Recession in India does not seem to be imminent

Friends,

Recession can be said to be some thing like declining economic activity of high order which covers most sectors of economy and is for a longer duration. By this yardstick the recession in India does not seem to be imminent. But one condition preceding the full-fledged recession seems to have been there ie that the markets drop most before the recession begins and then the bear markets last for some time but usually show little further losses during the rest of the bear market. The recovery starts even before the recession has actually ended.

These are some very interesting observations. The markets have dropped more than they have dropped before the recession at other times in history. So whatever way look at it, the markets are calling for entry as supposing there will be recession, there will not be much further drop in market and in case there is no recession in fact and the drop is due to fear in light of the financial mess elsewhere in the world, there would be very steep recovery taking bears by storm. So only pre-requisite for investing is having money with slightly longer period horizon in mind. Another plus point is that the nominal earning rate is equal to interest yield and interest rates on down hill path.

Don’t you think Islamic practices of not giving loans for earning interest will have saved the US from falling to such pass. The Islamic method calls for straight purchase of asset and enjoy only fruits of enterprise. I also have been advocating some thing similar that buy assets straight away and do away with interest based transactions to have better peace of mind and hope for good profits by buying shares. Inflation would not eat into your money’s worth and there will be no hassles of recovering money and monitoring health of borrowers. Isn’t there a lurking fear in minds of Indians too about the safety of FDs with banks. Bad debt is death of capital , bad investment is only a loss of a part of it.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market matrix – G7 finance ministers will some how find a solution

Friends,

The banks deposits have grown by 19.8 pc and the bank advances have grown by 24.8 pc (YoY). The inflation number for latest week declared at 11.8 pc. The IIP number for Aug is just up 1.3 pc Crude prices go down to 82 dollars/bbl.

The banking stocks are trading way down in European markets and have spoilt sentiment. The DoW has lost 21 pc over last five session. Our Nifty too lost 232 points and closed at 3279 points. Indian banks have yet not reported any panic situation so far but the measures taken here have not helped matter either.

Rupee weakens further and is 48.4 to a dollar. I am surprised that it is losing value against a currency of much more afflicted economy. Sale of dollar to stem rupees’ fall in fact dried up liquidity. RBI says 14 Indian banks have revealed exposure to Lehman Bros but only nominally. FDI flow is continuing and suggests that Indian economy is being rated highly.

I think that G7 finance ministers will some how find a solution to crisis facing the world.

If there is further lowering of bench mark interest rates, the equity market as also other markets should have support.

There is a rumour that the two warring brothers who now represent the divided house of the big empire are in to markets. One is shorting and the other is on bullish side. If this be so, the one shorting the market will be in soup.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Public Sector Banks shares may be bought

By krsna Khandelwal – A veteran market analyst

Friends,

The PSBs net NPAs are up by 24 p.c. In 3 years but only in absolute terms i.e. up at Rs 17015 crs in 07-08. The system-wide net NPA ratio is below 1 p.c.only. 24 PSBs have below 1 p.c.NPA at present while only 14 PSBs had it below 1 p.c. In 06-07. This remarkable and speaks of generally better corporate performance of PSBs. The public sector bank’s share may be bought at current prices as the gloom displayed in market may not remain there forever and may be the first quarterly results will make it a heady times in the markets.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix: Current Economic News Analysis

By krsna Khandelwal – A veteran market analyst

Friends,

Information Technology Department has drawn mega-city plans which are identified as investment regions for hardware an software companies.Land acquisition and development of the region will be done by the states. The IT sector is preferred child of govt , no doubt.

Govt suggested to oil PSUs to issue bonus shares who have in turn declined to do so on the pretext of under-recoveries which will make it difficult to maintain yield post bonus issue. Both parties are have reasons but I have many a times brought before you the requirement of a firm predetermined policy regarding oil pricing rather than whimsically acting in that direction. This is one area that should be immediately paid attention to.

IOC want govt to raise petrol prices by Rs 8-9 per litre to meet Rs 120 cr deficit per day, a tall order either way. In West Bengal , petrol at refinery gate is Rs 20.39 per litre while motorists have to pay Rs 46.86 per litre at pumps.

Singur is abuzz with activity and the Tata Motors would change the face of region without doubt and would establish West Bengal back as an important automobile manufacturing state.

Four Indian banks , namely, SBI,ICICI,BOB and BOI have to book mark to market losses for exposure in US Sub-Prime securities. BOB has however clarified that it may not have to do it.

Licensing for banks may be done away with in India . RBI says there is now no need for it as the banks are opening branches in rural and semi-urban area on their own initiative. The license free regime for the banks will be hotting up competition in profitable centres and thereby will affect profitability of banks.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Panch Tattva Points: Post Result as on 25 Oct 2007

By krsna Khandelwal – A veteran market analyst

INGVYSYABK @ 268 (251007) gets 870 panch-tattva points and may be sold off.

BABKRAJAS @ 117 (251007) gets 908 panch-tattva points and may sold off.

