Investing in the equity market directly is exciting and rewarding over a long period.
But the volatility and the information overload make it a very difficult task.
It is important to understand that everyone has different financial goals and risk appetite. So the first step would be to be aware of your own financial goals and your risk profile before you take a d ip into the Stock Markets!
CERC has issued draft guidelines for tariffs for the period 2009-14. The proposed guidelines has retained the 14% ROE for tariff fixation. However, it has proposed to link incentives based on plant availability as against the earlier practice of incentive based on PLF. There has been change in depreciation charges which is aimed at avoiding front-loading of tariffs.
Fuel efficiency norms tightened. If implemented, may reduce fuel cost savings for generators like NTPC
The new guidelines propose linking incentives to plant availability as against the earlier practice of plant load factor (PLF). Several power generators including NTPC and NLC have earlier favoured incentive based on plant availability. According to them, generator can only ensure availability of the station whereas generation schedule depends on demand by the customers. Plant availability is within the control of the plant management while the generation depends on available demand from the SEBs
Stocks News
Depth and breadth of private banking space has now increased. You see significantly large private banks. And the private sector is getting market share. I feel the valuation of PSU banks continue to trade at a discount.
People are talking of reforms in financial sector in general and banks in particular. Will that increase activity in PSU bank stocks?
We have to pay for the subsidies. There is no other way than through the capital receipts. The gap can’t be filled with revenue receipts. Capital receipts can come only via disinvestment.
But, disinvestment doesn’t necessarily mean selling off. It could be like the selling of 3G licence. It could be through public sector IPOs.
Business is booming as usual. Biggest consumption and raising per capita income means they are at slight premium to the indices. From business point of view, they will feel pangs of liquidity. We are little unsure if they can quote at the non-cyclical valuations they are quoting at this point, which shouldn’t be the case
Program trading is casually defined as the use of computers in stock markets to engage in arbitrage and portfolio insurance strategies.
The term has also been defined as “a wide range of portfolio trading strategies involving the purchase or sale of 15 or more stocks having a total market value of $1 million or more” without any direct reference to the use of computers. The word “program” can be interpreted in its earlier, more general meaning of a defined and pre-arranged sequence of steps, rather than specifically a computer program.
In recent times, there has been a subset of program trading called algorithmic trading. This is when a computer program takes a large order, breaks it up into small pieces (typically 100-300 shares per piece), and gradually submits these pieces to the market.
The goal is to complete the order without other market participants realizing that a large trade is in progress, because they would change their behaviour (and thus the price) to the detriment of the program trader if they recognized a large trade.
There’s no better formula for losing money than to buy high and sell low. And data for 2008 shows people have been doing exactly this
Indian stock markets were lower by around 29% in the current year, and have since recovered around 14% from the low. Market participants cite various reasons for this performance: inflation, deteriorating macro numbers, selling by foreign institutional investors (FIIs), declining global risk appetite, and so on.
Often, I run into investors who recount their own investing experiences. Here are a few samples of varying perspectives on the stock market. First, a young graduate who has got his degree and has been working since 2003, says, “Stock markets? A place to make quick money. Hardly any downside, invest at every correction. Markets will always go up.”
Next, a gent in his late 30s who has been working for 10 years, says: “You can make money, but watch for sharp corrections, and a scam every five years.”
Third, a home maker who started investing in 2008. This lady says, “Stock markets? Stay away! The kitchen is safer! I lost money in intraday trading. Experts on the business TV channels say the markets will not rise.”
Fourth is a retired bank manager. He says, “Stock markets are highly risky! I lost money in the past, when IT stocks crashed. There’s no guaranteed income. Bank deposits are safer.”
Fifth, a gentleman in his late 40s, with a career of 20 years, says, “Stock markets are all about timing. If you time it right, you make money. If not, the volatility will kill you.”
Next, a day trader in stocks says, “I’m a daily wage earner. I leverage in futures markets. I make or break Rs 10,000 to Rs 20,000 a day.” And lastly, we have a stock market investor who says, “Buy stocks when crude oil falls, and vice versa.”
These views seem diverse, but there’s a common underlying thread: they all take an unfortunately short-term view. No one refers to stocks as a long-term wealth creation tool. The Sensex hit its 2008 intraday low of 12,595 on July 15, 2008—four days after crude oil touched its all-time high of $147/barrel. On the same day, the yield on 10-year government bonds touched a recent high of 9.55%.
Once crude oil prices started falling, due to worries about global demand and the unwinding of speculative positions, Indian markets recovered sharply. The trend to sell stocks and buy oil seems to have reversed. Oil is now 20% below its peak.
