Sensex close well above 10500 today.

Markets turn out to be bullish with strong global cues.
China announced a stimulus package to boost growth. Metals, power and capital goods stocks were the major gainers in today’s upmove.
All the sectoral indices ended in the green. BSE Metal Index surged 11.04 per cent, BSE Power Index climbed 8.36 per cent, BSE Oil&gas Index moved 6.28 per cent higher.

Sterlite Industries, up 14.16 per cent, was the standout performer in Monday’s trade. Tata Steel (12.78%), Tata Power (11.89%), Reliance Infrastructure (11.29%), Bharti Airtel (10.85%) and Hindalco Industries (9.76%) posted significant gains.

Among frontline stocks, ITC (-1.54%) and Maruti Suzuki (-0.6%) ended with losses.

Market breadth on BSE showed 1692 advances against 856 declines.
More readings ET.

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Three Indians among WSJ top 50 women to watch for this year

Led by Pepsico Chief Indra Nooyi, three Indians have made their way into the Wall Street Journal's global list of 50 women to watch for this year.

Cisco's Chief Technology Officer Padmasree Warrior and INX Media's Chief Executive Indrani Mukerjea are the other two women who made the cut.

Ranked at second spot, snacks and beverages major Pepsico Chief Nooyi is the lone Indian in the top 10. Warrior and Mukerjea are ranked at 31st and 41st positions, respectively.

At the top of the heap is Federal Deposit Insurance Corporation Chairman Sheila Bair. Barbara Desoer, who is the President, Mortgage, Home Equity & Insurance Services, at the Bank of America, is placed at the third position.

Writing on Nooyi, the publication said that confronted this year by high commodity prices, a downturn in US beverage sales, and other consequences of the souring economy, the Pepsico Chief did not shy from some bold steps.

"She has been pushing the Purchase, NY, company in new directions since arriving 14 years ago as head of corporate strategy.

"Her drive to get Pepsi to buy Tropicana and Quaker Oats helped shift the company's soda-and-potato-chip-dominated portfolio toward healthier drinks and snacks," WSJ said.

Others in the top 10 are People's Bank of China's Deputy Governor Hu Xiaolian (4th), French Finance Minister Christine Lagarde (5), Kraft Foods' Chief Executive Irene Rosenfeld (6), Temasek Holdings' Chief Hon Ching (7), DuPont President Ellen Kullman (8), Xerox Chairman Anne Mulcahy (9) and Laura Tyson (10), who is the Professor of Business at the University of California, Berkeley.
Source: - ET

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Ashok Leyland to work 3 days a week.

"Demand for commercial vehicles has fallen owing to inadequate funds for buyers and high interest costs"
India’s second largest maker of trucks, buses and other commercial vehicles by sales, Ashok Leyland Ltd has decided to halve the number of days its factories will produce vehicles to three a week, a day after its bigger rival, Tata Motors Ltd announced a three-day shutdown at its Jamshedpur unit to keep inventory levels in check.

The Chennai-headquartered Ashok Leyland said in a statement that during the last few weeks, demand for heavy duty commercial vehicles has fallen owing to inadequate funds for buyers and high interest costs. That has led it to moderate production for the next two months until December-end, the company said.

The decision, the auto maker added, has also been partially influenced by problems encountered by its suppliers as a result of power shortage in some parts of the country. Vinod Dasari, the firm’s chief operating officer, said it hopes the demand to rebound by January 2009.

The production cuts at the two firms follow lowered sales in the past few months. Tata Motors reported a decline of 29% in October 2008 sales to 19,154 units from 27,103 units in the year-ago month. The decline was mainly led by the medium- and heavy-duty vehicles, that shrank by nearly half.

Ashok Leyland reported an overall drop of of 50.2% in its sales in the same period.

Even Eicher Motors Ltd, the third largest player in terms of sales, reported an overall decline of 79% in its domestic sales in September to 1,552 units from 2,539 units, a decline of 39%. The company has yet to release its October sales numbers.

The Indian commercial vehicle industry is reeling under a slowdown in demand triggered primarily by the paucity of and high cost of vehicle financing. Some 95% of commercial vehicles sold in the country are bought or leased with the backing of vehicle finance.

“There is an intrinsic demand in the market, it’s just that there is a lack of finance,” said Siddhartha Lal, managing director, Eicher Motors.

With banks slowing on new sanctions and disbursals of commercial vehicle loans, non-banking finance companies such as Shriram Transport Finance Co. have stepped up their loan portfolio but seem to be unable to fill the void created by reticent banks, experts said.

Still, with liquidity easing in credit markets, Mahantesh Sabarad, an analyst with Centrum Broking, said he expected a reversal of the slowdown. “It’s more of a temporary phenomenon; once the liquidity situation improves, I don’t see any reason for sales to continue on a depressed note,” he said. “Operators have merely postponed and not stopped purchases.”

