The Crash( 17.5.2006) and FII activities since then
- Thread starter pkjha30
- Start date
- Status
pkjha30 said:
Hi Ahmed
You have raised certain issues ,which are vital and needs to be analysed by all in order to understand it.
First , our MFs are selling because they are under redemption pressure without openly acknowledgeing it(would be a sign of wekness and it would start a run on them cascading effect)
Secondly, FIIs sold around 4% on 10 days. This four percent is derived from FIIs total holding. But if you see their sale and purchase that is much more and its impact will be more pronounced.
--------------------Buy--------sale--------------net
Total for May 2006---- 47728.8--- 55082.9----( -7354.2) This is four percent of total holding in May 2006 (3.94181%)
Grand Total till May 31, 2006---1069729.4--- 883165.1--- 186564.3 (Invested amount by end of May))
Grand Total till June 23, 2006 ---- 1100711.8--- 913150.3--- 187561.5 (Invested amount Till Now.)Shows slight increase.
People are so scared that they won't think it is a bull market untill it is too late for them. Meanwhile, intelligent people like members of this forum will trade wisely and get the most of this market. Money is made both ways.
Many would try and recover their losses. Some would like to get out when it rallies.
Abt Fed Rate
If you something is coming and widely anticipated then when it actually comes, not much of the impact will be seen. Why we are ready for the storm. So Fed rate increase has already been factored to a large extent. Unless they increase much more than what is anticipated nothing will happen. My guess.
If they increase less than the anticipated rate prices will move up.
If they increase more than anticipated then prices will surely plummet.
Dependence on FIIs
The overdependence on FII is inevitable. The global economy is becoming one place. Some years ago when one India got jog in Bangalore, ten Amricans got Pink slips(quit notices) and they called themselves bangalored (Just like floored) Now TCS is planning to recruit 1000 Americans. many Forigners want to come and work in bangalore. Fund Houses also shifted their money from USA Stock market to Bonds and Govt Securities but volatality was less because of rules and regulations and wide retail participation. That increases depth of market which is absent in india. Still it is not regarded as a valid source of income but rather a tarnished source of Income.Stock broker is the most distrusted of the lot and if you call somebody a broker that means you are abusing him. This mindset has not chaged and practices so some brokers only reinforces this impression.It may be wrong but it is there.If somebody makes a money instock market people tend to think he has usurped somebody's hard earned money and is looked down upon. The participation is still speculative and many laws need to be changed to make it socially acceptable one.
So we will have dependence on FIIs , It is not Gulaami or anything. It is called world economic integration. We should also be allowed to invest in other countries and then we will be equally influential.Further, if that four % was in a span of four months it would not have casued a ripple. They used their money power and drove the prices down so we are scared to think it will go to 7600 or 4500 or 3500. The drop is a result of this psychological fear rather than result of poor fundamentals.Is there a limit? No. But will it go down? Only time will tell. FII actions clearly indicate that it will not go down as predicted by doomsayers.India is firmly on growth path albit with deficiencies.
Pankaj
You have raised certain issues ,which are vital and needs to be analysed by all in order to understand it.
First , our MFs are selling because they are under redemption pressure without openly acknowledgeing it(would be a sign of wekness and it would start a run on them cascading effect)
Secondly, FIIs sold around 4% on 10 days. This four percent is derived from FIIs total holding. But if you see their sale and purchase that is much more and its impact will be more pronounced.
--------------------Buy--------sale--------------net
Total for May 2006---- 47728.8--- 55082.9----( -7354.2) This is four percent of total holding in May 2006 (3.94181%)
Grand Total till May 31, 2006---1069729.4--- 883165.1--- 186564.3 (Invested amount by end of May))
Grand Total till June 23, 2006 ---- 1100711.8--- 913150.3--- 187561.5 (Invested amount Till Now.)Shows slight increase.
People are so scared that they won't think it is a bull market untill it is too late for them. Meanwhile, intelligent people like members of this forum will trade wisely and get the most of this market. Money is made both ways.
Many would try and recover their losses. Some would like to get out when it rallies.
Abt Fed Rate
If you something is coming and widely anticipated then when it actually comes, not much of the impact will be seen. Why we are ready for the storm. So Fed rate increase has already been factored to a large extent. Unless they increase much more than what is anticipated nothing will happen. My guess.
If they increase less than the anticipated rate prices will move up.
If they increase more than anticipated then prices will surely plummet.
Dependence on FIIs
The overdependence on FII is inevitable. The global economy is becoming one place. Some years ago when one India got jog in Bangalore, ten Amricans got Pink slips(quit notices) and they called themselves bangalored (Just like floored) Now TCS is planning to recruit 1000 Americans. many Forigners want to come and work in bangalore. Fund Houses also shifted their money from USA Stock market to Bonds and Govt Securities but volatality was less because of rules and regulations and wide retail participation. That increases depth of market which is absent in india. Still it is not regarded as a valid source of income but rather a tarnished source of Income.Stock broker is the most distrusted of the lot and if you call somebody a broker that means you are abusing him. This mindset has not chaged and practices so some brokers only reinforces this impression.It may be wrong but it is there.If somebody makes a money instock market people tend to think he has usurped somebody's hard earned money and is looked down upon. The participation is still speculative and many laws need to be changed to make it socially acceptable one.
