Market Matrix – India saw one of the worst market downfall

Friends,

RBI has not met expectations of markets and India saw one of the worst downfalls and Nifty closed down 359 at 2520 points. There was no further release of money into market by RBI while it was observed by RBI that Indian economy is on track. The other markets did not help either, after weak Asia and weak European advices the US markets have also tumbled down today. While there is no limit to up side down side should have some limit. How in the world would one sell assets worth much more, far cheaper, just because these assets happen to be marketable ie represented by equity shares.

I find govt lacking in its duty today, back in eighties and early nineties, the govt used to direct the institutions to come for support of market, when ever there was undue pressure. Mr Pherwani of UTI used to be called big bull. He had contributed a lot to the development of capital markets. Such directives from govt are missing today.

Govt should direct banks to pick up good quality stocks without hitch. Any enlargement of crisis will make matters worse for all finance sector entities. One reassuring sign is that there is no payment crisis in markets. The banks are doing business as usual and this is a great thing.

I was surprised last year at all asset classes going up simutaneously and deducted that the world would face some crisis. Today reverse is happening while all asset classes are going down. This may be due to the rewinding action and may be this would make world healthy again. Why should all this happen, is some thing that should be found an answer for. I maintain that the supply and contraction of money in hands of central banks is the cause of it.

In India, so far, the credit off take is normal, banks are lending. The crude is further down to 64 dollar/bbl, the inflation number in coming down and only gradually, the infrastructure funding is increasing.

There hasn’t been redemption of mutual funds on an alarming scale. FIIs have sold just Rs 1450 crs worth of equities today and under what design they are selling it so cheap is again a question. While picking stocks they were seen to be doing thorough home work and why while selling no home work is being done.

The cash rich companies should have announced their ‘buy back shares’ plan. They should have done it in hoards, a few have done to. Isn’t it just proper for every good management to postpone the expansion plans and utilise cash for the share buy back. This will reward the shareholder very handsomely. But it is not being done because may be the smart management are happy for the falling markets and would pick stock for themseleves at these prices.

If only the right things were done by right people at the right time,the world would be much more prosperous. Since this does not happen, the reverse is that some in position are out to profit at the cost of general public. It is a relief that India’s 80 pc population is still in traditional style exchanges and not entangled with the new age trading style.

The fall without a matching event taking place is surprising enough. How will the truth come out?. Since the abnormal times were in every body’s knowledge, the excessive trading is not there in any case to warrant such falls.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

MADRASCEM,PUNJLLOYD,STER,GAIL,RELIANCE, DRREDDY,RELINFRA

MADRASCEM @ 75 (231008) gets 1417 pancha-tattva poiints and may be bought for long term.

PUNJLLOYD @ 164 (231008) gets 960 pancha-tattva points and this should be bought on declines for long term.

STER 246(231008) gets 1354 pancha-tattva points and it should be bought for long term.

GAIL @ 224 (231008) gets 824 pancha-tattva points and it should be bought on falling further from this level.

RELIANCE @ 1217 (231008) gets 812 pancha-tattva points and is to be accumulated over in a few strokes over time for long term.

DRREDDY @ 465 (231008) gets 870 pancha-tattva point and should be bought on down days in a few strokes for long term.

RELINFRA @ 447 (231008) gets 929 pancha-tattva points and should be accumulated over time for medium term.

BIRDINFO Stock Rx – A prescription for stock market

MADRASCEM, PUNJLLOYD, STER, GAIL, RELIANCE, DRREDDY,RELINFRA

MADRASCEM @ 75 (231008) gets 1417 pancha-tattva poiints and may be bought for long term.

PUNJLLOYD @ 164 (231008) gets 960 pancha-tattva points and this should be bought on declines for long term.

STER 246(231008) gets 1354 pancha-tattva points and it should be bought for long term.

GAIL @ 224 (231008) gets 824 pancha-tattva points and it should be bought on falling further from this level.

RELIANCE @ 1217 (231008) gets 812 pancha-tattva points and is to be accumulated over in a few strokes over time for long term.

