panch-tattva talk…the inevitable happened

Friends,

The markets in India closed higher with about 8 pc gains on back of positive global cues , Nifty closed at 2888 pts.

BoJ has reduced rates while Nikkei has suffered most in a month since its beginning, such has been the month of Oct 08.

The businesses are getting all sorts of concessions the world over. Presidential candidate McCain is in favour of lower capital gains tax and lower corporate tax. His argument is against taxing twice through capital gains and he thinks that businesses create jobs hence the corporate taxes should be lower. The corporate taxes in USA happen to be high now while these were lower in middle of last century , in comparison with other countries in world. In India the long term gains in equities are nil but corporate taxes should be lowered.

The new companies bill, in which J J Irani has had a role to play , has been tabled in parliament. The FDI in insurance sector stands increased to 49 pc now. The jet fuel duty has been withdrawn to help loss making aviation companies. The CRR amy be cut further as call rates are again very high. Things are moving apace and the market may gallop.

The Oct auto sales are very encouraging, the results in Oct 08 have maintained sales growth while profit growth is slightly poorer. Since it is growth still , the people may now commit funds to equities because the recession may not materialise in view of the steps taken by govts and particularly India.

The DOW has rebounded after visiting negative territory in today’s still continuing ssession. It is up 172 pts at this very moment. There was late recovery in European markets too. I think the bears have reason to be on back-foot. The cumulative effect of the steps taken will show itself every passing day.

Buffets word are proving to be prophetic again and I am not sorry for having echoed the same.

HariOm,
KrsnaKhandelwal

panch-tattva talk…is there need to protect markets from fall

Friends,

The beauty of the market in iis its being free. The stock markets are supposed to be left free and here the flow of information is also supposed to be unhindered and made available to all. There are still some impediments in the free flow of information due to some technical difficulties and some obstructions deliberately put in place by the interested.

What ever the case be the markets should be left without intervention but is there a need to control the markets when prices tend to hugely deviate from the seemingly normal price for the day!

In my openion the intervention by govt should never be by any such rule. There is ,however, an implied obligation on the part of govt to see that the market does not attack the price levels beyond the reasonable level in a short time. It is necessary from the point of view of not letting any body unduly suffer just because such market condition coincides with ones requirement of withdrawing cash. It is also necessary from the angle of not making the risk capital pooling to difficult or too costly. The participants would account for higher risk in the pricing if such times come about in markets or may come . This is a cost best saved by having some mechanism by which the absurd pricing on the up or down side is prevented. If an economy can reduce the risk element in risk capital due to abnormacies , it will be a great economic service to the nation at far lower cost than by any other means. I think these should be the only purposes and none else while the govt does something to stabilise the market. I repeat that intervention in free trading by rules will be negative.

How can it be done! In india it is very easy to do. The state owned banks should have some pocket where they have stocks and funds ready for use in terms of their resercher’s advice. The second is that RBI can have soverign fund allowed to be funded in times of such need by RBI’s large kitty at the shortest notice while its stocks related economic reserchers should be updating the applicable action plan on a regular basis.

There is a further need of having a board which may order entry into market when need arises. Top secrecy should be maintained about the intended size of fund deployed for the purpose . It should best be done by wide spead buying rather than in a concentrated fashion.

Another point that would save the markets is that there should be no funding by the banks for share purchase. The risk capital should be from out of only the owned funds and not borrowed funds. On private basis people may do whatever. In fact promoters also should not be funded on the strength of share holding in their own companies , neither the shares should be accepted as security for other advances. This will bring a balance and put a premium on the shares. The present day world crisis is due to faulty home-mortgages , what would have happened had there been large scale lending backed by stocks. Since there always is necessary liquidity available one should meet his short term need selling stocks and buying back when the funds are spare.

The leverage obtained in market in ‘F and O’ section is not based on financing by institutions and is mostly private arrangement through the mechanism and hence it is Okay. The lending and borrowing of shares for sale etc should also be restricted
to individuals and direct owners like corporates and not be done by institutions who are not direct owners of shares like MFs and other such entities.

In fact leverage is mostly a tool in the hands of organised cartels in markets who try and take advantage by manupulation. There scheming goes to the extent of either parishing themselves or parishing those on the other side.

