Sell, sell and book profit !!

A full week of trading without much progress in either direction for the BSE Sensex. The chart pattern is tantalisingly poised and may move either way. Let us first take a look at the 6 months bar chart pattern of the BSE Sensex index:-

The Sensex broke above the trend line connecting the tops of the rising wedge pattern almost a month back but has continued to move sideways, and has failed to cross the previous high of 17200. Last week the index alternated between lower and higher closes, and is now resting on the trend line. As we will see in the 3 months bar chart pattern of the BSE Sensex, the index is also resting on the 20 day EMA, which has provided good support to recent corrections.

While there is a possibility of the Sensex moving up again – particularly if the FIIs start pouring in money, the chances of a break downwards is increasing. As the three EMAs are still merrily moving up, the distance between the 50 day EMA and 200 day EMA has increased more than 2000 points. This indicates a likely correction in the near future.

The technical indicators are all looking bearish. The RSI, MFI, Aroon, MACD and slow stochastic are all in the positive zone but are moving down steadily. Most importantly in the shorter term, market sentiments seem to be turning bearish, as good news (like the Reliance Industries 1:1 bonus after 12 years, and the Q209 results of Infosys that turned out better than consensus estimates) failed to produce any buying interest.

Watch out for a downward break below the lower trend line joining the bottoms of the rising wedge pattern. That may start an ‘end run’ that could lead to a sharp correction. The rising wedge pattern is quite bearish and is usually followed by a sharp downward break.

Bull markets climb a wall or worry, and a large inflow of liquidity can nullify all technical analysis – as has happened a few times during this bull rally. So avoid shorting the market.

Bottomline? The chart pattern of the BSE Sensex index is poised at a crucial support level. Stay on the sidelines and watch the unfolding battle between the bulls and bears. Keep tight stop-losses and book partial profits at every opportunity.

Market Talk – 03/10/2009

Market march is on though most of them are pessimistic. Market is making traders tiring as traders have lost patience and they want returns same day. Market knows it and using rotation theory. Traders sold IDBI and IDBI fired. IDFC we started with 127 made one top of 146 allowed traders to exit thereafter it made them tire between 140 and 150 range and today suddenly it is out of woods. Same thing we have noticed in Larsen Reliance and GLT Infra. RNRL and R Power in the same boat. Ispat a clear turnaround stock with OTS in place which will match the losses of Q1, inventory gains and renewal of contracts at high prices will spark Q2 and with renewed interest in any steel Ispat is set to change its name to IS PAR… You must understand the market philosophy. It just wants the traders to stay invested for sizable period of time to earn some profits. Very rarely the intra day tips work. Traders keep on changing stocks and what they buy goes down and what they sell goes up. Therefore the loyalty factor has to be kept in mind. One thing you have seen is that Nifty O I has been showing continuous rise which is an indication of fresh built up of short in anticipation of correction. This trend we have been seeing since 4400 and Nifty has already close t0 5100. Now where would you stop saying that the Bull Run is on…? Bears would not agree as they feel that at 17000 market are expensive and liquidity cannot drive for long. My opinion is otherwise. Govt has set targets of few IPO in March 10 which is post Budget which is a fair indication of further rally. This IPO are possible only if the Budget 10 is good. Budget 10 could be good only if the revenue for 09-10 exceed target by wide margin and deficit drops down to 5%. This all seems dream nos especially when FM and finance man and not opening up their mind clearly. With 15 bn usd QIP and fund raising and another 10 bn usd in the pipeline, there is no ambiguity in my mind about the revenue collection and the targets. It is very simply arithmetic. For every Re 1 raised we generally contribute 78 paise to the exchequer in the form of various taxes. This 25 bn funds churning is a big exercise for Govt for revenue collection. In fact, now each and every sector attracts service tax which is 12% and this 25 bn usd which is expected to go in capex cannot escape this tax apart from all other taxes. Apart from this, 32 bn capex is planned by Posco and Mittal alone which will add huge number game for tax collection. In short, there is no end of pessimism though we need to have basic thinking to know why markets could test new high before budget. Just not liquidity, it is fundamentals which are driving markets and whole world will realise this at the time of Budget 2010. You have every right the take negative call and sell short. But the fact remains, 2009 was never a year of bears and those who tried to go against the wind have seen themselves evaporated. My friends who were advocating 2500 and 900 Nifty are now a day vanished and I don’t know what their current status is. If they are still bearish I wish all the best to them and God may give courage to them. At Cni, all the followers have made decent return in market. Rs 60 lacs profit on one lot each in 8 months speaks about the Cni performance. Our best bets now are Ispat, IDBI, IFCI, IDFC, Idea and Larsen apart from RIL and SBI.

