Can we bounce back AGAIN ?

Hello Readers / Visitors,

We are back from where we started at 19 Sept'2008 as updated in our previous posts weekly charts.

Today we have updated Nifty daily charts which shows the Trendline from where we bounced last 2 times. This is the third time Markets are testing this trendline support, if we manage to sustain this levels then we can again see Nifty testing 4200 - 4400 levels in days to come else we can test previous double bottom support at 3800 levels else even lower.

Basically markets are waiting for some big news for moving up of Nuke deal, if it does then we can see pull back. In short we can say MAKE or BREAK situations for markets.

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NEW $1

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This is just imaginary view of new photographic $ after subprime & bankruptcy in United states.

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BIGGer bull run yet to come: Rakesh Jhunjhunwala

Rakesh Jhunjhunwala is India’s most successful investors; one of the stock market’s most successful stories. The sometimes maverick, often mercurial but always a respected voice. He is a wealth creator and a man who anyone who enters the stock market wants to be.

Here is a verbatim transcript of Investor and Trader, Rakesh Jhunjhunwala' s exclusive interview with Mitali Mukherjee on CNBC TV18's Wealth Creators show. Also watch the accompanying video.

http://www.moneycontrol.com/mccode/news/article/news_article.php?autono=356959

Source : CNBC-TV18

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US FINANCIAL CRISIS – A LONG AND DARK TUNNEL TO LIGHT

Hello Visitors / Readers,

Globalisation today seems like a double edged sword. If we were celebrating the big way in which major FIIs of the world were queuing up to invest in the Indian stock markets and also in major projects through FDIs, today, that same investment looks like a big burden. What we used to say with pride yesterday of “being globally aligned” seems like a curse now.

The collapse of the USA financial markets has unleashed a wave of uncertainty, we don’t know which bank or financial institution or mutual fund or insurance company might announce bankruptcy. If Lehman and Merrill could collapse, nothing more would now come as surprise, its just that people want this precipitation to get over and done with, so that we can salvage what we can from the debris and once again look at rebuilding.

For the Indian markets, this crisis of confidence is huge. We are still trying to ascertain the damage and like the rest of the world, do not know what more lies ahead. The day the news broke, there was a virtual meltdown across the board but the maximum brunt was borne by the banking, finance or NBFC stocks, realty and IT stocks. It was too early for the banks to come forth and state their damage but the markets knew that it would be substantial.

EFFECT ON INDIAN BANKS:
The worst affected is the private sector bank, ICICI Bank, its exposure is to the tune of $80 million, which it invested in Lehman’s senior bonds. The bank has issued a statement saying that it had already made provisions of $12 million on these bonds and a further $28 million worth of provisioning might be required if 50% recovery is assumed. SBI has an exposure of around $55 million (Rs256 crore) and PNB $5 million to Lehman. Bank of Baroda’s exposure is less than $10 million. Bank of India is stated to have a direct exposure of $11.33 million.

One will soon seen banks issuing statements, stating that its exposure is minimal and its impact on the profitability would not be too much. But surely, the impact would be there and profitability will take a hit. At such times, we cannot help but wonder how our hard earned money, which we park with the banks, manages to earn such losses?

EFFECT ON NBFCs:
The effect on portfolio management services is expected to be huge. Even when Bear Stearns had collapsed, there wasn’t this sense of panic and surely confidence was intact. Today, investors have lost complete faith. They are just too scared to go even bottom fishing in this market. The feeling is that this bear phase is for the long run, no one knows where the bottom is, so they feel why invest now when there might be an opportunity later? This psyche of the investors is bound to hit the business of these NBFCs. As such these NBFCs were seeing a slowdown due to lower demand from customers and challenging market conditions, The collapse just made things worse.

EFFECT ON REALTY/INFRA PROJECTS:
Now this is going to be the most troubled. Lehman and Merrill have invested through FDIs in many projects in India, in realty and infrastructure. Those projects which have received the full amount earmarked for the project are safe. But what about those, who are yet to get the promised funds? Surely their projects lay in a lurch today. Unitech has also gone on record stating that it has received Rs.740 crore and has closed the deal with Lehman Brothers. DLF Assets raised US$200 million in 2007 as equity from Lehman Brothers, the company says that the money has been received but equity is yet to be transferred. In HDIL, Lehman, through its Hong Kong subsidiary, had signed a written agreement to float a SPV for developing a project in Dharavi. That lies in uncertainty now.

