panch-tattva talk…the underlying wisdom

Friends,

 

I invite you to go throuh the following post dtd October 16, 2006. The sensex ruled at 12736 pts then and it is now hovering around 14500 pts at a PE of around 18. Since October 2006 a lot has happened . The corporates did well and the indices went to touch dizzy hights and then retreated equally forcefully during the period under reference. It is said that the course of indicesis unpredictable but what you would read below would certainly convince you hat the basics cannot be negated in longer time periods.

 

I am inclined togive you some inkling in to future possibilities in the markets. At present the PE for the market as a whole is quite OK for the entry to be made. Equally true is the possibility of some bad times faced by the corporates and earnings may dwindle but since there already has been an elapse of considerable period of time since October 2006 and the PE level is lower now than it was in October 2006 , the fall in earnings , if any, would not let the share prices go down much. There would be a higher discounting of earnings instead. This should keep the worry about the meling of the markets in view of some dent in earnings at bay. On the contrary , should the environment improve in terms of larger capitakl inflows and lowering of interest rates along with the loweing of CRR ( this is expected too upon the inflation numbers coming down ) , there would be an forceful recovery which may terminate only after it has breached earlier tops. It is on this logic that I recommend staying invested , to an extent of one confort.

 

Now, please read the post referred above:

‘ Monday, October 16, 2006

Market Matrix: The Sensex Possibilities – 16 Oct 2006

By krsna Khandelwal – A Stock Market Vedic Theory proponent
Gentlemen,
When the Sensex touched 12736 on Friday the 13 Oct 06 there was lukewarm response from the side of public at large.The reason lay in the fact that only select stocks had gone up and the rest were resting still. The euphoric conditions without general participation are viewed with suspicion. Coupled with it when some reports are seen which give only half baked analysis,I rather surprise at the state of affairs in financial reporting. The following are the excerpts from an article that appeared in the TOI(Ahmedabad Edition) on Saturday the 14 Oct 06:
‘Sensex touched all time high 12736 points on the 13 Oct.This discounts PE for Sensex at 22.09.On May 10th 06 Sensex at 12612 was at 22.15 PE.ENAM expects the 06-07 earning to go up by 32%.With improvement the EPS for Sensex as a whole, would work out to 672/- and the discounting for Sensex would come down to 19 PE. ENAM further expects the 07-08 earnings growth @17% , after which the discounting would further come down to 16 PE as then the EPS would be 785/-.’
The writer Mr.Prabhakar Sinha has further contended that present high discounting is in expectation of high rate of growth.As earnings would be bigger next year the discounting ratio for Sensex will come down naturally.
I now request my readers to further understand the whole thing given above.While one may not entirely dispute that the EPS for the Sensex would go up in the current year and the next and it may actually touch 785/- for the sensex. Resultingly the sensex PE would be down to 16. Now should it be any comfort going forward at this level of discounting? Before answering this question we have to also raise the bar for Sensex. Over two year holding period the cost of carry at just a moderate 10% p.a. would actually be taking the real level of Sensex to 15400 points.Therefore the EPS of 785/-,as expected, would be discounting the Sensex at over 19 PE multiple. So, in practical terms no ground would be gained and risk would remain glaring in the eye of investors. This simple but useful exercise is enough to put off the serious and risk averse investor from making foray in to market at this high level generally. However, the specific stocks may be selected and bought. They say in the game of Bridge that whenever in doubt play trumps, I say that whenever in doubt in the stock markets check ‘panch-tattva’ points. ‘

 

I am contactable at +919724313034/+919376168780.

HariOm

krsnaKhandelwal

panch-tattva/update…mcdowell-n,kotakbank

 

MCDOWELL-N @1358 (290808) gets 839 panch-tattva points and sell it off and buy on some correction.

 

KOTAKBANK @605 (290808) gets 765 panch-tattva points and should be soll off and bought on corrrection.

panch-tattva/update…cumminsind,lupin

 

CUMMINSIND @318 (290808) gets 894 panch-tattva points and is to be sold on surges and bought on declines.

 

LUPIN @731 (290808) gets 1009 panch-tattva points and is rightly priced at present and you may book profits on decent advance from here and next wait for the advise after next result.

panch-tattva talk…promoters encashing riches

Friends,

The Tatas have are going to reduce the size of issue for funding the Tata Motors future projects as they suspect that the sluggish market may not respond rightly. They would be footing part of the bill themselves and may sell some of their stake held in TCS which is still substantial. TCS is a poor performer in market for this reason while it is in fine fettle. You may consider buying in to this scrip on down days. You may recall that at the high level of TCS , I had warned of this very possibility and also around the time of Tatas take over of CORUS.

Now , there is one more group which is trying to fund the future need for funds by letting the promoter stake diluted. The DLF would be issueing securities worth about Rs ten thousand crores in form of ADRs/GDRs and when this excercise is over DLF would have become good bet for investment and is so right now if bought on down days. It seems DLF is going to be a substantial company in terms of size of operation and a world level player.

Both above cases are good examples of Indian markets and Indians companies maturing in to securing world class status.

HariOm,
KrsnaKhandelwal

panch-tattva talk…fiscal deficit and inflation

Friends,

Control of fiscal deficit within 3 p.c. is the challenge thrown up by the Fiscal Responsibility and Budget Management Act and the govt would be able to meet it inspite of its purse-opening policies for the farmers and for the govt employees , thanks to inflation. The direct collection would grow by 46 p.c. and there would be flows from auction of G3 spectrum,transfer of surplus generated by RBI to govt (Rs15K crs against Rs11K crs last year) and also out of PSU stake sales.