The US Fed has reduced rate by 50 bps with assurance that more will be done if required. It was a unanimous decision.The US market has not reacted up as it was already a known thing. However, the Asian stocks have shown good jumps as every passing day the stability is returning.The interest rate cut is the best medicine for ailing stocks , it works at many levels about which I have explained earlier. With rate cut here , our economy can enter in fast lane overnight but the RBI always wants to be seen as an elephant taking turns slowly while if Indian economy has to be tiger like the RBI will behave in a tiger like fashion. I despise Reddy’s raising of CRR and had raised alarm then itself. If he had been slightly imaginative India would have maintained its edge on the world scene. The present chief should at least see the light of the day.

These outourings may seem scholarly but in fact are just for the purpose of giving back ground idea to the young.

HariOm,
KrsnaKhandelwal

panch-tattva talk…further rate cuts

Friends,

The Oct 08 series has closed today in a quiet manner but the losses seen by it are enormous . Market turnover is good for the day at Rs69000 cr. The loss in a single month have been between 20 to 70 pc even for the leading corporates some of which by the way posted the best ever quarterly profits.The Nifty and sensex lost 33 pc in Oct series.

Unitech has arranged to sell 60 pc stake in its wireless business arm to Telenor through further issue of capital for Rs 6120 crs and will see debt of Rs 1900 cr paid back by the subsidery.

US Fed is likely to cut rate by 50 bps and probably will follow up with another 50 bps later.

BoJ would consider cutting rate in its next friday meeting.

China has cut rates by 27 bps on both ie deposits and advances.

SBI says it is receiving Rs 1000 crs a day as deposits for last 10 days.

Auto loan growth is 6 pc against 12 pc last year.

The European markets are trading higher but DAX is an exception.

HariOm,
KrsnaKhandelwal

panch-tattva talk…would you believe

Friends,

The US markets were up last day by not less than 10pc. DOW is now back at over 9000 and Nasdaq at 1650. These seem to be very respectable figures.The Asian have a the second day follow up rise today. All markets have become very firm. The Diwali session last day was a rewarding one for those who relied on ‘panch-tattva’. I am lucky to have critics who rubbish what I say but they are people who put me on right course.I am pleased in no small measure about the correctness of my various writings. What may have come to you as surprise , was seen by me as writing on the wall. I pray to you that don’t ever listen to a view which can not be substantiate with numbers,history and logic and most of all it should not defy the theory of proportions.

That there was a calculated move by some is some thing sure and their campaign was responsible for the gyrations in the Indian markets specially.SEBI may cry foul after the horse has bolted but it was simply dicernible. If high and mighty are involved , it will just be that all is possible.

The ADRs have been up by more than 20 pc. Sensex and Nifty would create history today, I think so because it happens to be last day of settlement under ‘F and O’ section. Remember the line I gave you yesterday that the markets were wrong at 5500 Nifty in Oct 07 against right level of 4100 and also that markets are wronge at under 3000 while they should between 4100 to 4500.

Now , would you not like to be on the long side of market. Here I may give you a warning that please follow ‘panch-tattva’ recommendations for entry, exit and maintenance. In times when the moves are fast and unpreditable, those who follow ‘panch-tattva’ will not get into wrong situations. I may tell you again that its based on purely scientific study of every aspect governing the stock prices and economy.It has capacity to clearly see the manipulation in market.

‘Naya saal mubarak ho’.

HariOm,
KrsnaKhandelwal

panch-tattva/post result

BHARATFORG @95 gets 1046 panch-tattva points and may be bought for long term.

ADANIENT @299 (271008) gets 841 panch-tattva points and consider it after next qly.

KSOIL @39 (271008) gets 975 panch-tattva points and should be bought in few strokes , book partial profits on surges.

panch-tattva/post result

JBFIND @39 (271008) gets 690 panch-tattva points and is to be considered after next qly.

ARVIND @14 (271008) gets 927 panch-tattva points and buy this regularly and partially book profits on surges.

BANKBARODA @226 gets 1105 panch-tattva points and buy it for medium term.

APAR @88 (271008) gets 817 panch-tattva points and consider it after next qly.

BHUSHANSTL @542 (271008) gets 1201 panch-tattva points buy it but be careful with stop loss.

panch-tattva/post result

GSFC @70 (271008) gets 1085 panch-tattva points and should be bought in good measure for long term.