Lehman had also invested $80 million in Bangalore-based SEZ Gandhi City and was likely to hike its share to $300 million. Ashok Piramal’s Peninsula Land has inked a JV with Lehman, which will have a stake of 75% is to bring in Rs.5 billion, to invest in various realty projects of Peninsula.

What happens to that now?

Lehman has a 28.41% stake in KSK Energy. The above shares are locked in for a period of one year from July 05, 2008 (the date of IPO allotment) and cannot be sold in the stock market till the expiry of the said period. But does this rule hold true when Lehman goes bankrupt?

Similarly, Merrill Lynch has taken a 12.74% in Resurgere Mines.

EEFECT ON PRE-IPO PLACEMENTS:
Apart from the projects, the biggest threat is for projects which currently seeking pre-IPO placements. With a fear psychosis gripping all, and FIIs yet to ascertain the losses on which they are sitting on, it is going to become difficult for companies, vying to set up mega projects but seeking pre-IPO placements with reputed FIIs. Lack of any takers for pre-IPO stakes would mean delays. Yes, there will be other invesors who would be willing to buy stakes but would now expect it at far below the prevailing market rates. But will that again be ecnomically viable?

Adani Power is currently looking at placing 4.4-5% stake of its equity with private equity investors. Jet Airways had planned to raise $400 million from private placement with institutions. ICICI Securities planned to offload 15% of its stake to raise $1 billion. What happens to their IPOs now?

Morgan Stanley Private Equity is to pick up a 30.4% stake in Biotor Industries for Rs.240 crore ($53 million). Will that happen now? Tata’s Ginger Hotel chain planned to offload 20% of its stake to raise $75-100 million for expansion of its no-frills hotel chain Ginger. Retail chain group – Subhiksha which also nurtures plans of going public is seeking FII investment for its 9% stake and was hoping to raise $80-100 million(Rs.400 crore). Will these investments come through?

This does not bode well for the market as it is the primary which feeds the secondary market. The primary market is an indicator of the economic activity and now, with pre-IPO funding also expected to face an uphill task, IPO markets could come to a grinding halt for some time.

AIG might have been pulled back from the brink of bankruptcy but it indicates the deep rooted trouble in the US financial markets. The collapse of Lehman and Merrill is sure to have far reaching consequences in India. We can only hope that this is the end of the dark tunnel though the road to light is dark, long and winding.



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WHO WILL GO DOWN NEXT ?

Hello Readers / Visitors,

“Who is next?”
That seems to be the biggest question and the reason for the extraordinary uncertainty prevailing in the world financial markets. Clearly the US Govt coming to the rescue of AIG did not help recoup the sentiments and the fear psychosis continued till the mid morning, after which the Asian markets and the Indian markets staged a recovery. For India, the Finance Minister coming out and assuring that India need not panic and going on record to state that Indian banks, especially the PSU banks had virtually no exposure to Lehman helped bolster the sentiments. Mr.Chidambaram stated that the Govt would be going ahead with its reform process and expected the Indian economy to grow at around 8%. Dalal Street felt assured and banking stocks were the first to recover.

Prior to this assurance from the Finance Minister, the moods remained despondent and all eyes were on developments unfolding in USA. The market has now learnt to read the signs and based on yesterday’s market data, it has emerged that Morgan Stanley was a major seller on Dalal Street. Morgan Stanley Mauritius Company, the company through which Morgan Stanley trades in India, executed block deals through P-Note transfers. It sold stocks worth Rs.871 crore. It sold 25.51 lakh shares of United Spirits at Rs.1,328 per share which was entirely purchased by Goldman Sachs. It sold 57.47 lakh shares of Pantaloon Retail at Rs 359 per share and this was purchased by Deutsche Securities Mauritius. It sold stocks of Educomp (5.32 lakh shares); Jindal saw (17.72 lakh shares); Subhash Projects (8.1 lakh shares) and all these were also purchased by Deutsche Securities Mauritius. It also sold Opto Circuits (7.53 lakh shares) to JF Eastern Smaller Companies Fund and Gujarat NRE Coke (18.31 lakh shares).

