Obama vs Goldman 'Oil' Sachs - PART II - Crude Capitulates - the Obama Effect ! - as predicted.

On September 5th we had written .....' Crude oil prices have since come down to around $105-110 levels currently. However, Goldman Sachs is still very bullish on crude and has once again put a target of $150 on crude by year end. With the US election date fast approaching, we will soon have the political pundits coming out with a constant dose of opinion polls on the chances of both presidential candidates. Positive swings in favour of Obama could well signal a negative on crude oil prices and negate the Goldman effect....' Since then Obama has taken a bigger lead over McCain in the opinion polls / presidential debate points nearer to the fast-approaching presidential elections. Consequently, as predicted, crude oil levels have now come down to $70-75 levels. Even the obstinate 'Oil Bull' Goldman Sachs has substantially scaled down its future outlook on crude prices despite having predicted oil prices to be at $150 by year end 6 weeks back - around September 5th.

'Bear' Market's been the only Reality and How???

In April 2006, the Sensex scaled the 12,000 mark for the first time ever and this has been the pivot point for the Indian Stock market eversince. Infact, over the last 31 months since this historical peak was first conquered, we have had the Sensex revisiting the 12,000 odd mark almost as a reality check in as many as 22 months out of the last 31 months. Therefore, approx. 71% and a whopping majority of the overall time in the ensuing period was spent around 12,000. Evidently, Sensex levels between 13,000 to 21,000 was merely an over-hyped aberration. Fundamentally, if at the current index level of 9,975 the Sensex PE stands at 12.60 (per reports in financial dailies), at the pivot level of 12,000 the PE was at a more realistic and reasonable level of around 15. That being so, between 13,000 - 21,000, the PEs were in the high-end of the illusionary range of 17- 27, and therefore, lacked sustainability. In the overall scheme of things, markets have many a time in my experience swung between extremes. After having done so, it is almost magnetically pulled towards the plausible levels (12,000 in our case) most of the times - as evidenced above - with Micro and Macro factors acting as catalysts. I trust the markets to surely have a way of correcting the excesses too after having often over-stretched itself on either side - but can we ever live to see the last of it ? Take a call !

Take a bow !!! Our September 1st BEAR CALL on the Indian Stock Market - SPOT ON !!!

We were perhaps one of the biggest contrarions on September 1st, 2008 and perhaps the motley few who could accurately read the BEAR TREND in the market well ahead of most. Reliance Industries is currently at Rs.1,306 (down 39% from Rs.2,136 on August 31) and the Bombay Sensex at 9,975 (down 32% from 14,565 on August 31). Approx. 4,600 points have got wiped off the Sensex in only 6 weeks since our prediction led by heavy-weights like Reliance Industries.

Reliance down 16% takes index down by 9% - We had cautioned you on September 1

On September 1, we had clearly warned that Reliance Industries can take the Indian stock markets down sharply. Reliance has since dipped from Rs.2,136 on August 31 to a low of Rs.1,800 on September 16 - a dip of about 16% and the Bombay Sensitive Index from 14,565 on August 31 to 13,263 today - down by whopping 9%. The writing was clearly on the wall but the majority of the market experts / brokerages ignored it - leaving Investors / traders trapped at higher levels. At 14,500-15,000 levels of the index, many leading Indian brokerages including an expert from Karvy reiterated a number of times on TV that he was sure that the index will climb to 16,000-17,000 levels shortly. Sample this : in his book 'Swim with the Sharks' - Harvey Mackay writes 'You'll always get the good news, its how quickly you get the bad news that counts'.

Obama vs Goldman 'Oil' Sachs

Goldman Sachs had predicted earlier in the year the crude oil will touch $150 by July 4th when oil was ruling around the $100-$110 mark. Being that it is a very large player in the crude futures market and therefore, true to their word we got to see oil at around $142-147 by July 4th. The world reeled under the pressure of high inflation due to the tizzy hieghts that crude oil touched. This evoked very strong reactions accross the world including the political circles in the USA. Mr.Barack Obama, one of the US Presidential candidate, went to town proclaiming that he will, among other things impose a "windfall" profits tax on oil companies if he is voted into power. Crude oil prices have since come down to around $105-110 levels currently. However, Goldman Sachs is still very bullish on crude and has once again put a target of $150 on crude by year end. With the US election date fast approaching, we will soon have the political pundits coming out with a constant dose of opinion polls on the chances of both presidential candidates. Positive swings in favour of Obama could well signal a negative on crude oil prices and negate the Goldman effect.

