Wednesday, January 23, 2008

Indian stock markets collapse; take global cues

What a few weeks of trading it has been....since the beginning of 2008. The benchmark indices in India, and across-the-globe, has crashed by anywhere between 15-20%.

BSE Sensex: -17.6%
BSE Midcap: -27.5%
BSE Smallcap: -26.7%

Most retail portfolios (cash folios) are down by anywhere between 25-40%. F&O traders that were long would have lost their shirts though.

Who did what during this period:

Cum. MF Cum. FIIs Sensex
183.5 142.3
478.7 -102.2 0.8%
968.7 622.9 -0.6%
1585.3 1131.7 1.7%
1615.3 1050.8 0.6%
1627.8 2104.2 0.3%
1426.6 2378.8 0.0%
1472.9 1748.0 -1.4%
1198.7 1861.7 1.2%
647.3 2036.1 -0.5%
127.8 2261.9 -2.3%
68.3 -17.7 -1.9%
529.2 -2203.7 -0.8%
258.0 -3559.8 -3.5%
2256.2 -5985.5 -7.4%
5034.9 -10250.7 -5.0%

Clearly, global market cues and a concurrent pull out by FIIs have had a big impact on the markets. So far they have pulled out more than 2.5 billion dollars, that too in five straight trading sessions. However, a pull out of a mere USD 2.5 billion dollars is really small when one considers the overall inflows and the total market cap of Indian markets.

Where to now?

US Federal Reserve in an extreme step reduced the overnight federal funds rate by a sharp 75 basis points, to 3.25%. This has had a positive impact on most emerging markets with Brazil and Mexico recording over 5% gains overnight. Some of the major Asian markets open in the green too. Each of the three major indices - Nikkei, Hang Seng and Shanghai are currently up by anywhere between 2-5%.

Indian markets are therefore expected to open in positive territory this morning. However, will the gains sustain over the next few days? Maybe not. Given the kind of drop we've seen in the past few days, a lot of people would be looking to exit on rallies, simply to balance our their positions which are currently tottering deep in the red.

theIPOguru has a nice and apt article on "Greed and Fear". Here's the article ...

It was flattering to receive all those calls and SMS’s yesterday and again, this morning, after the stock-market did the ‘Humpty-Dumpty’ act.

Most of those of you who called had seen my article titled ‘A Sense of Déjà vu’ which appeared in the HT ( Delhi and Mumbai edition ) and was also posted on the blog.

Call it premonition, or simply the wisdom that comes with hair turning grey over the years spent at the bourses, but at the end of the day, that’s what I have believed investing is all about. Its all about Asset Allocation, Re-Balancing and lots of Common Sense.

Fundamentals cannot be ignored . As good old Abe Lincoln once said ‘ You can fool all the people, some of the time; Some of the People, all the time; But you can never fool all the people, all the time’.

Will the markets rebound after this hammering ? They certainly will. When ? Ask the FIIs ( or should it be the world’s richest brothers ? ).

Like I mentioned, fundamentals cannot be ignored forever.

So my friends, keep the faith, consider buying at successive declines and play the waiting game. The rewards will come.

Patience, like I often mention, is a great virtue.


Here's the link to the entire article.

As for me, I've been buying (with whatever little money I have...) some of the stocks that I'm bullish on:

- Crest Animation
- Monsanto India
- Dish TV
- Patel Integrated Logistics

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