So we will have dependence on FIIs , It is not Gulaami or anything. It is called world economic integration. We should also be allowed to invest in other countries and then we will be equally influential.Further, if that four % was in a span of four months it would not have casued a ripple. They used their money power and drove the prices down so we are scared to think it will go to 7600 or 4500 or 3500. The drop is a result of this psychological fear rather than result of poor fundamentals.Is there a limit? No. But will it go down? Only time will tell. FII actions clearly indicate that it will not go down as predicted by doomsayers.India is firmly on growth path albit with deficiencies.
Pankaj
Thanks dada just came from job and opened directly ur thread. Hopping for the reply so very happy to see the reply. Reply was from morning so sorry for the late.
One more thing i wanted to ask i have heard that LIC and GIC are buying nowadays very hugely(i don't know the figure, if any have pl. send it here). So what that indicates i think becz. of that volatility will be in control. Still learning from u people. Still a lot to learn.
Still i am in worry. If you people remember i have worried on 5th may and i have created one forum "Is market may fall till 10000?" when market was at 12300 but not a single person was reply in that thread saying market may go down. Now still i am worry but this time i hope that i will be wrong. again i wanted to ask one question "is market may fall till 8000?" again we are 2400 point up from 8000 level. i am saying this because FII is waiting to sell this time (they didn't sell this time according to thier recent trend) Now this time they will sell very hugely so be alert remember last time i was right what do u say dada.
wrgrds
Ahmed
Hi Ahmed
Possiblities are there.Monday other days in the next weak will be volatile. Any unexpected turn on FED rate will accentuate the volatality in either direction. Possibility to 2900 now a cool 142 points down can not be ruledOut.
I tried to search for LIC and UTI buying but could not find any significant operation. In fact MFs are only marginally in net buy. But then that is a good sign.That means they are absorbing the supply so retail investor could think of taking positions in strong securities if they are comfortable with prices.
Most of the indices have tanked arounf 50% and have retraced 50% of the decline so far. To a lay man chart looks like it is on its tortuous way up. Now only consolidation part remains when supplies from frieghtened and injured fawns will be absorbed. A period of consolidation is good. It should be in the range of 9650 to 11000.. Then only it will be ready to ramp up.
So sa you said, it may touch 10000 and nifty may go to 2900 as it closed below 3000 on all days except four working days 2nd, 5th ,23rd,25th june.
In may 2006 it was above 3000 all the time. Mind you FIIs were net seller by more than Rs. 7500 crs in May and now net buyer in June. MF are net seller by Rs. 2000 crs approx. so any net buying by them will absorb the quantity available.
It is in the bottom building exercise that one finds opportunities for wealth creation but money making may not be there given the volatality and we have to correlate the experiences of individuals with their brokers and find the broader picture of actual operations of stop losses and margin trading. Broker will make money no matter what you do.
Lastly I saw, surprisingly only LIC and UTI were two funds which were giving positive returns and all were negative for the month of May 2006. If you see their annualised return it was hardly 6% as against 40% avg for others. But for three months perios except these two all were negative.
SO afterall they are not so stupid bunch of bumbling money managers. They are smart kids from India.
Documents for all statements made above is attached You can analyse and come to better conclusion as mine is highly coloured with growth prospects of India.
Also see this document
http://www.nseindia.com/archives/indices/update/indupMay2006.pdf
Pankaj
Possiblities are there.Monday other days in the next weak will be volatile. Any unexpected turn on FED rate will accentuate the volatality in either direction. Possibility to 2900 now a cool 142 points down can not be ruledOut.
I tried to search for LIC and UTI buying but could not find any significant operation. In fact MFs are only marginally in net buy. But then that is a good sign.That means they are absorbing the supply so retail investor could think of taking positions in strong securities if they are comfortable with prices.
Most of the indices have tanked arounf 50% and have retraced 50% of the decline so far. To a lay man chart looks like it is on its tortuous way up. Now only consolidation part remains when supplies from frieghtened and injured fawns will be absorbed. A period of consolidation is good. It should be in the range of 9650 to 11000.. Then only it will be ready to ramp up.
So sa you said, it may touch 10000 and nifty may go to 2900 as it closed below 3000 on all days except four working days 2nd, 5th ,23rd,25th june.
In may 2006 it was above 3000 all the time. Mind you FIIs were net seller by more than Rs. 7500 crs in May and now net buyer in June. MF are net seller by Rs. 2000 crs approx. so any net buying by them will absorb the quantity available.
It is in the bottom building exercise that one finds opportunities for wealth creation but money making may not be there given the volatality and we have to correlate the experiences of individuals with their brokers and find the broader picture of actual operations of stop losses and margin trading. Broker will make money no matter what you do.
Lastly I saw, surprisingly only LIC and UTI were two funds which were giving positive returns and all were negative for the month of May 2006. If you see their annualised return it was hardly 6% as against 40% avg for others. But for three months perios except these two all were negative.
