The Crash( 17.5.2006) and FII activities since then

[mahmeds2000]

Hi Amit

Its quite informative. Infact Similar article appeared in reuters which I gave in my previous posts.


Hi Ahmed
BOJ is meeting on 14th July. Remember Japan is the plcae where Sun rises first. So we will know the situation beforeclosing of Market, hopefully. Nikkei should be reacting to it. and we will be reacting to both.

It will have implication on world liquidity and less availability of cheap money for speculative investment. So there will be less froth in the market and stocks should be available at attractive prices and valuation.

This simply means that to have patience and guts to invest in highly negative environment.

The trick is to identify when bottom forming is taking place. one way to check is to scan through fundamental indicators and sectors and price volume history. value investing or opportunity investing is almost always in negative ti neutral environment. Trend investing is in the confirmed uptrend and sentiments are positive.


Pankaj

Thanks Dada,
Here i am posting some interesting view of one broker:

Though the Dy Finance Minister of Japan had indicated yesterday that he is not in favour of rate hike at this juncture, our powerful cartel had some different idea altogether. 11000 has become a bigger ghost for market where Entire Street is talking of sell off. Well, market is still hugely oversold and stock futures position indicates no improvement in liquidity.

One bn USD stock futures except arbitrage positions mean whenever a 100 to 200 mn USD buying comes market will up by 250 points and at the same time every bout of selling in front line stocks such as ACC, G A Cement, Century, ONGC, RIL, Reliance Capital is digested and these stocks are failing to budge. Nifty future is still a deep discount and whenever market players sense that markets are consolidating and not ready to fall the short covering starts. Trend decider is still RIL which is likely to post further gains and every weakness is an opportunity to buy only.

Apart from BOJ issue, the PM resignation rumour has done a trick for the market. It is very easy in absence of any regulation in this market to break its back. Go short, trigger the rumour which gets spread across India in less than 30 minutes and when investors are even verifying the veracity break the Nifty without much volumes and positive opening to begin with means everybody on the street were long which will add to the woes by automatic squaring up. This is a dangerous game but seems to have been mastered by the operators as I have not seen any change in modus operandi for last 7 years at least. There is nothing wrong.

Volumes in B gr have started picking and at the same time A gr is showing little nervousness and therefore it is advisable to buy B gr shares instead of betting on A gr shares. Even FII buying is seen in select B gr shares which is evident from FII Sensor Data.

Remember one should be really scared when everybody is making money in the market but should be little scared when markets are going down.

wrgrds
Ahmed

 

[mahmeds2000]

Hi all,
GOOD TO READ.
Some more interesting news frmo moneycontrol:

Hello Friends,
I have been asked that I should write reasons for being bullish but seems these are new people who do not knows me/read me regularly, as I have always written reasons for my being Bullish on our market.
I am again trying to give reasons in which some may get repeated and some maybe new as I may have found some new.
Here it goes:
1)This Bull market is not due to any manupalation.This is not a HM or KP type Bull Run.This Bull run is based on strong economy.
2)We have just started our bullish run and that can't end abrubtly.There are arguements that China though growing at 9% is in Bear run for many years but they have already seen Bull run that have lasted atleast 5-6 years and we are still in the midst of it.So even if we compare our bull run with China and say that even if we grow at 9% GDP then also we have still 3 good years of bull run to go by.
3)Emerging markets like Brazil is having a supurb bull run.It's index is at 33000, Poland Warsaw is at 37000, and both country are smaller then ours and still they have this index,then what we have to put ours SENSEX is anybodies guess.
4)Most important reason for me to believe that we are in Bull Run is that as this correction has happened, at 8800 ,all the stocks prices have come down by atleast 50%.They are just like 7000 sensex and hence there is no further space to go below 8800.At this point of time investors would rather stay invested rather then sell in more then 50% down.So this has to be interrupted.
5)The Execesses has been corrected and in real sense the pirces have come to reasonable level( to me screaming buy) from where one can only buy.
6)As I have written that FII were not sellers in cash Stocks, they just sold in Futures.I have given a clipping yesterday on that, what FII did in May and June.
7)Means they have not taken out money from India.
8)Yesterday figures of day before yesterday figure came that FII bought 500cr in equity shares.See this is real buying.They have not bought in Futures.Some one wrote me that Goldman figures that came were provisional or something like that.But let me write that there is lots of warehousing going on by FII where, they do not buy shares but gives money to other entity to buy now and at certain times they will disclose it that they bought it.
9)One more point for technical analyst.One of the biggest broking house top person who is just the Master of our market(not KP or RJ)and a veteran in many terms then Kp and RJ ,said that there is not even a chance for market to go down below 9500 and this he said when market just came off form a new low of 8800.
He told this to one of my friend that, see, 9500 support has not been broken.Market didn't remain below 9500 for 3 days.It came back the very next day.Even if again market breaks this level of 9500 then also it will come back on the same day or next day, and no need to say that we are now nearing 11k.....
10)I have seen some saying that he will buy stocks at 30-40% down from here.I am surprised to hear saying like that.Do he have any idea what will be the prices at down 30-40% from here.Stocks are already down by 50% and more 30-40% means you are at 2600 level of Sensex (not Nifty).At level 2001 when Bin laden shooked USA.People just go on giving opinions withour reasons.Had they though what will happen at 90% dwown prices?
11)I think,our economy is not that bad, nor liquidity is that much gone out that we start thinking of this prices.Do we?On the contarary our economy is booming.And there are many a miles for our economy to prosper.
12)As Samir Arora eptly said in BS that one can't compare Indian Market with other emerging markets like Russia, Brazil, Korea, Malaysia,Taiwan etc.You will find only OIL companies and some logistic companies in Russia, Korea you will find more of Electronics goods company etc, while India is the only place where FII will find MNC's like Siemens, ABB,Areva T&D,Alfa Laval,Ingersol Rand,HLL,and others.And so FII can take a stake here and that will come with a premium.
He aslo claimed that Indian P/E will remain more then any peers Emerging market country.They have to get used to it.
I may have missed some more reasons , and I will write if I recall it anytime.

 

[pkjha30]

Hi Ahmed

That was quite a long write up.
From a general perspective, I agree with most of the points made by you.
You have given an interesting idea about FII doing warehousing or somebody doing proxy buy for FII. Well, this is a clear case of manipulation.

One thing is very clear that our bull run is not manipulated by people like OK or HM( are we certain,ipo scam is fresh in memory, on a smaller scale). FIIs can easily influence the prices due to their sheer size of operations.I have a feeling that bull run from Jan2006 till May 2006 was result of liquidity and FIIs jacking up prices for selling at a later date.If they worked out such a scenario then it would be easy to hegde their position in derivatives for a possible loss in CM.

On the whole bull run is based on the growth factor and the premium for India comes from many factors, as you have mentioned.The market may have seen the bottom already and may be in volatile consolidation.Initial period of consolidaton ia always volatile and market over-reacts to any rumours or hint of trouble. Main problem will still come from BOJ and Fed rate as an indciation of liquidity crisis and economy slowing down( which, ironically, Fed is trying to achieve and BOJ is trying to accelerate,different objectives with same policy, funny economics)

Investor faith is so shaken that it will take time before they return to the altar.Wise hands are busy collecting war booty.

I said earlier that we will be in the range of 9500-11000. If and when that range is broken either downward or upward, we'll be in next loop.
http://www.traderji.com/49682-post449.html

As Saint has pointed out that we need a confirmation for the primary downtrend. else we are in a secular bull market.

I think the upward journey has been interrupted but not halted. We need to cross the peak on high volumes so as to move on further. But game is that of consolidation.

Pankaj

 

[mahmeds2000]

Caution For monday:

Dow is -134 pt. approximatly 1.2% down so caution for monday.
http://indexes.dowjones.com/mdsidx/index.cfm?event=showHome
So investor sholud take caution.

