New trading hours for NSE and BSE

From 4 January 2010, trading will start at 9:00 IST and close at 15:30 IST compared to the current timing of 9:55 IST to 15:30 IST.

So wake up early!

OMCs valuations seem full

The government had not issued any oil bonds and that has raised serious concerns regarding the delay in the issue of oil bonds. However, the
finance secretary's statement on compensating the OMCs in cash instead of oil bonds if implemented will be a positive and is expected to allay the concerns related to the intention of the government with regard the OMC compensation.

The positive indications from the government on the subsidy front, the hike in automobile fuel prices and the oil moving in a narrow band for sometime have led to a steep run-up in the stock prices of the OMCs. Since April 01, 2009, IOCL, BPCL and HPCL are up.

Hence, at the current market price, it is believed that the valuation of the OMCs seems full. We highlight here that any development or any notification from the government related to the de-regulation of the automobile
fuels could result in the re-rating of the OMCs. 

Beware of real-estate stocks!

In key economic data, new home sales tumbled 11.3% in November 2009, raising the specter that previous positive signs in the industry were the result ofgovernment stimulus and not sustainable!

Beware of real-estate stocks!

CRR to be raised if prices do not decline in December.

Montek Singh Ahluwalia said - from January 2010 you will see a decline a food prices. What you see now is speculative, probably due to the drought situation. The stock situation is relatively OK. Problems such as this cannot be tackled by blunt instruments like monetary policy."

Price increase at the retail level is much more than the increase at the wholesale level. This is because of dysfunctionality in the distribution system. The ministry is looking into it, but whenever required, the country should do imports.

India's food-price inflation cannot be tackled through monetary and other policy steps, while inflationary expectations will not stay long. Earlier India's central bank may have to raise the cash reserve ratio (CRR)
to drain money from the banking system if prices do not decline in December.

Buy Lupin with a target of 1700

LUPIN in the pharmaceutical sector looks areally good. It is fundamentally a very strong company as per my research. Lupin is also getting into the Japanese market. Japanese markets have never been easy to tap into and this might be a good opening for Lupin.
Analyts feel that this stock will touch 1700 in year 2010.

Disclosure: I hold this stock in my portfolio.

Advance tax payments by Indian firms

Advance tax payments by Indian firms rose 24 % annually in October-December, signaling higher corporate profits and raising prospects that the country may exceed the target for direct taxes. The corporates paid
about Rs 55,900 crore in advance tax in the December quarter compared to about Rs 50500 crore during July-September quarter, and  about Rs 41,600 crore during the year-ago quarter.

Sectors to watch out for....

Three sectors to watch out for are
(1) Automobiles
(2) Pharma
(3) IT

Investment in these sectors can be a safe and defensive pick for next few months if the markets correct sharply from here.

RBI may tighten monetary policy in this month

The RBI may tighten monetary policy in this month as inflation could rise to near 7% in March 2010. By the end of December, they can review the situation and take action... depending how the prices have behaved in December. By the end of March 2010, inflation could be close to 7%.

Lok Sabha approves spending of funds

The Lok Sabha on Friday approved extra spending of $5.5 billion for the year ending March 2010. The 

additional spending is needed for food and fertiliser subsidies, wages, infrastructure
projects and an equity infusion into state-run carrier Air India. 
Finance Minister Pranab Mukherjee has said the additional spending need not be funded through 

additional borrowing. 

Fund inflow into emerging markets

The latest data from global fund tracker showed emerging market equity funds received $2.3 billion in inflows in
the week ended 9 December 2009, bringing 2009 inflows to $75.4 billion.
Emerging-market funds are heading for record annual inflows in 2009. The previous record was $54 billion in 2007.

IIP for October

The Index of Industrial Production (IIP) for October 2009 registered a growth of 10.3% Y-O-Y,
well below the consensus estimate of 12%.
For the year-to-dateperiod of FY2010, the IIP growth now stands at 7.1%, which is higher compared with the 4.3% growth during the corresponding period of the last year.

The growth in the industrial output during October 2009 was led by the manufacturing and mining segments while the growth in the electricity segment was more or less in line with that of the previous year.

