Sensex up 376 Points at 20445….Pre Diwali Fireworks fuelled by Coal and Wholesale Buying by FIIs….. while we Retail Indians await Diwali !

Sensex continues to seduce….is up 376 points today at 20445…Pre Diwali Fireworks fuelled by Coal perhaps !….a not so subtle reference to the Mega IPO of Coal India that opens on October 18….sentiment has to be kept sizzling

….and FIIs have already started celebrating Diwali a month or two early by intensifying wholesale buying of ‘Phatakas’ (stocks) and torching the Sensex past 20000 !…..while we Retail Indians yet await Diwali

….just think the Indian Sensex Torch has been carried by the FIIs in the relay past 20000…while most Indians have hardly participated in the Run and have just been cynical and wary spectators!….we are allowing the FIIs to ‘carpetbag’ us !

….hope you guys have got into IDBI Bank (blogged a few days ago)…it’s up smartly to Rs 158 today….and yes,IFCI too has surged past Rs 66 today

…..last Diwali I had  given just Two Safe Buys…to play a Safe Diwali…Larsen & Toubro and Gold…Both have been shining throught the year …Wonder what I’ll give this Diwali !

Cheers !

First Time we see Dichotomy between Strong FIIs Inflows and the Sensex Trend…A clear Macro Warning

SENSEX CLOSE IN 2009 : 17465..SENSEX LEVEL NOW AT 11.09 am,MAY 17,2010 : 16628

Down 367 points from Friday Close….but down 5% from 2009 Close   

  

FII EQUITY FLOWS AND SENSEX MOVEMENTS …A CLEAR DICHOTOMY IN 2010 

 Year

Net Investment US($) million

Sensex % Movement in the Year

2005

10707

42

2006

8106

47

2007

17655

47

2008 

(11974) Outflow

(52)

2009

17458

81

For 2010 till May 14, 2010

6148

(5)

 

 

 

 

 

 

 

 

 

Total FII FII Equity Investments : US $ 78.76 Billion

 

Registered FIIs :1714    Registered Sub accounts : 5369

 

India remains  a great Investment Destination…But have a look above….whenever we’ve seen huge FII Inflows,the Sensex has simply run away….in 2008 when we witnessed huge outflows,the Sensex sank,only to recover brilliantly when inflows topped US $ 17 billion in 2009

But 2010 has been a revelation…There is a clear dichotomy between FII Inflows and the Sensex…In Four and a half Months yet in 2010 we’ve seen strong FII Inflows of US $ 6.1 Billion…a strong part were in IPOs….one would have expected the Sensex to power ahead…Instead it has buckled 5% till date today from 2009 close

It’s a clear Macro Warning…India remains coupled to World Markets….the disturbing PIIIGS Solvency Scenario in Europe and the Debts and Deficits of USA continue to spook the Global World…It’s a contagion that’s being tackled

Beginning of the Year in January 2010,I had blogged that the Sensex range will remain in the 14000 to 18000 for the first part of 2010…when it touched 18000 a few weeks ago,I had given a  macro warning that we’re at the top end of the range and extreme caution should be exercise when playing the Indices or Trading…the onbly way to beat the Indices benchmark would be specific selections

Don’t get unnerved by this Volatility…it’s part of the Equity Experience….just stay focussed on Long Term Goals and Proper Asset Allocation when playing out your Strategy 

And I continue to reiterate,as I’ve been for a few years now….do consider GOLD strongly….it’s moved from US $ 650/oz to over US $ 1200/oz now….My first target was US $ 1000…it reached this late in 2009…Beginning 2010,I had said that Gold would touch US $ 1200 in 2010…it’s done so in May itself !…..My next big target is US $ 2500 inside a few years…..and then US $ 5000 !……given the huge uncertainties and poor visibilities in global economic recovery in USA,Europe and Japan…and the liquidity tightening in China to reduce fears of any Asset Bubble Formation…any Investment in Equity,anywhere in the World….and even in Debt,I daresay, should be done cautiously and with complete understanding of the Risks involved   

read more

Happy Diwali & Prosperous New Samvat 2066 Year to all….Two SS 4 Selects this Diwali…Larsen & Toubro at Rs 1700 and GOLD

Wishing all of you a Happy Diwali and a Prosperous New Samvat 2066 Year…..with Safety,Surety and Solidity…and using the terminology of our SS Recommendations may you get many spectacular and sparkling winners in your Equity Portfolio….However keeping in the spirit of a Safe Diwali 

MY TWO SAFE,SURE AND SOLID DIWALI PICKS
 
BOTH ARE SS 4 SELECTS
(SS 4 : Scriptech Shield)
 
LARSEN & TOUBRO @ Rs 1700
&
Continue to GO for GOLD
 
GOLD WILL CONTINUE TO SOAR FROM US $ 1000/oz to US $ 2500/oz IN THE NEXT TWO  TO THREE YEARS

Wish all of you a very Happy Samvat 2066….Muhurat Trading is from 6.15 pm to 7.15 pm today.Diwali is a Festival to wish safety,peace and prosperity and well being…Keeping with this spirit and philosophy of Well Being and feeling nice and warm and pure and happy and safe,my Diwali Recommendations are safe,sure and solid and will rebound even if they correct
 