MRPL @33 gets 926 panch-tattva points and buy it in a restricted way.

GLENMARK @258 gets 998 panch-tattva points and buy this in a restricted way.

SUNPHARMA @1176 (271008) gets 1053 panch-tattva points and qualifies for investment.

THERMAX @276 gets 884 panch-tattva points is to be bought on declines.

panch-tattva/post result

SBIN @1052(271008) gets 1044 panch-tattva points and it should be bought for long term and kept till there is any consequitive drop in profits in three quarters.

TATACOMM @354 (271008) gets 750panch-tattva points and consider it for buying after the next quarterly result.

ICICIBANK (271008) gets 949 panch-tattva points and should be bought in small quantities over time for long term.

panch-tattva talk…world indices balance

Friends,

Wish you all a very very happy Diwali and growth of what you invest in today’s ‘Moorat Hours’ at bourses.

The world’s indices are trying to regain a new respective real parity in terms of strengths they have with foreseeable future in sight, all in the aftermath of, the US based,US created and in fact largely confined to US , financial crisis (partnered by those smaller economies of the west which sought expansion in overly internationalised economy of US). The rest of the world is facing problems too but more account of the loss of benefit that they were drawing form US markets and less on account of financial break-down. They are having to sigh more just in sympathy as they don’t want to be seen drawing comfort out of the US and western losses. While their comfort is related to that only and is an ugli fact. The crude is an essential item to ensure continued growth of emerging market economies paricularly India and China. These countries have all other advantages but less of oil. The one most important advantage is large local market (more perfectly developed in India than in China). The requirement of a big unified market brought the European nations together who in fact don’t see eye to eye, the most matters.

If we will deeply analyse, it will turn out that in the near future times the China which integrated its economy with US in a large measure , will face some grave crisis. It may be that nothing comes out in terms of doctored statistics but the Shanghai Index is telling it all. The DoW is confused and goes up and down in an directionless manner as if there are somethings known to few but unknown to most. The things unknown may have been overly assessed by those who know them or underly assessed. Those who are in the know may have to correct their view and those who would come to know may have to take fresh view of things. Did it not happen that the facts have taken a whole 12 months and more to come out and get assessed.What would have been discounted much earlier is still bothering and that’s the reason I think the whole bundle of facts is yet to unfold .Either way , the US will have to face times of lesser advantage and will have to put up with lesser share of consumption of worlds riches.The high value of dollar is making China richer due to high dollar reserves with it but its edge will be lost , the US will import less and try and develop its real economy with lesser stress on financial industry which is pass-time of rich only. India on the other hand is seeing the turmoil in market because its more integrated there but none very severe ill effect any where. The crude price drop is a real shot in arm. The recession will be taken care by increased govt spending. Our PM confirmed it of Chinese soil saying that what we have done by way of govt spending without revenue is OK by Keynsian remedy in such times. Very much so but his team should make the markets go way up otherwise howelse the seed (risk capital) will be raised for the fresh projects.</p

I have recounted only recently the strengths India carries viz a viz other economies of the world, I would skip it here.

There is a spate of good news, if only good news would start having positive effect. I recounted the possibilities about Nifty and related matters. The SEBI has, in fact in a surprise move, allowed the promoters to keep aquiring in open market up to five percent equity in one year till it reaches the 75 pc ceiling. This will not even trigger a public offer requirement. A reasonable announcement in good time. SEBI is initiating a probe into markets’ odd behaviour on 24th and 27th Oct. Power Minister said that global slump would not affect capacity creation of around 90000 MW by end of eleventh plan. A lay out of Rs 10 lac crs will be required and debt /equity ratio will be 70:30.

Porsche has bought nearly all free-stocks of VW and the stock vaulted up by 98 pc.Honda has upped production of feul efficient cars.Electrolux AB has beaten estimated profit figures.FED chief may push overnight rate to zero (when borrowers have trouble and the lenders have danger of loosing capital , what better alternative can be found than making interest zero). US house prices are lower by twenty pc from peak and foreclosures are growing. This is not a very bad thing to happen unless accompanied by some other oblique arrangements between the involved entities. In any case the end to trouble shouldn’t be far. There are signs of thawing out in banking sphere. The rates paid by banks for borrowing are only half of what the most intense moments of panic saw them offer.The rescue package has been put to practice, banks have had money flowing to them in US.

