Market Matrix – China has shown GDP growth figures of 9 pc for the III qtr

Friends,

There is positive outlook around the world. After DOW closed up by over 400 points yesterday, the Asian markets have started to see reason to shed fears.

China has shown GDP growth figures of 9 pc for the III qtr. In fact US recession has more to do with China than with India excepting for the fact that India requires capital flows from there but China has surplus dollar pool and now does not need capital from outside as much as we do. China’s exports to US are major cause of its GDP growth and now it will have to raise domestic consumption which can come only when its leaders are ready for putting incomes in the hands of workers and labour. This can be done only by making the cost of production high and would further make it less competitive in international market place. So, what had to happen is happening. Indian corporates have been under pressure to raise salaries through out the boom period of last four/five years and would be able to contain wage bill this year. If you recall, I had mentioned that the year 2008 will put China under some kind of slow down.

It is good that we have a PM who is an economist too. While I objected to Reddy’s hawkish stance on every occasion when he tightened the supply of money for the fear of inflation going out of hand. My contention was that when the inflation is not due to local factors why put the productive machinery to do with lesser money supply and strangulate it. Luckily, he has been replaced with somebody who listens to govt head , PM has seen to it that the delay does not mar the industry. His timely intervention has done the needed repair to the damage done by Reddy.

Also, now, our PM is stronger PM because the lesser ones have thought it fit not to do anything by speaking absurd thing in this period of turmoil. Do we not see the Paswans and even PCs keeping cool and giving back leadership to PM. Our FM has understanding but likes to tease before he does some thing likable. He has to moderate the impact of STT and service tax which is making India loose business to Singapore like places as far as the security trading goes (Singapore now accounts for 40 pc trade in Nifty futures).

The PM has been so careful as to reassure that further steps would be taken as soon found needed. These words should be music to the ears of trade and industry. The matter is so simple, the money supply has to be at level where there is optimum production, inflation or no inflation. The simplest tactic to keep inflation off is by keeping the govt expenditure limited to revenue earned and let it be met by deficit financing, any attempt beyond this is bound to have ill effects on this side or that.

In my opinion it will be prudent to bring the repo rate down to 7 pc and CRR down to 5 pc and this is not some thing extra-ordinery to do, we had CRR of 4.5 pc and repo rate of 6 pc in the year 2004. The sole factor for the slow down in India will be a defective monetary policy and nothing else. This is needed also because the banks and financial institution have to be provided help that would make them stronger and look stronger too. This is in fact in everybody’s interest after seeing what happened in Western world.

I invite your views through comments columns, its so easy.

HariOm,
Krsna Khandelwal

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Hopeful Signs in the markets world over

By krsna Khandelwal – A veteran market analyst

Friends,

The DOW closed up nearly 500 points. There is a possibility that the rescue plan is okayed today itself. The world markets are saluting the developments in America. The gloom is giving way to bloom, Indian market which has seen triple bottom formation yesterday,is bound to be seen by the investors a better place than any other place in the world for investment. The FDI in last month has been the maximum. The FM the SEBI Chief have confirmed that there are no regulatory black holes here and RBI has endorsed the capital adequacy of ICICI Bank which was rumoured to have been affected due to American crisis directly. The freight rates are down and would give phillip to international trade and cheap transportation of bulk commodities. India imports in bulk coal and oil and exports in ores and other exportable. Sugar and food now form part of bulk commodities that are exported into and out of India as per the need. The USA is in process of loosing its clout in the economic and financial world while it may have retained its political clout for the time being after USSR demise. The China remains a mysterious state even after its rise in economic field, in financial field it is still in nascent stage. USA wants and has demonstrated that it wants to side with India against China in granting the second status in importance order. This may not have come as an open thing but is seen by the discerning eye. It is also a right thing to happen but India has to ready itself for it.It has to therefore take rapid strides in economic field. I hope the next govt is headed by a person of calibre of Vajpayee or Man Mohan. The small time politicians will remain but the country should have a balanced and non-partisan person as head of govt at least, the head of state here is not so important and may well reflect political remonstration.

I have to write all this for the feel of times while seeing this site recording economic and corporate history with share market in focus.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – Public debt of India and China

By krsna Khandelwal – A veteran market analyst

Friends,

India’s Public Debt is at about 72% of GDP and is higher by 10% over the position before eight years. It has changed by just by 0.4% over the last five years while China’s has changed by 4.5% over this very period. This is an important matter and Indian Govt has managed its finances well over the last decade and the present state would only improve over time and this therefore leaves no room for concern and the stock market should be affected adversely for it, rather they have room for improvement.