SO afterall they are not so stupid bunch of bumbling money managers. They are smart kids from India.
Documents for all statements made above is attached You can analyse and come to better conclusion as mine is highly coloured with growth prospects of India.
Also see this document
http://www.nseindia.com/archives/indices/update/indupMay2006.pdf
Pankaj
Last edited:
Hi
We have been subjected to lot of crap in terms of risk and returns for investments in Emerging markets. Let me tell you that performance of global fund on anuualised basis has been much more than any other asset class till may end. If it falls below 2/3er of current performance they will still be attractive in comparision to other markets. I don't know if other markets will be able to deliver the same return or better than their current performance including Money market i.e. Bonds.
There are some pdf reports of performance of global fund houses across various markets .Almost all funs of repute are listed. A comparison will tell us that Ems were able to deliver more than 20 % return while other markets paled in significance. Hits they have taken is large in emerging markets but after the hits annualised returns are far better than the paltry performance of other developped and politically less risky market.
Kindly go through these reports. I have provided links for six. There are other reports listed for period upto 31.5.2006.
European market
http://www.globefund.com/static/romf/generic/tabeur.pdf
Emerging Market
http://www.globefund.com/static/romf/generic/tabeme.pdf
USA Equity market
http://www.globefund.com/static/romf/generic/tabueq.pdf
USA Small and Mid CAp
http://www.globefund.com/static/romf/generic/tabuss.pdf
USA Money Market(Bonds)
http://www.globefund.com/static/romf/generic/tabfmm.pdf
USA Global Equity
http://www.globefund.com/static/romf/generic/tabgeq.pdf
These will give a fair idea about their performance.
Now to talk about Global cues and global voices.
DOW and Nasdaq closed in RED but the closing was not very clear and lacked any directional sense.
Europe was largely green and Latin America was firmly in green
Except for India and China,Korea Asia was splashed in red.
Those who are interested in knowing what may befall the world stock market and in paerticular USA may like to visit this site
http://www.resourceinvestor.com/pebble.asp?relid=17570
and may be this
http://www.billcara.com/archives/2006/06/bear_market_tak.html
James Montier is quoted as follows
And something little to chear you up
http://ddo.typepad.com/ddo/2006/06/japanese_intere.html
In any case this week will be providing clue to what future beholds. Volatality will be ther order of the day. FIIs are in in small measures and they are now net buyer in june having sold off massively. Global cues continues to be unclear. No directional sense has emerged and none will wmerge till Fed rates are over. In any case they are nearing their presumed limits. Once it reaches 6% USA may not be able to bear this burden and might sink into recession. But that is going to take one year flat(four quarters of one quarter rise each).
By the time it will be into Elections and such risk will be good for Democrates and disastrous for Republicans. And if Democrates come we will be into real recession. So I think FED may not be able to take that risk(a fallacious argument) but ..........
EMs have delivered good returns on their own and if growth continues it will do so especially India and China is stated to be superhot with 9.4% expected growth rate which USA finds unpalatable and are pressurising China to take various steps to cool off its economy.
As for Monday's opening , that is not relevant since we are talking of long term. A few points here and there do not matter. In any case this is not a bear market so keep your list handy and wait for your opportunity to come.
I have a feeling that we might have wintnessed the bottom and now will witness consolidation where strong hands get in and week hands get out and slowly supply dwindle. After that stock shoots up. This period will be different for different and not a fixed point in time.
Pankaj
We have been subjected to lot of crap in terms of risk and returns for investments in Emerging markets. Let me tell you that performance of global fund on anuualised basis has been much more than any other asset class till may end. If it falls below 2/3er of current performance they will still be attractive in comparision to other markets. I don't know if other markets will be able to deliver the same return or better than their current performance including Money market i.e. Bonds.
There are some pdf reports of performance of global fund houses across various markets .Almost all funs of repute are listed. A comparison will tell us that Ems were able to deliver more than 20 % return while other markets paled in significance. Hits they have taken is large in emerging markets but after the hits annualised returns are far better than the paltry performance of other developped and politically less risky market.
Kindly go through these reports. I have provided links for six. There are other reports listed for period upto 31.5.2006.
European market
http://www.globefund.com/static/romf/generic/tabeur.pdf
Emerging Market
http://www.globefund.com/static/romf/generic/tabeme.pdf
USA Equity market
http://www.globefund.com/static/romf/generic/tabueq.pdf
USA Small and Mid CAp
http://www.globefund.com/static/romf/generic/tabuss.pdf
USA Money Market(Bonds)
http://www.globefund.com/static/romf/generic/tabfmm.pdf
USA Global Equity
http://www.globefund.com/static/romf/generic/tabgeq.pdf
These will give a fair idea about their performance.
Now to talk about Global cues and global voices.
DOW and Nasdaq closed in RED but the closing was not very clear and lacked any directional sense.
Europe was largely green and Latin America was firmly in green
Except for India and China,Korea Asia was splashed in red.
