Fluctuating Indian Stock Market and Banking Scrips

With the recent fluctuation in the market and the high volatility associated due to global market trends has given rise to quite a few speculations. Various factors including the improvement in US Economy, prolonged Euro Zone Crisis and the most recent FIIs pulling out of Bonds market with the remarks of US Fed chief to slow down the Bond Purchase in US and  slow down the stimulus to the US Economy, all played important roles in the volatility associated with the Stock Market in India.  Domestically also, slowdown in the Domestic Industrial Output again pulled down the Stock Market.  The other factors that seems to be impacting are the fall in the Gold prices and the talk of the Country going under Mild Recession.  All these factors as if were not good enough that now we have an issue of Depreciating Re against major currencies of the world like Dollar, Pound and Euro. This is pegged to touch the highs of 63/dollar and that would mean increased Import Bills and Increased Fuel Prices.  What does that mean - Impending Inflation.  So how is market supposed to behave?

Market are expected to ride a choppy and turbulent wave of highs and lows due to the above mentioned reasons. Since RBI is not intervening at present to control the Depreciating Re we need to look at investing in market only from a long term perspective.  Specifically those looking at the Banking Sector need to be really cautious.  The Banking Scrips are already in negative to some extent and with the further depreciation in Re I would expect the Scrips to lose the Shine further.  Reason being the impact they will have on their Business and Profit Margins. Unless RBI revises the Repo Rate and CRR, Banks would not perform as they are expected by the investors and certainly that would bring down the confidence vested in them resulting in Sell, and Sell mostly by the Institutional Investors. This would result in the downward price trend of the Banking Scrips.

Some Safe Bets in this could be the Banks with Low NPAs like HDFC, BOI, IDBI or similar ones in the rank. However, please do not read this as my recommendation or even suggestion to invest in them.  I am simply talking on the probabilistic terms that these Could be safer scrips than the others.  But again, the selection of Banking Scrips to invest in needs to be done with utmost care and with a mid or long term perspective and with a target hold of minimum 1 year.  I would not suggest a Short term hold on the Banking Scrips and also not at all if you would be afraid of the high volatility that may be associated with the Share market and the Banking
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Note- Had to update as Rupee Symbol was not showing up
Update - Re has already touched 60/dollar at the time i revised this article

Downgrading of US Credit Rating and Indian Stock Market

It was certainly a Breaking news World over when Standards and Poor (S&P) downgraded the Credit Rating of US from AAA to AA+. First ever since 1917, but yes that's a hard fact.  US economy is seeing a downward trend for all the reasons of Lack of Adequate Governance Mechanism and for the reason that can be well expressed as  - 

"In an economy if a few people make a few work for few who think its there birth right to not work, it kicks the downturn.  But, if the people who work think that when they work, the benefits pass on to the others who either make them work or don't work and then they stop working, the economy would certainly take a good plunge to hit the dirt."

Now, its an interesting factor to see  an economy crumple and equally interesting is to see the effect on the other economies, specifically the growing economies.  India being one of those where it is certain to see the negative impact, but it would be equally interesting in case of India to see the way the Indian economy would cash in the opportunity.  

Wait there before you make an opinion that I might be talking absurd and weird please mark my words that the Indian Economy is one of the most strong economy to glide through the worst economic crisis that might hit the world.  It is an economy which is one of the most self reliant economies. Though it might get hit by the patch of downturn world over, but it certainly has the ability to re-bounce from the slack and hit the pace again.  

The Indian Stock Market would also react negative for the plunge in stock Markets world over and there would be a selling pressure in the market.  But the investors should NOT PANIC at the selling Pressure from the Institutional Investors or the FIIs.  The selling pressure certainly would create a void, but that void would be temporary and as the Indian Economy would re-bounce, the markets would look upwards....just a matter of few weeks. From where I see the Market, it would not be say another 4 weeks that the market would see an upward swing.

I am going to be holding on to my portfolio with a tight grip on the stocks I own and would suggest the same to the friends and family.  It is certainly an acid test, where we are not supposed to panic and give in to the selling pressure.  Its rather time to Hold and Wait......

Stock Market - What's wise?

Indian Stock Market has been playing with the emotions of the investors. Its been fluctuating ever since it touched the peak. Though BSE sensex has been hovering around the 8000 mark and been gettitng the support around that, the month of March does not seem to be the time to be providing any assurance to the investors. Market experts are expecting selling pressure by FIIs during the month. This certainly might trigger a short term panic in the retail sector investors, but is it really a news to create Panic?

I see it as not, what I see it as n opportunity for the Retail Investors to put their money at the right plays and hold for a longer term. The stocks would see more corrections in March-April duration and Retail Investors would be able to get good deals on the various stock. It would be a worth to invest during the plummeting times if one is looking at Long Term Investment and not just simple Buy / Sell trades to earn short term profits.

I would see market getting slightly below 8000 mark by the month end and be hovering on that range for next few sessions. Though I would not be surprised to see market plummeting to 7500 by month-end. But all this should not be a worry for the Hold Positions and Long Term Players.