RBI Governer on food price inflation

On Monday central bank Governor D. Subbarao said food price inflation was a supply-side issue and monetary
policy was an inefficient tool to rein it in.The RBI holds its next policy meeting in late January, but it can adjust monetary policy at any time.

Capital inflows into India reflect investor confidence in the Indian economy

Capital inflows into India reflect investor confidence in the economy, the RBI governor Duvvuri Subbarao
said at a televised panel discussion, although measures to control them could not be ruled out in case there was a surge in
foreign funds that needed to be contained. 

Rallis India can touch 987

Rallis can touch 987 on the charts.
A change of trend is seen in the MACD charts. 

Exide Industries can touch 124.

Exide Industries is on an up-move. Its immidiate target is seen at 124. The MACD(12-26) is just srossing above the MACD signalline.

BEML on the upmove, target 1092.

Stocks like BEML are on an upmove. On the MACD charts a strong upmove is seen which can take the stock to 1092.

FDI for Pension funds.....

In a move that is aimed at signalling the UPA government's intent to aggressively push the reform agenda, the Cabinet on 3 December 2009 clear the Pension Fund Regulatory & Development Authority Bill that seeks to bring foreign direct investment (FDI) into the sector. The Bill proposes to allow foreign players to hold up to 26% stake in Indian pension fund companies. It would also permit pension funds to deploy part of
their corpus abroad in approved instruments.

World Bank on India

The World Bank has committed to increase its lending to India to about $7 billion this year from an average $2.3 billion in the previous four years.

In September, the World Bank approved $4.3 billion in loans for India to help finance infrastructure building and to shore up the capital of some state-run banks as the economy recovers from the global financial crisis. The loans are part of the bank's $14 billion lending for Asia's third-largest economy over three years through 2012.

Govt to sell stake in profit making firms

On Tuesday, Finance Minister Pranab Mukherjee told parliament the government would sell up to 10% of its stake in the profit making state-run firms.

The government has reportedly drawn up 25 state firms for stake sales. These include-
Nuclear Power Corporation of India, 
National  Bank for Agriculture and Rural Development, 
Exim Bank of India,
Punjab & Sind Bank, 
Indian Railways Finance Corporation and
National Housing Bank. 

Other companies planning initial public offers (IPO) include SBI Caps and SBI Fund Management, both
subsidiaries of government-controlled State Bank of India.

Many of these IPOs could hit the market after the follow-on public offers of 5% each in NTPC and Rural Electrification Corporation, and a 10% stake sale in unlisted Satluj Jal Vidyut Nigam are completed in the current financial year.

Economy can grow at 7% in 2009-2010

C. Rangarajan, chairman of the prime minister's Economic Advisory Council on Tuesday said the robust growth of the economy in July-September indicated it could expand at around 7% in 2009-10.

The latest numbers indicate that industry and services are growing very strongly, this could help offset to a very large extent the impact of the decline in agricultural production.

Automobile growth intact

Automobile sales continued its robust growth momentum in November 2009 on account of strong demand environment, which is also driving the success of newly-launched products by automakers.
Traditionally, the sales volume in auto sector slows down after the festive season, however in the current year, the volume has remained intact for major automakers such as Hero Honda Motors and Maruti Suzuki India, which speaks about buoyancy  in demand.

Passenger car leader Maruti Suzuki reported a boisterous 66.6% y-o-y growth in its total sales volume for November 2009. In the two-wheeler segment, market leader Hero Honda’s sales volume for the month grew by strong 31.8% yoy.

GDP at 7.9% in Q2

Monday showed the gross domestic product (GDP) grew by 7.9% in Q2 September 2009, from 7.1% in the
previous year, as stimulus measures boosted demand and manufacturing activity surged. The economy had
registered a 6.1% growth in the first quarter.

The bulk of the recovery was led by a 9.2% growth in manufacturing, 9.5%  in mining and 6.5% in construction. But agriculture continued to me a major drag with a mere 0.9% growth.

Which Indian companies may be affected by Dubai crises...

Some Indian listed companies have exposure to the Dubai economy and its once-booming real estate business.


