INDIA
Our web coverage of India is courtesy of Taran
Marwah [alternate email: Taran]
Last Updated:
12/11/2006 11:50:03
Mon, 18 Apr 2005 19:24:25
GMT
Foreign investors may invest
and trade India through Country Funds
(IIF, IFN, IGF, JFI), or individual stocks with ADRS on the NYSE such
as ICICI (IC) or Nasdaq listed companies such as Infosys Tech (INFY)
and SATYAM INFOWAY (SIFY). To track the Indices and Prices of shares,
visit
Bombay Stock Exchange
(BSE) and
National Stock Exchange
of India (NSE).
DECEMBER 2006
BSE SENSEX closed today – Friday 1st Dec’06 at a
lifetime high of 13,845. Up 5.40 % from 3rd Nov’06 close of 13,131.
History was created today at both BSE and NSE. SENSEX today tested a new lifetime high of 13,858 ( just 142 pts.
short of 14,000 mark) on an intra-day basis and so did NIFTY at 4000 level.
For the period under review the high and low for SENSEX were 13,858 and 12,950
respectively. The Indian stock markets were on fire in Nov’06 as in Oct'06.
SENSEX just fell short of 14,000 mark ( R3 for last month ). Briefly - Real
Estate, Banking, Cement and Infrastructure stocks were on fire testing their
life time highs. Other sectors, which were also in demand, were – Two Wheelers,
Media, Telecom and LCVs. However the equity market lacked depth. Only a handful
of mid-cap stocks apart from the blue chips were in action. Sugar and Metal
stocks were weak in Nov’06.
At this level of SENSEX the Indian Equities trade at about
20 times their P/E multiples for 2007 earnings as against 10 - 14 times for the
rest of Asian Markets. The Indian Economy has grown at a fantastic rate of 9.1 % for H1 for the current fiscal, as per
figures released by Ministry of Finance, Govt. of India. The annualized GDP
growth rate as anticipated for this fiscal by GoI is now revised at 9.0 % as
against 8.0 % at start of the financial year. This is indeed commendable as
agriculture sector is lagging and exports are down on Q2 to Q2 basis for the
current and last fiscal. This P/E multiple of 20 for ’07 earnings for Indian
Equities makes me nervous. This figure is not justified as per my understanding.
We have to be realistic with comparison to BRIC economies and other Asian peers.
I still stand by my word that Indian Equities are in a “Bubble Zone”. There can
be a savage correction from 14000+ levels.
FIIs pumped in US $ 2.03 billion into Indian Equity
Markets in Nov’06. This is the highest monthly inflow by FIIs in this calender
2006. Hence the SENSEX hit new highs on account of this FII liquidity.
In Oct’06 FIIs pumped in US $ 1.78 billion into Indian Equities. Total FII
investment into Indian Equities till 1st Dec’06 calendar is US $ 8.70
billion. In calendar 2006 – FIIs pumped in record US $ 10.70 billion. In
calendar 2005, new FIIs registrations
with SEBI are 170. Total number of FIIs registered with SEBI as of date is 993. Domestic MFs only invested only
US $ 72.0 million in Indian Equities in Nov'06. Looks like they are following '
Wait and Watch Philosopy'.
My question is how many
of these FIIs registered with SEBI ( through their Mauritius branch offices )
are genuine FIIs and not are front companies of Indian politicians, underworld
and businessmen ? It is worthwhile to
mention here for retail investors that 90 % of
all FII investments into Indian Equities is through Mauritius – a tax
haven with which Indian Government has signed a DTAT i.e. Double Taxation
Avoidance Treaty. Why the same treaty is not in place with other global tax
havens viz – Isle of Man, British Virgin Islands, Dutch Antilles, Bahamas,
Gibraltar etc ? Can someone from the Indian Finance Ministry answer this simple
question for me for the sake of millions of small investors in India ??? I smell
a rat here !
I am sure that there is a nexus between Indian politicians
and the businessmen/underworld for keeping Mauritius as the safest haven, so as
to launder ‘slush funds’ into the Indian Stock Markets. History will endorse my
statement as above one day !
I do not deny that
the Indian Economy is the second fastest growing economy in the world after
China and also India is a functional democracy. As per my limited understanding
the P/E multiple of 20+ does not even justify end 2008 fiscal earnings. Please
note that - BSE SENSEX has moved up from a level of 8929 as on 14th June’06 to 13,845 as of today
in less than six months. This is a whopping increase of 51.00 % - Out performing all Global Equities Indices !
Please correct me if am wrong on this figure.
Investors forget again and again about India’s macro level
economic parameters. One cannot ignore these fundamentals in the event of a
robust 9.0 % annual GDP growth. Our fiscal deficit is still a cause of serious
worry. The biggest hit to the soaring fiscal deficit this financial year is the
implementation of the ‘populist’ measure by the current coalition Government in
New Delhi – “ The Rural Employment Guarantee Scheme”. This translates to a
direct extra expenditure by the GoI this fiscal to the tune of US $ 1.20
billion. This is the on account of running a coalition government in India.
Leftists have stopped all reforms in India and the Indian Prime Minister has
admitted that he cannot tread on a path, which is not approved by the Leftists,
who support the current Government in New Delhi, India. Secondly - India still
is a deficit Current Account Economy. Exports have dropped in Q2 of 2006 vis a vis Q2 of fiscal 2005. This may be
on account weak US $ and signs of slowing down of the American Economy. India
cannot be insulated from the world economy today. For the past few months SENSEX
is on a brisk cantor ignoring all global equity indices.
I still have not finalized my note on India’s red-hot ‘Real Estate’ Sector as I am
still waiting for the " Real Estate Bill 2006 " to be passed by GoI.. Real
Estate prices are shooting through the roof in Indian Metros and also Tier II
and III cities in both residential and commercial space for the past two years.
In some towns and cities in India the land prices have appreciated by more than
200 to 300 % in the last 24 months. Some listed real estate stocks have jumped
by 1000 % ( e.g. UNITECH ) in the last one year or so. These listed real estate
companies are around twenty in number at BSE and quote with P/E multiples of 100
to 300. This is just like the ‘dot com bubble ‘ of 1999-2000. Just for ready
reference – Commercial Office Space in posh Nariman Point in Bombay is a shade
lower than prices in Mayfair in London !
The Indian Govt. is also worried about speculation in the
Real Estate Sector and is putting checks in place through the PSU Banks, which
have a near monopoly in the Indian Economy. Directives have been issued to the
PSU Banks from the Finance Ministry recently that they should extend credit to
the real estate developers and builders with stipulated collateral in place.
I think the directive is too late. The ‘rabbit is out of the hat’ or you
can say ‘the bullet has already left the barrel’ ! The prices are at
astronomical levels and crash is imminent as per my understanding of the real
estate sector. Anyway - Better late then never ! Also the Asset Securitization
Bill has been further armed for Banks to attach the property/land assets of
defaulters working in consonance with Debt Recovery Tribunal, under the law of
the land. This gives more powers to the PSU Banks to reduce their NPAs. Private
Banks in any case are not lending funds to real estate developers and builders
since the past two years without proper collaterals.
I may be sounding a bit pessimistic and over-cautious to
the investors who are more or less fully invested in the Indian Equities and
Real Estate with little cash in hands. I again would like to mention that –
Indian Stocks and now Real Estate also are in “BUBBLE ZONE” as was the case in
1999-2000 with the ‘dot com’ sector. I advise investors to be cash rich and
preserve their capital.
Stay invested in Gold till mid 2007. You will see a level
of US $ 800 as predicted in Oct’2005. It is trading today at US $ 645
pto.
Crude held US $ 58.00 pbbl as
predicted in the last month’s forecast. It closed today at NYSE at US $ 63.00+
for Jan’07 deliveries. The GoI reduced the prices of Gasoline and Diesel in end
Nov’06 as Crude prices have cooled from US $ 78.00+ to around US $ 60.00 since
Mid-July’06 to date spot. This was also a plus for the equity markets although
still at these prices GoI subsidizes SKO and LPG. I am sure till the current
Government is at the helm of affairs subsidies in Petroleum and Farm Sector
cannot be cut further. The Leftist will not allow this to happen. Without the
support of the Leftists this UPA led alliance does not have the numbers to stay
in power. What can the Finance Minister do to lower the Fiscal Deficit with such
huge subsidies in the economy ? The
Finance Minister in my view is still doing a jolly good job inspite of
constraints from the Leftists. .