Those who are interested in knowing what may befall the world stock market and in paerticular USA may like to visit this site
http://www.resourceinvestor.com/pebble.asp?relid=17570
and may be this
http://www.billcara.com/archives/2006/06/bear_market_tak.html
James Montier is quoted as follows
And something little to chear you up
http://ddo.typepad.com/ddo/2006/06/japanese_intere.html
In any case this week will be providing clue to what future beholds. Volatality will be ther order of the day. FIIs are in in small measures and they are now net buyer in june having sold off massively. Global cues continues to be unclear. No directional sense has emerged and none will wmerge till Fed rates are over. In any case they are nearing their presumed limits. Once it reaches 6% USA may not be able to bear this burden and might sink into recession. But that is going to take one year flat(four quarters of one quarter rise each).
By the time it will be into Elections and such risk will be good for Democrates and disastrous for Republicans. And if Democrates come we will be into real recession. So I think FED may not be able to take that risk(a fallacious argument) but ..........
EMs have delivered good returns on their own and if growth continues it will do so especially India and China is stated to be superhot with 9.4% expected growth rate which USA finds unpalatable and are pressurising China to take various steps to cool off its economy.
As for Monday's opening , that is not relevant since we are talking of long term. A few points here and there do not matter. In any case this is not a bear market so keep your list handy and wait for your opportunity to come.
I have a feeling that we might have wintnessed the bottom and now will witness consolidation where strong hands get in and week hands get out and slowly supply dwindle. After that stock shoots up. This period will be different for different and not a fixed point in time.
Pankaj
Hi
A listless closing at Dow and Nasdaq.World is showing great concern about FED rates. Some have upped the peak rate target of 6% before it starts lowering or at least stops increasing it.
So new items say though singnals are there for increase of 0.5% leading to rate of 5.5% instead of 5.25 % as expected.
If that is so the market will take some more corrections but in case that dose not happen then it is already factored in 0.25% hike.
As for Monday, signs are that market will open positive and stay positive on improved sentiments and aided by success of Mittal takeover bid of Arcelor.
We are likely to see consolidation process underway as I don't know how many people would be in mood to short now thereby avoiding cascading effect of individual decisions working collectively in Stock market.
For investors no point in entering now as sentimental ramp up is in the offing.Short term profit, fine. Long term, wait for July and pullbacks.
Pankaj
A listless closing at Dow and Nasdaq.World is showing great concern about FED rates. Some have upped the peak rate target of 6% before it starts lowering or at least stops increasing it.
So new items say though singnals are there for increase of 0.5% leading to rate of 5.5% instead of 5.25 % as expected.
If that is so the market will take some more corrections but in case that dose not happen then it is already factored in 0.25% hike.
As for Monday, signs are that market will open positive and stay positive on improved sentiments and aided by success of Mittal takeover bid of Arcelor.
We are likely to see consolidation process underway as I don't know how many people would be in mood to short now thereby avoiding cascading effect of individual decisions working collectively in Stock market.
For investors no point in entering now as sentimental ramp up is in the offing.Short term profit, fine. Long term, wait for July and pullbacks.
Pankaj
Hi
With the corrections last month on the back of news that FED will increase the interest rates, along with BOJ sucking liquidity from financial market and other central banks also raising rates, scene was set for deep corrections all over the world market.
Now anticipated increase appears to have been fully factored in and investors were increasingly of the opinion that prices are at correct valuations, the spectre of higher than the anticipated rise is raising its, head, thereby , spooking the market.
The anticipation of higher than expected rate will keep the market on tanterhooks. Global cues have sharply turned negative during last 24 hours.
There are serious concerns over the activities of hedge funds which have witnessed explovise growth over last few years due to cheap yen from Japan.Us court has thrown the rule requiring them to be registered with SEC on the ground that it is arbitrary and it exempts fund with less than 15 clients from registering. Now it is to be seen if SEC decides to appeal higher or come with tighter rule. In either case danger posed by hedge fund can not be wished away now. So the equation is to be clearly understood. Hedge funds have more operational flexibility. They need not adhere to many prudential practices and often works on the boundary conditions, i.e. slight change in various operating parameter will see them flying to lucrative destinations. Margins are thin and risks are higher. Often they have destabilising effect on the stock market as thinner margins disappear and they dump stock en-masse leading to meltdown. Their money is nimble and quickfooted like hyena and sometimes need to clean up an inflated market.
Now if interest rates go up then money will be costlier and thin margins will evaporate. So hedge funds will fly off again to safer destinations such a bonds.
Secondly, if money is costlier, companies will find it difficult to get loans at cheaper rates. Cost of business will be up so profit will reduce unless they find it possible to pass it on. That may not be feasible in many cases. So results will be bad and stock prices of such companies will decrease. This will be anticipated much in advance by hedge funds and they will exit before impact is really visible to others. In such case there will be immediate decline the rise and then slow decline over a long period. Investors are well to study individualcompanies for such factors. It will be seen in scetoral shift of the outlook in general. Better companies will be able to survive. Hedge fund makes no allowance for that.