 Nagarjuna Construction
The company has only one venture in Dubai, a 440-apartment project, and is going slow on it.
The company is also doing a Rs 100-crore water pipeline project at Dewa, Dubai. There is no default payment problem at the Dewa project. The company’s Middle-East exposure is mostly to government-owned agencies.

Larsen & Toubro
Larsen & Toubro has exposure in multiple segments in Middle East, The company has exposure in the hydro-power segment. The total exposure to the Middle-East over the last two years is to the tune of USD 200 million.

Punj Lloyd
The infrastructure player has no exposure to Dubai or real estate exposure in UAE, they are doing only oil & gas projects in Abu Dhabi where there are no concerns at all.

Voltas
The company is executing a Rs 900-crore project in Dubai as part of a joint venture where Voltas has 37% stake. “They say that the project for Emaar and the client has fully funded the project. Thus, they are not anticipating any delays. their order book is primarily from Abu Dhabi and Qatar. Dubai also has not defaulted on any of our payments.

Bank of Baroda
Bank of Baroda has some real estate exposure to Dubai accounting to 5–6% of its loan book. Interest on all loans in Dubai have been paid till last due. Bank of Baroda has 10 branches in the Gulf region. It has small banking exposure, mainly for remittances in the region.

Unitech
The company said it had not exposure to Dubai real estate.

DLF
DLF has no exposure to Dubai, it said.

Indiabulls Real Estate
The company does not have any direct/indirect investment in Dubai. 

Omaxe
Omaxe is likely to exit its two real estate projects in Dubai. They had planned a Rs 2,850 crore investment in Dubai, out of which they have already paid Rs 50 crore to Nakheel as first instalment and may seek refund if they exit the Dubai project.
HDIL
HDIL has no exposure to Dubai, it said.

SpiceJet
Dubai World’s investment arm, Istithmar, holds 13% stake in SpiceJet

Aban Offshore
The oil exploration company has deployed six rigs in West Asia.

DUBAI... a fallacy???

In the past decade Dubai undertook spectacular real estate projects to re-invent itself as a tourism and finance hub. Dubai's population rocketed to 1.5 million, as professionals from around the world took plum jobs in a country marketed as a liberal enclave in the Gulf sun.
However, Dubai's debt troubles have exposed the fallacy of its once much-vaunted "model" of raising shining cities in the desert with foreign residents, finance and labour.

Party time for bears!

Nifty opened gap-down today continuing its yesterday’s sell-off and broke many crucial supports in process, indicating that the next move down, which began yesterday will be quite intense. After making an intra-day low of 4806, it recovered quite a lot and closed above 4900, giving some relief to the bulls.

Experts reckon that the final hour bounce is just a dead cat bounce and should have been used as a selling opportunity.

Nifty is trading below its 50 DMA and the momentum indicators on the daily charts have also given a sell crossover. Hence, the short and medium term bias is down.

Is Dubai real-estate loan issues really a big problem?

Dubai real-estate loan issues is NOT that big a problem as we saw a fall on the Indian indices. But 5100 was a resistance level and going beyound it was very difficult as it touched it past 3 times are retraced back.
A correction was overdue and this event was a trigger which started the correction. The market was just looking for a reason to sell out.


What really happened? 

Dubai's financial health came under scrutiny after a major government-owned investment company asked for 

a six-month  delay on repaying its debts. Dubai World, which has total debts of $59 billion,
is asking creditors if it can postpone its forthcoming payments until May next year. 

Reliance looks good after Ex-Bonus

The new range for Relaince after the Ex-Bonus date will be Rs 900 to Rs 1,100 in the short-term. In the longer-term  we have our targets around Rs 1,300-1,400. 
Possibly once the acquisition is made and that goes through at decent valuations then possibly we could see higher levels as well.

Buy signal for EMCO

MACD charts for EMCO are showing strength. The MACD line has just crossed over its 9-Day MACD signal line.

A little resistance might be seen at the price of 88 - which is the 100 day moving average.

Buy signal on Bank of India

Short term traders can buy Bank of India. Divergenve is started showing up on the MACD charts. The MACD line just crossed the 9-Day MACD signal line.















