs for global stock markets in 2008. All major market indices in the world have corrected significantly from their peak levels. The indices in India (Bse and Nse) crashed over 30 percent from their peak levels.

Negative investor sentiments, high interest rates, rising subsidy bill of the government (specially the fuel subsidy and agricultural loan waivers), cautious outlook projected by some large corporates, and elections due at the end of 2008 did not help the Indian markets.

The global markets (esp. US) plagued by negative sentiments and news flows related to the US sub-prime crisis, weak US economic data (job market data, property prices, and consumer purchase data) and the views and predictions of a slowdown in the US economy. Analysts feel this was bound to happen as the trading deficit of the US was on the rise from the past many years and it has reached USD 760 billion in 2006.This means a deficit of two billion dollars every day. This huge trade deficit triggered depreciation of the US dollar against all major world currencies (euro, Japanese yen, Canadian dollar, British pound etc).