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Market Outlook - Long Term
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MUMBAI: Reserve Bank of India (RBI) today reduced the cash reserve ratio (CRR) by 100bps to 6.5% effective October 11, 2008. The move will release an additional Rs 40,000 crore.....
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THE effects of slowdown and mkt crash will be felt in next few qts...
people are postponing big and small purchases of cars,exp tv, foreign tour, land flat purchasing...and splurge on luxury items. i myself have shelved plans of few big purchases and tour programs....after few months A RISE in bank deposit will be visible...for sure as small investors are scared of stock mkt.FOR NOW....
In reply to:
CAPITAL PRESERVATION !!!
Posted by :
ravipratap61
US govt is now injecting VITAMIN in dead cat...wonder why US govt is buying the corpse of dead banks...still hopeful of bring life in dead body.only playing with money of hard earned taxpayers. 
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EVER thought what MOODY`S and STD & POORS were doing all those years,
how all the big banks in usa and europe, uk escaped its lens...UNDERSTANDABLY THEY ALL COLLAPSED NOT IN A DAY...what their balance sheet telling for attention...is not risky asstes popping out,
is not they failed to cover their debt with any security...WHY, WHY, HOW, HOW...what security agency ,fed gov,rating agencies doing...they were dazzeld by glossy names...or something fishy behind all these...as all choose to see the other way...THE DANGER IS MORE IN INDIA WITH VERY HIGH CORRUPTION INDEX....
In reply to:
CAPITAL PRESERVATION !!!
Posted by : ravipratap61
US govt is now injecting VITAMIN in dead cat...wonder why US govt is buying the corpse of dead banks...still hopeful of bring life in dead body.only playing with money of hard earned taxpayers.
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US govt is now injecting VITAMIN in dead cat...wonder why US govt is buying the corpse of dead banks...still hopeful of bring life in dead body.only playing with money of hard earned taxpayers....
In reply to:
CAPITAL PRESERVATION !!!
Posted by : ravipratap61
THE WOrrying factor is cascading effect and loss of confidance....
ICICI bk may not be in bad position asset or profit wise but what abt the shaken confidance in pvt banks world over, allover the world pvt banks are being taken over by govt...or getting nationalised from USA, UK, GERMANY, JAPAN, ICELAND....
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Just analyse FII figures for Monday & Tuesday. Monday - FII sold 1000 Cr - Index up 700 pints. Tuesday - FII bought 900 cr - Index up only 150 points. So, dear investors, Indian MF`s and Indian public activity/sentiments are more responsible for index movement. So don`t even look at FII figures....
...
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for the followers who passed away.
who followed the wrong prophet .....
first
Nifty may rally to 5300-5500 levels in June: Ashwani Gujral
2008-05-16 09:31:51 Source : Bazaar/CNBC-TV18
second
I am in Reliance Field off Kakinada (Krishna Godavari Basin), buzzing
with activity. production expected to commence, may be mid-August.
Watch the Reliance counters in next few days which will be enough to
sustain the indices. Weather is no good and the roll and pitch of the
vessel makes internet connectivity a big trouble apart from myself
having to get tied up on Bridge. Will update in general, not exactly on
day-to-day basis.
17 Jul 2008:- Hope, all my friends are fully invested as on date as we
have seen 3800-3850 range yesterday. Now, hold tight, till we see a 25%
appreciation. Those with short term view may sell with 10%
appreciation.
It was joetom may his soul rest in peace.
and yet more
...
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dineshsahay-Yes you are right!!
...
In reply to:
Sit on cash and pospone buying
Posted by : dineshsahay
Investors,
Market continues to be bearish, liquidity is a problem, FII`s are selling constantly and global cues not at all condusive, it is advisable to stay away from buying for some time as market may still go down to 1500 points from here to 9000/9700 sensex. It is better to sit on cash and come out from markets if possible.
On lower levels there are no of good stocks where one can switch to at BSE 9000/9500, e.g. RPL, RIL, L&T, ABBAN Offshore, BHEL, Infosys,NTPC, RCOM,GVK POWER,BHARTI AIRTEL,TCS, TATApower, Tata Motors, Tata steel, Mercator lines, HDFC bank, Dr Reddy`Lab,Sunpharma, Biocon etc
Please do`nt see market to go from here to highs like 20000 in near future unless global situation is improved which is not on cards for next few years, however as india`s ecomnomy is concerned I do not see growth to continue as 8/9% so the market has limited scope to be in range of 9500 to 14500 in coming months. Do not expect miracles at present state of affairs as Indian stock markets will definitely will have impact of global conditions.
There is a very narrow range for traders but for investors medium to long term sell some, hold and sit on cash.
Dinesh Sahay
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BSE IT index is headed lower although we see gambling in the sectors from years. It has good support at 1800, & it can touch 1004 if the condition worsens in IT sector during depression era of US.
BSE IT sector to bottom out at 1600-1800. ...
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As suggested in my previous writings, the government has gone ahead and reduced the CRR.
However, it will not work – at best it will result in relief rally in stock exchanges.
This kind of piece meal approach will not work. It did not work with US government for the last one year.
The government needs to do the following SIMULTANEOUSLY :-
- Reduce CRR to 4%.
- Cut bank bank rates 7%
- Cut SLR to 22% now and to 20% in another 4 weeks
- Unlimited protection to bank deposit for next 3 years.
- Increase spending in infrastructure - start announcing projects and start talking about upcoming spending
- Guarantee interbank loans - otherwise CRR cut will not work.
- Be ready to provide finance to private companies in trouble, using one of the many government arms
- We are at two more risk - in terms of flight of capital :-
a) Current account deficit - our creditors worldwide are facing a liquidity crunch - likely to call in the money or not roll over the debt – this kind of thing has had lead to massive crisis in the past in countries across the world.
b) Developed economies will withdraw cash parked in India in equities and other assets - if not tackled properly this will lead to a asset/ securities meltdown in India
This flow of capital will need to to be managed (more thoughts on this later)
Government has to launch a massive co-ordinated and sustained attack on the problem facing our economy and not throw one pebble at a time if it`s measures are to have any impact.
Irrespective of the Government does, we are very likely to hit 5% GDP. If the government acts fast and decisively, sub 5% levels can be avoided....
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They will tend to move towards gold. So, that can change and a huge demand will show itself for gold from developing markets as people want to diversify. And gold is now breaking out of the technical trading range of almost thirty years between $300 to $900 an ounce. So if it breaks out of the $1,000 an ounce barrier, there could be a sharp up movement in gold. I am not very fond of gold, but as a temporary measure it might help stabilise a portfolio and provide insurance.
Would the earnings growth remain at these levels or will there be a downgrade?
I think it is up in the air. Considering the IIP numbers are down, confidence of the consumer has shaken, confidence of global business has shaken, whether it is technology, steel, or refineries earnings will be muted. I do not have the exact numbers, but I would expect that the pace would the poorest in the last five years. I think the growth premium is over. Companies that require capital to grow and instead of growing through internal accruals, those that have borrowed money from all corners–will find the going hard. So growth will have to come down and if investors want protection the only safe haven are places like FMCG and companies that are deleveraged.
What is your view on the commodities stocks now?
Commodity stocks are not necessarily good long-term investments. I think the global growth will slowdown so the demand for commodities be it oil, zinc or copper will tend to slowdown. Globally, the demand destruction is going on. Till some time we were worried about the inflation, but now we are worried more on deflation. And during deflationary times, commodities do tend to underperform.
How much money have FIIs pulled out and your view on FII investments coming to India?
FII selling is inevitable, they sold about $10 billion in India or about 13 per cent of the total investments they have made in India. Since there is no liquidity they might not be able to sell aggressively. It will take time for the FIIs to invest once gain into the Indian markets. In a period of contracting liquidity, money that chased emerging markets, commodities, art, and real estate will slow down. We will all go back to limited liquidity, you will have to prove that you are worth the money. So, if you hold cash you might be able to pick up some unbelievable bargains.
...
In reply to:
`Recovery might take a long time`
Posted by : sambala
The severe liquidity crunch in the global financial markets has led to a flight of capital from the Indian equity markets. This has resulted in the markets plunging to record lows with little hope for recovery in sight in the near term. What has caused this, why have the Indian markets reacted in such a manner and what to do in such a situation are questions that are topmost in the minds of equity investors.Ramesh Damani, member BSE and a well know name in the Indian equity markets analyses the past, present and future trends in an interview to Vishal Chhabria and Jitendra Kumar Gupta.
What’s your perception of the troubled financial markets and its impact on India?
It’s pretty serious and one in a hundred year event. I think you can trace this back to 1980, when global markets took off led by the Dow and was followed by emerging markets and other asset classes. Two things stand out–deregulation and American style democracy. I think we probably have swung the pendulum too far in both those areas. As Lenin, was fond of saying, “A capitalist will sell you the rope with which you are going to hang him.” That is what Western financial institutions have done. They have hung themselves with their own bill of goods.
Will the crisis engulf Asian economies?
It is doing that already and Asian markets are also falling. This is because America is the largest consumer of products made in Taiwan, Hong Kong or China. India’s economy is off course driven by domestic factors and some what insulated, but you know when there is collateral damage you can see panic across the street. So some part of it is collateral damage and some is due to excesses in our own market.
Is the worst over, what are the early signs that indicate this?
The bear market has two dimensions; one is price the other time. And clearly on the price front we will stop falling at some point, we are not at the bottom yet, but will probably get to the bottom soon. But the time dimension can sometime be quite long in a bear market. To give an example, the second largest economy in the world (Japan) had the twenty five year bull run, which ended in the 1989.
The index went to 40,000 and from there, even as I speak to you, it is below 10,000 and we are getting into the twentieth year. So once a bubble breaks, often the time dimension can take the entire generation to forget the excesses that took place in the previous bull market. So we have been too used to very sharp ‘V’ shape recoveries occurring in the global economy. My sense is that the recovery is going to happen over a long time or ‘U’ shape rather then a ‘V’ shape recovery. Overall, it is classic symptom of a bear market where the headline stocks fall and at some time we will have capitulation.
From the Indian point of view, where are we in the cycle?
Let’s take any country that goes through a period of economic phases. We might now be entering a phase where the economy will continue to do well, we might see 6-6.5 per cent growth this year may be 5 per cent one year down the road. So the economy will continue to grow at 5 per cent is not bad in a world that is growing at 2 per cent. But stock markets might go nowhere.
So there are two different things investors have to look at, one the economy will continue to do well, but that is already priced into the market. For example, in 1992, the Hindustan Lever was Rs 330 per share, even today 20 years later the price is Rs 240. So a number of good stocks get priced and then continue to move sideways for years to come. There is no relationship, that if the economy does well, the markets have to do well.
Would you opt for stocks, bonds or altogether different asset class like gold?
Every year there is particular asset class which has done well like during the seventies, Japanese stocks did well, in the eighties America had a bull run, in the nineties technology stocks did well and of late, the emerging market stocks have been the stars. So every decade is marked by fondness for a particular asset class. The one asset class that has not really worked is cash and given the liquidity crunch in the market and given the fact that the money has dried up, my sense is that the cash might command a premium in the market.
Cash will be king. So those who have cash might be able to buy assets at throw away prices. My suggestion to investors is that you should have at least 20-30 per cent of your portfolio in cash, also as an alternate I will also suggest about 2-5 per cent of portfolio in gold. However one must understand that gold is a non-productive asset, which does not pay any dividend and there is a holding cost to gold. However, central bankers and institutions have debased currencies and financial instruments so much that people will not trust those currencies and financial instruments anymore.
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The severe liquidity crunch in the global financial markets has led to a flight of capital from the Indian equity markets. This has resulted in the markets plunging to record lows with little hope for recovery in sight in the near term. What has caused this, why have the Indian markets reacted in such a manner and what to do in such a situation are questions that are topmost in the minds of equity investors.Ramesh Damani, member BSE and a well know name in the Indian equity markets analyses the past, present and future trends in an interview to Vishal Chhabria and Jitendra Kumar Gupta.