Thirdly,high inflation will cut the consumer spending as also high cost of borrowing. So many booming sectors will become busting sectors. Such companies will find themselves in doldrums and unable to steer in any direction. Their results will be bad and will be visible over two quarters at least.
So a sectoral realigment keeping in view domestic conditions will have to be done. India is set on a moderately high growth rate though less than china.To sustain that rate the investment required is more than 1600000 crores at 2001-2002 prices.Our priority areas are With such a massive investment over the period of five years is certainly going to be beneficial. Further to sustain such growth rate we need to develop at 10% in Industrial sector and above 5 % in Agriculture sector.
So if capital is costly, imports are dearer , growth rate in industrial sector will suffer. If monsoon is bad, or credit delivery system to farmers are poor then agricultural growth will suffer.
These aspects need to be watched out. Technology sectors perticularly IT and services should show normal growth. However strong dollar will impact the revenue of IT companies.
Market will in the long term will react to these conditions . These thing will have to be analysed in detail by some knowledgeable members so that a firm sectoral outlook could be presented on long term basis for investment purposes. That should take into account the current scenario and potential for growth and Govt. policy imperatives.
In general , when I am optimistic , I mean the areas where policy focus is centered will grow as the country has potential for the growth and to achive those targets it will take many years before we take a breather. We have to lookaround us to see if such a change is evident, look beyond numbers also.
To give you some numbers to keep in mind before we see around us
Sectoral Structure of GDP at factor cost
SECTORS--- 2006-07--- Tenth Plan
1 Agriculture & Allied Activities-- 20.5-- 22.2
2 Mining & Quarrying ---1.9 --2.1
3 Manufacturing --- 16.7--- 16.1
4 Elect, Gas & Water Supply--- 2.8--- 2.8
5 Construction ---6.1--- 6.1
6 Trade ---13.6 ---13.3
7 Rail Transport ----0.8--- 0.8
8 Other Transport ---4.8--- 4.8
9 Communication ---- 2.3---- 2.1
10 Financial Services ----7.5--- 7.0
11 Public Administration ---- 6.1 ---6.4
12 Other Services ---16.8 ---16.4
Total ----100.0 ----100.0
Sectoral Growth Rates and ICORs Tenth Plan
SECTORS Growth ICOR(Rate (%))
1 Agriculture & Allied activities ---- 3.97 ---1.99
2 Mining & Quarrying ---- 4.30---- 7.99
3 Manufacturing ---- 9.82---- 7.77
4 Elect, Gas& Water Supply ---- 7.99 ---- 14.97
5 Construction ---- 8.34 ---- 0.99
6 Trade ---- 9.44 ---- 0.91
7 Rail Transport ---- 5.40 ---- 14.66
8 Other Transport ---- 7.54 ---- 5.37
9 Communication ---- 15.00---- 8.33
10 Financial Services---- 11.69 ---- 1.56
11 Public Administration ---- 6.43 ---- 5.45
12 Other Services ---- 9.26 ---- 3.53
Total GDPfc ---- 7.93 ---- 3.58
Projected investment requirements for Private sectors in 000crs.
Sectors--- Investment required---- Projected Private investment
1.Agriculture & Allied--- 219.6--- 174.0
2. Mining & Quarrying ---89.4 ---103.0
3.Manufacturing ---1476.9--- 1330.7
4.Electricity ,Gas & Water Supply ---412.5--- 68.0
5.Construction ---61.0 ---38.9
6.Trade ---136.6--- 106.0
7.Rail Transport--- 81.9 ---60.6
8.Other Transport--- 237.6 ---184.3
9.Communications--- 296.4 ---74.1
10.Financial Services--- 151.2 ---26.5
11.Public Administration ---273.1--- 30.6
12.Other Services--- 645.3 ---499.9
Total ---4081.7--- 2476.1
If we are able to muster what is given above(figures from 10th Plan) then it should be visible around us. And if you get confident by looking around you that yes there are visible signs of growth and future actions/plans then liquidity will come to India. Market will see up for a long time to come. These temporary blips should be used fruitfully. NO we are not at all going to doomed level.
Pankaj
With the corrections last month on the back of news that FED will increase the interest rates, along with BOJ sucking liquidity from financial market and other central banks also raising rates, scene was set for deep corrections all over the world market.
Now anticipated increase appears to have been fully factored in and investors were increasingly of the opinion that prices are at correct valuations, the spectre of higher than the anticipated rise is raising its, head, thereby , spooking the market.
The anticipation of higher than expected rate will keep the market on tanterhooks. Global cues have sharply turned negative during last 24 hours.
There are serious concerns over the activities of hedge funds which have witnessed explovise growth over last few years due to cheap yen from Japan.Us court has thrown the rule requiring them to be registered with SEC on the ground that it is arbitrary and it exempts fund with less than 15 clients from registering. Now it is to be seen if SEC decides to appeal higher or come with tighter rule. In either case danger posed by hedge fund can not be wished away now. So the equation is to be clearly understood. Hedge funds have more operational flexibility. They need not adhere to many prudential practices and often works on the boundary conditions, i.e. slight change in various operating parameter will see them flying to lucrative destinations. Margins are thin and risks are higher. Often they have destabilising effect on the stock market as thinner margins disappear and they dump stock en-masse leading to meltdown. Their money is nimble and quickfooted like hyena and sometimes need to clean up an inflated market.