Despite the slowdown facing the industry, plans of multinational truck makers that got into alliances with Indian partners in the last two years remain unaffected, company executives said.

Rakesh Kalra, managing director of Mahindra Navistar Automotives Ltd, Mahindra and Mahindra Ltd’s commercial vehicle venture, said plans for starting production were on schedule for 2009. “We don’t have any plans to re-look the capital expenditure or volume plans,” he said.

Shares of Ashok Leyland fell 9.33% to Rs17.50 each, shrinking faster than the broader market. Eicher Motors closed at Rs220.40, down 2.48%, and Tata Motors shares sank 12.17% to Rs159.15 each on the Bombay Stock Exchange, whose benchmark Sensex closed down 3.86%.
Source: - Livemint

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Stock Market Investing and Gambling.

One of the biggest myth among many people is that they think stock market investing is just like gambling.
They shy off from investing as they think it is gambling.
Many of our parents and grand parents didn't invest as they thought investing is just like gambling otherwise all of them have been just like Warren Buffet. If not at lest multi-millionaire.

Meaning of Investing and Gambling.
Merriam-Webster's first definition for "invest" is : "to commit (money) in order to earn a financial return." And the second definition is "to make use of for future benefits or advantages."

What about "gamble"? The first meaning is "to play a game for money or property" and the second is "to stake something on a contingency."

Some say it (Investing) is very much like gambling. While some say its myth comparing stock markets with gambling.
What I feel - In true sense if you go and see investing is buying the stock buy predicting the future (fundamentally or technically)with a sole aim to earn a profit. While in gambling you cant predict any future , people blindly put money without knowing the future.

There are some important differences here, though. Investment brokers may live off salaries or commissions, but the day trader depends directly on the market for income. The gambler may have a lot of good days, but the bad week will sap the earnings from a few good days. There is no doubt that the psychology behind gambling and active trading seems alarmingly similar, while gambling is considered illegal and illicit in many parts of the world, or at least looked down upon, day trading is mysterious and high sounding.

My point is that if you study the trends of the stock market, you can always gain with minimal (if any) loss. Gambling precludes some level of loss (and hopefully gain) -- even the best poker players have lost money, although they feel that their skills can outwit most casual players.

The other difference is the expectation. Gamblers don't go to Las Vegas with $100 hoping to come back with $115. They want to double or triple their money quickly. Investing is slower. You hope to double or triple your money, but over decades, not minutes or hours.

Markets depend on trends . Gambling is to go by flow.
Study and knowledge in markets is essential. In gambling a good knowledge base is not required , it depends on luck.

PS - At the end I wont say stock market is not gambling , a bit of it is gambling i.e. Day trading. There are speculators (gamblers) in stock markets who may act as a bear or even a bull which affect the price of the stock on a high level.
Take for an instance a few week ago rumors for ICICI bank becoming bankrupt were spread by a broker in Mumbai. So he speculated the stock price.

Shying of investing in Stock is knot done. Warren Buffet became rich by investing. So can you.

Happy Investing.

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Nifty,Sensex end 3% up as rate sensitives soar.

Equities surged to close sharply higher on Tuesday as aggressive buying emerged in realty, banking and power stocks in the last hour of trade.
In a meeting with the finance minister P Chidambaram, PSU bankers reached a consensus to cut interest rates on advances by 75 basis points, while on deposits by 50 bps, say reports.

Bombay Stock Exchange’s Sensex closed at 10,668.45, up 330.77 points or 3.20 per cent. The index touched a high of 10,668 and low of 10,116.22.

National Stock Exchange’s Nifty ended at 3151 up 3.52 per cent. The broader index touched an intra-day high of 3152.30 and an intra-day low of 2985.

BSE Midcap Index was up 2.88 per cent and BSE Smallcap Index moved 2.90 per cent higher.

DLF (17.13 per cent), Jaiprakash Associates (9.58 per cent), Ranbaxy Laboratories (9.27per cent), Tata Power (8.47per cent) and ITC (8.45 per cent) were the top Sensex gainers.

Satyam Computers (-7.41 per cent), TCS (-7.38 per cent), Wipro (-4.80 per cent), Infosys Technologies (-3.32 per cent) and Sterlite Industries (-2 per cent) were the losers.

Market breadth was positive on the BSE with 1806 advances and 782 declines.

Source: - ET
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A cool site on the Indian Stock Markets.

We see many blogs coming and many blogs disappearing every day.
I recently came across a site called Stockezy.com
A brilliant and a clean site on Indian Markets.
Every one has a Tip , New and an Opinion thats what I like in Stockezy that a common person can share it over there.

