Wednesday, May 09, 2012

"After, GAAR deferment, a full-fledged rally is offing in the Indian Market/s"~~Suman Mukherjee
My new slogan: "Buy in May, and make money each Day".
Yesterday, the much expected rally in the Indian Bourses got a jolt, when the investors dumped the stocks across the board, with the Sensex plunging more than 300 points in the late afternoon trade. The move came as a surprise after a remarkable recovery  triggered by the deferral of GAAR (General Anti-Avoidance Rules) deferral by a year. It seems it was a well orchestrated move by a bear cartel operating from somewhere, when there was no such news which could trigger such a massive fall, except may be the Vodaphone case.
FII DERIVATIVES STATISTICS FOR 08-May-2012
BUY SELL OPEN INTEREST AT THE END OF THE DAY
No. of contracts Amt in Crores No. of contracts Amt in Crores No. of contracts Amt in Crores
INDEX FUTURES 81511 2038.92 86421 2114.58 401123 9726.69 -75.66
INDEX OPTIONS 932103 23593.28 914782 23249.36 1375549 34378.03 343.93
STOCK FUTURES 67795 1720.80 70697 1825.19 856363 20699.69 -104.39
STOCK OPTIONS 39354 981.99 39839 986.40 40327 1006.95 -4.41
Total 159.48
According N Jayakumar, president of Prime Securities,  the GAAR clarification and crude oil prices cooling off will support markets in the near-term. The vagueness of the original plan, which was unveiled as part of India’s budget for the fiscal year beginning in April, caused uncertainty among foreign investors, putting an already weak government on the defensive, he told a business channel yesterday. “I think we have a good set-up right now for a surprise rally in markets,” he said. 
FII & DII trading activity across NSE and BSE 08-05-2012. 
Category Buy Sell Net
Value Value Value
FII
1905.58
2304.56 -398.98
DII
1177.65
920.05 257.6
According to one of the respected gentleman in this field, Mr.Even Samir Arora, fund manager at Helios Capital, A rally is possible in the near-term". He says the government not being stubborn on the GAAR issue has sent a positive signal and investors are still hopeful of a some action post Budget.However, markets will primarily be driven by global events, he added.”As long as the downside is not expected in the short-term, then depending on investor appetite you could have inflows and market going up,” he  said. 
There are large scale apprehensions that US economy could be a possible, victim of any European crisis, as twenty-two percent of U.S. exports are sent to Europe and the two economies are stitched together with cross-border investments, interdependent capital markets and a shared view of global economic governance. But till now, the apprehensions remains in the media, with nothing much happening to the US, economy, which as of now is pulling on well. 
It has now become a common street talk that when either economy catches cold the other one risks more than a mild sniffle. But then hold on, European Union is not one country, it is combination, of several economies (27 member states), who vary in the degree of governance and economies of scale. Therefore, the problem of few countries, there cannot dictate the economies of EU in general. Greece is a small country, which can be ignored. It could be a important to media houses like Reuter, or Financial Times, who needs eye popping news to grab the attention.
It is true that the European elections have added a degree of uncertainty, but the impact is likely to be short-lived. As Europe goes through the process of finding a way to combine some growth with long-term deficit reduction, U.S. exports are likely to suffer, though the quantum cannot be said at this moment. But then these are just speculation and it is very much possible that even the reverse can also happen. Isn't it? So, why think so much on these media reports and spoil the ambiance?
As expected, the Hollande victory and the political upheaval in Greece triggered strong reaction from markets around the world. European banks that have been harboring reserves are likely to be even more cautious going forward. And again, there is talk of Greece having to leave the eurozone. But all these are not the sufficient conditions to pull the markets down, other than to cause worry. This gives excellent opportunities to buy in bulk from the markets.
The day after Francois Hollande rode to power in France on a slogan of ``change now'' the conversation in Europe is already different: Austerity has become a a much "hated word". In Greece, on the other  hand political parties who rejected the extreme belt-tightening measures required by international community, were the big winners in parliamentary elections. 
German voters in a northern state ousted the coalition led by Chancellor Angela Merkel's conservative party, which has pressed the case for austerity. 
But for some time now, calls for growth have been heard from Ireland to Italy. The Dutch government suffered growth. The new emphasis on growth reflects both a p recently as it failed to heed calls for policies to fosterolitical and economic necessity. Greece has already plunged into high rates of unemployment. In Spain, the overall unemployment rate is approaching 25%. Almost half of younger Spaniards are out of work. Adding austerity to the mix is simply politically unsustainable in mature democracies, as the election results in France and Greece demonstrate.
So, now we could see more spending in the Europe, leading to growths in the economies there. I feel austerity is no way of solving this kind of severe crisis. If we remember how the US, dealt with the recession, almost 3 years ago, we find that they did all the things to boost sales, and we have seen the results. The only problem which I feel is the election of a socialist in the France. However, if a pseudo--socialist like Barrack Hussein Obama could bring the US, economy to track, leading to the strengthening of the USD, we can hope for the same outcome from the France too. 
Those who speak of American exporters suffering if due to a sagging confidence in the value of the euro against the dollar, should understand that the US's 80% exports is outside the EU, so how is that it would  have a major effect on the US economy? Yes, it  is a fact that exports have been one of the US economy's few strengths since the recession ended three years ago, but that be the case then the US economy would also suffer if the USD appreciates against the INR, isn't it? 
I do not bother to discuss too much about Greece because it is a too small a country to have any impact on the world economy, after repeated bail outs by the European Banks. It is true here that political parties that backed two bailouts lost their majority in Parliament, but then who knows the Greece's New Government could even find better solutions to pay up the country's massive rescue loans. At the same time it is almost a remote possibility that they would even think of getting out of the Euro, and hit them on the foot. 