I will advise when to enter the Indian Equity Market with
specific stocks after the correction is over, if any. For traders the levels to
watch for BSE SENSEX for Dec’06 are as follows :
R1 14000 R2 14500
S1 13600 S2 13400 S3 13000
THINK SWISS AND PRESERVE YOUR
CAPITAL.
The Indian Equity Markets are not moving in sync with the
global and especially Asian and other BRIC Markets. The SENSEX is on a roll with
a strong bullish under-current. I am not recommending any stocks to be purchased
at these levels. Take most of the profits ‘off the table’ and enjoy your winter
vacation in the Swiss Alps !
Special Update on Participatory Notes( PNs)
:
My apprehensions about 'slush funds' entering the
Indian Equities have been endorsed by a leading newspaper in India - The Times
of India ( New Delhi edition dated 12th Nov'06). I mentioned about this issue in
my last update. This is a very serious issue as the Indian Markets are driven to
unrealistic levels by these 'slush funds'. The current valuations of Indian
Stocks or Indices are not justified as per my understanding. The BSE SENSEX or
NIFTY are currently at their life time highs - thanks to the 'slush funds'. The
Indian Stock Market is manipulated as per my understanding. The Indian GDP is
growing at 8.0 % per annum and the economy is ''On a Roll" ! I totally agree
with the pundits in India on this issue.
My fear is that the Indian Stock markets
are partially controlled by the political and business mafia. This is the
real issue as far as I am concerned. Just imagine this mafia taking the BSE
SENSEX to 14,000+ levels and then off loading their holdings. The retail
investor or Indian MFs will be at the receiving end ! The retail investor always
loses his hard earned money by entering the Stock Market at higher levels
because he does not want to miss the bus ! Greed is the main culprit. Stock
Markets Operators are exiting at heated levels and the poor retail investor is
entering the Market at these crazy levels - He does not wish to miss the bus !
I am just cautioning again the retail investors
that please stay away from the equities till further advise as I feel this
'Equity Bubble' will burst at any levels between 13,500 to 14,000+
levels
I am printing verbatim an article as below
on the subject as above :
Tax havens under
watch for money
laundering :
Even as the government is debating a law for
security scrutiny of foreign investment, Reserve Bank of India ( RBI - India's
Central Bank) and SEBI are being asked by the finance ministry to keep a watch
on money laundering from tax heavens.
The move,senior finance ministry officials said,
marked the first instance of the government's economic set up acknowledging that
tax heavens were possible routes for money laundering - a concern expressed by
intelligence agencies in the past few months.Agencies involved economic investigations have in past expressed fears
that the tax heavens were being used to route and re-route ill-gotten wealth (
slush funds) by the underworld, politicians and businessmen. In fact ,
they have expressed fears that the funds were flowing into the
Indian Stock Markets through participatory notes ( PNs) issued by
FIIs.The draft National Security Exception Bill, circulated by the
National Security Council Secretariat, has also suggested that RBI and
SEBI should keep a watch to check the actual source of
PNs.
PNs are used are issued in lieu of money received
from foreign nationals who do not wished to be identified. The money is then
used to invest in Indian Stock Markets. A Finance Ministry background paper has
mentioned that the two regulators are being asked to prepare a negative list of
'tax heavens'. Officials, however said that the list was not for purposes of
restricting investment flows, either direct( FDI ) or portfolio( FII ), but
for keeping a tab on money launderers.
The move could well be a negotiating stance adopted
by India to pressurize Mauritius - which is the largest source of foreign
investment to India to amend the Double Taxation Avoidance Treaty. So far, New
Delhi has been unsuccessful in convincing Mauritius to amend the pact, which
even the Indian Finance Minister Honorable Mr. P. Chidambram said could be
misused by companies and individuals. But he has expressed helplessness in
amending Agreement unilaterally given the strong political and diplomatic ties
with Mauritius.
NOVEMBER
As predicted in the last update the BSE SENSEX
tested 12,900 level and closed today - Friday 3rd Nov'06 at a new life time high
level of 13,131 up smartly by 6.1% from 6th Oct'06 close of 12,373. In the
period under review the high and low for BSE SENSEX were 13,146 and 12,261
respectively. FIIs pumped in US $ 1.78 Billion into Indian Equities in the
calendar month of October 2006. This is inspite of India being the most
expensive equity markets in the emerging markets worldwide. I feel the Indian
Equities are in a "bubble zone" as explained later in this
update.
The Indian economy is on a roll with good set
of Q2 results and that the Indian GDP will grow annually this fiscal by 8.0 %.
This said and done, the valuations of the Indian Equities at the current level
cannot be justified. This covers all frontline SENSEX stocks and quality Mid Cap
Stocks in various sectors.
The FIIs have already pumped in US $ 2.78 Billion
in Q2 of the current fiscal ( July-Aug-Sept'06). This is a record in the history
of Indian Equities since the bull run started in April 2003. During the same
period as above Domestic Funds and MFs pumped in $ 2.28 Billion ( equivalent in
INR) into equities.
I have some serious doubts that the above FII
figures are genuine inflows from foreign investors. India generates a lot of
'slush' money in its economy, which is parked overseas in tax heavens or other
countries in foreign currency. Some of this money could be entering as FII
inflows from tax heavens like Mauritius. The FIIs buy Indian Equities through
" Participatory Notes ( PNs)" as per SEBI Guidelines since
1992. These "PNs" are issued by "Sub Accounts"
of FIIs as instruments that can trade in Equities in India. The Indian
Government bars individaul entities( HNWIs) to register with SEBI as "Sub
Accounts" of FIIs. This "PN" route does not expose the credentials of the actual
buyer of Indain Equities. Under this garb of PNs - dubious buyers maybe pouring
billions of dollars in Indain Equities. This "PN" route should be abolished as
recomended to the Finance Minister the the panel set up for "Full
Convertibility" of the Indian Rupee ( INR). I am sure substantial 'slush' money
by Indian operators in entering Indian Equities through this "PN" route. If this
"PN" route is abolished, I bet the FIIs will pull out funds from the Indian
Equity markets. This will lead to a crash in the SENSEX by 30 % or more. But I
think this is less unlikely to happen as the Indian Finance Minister will not
abolish the "PN" route for FII investment in India. Also the Indian Rupee is not
convertible on "Capital Account" as yet and hence overseas HNWIs cannot buy
Indian equity directly. They have to go through the FIIs registered with SEBI in
India - MERRIL, BEAR STERNS, GOLDMAN SACHS, CLSA, PRDENTIAL, FRANKLIN TEMPLETON,
FIDELITY, NOMURA etc.
It is worthwhile to mention here that India is very
low ( 3.3 basis pts.) on M/s. Transparency International's 'Corruption Index'.
(Lower the Index - higher the rate of corrution i that nation). The most corrupt
nation ( Haiti) has an index of 1.3. Pakistan is 2.2 on the coruption
index.
I have no doubt in my mind that substantial 'slush'
money has entered the Indian Equities since the past three years and the Indian
Equity Markets are on fire defying all logic. This Equity "Bubble" will burst
anytime in November 2006 through April 2007. This crash would be savage and
brutal.
Astrologically too the situation for the Indian
Economy is not good for the next six months i.e. end Nov 2006 to end March 2007.
Saturn will enter Leo for the Indian
Sub-Continent from end Nov'06 as per Vedic
Astrology. This stellar movement of Saturn can have sinister implications
:
a) Stock Markets can crash
b) Political upheaval or instability
c) Major natural calamites viz Earthquakes, Tsunami
etc.
The BSE SENSEX is now in 'Uncharted Territory'. It
can go to any highs and the prediction is difficult. The BSE SENSEX can go to
any crazy level say - 14,500 in the next fiscal year.
For Nov'06 the levels to watch are :
R1 13,300 R2 13,600 R3 14,000
S1 13,000 S2 12,750, S3 12,400
As per Fibonacci the long term support
level for BSE SENSEX is at 11,400.
For GOLD and Crude Oil - my predictions as the same
as per last update.
I advise investors to completely stay away from
Indian Equities till further advise. Let the SENSEX correct. Do not be greedy.
The risk is too high at these levels ( 13,000+) to buy equities in India as per
my understanding. Punters and Traders can play this market even at these levels.
These guys play in the F & O segment which requires skill and experience.
They make money both in bull and bear markets.
Invest in Gold for long term. Do not put your
funds into any Mutual Funds which have any linkage to Equities. Put your
funds in the 'Debt' instruments for the next six months or till further advise.
Balance sit on cash. We will enter when the equity bubble
bursts.
The Indian Real Estate Markets are on fire too.