Firstly to get started you need to register. Click Here to register.
Then you can submit Stock Tip , News & Opinion.
More over it has an excellent Portfolio manager and all that for free.
It has a high quality of Stock quote provider with good decent charts.
I compare stockezy better than stockbuddy and various other sites.
The portfolio manager can be compared with various sites such as myiris , rediff and many more.

Happy Investing.

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India VIX: Volatility Index

VIX is a measure of the implied volatility of Nifty 50 Index Option prices over the next 30 day period. It is an estimate of investor sentiment and is a helpful indicator of the amount the market is expected to "fluctuate" in the near term. Higher the implied volatility, higher the India VIX value and vice-versa.

How to interpret VIX?

The VIX is quoted in terms of percentage points and translates, roughly, to the expected movement in the Nifty 50 Index over the next 30-day period, on an annualized basis. For example, if the VIX is at 15, this represents an expected annual change of 15%; thus one can infer that the index option markets expect the Nifty 50 to move up or down over the next 30-day period. That is, if, for example, the Nifty 50 is currently at 100, then the estimated 30-day change in the Nifty 50 will be within 4.3 points up or down.

Interpret VIX on graph.
Click here.

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First Step - By Share Khan.

The new bees in markets can always check out and get a free E- Book from Share Khan (Stock Broking) Just by filling a simple form Click here.
Its interesting to read and understand.

- Chirag.
Happy Diwali.

P.S - First Step is a Unique program for those who are new to investing.

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Sensex recovers more than 850 points from days low.

Equities staged sharp recovery on Monday but still closed in the red. Major recovery was seen in real estate and oil&gas stocks while auto and FMCG stocks ended with major losses.

Bombay Stock Exchange’s Sensex bounced from intra-day low of 7,697.39 to end 2.07 per cent or 180.49 points lower at 8,520.58, down.

National Stock Exchange’s Nifty ended at 2532.4, down 51.60 points or 2 per cent. The index touched an intra-day low of 2,252.75.


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More companies show fall in profit, losses in Q2

The tide for Indian firms seems to be turning. As much as 41 per cent of companies announcing their second-quarter results have registered a drop in profit.

From the sample size of 657 companies, 218 firms have shown a drop in profit, while 51 firms reported losses against profits in the corresponding quarter of the previous year.

The net profit of 218 firms dropped 30.5 per cent and net sales rose at a slower pace of 17.7 per cent. In contrast, these firms saw net profit growth of 19.23 per cent on net sales growth of 18.69 per cent for the quarter ending September 2007.

Apart from slower sales growth in sales, rising input costs seem to have narrowed the operating margins of these 218 companies fully 592 basis points from 21.25 per cent in the quarter ending September 2007 to 15.33 per cent in the same quarter of 2008.

Companies reporting losses in the second quarter have registered a combined loss of Rs 669 crore against Rs 724 crore in the corresponding quarter of the previous year — and a net profit of Rs 734 crore in the first quarter of the current fiscal year.

Most of this quarter’s loss-makers are firms in sectors like automobiles, cement, metals, the media, capital goods and fertilisers, which were hard hit by rising input costs that could not be offset by price increases.

Ambuja Cement, Hindustan Zinc, Grasim Industries and Bharat Heavy Electricals are among the heavyweights that have suffered on account of rising input costs.

Ambuja Cement, now part of the Holcim group, admitted that its performance was affected mainly due to rise in the cost of coal, freight and fly ash. The firm was unable to pass on the higher costs to consumers under pressure from the government, which was attempting to rein in a sharp rise in inflation.

Power and fuel costs, which increased a steep 35 per cent, seemed to have contributed the most to the margin contraction.

Hindustan Zinc was affected by a decline in zinc and lead prices by around 40 per cent each on the London Metal Exchange. At the same time, mining and manufacturing expenses rose from 14.3 per cent of revenues in the second quarter of previous year to 29.4 per cent this year due to a sharp increase in power and fuel costs, mainly because the company imports thermal coal on a spot basis.

Overseas debt, mostly external commercial borrowing (ECBs), foreign currency convertible bonds (FCCBs) and hedging of export revenue and dollar are among some other factors that have hurt companies like JSW Steel, Maruti Suzuki, GTL, Jubilant Organosys, Wockhardt and Cipla, among others.

JSW Steel had to set aside Rs. 268.35 crore for exchange loss on account of the depreciation of the rupee against various foreign currencies. Finolex suffered forex and derivative losses of Rs 59.1 crore and commodity hedging related losses of Rs 1.9 crore primarily for importing raw material.

Wockhardt provisioned Rs 55.32 crore for currency rate fluctuation and Rs 1.09 crore for interest rate derivative losses.