One thing that I would opt out from would be Short-Sellling that could be really tricky in these situations as the Promoters and Directors may step in to buy shares to gain support for their Company's stocks and send a message to the market that we are doing well to face the turbulent times. And yes it would be advisable to follow the buying pattern of stocks one is watching and if the Board Members / CEO / CFO buy their respective company's stock, its worth Buying that stock.

Risk and Caution are something that one needs to always keep in mind while investing in Stock Market.

Indian Stock Market - Time to be Cautious

The Markets as they opened today morning have been really heartening. After a downslide over the past 7 sessions, today the markets have opened on a high note, in the positive territory, that certainly a good news for the Investors. But is that really a good news as the sentiments have been positive because of external factor of Fed Interest Rate cut. It has not been on the positive industrial growth or the positive GDP growth as overall factor. Though the morning session itself is volatile after good opening, there still is room for some corrections to come in place during the mid session and the closing session as the pressures are building up.

Overall the time is to be cautious and is to play long term. One should not get carried away with the market fluctuation and should hold the positions rather than trying to square off. Its time to be in the Cash segment for long term rather than Futures.

The Stocks that are to be watched and held for a longer term would include –

Bombay Dyeing for around 740/- as the cue is to double up with a target price of around 1500/-

Zee Tele for around 210/- as the target price could go around 300/-

HCL Tech for around 230/- or 240/- with target price around 350/-

PSU Bank Stocks like Allahabad Bank and Union Bank.

Now these are few stocks that are supposed to go good over a period and hence GOOD Time to purchase them and hold them. But sure to be cautious as while I write this, the Stock Markets have already started shedding the opening gains and are showing too much volatility. Sensex after a good rebound again is hovering around 17000 and Nifty below 5000 mark.

As had written last night, my personal feeling is still the same, markets would not cross over to regain so early as this weekend.

Regards

Mayank Trivedi

Indian Stocks - Market Mayhem Part 2

Tuesday’s Stock Market Mayhem reminded me of the previous post that I had written on October, 17, 2007. And this time post the mayhem, there seems to be a good news “per say” for the market bourses. The US Federal Reserves Rate has been cut by .75 basis points and that as the past suggests would mean the inflow of Foreign Funds (US) would flow in to India and the other Asian markets. That would mean the markets would open with positive note.

Ah but a catch there that US Fed asserts that there would still be downside risks to the growth. Now what does that mean??? Dow still was reeling negative and was not giving much positive indication, so what do we infer??

If we take cue from the Fed Interest Cut then the market should open in positive territory with FFI Fund inflow, but on the contrary, if we take the Dow Jones cue, then the markets would still be on the negative territory.

Here, what is the sentiment of the market players, not the specialists and the experts but those who hail from the retail market and who are the avid watchers of the stock market in India? The sentiment is, that if Market fares better in the coming days, and the Nifty does not fall below 4500 points, it would be able to recover faster. Translating that for Sensex then the circuit break point would be 15000.

Please recall that in my post on October 17 last year I had mentioned that the Indian Stocks are being overvalued and I strictly feel that there should be another correction in the Sensex and Nifty for between 5 to 10%.That means from current prices the sensex and Nifty should be corrected around 15200 and 4550 Respectively. As per the performances of the various Industry Sectors, that would be the correct valuation of the stocks.

For say in the coming days, both Nifty and Sensex go below the levels of 4500 and 15000 respectively, then there are hugh chances that they would hover in the range of 4000 to 4500 and 14000 to 15000 respectively for quite some time. Umm let say till budget time. Post which, if we get a populist Budget, the market would get the support and come over the bearish shadows as they are hovering at present.

Whatever we say, the morning opening Bells would provide us the clearer picture and Wednesday’s Market performance would more or less decide the fate for Nifty as well as Sensex, as to whether they would go below the benchmarks of 4500 and 15000 or they would rebound back. The Opening session and the mid way would be the deciding factor for more…..

Regards

Mayank Trivedi

Indian Stock Market - High Action Day

I had been closely following the high action drama that was going on the Indian Stock market. Surely a windfall of the USD after Fed cut down interest rate by .5 points. The entire gamut of funds flew down from the US economy to the developing and the third world front. Typically the Indian Stock market rode the bullish wave to touch 19000 figure, that was something tremendous. The market is further inclined to go up to touch the 20000 figure in next week or so. But is that what we are expecting of the industry experts are looking towards.

If I run through the minds of the industry experts expressing their thoughts on various channels, I fear a High action drama and a series of high action days where the FIIs might go ahead on a Profit brooking spree triggering the collapse of Indian Stock market back to the range of 15000 to 16000. It is quite a surprising rise and equally would be the downfall.

When I see today most of the stocks are priced quite high as compared to the real performance of the companies and that means that has to come down. This high swing in the stock market reminds me of the Harshad Mehta effect.

As I write this post, I hear that the other Asian Markets are not performing as good, so do I hear the bells ringing??

Mayank Trivedi