Which bubble will burst first is a million dollar question ? Equity or Real
Estate ? I think equity bubble will burst first followed by the real estate
bubble. I will put a note on the red hot Indian "Real Estate" sector in a couple
of months. Let this Sector be more regulated by the Govt. of India. This Sector
is dominated in India by a few copanies who are listed on the BSE and NSE. The
FDI into this Sector is open but I feel ther needs to be Regulator in India for
the Real Estate Sector to curb speculation and also dubious real estate
developers.
PRESERVE YOUR CAPITAL. THINK SWISS !
OCTOBER
The BSE SENSEX closed today - Friday 6th Oct'06 at
a bullish level of 12,373 up 3.8 % from the close of 16th Sept'06 ( 11,918 ).
It tested a new three month high of 12,489 on 3rd Oct'06 on an intra-day basis.
Global markets were bullish including the American Stock Markets. DJIA tested
its record intra-day of 11,928 on 5th Oct'06. Global markets were up as
DJIA tested record highs as mentioned above. So were the Indian Stock
Markets.
Please refer to my predictions of 10th Sept'06. I
said there is a 20.00 % probability that BSE SENSEX could test 12,900 and a
double top at this level. It looks like we are heading towards 12,900 level,
which will be BSE SENSEX's all time high. BSE SENSEX earlier all time high was
12,671 in Mid- May'06.
Low Crude oil prices at US $ 60.00 was one of the
main reasons for global stock markets being bullish. Plus interest rates being
stable also was a bullish trigger. Remember Crude Oil fell from $ 78.40 pbbl
from Mid July'06 to US $ 58.60 in end Sept'06. This is a massive correction of
about 25.00 %. Also FIIs were active buyers of Indian Equities. They pumped in
US $ 1.17 Billion in the Sept'06 in Indian equities inspite of India being the
most expensive market in BRIC economies and other economies in Asia. Indian GDP
growth is estimated to be around 8.0 % this fiscal. Plus India is perceived as
the best long term story for equities by FIIs from all over the globe. Fiscal
Deficit will be lower with this kind of annual GDP growth. Indian Current
account deficit will be lower in Q2 and Q3 as Crude Oil has cooled to $ 60.00
level.
I advise investors to stay away from Indian
Equities as there is approx. 500 point rally form today's close to 12,900 level.
The reward : risk ratio is minimal at these high level of BSE SENSEX. It may
correct from levels below 12,900 as BSE SENSEX's all time high is
12,671.
It is pragmatic to wait for a correction and then
enter the market with some small and mid cap stocks with low P/Es and good
management. I am working on a few mid and small cap shares which I will
recommend at an opportune time. The front line SENSEX and NIFTY stocks are
trading at 17.00 times their FY07 earnings as against 10.00 to 12.00 times in
BRIC and other economies like Taiwan and South Korea. I will focus on midcap and
small cap stocks for investing as trading calls as I expect major correction in
third week of No'06. I will advise accordingly.
Investors who missed out on GOLD can enter now at $
580+. GOLD should not break US $ 550 level as it did in 1983. There is very
strong support at $ 550 levels. If it closes for three days below $ 550 pto exit
from your long positions in GOLD.
Crude should hold $ 56 to 58 pbbl. Three days
closing below $ 56 pbbl will take Crude to levels below $ 50 pbbl. As per my
prediction Crude will hold $ 58 pbbl level.
Indian Corporates start reporting their Q2 ( July
thru Sept'06 ) results on 11th Oct'06 onwards. These results will have a big
bearing on BSE SENSEX and NIFTY. I expect Indian Corporates to announce good Q2
results and hence BSE SENSEX can test its all time high of 12,900.
Hence please bear with me till further advise and
stay away from Indian Equities. The reward : risk ratio is not worth it at these
levels.
September 10 update:
The BSE SENSEX closed today - Friday 8th Sept'06 at
a bullish level of 11,918. It tested close to 12,000 during the month of Aug'06
contrary to my predictions. I have studied the BSE SENSEX charts for the
past decade in detail and am not getting a clear trend. My analysis is follows
:
THERE IS A 20.00 % PROBABILITY THAT BSE SENSEX WILL
BE BULLISH IN SEPT 2006 AND ONE CAN SEE A DOUBLE TOP AT 12,900. BUT THE SCARY
PART IS THAT THERE IS A 80.00 % PROBABILITY THAT BSE SENSEX CAN CORRECT FROM
12,000+ LEVELS BY 25.00 TO 30.00 % WITHIN THE NEXT THREE MONTHS. MY PERSONAL
VIEW IS THAT THE LATTER WILL HAPPEN. BUT I CAN BE WRONG !
IN VIEW OF THE ABOVE, DETAILED ANALYSIS IS DELAYED
FOR SEPT 2006. I AM STUDYING THE DATA AND WILL UPDATE ASAP.
I ADVISE INVESTORS TO COMPLETELY STAY AWAY
FROM THE INDIAN EQUITIES TILL FURTHER ADVISE.
SPECIAL
CRUDE OIL UPDATE
Crude Oil Aug'06
Futures closed today - Friday 14th July'06 at US $ 76.80 pbbl. The
intra day high was a whopping US $ 78.40 for Aug'06 contracts. I mentioned in the
last forecast that equity markets the world over could correct on
account of Crude Oil going above US $ 75.00+. I wrote on 5th July: "For three days in a
row if US Light Crude Futures close above US $ 75.00 - You will see
Crude at NYMEX zooming to US $ 80.00+ in a matter of weeks.
Equities will take a
major dip globally and the starting point will be DJIA tanking. This
can happen in July'06 "
My prediction was
correct on Crude Oil again. BINGO!
For three days in a
row (7/10 to 7/12/2006) Crude at NYMEX
closed above US $ 75.00 pbbl. As predicted there was a 'break
out' in Crude Oil prices. It tested a record intra
day high of US $ 78.40 ppbl today at NYMEX..
For Dec'06
contracts at NYMEX the prices today were in excess of US $
80.00 pbbl. Global equity markets have corrected this week lead by DJIA
( corrected by 2.7 % this week ).
Others important equity indices also
corrected in the world - Japan, Taiwan, Hong
Kong, BRIC economies and markets in EC. The
correction was in the range to 2.0 to 4.0 %.
There are a couple of
factors which are making Crude Oil traders nervous apart
from demand push from America, China and India - Japan's
interest rate hike, Israel's proactive attacks on Palestinian areas
and Lebanon, Nigerian disruptions due to militant attacks on
Oil installations and Iran's nuclear fuel enrichment stand off. It is
important to note that neither Israel nor Lebanon are Crude Oil
suppliers. It is a question of sentiment which is
making traders
nervous.
I feel we are going to
see prices in excess of US $ 80.00 pbbl in the month of Aug'06 for Sept'06
contracts at NYMEX if not before. The next level is US $ 84.00 and US $ 86.00
pbbl at NYMEX. One can see prices near to US $ 90.00+ by Oct'06 if the
geo-political issues as mentioned above are not settled. Global equity markets
will be bearish till Crude Oil stays above US $ 75.00 mark. If it tests US $
80.00 in July or Aug'06 - Global equity markets will crash including
India.
If the above issues
are settled Crude Oil prices can dip back to US $ 70.00 levels. Although I am
bullish on Crude and Gold for 2006 till mid 2007, I still would advise investors
to put strict stop losses while trading in Crude Oil Futures in India at
MCX.
India is growing at
about 7.5 % per annum and is only next to China in terms of GDP growth. Earnings
season is on and Indian companies will show fantastic Q1 results as evident by
Q1 results of the current fiscal ( April'06 to March'07 ) shown by INFOSYS( INFY
at NASDAQ). INFY's Q1 results were superb and beat street expectations. If the
Crude Oil prices dip to US $ 70.00 pbbl level at NYMEX in the coming two weeks -
we can see a big rally in the Indian Stock Markets.
BSE SENSEX closed
today at 10,678. The high and lows for the period were - 11000 and 10,500
approx. BSE SENSEX could zoom to 11280+ levels ( R3 as per last update ) if
Crude dips to US $ 70.00 levels. The Indian stock markets have discounted the
major terrorist attacks in Bombay on 11th July'06 by Islamic militants. Stock
Markets would have crashed by 10.0 % on 12th July'06 but Government of India
intervened and supported the SENSEX by buying huge amount of blue chip stocks
through State controlled FIs. This does not happen in markets like USA and EC.
The State does not step in to support falling knives!