Bank of India  also moved up its 50-Day Simple Moving Average of 380. This again shows strength in the stock.

NIFTY's future

Nifty opened in positive today. There is a good support at 5050-5030 levels and a resistance at 5182, the previous high. So, now the range is 5030-5182 and a breakout from this range would determine the next move. Till then if Nifty stays above 5050 it might touch 5150-5180 levels. The momentum is showing a mixed picture signaling that some caution is required at higher levels. In this type of situation we may see some sideways movement and intra-day volatility.

Capital Inflows into India

Brazil and Taiwan have taken steps to curb hot money inflows, and other governments are keeping a watchful eye on inflows, wary that they could fuel asset price bubbles. The IMF's chief economist on Monday warned of bubbles in emerging markets on uncontrolable capital movements, which was echoed by the Asian
Development Bank on Tuesday.

The Indian government can absorb nearly $100 billion of dollars in capital inflows, nearly double what is expected this year, before it needs to take strong restrictive measures, C. Rangarajan, chairman of the
Prime Minister's Economic Advisory Council said on Tuesday. Economic growth was picking up, and should hit 7 to 8 % in the fiscal year starting March 2010, he said, adding the biggest worry over the next few months was rising inflation.

View on Telecommunications sector

Low mobile number portability (MNP) charge to increase churn rate; negative for mobile operators. 

The latest notification by the Telecom Regulatory Authority of India (TRAI) caps the porting charge at Rs19 for mobile number portability (MNP); It is believed that low porting charge would lead to higher porting volumes and thus would increase the churn rate in the sector, further intensifying the competition amongst the operators. This would be negative for the GSM operators (Bharti Airtel, Vodafone, Idea Cellular) as these operators stand the risk of losing the high revenue, high-margin post-paid subscribers. It is expected from operators to spend more time and resource in retaining customers, advertising aggressively and enhancing their service quality. With these expenses expected to come into play, the dilution of the earnings before interest, tax, depreciation and amortisation (EBITDA) margin could not be ruled out. 

STAY AWAY FROM TELECOM SECTOR!!!!

NIFTY's new support and resistances

The Nifty opened in the positive following the sharp pullback in the previous session. The Nifty has surpassed the high of 5080 with strong momentum that has made it trade above 5100.
On the upside 5182 remains a crucial resistance and on the lower side 5050 and 4990 are important supports.

Going forward, it would be important to see whether the Nifty manages to cross 5182.

NIFTY should cross 5080 to move further

On Friday Nifty staged a strong bounce-back from its intraday low, giving a close above the psychologically important 5050. However, to gain more strength, it needs to close above 5080.
On lower side, 4920 was held as good support in the short term. Going forward too, till this level is held
we may see good amount of buying.
The index also closed above 5050 giving further conviction for the up-move - Cheers to the bulls.

Govt has no plan to tax capital inflows‏

The Sensex and NIFTY snapped last two days' losses, taking cue from higher European stocks. Also comments by the deputy chairman of the government's planning commission that the government is not considering imposing a tax to curb an influx in overseas funds.

On this news - the Nifty regained the psychological 5,000 mark after and the Sensex regained the psychological 17,000 mark.

NIFTY's short term and medium term trend remain downwards.

The Nifty opened in the negative continuing with yesterday’s fall. Weak global cues did not help matters.
The Nifty has broken down from the rising wedge, which is a bearish pattern.
On the lower side, 4920 and 4860 are the supports. So, as long as we do not close above 5050 convincingly, the short-term and medium-term trends remain down.

Update on Bank of Japan

The Bank of Japan (BoJ) at a regular policy meeting on interest rates today, left its overnight call-rate target at 0.1%. The BoJ also offered an upbeat outlook on the nation's overall economy, saying that financial conditions continue to show signs of improvement, exports and production continue to increase, and the decline in
corporate-capital outlays appears to be ending.

NIFTY resistance at 5050

Nifty finally could not sustain above 5050 despite several attempts by the bulls.  The bears were successful in
dragging it below 5000. The fall signals that the pullback of the fall is almost over.
This will be confirmed once we get a weekly negative close.

However, on the lower side 16370 on Sensex and 4860 on Nifty are crucial supports.