What’s your perception of the troubled financial markets and its impact on India?
It’s pretty serious and one in a hundred year event. I think you can trace this back to 1980, when global markets took off led by the Dow and was followed by emerging markets and other asset classes. Two things stand out–deregulation and American style democracy. I think we probably have swung the pendulum too far in both those areas. As Lenin, was fond of saying, “A capitalist will sell you the rope with which you are going to hang him.” That is what Western financial institutions have done. They have hung themselves with their own bill of goods.
Will the crisis engulf Asian economies?
It is doing that already and Asian markets are also falling. This is because America is the largest consumer of products made in Taiwan, Hong Kong or China. India’s economy is off course driven by domestic factors and some what insulated, but you know when there is collateral damage you can see panic across the street. So some part of it is collateral damage and some is due to excesses in our own market.
Is the worst over, what are the early signs that indicate this?
The bear market has two dimensions; one is price the other time. And clearly on the price front we will stop falling at some point, we are not at the bottom yet, but will probably get to the bottom soon. But the time dimension can sometime be quite long in a bear market. To give an example, the second largest economy in the world (Japan) had the twenty five year bull run, which ended in the 1989.
The index went to 40,000 and from there, even as I speak to you, it is below 10,000 and we are getting into the twentieth year. So once a bubble breaks, often the time dimension can take the entire generation to forget the excesses that took place in the previous bull market. So we have been too used to very sharp ‘V’ shape recoveries occurring in the global economy. My sense is that the recovery is going to happen over a long time or ‘U’ shape rather then a ‘V’ shape recovery. Overall, it is classic symptom of a bear market where the headline stocks fall and at some time we will have capitulation.
From the Indian point of view, where are we in the cycle?
Let’s take any country that goes through a period of economic phases. We might now be entering a phase where the economy will continue to do well, we might see 6-6.5 per cent growth this year may be 5 per cent one year down the road. So the economy will continue to grow at 5 per cent is not bad in a world that is growing at 2 per cent. But stock markets might go nowhere.
So there are two different things investors have to look at, one the economy will continue to do well, but that is already priced into the market. For example, in 1992, the Hindustan Lever was Rs 330 per share, even today 20 years later the price is Rs 240. So a number of good stocks get priced and then continue to move sideways for years to come. There is no relationship, that if the economy does well, the markets have to do well.
Would you opt for stocks, bonds or altogether different asset class like gold?
Every year there is particular asset class which has done well like during the seventies, Japanese stocks did well, in the eighties America had a bull run, in the nineties technology stocks did well and of late, the emerging market stocks have been the stars. So every decade is marked by fondness for a particular asset class. The one asset class that has not really worked is cash and given the liquidity crunch in the market and given the fact that the money has dried up, my sense is that the cash might command a premium in the market.
Cash will be king. So those who have cash might be able to buy assets at throw away prices. My suggestion to investors is that you should have at least 20-30 per cent of your portfolio in cash, also as an alternate I will also suggest about 2-5 per cent of portfolio in gold. However one must understand that gold is a non-productive asset, which does not pay any dividend and there is a holding cost to gold. However, central bankers and institutions have debased currencies and financial instruments so much that people will not trust those currencies and financial instruments anymore.
...
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In the capital market, FIIs have pulled out 10.05 billion dollars net in 2008 so far, while they have net pumped in 2.15 billion dollars in the debt market, according to SEBI figures.
Subbarao said emerging economies, which do not have direct or significant exposure to stressed financial instruments and troubled financial institutions are experiencing the indirect impact of the crisis.
He said that the impact is "by no means insignificant or trivial. Indeed, it could intensify in the months ahead."
v.krishnamoorthy
Folsom/USA...
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I HAVE TIME AND AGAIN warned abt ROCKET RECOMMENDATIONs....
making money is never easy in stock mkt...and will never be....
In reply to:
CAPITAL PRESERVATION !!!