Nothing has changed significantly in the fundamentals other than sentiment and the drop in oil prices. But the stock market rallied 14% from the bottom. There could be other reasons besides oil, but crude certainly facilitated the rally. What if the trend were to reverse, so that oil prices started climbing again towards $150/barrel? Would the market fall again? If it were that easy, everyone would make money in the stock markets!
Only if the price of oil falls substantially and remains low for a long time will it translate into benefits for the economy, earnings and markets. Although crude prices are crucial to the Indian economy, it’s surprising that at every dollar drop or rise in oil, speculators take the markets up or down.
Retail investors often get carried away by short-term movements. Sometimes newer correlations between different factors emerge in stock markets, such as now, buy equity and sell oil. Such correlation trades often influence market movements in the short run, which then deviate from fundamentals.
The long-term winners are the fundamentals.
Often, stock markets are regarded as an arena for shortterm speculation, especially in a rising market. Stock markets and equity mutual funds are vehicles for long-term wealth creation. Investments in these should be made in a disciplined way, irrespective of market levels.
A retail investor should remain invested in stock markets over a few market cycles—at least five years—to create wealth. A short-term market timer is likely to lose money in the long run, unless he has the gift of predicting the future.
Goldman Sachs issued a report in 2003 predicting that India’s economy will be the world’s third largest by 2035. The report cited expected annual growth rates of 5.3% to 6.1%.Though it has been a bumpy ride as of late, India has the potential to fulfill these optimistic promises. Unfortunately, I’m about as confident in “potential” macroeconomic projections as I am in my own ability to read the future. After all, questions about economic reform, infrastructure, and education must be addressed first.
But if these projections are even close, the Indian stock market will show you the money.
China vs. India: showdown of the 21st century
The real question is: How much of these two looming giants should you have? Both are growing at accelerated rates, so it’s not a simple decision. You really need both — a good piece of China will pay off over the next few decades.
That said, I look to India to exploit an edge: its commitment to the democratic process. Yes, this may sound cliche. India’s government has long been criticized for extended periods of unremarkable reform. Yet I prefer it.
Advantage: India
Long term, India’s commitment to democracy and free markets are a massive benefit. The economies of Brazil, Taiwan, South Korea, and yes, even the United States can testify to that.
At its simplest, India is attempting to build a foundation of sustainable yet powerful growth. And it is doing it through a functional democratic process, which is accountable to its citizens.
Taking stock
When it comes down to companies, India has some specific areas of critical advantage. The IT outsourcing world has been hit before. But I think Satyam is still an intriguing investment opportunity that has been tremendously volatile as of late. The company is closing in on becoming the developing world’s first global consulting firm — similar to IBM’s (NYSE: IBM) role in the tech consulting industry. In the financial world, our Global Gains team of analysts picked up on two Indian banks (ICICI was one) that have posted strong financial performance of late. The other, HDFC (NYSE: HDB), continues to be an intriguing investment in a country that is building wealth quickly.
Attacking its own content-hungry consumers, Rediff.com has created a strong online presence that is beginning to resemble Microsoft’s (Nasdaq: MSFT) MSN site in its early years. Rediff is certainly not on the same scale of popularity or profitability yet; it may be getting there soon. If you are paying attention to SINA (Nasdaq: SINA) in China, you might want to look into Rediff.com as well.
The Finance Minister dedicated to the financial services community, a new product - Currency Futures on 29th August, 2008. And ever since, Ajay Shah is busy on the NSE web page with its live display of currency futures.
NSE hasn’t setup intra-day data release for the currency futures market. I got impatient and setup something by myself, a Unix scripting solution that polls their website. I had this up and running by the afternoon, and managed to capture 1009 distinct observations of their `market-by-price’ (`MBP’) for the near month (September) contract yesterday (from 1:41 PM to 5 PM). NSE’s term `market by price’ or `MBP’ pertains to the quantities available for both buy and sell at the best five prices. This is unprecedented transparency when compared with the history of currency trading in India. Today (3rd) I got around to looking at this data. This was Day 3 of the currency futures market, where trading had started on 29th August
Last week BSE Sensex gained 159 points or 1.1% to 14,564 and Nifty edged up 31 points or 0.71% to 4,360
Crude Oil has touched $117 now.
FII have sold worth 1176 Cr and Domestic MF has also sold around 759 Cr during the last week.
Inflation at 12.40% was lower than 12.63% for the previous week.
Central Statistical Organisation (CSO) said Gross Domestic Product (GDP) in the fiscal first quarter grew by 7.9% as against 8.8% in the fourth quarter of the last fiscal year.
Nuclear Suppliers Group (NSG) meeting begins on 4th September would give some direction to the market. Next week’s inflation numbers would be interesting and would give the real direction of the inflation numbers.
Powered by Twitter Tools.
Personal Finance 2.01 Ranjan Varma