Economic and financial trouble in Europe is not good for the American economy nor is it good for the Asian as well or BRICS nations. Neither is the political turmoil caused by too much austerity imposed too quickly----so everyone will look for a possible solution to this problem. Traders will do well with a period of volatility caused by the changes in governments. Longer-term investors in Europe or the United States will be fine as long as they keep their eyes on economic and corporate fundamentals.
Now India coming to India, we find that we are a domestic driven economy, with around 70-75% of self-consumption story. Now though 2011 was a difficult period for Indian exports, 2012-13 could see some improvement, following the stoppage of "Austerity measures" in Europe and depreciation of INR against the USD. Exports had a healthy run in the first half of 2011-2012, while growth rates had been steadily falling since August, 2011. 
Though the Summer order book has seen a drop of around 25%, and the big stores and outlets in Europe are all asking for a discount, the situation could improve as the Europe goes for spending, spree, with the new governments taking special measures in this direction. 
Engineering exports had seen a robust performance in recent years. In 2010-11, engineering exports reached $60 billion. One of the India’s primary markets is Germany, and exports are expected to fare well, if the government there, takes special measures to boost the economy. About 40% of India’s engineering exports are meant for the European and American markets. However, experts do not foresee exports going into negative territory, a scenario in which revenue would be lower than that seen in 2011-12, though growth rates are expected to be tepid.
India’s exports in March, 2012 fell for the first time since 2009, when the global financial crisis was at its peak, as the slow recovery of the US economy and the European debt crisis hit the demand for Indian goods and services. Government data showed that exports fell marginally by 5.7% to $28.7bn compared with a year ago, while imports rose 24.3 per cent to $42.6bn--but then the as always, the media (especially the foreign ones) blew it out of proportions. The last time imports dropped on an annual basis was in September 2009. 
But then should we PANIC? Absolutely not, because we are not back to the 2008 and 2009 crisis situation.  India’s fiscal deficit rose to 5.9% of GDP in the year ending in March 2012, which is above the UPA--government's projected target of 4.6%. But how did this government land us in this situation--through increasing fuel subsidies, employment creation schemes and other welfare programmes. So, these needs to be reduced or re-looked for a possible strealining in the coming days. 
In a move to stimulate the economy the RBI has already cut key lending rates for the first time in three years last month after the country’s growth rose only 6.1% in the last quarter of 2011– its slowest pace since 2009. This is expected to show its effect in the coming days, as the Banks starts cutting PLRs.
Now, when the Indian economy is already in turmoil, who gave the idea to the FMO, to bring such dubious and still-born legislations like GAAR--the government should first makes its house clean (the Swiss Bank Account holders in his own party and colleagues) before going after corporates. It should given Indian people some peace of mind; after a basket of ministers were booked as "SCAM-STARS". 
If anyone drinks milk sitting in a bar, many will not believe the story, that actually he is not taking any hard drink---therefore, the government should suddenly stop projecting itself as "Holier than thou". 
If anything needs to be implemented it should be done slowly and steadily. Or else we might have to eat LIZARDS in the coming days, if the investments starts to slow down and companies starts to get bankrupt. Also, the foreign news, agencies like Reuters, should stop sending wrong information to the world media, by punching these kinds of lines, "The continued lack of definition is exacerbating perceptions of India as prone to vague pronouncements and sudden changes in rules, a weakness for a country already facing deep economic and fiscal challenges and a general election in 2014". The government has clarified many times, but if your reporters cannot follow what the government said, then they should stop reporting about India--please stop misleading Indians and the world community. However, you are right that this UPA government is in a confused state, therefore, such, rapid change of rules...........
It is to be noted that India has made concessions on Monday to address a the concerns of FIIs over the GAAR proposals. The changes included delaying the implementation of GAAR provisions by a year and shifting the burden of proving tax evasion on tax authorities.  So, the government is already working in this front.
I do not understand one thing: why are the FIIs not willing to pay Tax to the Government of India, when 1.2 billion India are liable to pay----are they SON of GODs? These fellows want to enjoy Indian cuisine, without paying the fees---how is it possible? The government has to take decision, taking all these factors into consideration. However, I do not feel in the long run, the FIIs will leave the golden goose named India, simply because of some tax constraints. India will also benefit, from the FIIs tax money, to trim down its Fiscal Deficit. 
It is only a media game, which is actually creating a false fear in the minds of the investors regarding GAAR and other activities, to aid the bears--for the moment GAAR is RIP, so forget and start buying good scrips. How can the scrips like Lanco Infrastructure Ltd, which is into construction and solar energy (nothing much to do with exports) fall by 5% intra-day, except some manipulation here and there......!! So, go ahead and buy, I am sure you will be able to make good money in the coming days.  Please do not try to time the markets too much by doing, "Analysis Paralysis" with Charts and all those superficial things; those who have spent too much on these have never ever been too much successful in their equity investments domain. Market always gives opportunities---it is only the individual acumen which is necessary to catch these rewards.  We have come  here to make money from the market and not to show off our knowledge about charts and fundamental analysis. Isn't it??!! Therefore, the money should come either through singles or through over-boundaries--it does not matter. 

References
(i) http://www.firstpost.com
(ii) http://www.ft.com
(iii) http://yahoo.com
(iv) http://economictimes.indiatimes.com
(v) http://in.reuters.com 
(vi) http://edition.cnn.com

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