When will investors stop behaving like fools?

Even after facing rude shocks in recent sessions, most of the investors are once again repeating same mistakes by investing in stocks like RNRL, Neyveli Lignite and Essar oil etc.

Why don’t they invest in good companies with strong fundaments which are trading at reasonable valuations?

Why don’t they do basic research on companies before putting their hard earned money?

Why do they think stock markets as speculation centres?

Investors will continue to lose money in stock markets as long as they want to make big money in small time period without basic knowledge on companies.
Popular theory: Indian economy will less likely be affected by American economic crisis. So our stock markets are safe heavens for investments. Is it really correct?

My opinion: As they are saying, our economy is less dependent on American economy unlike Japan (Except sectors like IT and Pharma). But our stock markets are no longer representing our economy. They are the “bubbles” created due to irrational investments by foreign and domestic institutions. So they will be definitely affected by American financial crisis. Don’t believe in “decoupling theory”. If you believe in it, you will face the similar fate of BJP in 2004 elections (India Shining campaign).

Severity of American crisis:

1. US Federal is aiding in increasing American crisis as it did in 2001 by cutting interest rates. Instead of taking long term measures, it is opting for stop gap measures like rate cut which will further aggravate crisis.

2. When a company like “Apple” after announcing superb results gave cautious growth signs. It is a clear sign of future growth problems.

3. When a company like “Google” shed 30% of its stock price (good fundamentals, growth opportunities etc.), we should understand the severity of the problem.

4. Soros: "World is facing worst ever economic crisis after world war 2". When an experienced expert gave that statement, we should understand the problem.

5. United States housing sales fell first time in 25 years and prices are declined for the first time since 1929 great American depression.

Note: Stock Markets will see ups and downs until President George Bush comes with great relief package. These are more testing times for world stock markets due to lack of confidence in investors.

My advice: Indian stock markets (BSE SENSEX) will move between 14,500-18,500 points with extreme volatility. It is difficult for ordinary investors to plan their investments in such an extreme volatile situation.

If you are a long term investor, invest in good companies which are less dependent on United States like Reliance Communications, Tata Motors, L&T, and Reliance Industries etc.

Stay away from penny stocks and overvalued stocks like RNRL, Ispat, and Essar Oil etc.

Save your money for upcoming wonderful IPOs like ATPL.

Long term investors should continue to accumulate good stocks and forget about them for 1-2 years. Speculators will bite the dust in these unpredictable times. Conservative investors should stay away from markets until “recession” fears are cleared.

Please share your opinion on Indian share markets.

Advice for new stock market investors

Many new investors are asking me for advice on their recent “investments” in the stock markets which were bought at steep prices. Most of these investors do not know much about stock markets. They have just entered into these markets to make some easy money (brokers, media and "expert" friends are real culprits).

My advice for these “innocent” investors:

1. Indian stock markets are not investment centres at current valuations. They became gambling centres in the recent days. Can anyone finally make money in gambling?

2. Do you what happened to the investors during Harshad Mehta days and IT boom time?

3. Do you know, like Ambanis now, Wipro’s Premji became the second richest man in the world for some days due to these stock markets? Anil Ambani will become the world richest man after Reliance Power listing. Do you think they can stay there?

4. Never believe in the words of CNBC analysts and broker’s words. They will change their words according to the market sentiment. Just analyse their statements by going through the archives of business newspapers or moneycontrol.com. Do you what they have said about Ispat Industries when it was at Rs 14?

5. Don’t lose your hard earned money in the stock markets by investing at these valuations. Stock markets already discounted 2009-10 earnings also. I know it is very difficult to control one after seeing the euphoric mood among your friends. Have patience. Better opportunities will come for investments at reasonable valuations.

6. Any government will take populist decisions before elections. Don’t expect significant industry helping decisions in the election year.

7. Accumulate more knowledge about various companies and businesses by regularly reading business newspapers and magazines.

8. Know basic fundamentals about stocks like P/E ratio, Book value, historical stock prices, when to buy/sell shares etc.

9. Day trading may give you some short term gains but long term investors are always the real winners in stock markets. Never indulge in day trading. Leave it for big brokers.

10. Never invest in stock markets just basing on tips of brokers and friends. Do your own research on the company and business and its growth prospects and valuations.