Reliance (2081) down 3% , BSE Sensex down only 0.5%

Reliance Industries (2081) has underperformed the BSE Sensitive Index by almost 6 times in September up to date. This was discussed by us on September 1st - when we were very skeptical about Reliance in terms of returns vis-a-vis the index.

Reliance Industries (2136) , RPL (157) look weak

Indian stock market's leading blue chip Reliance Industries has been under-performing the markets in the last two months even though the markets have remained stable. Any adverse movement in the share price of Reliance, which is an Index heavyweight, will have a negative impact on the overall market - more so because there are not many other shares with high weightage that can prop up the index.

Indian Share Market Maturing ? Take a hint from Mr. Rakesh Jhunjhunwala

In an interaction on August 23, the Warren Buffett of Indian stock markets Mr Rakesh Jhunjhunwala said, until now we have had three bear markets. “In April 1992, the peak PE was at 63.1 per cent and we have the scam of Mr Harshad Mehta, then in 1994 we peaked at 42 times the earnings, then in December 1999 we peaked at 30 times the earning and had the Ketan Parekh scam. In 2008, we peaked at 21 times the earnings with no scams. While there was euphoria and mania, this time we have peaked at a far more reasonable valuation and are still below peak PE levels of the past,” he said. If I can read between the lines - this to me signifies that as the Indian market matures even further, the gap between manic reactions on both sides - euphoria and pain will narrow. Though the same cannot be said in terms of a time lag between the two - which may well signify an overall lower CAGR on a basket of share market investments. Future upsides will be capped at lower PEs than the previous highest achieved at the last peak before it plateaus out. Therefore, investors who really want to make money in the longer run will have to enter stocks only when it commands a lower PE (considering that previous PE highs may not be achieved) with of course other future prospects and parameters. To coincide with Mr.Rakesh Jhunjhunwala's nuances, a recent SEBI amendments for a stricter evaluation and pricing of IPOs and other capital issuances by existing listed companies is not only a very positive step in managing expectations at reasonable levels of the both issuer and the investor - it will also help in the markets coming of age.

USA & India - Stock Market Co-relations

In the past 2 months the Dow Jones Industrial Index and India's NSE Index have seen positive patterns emerging in terms of technicals - both showing a rising top and a rising bottom formation. Going forward, both countries are grappling with oil price led inflation and their respective negative internal micros. The markets seems to have resigned itself to some issues that they have little control over and are possibly looking at better times ahead. However, excesses on the upper side have yet to be reciprocated on the down side as is the nature of the markets. This could well happen if commodity markets once again spike up or an unknown eventuality catches everybody unawares. With political elections around the corner every effort will be made to feed market-friendly news in the coming months which may keep the markets steadier despite intermittent blips. Possibly, the scenario will add to the time-wise correction with a positive bias which the markets indeed requires for longer term sustainability.

Mid-Cap IT Stocks look good

Mid cap stocks like 3i Infotech, Rolta, Geodesic and Microtech are some of the stocks that look very good bet in a gyrating market largely because of the neutral impact on these companies due to adverse conditions in the USA & other developed markets. The domains these companies operate in largely insulated to local micro and macro headwinds.

How to be a Smart Investor ?

For starters, to be one you might want to try and keep track of the company's products, management, growth prospects, bottom-line, acquisitions, mergers, buy-backs, government policies, regulations, taxes, world/local economy, international demand/supply, world commodities/stock markets, other asset-classes, seasonal factors, calendar events, geo-political factors, currency & interest rate movements, FII/Mutual fund data, technicals/fundamentals, insider news, sentiments, perceptions et al. Easy isn't it? So, what are the canons of successful investing in stock markets? This is a question which many of us ask when faced with a particular market scenario. Not suprisingly, we come accross different answers each time notwithstanding being bombarded with informations and conjectures as soon as we come alive each morning. Don't you think that that day is not far when they'd have invented a technology that enables exchange of SMSs even while sleeping. Curiously enough, if that be the case, you and I will still rush-in to take the prime-mover advantage in the race for more - or some bloke would be smart enough to sell it to us anyways. When we perpetually keep all doors and windows open to the vagaries of the weather, for sure we will enjoy the breeze but can we weather the ominous storm that will suddenly threatens us from time to time? Given the fact that one needs to be invested in the stock markets or any asset class over time, funnelling vital clues into meaningful decisions is more important than shutting yourselves from the data deluge. Differentiating between a breeze and a storm is as important as clocking a profit or loss situation. Else, find an insurance company to possibly cover against the risk of literally loosing your shirt due to an information overload?

