P-Notes problem: BSE Sensex will touch 18,000 today

SEBI has finally taken necessary steps to halt current mad Bull Run in Indian share markets by proposing new rules to curb short term foreign inflows. SEBI proposals to curb indirect foreign investments by proposing new rules on P-Notes will create havoc in the stock markets. There will be a panic selling by FIIs (mainly hedge funds) which makes Sensex fall by 800-1000 points. P-notes are offshore derivative instruments issued by top brokerage houses for foreign investors. P-Notes protect identity of FIIs with easy entry/exit options and are generally short term investments which are responsible for recent Bull Run. Stocks like ICICI Bank, Reliance, Reliance Energy, L&T, RIIL, DLF etc will lose 4 -5% and this phase will continue for another 2-3 days. Hedge funds will withdraw their money by anticipating further curbs on foreign inflows. SEBI has done it; Let us wait for RBI steps.

Targets for Indian Stock Exchanges:

BSE Sensex:

CMP: 19,051.
Target: 18,000-18,200.
Short term target: 16,500-17,000.

NSE Nifty:

CMP: 5,668.
Target: 5,450-5,500.
Short term target: 5,000-5,200.

Why participatory notes (P-Notes) are dangerous for stock markets?

Direct FII investment is generally a long term investment like mutual funds and LIC etc. But investments by P-Notes (participatory notes) are generally a short term investment with easy entry and exit options. P-notes are offshore derivative instruments used by FIIs for investing in stock markets. 50% of foreign investments in Indian stocks are through P-Notes. Investment by P-Notes is not a serious investment and SEBI has taken correct step in the right direction to halt this unreasonable bull rally. Investors in Nifty derivatives will suffer unbelievable losses if don’t exit immediately. Manipulators will move away from Indian stock markets atleast in short term.

What investors need to do?

Investors should wait until clear picture emerges on this issue. Next week may provide ideal opportunity for fresh investments if political conditions are stable. BSE Sensex may touch 16,500-17,000 in this week. SEBI proposals on short term FII investments will once again link stock markets to economic performance.

Crucial note:

From now onwards, top brokerage houses may not even report P-Notes investments which may halt free fall in stock markets. It is better for normal investors not to make any fresh investments who don’t have enough knowledge on these issues.

Click here to read more about SEBI proposals on P-Notes.

Is there any method in this madness?

Indian stock markets along with global markets are witnessing most volatile intra-day sessions in the recent days. Investors are repeating same mistakes by investing in weak stocks when fundamentals and valuations are big worrying points. Investors ignored the negative implications of credit policy on Indian companies in the yesterday session. Volatility will continue in the coming sessions.

Global Cues:

1. US markets lost 146 points after trading in the positive zone in the early session. Crude is in the $ 77-78 zone. Asian stocks are following their global peers.

Market Movements: All the global markets are in negative zone.

1. BSE Sensex:
CMP: 15,550.
Target: 15,330.

2. NSE Nifty:
CMP: 4528.
Target: 4465.

Stock of the Day:

1. Everonn Systems – It will list around Rs 450-500 and may cross Rs 550. Long term prospects are good for this stock but may be volatile in short term.

Significant views on Economy and Stock Markets:

1. RBI Credit policy will be misfired. Instead of decreasing liquidity, it may increase liquidity and also impact balance sheets of companies. Investors will realise the negative impact of credit policy within a short term. Volatility will continue in markets.

2. It will be difficult to keep Rupee above 40 against dollar. Rupee appreciation will continue in the long term. If RBI tries to keep rupee above 40, there will be negative implications due to rise in inflation. No government wants this situation just before elections. IT Midcaps and Textile stocks will be affected.

3. Hindustan Sanitary ware is a contra pick for long term investors while Meghamani Organics is a safe best for long term investors.

4. One investor asked me about Jain Studios. Don’t concentrate on such penny stocks without fundamentals and growth prospects. One should buy stocks with either strong fundamentals or better growth prospects. There will be no buyers for such stocks if markets go into bearish zone.
5. Sectors like food processing, Electronic hardware, Hotel and leather companies will get more sops in the coming budget – Finance Minister.

