Indian Stocks – Bear’s arrival knocking on Dalal Street

The story of Indian stock market index in the past ten trading sessions is nothing but “hope” rapidly followed by shell” shock”. The breezy roller-coaster ride that we had expected turned in to a scary hurtles downward. Out performer has suddenly turned into an underperformer.

 The massive sell off that began on November 3 continues with high level of volatility. The markets witnessed its one of longest losing streak after May. The tumble was very severe and deep. Today National Stock Exchange’s Nifty ended at 4765.55, up 54.75 points or 1.16 per cent. The index bounced back from intra-day low of 4610.60 to touch a high of 4733.

 Punters, fund managers and individual investors ask to them whether the recent sell off here to stay. It seems that the Indian stock markets have seen the top and in search of a bottom at least for the time being.

“India looks especially vulnerable to the downside. This market has had a good run higher and now shows signs of momentum loss. With five waves completed at multiple degrees, it’s time to step off the bull train in India, if not time to outright explore bearish opportunities.” Now, the right-hand side of the graph shows the massive selling that has taken place in the Nifty.)Source: Elliott International-www.elliottwave.com)

 A very interesting analysis is presented here below:(Click the graph )

Are Global Stocks Commodities, Assets subject to Carry Trade Bubble?

The “mother of all carry trades” that Prof. Nouriel Roubini warned of recently is growing and threatening to cause a global implosion, the economist warned in a CNBC interview.

For the second time in as many weeks, Roubini cautioned that investors using cheap US dollars to embrace risk will quickly reverse course once the greenback strengthens.

Click CNBC Interview Discussing Carry Trades and Asset Bubbles by Nouriel Roubini 2009-11-04 12:09:53)Mother of all Carry Trades Faces an Inevitable Bust to get to know the ins and outs of What is carry trade bubble.

 Rogers, the investor who predicted the start of the commodities rally in 1999, said Nouriel Roubini is wrong about the threat of bubbles. However Rogers agreed with Roubini that the dollar’s decline was encouraging investors to buy more commodities and assets. The US currency has dropped 13% since the start of March against a trade-weighted basket of currencies. For full discussion on the subject click Roubini’s wrong on ‘bubbles’ in gold, emerging markets: Jim Rogers.

World’s top 10 Secretive Financial Centers-A Survey

Move over Switzerland. The tiny state of Delaware beats the Alpine country in a contest for the most secretive financial jurisdiction, a tax justice rights group said.

The ranking is based on a composite of total offshore activity and measures such as whether a jurisdiction obtains beneficial ownership information about companies and the degree of cooperation in turning over requested financial information.

The survey of laws, practices and size of inflows in 60 jurisdictions listed top 10 secretive financial centers in the world. They are as follows: Click here for more details- World’s top 10 secretive financial centers.(Source: Text: Reuters, Tax Justice Network- (This article appeared in Economic Times-Slide shows)

Global recovery liable to run out of steam: Soros expects a double dip

“I regret to tell you that the recovery is liable to run out of steam and may even be followed by a ‘double dip,’ although I am not sure whether it will occur in 2010 or 2011,” said Billionaire investor George Soros in his recently delivered lecture in Budapest .

He also further highlighted that world financial system needs to be reinvented to prevent a repeat of the crisis. Also underlined the need for a new Bretton Woods conference to revise the IMF’s methods of operation and consider new rules to control capital movements.

 Soros said the total freedom of financial capital to move around globally has proved to be a source of instability and needs to be curbed, along with the “dangerous imbalances” caused by the dollar’s use as the dominant international currency.

 ”The dollar no longer enjoys the trust and confidence it once did, yet no other currency is in a position to take its place,” Soros said in his lecture.

He said China was expected to maintain capital controls but will establish bilateral clearing accounts with some countries, like Brazil, denominated in yuans. “This will diminish the status of the dollar as the international currency without replacing it,” he said. Soros added that the US banking system has to earn its way out of a hole, while in commercial real estate and leverage buyouts, the “bloodletting is yet to come.”

In the context of recent high volatility witnessed in the movement of global stock prices Soros’ point of view suggests, are gloomy days once again ahead for the stocks,commodity and asset prices?

Check out the top 10 most prosperous nations

The 2009 Legatum Prosperity Index published and compiled by the Legatum Institute, an independent policy, advocacy and advisory organization, ranked 104 countries which are home to 90 percent of the world’s population.

“The Legatum Prosperity Index is the world’s only global assessment of wealth and wellbeing; unlike other studies that rank countries by actual levels of wealth, life satisfaction or development, the Prosperity Index produces rankings based upon the very foundations of prosperity – those factors that help drive economic growth and produce happy citizens over the long term”.

For those who value their freedom of expression as much as health, wealth, and prosperity, then Finland is the place to be, with an index ranking the Nordic nation the best in the world. For additional information visit http://www.prosperity.com/

Stock Markets and Investor’s return

According to a Credit Suisse report, if you buy after a 40 per cent drop in the market, the probability of making profits after three years is over 70 per cent. After five years, it goes up to over 80 per cent, against nearly 40 per cent if you buy after a long rally.

Historical evidences show that investors who enter the equity market at lower levels get a return of over 50 per cent within six months.

But investors who enter close on the heels of a 150 per cent rise in the market get a modest return after three-five years.

The Indian BSE Sensex and the Hang Seng have doubled, while other benchmark indices have appreciated by over 60 per cent from their 52-week lows.

The Indian BSE Sensex has appreciated by 102 per cent in six months from its low of 8,160 on March 9, 2009. So, the scope for any short-term upside is limited and one can only hope for long-term gains.

Are Indian Stocks Over-Valued with high P/E multiples?

