STOCK MARKETS AND OCTOBER

So it is proved once again that the month of October is not good for Stock markets. Over the past 80 years, starting from 1929, the month of October is always a bad omen for stock markets world over barring few exceptions.Remember how bullish/positive most of the market participants were just 10 days ago and see how things have changed dramatically. While the uptrend or so called strength during the last 2 months was labored and with declining volumes, the fall is sharp and swift to say the least. Like the famous words in U.S nowadays(TOO BIG TO FAIL) we are now hearing lot of voices now which say - IT WAS EXPECTED AND/OR I SAID SO. But as far as I know only very few stayed away for buying at 5000-5100 levels(nifty)even after the INDEX doubled in less than 7 months saying that every correction is a buying opportunity and lot of money is waiting in the sidelines to support the market at lower levels.

On the macro side, the closure of small regional banks in U.S is happening faster than the H1N1 deaths as the number has gone upto 115 as of yesterday(30/10/2009)from less than 100 at the start of the month(as mentioned in my article dated 2/10/2009).


Federal regulators close 9 banks, mostly in West; marks 115 US bank failures this year

And as per the Federal Reserve's own statement another 330 banks are in the watchlist.

The telecom sector was the worst performer last month in India, with the market leader BHARTI AIRTEL losing 1/3rd of its market cap. Amongst many others, one of our knowledgeable market analyst Mr.Ramesh Damani, candidly recommended short in telecom and long in Airways as a contrarian bet sometime ago and he is spot on in his reading.KUDOS to RAMESH DAMANI!!!!!!!(He also mentioned as one of the reason for the industry's tough times is the new emerging concept"GOOGLE VOICE"). By the Way,I am not a technology man by any stretch of imagination.

With U.S market in lot of mess still and the printing notes and giving stimulus is not the solution, the crisis created by 40-50 years of borrowing and spending can not be corrected in 1-2 years. My reading is that it should take atleast 5years if not more and so we are in for long testing years before the new highs are made in any sustainable basis in emerging markets or elsewhere. So learn to be patient and tone down your expectations. Happy investing. BEST OF LUCK.

MY ONLY RECOMMENDATION: SPICEJET(BSE:500285) CMP 37.05 TARGET Rs.60-75 in 12-15months

RALLY IN ITS FINAL LAP

The problems in the U.S economy are not only continuing inspite of the liberal printing of currency notes by the Federal Reserve but are actually worsening day by day. Take a look the recent economic news and numbers:

1.UNEMPLOYMENT

This is threatening to touch double digits soon but President Obama continues to guarantee jobs to everybody everyday.

2.CLOSER OF U.S.BANKS - REGIONAL

Regulators have shut Warren Bank in Warren, Mich., and two small banks in Colorado and Minnesota, boosting the number of failed U.S. banks this year to 98 as loan defaults rise in the worst financial climate in decades, as losses have mounted on commercial real estate and other soured loans in the wake of the financial crisis and the recession that has gripped the economy. The failures have cost the fund that insures bank deposits about $25 billion, the FDIC said Tuesday.

The fund has been so sapped by the wave of collapsing banks that it now has fallen into the red. The FDIC now expects the cost of bank failures to grow to about $100 billion over the next four years -- up from an estimate of $70 billion made in the spring. Most of the $100 billion in costs are expected to come from failures this year and next.

3.SOCIAL SECURITY COSTS

As more elderly people who are losing jobs are not able to get another job, they are opting for the social security and medical benefits which is already putting a strain in that fund.

4.The major buyer of U.S.Bonds/treasury paper today is China which is now open in its view that it wants an alternative currency to U.S.Dollar and that it is looking at investments which are in real assets/value than in paper form.So, if China decides to stop funding the borrowings of U.S then imagine what will be the result. This situation is without taking into a/c the possibility of China selling U.S bonds/treasury papers?

The stock markets world over are in their own self,going up on easy money flow and discounting the positives only like signs of growth(or worst is over). These same theories are talked about even in December 2007 when U.S Fed cut interest rates from 5.25% to 0.50%. The money flow was there and also lot of MONEY WAS WAITING IN THE SIDELINES to buy at every fall. But we all know that the money in the sidelines never came to the market even after SENSEX came down from 21000 to 7700.

I am fairly convinced that this liquidity driven rally is in its final laps now and may soon end gasping for breadth as it has no final target to end the race but will have to end on its own only due to exhaustion.BEST OF LUCK

Return of recklessness

Is it deficit MONSOON? Who is talking about it. Are the stock valuations fair and reasonable or overvalued? Nobody seems to care about it. Have all the negatives on corporate workings and financial tightness resolved? Who is bothered. All every trader and strangely the INVESTORS want is to make money, that too quickly and everyday. And for this, all of them want the market to keep going up. And the sentiment is adequately supported by the money supply and the cheerful faces of some business channels who are always talking about market going up only.

It is shameful that many analysts and business channels who talk about decoupling theory are also talking about Dow Futures and S&P 500's chart. Why should they be worried about them when they are convinced of our(INDIAN) markets decoupling? I dont understand.