Initially market was FII's driven. Now it seems to be rumers driven market .

Ahmed

 

[aca_trader]

Hi Ahmed

As Saint has pointed out that we need a confirmation for the primary downtrend. else we are in a secular bull market.

Pankaj

Even if that primary downtrend is confirmed, we will be in a secular bull market. Today the primary trend is undecisive and not the secular trend.

Best Regards,
--Ashish

 

[Saint]

As Saint has pointed out that we need a confirmation for the primary downtrend. else we are in a secular bull market.

I think the upward journey has been interrupted but not halted. We need to cross the peak on high volumes so as to move on further. But game is that of consolidation.

Pankaj

Hi Pankaj,

One wonders if this deep pullback is the start of a new primary dntrend.......but as Ashish correctly pointed out,even if we get into a confirmed primary downtrend,we are still very much in a Secular Bull Mkt.

Great thread,my friend.....wishing you all the very best as always!

Saint

 

[pkjha30]

Hi Pankaj,

One wonders if this deep pullback is the start of a new primary dntrend.......but as Ashish correctly pointed out,even if we get into a confirmed primary downtrend,we are still very much in a Secular Bull Mkt.

Great thread,my friend.....wishing you all the very best as always!

Saint

Hi Saint

Thanks for encouraging words. This is indeed a deep pullback which threatens to interrupt the party.However, I would go by the fact that secular bull run( which probably means long term uptrend across sectors) is still on.For me also primary dntrend needs confirmation. And the situation is fluctuating as told by twistedfuture as it always has.
Secular bull run has still a lot of steam left or so I believe.

Today's FII data from NSE

FII trading activity on NSE and BSE in the Capital Market segment(In Rs. Crores)
Date--- Buy Value--- Sell Value--- Net Value
10-Jul-2006 ---565.48--- 667.67--- (-102.19)

And SEBI figure

Reporting Date---Gross Purchases(Rs Crores)---- Gross Sales(Rs Crores) Net Investment (Rs Crores)---- Net Investment US($) million at month exchange rate
10-JUL-2006---- 933.10---- 1369.00---- (435.90) (94.60)

FII derivatives figure by SEBI


------------------BUY -----------SELL -------------OPEN INTEREST AT THE END OF THE DAY


INDEX FUTURES---728.31 ----1108.39 ----7825.43

INDEX OPTIONS ---141.85 ----124.17 -----1804.32

STOCK FUTURES ----340.46 ----271.91 ----7353.64

STOCK OPTIONS ----0.23 ----0.29 ----44.06

They were net seller by around 400 crs in index futures and net buyer for index options and stock options(which stocks we don't know)

In a low volume day they were coolly selling their wares.Index was up by 2.15% on low volumes which clearly indicates that it is not convincing and that things maytake turn for the worse in near future.

Mutual Funds are still net seller for the month of July by more than 800 crs.
Period----------buy-------------sell----------net
July 2006 (upto 7th)----1059.71----1923.53---(-863.82)


So together FIIs and MF are trying very hard to bring about seminal changes in the way market behaves. Gone are the days of individual operators. May be they have confined to specific small stocks byt FIIs are certainly moving the market in a big ways.

On global front

Except Indonesia and Malesia rest of the indices were up with nikkei by 1.60%

Europe was mixed but FTSE was marginally down by 0.07%

USA has started on a positive note. Investors are banking on strong corporate results, strong guidance and drop in oil prices.

Given the FED concerns and possibility of another hike has not gone away and BOJ yet to decide on rate hike, while other central banks in emerging markets trying to increase interest rates on inflation concerns, I would say for investors don't expect much from the rise on thin volumes. Its good for trading but not a good indication for investing. May be more value buys are on the way.

Selected stocks have risen and covered most of their slide now but a large number of stocks have not seen the light in this rise. So this rise is clearly concentrated to specific stocks which have show strong tendencies to stabilise at higher lavels. It also means that such stocks have been used to fuel this rise from the bottom.All stocks will not rise at the same time. I have seen the tendencies that during different periods different stocks lead the sensex or cause the down fall or moderation.