DRREDDY @ 465 (231008) gets 870 pancha-tattva point and should be bought on down days in a few strokes for long term.

RELINFRA @ 447 (231008) gets 929 pancha-tattva points and should be accumulated over time for medium term.

BIRDINFO Stock Rx – A prescription for stock market

GRASIM, ACC

GRASIM @ 1180 (231008) gets 1257 pancha-tattva points and should be bought for long term.

ACC @ 442 (231008) gets 1011 pancha-tattva point and is OK for long term investment.

BIRDINFO Stock Rx – A prescription for stock market

World Matrix – Former US Fed Chief never estimated that the crisis will be so big

Friends,

Former US Fed Chief spoke yesterday that he never estimated that the crisis will be so big. He said that while he had some idea about that there is overplay but could not fathom the depth of it.

In hind sight it may seem that some thing could have been or should have been done by way of regulation but in an economy which is avowedly free market economy, how can suddenly a person can intervene unless there is change in policy. An early intervention would have spoilt the party then and he would have been blamed.

He was hopeful that the strong American nation would surely come out of the crisis given the rescue effort. He has endorsed the rescue efforts. In the end, the worth of highly paid Harvard (type) educated persons comes in to question. How and why they landed all their companies in such a situation. Only so much is clear that while fraud element is missing but ambition to earn mega-buck may have been at back of it. The role of rating agencies is however suspect.

China is in soup because only it had mostly benefited out of the buying power transferred to American public while the sub-prime crisis was in the making. India did not gain out of it but its markets are afflicted as the FIIs have had to withdraw money invested in India.

Now, the earlier Indian RBI chief, empowered with some exclusive powers sensed the excesses going on and acted by tightening money supply. This went too far and has strained Industry here. The new RBI Chief is acting to mitigate the hardship but as he is a bureaucrat, he is not being bold enough. The SLR and CRR should be brought back to levels in 2003. Didn’t we see the tremendous growth since 2003 (not artificial growth like China) and which may continue. This is the time when India can overtake other economies. The slow-down elsewhere does not mean that there should be slow-down here too.

Our concern was the high crude prices and rightly so but it has cooled down and allows us consume more in proportion. The gold is costly and India a traditional buyer of gold should stop investing in it at such high price. The govt should reduce interest rates to enable industry lower interest costs on sophisticated machinery and deliver manufactured goods cheaply and at internationally competitive prices. The increased supply of goods and services will take care of inflation too. This is how the nations become rich, its not by keeping enterpreneures starved of capital. Its also not by inducing people to walk away from investing in risk capital but in earning income passively by way of interest which should be domain for the widows and aged only.

The Pension and Provident Funds should be asked to go fifty-fifty in to equity and debt or at least 1/3 rd in to equities. This is necessary because it is business and industry only that will give the depositor the goods and services to be consumed in the late years. No business and no industry, there will be no capital and no interest , only books will show it as is the case with America. The future world financial order calls for greater importance being given to direct ownership of productive assets and not like having them as collateral security and asking for a fixed return by way of interest. This system actually is responsible to upset the financial apple carts as also spoiling savings of people by dilution in currency values. Both side suffer turn by turn but why should they because only some intermediaries make extra-ordinary gain through manipulation.

Not stopping here, all the saving through equity investing only should qualify for concession under section 80C. Nehru had provision of taxing unearned incomes through interest at higher levels.

The DOW was up yesterday and Indian market down, Asia is down this morning again. RBI has liberalised ECB norms and may take some policy initiatives today. The ban on short-selling through entities out-side India should not be minded because the possessor of equity should be basically free to do what ever with his equity holding. Equity market should free from every control however the exchanges should not let excesses happen and nature of transaction should be apparent to all.

SEBI has duty to ask for provisional monthly P/L figures by every 15th of the next months. In todays time of electronic accounting and information over Internet it should not be difficult, the progressive correction would automatically happen too but insider trading and manipulation would stop.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market