Those who follow this site would recall may having said in Oct 07 that the then Nfity level was wrong at 5500 and should have been at 4100, earlier when it was 1000 2002 I had estimated its value at 1700. In the same way I have reason to say that the right level for nifty is somewhere between 4100 and 4500. It requires courage to agree to what is seemingly too much off the commonly perceived mark but you also know what is common view is majority view and you pretty well know what the majority consists of.

I commit myself rather too early but how can you not speak what you see or perceive. Also if you are not from the first ones to give a glimpse in to future , what are you worth!

The learned should excuse me but my readers are of all ages and of all backgrounds. I have to some times repeat the point , say it in a different manner. Yet more is thrown into my writings because I want to give a piece of old history and record new history.

HariOm,
KrsnaKhandelwal

panch-tattva talk…let’s discuss nifty in detail

Friends,

 

Please note the following interesting facts about Nifty (since Jan ‘99) without yourself going in to turning huge data yourself:

 

-Nifty PE was lowest at 10.86 on 09/05/03 and at the same time it had P/BV ratio of 2.02 and the Div. Yield of 3.18 %.

-Nifty had highest PE of 28.29 on 08/01/08 while P/BV then stood at 6.55 (this is highest since Jan ‘99) and D/Yld at 0.82 (this is lowest since Jan ‘99)

-Nifty had lowest P/BV of 1.92 on 21/09/01 while its PE was 12.30 and D/Yld at 1.75 %.

-Nifty has 10.99 PE , 2.17 P/BV , and 2.18% D/Yld on 24/10/08 when it stood at 2582 points.

 

Now what may be observed in these figures , if the Nifty stays at present level:

 

-if the earnigs progress the PE will breach its lowest point and this is making new history.

-if the earnings remain the same the P/BV ratio will keep improving making it move towards breaching  the historical low of 1.92 P/BV, again adding new chapter to history.

-if the dividend pay-outs improve due to stoppage of expansion plans of companies in view of lower demand (ie recession) , the D/Yld will improve to breach the historical high of 3.18 %.

-if the companies post lower earnings the PE will go up but it has room for going up as the historical high has been 28.29 but the P/BV will still improve making it breach its lowest point 0f 1.92 which is again creating new historical point.

-if we consider the D/Yld in light of real rate of returns , it is positive while real rate of return on 10yr Govt paper would be negative (intt @7.5% minus rate of inflation of 11.04% ie minus 2.54%). This will be post tax return against taxable interest returns.

-if the interest rates are reduced further , as is a possibility too , the difference in return shown above will be still more.

-if inflation remains the assets (other than cash and receivables minus debt) will keep improving besides the already existing revalueation surplus which does not reflect in figures of balance sheets.

-if the companies raise further capital at current prices , the P/BV ratio will still improve and the additional cash will either lower interest out go or will improve capacities. In both cases the PE will go further down.

-if the companies decide to use the cash generated for the buy back of shares the floating stock will diminish and will put upward pressure on prices.

-if this conditions continue the promoters can only increase their holding by open market purchase as the preferencial allotment will not be liked due high average price for last six months. This will also make the absorption of floating stock.

-if the low stock prices continue there may be attempts of hostile take over of weaker companies , even otherwise the weaker players may be bought out and their outstanding stocks extinguished.

-if the profitability gets diminished the cash-flows of the companies will have lower impact because the tax payment would first bear the impact.

-if the market don’t improve there would be lesser number of IPOs and demand pressure on investible  rupee will be lower which will find way in to secondery market.

-the ratio of holding by the retail investor is at a low point compared to last year, those who booked profits in the bull run will come back to aquire shares.

-those who missed bus in the last many years bull run will try their hand out this time.

-all asset prices are going down so there will be less aversion to equity investing at a safe point.

-no capital gain tax on long term holding will invite new investors who would not like to book profits mid way ie before one year holding period.

 

There are many more ponderables but above are enough for todays food for thought.

 

Its not surprising therefore that the analysts are being asked for the list of stocks worth buying. The lay investors do not understand much but at least understand that when 80% of value has already gone , the rest twenty percent may not go entirely. This is sort of thumb rule for them.

 

HariOm,

krsnaKhandelwal