Why Indian stocks will crash in October?

Most of the investors and analysts are unable to cope with this unbelievable rise in Indian stocks especially capital goods and power stocks. Foreign investors and big financial institutions invested heavily in these stocks when markets were crashed in August but many retail investors missed to capitalize this rally. FIIs discounted all the negative news and poured money into Indian stocks after Fed rate cut in September. But will this euphoria last forever?

Why Indian stock markets will crash in October?

1. Political Instability: This is the single most major reason for stock market crash. Investors especially FIIs never like political instability and they will book profits and go to another country. Even though political turmoil will have no significant impact on the growth of companies, stock markets always negatively respond to political instability.

2. RBI decision: Don’t expect positive news from RBI. Don’t be fooled by inflation data which is released on every Friday. You will know real inflation in the routine life. No government will allow raising inflation by cutting interest rate cut just before elections. RBI will definitely raise CRR and is major negative news for markets.

3. Negative news: When markets rose too high within a short span, single negative news will create havoc in stock markets. Markets discounted negative news like Crude rise, rupee appreciation, inflation concerns in U.S after fed rate cut and slow down in economic growth etc. How long investors will discount all these negative news?

4. Government policies: If mid-term polls are inevitable, Government prefers people over companies. Popular policies will slow down momentum which will negatively impact investors sentiment towards India.

5. Foreign Investors (FIIs): FIIs were major culprits for August crash and are going to be responsible for October crash. Just see and learn how they are cashing money from every rise?

6. Economic growth: There is a slow down in economic growth if you see the data but markets already discounted 2008-09 earnings especially for high growth sectors like power and capital goods.

7. Profit booking: Shrewd investor always book profits just before every crash whether it is in 2000 or 2006. Greedy investors always lose money in every crash. Decide yourself whether you are greedy or not?

8. US markets: US fed rate cut created euphoria among investors but this will actually show negative impact on the long term on credit crisis. It treated chronic disease in acute manner. Instead of curing root causes of credit concerns, it went in superficial manner which will cause inflation pressure in America and severely impact economy.

Stock markets will continue to surprise us as they no longer represent a country’s economy. Markets are in the grip of few investors who can manipulate stock prices according to their will. Why Reliance rose above 2,400, can anyone explain me? Can anyone explain me the changes in Indian economy from August to September?

Closely watch Q2 results and movements of political parties and take a quick decision. This exceptional rise is no way responsible to economy and next crash will not be due to economy. It is better for retail investors to book profits and watch the unfolding scenes to enter the next rally. But I still believe in long term Indian story but not Foreign investors.

Please share your opinion on my views.

Are you ready for another May crash?

Media and Analysts are already started commenting about new highs and bullish trend. I don’t buy into their views. I am suspecting another “May Crash” in the coming days due to unreasonable valuations. Investors should stay away from markets in these volatile times while traders and operators continue to play their games.

Strategy: Closely watch Rupee value, Metal prices, Crude price and Inflation rate. Rupee appreciation is enough to crash the markets. Foreign investors may book profits at any time.

My thoughts on the Indian share markets:

1. Stock markets rose in the recent sessions without any significant positive news. More hype behind this rise than substance.

2. Investors are just following herd mentality. They bought IT stocks yesterday (even though rupee is appreciating). This is a dangerous sign. There will be heavy panic selling on negative news. E.g., Bajaj Auto yesterday.

3. Can SBI, SAIL, TV 18, JSW Steel and Reliance Industries justify their valuations in the next 2 quarters?

4. Except Reliance Capital, other high rising stocks may fall by more than 10% in this month.

5. Why Banking index rose on March 16 and fell on March 17?

6. Why sugar stocks are rising intermittently even though sugar prices are at all time low?

7. Why Real-Estate stocks are suddenly rising?

Use your common sense before investing in stock markets. In my opinion, markets will soon touch 12,000-12,500 mark.

About Teledata:

Yesterday, one reader asked me about the prospects of Teledata.

My opinion: Teledata rose too much within a short span of time. Not even a single mutual fund is holding this stock. It means markets have still suspicion about its future. It is a pure traders stock. Short term Investors with high risk appetite can enter into this stock at this level.

Market Trend:

Investors will book profits today and yesterday’s top gainers will suffer heavy losses today. Rupee appreciation and crude price rise will spoil the sentiment of the markets. All the global markets are trading negatively due to fall in metal prices and rise in crude price.

