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Monday, September 15, 2008

Panic bottom signals a trend change?

Lehmann Bros. filed for bankruptcy today and the global markets have tumbled. The Indian markets are no exception. The price of crude is now below $ 100, yet our markets have not rallied. The reason for that is the unusually fast depreciation of the Indian Rupee against the US Dollar. The USD has risen from Rs. 40 to Rs. 46 in just a few months. The rise has been very sharp since the day Derivatives trading in Forex was launched in India. So such a sharp move in the USD-Indian Rupee exchange rate was sort of expected on the back of heavy speculation. The rise of the dollar against the rupee has almost nullified the fall in Crude Oil price.

But such bankruptcies in the US financials can actually be good news for the markets, in the sense that all the bad news is finally getting out in the open. Also consider the fact that the bell weather stock of India, Reliance Industries has finally taken a pounding. During the entire bear market phase of 2008, RIL was the last man standing coz it hadn't fallen much as compared to the mid-caps. It was sort of holding the fort above Rs. 2000 levels. But today it has broken down to a low of Rs.1832. To my mind, this is a sure sign that we are finally close to a trend change and the end of the extended bear phase. RIL will soon form its bottom and then usher in a rally for the Diwali-Christmas season. Most of the midcap stocks may have bottomed out already and it makes sense to go out and buy such beaten down value stocks in bulk. I think we are on track for a rally around Diwali which could last upto Christmas. So keep your shopping list ready.



Superstar said...

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Anonymous said...

I agree with you Navin. The world isn't coming to an end and its a good time to get back into the Indian markets. Just pick up the top 5 of the BSE 30/NSE 50 and see some decent gains by this year end. I would definitely pick up RIL,ONGC,SBI & BHEL

hardikpndy said...

hi Superstar,

I bought gremach 100 @68.
Shall I keep on buying on every dip?
or wait n watch?

Superstar said...

Hi Hardik,
If I was you I'd keep buying Gremach Infra on every dip and hold for one-two years at least. Today was a great opportunity to buy it at dirt cheap levels.


sangjukta said...

Hi Navin ji,
The announcement regarding RIL that they are starting pumping oil from its D-6 block in the Krishna Godavari basin from Today. What will be the affect on RIL and RPL run? And I have taken Gremach at 68 level, hope for the best.

Superstar said...

Hi Sangjukta,
As expected, we have seen a big turn around from the panic bottoms touched after the Lehman news early last week.
The RIL D-6 Krishna Godavari basin news is a good news for the market, but some short term traders who bought the stock around 1800 levels might want to book some profit. For the long term investors, it makes sense to stay invested in all the three stocks you've named according to my mind. We may see bigger rallies in the weeks and months ahead.


shashjpn said...

hi superstar,
I am holding on IFCI & Assam company. Any updates on IFCI stake sale.? Please advice on these stocks.


sujatha said...

Hi Navin,

I hold 750 shares of " PYRAMID SAIMIRA THATRE" at an average of 150 per share. Many brokerage firms and my friends suggested me to buy this scrip. It has shown a good growth in its sales and its EPS and PE are also excellent.

What will be its near time target?

Will it break its previous high of 540 in this up comming festival season?

Superstar said...

Hi Shashjpn,
You haven't mentioned your cost price of both your stocks. There have been some unconfirmed reports of IFCI trying to start the stake sale process again after it failed to do so the last time. But it is very unlikely that it would go above 50-60 levels this time keeping in mind the dismal state of things for financial companies at present. I would have shifted to some other stock rather than waiting in this one.
Assam Company I don't track actively, but it is trading near it's years' lows so one can probably hold it in case there is a rally in the next few weeks.

Hi Sujatha,
The downside in Pyramid Saimira is limited. It is currently trading at around 115. Although it seems very unlikely that it will touch its earlier highs of 500 plus levels in the next couple of years, you can expect to see it going above your cost price of 150 whenever the sentiment of the market improves and there is a bull rally.