Evergreen LARSEN & TOUBRO ,even at Rs 1700 and Gold
 
LARSEN & TOUBRO @ Rs 1700

 
&
 

GOLD

Reiterating again what we said in Feb 2009 and even earlier
Continue to GO for GOLD ! 
February 19th, 2009
 
I see the next Five Years as a great period for Indian Stocks and with the right selection and a good measure of patience and temperament you could well be in a position to retire rich before 2015 !….Don’t worry too much about where our Sensex is going from 17300 levels today…Think beyond the short term…and as I keep repeating,if our government can have Five Years Plans,why can’t you !…..Think 5 years
Cheers !

Sudden Fall in Equities soon !? I can Sense and Feel it…Better Hedge Equities Right away

As Wall Street slaps Washington,Dalal Street will damn Delhi too….It’s been perceived as a STIMU-LIE Package in both countries

Yesterday the DOW teetered more towards the Edge clsoing at 7466,the lowest in six years

It’s just past 2.30 pm in Mumbai and the Sensex and Nifty are struggling to stay over 8800 and 2700 respectively

I can sense and feel that soon,the Dow may just plunge 500 to 1000 points in a Day soon…we will follow as we too will test October 2008 Lows

This Intuition or gut feel is strongly supported by weakening macros fundamentals in USA particularly and the world over in general…The IMF has already stated that it expects many more countries to come to it for Bail-Outs

I was watching the classic Movie ‘Sea Biscuit’ last night on Star Movies…What a parrellel !…The Movie is about a Champion Horse and Horse Racing and is set in the times when America was devastated by the Depression of 1929…The Wealthy became Poor,literally overnight,and lost their Homes and All their Assets….they took to the Highways and settled in poorer conditions….It’s happening allover again,I daresay ! 

If disinclined to sell off equities at these low levels,atleast exercise prudence to fully hedge your equity portfolio right away

You can do this in Three Ways

  • Sell off All or Part of Equities…Hard Call at these Low levels already as Heavy Loss sitting in Portfolios…but it will give you Capital to Grasp Greater Opportunities ahead
  • by committing appropriate additional Funds and Investing in negatively or less positively correlated Investments to Equity…Silver and Gold as Alternative Investments run at the top of my mind  or
  • Go Short in Index or Specific Stock Futures or buy Protected Index or Stock Puts…by shorting Futures ,you are locking in the current value of your equity portfolio…so if the Market fall,so will the value of your portfolio…but this fall will be offset by the gains you make on your Futures Contracts that you shorted…..by buying Protected Puts,you pay the Premium to insure your Equity Portfolio from any Fall,while keeping the upside potential alive…this would seem the best strategy,if you need protection from significant downside,but don’t really have such an intense feeling or sense like I do that this will happen suddenly and soon…It is better to pay a 2%-3% Premium to protect from a 15% to 20% potential downside from here…The OPTIDX Nifty PE with Strike Level of 2700 and Market lot of 50 has a premium of Rs 47 and Rs 142 respectively for Feb 26,2009 and March 26,2009 contracts…You’ll be paying Rs 2350, that’s under 2% costs, on a contract Value of Rs 135000 for a week’s hedge and a high Rs 7100,under 5%  cost, for a month’s hedge…the underlying Nifty is 2717 and it’s just past 2.30 pm

read more

Continue to GO for GOLD !

Ever since I was convinced that USA stood for Unintelligently Searching for Answers,I have been convinced that ‘Gold’ has to be in your Portfolio

Check this blog of mine on October 23,3008 http://www.gauravblog.com/?p=263 where the Title warns whether the US $ will become Tissue paper ! and the Blog concludes with me recommending to Go for Gold

Gold has soared to US $ 976/oz and in India it’s crossed a record Rs 15500/ten grams and close to Rs 18000 for a Ten Gram Gold Coin of 99.99 purity…Just about 18 months ago,a similar coin was quoted below Rs 11000 !

With an explosion of CDOs and CDSs defaults in Trillions of Dollars expected this Year to further crash Global Economies,the US Dollar is poised to decline significantly against major world currencies

Gold was given a US $ 35/oz value in 1944 when the Bretton Woods Agreement came about and where Gold was the World Standard and Reserve Currency.In 1971 this Agreement was abandoned and the US Dollar became the World Reserve Currency….Adjusting for Inflation Gold should now have quoted at US $ 2200/oz !