NIFTY falls below 5000 mark.

The SENSEX and NIFTY hit day's low in afternoon trade on weak European cues.
Index heavyweight Reliance Industries edged lower.
The Sensex fell below 17,000 mark after regaining that level in opening trade.

The Nifty fell below 5000 mark. FMCG, power, banking, realty and IT stocks declined.

Intraday volatility was high.  Equities may remain volatile over the next few days as traders rollover positions in the derivative segment from November 2009 series to December 2009 series ahead of the expiry.

BE CAUTIOUS!!! Do not buy at these levels until an uptrend is seen.

Support and Resistence levels for NIFTY and SENSEX

The Nifty could test the 5100-5150 range on the up side, while on the down side it could find support at 5000 and 4920. 

The Sensex is likely to get support at 16600 and may face resistance at 17300.

Buy rating for Jindal Steel and Power

Jindal Steel and Power (JSP) is India's largest coal-based sponge iron producer and is fully integrated from iron ore and non coking coal mines to steel production. Steel capacity is 3mtpa. JSP's 340MW captive power plant feeds on recovery of waste gases and coal washery rejects. JSP has set up a 1,000MW merchant power plant under a wholly owned subsidiary. The company has rich coal resources in India and has interests in iron ore, oil & gas and coal assets in Bolivia, Georgia, and Africa.

• 1,000MW merchant power plant already set up has very strong cash flows due to cost leadership and very lucrative power rates due to the demand and supply gap in India.
  
• The total thermal power capacity will rise from 1,340MW presently to 6,000MW in 4-5 years.
• JSPL has firmed up plans to set up a 1,000MW thermal power plant in Jharkhand.

Year on Year Growth in specific Cement companies

In October 2009, all-India cement dispatches (including ACC and Ambuja) reported YoY growth of 7.3% YoY. YoY growth has been moderate primarily on account of a slowdown in construction activates during the festival season.

Major players reported impressive growth-
Dalmia Cement 49.5%,
Jaypee 35.2%, 
India Cement 34.5% ,
and Shree Cement  12.3%

Outlook for Cement sector

Infrastructure spending undertaken by the government prior to elections and demand from rural and semi-urban housing mainly drove the strong YoY growth in cement dispatches. The poor monsoon has increased the uncertainty of cement demand in the near future. The uncertainty has further increased on account of growth
driven by rural spending, which is heavily dependent on monsoons.

Above 5050 the gates are open for the Nifty to touch the 5150 level!

The Nifty is managing to trade above 5050, which is a positive sign in the short term as the same was a major
hurdle. Above 5050 the gates are open for the Nifty to touch the 5150 level.
Now, on the lower side 5030 and 4940 remains the near-term support levels.

Foreign capital into India

Finance Minister Pranab Mukherjee said on Wednesday the country is monitoring foreign capital inflows and the current higher inflows are not a matter of concern.

Indian stocks have risen sharply this year (since March) on robust inflow from foreign funds.

Which sectors would perform the best in 2010?

The trades that I would focus on are really related to what happens to the domestic economy. Industrials, financials and domestic consumption stories are the ones that I think that will probably do the best.

Should the markets be worried with the exit policy?

Some analysts that an exit by the central bank, which in some way has already started by the October policy and will only accelerate from hereon, will reaffirm the growth environment that Indian equities are dealing with and therefore cause markets to actually do better.

If we have a look back at 2004-05. That was the period when the Reserve Bank of India(RBI) had started tightening and equities actually did quite well in that period because it just reconfirmed that we were in an accelerating growth environment.

Sectors with negative outlook

Reality and Telecom sectors will continue to be under pressure and can see their previous lows.

The story in telecom sector is over, due to intense competition by the new players. We have already seen around 80% penetration into the market and the scope for new connections etc is very limited. The only way which remains is to snatch each others customers.

Auto pack the strongest!

Auto pack has emerged as the strongest. It was the only sector which didn't need to raise capital in this downturn.
Autos will see an incremental growth from here on. Stocks to consider are Hero Honda, M&M, Maruti Suzuki, Bajaj Auto.