The Nifty today performed beautifully and closed with handsome gain of 63 points over its last days close and has stands at 4315 on this last day of Jun 08 series of F&O expiry. I am happy some endorsement of what have been saying is now visible in practical terms. I recommended host of items for purchase over the last two weeks and you would notice that there is good gain in most of the cases where the strategy has been duly adopted. I invite your attention to the case of ‘Reliance’ and see it for your self how it has worked.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix – China and India

By krsna Khandelwal – A veteran market analyst

Friends,

China’s per capita income (as per purchasing power parity) at 2000 constant prices reckoned in 1978 at $1077 was lower than India’s at $1255 at that time. This increased for China to $4726 by 2003 and for India legged behind at $2732 in 2003. Clearly China has raced ahead but it has displeased many sections of population and exploited its resources overly while in India we have displeased none and have exploited resources in a more agreeable way. Not very far in future, India would have better living standards and nearly equal income levels with China. There would be more to add to quality of life in the sense that we will be uncaged and also unshackled and our minds will not be mortgaged to any one while in China it may not happen so.

Only recently what China did in Tibet has unnerved the entire world for it may mar the coming Olympic’s charm. The world community has been in fix whether to react openly or let it go for they have to share the Olympic events in China. I think India should at least see the size of its contingent reduced to bare minimum to convey its displeasure. It may at least be absent at the time of opening ceremony. India should also have increased its military presence along the Chinese borders if it does not want to be vocal in protest. May be there are reasons not to displease it but the message should go that something unlikeable is unlikeable and India has guts to say so in some way.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix as on 27 Jan 2008

By krsna Khandelwal – A veteran market analyst

Friends,

Standard Chartered Bank earlier failed to clinch the deal for its MF business in India with a foreign buyer due RBIs non approval and is again trying to find a suitable buyer from India . This buyer may be ADA Group or Ranbaxy Group. Standard Chartered is trying to get more presence in Indian banking space but is exiting the growing MF sector is hard to understand.

The turbulent Indian stock markets closed the week at 5383 Nifty which after touching sub 4500 level on 22 Feb 08 rebounded fast. The FIIs have been sellers during the week. Fed rate reduction has given some stability to market.

Market crash on Tuesday was on low turnover and exposed the creaking infrastructure. On that day, trading terminal of 90% brokers remained shut down when the lower circuit was hit upon slide by 10%. The trading public was put to such bad pass for some of the heavy speculators. This thing should be taken care of.

India’s share in world market cap has come down to 2.7% and we must understand that any happening in Indian markets is still a storm in tea cup. We have to industrialize much more to be really important. I think its time to corporatise railways in as many companies as there are divisions and the public should be offered part of holding. Like wise any other activity of the commercial nature in the hands of govt. should be under an independent corpn. and which should also be listed on exchanges. This will impart responsibility on the employees and managers and will make it possible to reward better performing teams . The govt. then will be able to freely transfer surplus in revenue to create and invest in desired lines of businesses to fill the gap , for the benefit of citizens and also have their participation. This model will have best of capitalism and socialism too. This respect the sincerity and effort of people in govt companies. The Navratna have shown that they stand as tall as any other company in private sector.

Just a word of caution, the time has come that any attempt of market to go past 5700 Nifty level will be a time to get out of market and patiently watch the unfolding scenario post budget. An populist stance of the govt. may mar the charm of investing in equities for some time to come.

FM has hinted that the economy of India may grow at 8.5% rate . His estimate of the growth rate has come down in just under a month from 9.5% while China has maintained 11% growth. This does not behove for the guardians of economy to revise the growth rates without citing solid reasons. The Indian public remained invested at 6200 Nifty level without having an inkling that FM would see a slight so down so early. Shouldn’t such statement be made with responsibility.

Govt may spare un-exercised options from being charged STT. At present the strike plus the premium are taxed for STT in respect of options @0.017%STT collections during the year have been higher by 78.19%.

Re-enforcible plastics market at Rs.5000 crs per year may see growth at 25% per year for next two-three years.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix as on 18 Jan 2008

By krsna Khandelwal – A veteran market analyst

Friends,

Asian,US and European markets are all in a mood to take a dip. Sensex suffered a good fall and is settled below 20000. I expect a worse scenario. I place the right value for Sensex at 17500 and for Nifty somewhere at 4800 . Any higher point is a higher risk and lower reward. Let us see what is actually in store. The future events may force me to further down grade the performance of indices.