I feel that Crude
prices will remain firm in July'06 and BSE SENSEX will retest its 200 DMA level
i.e. 9600 ( S4 as per last update). The SENSEX could crash to 8750 levels also
if Crude Oil prices spiral out of control, FIIs pull out about US $ 2.00+
Billion from Indian Equities and some blue chip companies do not declare Q1
results as per Dalal Street expectations. Seems that 9600 level would hold. But
you never know about global geo-political factors which are not in control of
any individual Nation.
We are in for very
uncertain/choppy coming weeks and I advise strict caution to Indian investors
who speculate in the Futures and Options ( F & O ) segment in NIFTY, Stocks
and Commodities ( including Gold and Crude ). Please do not go by rumours. Study
hard facts backed by logic and then invest accordingly in Futures. There is
money to be made 'off the table' in Crude Oil Futures but please invest with
stop losses in place or proper with hedging on the commodity exchanges.
In India so far, there
is no facility to trade the BSE SENSEX as an Index in F & O segment. NIFTY
Index of the National Stock Exchange of India ( NSE ) is traded in the F & O
segment alongwith with nominated Stocks. Punters can go short in NIFTY Futures
but please hedge with suitable NIFTY Calls. Here also there is enough money to
be made as NIFTY could crash to 2820 ( worst case 2600 ) levels from the current
levels of 3120 or 3200 levels.
Small investors are
strictly advised not to play Crude Oil in F & O segment as this requires
expertise and years of experience. Yes they can buy and sell physical Gold
investment bars. One can buy physical Gold at US $ 630+ on correction. Target US
$ 800+ by Mid 2007, as per Oct'05 update!
I am not in favour of
bearish trends as small investors lose their capital. They do not book profits
at the right time in bull phase. Greed overplays and small retail investors are
stuck with mid cap and small cap Stocks when the correction sets in as in Oct'05
and May'06 in Indian equity market recently. This update is a 'caution notice'
to all investors including the retail ones to exit the equity markets if what is
predicted as above happens. Generally it happens with my
predictions!
I can only pray to God
that the geo-political issues in Lebanon, Nigeria and Iran are settled soon. Who
doesn't like the Bull Markets!
JULY 2006
BSE SENSEX closed today - Friday 30th
June at 10,609. The intra period high and lows were 10,627 and 8799
respectively. I had predicted that if SENSEX closed below 200 DMA i.e.
9600 - The SENSEX could fall to 8750(
S3) levels or lower. SENSEX crashed after breaching the 200
DMA as predicted. BSE SENSEX tested 8799 on Wednesday - 14th June on an
intra-day basis. The correction was brutal in the Indian Stock Market.
But the SENSEX recovered smartly after testing 8800 level. In fact
the SENSEX logged its biggest rise on a daily basis in its
history on 15th June'06. It rose by 616 pts on 15th June'06. This was
a historical day at the BSE.
As predicted the R1 level for
SENSEX - 10,700 was not breached. It fell short at
10,627, very close to our prediction. FIIs were net buyers at low
levels in the Indian Stock Markets. The domestic FIs and MFs
were also buyers at levels around 9000. The SENSEX
bounced back very sharply from 8800 levels to 10,500+ plus levels as
the Indian P/Es were now in line their peers in the emerging markets
and in Asia - Korea and Taiwan.
I somehow feel the SENSEX lacks
conviction although there was big rally in the Indian Stock
Markets after the announcement of a 0.25 % interest rate hike by FOMC
on 28th June'06. The BSE SENSEX rallied by a whopping
total 4.7% on 29th and 30th June'06, as did the all
other markets in Asia. The reason was the increase of only 0.25 %
interest rate hike by the American Fed. This was in line with
the street expectations. If the Fed had hiked interest rates
by 0.5% - there would have been major correction in the global stock
markets.
The levels to watch for BSE
SENSEX in July'06 are :
R1 10700 R2 11000 R3 11280 R4
11500
S1 10400 S2 10300 S3 9800 S4
9600
S4 -as mentioned earlier is a
very important level. This is the 200 DMA level - 9600. This
was convincingly breached as predicted in June'06. If this level is
breached again in July'06, the BSE SENSEX will again crash to 8750
levels. This can happen on account of any major
negative news globally i.e. crude oil price hike beyond US $
75.0+ or some other negative news from the American
economy.
On the domestic front the earning
season is approaching and if the results are in line with
street expectations, we could see the Indian Stock
Markets stabilize at around 10500+ levels.
My prediction for July'06 is that we
are in for another correction which could breach the
above S4 level of 9600 for the second time for reasons which
could be global or domestic. The Indian "Trade Deficit " is an account
of worry. Globally the Crude Oil price hike could be the trigger.
Global liquidity tightening could be another trigger for the correction.
The BSE SENSEX is in a zone
of 9800 to 10400 but I have a feeling the BSE SENSEX will again test
the 9600 levels. This time the correction could be even more severe.
I would advise investors to put money
in Gold and Crude Oil Futures, if they missed as instructed in Oct'05
and May'06. Gold can be held in physical form also. Only 25 %
of the investor's funds should be invested in Indian Stocks. For the
month of July'06 - I would advise investors to have nil exposure to
stocks. Sit on cash and enter the stock market when the SENSEX
corrects as predicted.
I hope my prediction about the BSE
SENSEX is incorrect for July'06!
June 12 Special Update.
This
is Secial Update as I feel that BSE SENSEX will
break its 200 DMA level of 9600 convincingly in the next two
days.
The BSE
SENSEX sank to 9201 level on Thursday 8th June'06 and closed
at 9296. This closing was well below the 200 DMA level of
9600. BSE SENSEX had its largest single day
rally ( since January 1992 ) on Friday 9th June'06
when it closed at a whopping 9810 level - up 514 pts from the
Thursday's close of 9296. This was a 'dead cat bounce' and
was a false indicator that the SENSEX would sustain
9600 levels.
The BSE
SENSEX closed today i.e. Monday 12th June at 9486 - down 334
pts from Friday's close of 9810. Fear has gripped the market
as FIIs have turned net sellers in Indian equities. Domestic
MFs are continuous sellers in the Indian equities and there is
no indicaion that this panic selling will subside. HNWIs who
are invested in Indian equities are also selling across the
board. I think the FIIs are pulling funds out of India to get
to reasonalble P/E levels.
The selling
in equities is not only limited to the SENSEX or
NIFTY stocks but is equally brutal in mid-cap and small-cap
stocks. The FIIs are worried about the following macro factors in the
Indian Economy:
i)
India's Current Account Deficit (
Balance of Payments on trade account) is at US $ 13.2 Billion,
which is around 3.5 % of its GDP. This fact is public
since March'06. The other BRIC economies have
Current Account ( BoP) surpluses. JP Morgan
Chase feels that this level of BoP deficit in India is too
high and is at 'palpatable' levels. Also they feel
that India attracts too little FDI. This is not 'hot money'.
FDI into China in calender 2005 was US $ 53.0 Billion. Brazil and
Russia had an FDI of US $ 15.0 Billion each in 2005. India
only attracted US $ 6.5 Billion during the same period. Again this
information is public since Jan'06. They alongwith other
investment guru's like Marc Faber and Jim Rogers feel that all emerging
markets will enter 'bear phase' soon as they expect the American
Economy to slow down in Q3 onwards. The US
$ will strengthen further as compared to the
currencies in BRIC economies.
ii) BNP
PARIBAS feels that inflation will hit the
Indian economy hard as the prices of gasoline and diesel will be raised
further. They aslo feel that there is an imbalance in the Indian
Banking Sector.
iii) NOMURA
feels that Indian Equity P/E ratios are still too high
as compared Thailand and Korea. Their report of
5th June'06 mentions that FIIs have only pulled out
7.0 to 8.0 % of their total funds invested in equities in
India till 4th June'06. There is a scope for futher withdrawls
by global FIIs including NOMURA from the Indian Equities. They feel the
fair level for BSE SENSEX would be 8500 to 9000. These are
scary levels !
iv) MORGAN
STANLEY confirms in their report dated 2nd June that equity
outflows from India in the last fifteen days have been in around US $
2.7 Billion. This is a significant figure as FIIs had
pumped in about US $ 4.8 Billion till date of the report into Indian
equity markets as per SEBI figures. MORGAN STANLEY feels that the
Indian Stock Markets are too dependent on FII
flows. This is hard fact.
I agree with
the above discoveries of the FIIs!
But these so
called discoveries as per para (i), (ii) and (iii) by FIIs are stale
figures. I am sure there is something more to it than what meets the
eye as regards FIIs and the Indian Equities are concerned.