PNB (508) at very attractive valuation

Punjab National Bank (PNB) is quoting at around a historically low valuation of around 8. With a risk of 5-7% on this stock it looks good to attain Rs.590-600 in the medium term. Being that it is among the largest banks in India and with strong recoveries - the amounts the company so recovered will directly add to its bottomline.

GTL (248) - Telecom Infrastructure play

GTL with with an almost 97% growth in net profit in the year ended 2007-08 is poised for continued growth with the growth of the mobile telephony sector. It is in the telecom tower space which can piggy back on the telecom growth with a medium term target of Rs.280-300.

Power on with CESC around Rs.474

CESC's a very good bet on the ever-growing demand for power. Clubbed with the prospects of its retail foray flagship 'Spencers' it could see muliple profit streams in the days ahead. A medium term target of Rs.525 - 550 looks imminent.

Focus: Indian Stocks International Plays

Fertilizers & Chemicals : Chambal Fertilisers, Coromandal Fertilisers, Tata Chemicals, Basant Agro. Alternate Energy : Suzlon, XL Telecom & Energy Power Generation: NTPC, CESC, Tata Power Mining : Sesa Goa, Gujarat NRE Coke Metals : Hindustan Zinc, Hindalco, Nalco Energy Equipments : Praj

Sterlite Tech recommended on May 2 at Rs.215 touches Rs.248 on May 8

Sterlite Tech recommended on May 2 at Rs.215 touches Rs.248 on May 8 despite the fact that Sensex has slipped down from 17,600 on May 2 to around 17,000 on May 8. Way to go still.

World's largest insurer AIG's Losses - Should policy holders of Indian Private Life Insurers with MNC partners be worried?

American International Group Inc - the world's largest insurer, posted its largest ever quarterly loss on Thursday - the second consecutive quarter that AIG had posted record losses, hurt by a write-down of derivatives exposed to bad mortgage investments. AIG's first-quarter net loss was $7.81 billion compared with net income of $4.13 billion a year earlier. This brings us to the pertinent question - Should policy holders of Indian Private Life Insurers with MNC partners be worried?

Sterlite Technologies (215)- Market Leader in product & performance

Stupendous performance from Sterlite Technologies (214) with the bottomline up almost up 80% for the year will be a multi-bagger since it is one the leaders in the optical cables market of the world and has also delivered consistent growth.

Bharti (904) will outperform from these levels

Bharti (904) will outperform from these levels because of its relative strength in the otherwise turbulent past months for the market and also because of its fundamental strength. Accumulate aggresively since the low appears to be around 825-850.

Federal Bank (243) and Corporation Bank (340) at attractive valuations

Both are quoting at near all-time low valuations with limited downside and therefore, can be bought and accumulated for handsome gains.

Dena Bank, Indian Bank & PSU Navratnas

Dena Bank (61) and Indian Bank (140) among PSU banks look good for 10%-15% upsurge in the short term. Accumulate PSU Navratnas and MiniRatnas for the medium term for good returns including bonuses etc.

Tracking Mid Cap Winners-March 2008 Results Part I

Temptation Foods....Vakrangee Soft....Compuage....Ankur Drugs....Rallis.... Lincoln Pharma....MMTC....Brescon....Stovec....GTL Infra....Garware Offshore.... Sky Millars....Goa Carbon....KS Oils....Noida Toll.... Orient Paper....Bluedart....Modella Wool....Bihar Caustic...Exide.... M&M Finance....Mangalam Chem Fert....Rain Commodities....Nippo Batteries....Crisil....ILFS Inv....Vimal Oil....Pondy Oxide.... Geodesic....Mysore Cement....Allcargo Global....Glaxo Consumer.... Mic Electronics....Kale Consultants.... Guj Hotels....Tanfac....Alembic....MRF....Ferro Alloys....Facor Alloys ....Unique Organics....Techno Electric....Tata Metaliks....Micro Inks ....Lloyd Electric....Avantel Softtel....Mangalam Cement....Simplex Castings

Can you trust Stock Market Analysts?

A recent readers survey conducted by the leading financial daily 'Economic Times' states that a whopping 86% of the readers do not reckon that the share market Analysts' suggestions are accurate. Wouldn't it be better to buy into an Index fund and stay put while leaving the pack to mull over beating or meeting the benchmark?