This is a general comments on the dynamics of the market from lay user's perspective.The upshot of all this is that while market may go up on thin volume it needs to cross the peak with high volumes or rise on high volumes to be convincing. It may be prelude to further testing of recent bottom.

The sign would be decreasing volatality on low volumes which would indicate
that supply of stocks at the current level is reducing and stock may brace for a change in direction on high volumes.At this juncture, global sentiments would play a role along with FII activities, simply their decision is not influenced by local factors but by global factors.

Global cues are still negative .

Other variables would be strong result and strong guidance, oil prices, reduction in inflation, higher economic growth in the quarter( this might lead to increase in FED rates due to increase in inflation--- here we have one paradox.)

I would say let sensex test another round of bottom. If it survives than it will be perhaps an indication of strength.



Pankaj

 

[Saint]

Hi Saint

Thanks for encouraging words. This is indeed a deep pullback which threatens to interrupt the party.However, I would go by the fact that secular bull run( which probably means long term uptrend across sectors) is still on.For me also primary dntrend needs confirmation. And the situation is fluctuating as told by twistedfuture as it always has.
Secular bull run has still a lot of steam left or so I believe.

Today's FII data from NSE

FII trading activity on NSE and BSE in the Capital Market segment(In Rs. Crores)
Date--- Buy Value--- Sell Value--- Net Value
10-Jul-2006 ---565.48--- 667.67--- (-102.19)

And SEBI figure

Reporting Date---Gross Purchases(Rs Crores)---- Gross Sales(Rs Crores) Net Investment (Rs Crores)---- Net Investment US($) million at month exchange rate
10-JUL-2006---- 933.10---- 1369.00---- (435.90) (94.60)

FII derivatives figure by SEBI


------------------BUY -----------SELL -------------OPEN INTEREST AT THE END OF THE DAY


INDEX FUTURES---728.31 ----1108.39 ----7825.43

INDEX OPTIONS ---141.85 ----124.17 -----1804.32

STOCK FUTURES ----340.46 ----271.91 ----7353.64

STOCK OPTIONS ----0.23 ----0.29 ----44.06

They were net seller by around 400 crs in index futures and net buyer for index options and stock options(which stocks we don't know)

In a low volume day they were coolly selling their wares.Index was up by 2.15% on low volumes which clearly indicates that it is not convincing and that things maytake turn for the worse in near future.

Mutual Funds are still net seller for the month of July by more than 800 crs.
Period----------buy-------------sell----------net
July 2006 (upto 7th)----1059.71----1923.53---(-863.82)


So together FIIs and MF are trying very hard to bring about seminal changes in the way market behaves. Gone are the days of individual operators. May be they have confined to specific small stocks byt FIIs are certainly moving the market in a big ways.

On global front

Except Indonesia and Malesia rest of the indices were up with nikkei by 1.60%

Europe was mixed but FTSE was marginally down by 0.07%

USA has started on a positive note. Investors are banking on strong corporate results, strong guidance and drop in oil prices.

Given the FED concerns and possibility of another hike has not gone away and BOJ yet to decide on rate hike, while other central banks in emerging markets trying to increase interest rates on inflation concerns, I would say for investors don't expect much from the rise on thin volumes. Its good for trading but not a good indication for investing. May be more value buys are on the way.

Selected stocks have risen and covered most of their slide now but a large number of stocks have not seen the light in this rise. So this rise is clearly concentrated to specific stocks which have show strong tendencies to stabilise at higher lavels. It also means that such stocks have been used to fuel this rise from the bottom.All stocks will not rise at the same time. I have seen the tendencies that during different periods different stocks lead the sensex or cause the down fall or moderation.

This is a general comments on the dynamics of the market from lay user's perspective.The upshot of all this is that while market may go up on thin volume it needs to cross the peak with high volumes or rise on high volumes to be convincing. It may be prelude to further testing of recent bottom.

