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.

Black days will continue for Global stock markets

Global markets are continuing their correction due to credit crisis concerns. US and Asian markets are falling with 2-6% correction in the last 2 days. Indian share markets will trade according to global trends for some more time due to FII selling. No one is giving exact guidance over the severity of this crisis. Subprime crisis added fuel to the already overvalued global markets. Watch from sidelines how this crisis will influence world markets and learn lessons for future investments.

Global Stock markets:

Courtesy: Bloomberg.

Global markets fell on second consecutive day. Dow Jones lost 167 points after the volatility in the initial trading session. Asian Stocks are near their 3-month low and Indian markets will follow their global peers. Uncertainty over the magnitude of subprime crisis is the major factor behind this melt down. Will more pain is on the cards? Wait for some more time.

Market Movements:

1. BSE Sensex: Sensex may lose 400-500 points in the initial session.
CMP: 15016.
Target: 14850 and lower.

2. NSE Nifty: Nifty may lose 150-200 points in the initial session.
CMP: 4375.
Target: 4310 and lower.

Positive Stock Market News:

1. DLF will buy DCM Shriram land for 1,600 crore.
2. Punj Lloyd sold 11% stake to private investors for 814 crore.
3. Bharti Airtel will launch 2G and 3G services in Sri Lanka.
4. Demerger of ICI India is on the cards due to acquisition of ICI by Akzo.
5. 2009 is the year of consolidation in banking sector.
6. Vedanta sold Sterlite gold for 320 crore.
7. Idea Cellular is the front runner for ICC sponsorship.
8. Bharti Airtel hiked local call rates along with SMS charges.

Negative Stock Market News:

1. Clear slowdown in consumer spending in US due to credit concerns – Wal-Mart.
2. Govt. Allowed cement imports to curb rising cement prices.
3. Expansion plans of India Inc will slow down – Morgan Stanley.
4. Government may move court on Reliance Gas price – Hindustan Times.
5. United Spirits debt rose due to W&M buy.
6. Tata Steel’s Titanium project is in trouble due to land acquisition problems.
7. Global markets will correct by 30-40% - Mark Faber.

Stock Market Analysis:

1. IPTV is set to boom. IOL Broadband is the biggest beneficiary.
2. Foreign Investors are real culprits behind this abnormal rise and fall of Indian Stocks.
3. According to my view, BSE Sensex will touch 14,000 mark in August and Share markets will bounce back after this subprime market crisis is over.
4. Enter into growth stocks like Punj Lloyd, Moser Baer, Bharti Airtel, Reliance Companies, L&T, BHEL, and ABB after the correction. Believe in the long term growth story of India.
5. Short term investors may suffer heavy losses in the coming days. Don’t take highly leveraged positions in these volatile times.
6. Mic Electronics is the best stock for long term investors.
7. Don’t do bottom fishing in sugar sector. More pain will come in the coming quarters.
8. Bharat Forge, Bajaj Hindustan, Tata Motors, Mastek, Tata Tea, TCS, Cipla are some contra buys for long term investors with 18-24 month horizon.
9. Sanjay Dutt arrest may spell doom for some distribution companies in the short term.
10. Fortis Healthcare is my favourite stock for long term investment. I have holding in this stock.
11. Takeover targets like Spice Tele, Spicejet may bring value to investors in the coming quarters.
12. Tata Tele and Essar Oil are my favourite turn around stories. I am also betting big on Ispat for long term.
13. Conservative investors should stay away from share markets for some more time.

Best Stocks for Day Traders:

1. DCM Shriram Consolidated.
CMP: 87.
Target: 90.

2. 90% of Index stocks will fall due to global melt down. Risk takers may bet on IT stocks to recover if rupee depreciates against dollar.

Stocks in NSE F&O ban: Nagarjuna Fertilisers and Omaxe.