ZUARIAGRO @ 226 (251007) gets 973 panch-tattva points and may be bought on declines for medium term.

CHAMBLFERT @ 44 (251007) gets 1055 panch-tattva points and may be bought but profit should be booked on surges.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Panch Tattva Points: Post Result as on 24 Oct 2007

By krsna Khandelwal – A veteran market analyst

PIDILITEIND @180 (24/10/07) gets 1010 panch-tattva points and may bought for long term.

NATIONALUM @ 278 (24/10/07) gets 1130 panch-tattva points and may be bought for up to next result.

TELEDATAIN @ 65 (24/10/07) gets 1325 panch-tattva points and may be bought but book profit on surges.

JKLAKSHMI @ 198 (24/10/07) gets 1361 panch-tattva points and may be bought for up to next result.

DRREDDY @ 630 (24/10/07) gets 851 panch-tattva points and may be sold for now, buy later on declines.

CIPLA @ 196 (24/10/07) gets 874 panch-tattva points and sell for now, buy later on declines.

LUPIN @ 626 (24/10/07) gets 875 panch-tattva points and may sold now, buy later on declines.

DCMSRMCONS @ 66 (24/10/07) gets 1341 panch-tattva points and may be bought for up to next result.

TVSMOTOR @ 57 (24/10/07) gets 823 panch-tattva points and may be sold off, buy back on good correction.

MAHABANK @ 57 (24/10/07) gets 1135 panch-tattva points and may be bought, book profit on surges.

UNIONBANK @ 160 (24/10/07) gets 1125 panch-tattva points and may be bought,book profit on surges.

VIJAYABANK @ 59 (24/10/07) gets 1184 panch-tattva points and buy it for up to next result.

BLUESTARCO @ 361 (24/10/07) gets 860 panch-tattva points and may be sold now and bought later on good correction.

JBFIND @ 165 (24/10/07) gets 1128 panch-tattva points and this may be bought but profits should be booked on surges.

GAEL @ 37 (24/10/07) gets 1061 panch-tattva points and may be bought but book profit on surges.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix: Very poor credit off take during first six months

By krsna Khandelwal – A veteran market analyst

Friends,

Banks have had very poor credit off take during first six months this year against last year; they have therefore decided to offer to big companies loans for short term at rates almost equal to their cost of funds. It is now clear that the banks were competing with each other to garner more of public deposits without any purpose and are forced to recover costs only. In a way, this is a mechanism of the market and therefore I say it is better that market forces are left to determine rates rather than RBI do it. At best, it should fix bottom and top rates for intervention by itself for the time being. I mean a declaration like ‘ the Banks may keep their PLR within the range of … to … and any bank under pressure to exceed should inform RBI which if satisfied would raise the respective limit’ would be enough to give its mind away. Similarly, it may fix a range of rates for a longer period for absorbing liquidity and to inject it for an indefinite period of time and announce a fortnight in advance should it find reason to amend it. This will enable the day-to-day adjustment of interest rates rather than go in to any particular direction and have greater pressure without its intensity known.

There is a report that the high net worth individuals have sold stocks worth more than $1.4 b during the current move upwards with a view to reduce the risk. They had suffered two bad jolts in market during last 12 months and could not cut losses. The caution is well conceived.

Last week saw BSE Auto Index improved by 0.62% to 5365 points but I think its better to be out of auto stocks until the quarterly results have been seen.

BSE Bankex receded by 2.58 % to 9224 points and here you must not buy SBI but may buy other banks which decline during the next week.

BSE Cap Goods Index improved by 7.24% to 15742 points and my advice is not to fall for it.

BSE Cons Durable Index was lower by 1.3% to 4741 points and this sector may be invested in.

BSE FMCG Index was lower by 2.52% at 2107 and here also investments may be made next week.

BSE Healthcare Index was up 1.11% to 3826 points and you choose your scrip for investment on declines.

BSE IT Index was better by 2.43% to 4740 and this sector is inviting to invest for medium term.

BSE Tech Index is better by 3.58% to 3900 points and may be invested in.

BSE Metal Index was richer by 1.27% to 14122 points and I have already advised to be selectively out of it.

BSE Oil & Gas Index was better by 5.73% to 10109 points and it is difficult to take a call just now on it, please wait for some time.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix: Financial crisis and remedy by central banks in US

By krsna Khandelwal – A veteran market analyst

Friends,

The market has closed at 4518 Nifty points and over the last fortnight, there is improvement of just 1.2% since 31 Aug 07. There has been, however, a bullish fervour in the minds of people through out this fortnight as I have been receiving calls from my readers who are in a mood to get in to the market to reap the benefit out of a rising market. The paradox is that the returns of 1.2% are not much to draw such a reaction from people at large. May be because of the continuous flow of bad news was not having any affect and this factor may have given people an idea that the potential is there but is not fully reflected. I smell rat here that there is an attempt by some quarters to spread the word around that this is a right time for investment. The speculators and analysts may be doing this under some influence but who can know, however, this can be surmised.