Positive News of the day:

1. The government has decided to allow states to acquire land for SEZ projects on behalf of private developers as long as owners sell their land voluntarily.

It is better for investors and traders to stay away from the stock markets today.

Analysis – Indian Stock markets in May

Indian investors lost heavily in the May for the past 3 years due to various reasons. Will the history repeat this year also? I don’t think so. If investors plan their investment strategy around mid caps, they may earn good money. Investors may book profits in some large caps.

Crucial Point: Don’t give too much importance to the movements of BSE Sensex or Nifty. Invest in good stocks at better price. Better stay away from small caps and rupee stocks. There will be no buyers when this bull phase is over. Book profits when you reach your goal. Never be sentimental with your stocks.

Following events may determine the stock movements in May:

Good News:

1. Inflation is under control. RBI may not take strict measures.
2. Good company results and better earnings forecasts.
3. Higher metal prices.
4. No major negative trigger points and political stability.
5. Good monsoon expectation.

Bad News:

1. Uttar Pradesh elections. Exit polls are indicating tough time for Congress and UPA.
2. Overvalued markets. No major trigger points that propel stock markets into higher peaks.
3. Appreciation of rupee. Along with inflation, this will determine the movement of stocks.
4. Higher prices of blue chip stocks like Reliance Industries, Bharti etc.
5. Better earnings in other emerging markets may decrease FII inflows.

If investors book profits, stock market may move downwards irrespective of any trigger points. If this happens, enter into good stocks at lower price.

My stocks for Long term Investors (2-3 years):

Future growth sectors:

1. Capital Goods
2. Shipping
3. Power

Select good stocks in these sectors for better returns.

Follow the following stocks carefully; invest them at better price (not at this level).

1. Tata Motors
2. Reliance Capital
3. Reliance Petro
4. Praj Industries
5. RNRL
6. Bharat Shipyard
7. Cipla (invest in this stock after 2-3 months)
8. Sugar Stocks (Invest in the shares after 6-9 months)
9. Hindalco and Tata steel will give excellent returns if you have patience.

My Stock Advice:

Never invest in sugar, Real Estate and IT stocks in the short term. This is my advice. You may not get good returns from large caps. Concentrate on good mid caps.

Following stocks will be dropped from MSCI Index:
1. Biocon
2. Matrix Labs
3. Bank of Baroda
4. Arvind Mills

Share your opinion on Indian stock markets.

Investment tips from Warren Buffet

Tips and advice for smart investors by Warren Buffet:

1. Beware of companies displaying weak accounting.
2. Unintelligible footnotes usually indicate untrustworthy management.
3. Be suspicious of companies that trumpet earnings projections and growth expectations.
4. Suspect those CEOs who regularly claim they do know the future –and we become downright incredulous if they consistently reach their declared targets.
5. Managers that always promise to “make the numbers” will at some point be tempted to make up the numbers.
6. Derivatives are financial weapons of mass destruction.

7. A director whose moderate income is heavily dependent on directors’ fees is highly unlikely to offend a CEO or fellow directors, who in a major way will determine his reputation in corporate circles.
8. If regulators believe that “significant” money taints independence (and it certainly can), they have overlooked a massive class of possible offenders. (referring to outside directors)

Those attributes are two legs of our “entrance” strategy, the third being a sensible purchase price.
We have no exit to strategy –we buy to keep.

That is one reason why Berkshire is usually the first- and sometimes the only –choice for sellers and their managers.

This is the synopsis of Warren Buffet speech in 2003.

Stock market guide for Indian investors – April 16, 2007-04-13

Today is another wonderful day for Indian stock Market investors especially for day traders.
Stock Market movement: Markets will move upwards and may gain around 250-300 points.
Resistance – 13,580 and 13,640

Most positive news: Inflation is moving downwards and RBI may not raise interest rates.

Global Cues: US markets moved upwards on Friday. Asian markets are on recovery mode.

Negative News for IT stocks: The Indian rupee closed at its strongest level against the dollar in eight years.

Investment Strategy for Day Traders:

Pick good small/mid cap stocks (Based on results) - They will give maximum profits in these highly volatile times.

TCS, Teledata and Aventis Pharma will announce results today. Tata Consultancy Services (TCS) has reportedly clinched a 100 million dollar deal spread over five years from Bank of China.

Stocks for Indian Stock Market Day Traders:

Kavveri Telecom announced superb Q4 results.