HT Media, which registered an 18 per cent rise in net sales, saw its net profit decline 49 per cent due to high raw material costs, including higher newsprint prices and also because of a jump in advertising costs. The media company stepped up advertisements to promote its Delhi edition.

INDIA INC FEELS THE PINCH (% change)
	Growth in sales		Growth in net profit		Operating margins
	Q1 08-09	Q2 08-09	Q1 08-09	Q2 08-09	Q1 08-09	Q2 08-09
Total sample (657 cos)	30.16	30.22	7.77	5.74	18.03	17.18
Rise in profit (311 cos)	32.69	34.95	18.01	28.50	19.96	19.97
Decline in profit (218 cos)	20.03	17.74	-19.08	-30.51	17.12	15.33
Profit to loss (51 cos)	53.16	39.45	-12.75	loss*	8.21	1.23
Loss to profit (30 cos)	21.48	36.93	1633.07#	Profit (p)	10.94	10.31
Both quarter losses (47 cos)	14.31	27.85	Profit (l)	Loss (b)	-3.80	-2.96
*Net loss of Rs 669.16 crore against net profit of Rs 724 over Q2 2007-08 Profit (p) net profit of Rs 96.52 crore vs net loss of Rs 67.75 crore over Q2 2007-08 Profit (l) net profit of Rs 198.77 crore vs net loss of Rs 234.25 crore over Q2 2007-08 loss (b) net loss of Rs 435.09 crore vs net loss of Rs 247.16 crore over Q2 2007-08 #Net profit of Rs 100.05 crore for the quarter ended June 2008 against Rs 6.35 crore for the quarter ended June 2007

Chennai Petroleum reported a loss of Rs 100 crore on account of weak refining margins of $1.7 per barrel. The refiner also suffered losses of Rs 190 crore on crude purchases and lower refinery throughput of 2.3 MMT compared with a run-rate of 2.7 MMT on account of a maintenance shutdown.

Jubilant Organosys reported net loss of Rs 69.57 crore, having set aside Rs 174.19 crore for FCCB-related exchange losses and other cash charges.

Source: - Business Standard.

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BSE not likely to break 8,000 levels.

Technical analyst, Vishwas Agarwal while commenting on the market said, ``Due to global cues and continuous withdrawal of FIIs, Indian markets have crashed. High value erosion in equity prices shattered confidence of equity market participants. Every one has lost hope in equities on account of one and half month panic in markets.``

``No one knows the bottom of the markets and where it will stop. Investors have lost huge money hence they are unable to participate in next up move. Presently no one wants to enter equity market despite having liquidity due to lack of trust in the market, ``added Agarwal.

Agarwal expects BSE will not break 8,000 levels and some foreign investment buying will come around these levels.

Source: - MyIRIS.Com

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Big bull keeps faith in stocks

Jhunjhunwala increases stakes in some companies despite market slump

Small investors may have given up hope on stocks, but the big bull is unperturbed. Billionaire investor Rakesh Jhunjhunwala and his wife Rekha have increased their stake in five companies at a time when 'buying stocks' has gone out of fashion.
The companies in which the Jhunjhunwalas have increased their stake in the quarter ended September 30, 2008, included Praj Industries, Lupin, Nagarjuna Construction, Autoline Industries and Geometric.
All of these stocks, except Lupin, delivered negative returns during the last quarter. Shares of Lupin gained about 8 per cent, while those of Praj Industries (down 19.89 per cent), Nagarjuna Construction (down 29.03 per cent), Autoline Industries (down 27.26 per cent) and Geometric (down 5.92 per cent) ended the quarter ended September 30 in red.
Jhunjhunwala, who is considered one of India's most successful stock market investors, is known to make investments in companies during early stage and hold them for a long duration.
For instance, shares of Karur Vysya Bank were bought by Jhunjhunwala way back in 1992. A chartered accountant by profession, the Forbes magazine had named him as the 51st richest Indian in 2007.
Jhunjhunwala and his wife retained stake in 15 of 24 companies, in which they have more than 1 per cent holding, in the last quarter. The list included companies like Crisil, Punj Lloyd, Bilcare, Pantaloon, Bhusan Steel, Viceroy Hotels, Prime Focus, Rishi Laser, Dwarikesh Sugar, MRO TEK, JB Chemicals, Alphageo, Mid-day Multimedia, Agrotech and Garware Wall Ropes.
There were four companies in which the Jhunjhunwalas have decreased their stake in the last quarter. In Titan Industries, their stake has come down from 8.98 per cent as of June 30 to 7.99 per cent as of September 30. The big bull also trimmed his stake marginally in Geojit Financial (from 8.60 per cent to 8.59 per cent), Karur Vysya Bank (from 4.62 per cent to 4.44 per cent) and Provogue (from 1.66 per cent to 1.63 per cent) in the last quarter.
When Financial Chronicle contacted the celebrated investor, he said, "I have no comment on my stock market investments."
Jhunjhunwala sees the 'mother of all bull markets' in India in another four to five years. He is also not worried about the massive withdrawal of money by the foreign institutional investors (FIIs) from the Indian stock market this year.
Stock holding above 1 per cent in a listed company is disclosed and Jhunjhunwala may be holding shares in several other companies, where his holding may be less than 1 per cent. There could also be more holdings through companies, trusts and proprietary accounts, which are not in the public domain. He also holds shares in several unlisted entities as a private equity investor.
Source: - MyDigitalFC