They are privy to some information which the common investor is not. I
am sure of this. How can views change in just six
days!
What
I do not understand is that the how has the situation changed on the
'macro level' about the Indian economy in a matter of
two weeks ? On 2nd June the SENSEX closed at 10,451 and today
barely after six trading days all the FIIs of the world are
talking of BSE SENSEX levels of 8000 or lower. I totally fail to
understand what has gone wrong in the Indian Economy in the last six
trading days except a hike in the prices of gasoline and diesel, which
was far inevitable ? The last time ther fuel price
hike was in Sep'05. These FII discoveries are baffling!
These
statements have added 'fuel to the fire'. Investors are literally
dumping stocks as they feel that BSE SENSEX will crash to 8000 levels
or lower. I have to be realistic and follow the trend which is turned
extemely bearish in India for the equities over the last ten days.
The BSE
SENSEX as mentioned earlier will breach 9600 ( 200 DMA ). The
support levels to watch for the next two weeks are:
S1
9300 S2 9000 S3 8750 S4 8000
Resistance
levels ( R ) remain the same as the last update. I feel 8000 level may
not be tested in June'06 and is tested
only in July'06. But you cannot rule out anything in
the Stock Markets. The fear of the future being so
bleak, as predicted by esteemed FIIs as above, has scared
Indian investors who are dumping their stock holdings 'lock stock and
barrel'. I think we are in for bad times.
Investors should
sell out of equities if the 9600 level is broken in the next two days.
Sit on cash.
JUNE
2006
The BSE SENSEX closed today i.e. 2nd
June’06 at 10,451 down about 13.0 %from the close of 12,043
as on 29th April’06. The intra month highs and low for BSE
SENSEX were 12,671 and a whopping 9827. The SENSEX corrected about 22.4
% in May’06. I predicted in the last month’s
forecast that a correction in the Indian Stock Markets would be
triggered by external factors. Exactly the same happened!
I had predicted that the BSE SENSEX
would test 12,630+ levels. The SENSEX breezed past this level to test a
life time high of 12,671 on 11th May'06. On the flop side I
had predicted support levels of 11800 - 11500 - 11280 and
11000. But hell broke loose on 15th May onwards and
SENSEX started cracking and all the above Support levels were
broken in a matter of a week. The final nail in coffin was on 22nd
May'06 when the next set of levels below the 11,000 mark were broken in
one single day - Black Monday !
American markets fell, followed by crash
in the emerging markets. The fall was further compounded by global
meltdown of prices of base metal prices – Aluminum, Copper
and Zinc. Gold also corrected sharply from a high of US $ 726 pto at
LME on 12th May’06 to US $ 619.00 as on today at LME. FIIs
pulled out about US $ 1.6 billion in May’06 from the Indian
Equity Markets as compared to US $ 10.0 billion from the emerging
markets. FIIs have pumped in US $ 4.0 billion into Indian Equities from
Jan to April’06. The equities in the emerging markets crashed
including BRIC and other markets in the Middle East. FIIs booked huge
profits as Indian Equity Markets were relatively at a higher P/E as
compared to other BRIC economies and economies of Taiwan, Hong Kong and
Korea.
On Monday 22nd May there was bloodbath
on Dalal Street. The BSE SENSEX fell from 11,143 to 9827 on intra day
basis – a fall of 1316.00 pts. This
is the single largest intra day fall in the history of BSE SENSEX. The
earlier largest fall in absolute numbers on intra day basis was on 17th
May 2004, when the SENSEX fell by 865 pts. I was in Germany on 17th
May'04 and hence did not witness the carnage which was on account
of political uncertainity in India.
In this case from Friday’s
19th May close of 10,939, the BSE SENSEX crashed to 9827 on Monday 22nd
May’06 before noon. This was a 10.0 % ( 1112
pts ) fall in the SENSEX. As per SEBI rules, if there is
10.0 % fall in BSE SENSEX or NIFTY from the previous day’s
close, then the trading is suspended for an hour to
‘cool off’ nerves. Hence trading was suspended at
BSE and NSE for an hour. After trading was re-started, I think domestic
FIs lent support to the Indian Markets and the BSE SENSEX closed on
22nd May’06 at 10,482, a net fall of only 454.00 pts.
There was an all around selling and
frontline stocks were hammered, as these stocks are liquid. Mid Caps
and Small Caps were treated similarly by other investors. Margin calls
of punters were triggered and hence this massive sell off. There was no
default by any major broking house in India.
Analysts have been predicting a
correction in the BSE SENSEX from 9000 levels. I predicted that the BSE
SENSEX would test 11,000 if the American Markets crashed or on account
of some other external factors. I never thought that the sell off would
be so brutal after 11,000 mark - All the support levels of 10,700
-10,400 -10,300 -10,000 and 9800 would be breached in
a single day. This happened on Black Monday – 22nd
May’06. I have never seen a carnage like this in my
life.
The analysts have given the following
reasons for the correction in global equity markets including India,
which was more severely hit:
i) Global fall in emerging markets lead
by fall in DJIA and NASDAQ.
ii) Global crash in prices of base
metals – Aluminum, Copper and Zinc. There are views that
Copper prices can fall further by 20 %. Gold will be stable.
iii) Hike of interest rates in
USA.
iv) Slowing down of the American
Economy, which could lead to recession in 2007.
v) The change of monetary policies in
Japan. The Bank of Japan may hike interest rates from the current
‘zero level’ regime in Japan.
vi) A stronger American Dollar vis a vis
currencies of emerging economies including BRIC.
On account of all these factors equities
on global emerging markets got hammered. The corrections were in the
range of 10 to 25 %. Indian Equities were among the worst hit.
In May’06 in India –
The Stock Market was on fire till 11th May. Stocks in the real estate
sector with ‘land banks’ were at crazy P/E ratios
ranging from 80 to 300 ! Real Estate is supposed to be the next hot
sector in India. These stocks got hammered and I think there is a lot
more downside in these stocks – Bombay Dyeing, Unitech,
Morarjee Realtors, Dawn Mills, DCM, Adani Export, etc.
Hotel, FMCG, Two Wheelers, Pharma, Auto,
Steel, Cement, Base Metals, Oil and Gas, Capital Goods, Paper and
Engineering Sector frontline stocks were all on fire on BSE and NSE.
Select blue chip stocks in the above sectors in micap were also on
fire. Too high and unsustainable P/Es. The list is too long and hence I
am not mentioning the individual stocks. There is a silver lining in
the India story, but in a bearish market – all good news is
discounted ! Indian economy grew @ 9.3 % in Q4 of the last fiscal year
( Jan to March’06). This bullish figure was totally
discounted by the stock market.
The correction set in on 12th
May’06 onwards with a relief rally on 17h May’06.
After that it was one-way street till the Black Monday – 22nd
May’06. This fall or correction was looming large after
12,000+ level of SENSEX but the way it hit even I was zonked!
I feel we are heading for a short-term
correction cycle in the Indian Stock Markets for the next four months.
Global pundits are saying that the fair value for BSE SENSEX is
anywhere between 7,500 to 8000. I feel there is a very
very strong support level for BSE SENSEX at its 200 DMA i.e. 9600.
The levels to watch for
June’06 are:
R1 10700 R2 11000
S1 10300, S2 10000, S3 9800 S4
9600 ( 200 DMA )
If for any reason say –
Tightening of global liquidity, hike in interest rates in USA and
Japan, Liquidity crisis in India or other external factors like Oil
shock ( $ 80+ ) or Iran fiasco - the 200 DMA of 9600 is breached
convincingly then we are in trouble for few months. If
BSE SENSEX closes for three days in a row below 9600 then we are in for
difficult times. I will give a special update on the
situation.
I hope the BSE SENSEX does not breach
the 9600 level in June’06.
I have been advising investors through
Oct’05 to as late as last month that they should reduce their
exposure to equities to only 25 % of their investible funds.
The risk to reward ratio for equities was too high from BSE SENSEX of
10,000+ levels. Very few investors must have paid heed to my requests.
Gold in Oct’05 was at $ 465 pto levels. Crude was at sub $ 60
levels.
Anyway – I advise investors to
please liquidate their equity holdings including ASIAN PAINTS as I feel
that BSE SENSEX level of 10,000 (S2) could be breached before 15th
July’06. Please book your losses, if you have not done as
yet.
I do not see BSE SENSEX testing 11,000+
till end Sept’06.
We will make a revised portfolio when
the SENSEX is at stable levels.