Our Mr Man Mohan is shaking hands of Chinese leadership in Beijing during his visit to China but handshake with Chinese leadership will never be with a warm heart. He is also attending meetings for the resolution of border related issues but this is only to postpone the time to come to brass tacks. Actually both are overwhelmed by the business prospects and therefore would keep at bay other worries and remain confused. Only thing that China feels secured under its military might and its ability to give marching orders to forces at will and without preparatory diplomatic work unlike India.

What are the options for India to remain free from dragon breathing up its neck. I think the best is to not bring to fore any concerns at all and just allow the Indian businessmen and Chinese business interests to exploit every business opportunity available, without helping it and without curbing it. Let Chinese authorities take their own stand . This may eventually prove to be state of entrenched business interests on both sides and leave the border related matters as of least importance. However, there would always remain a need for India to keep building up its military might and remain in state of preparedness. It is also to be followed for reasons of remaining prepared of USA’s adverse stand in future and also from a combination of Pakistan plus others. Needless to say that in the new order India has to emerge a power block itself and not just catch coattails of some other big power .

IBM posted better profits on the strength of weak dollar. The falling USA market at one point may turn fit for investment against emerging markets.

Peak power deficit hit highest point in Dec 07 for the year 2007 at 156% due to burgeoning demand and less than targeted addition to capacity. The peak demand was at 106184 MW during Dec while supply was 89620 MW.

Citi Group Inc posted biggest losses in 196 years history due to write down at $18bn.

Infosys forays in to Indian BPO market. This is going to be a big stabilising factor for Infosys in future. India outsourcing market has been growing at 56% and would grow to Rs 36000 crs by 2010.

Digby Jones, the British Minister for Trade, is not pleased at the manner in which RBI has treated application for opening of 100 rural branches by Standard Chartered Bank. Bank would like to spread some micro finance in villages enabling inclusive growth but RBI’s protectionist policy in not allowing it open branches is sen by him not right under the circumstances.

Apollo would put tyre unit in Hungary at an investment of Euro 200 mn.

PM’s Advisory Council has recommended slashing excise on consumer durables. I think this is not right thing to do. There should be reasons for the govt. to forgo revenue otherwise it will spur so called growth. While it is 16% , the service tax on tele-services is at 12% and this is contributed by mostly the poorer sections of society. If the revenue is not required better reduce the service tax on tele-services.

SBI has 2 lac employees , 9500 branches and operates in 32 countries. SBI is thinking to offer ESOPs to its employees which will form about 0.7% of the capital. Not a bad idea but it has come pretty late in the day.

Goan protests against SEZs and the state govts’ sympathetic stand has forced the central govt. to find ways to scrape the SEZs midway. Center may allow scraping the SEZs if the amount spent so far is compensated by the state govt. This idea is not bad considering the possibility of setting right a wrong. That SEZs concept was faulted one was mentioned in these columns long back when govts were busy giving clearances. SEZs happen to be for the benefit of industrialists and the Neta/Babus. The public does not see any benefit coming to them in general.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix: New labour laws in China and other economic news

By krsna Khandelwal – A veteran market analyst

Friends,

China has some new labour laws that would push labour costs of Chinese manufacturing enterprises by about 8% or even more according to some. There has been a lot of exploitation of labour in China in its march towards becoming the factory of the world. The Chinese leadership now understand that the short cuts to progress are not really going to work in the longer run. After adopting just interest rates, just taxing practices, just rate of exchange, just labour laws and just environmental concerns China would loose much of its edge over the other manufacturing nations. India , by the way, has better record and relies more on services sector for exports where the practices are on par with the international practices.

Tatas have bid for the Jaguar and Land Rover brands and seem to be ahead in the race to acquire them. If the deal is clinched , some 40 contracts will have to be signed before a formal take over is complete. I personally think that this deal is not in the interest of Tatas . They should be growing organically in auto sector rather than through acquisitions. The new brands may be more easily built here while keeping the old brands alive would be difficult. But , as earlier also mentioned, Tatas seem to be more inclined to get themselves perceived as international group rather than an Indian International Group. They have already close to over 40% revenue from the international operations including exports from India.

Hyundai Motor India will hike prices in Jan 08 for all its car models. On the other hand Maruti is set to offer discount ranging from Rs 18000/- to Rs 54000/- on its different models. The Tatas have planned to unveil their Rs one lac car in the Auto Expo in Jan 08 in Delhi.

CSIR’s former chief Mr Mashelkar had a ride on the Tata small car along with Ratan Tata and seemed pleased. The car would run 25KMs in a liter of petrol.