NIFTY above 5050

The Nifty opened in green with support from positive global cues. The Nifty has surpassed the 5050 level that was quite important. At levels above 5050 gates are open for the Nifty to gain more strength and move higher to the previous high level of 5150.
On the downside 4940 crucial support level.

Nifty has made triple top

Nifty has made triple top above 5000, so going forward it becomes important for Nifty to surpass it to gain more strength failing which open gates for lower levels. So, above are the levels which remain key as breach of any will lead to major move.

See 10-20% rally in markets from current levels

There is a good chance that we can trade higher in a couple of months. So it could be between 10-20%, that might put a top from here. Could be more, could be less but it'll be meaningful. It’ll be meaningful enough to warrant most people's involvement.

Sunset in USA!

India ranks 2nd amongst the countries with number of billionaires per trillion dollars of gross domestic product (GDP), Russia being 1st.

So can we say that the sun is finally setting in USA!

Are foreign investors more confident on India than domestic investors?

In the first quarter of the current financial year, foreign institutional investors increased their shareholding in nearly all the listed companies of the two Ambani groups, while individual domestic investors cut down their exposure to these companies during the same period.

These companies include Reliance Industries and Reliance Petroleum Ltd from the Mukesh Ambani group as also Reliance Capital, Reliance Communications, Reliance Infra and Reliance Natural Resources Ltd (RNRL) from the Anil Ambani group.

Is NIFTY headed towards 4600?

It looks like before expiry nifty should touch the 4600 levels, following which it should consolidate or slowly drift down to the 4400 levels before another breakout on the upside. It would be nice if nifty consolidates for sometime here and the small and midcap play catch up for a broader participation in the market.

Does emerging market outperformance depend on the falling dollar?

The fall in US dollar is something that goes hand in hand with an improvement in confidence.

Usually what we have been seeing for the last year or so was that whenever there was concern about global outlook then US dollar goes up in value. And when confidence builds regarding the global economy, demand for US dollar goes down and the US dollar falls.

That in turn also helps commodity prices such as the oil price and other commodities which in turn is the positive for emerging markets.

So the renewed upswing in share markets and the renewed downswing in the US dollar and likewise the renewed upswing in commodity prices they all go hand in hand. They are just all indicators, of a return to investor confidence.

India or China? Whats the preferred place for investment with investors.

Between China and India, the big difference is that China’s growth is basically being bought by the government through their tremendous fiscal stimulus. So, China is indeed growing faster than India but it is basically fake growth.
Whereas, in India, because you don’t have the same kind of tremendous surpluses, you haven’t stimulated the economy nearly as much and your growth is genuine.

Montek Singh Ahluwalia defends the budget

Deputy Commissioner of the Planning Commision, defending the Union Budget said that investors should not judge the Budget by what was said in the speech as the high fiscal deficit this year was justified. He said that it is impossible for the government to cut tax and reduce deficit at same time.

It clearly said that we are going for growth, getting back to a high growth path is our top priority, that we are in favour of inclusive growth. It’s the private investment that is going to drive the growth process. It said things like we need to do a lot in social sectors and infrastructure and I think it laid out, in my view, a macro economic framework which makes a difficult balancing act between trying to give stimulus on one hand and maintaining a reasonable fiscal deficit.

Can a good monsoon affect your investments?

The "monsoon effect" does have an impact on demand for fertilisers and tractors, and to a lesser extent, two-wheelers and consumer durables. But sustained trends in monsoon performance appear to be more important than above- or below-normal rains in a single year. Two consecutive years of bountiful or deficient rain, invariably show up in the sales numbers for fertilisers and tractors. Monsoons also appear to have a strong delayed effect on two-wheeler sales, usually with a lag of one year.Even in monsoon-dependent industries such as fertilisers, pesticides or tractors, investors should pay attention to company-specific factors such as target markets, product mix and dependence on domestic markets, for these could reduce the sensitivity of the financials to the `monsoon factor'.

The monsoon affects the lives and livelihoods of Indians in many ways. It involves not only the economy but also the socio-cultural and political aspects. Two important sectors in particular—business and farming—eagerly await a good monsoon. Farmers worry about crop production and the emanating income. Businesses wait for farmers’ income, aiming to sell more manufactured goods to them. A bad monsoon is a setback for both—poor income for farmers and less demand for manufactured goods.