Till that time keep your chins up and
take a break from the Stock Markets. Focus on Gold and Crude Oil to
make decent returns. THINK SWISS – PRESERVE YOUR CAPITAL !
MAY
2006
I regret I
could not update the India Web for the past three months. I will be
regular with my monthly update.
BSE SENSEX
closed today 29th April'06 at a whopping level of 12,043 -
Up approx. 24.00 % from the 3rd Feb'06 closing of
9743. BSE SENSEX created history of all sorts from 3rd Feb
till close of today. The high and lows for BSE SENSEX for the period as
above were 12,102 and 9740 respectively. BSE SENSEX tested 10,003 on
6th Feb'06. It tested 11,101 on 21st March'06 and tested 12,054 on 20th
April'06. The year 2006 will be another golden year in the history of
Indian Stock Markets. The levels of 10,000, 11,000 all
important level of 12,000 were all breached in a matter
of three months.
The Indian
Stock Markets were on fire after the presentation of the Union Budget
for the fiscal 2006-07. The Budget for the next fiscal year is
presented by the Indian Finance Minister on 28th Feb of the preceding
year. Just for our overseas investors, I would like to remind
that in India, the financial year for the Government of India is from
1st April to 31st March.
The Budget
was very well received by the investing community both Indian
as well as FIIs. The annual GDP grew at 8.0 % and the forecast for the
next fiscal is 8.1 %. For the first time the Indian Fiscal Deficit was
restricted to 4.0 % of the GDP. This was a fantastic effort by
the Indian Finance Minister and investors especially FIIs pumped in a
record US $ 1.70 Billion into Indian Equity Market in the month of
Feb'06. This is a record of all sorts. Congratulations to the Indian
Finance Minister !
During this
period all most all the blue chips in Cement, Power Equipment and
Transmission, Construction, Engineering, Auto Ancillaries, Two
Wheeler, FMCG, Sugar, Steel, Zinc, Copper and
Commercial Vehicle Sector Stocks were on fire. I am not giving
their details as the list is too long !
I thin only
PSU Oil and Gas Sector stocks did not rally on account of huge
subsidies in this sector. The Oil PSU Refiners have to bear the
subsidies on Gasoline, Diesel, Kerosene and LPG. But the major subsidy
is borne by ONGC. This Sector was clearly the under performer. The
compulsions of coalition government is the main
reason for this huge subsidy in the Petroleum and Farm Sector.
The Left Parties oppose hike in the prices of Petroleum
products and lowering of procurement
prices by the Govt. for Indian Farm Produce. We have to live
with this huge subsidies in both the sectors, as
above, till 2009, when the tenure of the present Govt.
expires.
On 20th
April'06 - Crude futures for May'06 tested $ 75.00 in
New York. On 20th April'06 Spot Gold tested US $ 645.80 on an intra day
basis. This a new 25 year high for Gold. On 26th April'06
Copper and Zinc tested their life time highs. We stick to our
prediction about Gold as mentioned in Oct'05 forecast. Investors can
refer to the year 2005 posts at the bottom of this page.
Property
Market in India is on fire too. The debate in India in the
investor circle is that which bubble will
burst first - Property or Stocks ! There is no denying the fact that
the BSE SENSEX and NIFTY have foxed almost all the pundits since early
Feb'06. Everyone has been predicting a major ( 10 to 15 % ) correction
from 10,000+ levels. There were minor corrections but the BSE SENSEX
defied laws of gravity in the past three months and motored past 12,000
with ease. Bears had a very very torrid time. I think they also must
have turned bulls after 10,500+ levels !
The Indian
Stock Markets are no doubt expensive as compared to its Asian
peers and the other BRIC economies. This bull rally
is purely driven by excess liquidity by both domestic MFs, FIs
and FIIs. In addition almost all sectors in the Indian Economy have met
Street expectations as regards financial performance. It has been a
phenomenal fiscal year in the Indian History ( April'05 to March'06 )
as the economy grew by 8.0 % - only next to China.
I feel that
the market is in very strong grip of bulls and the BSE SENSEX will test
12,600+ in May'06. The levels to watch are as follows :
R1 12200,
12400, 12630
S1 11800,
11500, 11280, 11000
If there is
no major negative global event i.e. Crude past US $ 80+ or a
terrorist attack or Iran fiasco - Then the Indian Markets will fall
only if the global stock markets tank especially the American Market.
Failing which the above levels are relevant.
In Oct'05 -
I had advised investors to park 50 % of their investible funds
into Gold and balance into equities. Gold at that time was quoting US $
465 pto. Please stay invested in Gold. We will start exiting
at around US $ 800 by the end of 2006. I now advise
investors to further reduce their exposure to equities by 25 %.
Hence be invested in equities to the tune of 25 % only of your
investible funds. Balance 25 % sit on cash or please invest in tax free
debt bonds. I agree with Henry - THINK SWISS AND PRESERVE YOUR CAPITAL
after June'06.
I am only
recommending one stock which looks very attractive to me even at this
level of BSE SENSEX.
Buy ASIAN
PAINTS at Rs. 630+ now and exit at Rs. 900+ by the end of May'06 or by
first week of June'06. There is huge accumulation in this Paints blue
chip between Rs. 630 to Rs. 650 levels. It will explode to Rs. 900+
Cheers to the Indian Stock Markets!
MARCH
2006
Dear investors and friends:
Due to some unforeseen circumstances at my end the update on
India Web Page will not be till further notice.
Inconvenience regretted,
Taran Marwah
FEBRUARY
2006
BSE SENSEX closed today i.e. 3rd
Feb at
a level of 9743,
up 4.0 % from the closing level of 2nd
Jan’06 of 9390. As predicted BSE SENSEX was
in a bull orbit after
crossing 9600 level and fell just short of the magical five figure
mark. It
tested 9994 on 1st
Feb’06.
The intra month high and low for the SENSEX was 9994 and 9158
respectively.
History was created yet another time at BSE as SENSEX touched a life
time high
of 9994!
BSE SENSEX corrected sharply to near 9150 level
( S2
) after testing the 9700 level as predicted. The Q3 corporate earnings
were a
mixed bag but met with Dalal
Street
expectations and a few sector stocks were on fire again, some of them
testing
new or life time highs. FIIs were active in the last week of
Jan’06. Asian
Markets were also on fire during this period. N225 tested 16,700+
levels in Tokyo.
In fact almost all the stocks mentioned in
Jan’06
forecast tested new highs. Fantastic dream bull run for the said
stocks. A few
additional stocks as below were on fire in Jan’06 :
FMCG : ITC, GILETTE and P & G.
METALS : TISCO, HIND ZINC
and NALCO. TISCO was on fire on account of proposed mega
deal
between MITTAL STEEL and ARCELOR.
CEMENT : GACL, ACC and ULTRATECH CEMENT.
World’s
second largest cement manufacturer HOLCIM, Switzerland,
picked up a minority stake in GACL. HOLCIM already has a stake
in ACC. The
Indian cement market is under a consolidation phase. MNC Cement giants
wish to
gain a foothold in the Indian Market. A few smaller cement
companies’ stocks
were also near their life time highs.
DOMESTIC PHARMA : CIPLA, SUN PHRAMA and DR.
REDDY’s
scaled new highs. In the forthcoming budget some tax relief is expected
for
this sector. CIPLA declared excellent Q3 results and plans to reward
its
shareholders with a bonus issue of stock.
ENGINEERING : It seems India
will excel in manufacturing sector as well and not only services sector
- IT
Sector. A host of additional companies saw their stocks soaring to new
highs in
the engineering sector – CROMPTON GREAVES, KIRLOSKAR BROS,
CUMMINS, GREAVES
COTTON and KIRLOSKAR OIL ENGINES. Some of these companies will be the
Asian
manufacturing hubs for the parent MNCs – CUMMINS INC, USA.
POWER TRANSMISSION : KEC INTL and KALPATARU
POWER.
COMMERCIAL VEHICLES : BEML and ASHOK LEYLAND
RETAIL : TRENT
and SHOPPERS STOP. This sector is a new kid on the block in India
as shopping gets into Malls !
HEALTHCARE : MAX INDIA
Quality stocks have had a dream run in the bull
marathon which started in 2003 onwards in Indian Equities. I feel that
almost
all quality stocks in their respective sectors have reached their fair
valuations. In some cases the valuations are over stretched. Hidden
gems have
to be found for 2006-07.
Investors should be very careful to put their
funds
into equities in 2006. We had advised our investors in Oct’05
that out of their
total investible funds, only 50 % should be allocated to equities in
2006.