Dollar goes Down,Gold Goes UP…that’s the simple equation really

Gold is marching towards US $ 2500/oz in the next two years ….Reason to be bullish on Gold are many

  • Demand swells…Contrarions have been buying Gold for some time now…Public are now seen climbing on to this ‘Gold Rush’ bandwagon…Huge Demand is seen not only in USA but even in China and India…The World Gold Council has reported that in Q 3 ended September 30,2008,Over US $ 6.5 Billion was spend on 232.1 Tonnes of Gold Coins and Bars….highest in Ten Years and up 121% from the previous year…This figure will get even more pronounced this year…Infact since July 2008,the US Mint has stopped selling the American Eagle Gold Coins as there is a shortage and a huge pent up demand 
  • There have not been any huge Gold Discoveries in Recent Times
  • Other Asset Classes,especially Equity,are being decimated and further decimation is indicated as the crisis deepens and widens…await the CDO’s and CDS’s Derivatives default Explosion…. and in times of such crisis and great uncertainty,Investors are turning to Safety and Gold
  • Gold Exchange Traded Funds are creating Demand for Millions of Ounces of Physical Gold 
  • US Dollar is declining in Value and Gold has already defacto become the World’s Currency.In fact ,since 1971,the Dollar has depreciated over 95% against Gold ! and over even lost over 90 % of it’s purchasing power against Hard currencies like the Swiss Franc and the DM,before the Euro came about.A Rising Dollar in the Longer term !? Unlikely…Scenario of Lower Interest rates and Trade and Budget Deficits will continue to put pressure…would you believe it that USA has never had a Trade surplus since mid 1970s ! 
  • Gold cannot be printed like Currency Notes…so Gold as an asset does not create any liabilities…it holds it’s monetary value over time
  • The more USA resorts to printing Currency to fund it’s crisis…in other words more the bail-outs, more Inflationary Pressures will be seen and the US Dollar will decline further in Value. M 3,that measures Currency in circulation, has shown an average 8% annual growth rate in the last 15 years ! USA,to avoid Defaulting on Sovereign Debt,would have no option but to print more currency. 
  • Unlike 1930s and 1970s,the World Stage now has major Global Players other than just  USA…the Demand for Gold will be stronger 
  • Since 2005 all World Currencies have been depreciating against Gold 
  • If Conflicts escalate in the Middle East,Afghanistan and other sensitive global pressure points,Gold will simply surge

read more

The World is becoming a Scarier place across all disciplines…Will the US $ become just Tissue paper !?

Let’s take a multi disciplinary view of the Global Financial and Economic Crisis…It’s Scary

Economics,Sociology,Politics,Sciences,Geography,History,Religon…take any Discipline and you’ll find  how Earth and it’s over six billion citizens are being impacted tragically  

I’m scared…for all of us…..I fear the next generation,my children, will have to pay too for the excesses of our generation and the previous ones

We have no say in Natural Disasters…but what about Manmade tragedies ?….. We are already witnessing the lethal dangers of Terrorism,Global Warming,Religious Bigotry,Pollution and Toxicity,Inequalities and Financial and Economic Earthquakes….the Scales are much larger than any in the past even than the Depression of 1929

So who do we Blame for all of this ?….Man’s greed to Create Wealth at Any Cost ? Capitalism ? Deregulation ?

If you target Capitalism,the Fingers point clearly at USA and England…’The Economist’ in it’s latest edition has a cover story titled ‘Capitalism at Bay’….It goes on to defend Capitalism warning that if the Confidence and Credit continue to dry up,a near-certain recession will become a depression,a calamity for everybody.

So if we believe in ‘Freedom at any Cost’,should we write of this financial and economic crisis as the ‘Cost of Freedom’ ?

Why should we agree to bailout well paid and well rewarded employees of Morgan instead of the Hundreds of Thousands of Hard Working Employees in General Motors ?  USA is asking this question

The fact is that if you actually take the pain to study USA’s Capitalism History,you will find the excesses in their system that have caused calamities every few decades

In a Nutshell USA has always been a spendthrift nation,opting to fund needs through printing more and more dollars,rather than reduce Government grants or raise Taxes.It had the cushion of Gold Reserves to do so…no longer as Value of  Dollar Notes in World Circulation far outstrips the Gold Reserves.As of September 30,2008,The US Government disclosed that the Deficit is US $ 455 Billion…it will rise dramatically as bail-out amounts are added.

The US $ is going to be Tissue Paper…It’s simply propped up because Oil Trade is yet in Dollars and US is bullying the world to keep it so…It took action overtly and covertly against those who tried non dollar Oil trade…Saddam Hussein in Iraq,Chavez in Venezuela… and is now threatening Iran who plans to open a Non Dollar Oil Trading Exchange….The moment Oil Trade begins in Non US Dollar Currency,Countries will realise that they do not need to stockpile US Dollars to buy Oil…they will swamp the market with US Dollars…USA’s only prowess now is military and it may use it to protect the US $…It’s already printed more Dollars than the value of Gold it had stockpiled against supply of arms and ammunition from Countries who participated in the World Wars initially…USA is a consumption based economy and not a Savings one like Asian Giants…USA spends US $ 107 for every US $ 100 it earns !…Ask the Fed Governor and even he will tell you he does not know the quantity of US $ Currency circulating or M3 in the World  

read more