Expected Weak Weekly Sensex Opening….drops @ 300 Points and struggling to stay over 16500…French Connection ?

Expected Weak Weekly Sensex Opening….drops @ 300 Points and struggling to stay over 16500…French Connection ? 

Socialist Francois Hollande has won the French Presidential Elections beating the incumbent Sarkozy….Hollande is against Euro Zone austerity measures and wants to renegotiate the Eurozone Austerity and Bailout Package…seeks to meet Chancellor Angela Merkel of Germany right away as top priority….He’s also going to raise taxes,focusing on the rich

Expect Eurozone to shiver as Hollande ascends Presidency…Keep a watch on USA…Dow too should be impacted

Europe should shrink further and slip into deeper recession…over 20% of India’s Exports flow to Europe…The impact will be  felt strongly….India’s current deficit is a record 4%of GDP….The Pressure on the Rupee will remain strong as our Imports cross US $ 550 Billion in FY 13….they were justa shade below US $ 500 Billion in FY 12…. while Exports,which just managed to cross US $ 300 Billion in FY 12 ,will remain inside US $ 350 Billion….the Rupee has already weakened 6% in April and threatens to cross Rs 54 to the US $ enroute to Rs 57-Rs 60 range

Interestingly hardening macros will mean softening micros…and this means opportunity at lower risk down the line

Dashing Through the Economy…Printing Currency all the Way !…Oh what Fun it is to ride on a one PIIGS Open Sleigh !… Hey ! Warning Bells ! Warning Bells ! Warning all the Way !…Santa Claus is not Coming riding on a Sleigh !

Sing this to the Tune of Christmas Carol “Jingle Bells”

“Dashing Through the Economy…Printing Currency all the Way !…Oh what Fun it is to ride on a one PIIGS Open Sleigh !… Hey ! Warning Bells ! Warning Bells ! Warning all the Way !…Santa Claus is not Coming riding on a Sleigh !”

Have a Look at this chart below (moneyandmarkets.com)  and see the crazy percentage of  Central Bank Assets as a % of the GDP in that Country

Central Banks of USA,Europe,England and Japan have printed more Currency in the past four years than in the whole of the past 50 years ,prior !….in an attempt to revive their Economies….and the result is simply not showing !…it is a matter of time that the currencies will lose their function as a ‘store of value’ 

You want a figure ! ?..it’s over US $  10 Trillion worth of freshly printed Currency pumped into the Economies in the last four years 

In 2008 USA’s FED  Assets to GDP ratio was just 6% …it’s now a record 20% !…England matches this !

Both,Japan and Europe are even more precarious…the ratio here is an unbelievable 30% !

Dangerous Levels of Printing Money to Fund Economy

PIIGS ~ Europe

Portugal,Ireland,Italy,Greece and Spain….currently the faltering Eurozone Economies…The Quantum in % of Sovereign Bonds of the Total Bonds Issued in the World stands at 40% according to S & P….In Spain the yields on Sovereign Bonds have climbed over 6% while the default hedge cost is now 5% ….The Unemployment rate is a stagerring 22% !….All PIIGS Nations have a dangerous level of Debt to GDP Ratios…Greece’s Debt is 160% of GDP…and all countries are battling recession and struggling to implement stringent austerity measures which is a prerequisite for bailout funding….social tension is the inevitable fallout….riots,strikes,demonstrations….and at an extreme can lead to anarchy…How Long can France and Germany continue to prop up the Eurozone !…they,themselves are answerable and have to counter increasing domestic challenges and arguments and debates to providing sustenance to others in the Eurozone…There is a growing fear of the Collapse of the Eurozone….inevitably countries like Greece and even Portugal may contemplate to exit the EuroZone and revert to their own or new currency and at a new exchange rate….the situation is tense and huge dollops of Bailout Funds are required over a sustained period of a few years…problem is where will such Funds come from !?….Printing Currency was the only Option left,perhaps !….Italy approached China for Funds by soliciting subscription to it’s sovereign bonds….China demanded Tangible Assets and stakeholdings in top Italian Companies !…as Bond Values can substantially be wiped off if economy continues to falter  ! read more

S & P retains BBB – Rating for India but downgrades Outlook to Negative…I’m finding it difficult to counter as it echoes ground realities !

