The Crash( 17.5.2006) and FII activities since then

[pkjha30]

Hi


Here is NSE figures

FII trading activity on NSE and BSE in the Capital Market segment(In Rs. Crores)
Date--- Buy Value ---Sell Value--- Net Value
14-Jun-2006--- 1528.98--- 1894.39--- -365.41
Total for June2006 ---18764.87--- 18113.82---- 651.05


And SEBI figures.

Reporting Date --- Gross Purchases(Rs Crores)--- Gross Sales(Rs Crores)--- Net Investment (Rs Crores)--- Net Investment US($) million at month exchange rate
14-JUN-2006---- 1735.10---- 1817.00---- (81.80)--- (18.00)
Total for June2006---20048.00 ---19198.20 ----849.80
So on a day when market moved up sharply in the morning and then crumbled they were net sellers as reported by SEBI and NSE

And MFs


Equity (Rs in crores)

Transaction Date---Gross Purchases---Gross Sales---Net Purchases / Sales
01.06.06----496.74---371.15---125.59
02.06.06---363.81---473.24-----109.43
05.06.06---219.86---637.28-----417.42
06.06.06---323.36---581.07-----257.71
07.06.06---296.50---514.07-----217.57
08.06.06---475.92---707.40-----231.48
09.06.06---362.06---664.85-----302.79
12.06.06---256.38---268.78-----12.40
13.06.06---143.48---435.91----292.43
Total---2938.11---4653.75----1715.64

Having crushed the bulls' balls now they are in for bear bashing. The market is and expected to remain volatile.

As already good discussion is taking place I leave these figure to members as to how to interpret it. Agilent's comment on the data given in previous post would throw some light.

As for me This week and month is crucial. Going below 9000 is not surprising. The range will now be somewhere 7680 to 9500. I don't know where sensex will find support. What kind of PE/EPS would whet the appetite of investors?
The key is with FIIs/FROGs and unless the negative sentiments turn into positive we could see volatality. As to if it is a bear market, I think not.

That will be only when LT is broken and perhaps country suffers from stagflation. With a growth rate of 7-9 % that is be unlikely.

Investors should wait and watch for positive signals.



Pankaj

 

[amitt29]

Hi,Pankaj doin a gr8 job.
But I slightly disagree with you,if u dont consider shaving off 1200 odd points on Nifty and 3000+points on Sensex not as bear market then what wud u consider.
Though I sincerely feel this market is closer to bottoming out for the intermediate (2-3) months.
Amit.

 

[pkjha30]

Hi

Let us recap in brief global market

Nikkei, Seoul and Taiwan ened in green territory.
Europe also largely in green.
Dow and Nasdaq opened green now.
Latin America in green.

China, India Indonesia and Malesia are in Red .Hovering around 1.11 to 1.50%.

FROGs analysis still indicating negative sentiments. One or two Analysts company have reported good growth possibility in Indian Market. They have advised their clients to remain invested or think of fresh investment. That is in general talked about Emerging Market and India gets mentioned ptominently. But majority of them advise stay out in view of volatality and risk factors. Time magazine has come out with a nice article on India.

This is what NewsWeek had to say in a recent article to American Investors

"International stocks. They've dazzled for the past five years. Since the start of 2001, U.S. stock mutual funds averaged 2.6 percent a year while internationals rose 8.5 percent, according to Morningstar, which tracks fund data. They've joined the general rout this month, but as you redo your investments they belong near the top of your list. Europe's economy is expanding, Asia's is sizzling and countries that export oil and metals are raking in the chips. "The shifting sands of the global economy aren't moving our way, they're moving Asia's way," says chief global economist Allen Sinai of Decision Economics. "You don't want to be only in dollar investments anymore." Besides, the dollar will weaken when the Fed stops raising interest rates, he says. When the dollar declines, internationals do even better for American investors. In these bad markets, however, consider investing monthly rather than buying all at once."

For Commodities their take is :

"Commodities. What a run for resources such as oils, metals and construction materials! The Commodity Research Bureau (CRB) index has doubled since January 2002, thanks to surging demand from China, India and other developing countries. Recently prices slid, but the high-demand story still has years to run, says CRB chief economist Richard Asplund. Energy mutual funds are hot. But for tracking commodities as a whole, consider exchange-traded funds (ETFs)—stocks you buy through your brokerage account. Possibilities include iShares Goldman Sachs Natural Resources, Vanguard Materials VIPERs and Energy VIPERs, and the new DB Commodity Index Tracking Fund."


These are initial exercises for clients of FIIs.


Further for our Bears . Have a look at this blog. It gives overall negative picture
http://www.stock-market-crash.net/blog.htm

Excerpts for members

"Hedge funds' contribution to the commodity bubble stems largely from their trend-following trading methodology. Trend following doesn't entail calling a top or bottom in market, but rather seeking to gain a big piece of the middle of a long trend. For this reason, trend following hedge funds tend to extend the length of market trends as they plow billions of dollars into relatively small markets such as commodities, causing them to achieve bubble-level valuations. Many pundits are attributing recent commodity action as being the result of "Chindia's" demand, but the reality is that funds are inflating the commodity markets like an elephant jumping into a kiddy-pool.