I am convinced that the short term money(about which neither the Govt nor the SEBI is bothered) which is driving many stocks to unreasonable valuations will dry up soon and then we can see a collapse similar to what we saw after the Budget. The Dollar Index is suggesting a sharp reversal and the stocks and commodities will follow suit in the opposite direction. So be very choosy in buying, if at all you want to buy.Otherwise sit tight on your money and deploy it from 4200 to 3800 level. ALL THE BEST

For consultancy and advice contact: sairam_1983@yahoo.com

WHEN & WHERE IT WILL END??????????

It has been an eventful year for Stock markets worldwide, so rough and bumpy that it could challenge the Chennai Autorikshaw wallas.As all good things come to an end, the 5 year bull market also did the same, though the end was painful enough to remove all the happiness that the good times provided. And nobody knows as of today whether the pain is over or not.After scalling steadily from 3000(sensex)in April 2003 to 15600 in September 2008(which I thought was the peak),sensex became senseless after the cut in U.S.interest rates,which started on the 18th Spetember 2007 and went on to hit 21200 by December 2007. Now the U.S.interest rate is down to 0-0.25% but the same senseless SENSEX is down 50% from the top. So once again it is clearly established that market discounts the fundamentals far ahead(6-12months) of the actual events.
Now that the interest rates,commodity prices- particularly Crude Oil are all coming down, the buzzword in the market is SLOWDOWN. Now the slowdown has hit all sectors and the sentiment is full of gloom and doom. The last 2 negatives to come out in the open in the next 3-6 months are CORPORATE RESULTS and ELECTION. This also coincides with the expected TIME WISE Correction of 18 months.
So, in my opinion, it is time to list your PORTFOLIO CONSTITUANTS now and get ready for the next bull market. By March 2009 you should have invested atleast 15-20% of your surplus and by June 2009 atleast 40-50%. To know which sector and what shares,
please wait for sometime or write to me at: sairam_1983@yahoo.com. Take care. Have a great year ahead.

HERE COMES THE CENTURY

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TIME TO BUY????????????

It was panic selling all around the world in the last week of October 2008.Nobody knew which market was following the other, as it became a vicious circle with one falling after another.Then came a sharp pullback of 30 to 50% in most of the markets in a quick time before grinding lower again. The Friday(21st Nov) rally starting from Hongkong, minutes before the Indian Markets opened, threw a surprise to many in India after a fall of more than 400 points in Dow on Thursday.Again it looks like a temporary relief rally after 7-8 days of continuous fall.

Now the question in Every body's mind is, when and where will we see the market bottom. While the numbers swings widely from 1600 -1900 for nifty and 6200-6900 for sensex, there are a vast majority who are convinced that there are screaming valuations in many front line and mid cap shares. But still only 1 out of 10 are buying and a lot more who actually wants to buy dont have the money to buy. And as it happens always near the bottom, those who are having money to invest prefer to keep quite, while many others are selling their shares either in fruastration or on the hope that they can buy them back at lower prices later.

I am of the opinion that the October low of 2252(NIFTY) and 7698(SENSEX)may not be broken deeply. I would put a 75% chance for the same. I am reasonably convinced that it is time to build one's portfolio and not worry about the bottom which is only a number. I am of the opinion that with a downward risk of 10-15% there are many stocks which can give a return of 50 to 100% in the next 2-3 years. My assumption is based on quite a few factors which I can not divulge in open as it is my source of income.

So go ahead and start buying in small quantities and on the days of sharp fall. First identify the shares you want to buy and make a clear plan of investing. Or else contact me at sairam_1983@yahoo.com

HAPPY INVESTING.

IS THE END IN SIGHT?????????????

In my last article dated 29th september, I predicted the Nifty to fall to 3425-3475 levels in 3 months time but truly did not expect the markets to tank like this in just 2 weeks. The Nifty touched a low of 3099.90 yesterday making it a significant bottom for the time being. Now all the bad/negative news are out in the open like:

1.The Financial mess in U.S housing & banking sectors

2.The Slow down in Indian Corporate growth & earnings

3.The extreme pessimism in Job markets in India and world over

4.The panic created in few Gaint Indian Corporates like ICICI Bank & Jet Airways similar to the collapse of few gaints in U.S.A & Europe.

5.The expectations that another 4-5 million houses will come under default in U.S

and so on & so forth. While markets may fall for 1 or 2 days when the negative news actually comes out in the open, the fear of unknown is largely discounted. And the concerted efforts taken by the Regulatory Authorities world over will start bearing fruit in the next 3-6 months.

As far the Indian stock market, 3000-3100(nifty) seems to be a good bottom for now with strong resistence between 3525-3650. I recommend buying Nifty close to the support levels of 3000-3100 for decent profits.Even if the Nifty is to breach 3000level, it will bounce back quickly & sharply to make sure that you make an exit by protecting your capital.

I am also recommending to BUY ICICI Bank around 360-380 & Praj Industries @75-80 range for decent trading profits.

If you are still not sure of putting money directly in stocks or managing it yourself,please feel free to contact me at sairam_1983@yahoo.com for an attractive assured return of 18% and the 100% safety of your capital.

9.25am(IST),17th October 2008