Now if interest rates go up then money will be costlier and thin margins will evaporate. So hedge funds will fly off again to safer destinations such a bonds.
Secondly, if money is costlier, companies will find it difficult to get loans at cheaper rates. Cost of business will be up so profit will reduce unless they find it possible to pass it on. That may not be feasible in many cases. So results will be bad and stock prices of such companies will decrease. This will be anticipated much in advance by hedge funds and they will exit before impact is really visible to others. In such case there will be immediate decline the rise and then slow decline over a long period. Investors are well to study individualcompanies for such factors. It will be seen in scetoral shift of the outlook in general. Better companies will be able to survive. Hedge fund makes no allowance for that.
Thirdly,high inflation will cut the consumer spending as also high cost of borrowing. So many booming sectors will become busting sectors. Such companies will find themselves in doldrums and unable to steer in any direction. Their results will be bad and will be visible over two quarters at least.
So a sectoral realigment keeping in view domestic conditions will have to be done. India is set on a moderately high growth rate though less than china.To sustain that rate the investment required is more than 1600000 crores at 2001-2002 prices.Our priority areas are With such a massive investment over the period of five years is certainly going to be beneficial. Further to sustain such growth rate we need to develop at 10% in Industrial sector and above 5 % in Agriculture sector.
So if capital is costly, imports are dearer , growth rate in industrial sector will suffer. If monsoon is bad, or credit delivery system to farmers are poor then agricultural growth will suffer.
These aspects need to be watched out. Technology sectors perticularly IT and services should show normal growth. However strong dollar will impact the revenue of IT companies.
Market will in the long term will react to these conditions . These thing will have to be analysed in detail by some knowledgeable members so that a firm sectoral outlook could be presented on long term basis for investment purposes. That should take into account the current scenario and potential for growth and Govt. policy imperatives.
In general , when I am optimistic , I mean the areas where policy focus is centered will grow as the country has potential for the growth and to achive those targets it will take many years before we take a breather. We have to lookaround us to see if such a change is evident, look beyond numbers also.
To give you some numbers to keep in mind before we see around us
Sectoral Structure of GDP at factor cost
SECTORS--- 2006-07--- Tenth Plan
1 Agriculture & Allied Activities-- 20.5-- 22.2
2 Mining & Quarrying ---1.9 --2.1
3 Manufacturing --- 16.7--- 16.1
4 Elect, Gas & Water Supply--- 2.8--- 2.8
5 Construction ---6.1--- 6.1
6 Trade ---13.6 ---13.3
7 Rail Transport ----0.8--- 0.8
8 Other Transport ---4.8--- 4.8
9 Communication ---- 2.3---- 2.1
10 Financial Services ----7.5--- 7.0
11 Public Administration ---- 6.1 ---6.4
12 Other Services ---16.8 ---16.4
Total ----100.0 ----100.0
Sectoral Growth Rates and ICORs Tenth Plan
SECTORS Growth ICOR(Rate (%))
1 Agriculture & Allied activities ---- 3.97 ---1.99
2 Mining & Quarrying ---- 4.30---- 7.99
3 Manufacturing ---- 9.82---- 7.77
4 Elect, Gas& Water Supply ---- 7.99 ---- 14.97
5 Construction ---- 8.34 ---- 0.99
6 Trade ---- 9.44 ---- 0.91
7 Rail Transport ---- 5.40 ---- 14.66
8 Other Transport ---- 7.54 ---- 5.37
9 Communication ---- 15.00---- 8.33
10 Financial Services---- 11.69 ---- 1.56
11 Public Administration ---- 6.43 ---- 5.45
12 Other Services ---- 9.26 ---- 3.53
Total GDPfc ---- 7.93 ---- 3.58
Projected investment requirements for Private sectors in 000crs.
Sectors--- Investment required---- Projected Private investment
1.Agriculture & Allied--- 219.6--- 174.0
2. Mining & Quarrying ---89.4 ---103.0
3.Manufacturing ---1476.9--- 1330.7
4.Electricity ,Gas & Water Supply ---412.5--- 68.0
5.Construction ---61.0 ---38.9
6.Trade ---136.6--- 106.0
7.Rail Transport--- 81.9 ---60.6
8.Other Transport--- 237.6 ---184.3
9.Communications--- 296.4 ---74.1
10.Financial Services--- 151.2 ---26.5
11.Public Administration ---273.1--- 30.6
12.Other Services--- 645.3 ---499.9
Total ---4081.7--- 2476.1
If we are able to muster what is given above(figures from 10th Plan) then it should be visible around us. And if you get confident by looking around you that yes there are visible signs of growth and future actions/plans then liquidity will come to India. Market will see up for a long time to come. These temporary blips should be used fruitfully. NO we are not at all going to doomed level.