Trend following hedge funds don't usually bail out at tops, preferring to sell their holdings only upon a clear confirmation that the uptrend is over, serving to further exacerbate the markets descent. The commodity markets will experience a violent free-fall as some funds take on short-positions, anticipating a multi-year downtrend."


And this on the Bear market

"Trading conditions associated with previous big declines at this point on the calendar are worth thinking about. There were 10 other big late-April to mid-May declines since the Great Depression. Seven occurred during bear markets. They ranged in pain from a 27 per cent drop in 1951-52 to a whopping 73 per cent decline in 1972-74, the biggest drop of the last century."

"It is not common knowledge but these seven big April/May drops were usually linked to painful Budget Day announcements a few weeks earlier of rising taxes or rising interest rates.


Two other painful April/May declines occurred in 1953 and 1986. Neither one turned into a full-fledged bear market. It is worth noting that the Spring Budget in both years featured significant tax cuts."



On the whole Negative cues.

Pankaj

 

[pkjha30]

Hi,Pankaj doin a gr8 job.
But I slightly disagree with you,if u dont consider shaving off 1200 odd points on Nifty and 3000+points on Sensex not as bear market then what wud u consider.
Though I sincerely feel this market is closer to bottoming out for the intermediate (2-3) months.
Amit.

Well Amit

The question of agreement or disagreement does not arise. We are all in the same market and discussing the same phenomena. We can have divergent views then only discussions move forward.Else what is the point of saying that you agree or I agree.We all agree to at least disagree.

As an investor I am concerned with the declines especially on a long term investment point of view. And trying to understand it in one way or another. Whatever helps it.

Now why it is not a bear market? I would't know.

I see economy is growing. development is taking place. The target is not yet achieved. Inflation without development is what we call stagflation. That is dangerous because there is no growth. The reasons may be manifold.
1. No more money to develop. We had this scenario in 1985-1995 when India faced finacial crisis.

2.Not much to develop. Already we are at the top of the pyramid and any further development would result in diminished return and increase in incremental cost.

3.Chaos and anarchy(Iraq)

4. Political crisis

There may be few more. But I see signs of none. In USA it may be .Not in India China and Indonesia and Malesia and......The emerging markets term is not given by us but by them That itself shows their perception about these countries' growth potential. Remember TienaanmenSquare. What ahppened. After all criticisms American still do business with them. China trade surplus is in favour of China.

There may be other dynamics of adjustments, currency rates, money flow and outsourcing of businesses. It will still be cheaper for MNCs of Emerged Market to take benefit of Emerging Market.

In view of these I consider this as a temporary blip and it may not be visible on a 10 year perspective a slight dimple on the smiling cheek.

So if market goes down say 50% as fibonacci retracement, what should happen if it is not a bear market. It should get up and start running. So long as Long Term trend is not broken it will not be a bear market.

But how does that concern us. A Market decline is a market decline. As a trader one should change the strategy to trade in such a market. As an investor one should try to pick stocks at better value and wait for trend change.

At the bottom there may be period when stocks will trade in a listless manner, within a range and then slowly trend will reverse. We will wait for that.

Pankaj

 

[Czar]

I think it would be prudent to revise this line: As an investor one should try to pick stocks at better value and wait for trend change.

Changed: As an investor one should wait for trend change and then try to pick stocks at better value.

IMHO

 

[pkjha30]

Hi

More on global cues

Marrill Lynch

Pent-Up Liquidity Awaits Better Inflation News
In light of the market turmoil it's no surprise that cash levels have shot up to 4.5 percent from 4.1 percent in May. A net 29 percent of asset allocators describe themselves as being overweight cash, which is one of the highest readings the fund manager survey has recorded. Combined with quite high levels of risk aversion, this suggests there is ample liquidity to be put to work if inflation concerns recede.

Equities are still seen as fair value or undervalued and, in a new question this month, a net 59 percent of the panel think it unlikely that equity markets will be lower six months from now.

Quality and Size Are What Matter

There is no guarantee that the liquidity sitting on the sidelines will flow back into sectors that were hit the hardest in recent weeks. Indeed, one of the strongest messages in June's survey is that quality and size are what count. Between May and June's surveys, Japanese equities fell by 16 percent and Indian shares by 30 percent. U.S. equities, by contrast, were down a mere 4 percent, even though this was the survey's most unloved regional asset class just one month ago.

Looking ahead, a net 28 percent of asset allocators expect to increase their weighting in U.S. equities over the next year and a corresponding 12 percent intend to shrink their allocation in emerging markets. A net 71 percent of this panel expects large caps to outperform small caps over the next 12 months.

The Japanese Connection

Man caught with his hand in the till

Japan's Five-Year Notes Gain on Receding Concerns Interest Rates Will Rise

June 14 (Bloomberg) -- Japanese government notes rose on speculation politicians will pressure the Bank of Japan to keep interest rates near zero after the bank's head said he invested in a fund founded by a shareholder activist jailed last week.