Balance 50 % should have been already allocated to GOLD in
Oct’05 when the
prices were near US $ 465 pto. GOLD tested a new 25 year high at US $
573.25 pto in London
today. Our prediction of US $ 550 pto by Mid 2006 is history now !
BINGO !
My prediction that GOLD will be US $ 800+
around Mid
2007 is now on a more sound footing !
Analysts are now talking GOLD at around US $ 600 pto by
Mid 2006.
BSE SENSEX may top off at 10,000+ level. The
SENSEX
could give a very sharp correction from 10,500 level which could be
tested in
Feb’06 itself or maybe in March’06. FII funds have
slowed in Jan’06 as compared
to calendar 2005. FIIs are sitting on the fence with large funds to be
invested
into India.
So
far the allocations have been below expectations for the Indian
Equities. We do
not know when will the FIIs enter again with a bang. Domestic FIs are
flush
with funds and analysts feel that this time around domestic FIs will
fuel the
rally past 10,000.
I feel that BSE SENSEX will correct very
sharply in
Feb or March’06. The trigger could be Union Budget blues,
Crude Oil spiking
above US $ 80+ or an adverse political development in India.
I advise investors to take profits home in
Feb’06
rally, if any. Please do not put any funds into equities till the
SENSEX
corrects as mentioned above. The levels to watch in Feb’06
are ;
R1 9850 R2 9940 R3 10,000
S1 9600 S2 9500 S3 9420
In event of Crude Oil spike the global markets
will
crash and so will the BSE SENSEX. Union Budget due on 28th
Feb’06 could also be viewed as negative by
FIIs and they might
decide to pull out a couple of billions of dollars. In case any of
these two
events do happen - Do not be surprised to see a level of around 9000 or
even
8750.
No new stocks are being recommended for
investment
till first week of March’06. I repeat it will not be able to
make money in
equities as easy as in 2004 and 2005. In 2006 it will be extremely
difficult to
get multiple returns in equities. Investors should be content with 45
to 50 %
gains in equities in 2006. Investors should curb their greed and be
realistic.
The years like 2004 and 2005 are a rare phenomenon wherein investors
got
returns on equities ranging from 50 to 500 %. These were golden years
for the
Indian Stocks.
Indian GDP is expected to grow @ 7.5% next
fiscal as
per the Indian Finance Minister. This is a commendable GDP growth rate
in view
of high energy prices in India.
Economists agree with this annual GDP growth figure but Indian Fiscal
Deficit
is cause of worry. Indian total fiscal deficit still is hovering around
8% of
GDP. This level maybe is one of highest in the developing world. In an
ideal
situation this figure should be around 3 %.
Let us see how the Finance Minister handles
this
issue in the forthcoming Union Budget for the next fiscal which will be
presented in the Parliament on 28th
Feb’06. In India Budget has an impact on the
economy unlike the
developed world where this is a ‘non issue’. The
Left Front will insist on a
populist Budget, which may not be well perceived by the FIIs. Subsidies
in Farm
and Petroleum Sector will be forced upon by the Leftists and this
further leads
to bleeding of the coffers !
Let
us hope the Indian Finance Minister does a good balancing act in the
Budget. We
all wish him luck as he has a very tough job at hand!
JANUARY
2006
I wish all the
investors, clients and my associates a very prosperous and a profitable
2006 !
BSE SENSEX closed
today i.e. 2nd Jan’06 at a bullish
level of 9390, up 5.0 % from the close of 2nd
Dec’05 level of 8962. BSE SENSEX created yet another history
today as it tested an all time high of 9457 today, although on an intra
day basis. The monthly high and low for the BSE SENSEX were 9457 and
8784 respectively.
FIIs pumped in US $
2.0 Billion into Indian Equities in Dec’05. This is a record
of all sorts. As predicted on account of this FII activity –
BSE SENSEX breezed past 9300 level with ease in Dec’05. It is
now close to 9500 as predicted. FIIs pumped in US $ 10.5 Billion into
Indian Equities in calendar 2005 as against US $ 8.5 Billion in
calendar 2004. Japan was a new destination in 2005 and now we hear that
FII funds from Middle East are chasing Indian Equities. 2005 was a
great year for Indian Equities and will be remembered in history as the
BSE SENSEX breezed past new levels of 7000, 8000 and 9000. It seems
that everybody in the world financial sector wants to have a
share in the Indian Equity Pie !
I feel 2006 will be
another landmark year for Indian Equities. I feel it is a matter of 9
to 12 weeks from today to see the predicted level of 10,000 for BSE
SENSEX, if FIIs keep up their commitments for the Indian Markets. The
said rally will purely be liquidity driven and may ignore fundamentals
in the sectors or individual stocks, as in the recent past. Analysts
expect that in calendar 2006, FIIs will pump in close to US $ 12.0+
Billion into Indian Equities. In this event one can expect BSE SENSEX
even at higher levels during the next fiscal year.
During the month of
Dec’05, quite a few sectors were on fire ! Selected Stocks in
these sectors scaled new highs. Brief details are as under :
FMCG
: HLL, TATA TEA, DABUR, MARICO and COLGATE.
CONSTRUCTION
: UNITECH , NAGARJUNA CONS and HCC.
ENGINEERING
: ALFA LAVAL, ESAB, ADOR WELD, ELECON ENGG, KIRLOSKAR
PNEUMATIC, SUZLON, VOLTAS and TRIVENI.
ELECTRONICS
: HONEYWELL, HAVELLS, BEL and NELCO.
SUGAR
: This sector was on rapid fire ! BAJAJ HIND SUGAR,
BANARI AMAN, BALRAMPUR, DHAMPUR, SAKTHI SUGAR, KCP and PONNIE ERODE.
AUTO
COMPONENTS and ALLIED : BHARAT FORGE, GABRIEL, FAG
BEARINGS, NRB BEARINGS, AMAR RAJA BATTERIES, EXIDE, SUNDARAM CLAYTON,
KALYANI BRAKE, REVL and RANE HOLDINGS.
TWO
WHEELERS : BAJAJ AUTO was on fire ! TVS MOTOR and HERO
HONDA tested new highs.
COMMERCIAL
VEHICLES : TATA MOTORS and EICHER MOTORS.
TRACTORS
: M & M deserves a special mention. This stock
has had a dream run. After being ex-bonus it rebounded back to Rs. 500+
which was the cum-bonus price. This stock has much more promise in
2006.
POWER
EQUIPMENT COS : This
year was probably one of the best years for investors who put their
money into – BHEL, SIEMENS and ABB. Nearly 100 % returns in
52 weeks !
MNC
PHARMA : The Domestic Pharma major- RANBAXY was a
disappointment. We had recommended this Sector for MNCs. AVENTIS,
MERCK, PFIZER were on fire !
HOTELS
: EIH and INDIAN HOTELS.
IT
SECTOR : INFY, SATYAM and WIPRO inspite of a weak Rupee.
I feel that
calendar 2005 was a special year for Indian investors. The credit goes
to the select Indian Companies who dared to benchmark themselves with
global levels. Not to forget FIIs who reposed faith in the Indian
Economy and select Indian companies.
Economists agree
with the Indian Finance Minister that 7.0 to 7.5 %
annual GDP growth is sustainable in the next two to three
years inspite of the pressure from the Left Front and high crude oil
prices. At these GDP growth rates FIIs will be active in the Indian
Equity Markets ahead of other Asian Economies, as India has shown to be
a true working democracy. I also feel that inspite of high crude oil
prices, this GDP growth rate is sustainable in the Indian Economy.
GOLD tested US $
540+ pto in Hong Kong on 12th Dec’05.
There was a sharp correction from this level to $ 495 level in the next
two weeks. It is back again on its upward journey ! I feel that $ 550
level will be tested much before June 2006. Analysts are now talking
about a level of US $ 570 by July’06 !
I feel that BSE
SENSEX will be bullish in the month of Jan’06. FIIs will
continue to pump in funds into the Indian Equities. The levels to watch
for Jan’06 are :
R1 9500 R2 9600 R3
9750
S1 9300 S2 9150 S3
9000
I feel there is a
very strong support for SENSEX at 9000 levels. If the BSE SENSEX can
break past 9600 levels in Jan’06 – one can see
fireworks on Dalal Street. SENSEX can test 9750 in a matter of weeks. I
expect a very sharp correction from 9600-9750 levels. Please book
profits at 9600+ levels. Re-enter at 9000 or 8750 levels.
