Is it end of great Indian equity Dream

Last year around same time, we were dreaming(and our analysts were predicting) of 25000 level on sensex, a year later it turned out to be completely right, just 2 slipped somewhere in 2008 and left us hoping that we don't go to stone age of 5000 sensex level.

We must thankfully say good by to 2008 for being kind to leave us in the end after creating havoc worldwide. Everyone on Financial sectors looks happy that the year of distrust, fall, sadness, 2008 is going down the drain. 

After biggest financial crisis of present world i.e. year 1929-30, this year leaves financials worldwide left wounded. But there is a message to all of us. 'DO NOT BE TOO GREEDY'. Always know limits.  When 2008 begun, everyone was looking at 25000 sensex, dream run to continue. But we forgot that,

- What we were seeing was due to Foreign inflows

- There was no reason for them to continue coming to India when their own houses were put to fire. 

As per a data extracted from leading broker, FIIs pull out Rs 53500Cr while Domestic Investors invested Rs. 15500 Cr. If I take this figure ahead, Rs 38000 Cr (pull out can leave us wounded and markets down more than 50% YoY. These wounds are going to take years and years to heal and see markets on fresh high.

We also forgot that ours GDP is rising due to foreign investments and our own savings are not sufficient to keep India moving. That's why you see many perks being given to foreign firms to come to India and invest, latest being in Insurance sector (with FDI limit going up to 49% with recent bill in parliament). 

Our annual GDP is less than USA's money lost in this financial crisis.  Are we confident of what we are doing?  I am no expert to answer that, perhaps the great expert of generations, the time, will answer that. My prediction is that, at the end of 2009, we would be somewhere 20% up from here (i.e. 12000 on sensex and 3700 on nifty) with seeing lot of volatile sessions.

Bye 2008!!  (No reason to add 'good' before bye!!)

Market staging smart upmove

With Domestic Trader deciding market pace inabsence of foreign rich fund managers, market are heading up. I would again cautious, stay away or book profits on ur holding if u bought recently before 5th Jan, whenbig boys arrives and decide market movement.

Today, market is seen up. But may loose ground in evening. IT Stocks will continue to tumble.

History repeats..

With markets showing year end rally, history repeats. As volumes are low (Fund managers are on vacation), small trades are pulling markets. This trend may show up for a day or two before a final call will be taken on markets.
Generally, from past trends, markets continue to rally or subdued until mid January and after which there are steep cuts (Remember Jan 21-22, 2008 cuts). Its probability in 2009 becomes high with the fact that by mid-Jan we will have corporate earnings coming out for Oct-Dec 2008 quarter which are expected to go down by about 15-20% at least.
So, play this rally to cleanupyour non performing stocks, even if that means loosing some money. It becomes a case, if your entire portfolio contains midcaps and small caps. So, clean them up and get into some good large cap stocks as they are first movers when markets stablise.
For today, I suspect, it will be another volatile session with markets going up during early trade.

Stay cautious

So, market conquered 2900 but are we really out of woods??

Not really. This week is a period of very low activity as most fund managers worldwide are on holiday. So a small trading amount can take stocks to a higher/lower levels. So stay cautious and donot buy in this smart looking upmoves. Wait for real money boys to return and then take a call on what should be done..

 

Markets stumbles

The fear that I expressed in my last post has started to come up the bourse. The markets have taken a dip on poor advanced tax numbers reported by IT department. The tax figures are down by 22% causing a dip in markets.

Since markets are off recent highs of 3100 by 250 points (8% slide), I think markets will stay new 2800-2900 for some time before taking directions. But if 2800 is broken on downside, it would leave gates open for bigger cut in market, may be up to 2500. And if earning season is worse than market expectations, you can see a level of 2200. But that's very pessimistic view of looking at things.

So, for now, dont have anything big in your portfolio and prefer to stay cash rich. Equity as an asset class has taken a hit and likely to be subdued for some time now. For next two quarters, my bet is gold which can appreciate up to Rs. 15000 per 10 gm if equity markets continue to slide.

Perhaps a time to re-look at your portfolio from short term perspective.

Is it time to Invest?

Well, this is the question many of my friends are struggling with. My take on the same is that Come January 15, and you will have more clarity on whether we are done with the bottom or still pain is to come. Lets analyze few facts to come to any conclusion.

Facts
1- In anticipation of Redemption pressure due to festive season, most global and Indian funds managers are sitting on hefty cash. Almost 2-3 times than they usually did in past few years.
2- This is year end going on and most hedge funds have to close their books by this time. So, we used to see a selling in X-mas week.
3- New market outlooks to come out in January for many global funds waiting to deploy money.

A Little Analysis
My take is hedge funds already have oversold, so the second point goes out of contention for year 2008. This said, December last week, being festive season, you may see slight dip in sensex, but no major bounce expected. Conclusion, we may see a lethargic, soporific markets for the year end. And that's logical also. You don't want to go in festive season with lot of open positions. So be light, book profits if you have any and enjoy new year is my suggestions.

If you have bought stocks in last dip of October, you can stay in it until market comes below 3000 for closing. If it does, we are in for a trouble. Also, if you get something 3200+ on nifty, please exit and book profits.

Then comes, when to invest. Well, wait until January end or preferably February first week. Global picture would be clear by then. And a possible dip (to allow these cash rich, underweight on equity fund managers worldwide to deploy cash at lower levels) would have occurred by then, if at all that has to come. '

Even otherwise, my take is that one should be happy compromising with less profits than to make losses in markets. Because, markets have already gone up by about 30% (700 points from 2500 nifty level). And by any imaginations, global issues of recession are not out of sight.

There is popular philosophy which says, equity markets bottoms out 6 months before economy. So that means, economies worldwide are to see more pain in fiscal 2009-10 than they did this year. So, in 2009, no investing please. Whenever you make 20-30% profits, get out. Markets will be kind to give you another entry which may be slightly higher than your previous entry, but now, you have more money as that money has already given 20-30% returns.

Now an Indian view point on why markets are likely to see a dip in January last week or Feb first week. In India, most of savings happen in the month of December to January making these fund managers more cash rich. And these guys are no fools. They know value of investing cheap and that is what strengthens my belief that markets must give a dip in Jan end or Feb beginning. How much is tough to say. But, this may no breach October lows (2500 nifty). If it does, wait some more and invest full capital when markets his 2200-2300 sort of level. If it does not, well, you are already deploying money in small quantum. How?? Say, 20% at 2850 level, 20% at 2700 level and wait to see market movement. If stays there or moves up, invest full, else wait for 60% investment in 2200 sort of levels. This paragraph is just an indication on how you can go about your investment, you can make any other combination as well which suits you.

I assume, Indian investor has learned over past period and will be investing his money (at least ULIP investments) in Protector/Preserver type schemes than investing in Maximiser/Multiplier type of options This is time to protect your capital. You can later switch to wealth maximisation. So, please invest in schemes which allows option to switch from protector to maximiser type of funds.

In my next post, I will explore some good sectors for next (and perhaps last of Indian equity markets) secular bull run in India.

Disclaimer: The above is just my personalview and any decision takenon the basis of above will be individual's choice and I will in no circumstance hold any responsibility for any situation arising out of this.