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Reserve Bank keeps key interest rates unchanged.

The Reserve Bank of India (RBI) credit policy did not announce any reduction in key lending rates, dimming the hopes of further infusion of any liquidity. Bankers say RBI may be waiting to see the action that the US Federal Reserve will take when it meets on October 29 and subsequently, European Central Bank, on November 3.

Bankers say that the credit policy was on expected lines as RBI had exhausted most of its ammunition in the form of a steep 250 basis point CRR cut and a 100 basis point cut in repo rate. They would rather wait and see how these measures pan out to solve the credit crisis before further cuts come in.

B A Prabhakar, executive director, Bank of India (BoI), says "the policy is on expected line. Banks, however, expected some relaxation on the prudential norms for classification of NPAs, specially for home loans (90-day limit for NPA to be reduced). At this point, RBI perhaps believes it is better not to alter prudential norms for capital adequacy."

Importers are also now allowed to borrow at higher cost from overseas.

Trade credits for importers to borrow overseas have been hiked to 200 basis points above six month LIBOR for short term loans upto one year.

N S Venkatesh, managing director and CEO of IDBI Gilts, says "RBI is moving in sync with the unfolding crisis. They have been pro-actively and swiftly managing the crisis at every stage. It may now be waiting to see what central banks, like the US Federal Reserve does before relaxing rates further.

Also, oil marketing and shipping companies will be allowed to hedge freight risk apart from the commodities risk allowed until now. In respect of other customers who are exposed to freight risk, AD banks may approach the central bank for permission on behalf of customers.

To contain the possibility of any systemic risks, a special working group has been constituted, with representatives from the RBI, banks and credit rating agencies which is expected to submit its report within three months. The group will study various types of trusts/SPVs set up by banks, management control by parent banks, related regulatory/supervisory issues and recommend a suitable supervisory framework.

Mohan Shenoi, treasurer, Kotak Mahindra Bank, said, "RBI has not ruled out any possibility of CRR cuts in future. If need arises they will review their stance and might adopt some conventional and unconventional measures to infuse liquidity. But the interest rates as of now have to remain unchanged and the bank will take at least 2 weeks to review the global and domestic conditions before easing the rates."

Source: - MyDigitalFC

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Who murdered the financial system?

Leftists claim that the global financial crisis was caused by reckless deregulation and greed. Rightists blame half-baked financial regulations and perverse incentives. Actually, the financial sector is deeply regulated, with major roles for both the state and markets. It was not one or the other that failed but the combination.

The best metaphor for the mess comes from Jack and Suzy Welch, who recall Agatha Christie’s Murder on the Orient Express. In this novel, 12 people are suspects in a murder. And 12 turn out to be guilty. What starts as a whodunit concludes as an everybody-dun-it. In the same spirit, allow me to present the 12 murderers of the US financial system.

The Federal Reserve Board

Alan Greenspan, Fed Governor in 1987-2006, was once hailed as a genius for keeping the US booming, but is now called a serial bubble-maker. He presided over bubbles in housing, credit, and stock markets. He said it was difficult to identify asset bubbles in advance, so anti-bubble policies might be anti-growth. It was better to let bubbles build, and sweep up after they burst. Bernanke, like Greenspan, ignored the US housing bubble till it burst.

US politicians

Envisioning a home for every American, regardless of income, they provided excess implicit and explicit housing subsidies. One law forced banks to lend to subprime poor borrowers. Legislators created Fannie Mae and Freddie Mac, government-sponsored entities that bought or underwrote 80% of all US mortgages, and enjoyed exemption from normal regulations. Politicians ignored Greenspan’s warning that such a dominant role for two under-regulated giants posed a huge financial risk.

Fannie Mae and Freddie Mac

They resisted regulation, and spent over $2 million lobbying legislators against any tightening of rules. As mortgagers of last resort they should have been especially prudent. But they bought stacks of toxic mortgage paper — collateralised debt obligations (CDOs) — seeking short-term profits that ultimately led to bankruptcy.