In recent years, India has developed ample economic strength to endure a bad monsoon. Agricultural, industrial and economic productivity is dependent on the monsoon. A slowdown in agricultural output will have a cascading effect on rural disposable incomes and the corporate targeted markets.

Two-wheeler sales of companies like Hero Honda, Bajaj Auto and TVS who have offerings in the rural segment, see optimism if the monsoons are normal. Similarly, surplus inventory and poor sales drag tractor makers if there is a poor monsoon. Companies like HLL and Nirma also have a large rural presence. Forecast about the timely arrival and even distribution of the rains directly promotes assurance of high growth. Thus, stock markets closely watch the monsoon pattern, as it has a direct impact on automobile, power, cement, steel, and infrastructure industries. It can mean a huge fortune, or a big loss to stockholders, notwithstanding the mood swings...among the people associated with good/poor harvests. Drought conditions are likely to reduce hydro-power generation, while the demand for power is likely to go up, aggravating power shortages.

Years with below-normal rainfall have been significant contributors to the economic crisis during those periods. Unemployment increases, especially in rural areas. Agricultural prices will rise, pulling up the inflation rate. One can expect fiscal deficit to increase, tax revenues to fall, and expenditures to rise. Going by past experiences, expenditure on education, health and social welfare would be cut. Finally, the burden of drought relief will fall on the government.

The nature of the relationship between agriculture and consumer demand has also changed. Historically, poor monsoons depressed growth in the agricultural sector only. Now, the rural sector is the economy’s driving force.

The demand for consumer durables and non-durables is coming from rich agricultural regions and the urban centres. Both are getting saturated. The other is the (potential) demand from poor agricultural regions which is highly dependent on the monsoons.

Share Buyback by Companies

Buybacks are suppose to enhance the shareholder value by decreasing the equity base. Such reduction boosts the return on equity and the price-to-earning ratio.

Share buyback refers to buying back its own shares by a company. In India comapnies can buyback their shares using the accumulated reserves they have.

Buybacks can be either (1) Tender offer or (2) Open market offer.
In tender offers the company commits itself to buyback fixed number of shares , it can be at a fixed price or auction based.
Auction based can again be either a book-building process or a reverse book-building process. In a book building process the process starts from the highest bidder. In the reverse book building it starts from the lowest bidder. In both the cases the cut-off point is where the quota of the shares to be bought has exausted.

Under Open market buybacks the company announces a "maximum price" limit for re-purchasing of its shares. It has no commitment. Hence at what price, date, and quantity of shares will be bought is at company's discretion.

Can the other states do the Gujarat way?

In one of Arun Shourie's interview he tells us the secret behind the massive industrial growth in Gujarat.
Under Narendra Modi's rule - as a succesful experiment - they do all the work at the site, they prepare the site, do all the ground work, obtain all the clearances on the project and then auction the project.

I wonder why the Government can't make it a national approach for rapid industrial growth; instead of leaving everthing to the individual setting up the industry. A lot of projects get delay because of the individual 's character seeking the clearance for setting up the industry.

Banking sector looking strong!

Banking looks extremely solid on the charts. While the market has corrected in the last two weeks, if you look at the banking stocks or banking index, they have been sideways - which tells you that there is accumulation taking place in the banking space.
There is a strong possibility for the stocks in this sector to move up substantially in the coming months.

Railway Budget on 3rd July 2009

With the Rail budget due on the 3rd July - 10 days to go - the rail stocks have already started buzzing!
Rail stocks like "Kalindee Rail" is already up 10% in a single trading session. Titagarh Wagons is up 5% in a single trading session.

Could this mean that with lot of reforms expected the Infra stocks will buzz before the budget on 6th July?

To what levels can the NIFTY drop before the budget?

Markets are currently in a short trading range of 4200 to 4450. A strong support for the NIFTY is the 4,000 and 4,100 levels.
The 4000 level on the NIFTY is a psychological number and the breakaway gap which was seen post-elections.

In the event 4200 breaks, a strong support should be seen at 4000 level.