World grain production is slated to go up to a record 2.316 billion tonnes in 2007.

European Central Bank is ready to offer Euro 350 billion worth of liquidity to banks etc at 4.2% rate of interest , almost in an unlimited way at the rates below market rates. There is growing discomfort on account of the way the Fed and BoE operate in the money markets. I have time and again given you indication that all is not well in world’s economic and monetary order. There is a need for a world body entrusted with the functions of the central bank with unbiased agenda for formulating monetary policies and fixing exchange rates and be represented equitably.

PM remarked at a meeting of National Development Council on Tuesday that US sub-prime crisis would affect countries exports as well. He was however sure of India’s agricultural growth at the rate of 4% a year . He was pleased that bank credit to agriculture was up by three times in three years . There is no doubt that the increased credit to farmers will see agriculture modernise and productive.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matix: Analysis of current news

By krsna Khandelwal – A veteran market analyst

Friends,

RIL exports 80% of its fuel but to traders. It has now decided to also directly market in US and Europe. The gap between the fuel prices and crude is widening and is to the advantage of refineries. The world refining capacity shortage will remain till 2011-12.

Govt. has allowed the holding arms and investment arms of the foreign companies to bring in money at will and park in India. They have been allowed to invest at will in respective sectors observing the applicable cap in the sector of their investment.

Cement demand is rising and may result in higher cement prices. In Mumbai the present price per bag is Rs 260/- while in Delhi it is Rs 230/- . I do not know how the ‘finmin’ will respond to price hike of cement.

Govt. plans to introduce 10% ethanol blended petrol from Oct 08 but some vehicles may not be fit to run on 10% mix. The 5% mis of ethanol is OK for most vehicles. I think there should not be any compulsion to buy the mixed petrol. It should be propagated through price differential.

Exactly 70 years ago, on the 13th Dec, the Japanese forces had massacred 300000 people in Nanjing, China. Both the countries are in process of leaving the past behind and remain friendly. For China there is hardly any scope of protesting for it does not care for lives for its own people much and the world knows. China is trying to be developed nation and should immediately improve its record and take steps to democratise the society as far as possible and the least it can do is to free the press completely.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix: China, India and Steel Scenario

By krsna Khandelwal – A veteran market analyst

Readers may find it interesting to see this post of 24 Aug 2006 on steel scenario.

“China is supposed to clock a production figure of 400 million tonnes of steel this year. China is a net importer of iron ore and still chose to establish so much capacity domestically is something not understandable even if it required so much steel for its own consumption. Its consumption is driven by some ultra mega projects and urbanization at super fast pace and the Olympics related demand. On all three counts the level of consumption seems not maintainable, the urbanization at breakneck speed may actually break its neck .The fast urbanization brings with it social problems and problems of forced settlement of population not actually desirable due to the natural economic currents in long run .Haven’t we seen the planned cities still not competing with the naturally grown cities around the world. The hinterland provides the sustaining strength to the cities and too much of planned shifts of population are therefore recipes for disaster. I have discussed this not because I am to discuss the steel scenario with respect to China, actually I intend to appreciate the future steel scenario in India.

In India we have a growth rate of about 8% per year , our GDP would be doubling every 8th or 9th year at this rate and the demand of steel like wise would be going up by three times every 8th or 9th year . By this simple equation, we would require 100 million tones of steel by 2015 and 300 million steel by 2025.This would be very much close to what China is consuming in per capita terms, which is about 220 kg. The world average is about 180 kg consumption per capita. The developed nations have an average consumption of 300kg of steel per capita. Against this backdrop, I think the level of consumption in India should not go beyond the figure of 200 kg per capita in near future because of the topography and the living patterns and aspirations of the Indians. In this light, I think any attempt to produce more than 200 million tones of steel by 2025 would be wrong and this target seems quite possible to be achieved in view of the committed capacity creation plans from the producers of steel in India and rest of the world.