T Rowe may buy 26 pct in India’s UTI Asset

U.S. firm T. Rowe Price may buy a 26 percent stake in India’s UTI Asset Management for 6.5-7 billion rupees ($134-144 million), the Economic Times newspaper said, citing two unnamed sources it said were familiar with the development.
The deal, if it were to finally go through, would value India’s oldest mutual fund house between 25 to 28 billion rupees or 4-5 percent of its assets, the paper said on Friday.
A T Rowe official told the paper she had no comment. UTI’s Chief Marketing Officer said the stake sale was on and he was hopeful it would be completed shortly, repeating a standard a line of the firm for the last 6 months.
UTI Mutual Fund officials could not be reached for immediate comments.

Indian cos world’s most reputed; Tatas above Google, Microsoft

PTI, New York: They may not be as big as their global peers in terms of
revenue and profits, but Indian companies are top of the lot in terms
of their reputation, as per a study that has ranked Tatas as more
reputed than the likes of Google, Microsoft, Coca-Cola, GE and Walt
Disney.

Noting that the world looks to “corporate India to find trust,
admiration and good feeling,” the US-based brand and reputation
management consulting firm Reputation Institute has named five Indian
firms among the top-50 in its annual list of the world’s most reputed
companies.

While the global list has been topped by Italy’s chocolate maker
Ferrero, Sweden’s retailer IKEA, and Johnson & Johnson in the US, the
Tata group has been ranked 11th.

Among Indian companies, Tatas are followed by SBI (29), Infosys (39),
Larsen & Toubro (47) and Maruti Suzuki (49th).

There are 22 other Indian companies on the list of 600 largest
companies, ranked in terms of their reputation.

“Corporate India has the best reputed companies. Of the 27 Indian
companies ranked among the 600 largest in the world, almost 90 per
cent received scores above the global mean, with five ranking among
the Top 50,” the Reputation Institute said in its annual study for
2009.

Only the US had more number of companies in the top-50 (17 companies),
the report noted. In terms of overall presence also, the US had five
times the number of companies in the list than India.

The list is made on the basis of admiration, trust and good feeling
that consumers have towards a company.

Other Indian companies on the list include — Hindustan Unilever (70th
rank), ITC (96), Canara Bank (103), HPCL (112), Indian Oil (113),
Wipro (117), Reliance Group (133), Mahindra & Mahindra (138), Bharti
Airtel (164), Bank of Baroda (175), BPCL (176) and Punjab National
Bank (178).

The report did not clarify whether the Reliance group means the Mukesh
Ambani Group or Anil Ambani group of companies.

The report revealed that corporate trust is higher in the emerging
markets, while companies in industrialised markets are trusted less.

“Proportionally, the largest companies in Brazil, Russia, India and
China (BRIC) enjoy a stronger emotional connection with consumers than
the largest companies in the industrialized world,” it added.

Out of the 289 companies from the US, Japan, the UK, France and
Germany, 45 per cent have reputations below the global average, while
only 34 per cent of the 142 companies from BRIC nations have
below-average reputations, with Chinese companies dragging down the
BRIC average substantially.

Industrial and Commercial Bank of China saw the largest gain in
reputation, 16.38 points from 2008 to 2009, while AIG lost the most
reputation capital with a drop of 27.52 points.

Internet giant Google has been ranked at the 23rd position, while
Microsoft grabbed the 30th rank and Walt Disney was at 21st place.
Nokia is at 45th, PepsiCo is 46th and GE is ranked 50th.

In 2008, Toyota and Google were number one and two, they now rank 59th
and 23rd, respectively.

Nassim Taleb bets on hyper-inflation

By Maverick

A hedge fund firm that reaped huge rewards betting against the market last year is about to open a fund premised on another wager: that the massive stimulus efforts of global governments will lead to hyperinflation.

 

The firm, Universa Investments L.P., is known for its ties to gloomy investor Nassim Nicholas Taleb, author of the 2007 bestseller “The Black Swan,” which describes the impact of extreme events on the world and financial markets.

 

Nassim Nicholas Taleb Funds run by Universa, which is managed and owned by Mr. Taleb’s long-time collaborator Mark Spitznagel, last year gained more than 100% thanks to its bearish bets. Universa now runs about $6 billion, up from the $300 million it began with in January 2007. Earlier this year, Mr. Spitznagel closed several funds to new investors.

 

Unlike last year’s sudden market implosion, inflation isn’t an unimaginable event that few currently anticipate. In fact, many fear inflation right now amid government efforts to goose the economy. Universa’s bet, however, is that inflation will reach levels few expect.

 

By opening the inflation fund, Universa is trying to capitalize on a wave of investor demand for its products, which when they’re right can protect investors from extreme market moves.

