Guide to sound financial planning

GREED & fear - Talking points

2009-12-06T10:49:00.000-08:00

A further melt up remains the most likely end to 2009. The
equity markets’ resilience has been further demonstrated over the past
week with the mini panic over Dubai. The whole episode serves as a further
reminder of how investors are prone to panic when debts they presume are
government guaranteed are in fact not so. There is certainly no reason to
assume that Dubai World is government guaranteed.

· If the credit multiplier does pick up in America, then the trade
in Asia becomes to buy Asian exporters and in particular Japanese
exporters given that a healthy US economy means a fundamentally stronger
US dollar since the foreign exchange market will be quick to discount
higher US interest rates. Still GREED & fear’s base case remains to wait
for hard evidence that releveraging is occurring before assuming it will
happen and adjusting portfolios accordingly.

· It is certainly wrong to assume that all of the upside has been
discounted for Asia and emerging markets, however consensus has become the
view that Asia and emerging markets are the best place to be. Even after
the remarkable performance seen this year, most emerging markets remain
well below their pre financial crisis highs.

· GREED & fear’s view remains that emerging markets will surpass
their pre-crisis dollar highs sooner or later. But the guess is that one
big correction lies between then and now, and during that correction the
US dollar will rally on the deleveraging trade and the oil-led commodity
complex will correct.

· The best stress test for any potential Asian resilience remains
a S&P500 correction, in terms of how Asia performs in any such correction.
It remains much more likely in the short term that the S&P500 will correct
because of monetary tightening concerns than because of concerns about a
“liquidity trap”. A further spike in oil remains to GREED & fear the most
plausible near term catalyst for a correction.

· The intensifying deflationary pressures in Japan have now
finally triggered a reaction leading to this week’s emergency
“unscheduled” Bank of Japan monetary policy meeting. But the BoJ again
managed to disappoint expectations when the market probably wanted to see
a big increase announced in quantitative easing.

· What the BoJ really needs to do is to convince investors that
the yen should once again become the funding currency of choice for carry
traders and not the US dollar. For a weaker yen remains the most effective
way of combating the intensifying deflationary pressures quickly.
Unfortunately, the BoJ does not have the necessary skill set to achieve
this which is why the best hope for the Japanese stock market is that
monetary policy gets traction in America and US dollar short term interest
rates normalise.

· GREED & fear remains of the view that investors should
overweight both Chinese banks and property stocks. The bounce back in
China bank stocks this week after last week’s capital raising scare is a
positive. As regards property, real interest rates should decline next
year in China since the pick up in inflation is likely to be greater than
the pick up in nominal interest rates.

· It is most unlikely that the PRC will tighten aggressively
towards the property sector given that a new land development cycle is one
important way the Chinese government hopes to meet its 8% plus growth
target next year without too great a reliance on SOE fixed asset
investment.

· The obviously most vulnerable area where similar debt concerns
like Dubai could suddenly shock markets remains the fringe parts of
Europe. The PIIGS spread has begun rising again in recent weeks, while the
CDS spreads on the weak underbelly of Euroland have also been rising again
with Greece leading the march upwards.

· Fortress Euroland has so far withstood the pressures of last
year’s global financial crisis. But in GREED & fear’s view it is premature
to declare victory. The Baltic States remain a high stress zone going
through dramatic GDP contractions. While as with Abu Dhabi, it remains
unclear if Germany is really willing to bail out the PIIGS 100 percents on
the dollar if government debt concerns come to a head.

· The euro is now supremely overvalued to the benefit of Asian
exporters to the Euroland region. Clearly, the euro can get more
overvalued so long as the rally in risk assets continues funded by the US
dollar carry trade. That means mounting pressure which Euroland can do
little about given its complete lack of credibility at the political
level.

· With the Copenhagen climate summit pending, if Obama wants to
seize the initiative on the economy and create an unnecessary capex cycle,
he needs to demand that corporate America becomes carbon compliant!

CLSA REPORT- copied from clsa report....content is owned by CLSA Securities

Sanity returns on Dalal street - not quite the same for the bears..:P

2009-11-30T11:46:00.000-08:00

what a day it was for the markets with 17000 being breached convincingly but the bears clawing back at the end with some profit booking to end the day just short of the landmark figure. This rally is clearly driven by liquidity chasing quality assets and better than expected performance of the economy as a whole. Exports and agriculture though remain a concern and the appreciation of the rupee hasnt helped the IT bunch either. Dubai crisis came and went in oblivion without anyone hurting anyone touchwood ! traders cut their positions short but the positive momentum driven by high volumes made them reenter at " fair valuations" if we see the growth trajectory of most sensex companies.

Some pundits are giving the recommendations of "buying on dips" without realizing that dips cant defined and support levels are a mere numerical figure in the current volatile trade. We suggest a defiant strategy of buying at current levels and holding on to positions till september 2010 for an annual return of 75
% with marginal risk.

here for the picks of the day -

1) madhucon projects - long term pick
2) tfci - tgt 26
3) ifci - tgt- 56.50
4) dhanalaxmi bank - long term pick
5) BF utilities - tgt 1550 - multibagger pick
6) tanla solutions
7) prakash industries - tgt 185 ( short term call)

disclaimer - i personally hold all except madhucon , dhanalaxmi and tanla solutions

what a cracker of a day for the markets....

