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A Leading Broking House wisely closes it’s Portfolio Management Service after Clients Portfolios erode

A leading Broking House has just wound up it’s Portfolio Management Schemes

This Broking House is promoted by the promoters of a leading Indian Pharmaceutical Company who recently sold off their Stake in the Pharma co to an Asian Pharma Giant

Client Portfolios had eroded sharply from the beginning of this Year.In One Portfolio an Investment of Rs 17.3 lakhs made in the Infrastructure PMS in January 2008 had shrunk in Value to just over Rs 5.76 lakhs(including Cash on hand of Rs 76000)…that’s a straight 66% drop this year

Clients shares and cash were transfered to their Demat and Bank Accounts respectively with an advice that Shares should be retained for atleast Three Years and current losses on them should not be booked now

As 2009 looks to be a very challenging year,this Broking House may well have taken a wise decision despite portfolio and reputation loss.Clients will not have to bear Portfolio Management Costs while retaining the Shares for the long term to give them a chance to recover   

The Group is well funded with Promoters pumping in part of the Record Sales Proceeds of Billions of Dollars from their stake sale of the Pharma Co…They have finalised an Insurance Business tie up with an Overseas major in the Field as well as taken over an Existing Mutual Fund Group….They are now scouting ,it seems,for a Housing Finance Company.

Scary October 2008…Sensex Oct 1:13056….Oct 27: Down 41% to an intra-day low of 7697….Oct 31: Bounce back 27% to close at 9788 in just three trading days…..so is the worst over ?

This week began with the Sensex recording an intra-day low of 7697 on Monday and it has closed up 27% from this low  to illuminate this Diwali week by a bounce back of 2091 points

October 2008 itself has been a very scary month…The Month began on October 1,2008 with the Sensex closing at it’s highest for the month…13056…It’s been sharply downhill since then ,plunging 41% or 5359 points to a low of 7697 on October 27,2008 before closing more respectfully at 9788 on October 31,2008 

So is the Worst Over ?

Not by a Long Shot…..Action has largely been restricted to Large Cap Stocks in the Sensex and the BSE 500 with heavyweights,HDFC and RIL leading the way ,up 17.48% and 13.81% respectively

BSE Indices

Oct 31,2008

Close

Up by

% Up from previous

trading day close

Sensex

9788.06

743.55

8.22

Mid Cap

3200.02

105.54

3.41

Small Cap

3765.11

90.50

2.46

BSE 500

3570.07

219.45

6.45

Fed has cut back rate to 1%,last seen in different circumstances in 2001, and the World is moving towards a Zero Rate Quantitative Monetary Easing Policy or QMEP…even Japan,with it’s 0.5% rate is thinking of reducing it.Money Supply and not Rates will be the Control Tool. 

With Recessionary and Liquidity crunch conditions unlikely to go away soon in developed nations,their GDP Growth rates will converge to Zero %

In India,with FII OutFlows continuing to dominate proceedings,the Sensex will face a challenge trying to create it’s own independent Identity and will continue to mirror and shadow the trend in Global Indices,particularly the Dow.Over US $ 3.5 billion has been moved out by the FIIs this month alone with the year’s aggregate to date crossing US $ 11 billion. 

Also there is a perceptible Corporate Earnings Slow down and many in the Construction and Infrastructure Sector have stopped work on many Projects with Demand and Asset Prices easing considerably and increasing difficulty in Financial Closures

HCC is one such major player in this sector that has announced project stoppage.It’s share price had slipped below Rs 40 today and closed without gains at just over Rs 41…it began this week with a year low of Rs 30…It had begun the Year 2008 with the Year High of Rs 279 !

Countries have been lining up the IMF for huge Bailouts…US $ 100 billion to six countries to be decided soon,probably today

The Global Economic situation remains grim and scary…India is not decoupled to escape the consequences,nothwithstanding what our FM has been assuring us right from Sensex levels of 21000 !….The second half of FY 09 will confirm that the Earnings slow down continues in India read more

IS INDUSTRIAL RECESSION SETTING IN EVEN IN INDIA ?