What is in store for the investors in steel scrips at present may be assessed like this. The price of steel in open market at present is enough to sustain the profitability of the steel companies but any dent in price would make the profits fall substantially. Whether the prices may be dented is to be seen in light of China turning in to an exporter of steel. Here I think if it does not export steel at below the cost of production; it may not actually export steel to India. Our government has to be careful from the beginning itself and it should see to it that the dumping is not be done by any body as this would upset the expansion plans of companies and would delay the coming up of green field projects. We have on our shores the lowest cost producers of steel and we should actually strive to become suppliers of value added steel to the world at large. I would invite every investor to increase his exposure in steel sector. Here lies the scope of making large gains as any surge in steel prices would make the profits jump (rather high jump). The surge in steel prices is well nigh possible if the imported steel is not bringing pressure and because the green field project have been delayed due to the land procurement problems and due to delays in mining lease agreements etc. The consumption of steel is about to take a high jump as the economy has been growing at a speed never seen in land where the growth used to be just 3% year after year in times of Mrs. Indira Gandhi. This sustained growth is going to make steel prices jump or else the rate of growth would itself come down. Since the possibility of later happening is remote, the steel firms are on good wicket. So make hay while SAIL is ruling around 75/- and TATASTEEL is ruling around 500/-. These two should be out-performing Nifty, which rules at 3330.”

Hari Om

BIRDINFO Stock Rx – A prescription for stock market

Market Matrix: Emergency in Pakistan

By krsna Khandelwal – A veteran market analyst

Friends,

This site is devoted particularly for the stock market related news analysis. The company specific results are analysed with the three-month horizon in view and you get the action plan along with the Panch Tattva points with the prevailing price under reference. The present height of market is such that it may make a fall and break the bones of the investor. The caution has been advised therefore.

Indian market has, of late, been in defiant mood. On Friday when every other market sulked, Indian market saw it fit to be going higher. This happened while no such news or indication was noticed. The flow of money may be the sole cause. This is not a fit cause as when the times demand and a retreat is to be made it may make the getaway gate look too small and the panic and stampede may be the result. The prudence demanded that during the last few weeks investment levels should have been reduced.

Some thing has happened yesterday that may precipitate a panic reaction and that is the declaration of emergency across the borders i.e. in Pakistan. The pseudo leader, a so called President and the Military General Mr. Musharraf has attempted a coup against himself. He has declared ‘emergency’ and has suspended the constitution. He has cited the reasons as the militants taking on the military inside the country and interfering in the process of controlling the terrorists for which he stands committed to the world and particularly to USA.

This development portends ill for India in many ways. For the first time, a Pak ruler has not blamed India, Indian threat of invasion and the situation in Kashmir as the problems to suspend civil liberties and deny democracy. The similar conditions prevailed when Yahya Khan led Pakistani Army perpetrated atrocities on Bangladesh and India had to intervene to liberate it. This time it is Musharraf against whom the popular uprising may take place and the refugee influx in large numbers may force India to intervene. There are other angles too. Indian intervention may not be liked by China and it may pose other problems for India as the emergence of Indian nation as the South East Asia’s unchallenged power may be to its discomfiture. There is a risk of increasing militant activity on the Pakistan’s North West frontier. The Pak’s nuke capacity and weaponry is in the danger of falling in wrong hands.

The USA is not particularly equipped or ready to send combative troops to any region now leave apart sending them to Pak to control the situation on ground. It may at best provide weaponry and monetary support to an ally. In this case, the ally itself is the problem and India is still not its stooge or an ally. Any formal understanding of US with India in relation to Pak will only make China more an adversary of the two. China has capacity in all respects but the logistics is not favourable to it. Ultimately the India has to be ready to support Pak with man, material and money in the end as its Middle Eastern Islamic brethren are no more in a position to help. Russia seems to have shed its international roles for good. The Europe is silent like never before. However, Pakistan is no more in a position to resort to border disputes and military action as the balance of power has tilted a lot in favour of India. The level of preparedness and vigilance by India about its borders with China, which, of late, is doing things not likable on Arunachal border, has to be raised. Tough situation really.

The Pak people have suffered a lot already and are also economically starved. They may easily be worked up against the regime that has been befooling them for quite some time now. There is a leadership gap and this may lead to very chaotic times. USA will have to suffer for compromising on democracy in case of Pakistan. The Panch-Sheel says ‘non interference in internal affairs of a country’ is a good principle but the oppression of masses by dictatorial rulers is to be ignored is asking for too much. Can you let the neighbour kill his wife or house mates in the name of non-interference. Clearly, no easy choices there let us watch how the drama unfolds.

There is however, a thin possibility that Musharraf succumbs to pressure or with possibility of pressure building up decides to let a fair election take place and hands over power. For this, I think he will have to arrange for the eminent jurists and draft a new constitution, which will have to be ratified by the two-thirds majority in the newly formed House of Representatives. This way he may seek to be pardoned for the acts in the past. Otherwise, in a world where the speech has really become free, like it or not, any kind of unpopular govt. will have to step down.

Hari Om

BIRDINFO Stock Rx – A prescription for stock market