Pankaj
Hi
Here's NSE figures for FII
FII trading activity on NSE and BSE in the Capital Market segment(In Rs. Crores)
Date --- Buy Value--- Sell Value--- Net Value
26-Jun-2006--- 2146.90--- 2148.09---( -1.19)
And SEBI Figure
Reporting Date--- Gross Purchases(Rs Crores)--- Gross Sales(Rs Crores) Net Investment (Rs Crores)--- Net Investment US($) million at month exchange rate
26-JUN-2006--- 21.70--- 14.70 --- 7.00-- 1.60
Wel the figure for sell and buy are pretty high for FIIs as per NSE reports which includes BSE data also. SEBI figure is not taken into account as there seems to be obvious error of sorts.
Buy and sell of FII was evenly matched.
Advance Decline Ratio of NSE remained overwhelmingly negative.
Advances --- 60 --- Declines--- 871 --- Unchanged --- 9
PE/PB and Div. Yield of NIFTY for today is as below
Date-- P/E-- P/B-- Div Yield
19-Jun-2006-- 16.58-- 4.20-- 1.65
20-Jun-2006-- 16.27-- 4.12-- 1.68
21-Jun-2006-- 16.62 --4.21-- 1.65
22-Jun-2006-- 17.03 --4.32-- 1.61
23-Jun-2006-- 17.30-- 4.39-- 1.58
25-Jun-2006--- 17.34 --4.40-- 1.58
26-Jun-2006-- 16.73 --4.24-- 1.64
These are monthly index returns for Indices for Up to May 2006
Monthly Index Returns for NSE indices.
As of end May 2006 (in %)
Index --1 month-- 3 month-- 6 month-- 1 year
S&P CNX Nifty-- (-13.68%)-- (-0.12%)-- 15.79%-- 47.11%
S&P CNX 500-- (-14.01%)-- (-0.89%)-- 14.27%-- 43.62%
S&P CNX Defty--( -16.22%)--( -0.12%) --15.79%--- 38.42%
CNX Nifty junior--( -15.00%)--( -2.33%)-- 11.17%-- 33.52%
CNX Midcap--( -14.42%)-- 0.08%-- 14.80%-- 43.92%
CNX IT Index---( -10.88%)--( -2.60%)--- 9.50%--- 31.93%
S&P CNX Banks--( -9.22%)---( -8.44%)--( -2.20%)-- 19.03%
Coming to today's action in the market. Market was rising for two days when dow was in negative and closing was listless and unconvincing. Europe and other markets closed in green on the back on news of Areclor but India closed more than 3% lower. Dow and Nasdaq has started in positive now.
The global cues were negative on account of anticipation of more than the expected rise. Though the market opened in gree and could not sustain and plummeted into negative territory. It charted out a path of a stone thrown up and now coming down arching. . A perfet downward curve. Clearly sentiments have spooked the investors. I have a feeling that FII sold heavily in the morning and bought in the evening.But no data to support it.
The closing today had one silverlining in that it closed above 10000 a psychological close which keeps uptrend intact supports the argument that bottom has been reached.
But let me sound a note of warning to you. This supprot has proved frivolous and could vanish at will If we are able to close above 10000 this week then it is a positive sign.
Further the argument that FIIs action and Indices movement are not cause and effect phenomena. It is fallacy of prediction by association and normally a logical fallacy. What it all means is that we can not simply correlate these two factors in cause and effect relationship, normally associated with science. In statistics ,probabilistic model is used which allows use of such association within acceptable parameters. One has to be sure of facts.
The FII actions and indices movement as charted have show similar movements. But a distinct time lag is also visible. That indicates that relationship may not be one to one but many to one. meaning thereby that various other parameters also impact the indices movement. Individual stocks and sectoral outlook, as well as psychological factors also play a role.
So when I tell ifts FII one need to qualify this with other factors.
As sensex has taken plunge today it may recover tomorrow or may remain subdued till thrusday when fed rate will be out of our way. If we end 10000 above we might recover and move on into upper range(above 10500) of consolidation else we will move in lower range(below 9500) of consolidation.
Pankaj
Here's NSE figures for FII
FII trading activity on NSE and BSE in the Capital Market segment(In Rs. Crores)
Date --- Buy Value--- Sell Value--- Net Value
26-Jun-2006--- 2146.90--- 2148.09---( -1.19)
And SEBI Figure
Reporting Date--- Gross Purchases(Rs Crores)--- Gross Sales(Rs Crores) Net Investment (Rs Crores)--- Net Investment US($) million at month exchange rate
26-JUN-2006--- 21.70--- 14.70 --- 7.00-- 1.60
Wel the figure for sell and buy are pretty high for FIIs as per NSE reports which includes BSE data also. SEBI figure is not taken into account as there seems to be obvious error of sorts.
Buy and sell of FII was evenly matched.
Advance Decline Ratio of NSE remained overwhelmingly negative.
