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Tuesday, March 19, 2013

Should the Indian Investor Panic?

"Be Fearfull when everyone is Greedy and be Greedy when others are Fearful"

Ironic that analysts who quote Warren Buffett regularly,start advising investors to hold their buy decisions the moment the market starts to go down.
 
There will always be 'black swans' as stated by Taleb but does that mean that companies growing at 6-8% YoY will suddenly halt.In the Indian context will a Tatasteel stop selling steel or a Tata Motors stop selling cars?Yes the sales QoQ basis will show a 50-100bps decline over three or four quarters.
 
Human memory always remembers the near date events.When the subprime crisis hit in 2008,it looked as if Stockmarkets and Wall Street would pull down shutters.Today,five years from the tumultous events and the fall of Bearn Stearns the 'pundits'are talking the same line!
 
Life goes on.Short of a catalysmic armageddon,alien invasion or World War III,the cycle of boom and bust will continue.Those firms that fail to innovate or keep in touch with customers will merge,get sold or perish.
 
Analysis is all about trying to see the bigger picture and even that is difficult at the rate at which technology is changing and changing the Lifestyle patterns.There was a time in the 1990s when banks wanted to have clients banking more in-branch so as to connect.Now they want to save on costs and outsource banking for the general retail segment through ATMs,vending machines,debit cards etc
 
India's leading telecom brand with presence in Africa-Bharti(cmp 285),looks a buy here as does Tataglobal(higher tea&coffee prices expected this year,CMP 125),Tatamotors-selling the world's most expensive and world's cheapest car(diversity) is buy on every dip.India's largest private sector infra co-Larsen&Toubro has a full order book.
 
The news that George Soros has sold his satke in Gold Funds may be misleading as in India the desire to own gold and real estate above all others is well known.So in the event of a global decline we might see it go dwon on MCX in an uneven manner.At best it should remain flat as Mr Bernanke and the Fed is again making noises of keeping up the QE.
 
In effect,keep investing in diversified large caps at every dip in the markets,Nifty might touch 5400-5500 till the political and economic circumstances improve.In a couple of years,the current market price of these scrips may have moved 30%.Not the glamour of making 130% in small caps.As records show just too much obfuscation in the balance sheets of such firms,too much equity holding pledged with NBFCs,too much news and too little substance.
 
Do not get left holding a KINGFISHER AIRLINES!!

Wednesday, March 6, 2013

New Trading tools,14286 and All That

The DOW hits a record high.Strange how a few months back the economies of Europe and US looked creaky,China seemed to be on a 'hard landing',India had no reforms and the general air of pessimism was like the haze in Guangzhou!
 
 
The value based index that is the DOW has always performed during difficult times and this time is no different.India on the other hand is undergoing a strange lethargic time,especially the stocks on its bellweather NSE and BSE.
 
The large caps have corrected 10%,the midcaps have been thrashed anywhere from 20-70%.Liquidity is low and market depth poor.Yet the BSE has been meandering around 19,000 levels though most stock prices are reflected levels of 2009-10.
 
Expectations of 25 bips cut in CRR in the March RBI meet might turn around sentiment and an unexpected 50 bips cut could lead Indian equities to new highs even when all round participation in markets is at new lows.
 
The way we look at trading in India I believe will undergo a fundamental change in the next two years.Gone will be the retail that buys or sells miniscule number of stocks.Gone too will be physical arbitrageurs as more Algorithmic trading takes hold.Mind you its distinct from high frequency trading.ALGO trading is more like the GPS in your car that guides you to the destination but does not itself drive the car.
 
The new trader/investor will be a technically adept individual with ALGO tools and the trading will be fast and precise.A lot of the HNI traders I talk to in Mumbai,Kolkata,Gujarat and Chennai are feeling the need for a trading system that provides inputs in real time.
 
My firm has made a small begining in introducing a platform for retail traders at a very competitive cost and I am sure other brokerages across India will race to develop tools.You,the reader,if you happen to be trading in the equity,commodity or currency markets,should race to unlearn and learn new technologies as education is the only way to evolve...!!
 
For any discussions,clarifications plz feel free to contact me:vishal.prabhakar71@gmail.com or
@dzango71 for twitter