Financial innovators

Their ideas provided cheap, easy credit, and helped stoke the global economic boom of 2003-08. Securitisation of mortgages provided an avalanche of capital for banks and mortgage companies to lend afresh. Unfortunately the new instruments were so complex that not even bankers realised their full risks.

CDOs smuggled BBB mortgages into AAA securities, leaving investors with huge quantities of down-rated paper when the housing bubble burst. Financial innovators created credit default swaps (CDSs), which insured bonds against default. CDS issues swelled to a mind-boggling $60 trillion. When markets fell and defaults widened, those holding CDSs faced disaster.

Regulators

All major countries had regulators for banking, insurance and financial/ stock markets. These were asleep at the wheel. No insurance regulator sought to check the runaway growth of the CDS market, or impose normal regulatory checks like capital adequacy. No financial regulator saw or checked the inherent risks in complex derivatives. Leftists today demand more regulations, but these will not thwart the next crisis if regulators stay asleep.

Instead of keeping mortgages on their own books, lenders packaged these into securities and sold them. So, they no longer had incentives to thoroughly check the creditworthiness of borrowers. Lending norms were constantly eased. Ultimately, banks were giving loans to people with no verification of income, jobs or assets. Some banks offered teaser loans — low starting interest rates, which reset at much higher levels in later years — to lure unsuspecting borrowers.

Investment banks

Once, these institutions provided financial services such as underwriting, wealth management, and assistance with IPOs and mergers and acquisition. But more recently they began using borrowed money — with leverage of up to 30 times — to trade on their own account. Deservedly, all five top investment banks have disappeared. Lehman Brothers is bust, Bear Stearns and Merrill Lynch have been acquired by banks, and Morgan Stanley and Goldman Sachs have been converted into regular banks.

Rating agencies

Moody’s and Standard and Poor’s were not tough or alert enough to spot the rise in risk as leverage skyrocketed. They allowed BBB mortgages to be laundered into AAA mortgages through CDOs.

The Basel rules for banks

These international negotiated norms provided harmonised regulatory checks on financial excesses across countries. The first set of norms, Basel-I, was widely criticised as too rigid and blunt. So countries agreed on Basel-II, which allowed banks to use credit ratings and models based on historical record to lower the risk-ratings of many securities. This dilution of norms led to excesses everywhere. Iceland’s banks went bust holding loans/securities totalling 10 times its GDP. The dilution of risk-rating in Basel-II helped inflate the financial bubble.

US Consumers

Their savings used to be 6% of disposable income some time ago, but more recently has been zero or even negative. They have gone on a huge borrowing spree to spend far more than they earn. This excess is reflected in huge, unsustainable US trade deficits.

Asian and OPEC countries

They undervalued their currencies to stimulate exports and create large trade surpluses with the US. They accumulated trillions in forex reserves, and put these mostly into dollar securities. This depressed US interest rates, and further fuelled borrowing there.

Everybody

Consumers, corporations, banks, politicians, the media — indeed everybody — was happy when housing prices boomed, stock markets boomed, and credit became cheap and easily available. Bubbles in all these areas grew in full public view. They were highlighted by analysts, but nobody wanted to stop the lovely party. Everybody liked easy money and rising asset prices. This trumped prudence across countries.

So, forget the Left-versus-Right or regulations-versus-markets debate on the financial crisis. States, institutions, markets and everybody else was guilty.

These actors will for some years don sackcloth and ashes, adopt stiffer regulations, and listen to lectures on the virtues of prudence and restraint. But after seven-to-ten years of the next business upswing, I predict that we will once again have a new generation of bubbles, evading whatever new checks have been put in place. When everybody loves bubbles, they are both irresistible and inevitable.
Source: - Economic Times.

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Investors' loss in mkt mayhem crosses one-trillion dollar mark.

The investors' loss in the ongoing stock market meltdown has crossed the one-trillion dollar mark, a figure associated with the size of entire Indian economy and the equity market till a few months ago.

At the end of today's trading when the benchmark Sensex dropped by over 500 points, the investor wealth measured in terms of cumulative market capitalisation of all listed firms dropped to Rs 32,20,682 crore (about 650 billion dollars).

This represents a fall of over 1.1 trillion dollars from a life-time high of close to 1.8 trillion dollars (Rs 72 trillion) on January 10 the day when Sensex scaled its life time high before embarking on a downslide.

The figure is even bigger than the estimated size of Indian economy of just about one trillion dollars. India's GDP is estimated at Rs 46,93,602 crore for the latest fiscal 2007-08, which translates into about 950 billion dollars at the current foreign exchange rate.

Indian stock markets had moved out of the trillion-dollar club this July, nearly a year after joining this league.

