INDIA
Our web coverage of India is courtesy of
Taran
Marwah [alternate email: Taran]
Last Updated:
12/04/2006 11:54:56
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 2006, 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.