Hi All
Why I am not seeing same euphoric response from public and forum members this time when sensex has broken its record and made Life Time High(LTH). There is doubt and uncertainty among the forum members, people are asking what if this is the same game play of some crooked scamsters or may be powerplay of FIIs.Lambs are being readied for slaughter and sooner or later they will be. Then there is November effect and October effect and then Summer effect.
Truely,
from now on we are in uncharted territory. Can we predict how long we will rush into this dark uphill tunnel. I tell you it is futile to time the market and too bad to try to predict it.Instead of seeing it running away or going down , we should see the underlying factors that hascaused the market to go down to Patal Lok and also to skyrocket to lifetime high.
I am also taken aback a little by the performance of sensex( and that of Nifty too). I was expecting it to cross 52 Wk high by end os September2006 and it came a little late by 13 days.
As of now the sensex has crossed four loops in its upward journey. 8500-9500, 9500-10500 and 10500-11500 and 11500-12500. Once it has crossed 12700 it might get firmly established in 12500-13200 range. The climb will be difficult and uncertain but we will cross it.
However the doubt arises from the fact that withing five months sensex has crossed four loops and is in the fifth loop making LTH. It is also above DowJones. Lot os questions have to be answered and action taken lest it falls back under the weight of omnipresent gravity.
So now coming to my oft repeated idea , I have seen almost one to one correspondence to FIIs buy and sell and Market movement. The attached file gives figure for 1.9.2006 to 13.10.2006 indicating FII net buy/sell Indices(nifty), Nifty PE/PB and BV.
PE is at 21.36. Ohh, we thought PE of 12 to 15 would be a reasonable level for Nifty. Please keep that in mind and be forewarned.
Also keep in mind that We had Nomura and GoldMan Sach and Few other telling that Indian Indices are way beyond its reach and is likely to go down to
7600. Though it never reached that stage, they managed to pull it back to the level where it got deeply wounded and is still healing. Remember they have the capacity to bring the market on its knees. But it would be too early for them to do so. At leas another 2000 point run will be there before I see happy forum members jumping in with public at large. I am sure this time they would be better disciplined and informed .
For last one and half month let us see what FIIs have done.(All figures in Rs Crores)
SEBI figure for FII( September 1006)
Equity --32212.20--- 26787.00---
5424.70
Well not bad.
Nifty jumped from 3435 to 3588.(153 pint jump Closed highest for September)
SEBI figure for FII(October2006)
Equity--- 16161.20--- 13993.10---
2167.90
Its fine.
Nifty jumped from 3569 to 3676. (Abt 107 point jump so far.)
SEBI Figure For FII for 2006 (till date)
Equity---357860.7--- 332878.90----
24981.80
Nifty jumped from 2835.95 to 3676.05 a jump of 835 points.(35%).
But the depression comes in the rising graph where on day to day basis FIIs are sellers even for small amount barring for few exceptions.
Monthly details of FIIs Net operations are given below.
Month--------------Buy-------Sell--------------Net
Jan2006(Equity)--- 33983.20--- 30105.10--- 3877.70
Feb2006(Equity)---- 35398.90--- 27811.40 -----7587.80
March2006(Equity)----- 52941.10---- 46252.20---- 6688.80
April2006(Equity) ----44644.80---- 44122.70 ----521.90
May2006(Equity)---- 47728.80--- 55082.90--- (7354.20)
June 2006(Equity)--- 39783.10--- 39303.50--- 479.50
July 2006(Equity)--- 26555.20--- 25410.30--- 1145.20
August206(Equity )---27237.70--- 22595.00---- 4643.10
September2006(Equity)--- 32212.20--- 26787.00 ----5424.70
October2006(Equity)--- 16161.20---- 13993.10--- 2167.90
FIIs turned positive only in second half of Jun 2006 but by that time they had inflicted deep wound and the Market was in upheaval. So they went positive and have gone on picking stocks from the battleground.
What was the effect of that deep wound inflicted on unsuspecting investors and traders. Most of them lost their life's saving , total erosion of capital and of course psychological trauma. The response of establishment was also on predictable line. Another effect was to expose the hollowness of the regulatory mechanism which makes market so much volatile. The fluctuations are in the range of 300-400 points in one day that even stop losses are useless.
Lessons are: not to predict your market. Do your study. For last one and half months only less than 1000 stocks are actively traded. Many may be on thin volumes. If we screen them, we would find less than 100 stocks(including some in MDCP and SMLCP) worth looking at.
Those stocks which suddenly wakeup from slumber and start moving up, as if there is no tomorrow for them , avoid , as there is really no tomorrow for them. If you can make money out of it I would say you are lucky but a fool. Sometimes risks are too much .
So the stocks which are in trading mode( read sideways) are surely meant for trading but if they fall in the first category do check if you could invest for long term. Stocks which are in trending mode, are for taking profit.
It is better to leave before peak. Exceptions would be few stocks in GRA or sensex and nifty. You can invest for long term and keep a watch so as to never take a hit of more than 10% or max 15%. When Market has made a new high, give it time for consolidation and pullback.
As we are seeing FIIs investment are still nowhere near what it was , it simply means that many of the genuine FIIs would also have got hurt and are nursing their wound yet. Moreover this deep wound was not specific to Indian Market but a world wide phenomenon. Return of DowJones few days back to make All time High was result of Investors optimist. Scepticism remains though. Czar would be right in pointing out that nothing fundamentally has changed. We might still be bear market. But I have not accepted that Bear Market argument and just like sectoral rotation takes place, worldwide reallocation of assets and investibles have taken place.
Oil prices are now low. Ben Bernanke is not making threatening noises. USA real estate sector is in dumps and Indian is picking up. Inflation seems to be manageable for Americans as their economy is slowing down(ohhh its effect will be seen in next two years). China has removed brakes and now is trying to fix 'em.Euro might become the next standard currency.North Korea did nuke test and Iran might do as well. If Americans move against them, their economy will only grow ( read Economics of War).
India, being emerging market, is the place for them to invest and get benefitted. So FII inflows should continue and I think if we are really able to manage 8.9 % growth rate, we would be making historic highs. But our discipline in investment and trade would only save us from occasional disaster
.
The sectors which are going to be in lime light would be Power, Telecom, Infrastruture, Capital good,Reatil and Real estate. Now you might ask what else I have left. Well nothing, but be sure to be in frontline stocks rather than third rung stocks in the hope of making millions overnight. AirPorts are next hot spots along with Power.If India is going to be developped we need lots of International quality airports and clean and assured power. Anyway choices are stcok specific and according to taste of individual and inclination to study individual stocks. Do check Stocks for year 2006 whcih was putout by nkpanjiyar and few others. On a long term basis they may still be valid.
Last but not the least,
always be careful with your investments and keep stoploss and also strict watch over them.Monitor those FII friends on routine basis for hint of imminent collapse. But let me tell you my thinking . It may drop another 2000 points from 15000 and that might take some time. But then I would be and may be a fool to tell that sensex would rise as I was telling since its fall( mine got averaged out
). Never predict the market , respect its dynamics and move with it like you ride a horse, you move up and down with movement of horse either galloping or cantering
Take whatever I have said with a pinch of salt as I firmly believe in My Country and its growth.Do You?
I am incorrigible and Hope is eternal.
Thanks to all who have responded positively and also critically(most needed for debate to go on)
Pankaj
ps:-Sorry for long and rambling thoughts, but couldn't resist posting. Remember, some posts where members are cautioned on advises from friends, take them seriously:
