Thanks Karnataka and Andhra Pradesh !….Bengaluru Equity Workshop Concludes Well

Returned late night from Bengaluru at 1 am in the morning as Flight was delayed after delivering a two day Equity Workshop at the weekend…the  eight in a series for a Broking House…It was pouring as we drove to the New Airport,50 + kms away from the City…but we had a Mad Max Driver who drove as if his life,and ours !, depended on it ! weaving at 100 kmph through stranded cars in the fast flooding roads ! and despite incessant rain whipping the windscreen…paid a ridiculous Rs 260 User Fee to access the Airport

Had gone earlier on Thursday,to spend two days at a friend’s 75 acre farm, 20 kms outside Bengaluru,on the fringe of the Bannnerghata Wildlife Park…what a great break !…could hear the silence !…had friend’s three dogs ( Small Datschund and Large Dalmatians!) all over me…Elephants and Monkeys destroy crops and so commercial farming becomes a tedious affair …tried to spot a Gharial in one of his four water harvested ponds on the farm…it had probably slipped in from the forest through the canals….relaxed company , great organic food,fresh vegetables,fresh mangoes,fresh coconut water,fresh jackfruit and fresh rains !…too short a break,though !

Then switched to workshop mode on Saturday Morning….It was truly satisfying…When I threw the House open  for any questions on Sunday ,prompt came the first one “When will you come back to Bengaluru for your next workshop !?….Thanks! Karnataka and Andhra Pradesh ! for some great participation

We had some fun discussing Valuations of Reliance Industries,Satyam and Reliance Power and even Jaiprakash Hydro among others companies…and am glad you’ll were genuine in your reactions when we played the Integrity,Insider Trading and Irrational Behaviour Scenarios

Now you know how Mumbai,Vadodora and Rajkot got excited  on Reliance Ind Valuations in March and April 2009  at Rs 1100 to Rs 1300 !…maybe I should have come to Bengaluru first !

So all of you know what is the appropriate Valuation Basis to use for Satyam…and how you can make some money on it ,based on an event based risk in June 2009 !

You are now acquainted with the Valuation Risks of Reliance Power at Rs 180 and Jai Prakash Hydro at Rs 70 !

Shanteeth,I hope we do get to 23000 + on the Sensex in 2009 itself, as you aggressively suggested at the outset of the workshop based on Technicals…though  I showed you why it looks highly improbable on Fundamentals !…glad you loved the Book I gave you “Screw it ! Just Do it! ” by Richard Branson…now pass it on so someone else enjoys it too !

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Mad ! Mad ! Mad ! Monday…Markets hit Upper Circuits again…Trading halted for the Day !

At 11.55 am,The BSE and NSE reopened after a two hour cooling period after hitting circuits on opening at 9.55 am

I’m not even in Mumbai…in Ahmedabad and feeling the Heat in more ways than One !

At 11.55 am the Sensex hit it’s second Upper Circuit at 14272.63,up 2099.21 points from Friday’s closing….up 17.24%

The Nifty hit 4308.05,up 636.40 from Friday…up 17.33%

As is the Policy ,the Markets have been now halted for Trading for the Day…This is unprecedented in our Market History

In seconds the Volumes had hit Rs 3000 crs…..My Heart goes out to all of those who had shorted the Nifty or  stocks in Futures…They have not yet been able to cover and are facing massive losses and therefore serious margin issues…They may need to sell part of their portfolios to pay off brokers…Short Sellers have been Shorted !..and How !

Tomorrow Sell at these Strong Sensex Levels….15000 +?…so quick…so soon…so much of euphoria !…it’s like the Markets were drying with the drought of 2008 and had began to recover…now the recovery is with such wet vengence on election results and  with the onset of monsoons now !…There is a GOD above…..but he’s now beginning to tell us to “Sell” !  

We must Salute the Mature and Decisive Indian Voter !…the Sensex surely will !

Not because the the Indian Voter voted for Congress….but for the simple fact that the Voter was decisive and mature in not Voting in a fractured verdict,we must salute The Indian Voter

Clearly and thankfully we will not have any king and queen makers now as the India Voter has voted strongly for a National Party

The Sensex too will salute the Voter and continue to Surge ahead on more on momentum than valuation…13000 and 14000 soon ?

 

EXIT POLLS…EXIT MARKETS ?

What’s got this Sensex so excited that it surged 50% from 8000 to 12000 in two months !?

Earnings ? Elections ?…..what’s so exciting ?

Nana Chudasama’s Banner on Marine Drive in Mumbai states ” EXCITING ELECTIONS…SURPRISES,SHOCKS,SUICIDES”…….Surely you don’t find Suicides exciting ! 

Barely had the Fifth and Final Phase of Polling closed yesterday,several Exit Polls came out fast….predictably predicting a fractured verdict…with neither UPA nor the NDA Alliance showing any significant lead….Amusingly,many Politicians,like the Communist Karat and the Samajwadi Mulayam gave sound bytes that they don’t believe in Exit Polls….The real verdict is day after tomorrow…on Saturday….when our stock markets are closed…so how will they open on Monday ?

So,what’s it going to be post Poll ?…What’s Idealogy to Opportunism ! You’re going to see blatant and pretty blunt opportunism by ALL politicians and their parties in their endeavour to be part of a governing coalition

We’re paying the Price for Capitalism…Now we will pay the Price for Democracy !….Freedom is after all our birthright ! 

As for our Stock Markets…I don’t want to be a rally spoiler….but I do think global and domestic economic woes remain heady….for one,just look at our balloning fiscal deficit and the balloning government borrowings to fund it….I’ve blogged these in detail earlier….the next government is surely going to be  really tested in it’s decisions to stimulate our Economy….Exports and Aviation are clearing begging for sops,while Cement and Banking hold out some Hope

So,with prevailing Macros,I see a Macro Sensex Valuation range of 9000-13500 and the Nifty dancing between 2500 and 4000 for the next few months,giving Multiples of 10 to 16 on expected FY 10 EPS levels of 850-900…so in a sense,I see we are currently at 10% below the top of the range and 30% from the bottom….Now,you make the Risk Call 

So in the Short Term,if you’re an addicted party animal and can’t help but party with the Sensex and Nifty ,riding the momentum with the FII Inflows of US $ Two Billion in the past two months,then make sure you leave before the party is over…Get the Drift ! 

And Remember…when you hear FII heads talking of Compelling valuations ,increasing risk appetite and Monies waiting on the sidelines….it’s all relative really !…I see more Momentum and Liquidity than Valuations currently…and riding these is riskier

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Some Wednesday Wanderings !…May’s Heat Wave causing a Lot of Bouncing !…Kingfisher Airlines Cheques…Adnan Sami…Tata’s JLR Debt woes forcing sale of TCS Shares…and our Sensex !

  • While the ‘King of Good Times’ bounces around in South Africa with his Cheerleaders cheering his ‘Royal Challengers’ in the IPL,his Kingfisher Airlines Cheques are bouncing here in India as the Airline faces more severe Royal Challenges that surely should be of a higher Priority
  • Have a look at the Times of India’s Mumbai Edition this morning…The’ve got Singer,Adnan Sami and his woes in three full blown reporting pieces on Page 1,3 and even 4 !…If you put them all together,it’s nearly a full page of Times Reporting on Adnan Sami !…They don’t even cover our PM like this ! Hey Guys ! You too have caught the ‘Bug’ Adnan Bug like his wife has !….It’s rather amusing that neither Adnan,nor his estranged wife are Indian Citizens…yet to settle their internal disputes and woes the’re using our Indian Police and Courts !…This is the beauty and graciousness of our Indian Democracy…welcoming one and all to come and use it’s facilities !….Just deport both to their own lands and see how their disputes will either be solved overnight or die a natural death quickly !…Hey ! Sami ! maybe crooning your hit song ‘Lift Kara De’ may be your prayer from out of all these woes !
  • Tata’s need to repay a bridge loan in June 2009 that was taken to part fund their purchase of Jaguar….Sigh !…yet again they have resorted to selling of part of their crown jewels !…Tata Sons have sold off 10 million shares of TCS today at Rs 627.25 to 15 different Institutions to raise Rs 627 crs…In fact in calender year 2008,TCS’s share price dropped by 44% ,twice the size of drop of competitor, Infosys….the reason was this very issue of selling pressure of  TCS shares by Tata Sons in 2008 
  •  Sensex is now 12000 and waiting for buying suckers…expect correction…the speed and scale of this 45% rise inside two months begs for it !

Sensex and Nifty up 50% in Six Months !…Where to now !

On September 27,2008,seven months ago the Sensex was 13000 and I had put up a contrarion blog http://www.gauravblog.com/?tag=contrarion-investment-strategy

I had said the Sensex is moving towards a Distress Zone and will break below 10000 to provide a great opportunity to build wealth over the coming years…so one should bring in Fresh funds to top up their portfolios and not sell 

Just a month later,on October 27,2009 the Sensex dropped below 8000,having begun the month at 13000 levels….from there,six months later on May 4,2009 it is kissing 12000,a rise of 50 % !

Yes of course,there was a problem end October 2008 with both,Cash and Conviction….. most were simply just too reluctant and resistant to add to their Eroded Equity Portfolios,lacking either one or both….but some who did,have reaped good returns…Their portfolios have recovered faster than those who just stayed put.

For example a portfolio that had eroded 50 % from Rs One crore to Rs 50 lakhs in 2008 by October 2008,infused fresh funds of Rs 25 lakhs…The portfolio would be currently, having crossed Rs One Crore,  moving towards Rs 1.25 crs,thus recovering the full portfolio erosion…If this fresh infusion was not made the erosion would yet be 25% in the portfolio,whose value would have climbed but only to @ Rs 75 lakhs…In fact many scrips that had a brilliant 2007,like IFCI that touched Rs 130,have barely recovered from their 2008 crash…IFCI has moved just from Rs 16 to Rs 27…yet a far cry from Rs 130 !…making the recovery process that much more difficult…Unitech is another prime example…

However there is great Historic precedence in the Belief that Long Term Investors should never exits Shares of Core,Strong Growing Companies…..Reliance,Larsen,BHEL…..instead on significant declines like we witnessed in 2008,fresh funds should be infused to top up portfolios…the recovery is that much faster

As I end this Blog past 1 pm,the Sensex has crossed 12000 having  surged 607 points and 5%,while the Nifty is just a shade below 3650

As I blogged last week….don’t short this market…you’re up against Momentum and Liquidity….However do blend Optimism with Caution at these levels….Our General Elections Results will be out on Saturday,May 16,2009……You get a Hung Parliament….Expect the Sensex to Hang too !

The Jury is yet out on whether this is merely a strong Bear Market Rally that may last a few months…Commodity Guru,Jim Rogers thinks so…..or it is the confirmation of a new Bull Market…Mark Mobius of Templeton,Abbey Cohen of Goldman Sachs and even Fidelity’s Head think so

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