6. Q1 Results – Decrease in sales growth but increase in profits growth compared to recent quarters. Decrease in growth is a worry.

7. There will be no hope for Sugar, Textiles and Midcap-IT companies in the medium term except Government sops.

Positive Stock News:

1. Imerys may acquire ACE Refractories.
2. Satyam got big orders from FIFA. Satyam is getting more orders from Europe in the recent days.

Negative Stock news:

1. RBI hiked CRR by 0.5%.

Best stocks for Day Traders:

1. Satyam Computers.
CMP: 480.
Target: 485

2. Everonn Systems.
Target: 550.

3. Sell BHEL and L&T.

4. Sell DLF.
5. Sell Tata Steel and Hindalco.

Things I can’t understand:

1. How can the good showing by companies like L&T and Reliance will change the fortunes of bad companies? Why investors are buying these companies?

2. Why BHEL is rising despite poor results?

3. Why banking stocks rose despite credit policy effect?

4. Is there any change in fundamentals between 550 points crash and 290 points rise?

5. Is there any change in US subprime market worries?

6. Are investors watching the poor results by Indian companies in the recent quarters in the most sectors?

7. Can Investors understand the crude price rise on Inflation?

8. Why RBI announced worst credit policy ignoring major problems? Is it a stop gap policy?

9. Why RBI doesn’t allow rupee appreciation despite benefits to common man like fall in inflation and benefits to balance sheets of most companies except exporters?

10. Why investors can’t wait for the settle down of this volatility?

Is there any method in this madness? Please share your views.

Markets are in negative zone

Indian stock markets are in the crucial period with slow down in US economy, rising crude price and appreciation of rupee against dollar will make markets continue to spiral downwards. Market operators may try to give positive edge but that is not sustainable. Stay away from markets until these wild moments stopped.

Market moments: Bearish.
NSE Nifty may trade in the range of 4095- 4120 while BSE Sensex may trade in the range 13,920-14,050.

Significant news:
1. ICICI Bank FPO opens today.

Stock Investment advice:
1. Stay away from IT, BPO and Textile stocks as rupee will continue to appreciate.
2. Stay away from Banking and Automotive stocks as rate hike is necessary.
3. Don’t believe in the ambitious statements by Textile minister. Even though volumes may rise, margins will suffer.

Positive Stock News:

1. Wipro will acquire IT arm of a major German company.
2. Reliance Communications will form JV with Accenture to maintain IT Infrastructure and services.
3. BHEL bagged Rs 139 crore order from NTPC.
4. Shareholders of Indoco remedies agreed merger proposal.
5. TRF and HCL got big orders.

Negative stock news:

1. Spicejet denied stake sale. But I believe in the rumours. Consolidation is healthy for Aviation industry.
2. Punjab National Bank dropped equity offer plan.
3. Oil price is at 9 year high. No hike in petrol and Diesel prices in India. Stay away from oil refining companies.
4. ABG Shipyard failed to announce inspiring results.

Results today:
SREI Infrastructure, Cambridge Solutions and Indian hotels.
I am advising investors to stay away from these extremely volatile markets for some more time. I will recommend any stocks.

Black days will continue for Indian investors

Today will be another painful day for Indian Investors. Some operators are trying to keep the positive momentum in the hyped and overvalued markets by raising the stock prices like Hindalco and ACC without any specific reason. But negative triggers emerging from global markets will continue to dampen the spirit of those bull operators. Correction is due for some time and markets will continue to give losses for some more time.

Market movements: BSE Sensex will trade between 14,000-13,870 while Nifty will trade between 4115-4075. Sentiment is very weak in the markets. Some late recovery may be seen.

Stock of the day: Time Technoplast.

My Stock advice:

1. Don’t be hyped by DLF subscription data. Most of those bids were by foreign investors with long term view. DLF will give heavy losses to medium term investors but may give good returns on listing day. I prefer Vishal retail.

2. Investors may buy good stocks after crash with BTST (Buy Today and Sell Tomorrow). This advice is only for risk taking investors.

Why DLF will rise on the listing day?

Foreign and long term investors who missed the allotment will lift the stock by buying on the day of listing.