Shocking IIP Nos for August 2008 were released today.On a yoy basis the overall industrial growth is a mere 1.3 % against 10.9 % 

SHOCKING IIP GROWTH FIGURES IN %  FOR AUGUST YOY

Sector Growth % in August 2008 Growth % in August 2007
Overall Industrial Growth

1.3

10.9

Manufacturing

1.1

10.7

Mining

4

14.7

Capital Goods

2.3

30.8

Consumer Durables

5.1

6.2

Clearly we are staring at a recession in India too following global slowdowns and even meltdowns

The Sensex is critical and at 12.44 pm is down 1042 points at 10286 plunging 9.19% already.The circuit is at 10% of quarter closing of 12750 and not 10% of yesterday’s closing of 11328…so watch out for a fall of 1275 points  to halt trading on BSE

RBI has announced a 150 basis CRR Cut and Infosys has lowered earnings guideline for FY 09 to to Rs 101.06 this morning

Times are clearly tough…ICICI Bank is down 26 % to Rs 335 ! just today…What is wrong here ? Will this Bank Collapse ? Is there some hole in the assets we don’t know about ?..SEBI Chairman,Mr Bhave has no answer  to the question as to what is happening in ICICI Bank…He was talking in on CNBC right now

With such poor IIP figures expect further capitulation of Equities as Corporate Earnings slow down significantly and einfact raise the ugly possibility of a reversalin Earnings growth to negative territory

So how would this affect India’s GDP ?…Clearly expect it to be revised officially downwards.It is projected to be 7.9% for FY 09 but even this recent revision will be revised downwards again…FY 10  projections will be even lower

There is increasing redemption pressure on Mutual Funds and this will lead to them offloading equities in huge quantities   

Even my 80 year old Uncle,who breathes the Stock Market daily before he even breathes in Oxygen and was born just before the Depression of 1929 and has been through it all,confesses he has never seen such financial fear and fright on this planet…and what he does not know is not worth knowing ! 

 

U S A…..United States of Abattoirs ! ….Strategy going forward

USA…What a slaughterhouse !…Bears & Sterns….Now Lehman,Merill Lynch,American International Group…all inside two days….with more to come !….Comical really…those who lived in Glass Houses were throwing stones at others…..Their Reports were always revising or even reversing estimates and projections and strategies advised earlier to justify every share price rise and fall !….how could you then sensibly move with them !…now you know why Warren Buffett prefers to be in Omaha……away from Wall Street! 

Till they threw their hands up this week they were all preaching Indian Equity Strategies in lengthy reports…messed up their own backyard and then moved on to mess up those around the world…sadly we let them…. succumbing to their pressures to open out our economy on a fast track for them to enter and play havoc…we were brainwashed to see the rose and not the thorns…we ignored the wilting,hoping that our markets would remain affected only to a limited extent by the US Contagion…we boasted of decoupling…and now as FIIs reverse flows of billions of dollars from our markets we in turn are wilting !  

Imagine if Freddie Mac and Fannie Mae,the USA Pillars of mortgage lending,  were allowed to collapse,instead of the Fed taking them over last week !…The 1929 Depression would have paled to what would have unleashed around the world

So what Now ?….Oh ! the Virus is deeply set in and only Disk cleansing and reformatting may salvage something…this would mean letting old Financial Powerhouses die out instead of baling them out…a sad and tough call but one which the Fed has taken now for Lehman

The reality is that the mortgage and other lending woes are yet to play out their strikes in full….any bale out…US $ 85 billion for an 80% stake was just announced by the Fed for the AIG Group…..will not create new jobs and new income and new business…will not be productively spend…it goes only to part fill the hole created by lending and investment loss…it will takes years to recoup and come back on healthy profit track…whether it is Citigroup or AIG

The business and sentiment shrinkage is visible in all developed economies…USA,UK,Germany,Japan and even China

Oil is now rapidly falling and is close to US $ 90/barrel…Inflation too is seen to be in a falling mode….and the rupee has dramatically depreciated 20% from Rs 39/US $ to Rs 47/US $ in no time read more

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