The Sensex has more than halved from its record high of 21,206.77 points to 10,169.90 points. It even slipped below the 10,000-point mark late last week when it dropped to 9,911.32 points on October 17, its lowest in over two years.

At the end of previous year, the total market cap of all the listed companies in India stood at Rs 71,69,985 crore.

In rupee terms, the loss in the ongoing about 10-month meltdown stands at about Rs 40 trillion.

Besides, the fall in market valuation, the sharp plunge in rupee against the US currency has also contributed to the sharper fall in the Indian market's dollar valuation.

Early this year, when the market was at its peak, the rupee value stood at about 39.25 to a dollar, but it has now fallen to near 49.32 level.

Source: - Digital FC

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Sensex ends below 10k.

The Sensex slipped below 10,000 mark for the first time in over two years due to aggressive selling by funds and worries on economic slowdown also weigh down the sentiment. The benchmarks touched their new 2008 lows today. Both Sensex and Nifty touched lows of 9,911.32 and 3,046.60 respectively. All sectors traded weak. Persistent selling by foreign investors has been a major concern for the markets.

BSE Midcap and Smallcap index shed 3.07% and 2.76% respectively.

Realty sector underperformed all other sectoral indices. The counter plunged 10.25% followed by Power (8.09%) and Metal (6.12%).

Indian stock market started the day on a positive note after a fall of 2.11% on the previous working day. The 30-share index, BSE Sensex opened with a gain of 181.85 points, at 10,763.34 on Friday.

Indices Trend
		Sensex		Nifty
Period	Value	% Change	Value	% Change
1 Week	11,328.36	(11.94)	3,513.65	(12.50)
1 Month	13,518.80	(26.21)	4,074.90	(24.55)
3 Months	13,635.40	(26.84)	4,092.25	(24.87)
6 Months	16,481.20	(39.47)	4,958.40	(38.00)
1 Year	17,613.99	(43.37)	5,184.00	(40.70)

Source: - MyIRIS

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Investment strategy in troubled times.

Ajay Bagga, CEO of Lotus India Asset Management & chairman of Financial Planning Standards Board (India), shares his investment strategy for the current market scenario.

The global economic and markets landscape has gone bleak over the last 15 months.
As global stock market indices fell, there has been a procession of hedge fund failures, formidable names have gone out of existence and all investors, including the ones in the so called safe US Money market funds, have stared at dwindling portfolios and mounting losses.

Investors have responded with a massive "flight to safety."

As the third quarter of 2008 approached, the crisis exacerbated with major institutions declaring bankruptcy, merging under liquidity pressures or going under government control.

Each such announcement has caused minor market bounces, as venerable market mavens repeatedly, erroneously announced that the worst was factored into the markets already.

Given this background of the last five quarters markets, how should investors best approach a difficult environment?

The first essential is to shut out the market noise. In the short term, as Benjamin Graham taught us nearly 75 years ago, the markets are driven by sentiment. And, sentiment causes markets to over shoot both, on the way up and the way down as well.

As media and analysts shout about the end of the world from the roof tops, the smart money was making money.

Most famously, a major fixed income fund manager, who had huge positions in bonds of Fannie and Freddie, warned of a "financial tsunami" if the US Treasury failed to act decisively on these two entities, virtually pushing these two GSE’s into government controllership and pocketing $1.3 billion of gains in a single weekend.

Similarly, many long short hedge funds made gains shorting financials, till the regulators changed the rules of the game by banning shorting itself.

The second critical action item for investors is to focus on their own asset allocation plan. If an investor is saving for a retirement that is 20 years away, the present market turmoil is only a distraction.

However, someone who is already retired and living off a diminishing portfolio, needs to switch into a preservation mode.

An analysis of their own investment horizon, financial goals and risks appetite, in the present volatile and depressed price environment is an invaluable step in setting investors finances on a firmer footing.

The third action step follows from shutting out the noise and re-evaluating the asset allocation.

Investors need to widely diversify their investments. In a falling market, with the kind of unprecedented events we have been seeing, a lot of thought to be uncorrelated assets start moving in sync.

Or, there could be counter-intuitive moves in a particular category which defies logic. For example, the strengthening of the US dollar against all major currencies since July 16, despite the huge deficit creating programs of the US monetary authorities.

And one final point. Understand the fundamentals. One famous market analyst sensationalised the crisis' impact on India by calling the Indian market over-valued and stated that he would be a buyer at 6000 levels of the benchmark BSE Sensex.

Well, guess what? The expected EPS of the BSE Sensex for FY09 is between Rs 950 to Rs 1020 odd. That puts a 6000 market at 6 times 1 year forward and around 5 times 2 year forward.

And this for a $1 trillion plus output economy growing at 7% in real terms at worst, with corporate earnings growth expected at 13% to 19% for the next two years?