S & P retains BBB – Rating for India but downgrades Outlook to Negative from Stable…indicating a possible down rating in the future….BBB- remains the lowest Investment grade Rating,just one notch above BB+ which is the highest Speculative Grade Rating….  I’m finding it difficult to counter as it echoes ground realities of high Current Account and Fiscal Deficits !

Sensex dropped a percent on this news earlier today and has recovered  a bit  to 17150 levels as I blog this just after 3 pm

Nearly Two years ago in May 2010 I had blogged how amusing it was that S & P continued to rate USA  as AAA…India at the time had the same rating of BBB-,as it does now, but with a stable outlook

S & P’s Sovereign Rating of USA remains at Top ‘AAA’….Amusing!

Friday, May 21st, 2010

Here is a selected and grouped compilation of the latest Standard & Poor’s Sovereign Ratings sourced from www.standardandpoors.com…what is interesting is the relatively high ratings to Ireland,Italy and Spain among the PIIGS Nations in context of the recessionary ,high debts and deficits ,low liquidity and survival issues being currently faced in the EuroZone

Selected Countries S & P Sovereign Ratings as on April 25,2012

 

Country

Local Currency Rating

Foreign Currency Rating

T & C Assessment

 

India ~ Unsolicited

BBB-

BBB-

BBB+

 

BRIC Nations

Brazil

A-

BBB

A-

Russia

BBB+

BBB

BBB

India

BBB-

BBB-

BBB+

China

AA-

AA-

AA-

 

PIIGS Nations ~ Europe

Portugal

BB

BB

AAA

Italy

BBB+

BBB+

AAA

Ireland

BBB+

BBB+

AAA

Greece

SD ~ Selective Default

SD ~ Selective Default

AAA

Spain

A

A

AAA

 

Developed Nations

USA ~ Unsolicited

AA+

AA+

AAA

UK ~ Unsolicited

AAA

AAA

AAA

Germany ~ Unsolicited

AAA

AAA

AAA

France ~ Unsolicited

AA+

AA+

AAA

Japan ~ Unsolicited

AA-

AA-

AAA

Australia ~ Unsolicited

AAA

AAA

AAA

New Zealand

AA+

AA

AAA

Canada

AAA

AAA

AAA

Netherlands ~ Unsolicited

AAA

AAA

AAA

Switzerland ~ Unsolicited

AAA

AAA

AAA

 

South & Central America

Brazil

A-

BBB

A-

Mexico

A-

BBB

A

Argentina ~ Unsolicited

B

B

B

Chile

AA

A+

AA

Peru

BBB+

BBB

A-

Colombia

BBB+

BBB-

BBB+

 

Asia

India

BBB-

BBB-

BBB+

China

AA-

AA-

AA-

Japan

AA-

AA-

AAA

Indonesia

BB+

BB+

BBB-

Thailand

A-

BBB+

A

Malaysia

A

A-

A+

South Korea

A+

A

AA-

Singapore ~ Unsolicited

AAA

AAA

AAA

Taiwan ~ Unsolicited

AA-

AA-

AA+

Phillipines

BB+

BB

BB+

Pakistan

B-

B-

B-

Sri Lanka

B+

B+

B+

Bangladesh

BB-

BB-

BB-

Turkey

BBB-

BB

BBB-

 

Africa

Egypt

B

B

B

South Africa

A

BBB+

A

Nigeria

B+

B+

B+

Kenya

B+

B+

BB-

Uganda

B+

B+

BB-

Given such Macro Negatives can the Sensex hold above 17000 in the short term with even FII Inflows reversing as Government seeks to clarify on tax with a retrospective effect  but instead creates a Fear psychosis,anger,anxiety and frustration with GAAR Measures and it’s targeting Vodaphone ?…In the Jan-March 2012 quarter the FIIs had pumped in a record Rs 41000 crs moving the Sensex from December 2011 Close levels of 15500 to Highs of 18500,only to revert back towards 17000 now

Furthermore,with the Rupee seeking to yet again depreciate further beyond Rs 53 to the US $ and thus keeping the pressure on Inflation and Interest rates, I for one,am finding it difficult to get excited or even remain spirited about macro trends in the  markets in the short term…I remain Hopeful and selective though !