Significant News:

1. Government will take measures to reduce overheating in Real-Estate and Housing- Finance Minister.
2. Time Technoplast will be listed today. Investors may make smart gains.

Negative stock News:

1. Indian consumer durables production is decreased.
2. Mayawati government will probe land allotments to IVRCL and others in Noida, Lucknow and Kanpur.

Positive stock news:

1. Reliance Energy’s Dadri project may get clearance from UP government.
2. L & T got Rs 911 crore order from ONGC and SAIL.
3. Cadila mulls to launch GDR issue.
4. Sundaram InfoTech bagged Microsoft order.
5. Government will give some sops to Textile sector. Short term risk taking investors may buy these stocks for short-medium term.
6. Deccan Aviation will hike prices in some routes.

My Stock picks for medium-long term investors:

1. Carborundum
2. Britannia.
3. Fortis health care.
4. Wire and Wireless (2-3 years).
5. Berger Paints.
6. Bharti Shipyard.
7. Areva T&D
8. Idea Cellular(6-12 months) and Tata tele.
9. RNRL (1-2 years).
10. Ispat Industries.

Note: Due to my personal busy schedule, I am unable to do sufficient research on stock markets to recommend stock picks for day traders. Mistakes are regretted. Am I addicted to blogging and stock markets? May be.

Hot Stock picks for Day traders and short term investors

BSE Sensex may touch 15,000 mark in June if rupee stays above 40 Vs dollar. With inflation is under control, RBI may not hike interest rates. With the introduction of futures and options in NSE Nifty junior and CNX 100, bulls will dominate markets due to increase in positive sentiment. Though DLF IPO and ICICI Bank issue will suck some money from markets, markets will rise due to participation by FIIs in selective stocks.

Market Movement: Nifty may touch 4350. Bulls will dominate the markets. Nifty Junior and CNX 100 stocks may see increase in volumes due to futures and options trading.

Warning for long term investors: If any major negative news breaks out, it will see a big crash in the markets due to high valuations in blue chips. Don’t take long positions in major stocks.

Significant News:

1. Indian economy grew at 9.4% in 2006-07 due to wonderful performance by Manufacturing, Services and Mining sectors.
2. Slow down in agricultural sector is a concern.
3. Reliance Money, online trading platform, will increase trading kiosks to 10,000 by March 2008 and to 25,000 by March 2009.
4. Amtek Auto will acquire the foundry business of UK based JL French castings.
5. L & T will spend Rs 2500 crore in expansion in 2007-08.
6. India became trillion dollar economy.
7. Closely watch Textile stock Himatsingka Seide share. It is currently trading at Rs 110.8.
8. Parsvnath announced the launch of Paliwal city in Panipat.

Negative news:

1. Average income of an Indian is less than Rs 2500 per month.
2. Low cost airlines like Spice Jet and Go Air may suffer heavy losses with recent consolidation in Indian Air space.
3. 50 Doctors will quit Escorts heart institute to Join Apollo. Stay away from Fortis health care stock.
4. Amtek Auto is a safe stock for short term investors. Target is 425 -427.
5. Thermax, Punj Lioyd and Reliance Communication may see some profit booking.
6. Stay away from MTNL as its ADR suffered big loss.
7. Sterlite, Hindustan Zinc and Hindalco may rise due to increase in metal prices.

Stock Market advice:

1. Enter into TCS around Rs 1202-1205 with stop loss at 1195.
2. Glenmark Pharma is a good short term bet with some risk. Target 740.
3. Idea is a safe short term bet with a target of 150-160. It may sell some stake in 2-3 months.
4. Tata Tea is a good stock for short term investors with a target of 1000.

Hot stocks for Day trading:

1. Adhunik Metaliks: 74% growth in revenues and 130% rise in profits.
CMP: 53.20
Target: 55 and 57
Stop Loss: 51
Wonderful results. Good share for short term investor.

2. Tata Tea: Good bet for short term investors.
CMP: 920
Target: 932 and 948
Stop loss: 895
It will acquire Mount Everest and 42% stake of Himalayan Mineral water. Today is the results day.