The sub-prime crisis is not dying down and I wonder what is it that is making the central banks decide in favour of the recourse that banks are actually taking around the world. There is, however, a history behind the central banks actually doing what they are doing. It is interesting to note that the idea of a central bank/authority in the financial field evolved in United States after a sort of crisis in financial market when the govt. asked a private bank name J P Morgan to inject liquidity in markets to save the situation. There has been a series of bail out operation by Fed in US. In 1987, Fed did it to absorb the shock of stock market crash.In 1998, there was a crisis on account of collapse of a hedge fund and Fed came forward to correct the situation. Every one is aware of the Fed did after the dot-com bust in 2001-03. Recently sub-prime crisis is making the central banks jittery the world over. If you really see, this action of a central bank smacks of favouring one category of population at the cost of other category of population by shifting of advantage to one at the cost of other. Why should depositor of a prudent lender suffer by way of lower interest earning if the central bank would help out the reckless lenders and in a way the greedy depositors remains with such an entity. Again, the same thing has to be repeated by me that big money has big hands and big influence and would never suffer in the bargains.

In light of above, I think there should be some organisations in the business of underwriting loan portfolios and big loans and there should be secondary level doing the re-underwriting on lines of re-insurers in the field of life and general insurance. As this would be at a charge and the study of credits risks involved would be scientifically assessed through out and costs known, a much better atmosphere can be created in the world of finance. We have seen the inefficiencies of the rating agencies who bark up the wrong tree, be wise after the event and still have financial stake in the matter. Their fee is earned before hand. There is always a contagion risk possible and the financial wizards and masters should pay heed to evolve a system where the crossing of lines is immediately known , discussed, paid for and the central bank is not duty bound to take care of the errant boys without a reward to good boys.

I would like to invite your feedback on this.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix: Mid May 2007

By krsna Khandelwal – A veteran market analyst

Friends,

Forbes Magazine perceives Indian tax payers as better of compared to France, Belgium and China.

The Customs and Excise duty collection has been up by 27.4% and 11.3% respectively. The share of indirect collection used to be 57.9% in 2003-04 and has since then come down to 51.20% .This is one good thing that weighs in favour of markets and industry in general. But there is flip side too. The govt. is taxing the lower incomes more fiercely than the big incomes by not suitably raising the limit of exemption. There is in fact complete tilt towards the richer people . This should be taken care of immediately. Unless there is a greater purchasing power left in hands of the masses , the increased supply of goods would be difficult. It is not only the savings that spur the economic activity but also the well being is necessary so that the consumption level increase in the economy.

The Thomson group would buy Reuters for $17 b and would form the 12 billion pound revenue generating corporation employing 46000 people and would have the news share of 34% against the rival Bloomberg’s 33%.

The parliament has cleared the SBI Subsidiaries Bill and now the stakes in subsidiaries may be diluted after SBI holds 51%. The subsidiaries would now have their own Chairman appointed by themselves.Due to some problems the desired objective of merging of the subsidiaries has not been possible. May be after SBI is through divesting its other than banking activity businesses, the merger would be possible.You may recall that the welcome effect of the steps taken was made known to you way back. There is going to be IPO rush by the banks raising about Rs30K crs to 40 K crs and by the way it should not dampen the banking stocks. The funds would form direct investible resource in the hands of bank and will add to book value hence no dilution in earnings would be there.

The MF club of India commands just $88 billion as against US’s $10414 b and on the low side Italy’s $453 b . Rest of the countries that matter have MF investments in between these figures. We therefore have a long way to go but some how the market here is not maturing the way it should. The situation has to improve on the front of total availability of quoted share and debenture stocks of the companies. The companies have lately started to raise monies and eventually a lot more will be added to present market capitalisation.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix: Indian Stock Market after recent correction

By krsna Khandelwal – A Stock Market Vedic Theory proponent

Market is up by half a percent and is consolidating, if this phenomenon goes on for some time, the stage will be set for the upward move for about three months. Cement stocks have now stabilised and may see some quick strides upwards when the profits may be booked. The IT sector is giving very tough times to investors and are behaving in an out of character manner. One may reduce stake in this sector. The banking sector is OK for the time being . Pharma sector seem healthy as also the FMCG. The auto sector requires some breathing time to adjust to new reality of the higher interest rate regime. About the telecom sector I am not too certain right now, it has to be watched for some time coming to conclusion.

There is increasing interest amongst the public to invest in equities as they perceive markets at normal level and expect better returns over the coming year. The younger amongst the public are less risk averse too. This is a good sign as ultimately Indians in general have to have better participation in the equity markets, we have looked at the FIIs for direction for far too long and 2007 is different than 1997. There are many more decent income families now as well as the awareness about the market has increased and on top of every thing the convenience to invest and trade is perfect. MF industry has matured enough and corporate governance as well regulation of markets is far better today so after a lull the new thrust is naturally expected.

Hari Om

BIRDINFO Stock Rx – A Vedic Prescription for stock market