Extreme volatility will continue in Indian Stock Markets

US subprime market crisis is spreading its wings from one country to another and creating tremors in the stock markets. Central Banks are releasing more money to protect financial markets from liquidity crisis. But no one is giving clear picture on the magnitude of this crisis. Unknown devil is more dangerous than known one. So fear will cause more danger than real problem. This uncertainty and volatility will continue until the magnitude of this crisis will be revealed. Stock Markets are now only for speculators not for investors. Don’t do technical trading, just depend on news based trading in these volatile times.

Global Markets: US markets like Indian Markets ended with minor loss after sharp recovery in the late session on Friday due to pumping of funds by Central Banks to curtail liquidity crisis. Asian Markets are in positive momentum with sharp volatility.

Market Movements: Volatile trading with more than 100 points intra-day swings.

1. BSE Sensex:
CMP: 14868.
Resistance: 14980
Support: 14660.

2. NSE Nifty:
CMP: 4333.
Resistance: 4400.
Support: 4250.

Significant Views:

1. S&P included IT giants, Infosys, Wipro and Satyam, in Warren Buffett model portfolio.
2. Indian Stock Market is the most expensive one in Asia-Pacific region. India is the least attractive one for Investments – Citi Group.

Positive News:

1. JSW Steel acquired 2.5-acre property of Orbit Corporation in Mumbai for Rs 800 crore.
2. ONGC-Mittal won gas block in Trinidad-Tobago.
3. TTML won bid for coin operated telephones.
4. Government will sell 10% stake in Oil India to Oil refineries.
5. Wipro is in JV with Boeing MRO facility.
6. Government will announce new Aviation policy in this week.
7. Bisleri will enter into International markets by September.

Negative News:

1. More delay in Tata Motors 1-lakh car project due to problems in Singur project.
2. Hindustan Oil Exploration shut down well at PY-3 field.

Stock Market Analysis:

1. Central banks are pumping more money into the financial markets to save from liquidity and credit crisis in the short term but it will have negative implications in the medium to long term.

2. IFCI stake sale news will continue to give strength to this stock. Be cautious around Rs 68-69 level. IFCI should break its strong resistance level of Rs 68-69 for the future rally.

3. Reliance Communications will bounce back at any time. Accumulate this stock in SIP way.

4. Nifty may bounce back today but short term target is 4100.

5. Biggest problem is no one exactly knows the severity of Subprime market crisis. Unless this is solved, markets will continue this current volatile run. Domestic Financial Institutions are saving the market from collapse by buying in equities. Will this continue?

6. RNRL and JP Hydro will consolidate in the short term due to their vertical run-up.

7. Banking Stocks: Benefits of new ECB norms are nullified by Subprime crisis.

Best Stocks for Day Traders:

1. IFCI:
CMP: 65.3
Target: 68.

2. Reliance Communications:
CMP: 520.8
Target: 529 and 536.

3. Reliance Energy:
CMP: 748.
Target: 760.

4. Most stocks will open on positive note but gradually move down due to profit booking. Real investors should stay away from Markets up to August 16. August 15 is the last date for current hedge withdrawals.

My opinion is implications of subprime crisis are more severe than analysts’ estimates. But strong economic growth is saving the markets from melt down. It will be better to stay away from Stock markets for some more time. Short term spikes are not sustainable. August, 2007 will be remembered forever in the Stock Market history due this crisis. Sit on cash for better opportunities in blue chips in the coming days.

Note: I hve holdings in some of the stocks discussed here.

Please share your views and Stock Recommendations.

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.

Correction will continue in June due to IPOs

Markets are in the dangerous territory. DLF and ICICI IPOs will suck big amounts from markets in June. Stock markets will continue to trade in this volatile zone for another 20-30 days. If investors accumulate money, they can buy some good stocks at attractive valuations. This is the only happy news in this month. Sometimes correction is also good. Newly entered traders and investors will suffer heavy losses in this whole episode.

Dangerous news:
1. Rupee may fall below 40.50 Vs dollar on the account of increased inflows due to big IPOs.