Advances --- 60 --- Declines--- 871 --- Unchanged --- 9
PE/PB and Div. Yield of NIFTY for today is as below
Date-- P/E-- P/B-- Div Yield
19-Jun-2006-- 16.58-- 4.20-- 1.65
20-Jun-2006-- 16.27-- 4.12-- 1.68
21-Jun-2006-- 16.62 --4.21-- 1.65
22-Jun-2006-- 17.03 --4.32-- 1.61
23-Jun-2006-- 17.30-- 4.39-- 1.58
25-Jun-2006--- 17.34 --4.40-- 1.58
26-Jun-2006-- 16.73 --4.24-- 1.64
These are monthly index returns for Indices for Up to May 2006
Monthly Index Returns for NSE indices.
As of end May 2006 (in %)
Index --1 month-- 3 month-- 6 month-- 1 year
S&P CNX Nifty-- (-13.68%)-- (-0.12%)-- 15.79%-- 47.11%
S&P CNX 500-- (-14.01%)-- (-0.89%)-- 14.27%-- 43.62%
S&P CNX Defty--( -16.22%)--( -0.12%) --15.79%--- 38.42%
CNX Nifty junior--( -15.00%)--( -2.33%)-- 11.17%-- 33.52%
CNX Midcap--( -14.42%)-- 0.08%-- 14.80%-- 43.92%
CNX IT Index---( -10.88%)--( -2.60%)--- 9.50%--- 31.93%
S&P CNX Banks--( -9.22%)---( -8.44%)--( -2.20%)-- 19.03%
Coming to today's action in the market. Market was rising for two days when dow was in negative and closing was listless and unconvincing. Europe and other markets closed in green on the back on news of Areclor but India closed more than 3% lower. Dow and Nasdaq has started in positive now.
The global cues were negative on account of anticipation of more than the expected rise. Though the market opened in gree and could not sustain and plummeted into negative territory. It charted out a path of a stone thrown up and now coming down arching. . A perfet downward curve. Clearly sentiments have spooked the investors. I have a feeling that FII sold heavily in the morning and bought in the evening.But no data to support it.
The closing today had one silverlining in that it closed above 10000 a psychological close which keeps uptrend intact supports the argument that bottom has been reached.
But let me sound a note of warning to you. This supprot has proved frivolous and could vanish at will If we are able to close above 10000 this week then it is a positive sign.
Further the argument that FIIs action and Indices movement are not cause and effect phenomena. It is fallacy of prediction by association and normally a logical fallacy. What it all means is that we can not simply correlate these two factors in cause and effect relationship, normally associated with science. In statistics ,probabilistic model is used which allows use of such association within acceptable parameters. One has to be sure of facts.
The FII actions and indices movement as charted have show similar movements. But a distinct time lag is also visible. That indicates that relationship may not be one to one but many to one. meaning thereby that various other parameters also impact the indices movement. Individual stocks and sectoral outlook, as well as psychological factors also play a role.
So when I tell ifts FII one need to qualify this with other factors.
As sensex has taken plunge today it may recover tomorrow or may remain subdued till thrusday when fed rate will be out of our way. If we end 10000 above we might recover and move on into upper range(above 10500) of consolidation else we will move in lower range(below 9500) of consolidation.
Pankaj
Hi pankaj,
Thanks for the best effort for us. Keep it up. Actually I wanted to share one news from mumbai mirror (Sat 24 june page 22)
Heading: Will Stock market sink to 6k-level?
Morgan Stanley report says poor policy response providing further downside risk
New delhi: While warning about a further risk that can pull the benchmark Sensex to near 6000 point level, leading global investment bank Morgan Stanley said that global factor likely to remain key influence on india's equity returns over the next one year.
The US economic growth and inflation rates, crude oil prices and emergin market valuations are among the most critical factors that would effect the indian stock market in the next 12 months, Morgan Stanly ridham Desai and Kuleen Tanna said in a latest report on the countrys market.
Why I am giving important to the above news because it is in mumbai mirror and no body till now gives this figure if this news becomes correct then ultimatly mumbai mirror will become hit (Which is dependent on now times of india) so they are searching for some breaking news to make the papper hit and they have good upportunity and they have taken the support of Morgan Stanley, and because of this i have thinking that this news might be correct.
Now your views dada.
wrgrds
Ahmed
Thanks for the best effort for us. Keep it up. Actually I wanted to share one news from mumbai mirror (Sat 24 june page 22)
Heading: Will Stock market sink to 6k-level?
Morgan Stanley report says poor policy response providing further downside risk
New delhi: While warning about a further risk that can pull the benchmark Sensex to near 6000 point level, leading global investment bank Morgan Stanley said that global factor likely to remain key influence on india's equity returns over the next one year.
The US economic growth and inflation rates, crude oil prices and emergin market valuations are among the most critical factors that would effect the indian stock market in the next 12 months, Morgan Stanly ridham Desai and Kuleen Tanna said in a latest report on the countrys market.
Why I am giving important to the above news because it is in mumbai mirror and no body till now gives this figure if this news becomes correct then ultimatly mumbai mirror will become hit (Which is dependent on now times of india) so they are searching for some breaking news to make the papper hit and they have good upportunity and they have taken the support of Morgan Stanley, and because of this i have thinking that this news might be correct.
Now your views dada.
wrgrds
Ahmed
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