Well you know what, I would borrow all I can and buy all the Indian stocks I can at 6000 levels. And probably at much higher than that levels as well.

So my simple suggestion to investors would be, diversify well, study your investments well, and understand the fundamentals better.

Analysts and commentators make a living by a catchy turn of phrase. That is impressive, but watch them as just one more set of players in the game of life.

Your money and its growth are far too important to trust it to the talking heads and fortune tellers.

Yes things look extremely bleak, yes we could see a multi-year economic slowdown, yes asset values will go down, most probably in sharp bursts.

Yet, all these should not radically impact your asset allocation plan. There is money to be made when there is blood on the streets.

And, to follow the Sage of Omaha Warren Buffet, investors need to be "greedy when others are fearful".

This buying low to one day sell high will work well if investors buy a diversified portfolio, in a systematic and disciplined manner over time. That is one of the best known ways to make market volatility work in your favour.

The focus on fundamentals will make the long term nature of the markets work in investors’ favour.

As Benjamin Graham completed the quote, 75 years ago, markets may behave like voting machines in the short term , but they behave like weighing machines in the long term.

Make those fundamentals count over the long term to create portfolio wealth.
Soutce: - UTVi

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Markets end red admit volatility.

Markets melted down as Sensex closed 800 points on the negative points.
We had a very poor IIP data ; Industrial Production is at 1.3 Percent compared to 10.9 Percent year-on-year (YoY).
Inflation numbers gave some relief but the relief didn't last for long.
Inflation comes to at 11.80% v/s 11.99 last week.
More over RBI cuts CRR by 150 bps which will get Rs60,00 cores in the markets adding liquidity.
Stocks which had a major plung were ICIC Bank , I Bulls and many more.

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Wall Street tumbles amid global sell-off, falls below 10,000

Wall Street tumbled on Monday, joining a selloff around the world, as fears grew that the financial crisis will cascade through economies globally despite bailout efforts by the US and other governments. The credit market remained under strain, and investors piled into government bonds. The Dow Jones industrials skidded more than 300 points and fell below 10,000 for the first time in four years.

The markets have come to the sobering realization that the Bush administration’s $700 billion rescue plan won’t work quickly to unfreeze the credit markets, and that many banks are still having difficulty gaining access to cash.

Over the weekend, governments across Europe rushed to prop up failing banks. The German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG, while France’s BNP Paribas agreed to acquire a 75 percent stake in Fortis’s Belgium bank after a government rescue failed.

The governments of Germany, Ireland and Greece also said they would guarantee bank deposits.

The Federal Reserve also took fresh steps to help ease seized-up credit markets. The central bank said Monday it will begin paying interest on commercial banks’ reserves and will expand its loan program to squeezed banks.

“These programs are going to be effective I believe,” said Rob Lutts, chief investment officer at Cabot Money Management. “Shorter term we’re in a very challenging environment that’s going to take a while.”

In the first hour of trading, the Dow Jones industrial average fell 336.43, or 3.26 percent, to 9,988.95, dropping below 10,000 for the first time since Oct. 29, 2004.

Broader indexes also tumbled. The Standard & Poor’s 500 index shed 40.26, or 3.66 percent, to 1,058.97; and the Nasdaq composite index fell 77.35, or 3.97 percent, to 1,870.04. The Russell 2000 index of smaller companies dropped 22.30, or 3.60 percent, to 597.10.

In Asia, the Nikkei 225 closed 4.25 percent lower. Europe’s stock markets also declined, with the FTSE-100 down 3.24 percent, Germany’s DAX down 5.28 percent, and France’s CAC-40 down 5.60 percent.

The anxiety was again obvious in the credit markets. The yield on the three-month Treasury bill slipped to 0.38 percent from 0.50 percent late Friday. Demand for bills remains high because of their safety; investors are willing to take extremely low returns just to have their money in a secure place.

Investors also moved into longer-term Treasury bonds. The yield on the 10-year note fell to 3.52 percent from 3.60 percent late Friday.

Source: EconomicTimes

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BNP Paribas’ 12-month Sensex target 9476

The Reserve Bank on Monday slashed by 0.50 per cent the rate of mandatory deposits that banks need to keep with it to ease the tight liquidity position, a move that may induce banks to lower commercial lending rates.

The new Cash Reserve Ratio (CRR) of 8.5 per cent will be effective from October 11 and would unlock about Rs 20,000 crore into the banking system, RBI said.

This is the first time in almost three years that the bank has relaxed its tight monetary policy stance that it had adopted to contain inflation.

The move, which comes in the backdrop of inflation easing below 12 per cent and outflow of foreign capital, is aimed at infusing more funds in the financial system.

Source: EconomicTimes

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