Most significant news:

1. Slow down in the growth of coal, cement and steel sectors in the first month of current financial year.
2. Petroleum refinery and power sectors showed improvement in growth.
3. Closely watch Berger paints stock as it will announce results today.

Positive stock news:

1. Jammu & Kashmir bank is planning to list in foreign markets.
2. Reliance capital is planning to enter into i-banking.
3. Reliance gas price bids may get clearance from government shortly.
4. Strides Arco labs acquired Grandix Pharma for 100 crore.
5. Hero Honda motors will enter into 4-wheeler components business.
6. Ispat group will invest $3 billion in Bangladesh.
7. GV Films will buy 10% stake in animation company “Sanara”.
8. Yashraj films will tie up with Disney to produce animation films.
9. Yashraj films may form JV with Blackstone group to enter into exhibition business.

Negative Stock News:

1. 10% price correction in the last 6 months in housing sector.
2. Courier companies stocks will suffer heavy losses due to 40% decrease in speed post charges.
Stock advice:
1. Buy Idea, RPL, RNRL and Zee Tele on declines.

Stocks to watch out:

Patni Computers, Jammu Kashmir bank, Berger paints and Reliance.

Note: I will not publish my daily recommendations until June 14 due to busy personal work.
Happy trading.

Best Stock picks for Indian Day Traders

Indian Share markets may continue their volatility in the short term with no significant positive cues in the domestic or Global markets. Long term investors may enter into markets after impending correction. Short term traders should concentrate on few stocks especially Mid caps.

Market Sentiment: Volatile swings. IT shares may suffer heavy losses due to bad sentiment and rupee appreciation. Stocks like Reliance Capital may range-bound.

Warning News:

1. IMF said cooling effects of US subprime markets will affect other emerging markets.

2. H-1B issue: 2 US senators asked Infosys and Wipro to submit details of their workforce. Stay away from IT stocks unless Dollar appreciates against rupee.

3. Sun TV lost Rs 936 crore market capitalisation on BSE in the last 5 trading sessions.

4. Tata Tele posted unimpressive results.

5. IOC revenue loss per day on petro product sales is Rs 85 crore.

Positive News:

1. GVK Power & Infrastructure Ltd (GVKPIL), an infrastructure company, has completed a $300 million Qualified Institutional Placement (QIP).

2. Hindalco completed Novelis acquisition.

3. Moser Baer will buy 15%-20% of new releases this year.

Stock Recommendation for Medium Term Investors:

1. Bajaj Auto: Demerger of this company will enhance the value of Investors – Business Standard.

Best Stock Picks for Day Traders:

1. United Breweries: (Only on BSE)
CMP: 362
Target: 364 and 367
Stop Loss: 358
United Spirits:
CMP: 833.7
Target: 855
Stop Loss: 824
It acquired Scottish distiller Whyte and Mackay for an enterprise value of 550 million pounds

2. Reliance Industries: ( May open with very high)
CMP: 1598.5
Target: 1615 and 1634
Stop Loss: 1583
Reliance Industries made 2 gas discoveries in west coast and Krishna basin.

3. Hindustan Construction Company (HCC):
CMP: 98.2
Target: 100, 101.5 and 103
Stop Loss: 95
HCC bagged Rs. 735 crore irrigation tunnel work from Andhra Pradesh government.

4. Videocon:
CMP: 426.15
Target: 434
Stop Loss: 417
It plans to set up a LCD manufacturing unit in China.

5. Bharti Airtel: (High Risk with profit booking by investors)
CMP: 833.9
Target: 846
Stop Loss: 820
Bharti entered into Sri Lankan market. Its clash with Wal-Mart over brand usage may be dampener.

6. TVS Motors:
CMP: 62.2
Target: 63 and 64.2
Stop Loss: 61
TVS motors will launch new bike “Neo” in Indonesia.

7. Hindalco, Raymond and Moser Baer.