Equities worldwide are over-valued with high P/E multiples. Indian stock market is not an exception. At 20.2 times, the bench mark BSE Sensex P/E ratio is higher than the 15-year average P/E of 15 times.

According to a Morgan Stanley analyst, for expected GDP growth of 5.8 per cent and 7.2 per cent for FY2010 and FY2011, respectively, an appropriate and stable ratio should be below 16.

At the current levels, MSCI AC Asia Pacific ex-Japan is trading at 15.3 times of the 12-month forward P/E, which is 76 per cent higher than the P/E of 8.7 times in November 2008.

Historically, the current ratio is above its long-term average since 1992. Over the past 18 years, the market has traded above this level only three times, all during the major bull runs of 1993 (P/E 17.3), 1999 (P/E 20.9) and 2007 (P/E 17.4).

NUMBERS AT A GLANCE
	Growth in NP* (%)		P/E ratio
	FY10E	FY11E	Current	FY10	FY11
Automobile	27.35	11.86	27.00	21.20	18.95
Banking	4.05	18.80	12.22	11.75	9.89
Capital Goods	35.82	24.33	33.80	24.89	20.02
Cement	8.86	-6.73	9.83	9.03	9.68
Construction	11.62	17.16	25.47	22.82	19.48
Finance	14.80	17.68	24.98	21.76	18.49
FMCG	14.78	15.48	27.72	24.15	20.91
IT-Software	0.27	11.71	19.99	19.94	17.85
Non-Ferrous Metals	12.79	35.89	16.63	14.75	10.85
Oil & gas	42.64	18.78	18.69	13.10	11.03
Pharmaceuticals	90.57	20.91	37.92	19.90	16.46
Power	10.47	13.01	24.08	21.80	19.29
Realty	-24.96	19.63	24.77	33.01	27.59
Steel	18.96	30.41	16.50	13.87	10.64
Telecom	16.77	16.11	17.08	14.63	12.60
Total *250companies)	19.14	19.11	19.50	16.37	13.74

The 250 sample companies representing 77 percent of market capitalization of BSE are trading at a P/E of 16.4 times of FY10 earnings and 13.74 times of FY11 earnings. Nevertheless, their current P/E of 19.5 times, based on the trailing 12-month earnings for June 2009, has been more than double from a P/E of only 8 times just six months ago. Hence, the current valuations are expensive.

Swelling India’s High Net worth Population

India’s high net worth individual (HNI) population shrank by 31.6 per cent to 84,000 in 2008, mainly due to a drop in the pace of economic growth and erosion in market capitalization, according to the Asia-Pacific Wealth Report released by Merrill Lynch Wealth Management and Cap Gemini.

In 2007, India had posted 22.7 per cent growth, the fastest in that year. According to the report, HNIs are those individuals who have investable assets of more than $1 million, excluding primary residence, collectibles, consumables, and consumer durables.

The financial crisis has made a dent in the wealth of HNIs in India. But the high pace of economic growth gives them a chance to increase wealth.

In fact, not only their ranks are expected to swell in the next 10 years but also that wealth was likely to extend beyond the metropolitan areas. “India currently has 80 million middle-class households and only 25 million reside in Tier-I cities like Mumbai and Delhi, while many others live in smaller cities and beyond.” There were already 51 districts that had twice the market potential of four metros combined, showing the potential for HNI wealth to be even more geographically dispersed in future, it added. (Source: BS 14/10/2009).

Indian Stock Index – Diwali Muhurat Day

News Headlines:Nifty hits 52-wk high as Samvat 2066 begins –Index Outlook: Market to hit the pause button- FIIs bring Rs 66k cr in Indian equities since last Diwali-Markets end in red-Sensex, Nifty up marginally-Sensex, Nifty notch up gains in early trade-Sensex doubles in -Samvat 2065-Sensex ends Samvat 2065 on a stellar note-Sensex ends up 140pts-

Trends in Last decade:

Date	Close	Gain/loss
Oct-26- 2000	3757.16	+013.55
Nov-14-2001	3113.04	+035.85
Nov-04-2002	2987.58	+037.00
Oct- 25-2003	4802.28	+044.91
Nov-12-2004	5964.01	+009.07
Nov-01-2005	7994.10	+101.78
Oct- 21-2006	12736.82	+027.42
Nov-09-2007	18907.60	-151.03
Oct -28-2008	9008.08	+498.52
Oct -17-2009	17326.01	+003.19

Indian Stocks- Samvat 2066-No Echo of the Past

New Trading year Samvat 2066 for Indian Stock markets began on 17^th October 2009.

 On Saturday the ‘Muhurat’ trading remained only a symbolic one.

 Nothing great took place. Trading got off to a tepid start and stocks failed to hold on to their initial gains; however there was a sense of optimism amongst investors and traders unlike in the previous year.

 The BSE Sensex, which hit a high of 21206.77 on January 10, 2008, nosedived 59.8 percent in nine months as panic stricken foreign investors pulled out a whopping $10.4 billion in fiscal 2009. It slumped to a 52-week low of 7697.39 points  last year. This year’s “Muhurat” trading on 17^th October the sensex ended at 17326.01 and the wide-based National Stock Exchange index Nifty at 5141.80.

 Stock market index is after all only an illustrative statistics and the interpretation is always critical and fluid. How many of my investor friends understand this logic? Many failed to think that such statistics are nothing but a mirage.  No Stock market statistics is an echo of the past, let alone the mirror of the future.

  However, this year’s Muhurat trading statistics do not justify the devils behind the global economic numbers. The small hope behind the numbers is nothing but reflective of the social mood of the economic shelter by Hedge Funds investments in Indian stocks in the background of weakening green backs. It looks that Exchange and interest rates are going to draw the future shape of the stock market map.