TATA’s Singur venture is under threat from Mamata’s agitating stance and she is refusing to see reason while Buddhadev has declared that the project would remain in tact , come what may. He has tried to have talks with Mamata to resolve the issue but polititians are politians, there first priority is scoring political points. Indian industrial progress has to go on in fits and starts. What is , however encouraging is the extention of invitation to Tatas by half a dozen Chief Ministers.

The World Bank has endorsed the Indian achievement of bringing the people living below one dollar a day down from 33.3 p.c. in 1990 to 24.3 p.c. in 2005. In all likelyhood the position in 2008 is much improved and the future years may well prove to be doing away with poverty almost entirely , thanks to the exposure of people living in interiors through tele-communication and extensive road network. The govt may do or not do other things , the poverty alleviation will be done on back of technology.

Asian markets have shown improvement and this should reflect on Indian bourses when they open for trading in 10 minitues.

HariOm,
KrsnaKhandelwal

panch-tattva/update…apollotyre,iob

 

APOLLOTYRE @40 (26082008) gets 1034 panch-tattva points and you may buy this stock for medium term. Also please book profits partly along the way.

 

IOB @89 (26082008) gets 1135 panch-tattva points and this may be bought for medium term and reviewed after the next result.

panch-tattva talk…low PEs

Friends,

The recent bearish times have resulted in 65 companies trading at lower than 10 PE out of universe of BS(Business Standard)200 scrips which are also covered under F and O section of NSE for trading. This nunber was just 24 in Jan08. The BS200 group now trades at 14.6 PE multiple against 25.5 PE multiple in Jan08. If PSUs are taken out the average PE would work out to 16.7 for the rest. The realty stocks have come down from 70 PE level to just 10 PE due to double effect of market sliding and the earnings going up.

Now, one can draw various conclusion from the very set of statistical numbers but I would say that the lower PEs and the good long term and medium term economic prospects make investing at present a risk free excercise. It is presumed by people in general that inflation has taken its toll in the markets. I see it differently ie if the inflation remains high for the coming year/years it will pave way for stronger market. To be specific Banking,Cemen,Steel,IT,Telecome and Realty are sectors with medium to long term promise. Those with iron will and strong guts should start accumulating stocks.

While I am writing this the Nifty shows 4300 level down 35 points over night loss.

HariOm,
KrsnaKhandelwal

panch-tattva/update

 

BOB @265 (250808) gets 1138 panch-tattva points and is good for purchase for long term.

 

JPASSOCIAT @159 (250808) gets 854 panch-tattva points and may be sold off and bought on declines.

panch-tattva/update…hdil,concor

HDIL @301 (210808) gets 1262 panch-tattva points and may be picked up for longterm.

 

CONCOR @868 (210808) gets 1083 panch-tattva points and may be picked up for medium term.

panch-tattva talk…efficient market

Friends,

The efficient market theory says that every thing knowable gets known to market and is reflected in price and this makes the markets efficient. This is true but with so much exception that it gives rise to ‘random walk theory’ which again has to be seen in a different light to make practical use. The developments take place everyday and the players translate them in to net change in price. Now the impediment is that timing and extent veries widely for the individuals/institutions and this makes the market seem to be walking randomly. This way the ‘random walk theory ‘ get credence and rightly gets it. Now how does one rationally find the holes to make profits around?

The answer is that you as a market palyer have to develop an eye to broadly judge the extent of ‘random walk’ away from the middle point in the upward or downward direction (the walks direction would always be away from the right point in either direction or converge to middle point). The second step would be to ensure that while you are going to take action in market nothing material has happened which afflicts the market since the time you concluded. So, the ‘efficient market’ always also allows itself to ‘randomly walk’ and let inefficiencies creep in to be taken advantage of. The charts will endorse it only.It is said that respose is positive and reaction is negative , keeping this in mind trade profitably , is my advice.

I advice you to go through the posts ‘panch-tattva talk…nifty rebound’ in Dec 07 and ‘panch-tattva talk…forget gold,buy stocks’ in Mar 08 which give a glimpse in to what could be concluded under the above logic and it has proved to be so right as to amaze me. Both these posts appeared under ‘top posts’ and I went through these and felt the need to draw your attention to these.

Now, the last economic news that is material is the adoption of 6th Pay Commission and the PM’s desire to even exceed the benefits recommended by Justice Srikrishna. This is going to balance out the monetary scarcity in market. This is also going to be good for stock markets as a large part of the arrears received by employees would find way in the equity investment and also a good part of it will get spent in aquisition of consumer durable. This is also a demonstration of power of the govt. in matter of distribution of income. Hasn’t the govt. gathered the distributed largess from other sections of society and handed to the one of its choice. Is there a formula in place to do so. There is in fact no formula in place and govt. ( rather the governing political group) only has to get pleased or find a benefit flowing to itself to act out redistribution. I simply fail to understand why the benefits were kept from flowing ordinerily in good time when the inflation was not at high point and why it has been felt necessry to do it when the inflation is running high even prompting govt to act non-judiciously in some ways. Anyway , ‘Kaliyug’ is not a time to suject ones soul to ethical interpretation of what goes on ordinerily or as a matter routine. Let it happen what is happening and respond in a way to have your advantage through the markets, it is quite ethical to do.

HariOm,
KrsnaKhandelwal