Morgan has totally invested Rs.11,200 crore in Indian stocks and this sell off yesterday, indicates that it has sold off around 8.5% of its total holdings. But the point to be noted here is that for every sale, there has been another FII buying, everyone is not just selling and running off. Doesn’t this mean that some well-to-do FIIs (a rare breed today!) are still favourably disposed towards India?

This is exactly what happened before Bear Stearns publicly announced that it was in irreversible trouble and ditto with Lehman too. These FIIs had started selling in bulk their holdings in the Indian markets, a few days before going bankrupt, trying to shore-up as much liquidity as possible. The name of Goldman Sachs also seems to keep popping up and keeping a close tab on the trades would indicate whether it too has started selling.

News on the street is that Morgan has sent out an SOS and is looking for a suitor. The one name which is coming in is of Wachovia, the fourth largest bank of USA.

Washington Mutual is also stated to be in trouble and JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co are expected to bid for parts of USA’s biggest savings and loan company. The perception on the street is that such deals which would help bail out troubled institutions would help revive some confidence back into the world markets.
The markets also started recovering on news that UK’s troubled bank – HBOS would be bailed out by Lloyds TBS for $22.2 billion. HBOS, based in Edinburgh is the largest provider of home loans in UK. There is some sense of belief that banks and institutions which could go phut, would be bought over and might not go the Lehman way. That is the only shred of optimism on the streets now. Plus of course the fact that all that is bad will happen in this week, we cannot go down any more. The big banks going bust would mean that smaller ones would also go down but this is probably the fag end of the entire sub-prime mortgage crisis.

From here, in a fortnight from now, Wall Street would never be the same and the entire world financial scene would have undergone a monumental change, liquidity pressure would be very high, and accessing capital would be a major issue and yet, with the markets being in such an oversold position, there would be smart short rallies once rebuilding starts.

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NANO – DRIVING FROM SINGUR TO DHARWAD ?

Hello Readers / Visitors,

Amidst all this looming global uncertainty, the last thing which one would want is more uncertainty on the home turf. So when right now liquidity is an issue and raising capital would pose some serious challenges, surely any company would like to avoid the additional stress caused by uncertainty over its project itself taking off due to land or environmental issues. In all this cacophony caused by the crisis in the world financial markets, all attention got completely diverted from the other domestic issues, which were earlier causes for pulling down the bourses.

The Tata Nano at Singur was one such issue, which simmers even today. It’s probably just that so much other bad news has come in that this is now passé, too small on a macro level. But yet, it remains an issue. There is now news of the company holding talks with the Karnataka Govt, for 1,000 acres of land at Dharwad, the alternate site for setting up the project. And if this happens, kudos to Tata Motors! And the country would boo West Bengal!

If Tata Motors moves out of West Bengal, in the present financially critical time, no company would want to take up anything in a State where there is so much uncertainty over getting land. Uncertainty over capital, uncertainties over land, how much more can any company take? It will surely put West Bengal on the world map, finding itself a place in the list of States to be avoided for doing business in India. If this is the plight of one of the most respected business house of India and of the most prestigious project for India, what could happen to those in the second rung? Naturally, others who are planning to set shop in that state, would now surely rethink.

One of the first companys’ to be vocal about it is Infosys. The IT company has plans to set up a software development centre in Kolkata but the companys’ Human Resources Chief Mohandas Pai said. "Singur has created a fear in the minds of India Inc. We have neither pulled out nor are planning to. We will rethink and reconsider the situation if need be." He has just said aloud what other companies in the state are feeling right now. Infosys is also again a very conservative group and they would not mouth such words, unless pushed to the corner. So when this is the sentiment of two of the top business houses of India, is there much hope for the state?

The official website of the West Bengal government calls itself a ‘Super Power’ and goes on to list the various advantages of doing business in the state. Well, at this juncture, we can only say, “Well designed website”. Under West Bengal Industrial Development Corporation (WBIDC) various ‘Parks’ are being set up. These parks are under various stages of progress. 2,500 acres of land is required for the Mega Iron & Steel Park and though WBIDC has identified the land, it is yet to be acquired. The Biotech park requires 60 acres and yet to be acquired. The Foundry Park requires totally 924 acres of land of which 300 acres have been purchased and the balance will be purchased through a committee set up by the State Government. For the Rubber Park, about 35 acres of land has been acquired out of total requirement of 170 acres. The Knowledge Park requires 850 acres which has been identified. This is great, so much employment would be generated. But again, it’s all about land acquisition. Will these projects be able to get the required land and even if they get the land, will they manage to start work?