Cheers ! 

Tough Macros are now reflecting in the Micros… Signs are Ominous for the Sensex at 17500 and Nifty at 5300 Levels…..

Tough Macros are now reflecting in Micros…Signs are Ominous for the Sensex at 17500 and Nifty at 5300 levels…Kindly exercise caution and utmost discretion when taking risks,especially on the long side….stop loss may be triggered….don’t be swayed by the record FII Inflows in the first three Months of Calendar year 2012…Going Short has been indicated for awhile now especially at 18500 levels a few weeks ago…Going Short Now at 17500 Sensex,therefore increases the relative risk as Liquidity Flows props up the Sensex….A Safe and Sensible strategy remains  to wait and watch and stay on the sidelines…go watch the Movies !…take that short break to the hill station or beach and prepare to enjoy the Summer Vacation…the next Four Days give you a long Weekend Break…this year too may not be any different for May…when you Sell and Go Away !

  • Global Cues….USA Fed warns yesterday that there may not be a third round of quantitative easing and therefore further Bond buying may be halted…Europe slides further into recession….China Economy decelerates sounding caution…Will it or Won’t it ~ Israel initiate all out Conflict with Iran ! ?…without awaiting USA go ahead !…Watch out for further rise in Oil then !
  • Domestic Cues…Financial reforms put on Hold as UPA does not have the Lok Sabha numbers and therefore political will to introduce these…more so as new coalition support partnerslike the Samajwadi party which swept the UP Elections last month weild increasing influence…FCCB Maturities this year may witness defaults…Suzlon,a case in point…it’s CFO just resigned…Crisil just announced that 3.4% of the Companies it covers have defaulted last year on debt repayment in FY 12…that’s  188 Companies defaulting…the highest in ten years….Banks Gross NPAs soared to 2.9% of Advances…Weak Economy and Tight Credit have been the reasons…FIIs and FDI Investments are on hold as there is confusion and lack of clarity on GAAR and the retrospective effect going back 42 years ! been announced for Tax Avoidance and Structuring Deals and issues…Vodaphone deliberating to move the United Nations on this….TCS & L & T Infotech facing huge Class Action Suits from ex employees in USA….Petrol Price Rise indicated clearly in the immediate future as Oil Companies crying Foul,Lower Oil Subsidy provided in Union Budget of FY 13  despite increasing Crude Oil Prices…Increasing fear of Government being Anti Business and keen to protect it’s PSU Fiefdoms…Changing Pricing Basis in Coal India not received well and strongly sparking off  Minority Shareholder Activism….Over 6000 Sub Brokers have not renewed their SEBI Registration….Many Members of Stock, Currency and Commodity Exchanges, who had expanded vigorously all over India and even Overseas are significantly closing or curtaling Operations to contain Costs….Equity Mutual Funds Schemes seeing lowest in Nine years Inflows and high Redemptions and therefore decreasing Assets Under Management…many Mutual Funds looking for Outright Buyers….Rupee Weakening…Interest rates refusing to ebb…Inflation ebbing may just quickly reverse trend as Oil Prices threaten to rise further…SEBI announces that Stock Exchanges can List but not on their Own Exchange and with several complex riders…Of the Nearly 1400 Private Equity Deals in the five period till 2007,not even 400 have managed an exit….the rest are stuck ,awaiting more bullish and suitable valuation times…..living in Hope  
  • read more

    “What Indian stocks should we be buying or selling ?”

    “What stocks should we be buying or selling ?” 

    Have been queried this more often in the past month or two, especially after 2012 opened with a bang and Sensex and Nifty began their 2012 Journey as if to conquer new peaks soon as record FII Inflows packed a punch ! 

    Overnight,as in any Bull run,the equity and derivative advisory websites and emailers began to come out of the woodwork like worms….”Make Money in a Day”….”We are always right”…”We earned our clients this and that in this and that strategy in stocks and indices”….the advice basis and approach could be fundamental or technical…such claims and boasts from such sites bombard your email box daily from all over India…Noida,Gurgaon, Bangalore,Hyderabad,Ahmedabad,Chandigarh,Kolkata,Chennai…and ofcourse Mumbai …you have to deal with these in addition to the plethora of Experts humming away contrasting and contradictory opinions on Stock Channels….Try Ignoring them….you’ll become wiser….Equity is Risky but never Boring ! 