Five-year yields fell to their lowest since March after Kozo Yamamoto, head of the ruling party's monetary panel, said BOJ Governor Toshihiko Fukui's investment in the fund founded by Yoshiaki Murakami was inappropriate. Traders pared bets that the central bank will raise its target rate by a quarter-percentage point by the end of the next quarter, after it leaves borrowing costs unchanged at a two-day policy meeting that ends tomorrow.

``Fukui's admission damages his credibility and will add to the pressure from politicians that the BOJ should not increase rates. The concern about higher rates is receding,'' said Koji Mori, who oversees the equivalent of $400 million in funds in Tokyo at Daiwa SB Investments Ltd., a unit of Japan's second- largest brokerage. ``It is coming to the time to buy bonds.''

And the Frenchman

`Inflation fears are coming to the fore and equity markets are calming down a bit, and that's negative for bonds,'' said Jitzes Noorman, a fixed-income strategist at Rabobank Groep in Utrecht, the Netherlands. ``The French CPI data fits the general picture that inflation is coming in above consensus.''

On Yesterday's Close in USA

"The heavy trading volume today was a good indication that we were nearing the end of this decline," said Peter Cardillo, chief strategist at S.W. Bach & Co. "I think the market is probably going to begin to stabilize over the next couple of days."

Oil prices dipped following the death of Iraq's main terrorist leader, and the U.S. dollar gained ground against the Japanese yen. However, investors were kept on edge by an inversion of short- and long-term bond yields.

Fears that higher interest rates will hinder global demand haunted overseas stock markets. Japan's Nikkei stock average plunged 3.07 percent; Britain's FTSE 100 sank 2.51 percent, Germany's DAX index dropped 2.9 percent and France's CAC-40 was lower by 2.91 percent.

The lack of economic news this week left investors with virtually no direction on the economy and whether the Fed will prolong its program of rate hikes at its June 28-29 policy meeting. Next week's reports on wholesale and consumer prices should bring evidence of whether surging energy costs have driven up prices in other areas _ the Fed's chief reason for continuing to raise lending rates."

And here's what John Caspar (casper who??? the ghost. Kidding??)has to say

what do you do with markets like these when you’re nervous? Go back to first principals and review. Do you have a strategic asset allocation that is suitable for both your risk tolerance and the time horizon of your goal? Are the mandates of the investment managers who are running your money consistent with the mandate of your strategy? Is there continuous due diligence being done to ensure that your managers are consistent in their style and performance? These are the controllables upon which you should focus. Once you’ve done that, you can ignore the short-term volatility in the market. Despite its insistence that it must be important in the short run, in the long run it doesn’t amount to much.

And his rules of Investing

Here’s a quick review of a few of the most important lessons of investing:

1. Equity returns are lumpy.

2. Time smoothes lumpy.

3. If being in can be expensive, being out can kill you.

Not implicit in the numbers, but important to remember nonetheless is this last point:

4. Rebalancing means market returns aren’t portfolio returns. An essential component of good portfolio management is the rebalancing of the strategically selected asset classes.

And Jubak's take on inflation conerns

Fears of higher inflation may send the financial markets into a tizzy. Signs of increasing inflation may force the Federal Reserve to raise interest rates more quickly than it would like. And certainly no consumer looks forward to paying more for goods and services.

But inflation isn’t entirely a bad thing. It enables companies with market-leading products to raise prices and increase profits. It takes the pressure off CEOs to cut costs, which they often do by firing workers.

For companies that make the equipment that enables other companies to increase production, inflation can be a sign of good times to come. That’s because part of inflation, at least, is a result of too much demand chasing too little supply. The rising prices that make up inflation are a measure of this imbalance and of specific bottlenecks in the economy. The imbalance creates a market for products that increase supply or remove bottlenecks, such as trucks, railroad cars, restaurant equipment, steel pipe for oil wells and air-conditioning systems for new buildings.

Inflation is good news for companies that add capacity to the economy

So that's it for now.

Pankaj

 

[pkjha30]

I think it would be prudent to revise this line: As an investor one should try to pick stocks at better value and wait for trend change.

Changed: As an investor one should wait for trend change and then try to pick stocks at better value.

IMHO

Hi czar

The emphasis is on the better value and not on the trend change which in any case always occur at regular frequencies. So I will stick to the imprudent line.

Pankaj

 

[pkjha30]

For the uninitiated like me.


Definition of Smart Money

Buy Low and Sell high

Sell High and Buy Low

Definition of Dumb Money


Sell Low Buy High

Buy High Sell Low

Pankaj

 

[Czar]

well dada value of anything is very vague & differs from time to time...

My 6th sense quota: After going thru your extensive researches I conclude that the Japanese are true samurai's & will never change, they are ready to strike USA after years of feeding USA with trillions of dollars & making it weak & weak & credit dependant, every US citizen has credit hungry today...Japan has given cocaine to USA for years & now they will take their sweet revenge for the atom bombs... If I was in their place I would do the same, bring them to their knees & chop their heads off... revenge is sweet...sadly the world will suffer

 

[Czar]

brazil has cracked over 2 % from being in green initially, so has mexico & nasdaq, dow hanging on minor gains...

for those interested in checking regularly:

http://www.bloomberg.com/markets/stocks/wei.html