 

The new strategy, designed by Mr. Spitznagel, aims to post big gains if inflation and interest rates take off as they did in the 1970s. Universa will invest in options tied to commodities such as corn, crude oil and copper, as well as options on stocks such as oil drillers and gold miners.  “We think these things are going to see massive volatility,” Mr. Taleb said in an interview. 

 

The fund will also bet against Treasury bonds, which tend to weaken in inflationary environments. Last week, Treasury yields shot to their highest level since November as prices fell on inflation concerns. Oil topped $66 a barrel. Gold is creeping up, nearing $1,000 an ounce.

 

The minimum investment in the firm’s other funds has been $25 million, though it rarely accepted investments less than $100 million, a person familiar with the fund says. Similar standards will likely apply to the new fund, called the Black Swan Protection Protocol-Inflation, according to the person.

 

Mr. Taleb doesn’t have an ownership interest in the Santa Monica, Calif., firm, but he has significant investments in it and helps shape its strategies.

 

The term “black swan,” which has become a market catch-phrase in the last few years, alludes to the once-widespread belief in the West that all swans are white. The notion was proven false when European explorers discovered black swans in Australia.

 

A black-swan event, according to Mr. Taleb, is something that is extreme and highly unexpected.

 

For the new inflation fund, there are risks.

 

As investors, Messrs. Spitznagel and Taleb have a mixed track record. The two managers wound down their Empirica Capital fund in 2004 after several years of lackluster returns.

 

Also, some investors are worried not about inflation but about deflation and its pernicious effects were the economy to remain stalled.

 

David Rosenberg, chief economist at Gluskin Sheff, a Toronto wealth-management firm, believes inflation won’t take hold until consumer spending rebounds, which he thinks could take years.

 

Says Mr. Rosenberg: “Not until the household sector expands its balance sheets are we likely to see the re-emergence of inflation on a sustained basis.”

 

Mr. Taleb said any deflation would be matched by an aggressive move by governments to stimulate their economies, leading inevitably to an uncontrollable surge in prices.

Property prices set to rise

Property prices in India which have been on the decline for several months on account of the credit crunch, are set to rise, according to Mr R.R. Nair, Director and Chief Executive, LIC Housing Finance Ltd.

“People cannot expect a further fall in property prices. That stage is over. Builders had lowered prices when they were in trouble in the last few months. For builders, the liquidity position has eased and the cash flows have improved. They have also cleared off existing inventories. Therefore, there is no reason for them to lower prices,” he said.

As the demand picks up, property prices will go up. This could happen in the next five-six months, Mr Nair, head of the second largest housing finance company in India, said.

“By how much the price will increase, will depend on the builders. In some pockets, they have started quietly increasing prices. However, it has not happened universally,” Mr Nair said in an interview to Business Line.

Moreover, builders had not increased prices in the last 15-18 months. Because of all this, there is a “good possibility’ that property prices will rise, he said.

Citing reasons for renewed housing demand, Mr Nair said that with a stable government in place, people feel that the economy will improve, the liquidity situation would be better and the soft interest regime will continue. They also feel that property prices have bottomed out. This is precisely why there is a renewed interest in buying homes, he said.

The property prices had seen a correction in the last two quarters as demand for housing had dried up. Builders had been forced to lower prices as they were sitting on a large inventory. Some builders who had planned luxury projects had converted to standard projects.

“With the economy looking up, there is confidence among builders that they can raise funds either through loans or through equity or QIPs. That is why builders have regained enthusiasm and started working on the projects”, he said.

Growth pick-up

 

 

The housing finance company has seen growth pick up from end- February. In March, the company had a 42-per cent growth. For April and May put together, there was a 120 per cent growth in approvals and a 50 per cent growth in disbursements.

Most of the growth for LIC Housing Finance has come from retail finance, Mr Nair said.

The company has revised its business growth target upward from the 25 per cent it set for itself at the beginning of this fiscal.

“With the first two months of this fiscal registering a 50-per cent growth in disbursements, the growth should be in the range of 30-40 per cent this fiscal”, Mr Nair said.

India Inc investment bails out US companies

This is according to a report released by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Ernst and Young titled ‘India Contributes to Employment, Capital Growth and Tax Revenues in the US: Direct Investments by Indian Companies in 2007-09’.

However, as the US moves towards a stringent policy of granting H-1B visas, India Inc’s appetite for investing in the US will be affected.

Speaking at the official release of the report on Thursday, Dr Amit Mitra, Secretary-General, FICCI, said: “Indian investments are critical at a time when the US is moving towards a policy of protectionism.” According to him, small and medium enterprises of India are saving US companies that are closing down.

Mr Nico Derksen, National Coordinator, Outbound Tax Advisory Services, Ernst & Young, said, “There’s a growing acceptance in the US regarding companies buying US firms.”

He added that Indian acquisitions were also preferred because they bring in fewer management changes. However, the fact that H-1B visas have gone down from 1,95,000 during the George Bush administration to 65,000 currently is a cause of concern.

Furthermore, Dr Mitra said that the controversy about H-1B visas being granted to India has been “blown out of proportion”.

In addition to the release of the report in India, FICCI will also be taking 12 parliamentarians to the US to meet the US Secretary of State, the Secretary of Commerce and other top politicians in US Congress to discuss economic issues with regard to outsourcing.

The FICCI forum of parliamentarians will meet professors from Yale and Harvard universities before going to Washington D.C. The forum will also present the FICCI-Ernst & Young report to the dignitaries they meet in the US.

According to the report, in the financial years 2007-08 and 2008-09, Indian companies made 143 acquisitions across various sectors in the US. The report was made on the basis of public records and according to the values of the deals that were disclosed. India Inc has had deals worth $5,392 million during the financial years 2007-08 and 2008-09.

Exit polls suggest India heading for weak coalition…..

India could be heading for a weak coalition government on Thursday, with exit polls from the general election suggesting the ruling Congress-led coalition and its rivals would fall short of an outright majority. Three exit polls on Wednesday showed the ruling Congress-led coalition was slightly ahead of the opposition Hindu-nationalist alliance, but both groups were in need of smaller allies to gain a parliamentary majority. Official results will be released on Saturday. Such a scenario may leave little room for either group to manoeuvre on the economy, because a shaky coalition is seen as unlikely to push key reforms such as raising foreign investment limit in the insurance sector and privatisation. “But now that it is just a slender lead, the market may become uncomfortable and think there might be more of a mess in the offing.” After the last election in 2004, Indian markets tumbled on fears that an unstable coalition would soft-pedal on the next stage of reforms in Asia’s third-largest economy which striving to emerge as a major global player.

The recession has ended….

If you want a bone to pick–or an economic argument to have–it should be about when the current recession actually began. The National Bureau of Economic Research, the U.S.’s semi-official recession arbiter, says it started in December 2007. But real gross domestic product grew at a 1% annual rate from then through August 2008. That doesn’t look like a recession to us.

Nonetheless, when Lehman Brothers collapsed and the $700-billion TARP plan was proposed, a very rare “panic” ensued. Monetary velocity collapsed. From September 2008 through March 2009, the economy shrank at a rate of 5.5%. That’s why we think the recession started in September 2008, not in December 2007.

Once the “real” recession started–the one that began in September–we consistently forecast it would be over by mid-2009, earlier than many (including the Federal Reserve) predicted. Now it looks like our V-shaped recovery is underway. When the NBER eventually gets around to declaring the recession end date, we think it will be May 2009.

New claims for unemployment insurance are probably the very best single indicator of the end of a recession. The monthly average for claims normally peaks one or two months before the economy bottoms–and it appears to have peaked in March, at 658,000, versus April’s 635,000.

Also, given that the September recession was marked by consumer spending falling off a cliff, we look at this measure to signal a rebound. Consumer spending grew at a 2.2% annual rate in the first quarter, and it looks set to rise again in the second quarter. Meanwhile, both major measures of consumer confidence (from The Conference Board and University of Michigan) shot upward in April.

The housing market is also showing nascent signs of life. New home sales bottomed in January at a 331,000 annual rate, but the pace of sales in February/March averaged 357,000. After falling 80% from January 2006 to January 2009, the rate of construction of single-family homes has remained essentially unchanged for the past two months, although (thankfully) it is at a level where builders are still rapidly cutting into excess inventories. In all likelihood, a bottom has been reached for both home sales and housing starts.

On the trade front, companies are increasingly willing to do business across borders. Inbound and outbound container traffic is up, at both the port of Los Angeles and the port of Long Beach. This is also a signal that credit conditions are easing, as international trade tends to be more credit-sensitive than domestic commerce.

Other signs of a rebound in monetary velocity can be found in prices. Consumer prices fell at a 12.4% annual rate in the last three months of 2008, the fastest decline since the Great Depression. In the first three months of 2009, however, prices are up at a 2.2% annual rate.

Meanwhile, commodity prices bottomed in February, signaling that the economy has turned a corner. In addition, Treasury bond yields are on the rise despite direct purchases by the Federal Reserve–an indicator that real interest rates have bottomed.

Add to all these signs April’s month-to-month jump in the ISM Manufacturing Index–the second largest in the last decade–and recent sharp increases in the Chicago PMI, the Philadelphia Fed Index and the Richmond Fed Index. All show the manufacturing recession is rapidly losing steam.

The end of the recession does not mean we won’t lose more jobs; employment is always a lagging indicator. And there will be more defaults, foreclosures and financial market problems too. But none of these are leading indicators.

In our view, there are no more shoes to drop.

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