If Ratan Tata pulls out, immediately under threat is the existence in the state of the ancillary units in Singur. Other companies like - Tata Realty Infrastructure, Tata Metaliks and Maithon Power might also seriously rethink. Bharat Forge, which had decided to invest big time in Bengal, around Rs.6,500 crore, largely because of the Nano, is now in two minds.

Reliance Retail was to set shop in a big way in West Bengal and even after hiring people, it was forced to shut shop and sack all the 400 people who had secured employment. Its stores were attacked by supporters of left-wing parties and made it impossible for the company to continue work. Reliance Retail is doing well today despite not operating in West Bengal. So whose loss has it been?

Videocon is setting up a 3 mtpa steel plant and has drawn out an invesment plan of Rs.15,000 crore. The company has thankfully clarified that its project is on track despite the Singur controversy. The company has acquired 400 acres of some 3,500-4,000 acres required. Here, the company is approaching the farmers directly and not through Govt acquisitions. It hopes to get all the required land by December 2008. That’s, real positive attitude, hope it works!

JSW Bengal Steel project is also going ahead and is sure of keeping to its schedule. It has already acquired 4,800 acre land and expects to commission an eight million tonne per annum iron ore beneficiation unit and six million tonne per annum pellet plant in West Bengal by 2012. How did the company manage to get the land? Like Videocon, it decided to take the lead and formed a three-prong strategy. First, instead of giving the sale proceeds to the farmers, it was decided to deposit the proceeds of land sale in a bank to ensure that they get monthly income. Second - a job to each family and third - a stake in the company. This is probably what the Tatas should have done too. But those in Bengal say that Jindal was getting jittery and to hold him back, the Govt agreed to make the Salboni unit an SEZ, the place where its greenfield unit is being set up.

Jai Balaji is putting up a Rs 16,000 crore, 5 mtpa steel plant, including a 3 mtpa cement plant and 1,214 MW captive power plant near Purulia and its land requirement is of 4,000 acres. 1,500 acres was to come in the first phase and this is yet to happen. Other projects facing similar situations are the Rs.16,000 crore investment from the Vedanta Group, Adhunik Steel (Rs 6,400 crore), Shyam Steel (Rs 8,000 crore) and Abhijit Steel (Rs.10,800 crore). These companies have either acquired a part of the land required or have fully acquired the land, yet right now, they are in two minds about going ahead.

Call it politicization or mishandling, the entire Tata Nano project has caused a dent on the brand image of West Bengal. If Tata pulls out, well, then God save the state! --

Source : Premium Investments

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WEEK END UPDATE

Hello Readers / Visitors,

Updating Weekly charts again where we mentioned earlier that if we sustain this trendline on weekly basis then we can see Nifty 4200 - 4400 - 4600. Also we have written that we can test 3800 levels if we break below this trendling line, In this week Nifty made low of 3799, just below 1 point of our support level of 3800 & bounced sharply & managed to close at 4245 spot levels.

Please note that all NIFTY levels are spot levels.

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Educomp Intraday chart 19 September 2008

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DEAD CAT BOUNCE 15 September 2008

Hello Readers / Visitors,

We are updating weekly charts for Nifty in live markets after markets are in full panic mode & Sensex is down by 600 odd points @ 13400 lvls & Nifty down by 200 odd points @ 4025 lvls.

In charts we have indicated a trendline from where the last bounce came, today again we are at the same level & markets are halting at this levels. If we manage to close above this trendline this week then we can see some pull back in the markets & can again test 4200 - 4400 - 4600 lvls else we can see recent bottom of 3800.

Todays sell off was mainly due to Lehman brothers filing Bankruptcy Chapter 11, Huricane storm, weak global cues , weak sentiments & continous selling from Fii's.

Lets check out few days closing to judge the trend in markets.

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