Should you look at "Cash Flow" statement before investing in a company?

We all look at the Profit & Loss statement and the Balance sheet of a company; but have we wondered how "Cash Flow" statement can be important?

What is a Cash Flow Statement?
It is one of the quarterly financial reports any public ltd company is required to disclose to the public. The document provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investments, as well as all cash outflows that pay for business activities and investments during a given quarter.

Why is Cash Flow needed? (Importance of Cash Flow statement)
Because public companies tend to use accrual accounting, the income statements they release each quarter may not necessarily reflect changes in their cash positions. For example, if a company lands a major contract, this contract would be recognized as revenue (and therefore income), but the company may not yet actually receive the cash from the contract until a later date. While the company may be earning a profit in the eyes of accountants, the company may, during the quarter, actually end up with less cash than when it started the quarter. Even profitable companies can fail to adequately manage their cash flow, which is why the cash flow statement is important: it helps investors see if a company is having trouble with cash.

Is deflation a concern for India?

June reported a deflation or an inflation at -1.6%. Its the first time it turned negative since 1978. Is it a concern for the Indian economy?

India does not suffer from any demand constraint so there should be no concern about deflation.

Firstly, there are number of variables for setting up policies with respect to inflation - WPI (wholesale price inxed), CPI (consumer price index), GDP deflator, inflation expectations, seasonally adjusted inflation trends.

Even as WPI is negative there are still many primary articles, food articles where inflation is still significant. Oil prices would be firming up as well.

Does falling inflation means falling prices?

Since last year, inflation has been making headlines sometimes for breaching a high of 12%, hitting new lows or becoming zero. The common misconception during this period was that when inflation falls, prices would fall. That however, is not true. Falling inflation rates doesn't mean falling of prices, it only implies that the rate at which the prices of goods are growing is low.


So when do prices really fall? The answer is when the inflation turns negative or a deflationatory situation. Inflation for the first time turned negative touching -1.6%. What this means is that prices in this week have fallen by 1.6% as compared to the same time last year.

Inflation is the rate of change in prices. So if the inflation is 10%, it mean prices are growing at 10%. If the inflation drops to 2%, it means prices are increasing at 2% instead of 10%.

When the inflation turns negative, you can see actual fall in prices. So, now that inflation has become negative, you will see the actual fall in prices.

Will Sensex touch 19500 or 21000 after Budget on july 3rd?

History indicates sensex posts negative returns for the one month after Budget. could it be different this time after July 6?

Foreign institutional investors (FIIs), insurance companies and brokerage companies expect the Finance to deliver a reform-oriented budget that will incorporate tax cuts, fiscal consolidation, a divestment programme and infrastructure spending. In that bullish scenario , the market may repeat the 1992 performance when sensex vaulted 34% in one month post-budget ...

“This budget in many ways will be a landmark budget. We are likely to see a judicious mix of developmental initiatives as well as economic reforms that should provide the right impetus to the economy. Stability of government and a developmental agenda will fuel further government spending and this will fire up another engine of GDP growth".

FIIs also seem bullish. “We have to make an assumption ahead of the Budget as we did with the election result. Therefore, we expect the finance minister to deliver a solid reformoriented budget. The election results almost immediately improved the outlook for capital flows".

Govt considers divesting 10% in BHEL

Will BHEL surge up with the disinvestment program?

Vilasrao Deshmukh, Minister for Heavy Industries, today presented the 100-day agenda for his ministry. Besides other things, he hinted at disinvestment in various public sector undertakings. He also expressed that the ministry was considering disinvesting up to 10% in BHEL.

The minister’s talk on disinvestment was a stand out feature. He expressed that the ministry was considering disinvesting upto 10% in BHEL. He also said that BHEL was in the process of signing a memorandum of understanding (MoU) with the Madhya Pradesh government for a 1,600 mw power unit.

Sebi scraps entry load for MFs

Will it attract more retail investors to the market?




Mutual fund investors have a reason to cheer. There will be no entry load on any mutual fund schemes from now on. Distributors will now have to disclose commission for schemes. In a landmark move, mutual fund investors will now decide on the commission payable to distributors.