Canara Bank may acquire Dena Bank.

Work at two-wheeler manufacturer LML's unit here will restart from tomorrow.

SAIL: The government has allotted a coking coal block to Steel Authority of India Ltd.

CMC announced 80% dividend. It is a must buy stock for day traders.

Gujarat NRE Coke Ltd (GNCL) will be setting up three power plants.
The company signed an agreement with Sailcon, a division of Steel Authority of India Ltd (SAIL), for the setting of the power plants.

Essar is to buy Canadian Steelmaker Algoma in an all cash deal worth C$1.85bn.

ITC Ltd, the country's biggest cigarette maker, plans to invest about Rs 15,000 crore in the next 5-7 years. ITC share may gain around 2-3 rupees.

Apollo Tyres rolled out dura tyre.

Rakesh Jhunjhunwala and persons acting in concert with him have bought 50,000 shares of Titan Industries on April 12 via market purchase.

Voltas announced that it has clocked a growth of over 30% in sales of its room air conditioner business.

Triton Corp has reported 19.16% increase in respect of net profit amounted to Rs 3.98 crore in the quarter ended March 2007 as against Rs 3.34 crore during the quarter ended March 2006.

Educomp Solutions Company is into overseas foray.

Infrastructure major Hindustan Construction Company Ltd (HCC) plans to enter the real estate business with an initial investment of Rs 1,000 crore.

Closely watch Sterilite and Hindalco.

Surprising Stocks:

Hero Honda, Aventis Pharma and Dr Reddys- may gain after some battering in the last 2-3 days.

Avoid these stocks:

National Pharmaceutical Pricing Authority (NPPA) has asked Cipla, the second biggest domestic drug maker, to pay Rs 748.27 crore as fine towards overcharging of controlled drugs.
RBI stopped FII buying in India Bulls Real estate.
Abbot Ltd sued Ranbaxy.
Stay away from sugar stocks due to rise in production and drop in sugar rates at New York commodity exchange.
Sesa Goa receives show cause notice from Jharkhand Government.

Indian stock market guide for Investors - April 9, 2007

Indian stock markets are entering into another uncertain week ahead of Infosys results and famous forecast. But, on Monday, Indian shares gain due to positive news from International and Asian markets. Decrease in crude oil price and Rise in Asian markets are positive news. Most of the companies may declare good profits in their financial results.Infy may give less than expected growth projections which will spoil the sentiments of markets and investors.

Stocks for Day Traders:

Lupin - Selling Hypertensive drug patent.
Ranbaxy – Picks up stake in Jupiter bioscience and Profits from Africa.
Gujarat NRE Coke - Due to spectacular Q4 results.
SRF-Raising 500 Crore from Carbon credit.
Tata Power and Reliance - Got permission to hike power tariff in Mumbai.

Investors should stay away from following sectors and stocks:

1. Bank stocks and Auto stocks – I can’t understand why some investors are still buying these stocks?
2. Reliance share may lose some sheen due to Government decision to limit the size of SEZs to 5,000 acre.
3. Real estate stocks will be undervalued due to loss of investor’s interest and government’s restrictions.
4. Fears of Rupee appreciation against dollar is not a good option to enter into IT stocks.
5. NTPC -Due to lacklustre results.
6. Jet airways - Court hearing.

How to set financial goals?

Everyone should have specific financial goals and start saving from early age in order to have a sound financial status as early as possible. Financial goals are either short term or long term.

8 steps to set Financial Goals:

1. Establish your Financial goals:

Think about your financial goals in life start plan accordingly.

2. Collect Financial information:

Gather complete data about investments and debts i.e; Equities, savings, Insurance policies, real estate documents, Tax returns. Write down complete source list of income and expenses.

3. Analyse the Data:

Analyse all the data and prepare clear picture of your financials. You can use software like Microsoft Money or Quicken.

4. Create perfect plan:

Get an idea about your risk appetite. Prepare a suitable plan as per your future needs. Plan should include diversified investments. Never put all your eggs in one basket.

5. Implement your plan:

This is the crucial plan. If you fail to implement the plan, all the above work bites the dust.

6. Monitor your plan:

Monitor the plan and change as per your needs and performance of the investments.

7. Take the experts help if necessary especially in tax planning and equity investments.

8. Read Business news papers and finance magazines to improve the knowledge on various investment options.

Source: Business Line