11. Never invest in Z, S and other unknown company shares with poor management. They may hit upper circuits in bull markets. You will finally left with some papers with no buyers. Biggest losers in any bull market are these kind of investors who may never able to sell their shares of those unknown companies.

12. Never enter into stock markets to make big money in small time. You need to work hard by doing enough research on companies before making big money. Long term investors in good companies will always become millionaires.

13. Compared to secondary markets, IPOs are safe in these times. Focus on primary markets by investing in good IPOs.

14. But sometimes, you need to follow herds as in Reliance Power IPO. We know it is not a good idea to invest in Reliance Power at such a steep price. But in bull markets, investors never follow caution and reason. So invest in Reliance Power and book profits on the day of listing.

15. United States is experiencing its worst recession after 2001. So better prepare for more bad news.

Why Indian stock markets are rising and falling?

Current steep rise in stock markets is not due to fundaments but just due to liquidity. Mutual funds and Insurance companies are providing domestic liquidity while foreign investors are gambling in Indian markets. Foreign money will move out of our country at any point of time. Stock exchanges are adding fuel to the fire by encouraging derivative market. We have to wait and watch when this mess will clear up and better senses will prevail.

Final advice: Don’t put your hard earned money in these gambling centres. BSE Sensex will oscillate between 18,000-21,000 points for some more time. New innocent investors should stay away from Indian stock markets until the emergence of clear picture. I am against investments even in mutual funds also. Most of these mutual fund managers are inexperienced ones as they have never managed funds in bear market. Sometimes patience will save you from catastrophes. Don't move your money into stock markets from bank deposits. Greed is not good for your financial health.

Please share your opinion.

Volatile Stock Markets due to extreme uncertainty

I am closely monitoring Indian stock market volatile movements but not giving any guidance due to extreme uncertainty. I have not seen this range of uncertainty for the last 3-4 years. That’s why I am not posting in the last 4-5 sessions. I will watch for another 3-4 sessions from side lines to get clear picture on Indian share markets.

Global Economic crisis (Sub prime credit crisis):

Don’t be tempted by short Bull Run in US stock markets. This subprime crisis is the most severe one in the last 16 years. We are just watching the tip of ice berg. We will see real effects in the coming weeks/months. No one is giving clear guidance on the magnitude of this subprime crisis. Rate cut by fed reserve may not be sufficient to cool down this crisis. Dow will touch 11,500-12,000 in the coming months.

Local Political crisis:

Communist parties are doing their best to dampen the spirits of bulls. Before this political uncertainty, India is the last option for withdrawal of money by FIIs due to the strong fundamentals. But India is now the first choice for FIIs to withdraw money in case of crisis due to political uncertainty. Uncertainty is always more dangerous than real thing. Communists may not withdraw support to UPA Government but they will cause enough damage to the investors by their comments.

Indian Stock Market guide:

1. Sit on cash and invest money whenever BSE Sensex falls below 14,000.

2. Invest money in high growth stocks like Punj Lloyd, Crompton Greeves, Bharti Airtel, BHEL, L&T, PFC, SBI, Welspun Gujarat, Praj Industries etc. They will lead the next rally.

3. Foreign investors will invest in these stocks after the termination of credit concerns.

4. Don’t expect exceptionable returns in 2007. Invest up to 2009-10 in growth stocks for exceptional returns.

5. Banking and Finance, Capital Goods, Shipping, Power and Infrastructure stocks will lead future rallies. Telecom story will continue for some more time.

6. Speculators will rarely beat long term investors in the returns/earnings in Stock markets.

7. Pharma is the dark horse.

Starcom-Mediavest survey on Online Trading platforms in India:

1. Reliance Money is the most secured and cost effective platform while Motilal Oswal is the best research driven platform. ICICI Direct is the least cost effective platform.

2. 5 Paisa is the second best cost effective trading platform while ICICI Direct is the second best secured platform.

Please share your experience on online trading platforms in India.

Subprime Market crisis will continue to disrupt world markets

French Company BNP Paribas announcement sent shivers throughout the world markets. Indian stocks suffered heavy selling pressure in the mid and late sessions after this announcement. Indian markets will continue to fall due to more than expected concerns over US subprime market crisis. Foreign investors are selling heavily in the last 7 trading sessions. Prudent investors can use this correction to enter into sound stocks for long term investment. Global Markets: US markets tumbled on Thursday amid concerns of Subprime crisis and BNP Paribas scare. Dow Jones lost 387 points while NASDAQ lost 56 points. Asian markets lost heavily by following global markets.