It seems that Crude
Oil prices in the range of US $ 60 to 65+ pbbl have already been factored in the Asian
Economies for the next years. Other Asian Stock Markets too
were on fire during Dec’05. NIKKEI, KOSPI, HANG SENG and
TAIWAN ST Indices tested new yearly and/or five yearly highs.
No new Stocks are
being recommended. Quality stocks across a few potential sectors have
had a dream run in the past six months in 2005 as mentioned above. I
will recommend additional stocks when the market corrects. We have to
find quality virgin Midcaps and Smallcaps in Indian Equities which will
be new multi baggers in 2006-07. It will not be easy to make mega bucks
in the Indian Stock Markets in the next fiscal as valuations would be
stretched on almost all the blue chips. Hard research is required to
spot hidden gems. I have already recommended six stocks last month,
which I feel will be multi baggers in 2006-07.
Cheers for the
Indian Stock Markets in 2006!
DECEMBER
2005
BSE SENSEX closed
today i.e. Friday
– 2nd Dec’05 at a life time
high of 8962. Up whopping 11.0 % from last month’s close of
8073. History was created today at BSE as the SENSEX tested an all time
high of 9056. BSE SENSEX breached past the all important 9000 mark on 29th
Nov’05 on intra-day
basis. The high and low for the BSE SENSEX for Nov’05 were
9056 and 8050 respectively. The BSE SENSEX was in a bull orbit in
Nov’05 and surprised almost all analysts including the
undersigned.
The FIIs came back
with a bang in India, in Nov’05 after pulling out US
$ 840 Million in Oct’05. The figure of US $ 600 Million
mentioned in the last month’s update was an approximate
figure. FIIs poured in US $ 902.50 Million in the Indian Equities in
Nov’05. On top of this Domestic FIs and MFs pumped in US $
123.00 Million. Indian Stock Markets were on fire from 14th
Nov’04 onwards. The
action was in frontline SENSEX and NIFTY Stocks most of which tested
their all time highs/new 52 week highs. Some Midcaps were on the same
trajectory. This sudden pumping of funds by FIIs was on account of a
few factors -
Robust Q2 GDP growth announced by Govt. of India – 7.5 % , No
further interest rte hikes in USA and Bullish stock markets in Hong
Kong, Japan and
South Korea etc. The respective indices – HANG SENG, N225,
KOSPI etc testing new 52 week highs or five year highs. For Q1 of this
fiscal the Indian GDP growth was 8.1 % ( China’s GDP
growth during the same period was 9.4 % ). The Indian Govt. feels that
the annual GDP growth this fiscal would be in excess of 7.5 %. This
would be only next to China in the
world.
FII investment
into Indian equities this fiscal till date have been US $ 8.70 billion.
If FIIs continue to pump another US $ 1.0 billion or so in
Dec’05 – we can expect Indian Stock Markets to test
new highs. The Indian Stock Markets are heavily dependent on FIIs flows
for directions/trends in the future. I feel that FIIs will continue to
pump in funds in the Indian Equities but cannot estimate the quantum of
funds. I feel that BSE SENSEX should test new highs in Dec’05.
The levels to
watch for Dec’05 are :
S1 8750 S2 8540
R1 9100 R2 9300
There is a very
strong support for the SENSEX at 8540. If BSE SENSEX drops
below 8540 - expect a free fall to 8250 levels. One cannot
rule out anything in Stock Markets. FIIs may decide to pull out a
billion or so as in Oct'05 !
BSE SENSEX can
breach past 9300 levels and if this level is sustained, I expect the
BSE SENSEX to test 9500+ in Dec’05 itself. The figure of
10,000 may then be tested this fiscal itself i.e. by 31st
March’06, if FIIs continue to pump funds as they have been
doing so far in the current fiscal except for Oct’05.
GOLD tested US $
505.30 pto in Hong Kong. It is on its
journey towards $ 550 pto as predicted !
I feel NYMEX Crude
would be US $ 60.00+ for Jan’06 deliveries during
Dec’05.
We would like to
recommend the following Sectors and Stocks for our investors :
- Defence Sector : In India, the production of
Defence Hardware is primarily with the Govt. of India A few years back
this sector was opened to Private Sector Indian Companies. We feel this
sector is a virgin sector in India and returns can be fantastic
in the medium to long term future, provided one can pick up top quality
blue chip stocks. We in India do not have the likes of
Lockheed Martin, Raytheon, Boeing, Northrop Grumman etc. We strongly
recommend the following three Stocks in this Sector in India :
a)
KIRLOSKAR OIL ENGINES : This Stock closed today
at Rs. 198.00, a new 52 week high. This is a Rs. 2.00 paid up Stock. We
feel that the Indian Navy ( Mazagaon Docks Ltd. ) will place a huge
order for six units of diesel engines with this company by
Jan’06 for propulsion of its Diesel Electric Submarines
through 2007-2010. The current EPS is Rs. 90.00.We expect the
FY’06 EPS at Rs. 150 and FY’07 Rs. 180. We expect a
price of Rs. 400 in the next 9 to 12 months. Markets discount the
future. Maybe one can see this price earlier !
b)
NELCO : This
Stock closed at Rs. 113.20. It tested a new 52 week high of Rs.123.00 in
Nov’05. The company has started delivering ‘ IR
Ground Sensors ’ to the Indian Army and huge orders are
expected in the near future from Ministry of Defence, Govt. of India.
There is also a strong possibility of this company getting orders from
Indian MoD for Ground Surveillance Radars. I expect the price of this
Stock to double in the next 9 to 12 months to Rs. Rs. 240.00+.
c)
L & T : Our old favourite engineering
stock tested Rs. 1810 today. We had predicted in March’05
that this stock will test Rs.1800 in 9/12 months. Bull’s eye
! We predict the Stock to double from this level of Rs. 1800 to Rs.
3600+ by Mid 2007. By this time it would have bagged a US $ 1.5 Billion
order from MoD, Govt. of India for supply of 155 mm Towed Howitzers for
the Indian Army. In addition it is also working on a few select niche
projects for the Indian MoD.
- BIRLA ERICCSON : We fancy this optical fibre
manufacturer in India ahead of its peers –
VINDHATELE, STERLITE OPTICS, AKSH OPTI etc. This Stock closed today at
Rs. 32.95. The 52 week high and low for this stock are Rs. 49.00 and
21.00 respectively. This is a turnaround stock and there is huge demand
in India for optical fibre to meet the
telecom infrastructure of both
Govt. of India and Private Telecom players. The OF from this company
commands a small premium in the marketplace because of its quality. We
predict that the Swedish partner will buy out the Indian partner
– BIRLA Group in this JV Company in 2006. I predict this
Stock to be Rs. 60.00+ in 12 months.
- WOCKHARDT PHARMA :
This Indian Pharma major closed today at Rs. 443.00.
It’s 52 week high and lows are Rs. 557.00 and 325.00
respectively. We fancy this stock ahead of its Indian peers –
REDDYs, BIOCON, PANCEA, SHANTHA etc. WOCKHARDT has already made
significant progress in the Biogenerics Sector in Europe. It is a leader in India in EPO, Human Insulin, IFN and
G-CSF products. It is expected that global ‘Off Patent’
Biogenerics Market would be worth US $ 10.00 billion by 2010. As of
today it is worth US $ 0.30 billion. WOCKHARDT will face intense
competition from global players like – TEVA, STDA, NOVARTIS
and smaller niche companies like- GeneMedix, Rhein Biotech and
BioPartners etc. I feel WOCKHARDT is a Rs. 900+ Stock in Mid 2007.
We wish to point
out one small macro issue for the Indian Economy – Fiscal
Deficit. For the fiscal 2004-05 the gross Fiscal Deficit of Govt. of
India was 8.3 % of GDP. This is a cause of worry as with the Left
Parties providing support to the current Congress led UPA Govt. in India, this figure may
end up close to 10.0 % by 31st Mar’05 against a
budgeted figure of 7.7 % of GDP by the Planning Commission. Compulsion
of running a coalition government in India with the support
of the Leftists, who are blocking all reforms and not allowing to cut
subsidies !!!
Cheers to the BSE
SENSEX in Dec’05 !
The
information above is provided by the source indicated and presented by
the Astrologers Fund Inc. Neither the Astrologers Fund Inc. nor the
source guarantee that the information supplied is accurate, complete or
timely, or make any warranties with regard to the results obtained from
its use. The Astrologers Fund does not guarantee the suitability or
potential value of any particular investment or information source.
Remember always to check with your licensed financial planner or broker
before acting. This is just the starting point of your research and you
must carefully investigate before you buy/or sell.