2009-11-23T10:35:00.000-08:00

today was a remarkable day for the traders as well as the investors as leading names lead the rally and every dip was seen as an entry point both by the domestic as well as institutional investors. The star of the day has to be reliance industries whose GDR doubled at the LSE and was up 3% on the sensex by the end of the trading session. Banks , autos , financials all participated in the liquidity and positive momentum rally taking cues from the US and asian markets.
commodities and PSU'S didnt drag either both posting handsome gains. In commodities space GOLD was again the sparkling spor with its futures showing no signs of slowing down

Now...the tips for tomorrow....

buy calls...

1) pratibha industries
2) tanla solutions
3) bank of maharashtra
4) union bank/corporation bank

we maintain underperform on telcom and media

UPGRADE RIL TO OVERWEIGHT- BUY WITH TARGET OF 2800

2009-11-23T02:00:00.001-08:00

2009-11-22T11:19:00.001-08:00

2009-11-22T11:17:00.001-08:00

FII'S being net sellers in last two trading sessions

2009-11-22T11:05:00.000-08:00

The technical indicators of the BSE Sensex index chart were looking
bullish last week, but the slowing upward momentum near the 17000
level and lower volume on Fri, Nov 13 '09 were concerns that haven't
been dissipated.

The BSE Sensex spent the week playing hide and seek with the 17000
level, finishing the first two days above it, the next two days below
and then, with a final surge on short-covering on Fri, Nov 20 '09,
ended on 17022 - 173 points (1%) higher for the week. Interestingly,
FIIs were net sellers on Friday.

FII's have been short for 2 days but in the long run we have to remember that they are bullish on india . Its a question of valuations now-how much to give seeing the growth prospective of the company . Also they have been increasing their stake in some of the companies they feel would be leaders of tomorrow. Anant raj industries , amara raja batteries , lakshmi energy , modern dairies are such examples.

short telecom stocks tomorrow....:)

Positive on power, steel on backward integration: Kotak

2009-11-20T10:35:00.001-08:00

what a remarkable come back after a volatile session....

2009-11-20T10:10:00.000-08:00

markets were down and out 200 odd points then suddenly gained a positive momentum after montek singh's annoucement of healthy capital inflows in the country this year. As i had suggested in my yesterday's post , banks and oil stocks did well , so did the capital goods and power sectors...power wasnt bad either.

yesterday's recommendations -
lakshmi energy -up 6 %
Sun pharma up - 3%
mercator lines up - 4%
icici bank up -2%
dishman pharma - went up 3.5 %..then profit booking led to 3 % down closing
sulzer was up 5 % during the day but ended 1.5 % up
and other calls had similar results...

tata motors has given a clean break out frm the 630 level with most FII'S giving it a "over weight" rating. I give it a "buy" with a target of 725

keep an eye on GVK , powergrid and PSU banking space.

The Hare (investor) and the Tortoise (investor)

2009-11-19T10:22:00.000-08:00

The fable about the race between the hare and the tortoise is one of
the better known amongst Aesop's fables. These fables not only provide
entertainment to young children, but usually end with a moral that has
relevance for adults.

But does the fable have any relevance to the world of investments? To
find out, let me recap the story:-

The hare once ridiculed the tortoise for its slow pace. Upset, and
knowing the frivolous nature of the hare, the tortoise challenged the
hare to a race. The hare promptly accepted the challenge.

On the appointed day, the race began and the hare was off and running.
As it came near the finishing point, it decided to rest a bit and soon
fell fast asleep. The tortoise, way behind, was slowly but surely
plodding along. It didn't stop even once, and kept right on going with
its measured steps till it got near the finishing point. The other
animals that had gathered to witness this incongruous race, started to
cheer.

The noise woke up the hare. It realised that the tortoise was about to
reach the finishing point, and made a mad dash to try and win the
race. But it was too late. The tortoise won. The moral of the fable?
Slow and steady wins the race.

Is investing a race? Yes, it is. The race is against time, which
doesn't stand still. Remember the saying, time is money? The more time
you can spend in making money, saving money and investing it
appropriately, the more money you will have for your enjoyment and old
age.

When we are young, we tend to be frivolous about our money. And our
time. We spend both on useless pursuits - haring off after a inside
tip or, a sure shot winner or, a great swing trade opportunity. We end
up losing money and wasting time.

In one investing lifetime, only a handful of bull and bear markets can
be fully utilised for generating large profits. To be able to do that,
you need to do your homework, develop proper strategies, and have the
discipline to stick to stop-losses. Otherwise, you will choose exactly
the wrong times to enter or exit the market.

As we grow older, we tend to value our time and money a lot more - may
be because we do not have enough left of either! So, to be successful
as an investor, don't be like the hare. Don't run after get-rich-quick
or multi-bagger schemes. One fine day, you will realise that the slow
and steady tortoise-like investing can amass a lot of wealth through
sheer discipline and the ability to stick to a plan....

nice way to sign out....

Mild correction before a breakout...

2009-11-19T09:58:00.000-08:00

sensex broke the 6 days upward trend to close at 16785 with nifty nose diving 60 points odd to 4989 led by real estate, banking and capital goods stocks. i expect the market to bounce back 35 points on the nifty tomorrow led by metals , FMCG and pharma stocks by the leaders will have to be the big boys like the ongc's and reliance who have a significant weightage on the indices.

some stocks to look forward to tomorrow are suzlon because of the hansen stake sale buzz , sun pharma because of the drug approval in the US , mercator lines , ICICI Bank , dishman pharma.

some of the gems i would advise my readers would be " sulzer " , sunil hitech , facor alloys , REC , lakshmi energy , walchandnagar industries and TV18. Keep coming back for more updates and brokerage reports.