Market Movements: Indian markets follow their global peers. Inflation data is also crucial.

1. BSE Sensex:
CMP: 15100.
Target: 14760- 14800.

2. NSE Nifty:
CMP: 4403.
Target: 4215- 4305.

Source: Bloomberg.

Significant News:

1. Inflation will be around 4.4% - small rise over the past week.
2. RBI may rise CRR once again in 2007 – Centurion bank.
3. Hyderabad Stock exchange may merge with Bombay stock exchange.
4. BSE may buy 5% stake in Calcutta Stock Exchange.
5. Puravankara fixed issue price at Rs 400.
6. Global volatility will raise further – Citi group.
7. Motilal Oswal priced IPO band between 725-825.

Positive Stock Market News:

1. Bajaj Auto will launch Exceed with DTS-Si in September.
2. Government will give more sops to regional Airlines.
3. Car sales up 11% in July while bike sales down 17%.
4. Praj Industries announced inauguration of manufacturing plant in Kandla SEZ
5. Government may allow PFC to tap the domestic and foreign private equity.
6. Bharti Airtel added 2 million subscribers in July while Idea added 0.8 million subscribers.
7. 20% increase in hotel room rates is on the horizon.
8. Infosys opens BPO centre in Mexico.
9. BHEL, Gayatri Projects and Aban Offshore bagged big orders.

Negative Stock Market News:

1. Foreign Institutional Investors sold shares worth Rs 6,127 crore in the last 9 trading sessions since July 27.
2. Tamilnadu Government will soon enter into cable TV business. This is another blow to Sun TV.
3. SEBI expressed reservations over the transparency in transactions in the margin accounts of brokers.
4. Government changed sugar subsidy structure which is another shock to this battered sector.
5. Tata Steel will have to pay $ 1 billion more due to loan crisis in US subprime market.
6. Nifty August futures discount increased to 48 points.
7. Brokers with more than 1 crore IT turnover will face IT raids.

Stock Market Analysis:

1. US Subprime market is crisis is worse than the expectations of many investors. As I said in my earlier columns, FIIs will withdraw more money from global markets. This will impact the Indian Markets in the short term. Use this opportunity to enter into good stocks and earn good money when FIIs return back to invest in Indian markets.

2. Profit booking along with US subprime market crisis were the major factors for the over correction in the markets yesterday.

3. Accumulate IFCI at around Rs 59-60 levels to make quick gains in the next week as bidding process will start on Monday. I have holding in this stock.

4. Tata power, Reliance Energy and Areva along with NTPC will benefit due to changes in Government nuclear policy.

5. Accumulate stocks like Reliance Communications, SBI, BHEL, Biocon etc. on declines.

Best Stocks for Day trading:

1. Sell Sun TV: Tamilnadu government entry into cable TV business.
CMP: 368.
Today Target: 342. It may touch 310-315 in the short term.

2. Sell Tata Steel:
CMP: 652.
Today Target: 630. Short term target is 615.

3. Sell Hero Honda:
CMP: 679.
Target: 671 and 668.

4. Buy Maruti Udyog for short term. Impressive performance in the troubled times.

5. 90% major stocks will face selling pressure in the opening session.

6. Sell Geojit Financial services.

Stocks in the F&O ban: IFCI and Omaxe.

Please share your opinion on my stock market analysis.

Sound stocks rebound with volatility

Sound stocks like ABB, Reliance Energy will rebound and volatility will continue due to expiry of derivatives. Short term risk taking investors can take positions in HPCL and BPCL as oil ministry is mulling price hike.

CRUCIAL POINT: If Inflation remains stable, there will be no change in interest rates in RBI credit policy on July 31. This is a trigger for Banking, Finance, Auto and Real estate sector. Take positions in these sectors if Inflation is below 4.3%.

Global Markets: All the global markets are volatile with positive moment.

Stock of the day: ABB – It will announce good results.