3. United Breweries: Air Deccan Buy.

4. Reliance Capital:
CMP: 953.5
Target: 971
Stop Loss: 937
It already crossed daily turnover Rs 600 crore just within one month of launch.

5. Wockhardt Pharma: US FDA approval for Terbinafine.
CMP: 413.7
Target: 419
Stop loss: 406

6. Amtek Auto: Acquisition news.

7. Educomp Solutions: New contract with Haryana government.

Stocks to watch out:

1. Akruti Nirman.
2. Sun Pharma and Glaxo.
3. Aditya Birla Nuvo.
4. TV Today.
5. Parsvnath Developers.

Please share your views and recommendations.

Stay away from Indian stock markets

It is better for retail investors to stay away from Indian stock markets as markets are in the grip of bears and operators. Markets may see some volatility in the mid session before crashing. BSE Sensex may lose 150-200 while NSE Nifty will break 4,200 resistance. Is it necessary to trade in these circumstances?

Advice: Stay away from markets.

Market sentiment: Bearish/ Heavy crash. Inflation data may change market movement.

Why markets may crash today?

1. Weakness in US Markets and Indian ADRs suffered losses.
2. Big fall in Asian markets on US economy concerns.
3. Fall in metal prices.
4. Derivative contracts expiry.
5. CRR hike concerns.
6. Profit booking in select stocks.
7. Rupee appreciation.
Advice: Stay away from markets.

Significant news:

1. Future valuation of the land may negatively impact the real Estate companies.
2. Anil Ambani’s SEZ is in trouble. Ambani group got DTH license.
3. NSE is the third fastest growing exchange in the world.
4. 500-550 is the price band of DLF IPO.
5. Revamp of Public sector bank’s portfolio will affect their return on assets.
6. Suzlon secures REPOWER bid.

Stock picks for Day Traders: (With risk)

1. BPCL:
CMP: 371
Target: 379
Stop Loss: 364

2. HPCL:
CMP: 286.5
Target: 295
Stop Loss: 280

3. Fortis healthcare:
Fortis and Trehan may attempt out-of-court settlement.

4. City Union Bank
CMP: 195.3
Target: 202.5
Stop Loss: 192
Stake selling report.

Stocks to watch out for:

BHEL, ITC, Suzlon and IPCA Labs.

Stay away from these stocks:

1. Copper prices are down. Stay away from Hindalco and Sterlite.

Share your stock recommendations.

NSE Nifty is at all time high

The NSE nifty reached an all time high of 4269 during intra-day session. Nifty finally ended at 4261 on Monday due to massive gains in Banking, Media, Metal and Reliance stocks. Surprisingly sugar stocks also rose without any positive triggers. IT stocks suffered losses due to rupee appreciation.

Day of Reliance:

Companies of Ambani brothers are the major gainers on Monday trading.

1. Reliance Energy rose 8.5% while Reliance Industries surged 3.7%.
2. Stocks of Anil Ambani are continuing their positive momentum.
3. Oil stocks are the surprise gainers.
4. Gains in SBI and HDFC boosted the market sentiment.

Can Stock Markets sustain this rally?

Absolutely not. Indian Stock markets can’t able to continue this rally in the coming sessions as valuations are stretched a bit too much.

Why markets may not continue this rally?

1. There will be no significant positive triggers after results.
2. Rise in interest rates may affect the margins of companies in the coming quarters.
3. Investors may book profits to enter at low valuations.
4. Sectors like sugar are rising without any reason. These are the dangerous signs.
5. Rupee is appreciating against dollar. This will severely affect IT and other export stocks.
6. Companies are investing big money. It will take time to yield results for these investments.


Markets will definitely return to 13,000 mark. Investors may enter into stock markets at these levels. But some good stocks like Dr Reddy’s labs are trading at attractive valuations. IT stocks may regain their value if dollar appreciates again.

My advice is stay away from Indian stock markets. Short term investors may invest in IT stocks as dollar will surely appreciate again. Investors who will enter into share markets at this level due to media hype will suffer heavy losses especially if they invest in high valued stocks like Reliance, SBI and RNRL etc.

Please share your views on Indian Stock markets.