Posted by : ravipratap61
THE WOrrying factor is cascading effect and loss of confidance....
ICICI bk may not be in bad position asset or profit wise but what abt the shaken confidance in pvt banks world over, allover the world pvt banks are being taken over by govt...or getting nationalised from USA, UK, GERMANY, JAPAN, ICELAND....
Tracked by: 0 Boarder
THE WOrrying factor is cascading effect and loss of confidance....
ICICI bk may not be in bad position asset or profit wise but what abt the shaken confidance in pvt banks world over, allover the world pvt banks are being taken over by govt...or getting nationalised from USA, UK, GERMANY, JAPAN, ICELAND....
...
In reply to:
CAPITAL PRESERVATION !!!
Posted by : ravipratap61
THANKS to UDAYAN MUKHERJEE AND CNBC for atleast warn us for impending crash....on BHEL - a few months back he advised that we could see very low levels to buy. thanks unayan and cnbc for saving my few thousands..
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Circa Stock Markets mayhem and fasten your seatbelts. Hi All, lemme start by admitting that I was surprised like all others on the swiftness of market drop; the numerical value did not bother me cause I expected nifty to go to 3400 any which ways. Now comes the future of markets and as usual I am gonna play it very long as money has to be made systematically in markets. My friends told me I was an idiot to have exited markets in 2007 at 18 K sensex…. At one point when sensex crossed 20 k – I thought that people around me were right and I was a fool. I stayed calm and telling myself that my plan of buying in 2009 should not change and I kept tight without getting into the greed of re-investing. But Alas, at 14 K I thought let me put some money so I invested 2 lacs in delivery shares which obviously have gone down to 1.2. lacs now. But that’s part of game – it’s a small money deployed with larger portfolio of 10+ lacs to be built in 2009-10 (maybe will top it up with 10-20 lacs more when the time and opportunity comes). Once again like I posted in 2003 stating bull run to go till 2007; I am risking another cyclical. There is obviously some logic to it and its called the 8 year cycle. Effectively the bottom fishing happens 2 years after the peak and my guess is this would happen sometime in late 09 or 2010. Simply adding 8 years to 2008 gives me circa 2016 – and that’s when the mother of all rallies should happen – my estimate is that Nifty should reach 10K if the current composition remains with few power stocks moved out. That will give immense opportunity of wealth creation for all of us. Now for some stupid logic – given the span of 70 years of human life, one should see 2-3 recessions and a depression. Alas, depressions wont last much as touted by lot of people as the 1929 fiasco happened in an isolated world, there was no fed at that time to act swiftly and intercontinental dependencies were not so heavy. Today the world economies are acting in concert to pull us out and they will succeed by next year and markets will be a safe place again. As for my love of Nifty 50 - I would suggest to buy everything except real estate; the real estate story will start unfolding once again in 2010 – so 2009 end would be a good time to buy these stocks – till then, at least I wont touch them. The speculation and 30-50% return will come in engineering sector, companies who are venturing into new consumer businesses, infrastructure, oil, heavy weight cement companies. 2009 will bring us cheer as prior to elections govt will infuse heavy liquidity into the system and hazaar speculations will happen. Yes, I am asking people to be courageous at such time – it’s a time to trade fearlessly if one needs to build the portfolio for future. Maybe its easy for me to say cause I am getting my salary cheque, I am not invested in the markets, I am zero on leverage and have no F&O positions. The rise from here will be swift… and in March 2009 we will all wonder where the lows have gone – not many will invest than also, the fear is gripped so badly. Year 2000 saw battering of IT stocks in a big way and hence not a very large population took losses, but this time – there is blood on all stocks, below book value, yet – no one will get the courage to pick stocks. I would state once again what I stated 5 years back – markets are not going to run away, bse is not getting shuttered down. Bottom line – we will go (die), markets will remain. Start investing in Nifty 50 with small money – it helps to get the confidence back and please do book minimal profits in your holdings though the period – a small profit is much better than any loss. Time to build capital. Cheers..kamalendu...
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