Significant views:

1. Total un-liquidated turnover in derivatives is around Rs 1, 00,000 crore. My view is we may experience another May, 2006 crash. When I see atmosphere in Ongole town, many retail investors are buying stocks without any basic knowledge about the companies, valuations and other fundamentals. This is surely a worrying sign.

2. Laxmi Mittal supported Mukhesh Ambani on gas pricing.

Rumour of the day:

1. IFCI may announce stake sale/new business model on August 4. Don’t sell your shares for another 2-3 months. Long term investors should not leave this goldmine.

2. Government will hike diesel and petrol prices soon.

Positive News:

1. SAIL announced will jointly explore opportunities and R&D activities.
2. Infosys and Philips signed $ 250 million BPO deal.
3. KEC International announced 74% jump in net profit.
4. Yes Bank net profit jumped by 113%.
5. 62% rise Wockhardt consolidated net profit.
6. Ispat industries recorded net loss of Rs 9.53 crore in 2006-07 Vs loss of 812 crore in 2005-06.
7. Ashahi India net profit in Q1 increased by 316%.
8. Godavari fertilisers announced merger with Coromandel fertilisers.
9. IndusInd bank posted 62% increase in net profit.
10. IDFC signed MOU with IIFC to finance infrastructure projects. Its net profit rose by 38%.
11. HDFC announced 25% rise in net profit.
12. Castrol India net profit rose by 32%.

Negative News:

1. Sterlite Industries posted unimpressive results. Some more selling today.
2. Aptech Q2 net profit fell by 13%.
3. Suzlon net profit fell by 116%.

Stock advice:

1. No analyst talked positively about ITC in the recent days. Everyone is recommending ITC now and giving targets. It happens only in Stock markets. Never follow hot stocks and hot ideas. Invest in sound stocks with strong fundamentals and good growth prospects before everyone will talk about it.

2. Sugar companies are announcing disappointing results. Accumulate on dips and sell them on the day of Govt. Sops announcement.

3. Closely watch Essar Oil. Another turnaround story is in the making.

4. It is waste to subscribe to Zylog now. Allotment will be very low in the retail category.

Hot stocks for Day Traders:

1. IFCI: August 4 meeting on stake sale.
2. IDFC: Big Investment plans.
3. SAIL: Mittal association.
4. Ashahi Glass India: Good results.
5. ABB: Results today.
6. Reliance Communications and DLF - With risk

Please share your ideas.

Are you ready for consolidation?

Indian stock markets will consolidate in the coming days due to profit booking and negative triggers. Inflation will rise due to rising crude prices and IT giants will post unimpressive results. Too much rise in realty stocks is a real concern. There will be heavy selling in these stocks in the coming sessions. Don’t forget, it is consolidation but not crash.

Global cues: US markets once again ended on positive note. Tata motors ADR and VSNL ADR are significant gainers.

Stock of the day: Vishal Retail. I recommended this IPO for exceptional earnings. Investors who got allotment will get 100-150% returns on the listing day. Vishal will list around Rs 550-600 and may even touch Rs 650-700 within one week.

Significant news:

1. RBI is optimistic on economic growth.

Positive stock news:

1. IOC may acquire stake in Petkim of Turkey.
2. Reliance and Bharti short listed for Qatar mobile license.
3. Temasek will buy 5% stake in Bharti Airtel.
4. Eicher motor announced good sales overcoming bad sentiment.
5. Prism cement may continue to gain.
6. Ashok Leyland signed JV with Finland Company.
7. Bombay rayon bought Leela laces.
8. India Foils stake sale.

Negative stock news:

1. Moody downgraded Tata Power on account of aggressive expansion.
2. No hike in fuel prices-Political decision. Stay away from HPCL and BPCL.

Stock advice:

1. Exit from RNRL and RPL. Returns are minimal from these prices.
2. IDBI and IDFC may move upwards at anytime. Closely watch these stocks.
3. Today is crucial for IFCI. If it crosses 66, it will touch 75 within 2 days.
4. Book profits in GMR Infra and enter into this on dips. Too much rise within a short period is always a concern.
5. Dena Bank and Deepak Fertilisers are safe ones in this consolidation mood.
6. Ashok Leyland may continue to gain in the short-medium term.
7. NSE barred Futures and Options in IFCI and Nagarjuna Fertilisers.
8. ONGC may move upwards at any time. Keep an eye on this stock.

