GauravBlog Logo

A Lion’s eye on the Bulls and Bears

“In India, companies may fall sick, but promoters rarely do!”

Gaurav's Blog


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

So should we now say that the six to nine months deadly speculative gameplay by a powerful and moneyed network of Institutions and Countries on Oil and Dollar is now over ?!…..Looks like it is…and it points to a strong corelation to the baling out of US Financial Groups by Sovereign Funds earlier this year

Watch out for all FIIs selling off Indian Stocks…especially Sesa Goa,where they hold a very high 23 % of the Equity…51% is held by the Vedanta Group…..This is the reason that Sesa Goa ex bonus should have stayed stable at Rs 175 but has been reeling under FII Selling, backed conveniently by Sell Reports from Major Brokerage and Financial Powerhouses,to fall to Rs 112 today…then should it be a Contrarion Buy ?…yes…at every decline with a six to twelve months outlook…keep a tab on how much of the 23% FII shareholding has been sold…you’ll get this figure from the company or in October when they release the shareholding pattern as on September 30,2008     

USA Collapses of Financial Powerhouses will also affect India’s Real Estate and Infrastructure Sector as Debt becomes expensive and Private Equity Funding ,avaliable only to proven promoters,will demand Placements at Poor Valuations and therefore Lower Pricing…….Project Cost and Time Delays become inevitable

India is losing Momentum and be wary of the Future…It’s going to be a very tough and tight next few quarters atleast….but for Godsake don’t lose conviction in Indian Equity…..just think long term….as Sensex tests further lows from 13250 levels today you’ll get an array of very interesting and even some exciting Investment Opportunities that in the next two to three years would turn out to be multibaggers

The common and well justified refrain,largely from Retail and High Net Worth Investors  is that where’s the Money to buy Now or at Declines?!….most are fully invested,having also reinvested Profits upto 2007 back into Equity and now are dealing with the Reinvestment Risk and Notional Loss even in Core Scrips like Reliance Industries…..Agreed…but the reality is that topping up the portfolio at very tempting valuations is a very useful strategy going forward to recoup gains…better than repositioning….Then should one sell now expecting a furher 20 % to 25% decline and buy in then ?……the decline may not be so intense from these levels and therefore it is not recommended to sell out now…However the reverse upward movement back to 18000 may play out over several months into 2009  

Selection of Specific Stocks to buy into is the key for Two to Five Bagger Gains into the next two to three years from Price ranges that these stocks may fall to in the next few weeks and months…Aggressive Players have already started moving in….I yet see some more Pain before the Gain….IFCI is one such stock…Its now below Rs 40….Rs 25 to Rs 30 will be a superb Buying Range…my network pundits have been arguing with me that I’m day dreaming on such a range actually materialising for IFCI

But then Buying Stocks at Distress Values gives you more superlative gains in the coming years than buying them at even Stress Values ! How greedy can I get !…Oh I just love these falls ! Awaiting some more ! 


Leave a Comment

Your email address will not be published. Required fields are marked *

On Key

Related Posts

Scroll to Top