    What comes to my mind is the classic song from ‘Mera Naam Joker’…… “Aye Bhai Zara Dekh kay Chalo…aage bhi nahi,peeche bhi,uppar bhi nahin neeche bhi…Aye Bhai ! ” …and quite comically too another classic song from the same movie retorts back to me ” Jeena Yaha ,Marna Yaha,Uske Siva Jaana Kaha !…”  ….that’s the addiction of Stock Markets !

    A Rational and Sensible Approach is that if you missed the early Jan and Feb run,don’t get seduced to get in now on a top down approach and play the Sensitive Indices,whether Sensex or Nifty ,or even Sector Indices like the Bank Nifty or any other….be very selective….it increasingly is a bottoms up market and Indications are that the Sensex will remain rangebound between 15000 and 19000 this year

    Yeah ! am sure you want to tap into my Selections !…Oil & Gas Sector Scrips have been hit with Subsidy burdens and additional cess pressure (Rs 4500/t from Rs 2500/t earlier) from this Budget 2012….but there is one Company that is expanding vigorously to take advantage of rising prices….I had interacted strongly with top management a few years ago….it became a good multibagger over the years….it now is positioning itself to become the world’s second largest capacity at a single place…need to interact with them again      read more

    Pranab’s Powerless Budget to Remain in Power !….Budget Speech is yet going on….over 1 hr 45 min….he remains standing while Sensex sinks from positive (up 100 points) to negative territory from yesterday to current 17600 levels

    Pranab’s Powerless Budget to Remain in Power !….Budget Speech is yet going on….over 1 hr 45 min….he remains standing while Sensex sinks from positive (up 100 points) to negative territory from yesterday to current 17600 levels

    Fill in the Blank by Choosing the correct Option

    Pranab delivers a ________ less Union Budget 2012

    1. Purpose
    2. Power
    3. Rudder
    4. Spine
    5. Reform
    6. Meaning
    7. All of the above

    Answer is 7….this was his 7th Budget and it came without any 7 year itch !

    Update just five minutes later…..

    I hour 50 minutes and Pranab ends his Budget Speech at 12.50 pm….as I had blogged yesterday I did not expect him to announce any path breaking or reformist anoouncements….I’m so sure of this mindset of a 75 + year old….Old School….Protectionist…Intend on Politicians,Parliamentarians and Bureaucrats retaining Control of Our Indian Economy which is really trying to break free to tap the great potential that India has….just look at him !….Gandhi Family Loyalty !…one more Rajiv Gandhi Scheme…this one offer Tax Breaks in Equity  to tap Retail Investors…this segment has lost serious principal in equity ! you think they would be bothered with new tax breaks !…..also retaining 51% Government Stake in PSUs while announcing a disinvestment target of Rs 30000 crs for FY 12/13…in other words Government will continue to majority own PSUs and also retain managing them and their continuing Inefficiencies !

    51 % FDI in Multi Brand Retail…”Held in Abeyance”

    49% FDI in Aviation….”under active consideration”

    Tax Exemptions and Bands marginally enhanced

    Service Tax Rate up from 10% to 12% on a more widened base

    Excise Duty up from 10% to 12%

    DTC should be implemented soon…no date given

    GST could come in by August 2012….heard this one before !

    Fiscal Deficit is 5.9% in FY 11/12 up from 4.6% from revised estimates….For FY 12/13 he has targeted 5.1%…this is high too….What if Oil Basket exceeds US $ 125 per barrel…In FY 11/12 they budgeted for US $ 90 and are facing US $ 115 !

    Food Security Bill to be fully provided for ….This is Sonia Gandhi’s pet…wonder if the  announced 2% of GDP Subsidy Target can be adhered too !…also the huge incremental of Rs One Lakh Crores in Agricultural Credit outlay to a record Rs 575000 crs may sound good…but given the scammed history of government machinery in context of leakage and corruption ,I fear and I daresay,the Government has provided more Funds for misappropriation !     read more