Stock picks for day traders:

1. Vishal Retail.
2. India Foils.

Note: I will partially book profits in my holdings. I may enter Dena bank, PFC and Fortis in the coming days at appropriate time. I hold my IFCI holdings irrespective of short term changes.

Unpredictable markets-news based trading

Indian stocks are moving in unpredictable ways with momentum is concentrated on few select stocks. One thing is sure correction due within a short period. Investors may take long positions in blue chips after the correction. Risk taking investors may buy stocks like EID Parry, Wire and Wireless, FDC Pharma, Berger paints and Rajashree sugars.

Stock advice: Don’t believe in the rumours of Hindalco and IDEA take overs.

Sector of the day: Sugar. IT Shares will be in reckoning if Dollar appreciates against rupee.

Market sentiment: Unpredictable markets. Forget index. Concentrate on select stocks.

Significant news:

1. Government will create 3 million tonnes of sugar buffer stocks to check fall in prices.
2. Aircel, Spice and Idea may merge to form a new entity. Invest in Idea for medium term. Target- Rs 145.

Positive Stock news:

1. Unitech received nod for establishment of IT SEZs at Greater Noida and Kolkata.
2. Cement companies like ACC and Gujarat Ambuja announced increase in sales.
3. Sterlite ADS will be listen in Mid June.
4. Parsvnath launched Rs 6 billion township.
5. ONGC bought stake in 3 Brazilian blocks.
6. JSW steel posted 36% jump in crude steel production.
7. Fortis appointed new medical team at Escorts heart institute.
8. Bajaj will launch LPG bike soon.

Negative stock news:

1. Bombay high court rejected Reliance Energy plea on MTHL.

Best Indian stocks for day traders:

1. Mount Everest: Open offer to buy a further 20% stake by Tata Tea at Rs 140.
2. Idea Cellular:
3. Sterlite:
4. GAIL: (with risk).
5. JSW Steel:
6. MTNL:
7. Shree Renuka sugars.
8. NIIT Tech: (Closely watch rupee value).

Stocks to watch out:

1. ONGC.
2. Parsvnath developers.
3. Fortis healthcare.

Please share your stock views.

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.

How to invest in Stock Markets?

Tips and advice for stock market investors:

1. You will never succeed in Share Markets if your investment decisions are based on tips from Brokers and friends. You should study the markets, analyze the trends, take calculated risks and then invest in stocks.

2. Learn lessons from failures. Even great investors like Warren Buffett suffered losses in his early days.

3. Identify your risk profile basing on your age, economical status, risk bearing capacity and future needs.

4. Never put all your money in single investment portfolio. Diversify them.

5. There are no shortcuts to earn money in share markets. You should work hard to make money in stocks as in other fields.

6. Never follow herd mentality. Buy valuable stocks when panic investors are selling them. Sell over valued shares when all are buying them. Never afraid to buy a fundamentally strong but undervalued stock. This is the key to the success of Warren Buffett. This is called Value investing.

7. Large caps are secure while midcaps give high returns. Identify the future sector and find the best stock in that sector. Accumulate those stocks. Power and Shipping are the future growth sectors in India.

8. Never invest in Z category stocks or rupee stocks just for the sake of high returns.

9. Never invest without stop loss and target. Never change them without any specific reason.

10. Read at least 2 business news papers and investment magazines.

Take care, happy investing!

10 Stock market investment tips

1. Invest in good company stocks only. Never invest in rupee or penny stocks.

2. Do research before buying a stock. Never buy stocks based on ‘tips’ by brokers and friends.

3. Read at least one business daily and one business weekly.

4. Try to concentrate on stocks in which you have good knowledge. It is too difficult to follow each and every stock.

5. Don’t believe in wild rumours. Trust the news from famous websites and news channels.

6. Don’t follow the mob. Try to find the value stocks based on the intrinsic value of a company.

7. Never invest in shares of uncertain businesses like real estate.

8. Discuss about shares in money control.com message boards and Google and Yahoo groups to improve the knowledge.

9. Watch CNBC and NDTV Profit regularly.

10. Never forget to set stop loss price. It will minimize the losses in case of market crashes.

Analyse the stocks, find the good companies, enter into the stock at appropriate time (price), set the target and never change it.

Please comment on this article.