The sign would be decreasing volatality on low volumes which would indicate
that supply of stocks at the current level is reducing and stock may brace for a change in direction on high volumes.At this juncture, global sentiments would play a role along with FII activities, simply their decision is not influenced by local factors but by global factors.

Global cues are still negative .

Other variables would be strong result and strong guidance, oil prices, reduction in inflation, higher economic growth in the quarter( this might lead to increase in FED rates due to increase in inflation--- here we have one paradox.)

I would say let sensex test another round of bottom. If it survives than it will be perhaps an indication of strength.



Pankaj

Great stuff as always,my friend........

Saint

 

[ravi1967]

hai pankaj, please find attached an extract from

Richard Golod
Director
Global Investment Strategies
Richard Golod is an Executive Director with Van Kampen Investments and a member of the Van Kampen Strategy Group. He is responsible for analyzing global financial and economic trends to develop actionable investment ideas


Emerging Markets
The MSCI EMF Index has dropped dramatically from its April highs. But, let’s not forget how quickly the markets advanced earlier this year.

For the past three years, I have been extremely bullish on the emerging markets, recommending an overweight position where appropriate. Above-trend global growth, excess liquidity and low valuations helped this asset class become one of the best performing asset classes—up over 160 percent for the three-year period. I also believed there was more risk getting out of this asset class too early than staying invested too late. As long as global growth and global excess liquidity were growing above trend, the emerging markets appeared to be well supported.

Despite oversold conditions and lower valuations (for example, the MSCI EMF Index is trading under 12 times 2006 estimated earnings; if Asia is excluded, the index trades at 10.4 times estimate earnings), investors should be aware of the potential risks that lie ahead. Emerging markets have become the manufacturing hub for the developed world, making this region highly sensitive to any consumer spending slowdown. In Asia, there is a tight relationship between export prices and Asian return on equity, which tends to influence stock prices. Export prices have been falling for some time and are not likely to rise if consumer spending slows.

Emerging markets also have tended to under perform (down 13 percent on average) when new orders are falling since 1993.

Moreover, the FOMC’s actions could have a considerable impact on emerging markets. Historical trends going back to 1974 have shown that, after a peak in rates, emerging markets have underperformed the global benchmark on all seven occasions over the following 12-month period. The FOMC is probably close to an end in raising rates, which does not bode well for the asset class.

Finally, one of the biggest challenges for the emerging markets might be the sudden change in global liquidity, especially from Japan. Since March, Japan’s monetary base has been collapsing as the Bank of Japan ends quantitative easing. I had expected a more gradual change, but the numbers prove otherwise. Since the monetary base in Japan is higher than that of the U.S., changes in liquidity in Japan can have far-reaching implications. Three times in the past 30 years, the monetary base declined year-on-year, and the global markets performed poorly over the following six-and 12-month periods.

If the decline in Japan’s monetary base turns out to be temporary, this could perhaps be an important buying opportunity. However, if excess liquidity continues to decline, I expect the emerging markets asset class would continue to come under selling pressure. Given the probability of further rate hikes in the U.S., investors should consider returning to a neutral or underweight allocation in this asset class, unless they have a long-term time horizon.
***************************End of extract

my comments are :

Are we missing a Good Buying Opportunity? This is a question in everybody's mind. I think that the market will slowly climb again as the Emerging Market Funds will have no place to invest except in India, as we are Fundamentally and Technically sound.
So inspite of temporary blips in Sensex, we will rise to 13000 levels in 2006 year end.But a word of caution is required.the fiscal deficit needs to be controlled.also we should take care not to invest in penny stocks and concentrate on A group stocks .
my picks are energy and FMCG stocks. reasons are :
consumer spending will continue as the salary increase this year in IT/ITES is pretty good .This may impact margins of IT companies, but FMCG will benifit.also more wealth means, more consumer goods like a/c , refrigerator, tv's and cars. this will push energy demand.
bye
ravi

 

[cooltetra]

Hi Pankaj
We are having a great meeting in chat, all my gurus except you and saint are missing.
Please join chat.

Best Regards
Coool