Sovereign Debt Default Scare - Is Dubai Too Big To Fail?

Just a year back big banks and financial institutions had defaulted big time in many developed nations, specially in US. Declaring themselves bankrupt overnight, these big financial institutions reported losses in billions of dollars on what we now know as sub prime crisis. So huge were the losses that US Govt alone injected more than $700 bn to resuscitate these dying financial institutions. Honest tax payers' money has been squandered to revive failed private US banks in one of the most aggressively capitalist nations of the world. Reason - these banks were too big to be allowed to fail. On the other hand, in 2009 alone 106 US banks had to close down, but they were not bailed out by US Fed. Reason - they were not big enough to be saved.

So what is the lesson to be learnt from here? Lesson is that as a business institution you have to bungle big time, show billions of dollars as debt in your books, borrow or leverage indiscriminately and then sit back and relax after blowing the whistle. You will face no problem because your government will bail you out since your bungling is too big. And once bailed out, you can then go about using the bailout money to enrich yourself with astronomically high bonuses. You can justify large bonuses by showing existence of big money in your books. So what if now the money in your books is honest taxpayers' money loaned to you by your government?You can be squatting smug on your haunches with the knowledge that, do what you may - you just cannot fail. You are too big to be allowed to fail!!

That is how investment bankers are using the bailout money in many countries. In fact in UK the public outrage has been such that Govt has now slapped 50% tax on bonuses that banks pay to their employees. As a result, Barclays recently announced a pay hike of 150% for 22000 of its investment bankers with retrospective effect from June 2009!! Take that - if you tax our bonuses then we have other means of looting tax payers' money.

Well so far so good. Big business institutions have been bailed out of thick financial soups by their respective governments. But in doing so these governments have become susceptible to credit crisis themselves. Governments, I agree, are again too big to be allowed to fail. And that is how we found Dubai getting bailed out by its neighbour, Abu Dhabi. For more details on Dubai bailout click this link here - http://archana-archdeb.blogspot.com/2009/12/debt-laden-dubai-when-will-woes-end.html

Abu Dhabi has given temporary reprieve to Dubai so as to maintain investor confidence in the region. But such actions of saving nations from becoming bankrupt will be possible only when there are only few and far between instances of sovereign default. What happens when most nations fall into a debt trap from which they cannot extricate themselves? Many developed European nations are on the brink of sovereign default. Greece, Spain, Ireland are some such names. Then there are a host of East European nations which are tottering under the burden of massive debt. Who will ultimately bail out whom?

The way even rich European nations are falling into debt trap, I wouldn't be surprised if lenders, as a species, totally vanish from the face of this earth. Germany is the richest nation in European Union and it also has spiraling debt in excess of 70% of its GDP. But wait a second! The biggest debt defaulter can be US in times to come. It is estimated that for the next 30 years US national debt will keep on increasing every year. Presently US Treasury has calculated the National Debt at $ 12.135 trillion. White House estimates a record $ 1.5 trillion deficit this year alone, and next 5-year deficit total of $ 4.97 trillion.

Now imagine a scenario in future when US defaults on its public debt. What will then happen to this global economy, which shook like an aspen leaf with the prospect of tiny Dubai defaulting? The total debt of Dubai, including all its state sponsored entities, is not more than $ 100 billion. Compare it with the present day US debt of $ 12135 billion. It is agreed that US is really too big to be allowed to fail. But tell me, who on this planet will be capable of bailing out US, in case it defaults??

Did Fed Go Wrong In Last FOMC Meet 2009?

US Central Bank concluded its two day meet on 16 Dec 2009, that being the last FOMC meet of year 2009. The Federal Reserve, specially its Chairman Ben Bernanke, was very careful in not ruffling any feathers, so to say. It took utmost care that the statements it issued should not unnerve market participants. It not only left the rates unchanged , but also retained its key phrase "exceptionally low rate for an extended period of time".

That's right. Fed wants to retain an exceptionally low rate for an extended period of time. And yet the US markets gave a thumbs down to this benign act of Fed. The moment the decision on rate was announced yesterday, the US markets sold off. Dow Jones which had made an intra-day high of 10553 before the announcement, swung into negative territory to make an intra-day low of 10402 after the announcement. By pressing the sell button US markets signaled to Ben Bernanke that he had not done enough.

But what more could Bernanke have done? He went overboard painting a rosy picture and not stepping on any toes, keeping rates at zero for an extended period of time. Time magazine also splashed him across newsstands on the same day as its Person of the Year 2009. Every bit of positioning helps. Time's managing editor showered accolades on Bernanke. Sample this piece from the article - "Bernanke didn't just learn from history; he wrote it himself and was damned if he was going to repeat it,".Such manoeuvres can surely give Bernanke that extra push when Senate Banking Committee votes this Thursday on Bernanke's second four year term.With a little help from my friend - reminds one of an old song by Beatles!

But alas! Markets will be markets!! Ben Bernanke's friendly and conciliatory overtures were given a total cold shoulder. The promptness with which the market sold off after the Fed announcement of keeping rates unchanged suggested that this was a premeditated move of the market. It could well be that irrespective of Fed decision market participants had preplanned to sell off after the announcement. Are they trying to express their displeasure before Bernanke gets the votes for a second term? Time will only tell. I would rather like to pin the sell off down to fears of sovereign default by Greece. More of that later.

Debt Laden Dubai - When Will The Woes End?

Fortnight ago Dubai World's request to its creditors for debt repayment restructuring plan had sent sentiments of global investors into a tizzy. In taking precautionary stance, global investors had exhibited an urgency to take cover at this slight bit of adverse news in global financial ecosystem. That amply indicates that risk taking appetite of global investors is surely on the wane. Otherwise, how do you explain a puny $ 26 bn expected default scaring the wits out of investors in South East Asia, across Indian Ocean to Europe and across Atlantic to the Americas?That's pandemic contagion, if you may!!

But why is the global investor getting spoofed so easily. Could it be that Dubai World episode portends destabilizing happenings in global financial ecosystem in days to come? Does Dubai World indicate that the cup of global financial woes is finally spilling over? Does Dubai epitomize the surreal world of tall dreams with borrowed money, whose nemesis is in offing? To get an answer to all that let us first understand the nuts and bolts of Dubai and Dubai World.

Dubai is one of the seven Emirates under the federal governance of UAE. It started off as a trade based oil-reliant economy but presently has turned itself on its head as a service and tourism oriented economy. This has been necessitated because of the belief that its oil reserve will last only twenty more years.

Dubai World is a state-owned conglomerate which deals in real estate, financial instruments and various other business ventures . Its real estate arm, Nakheel has to its credit the Palm Trilogy, three palm tree shaped man made islands, as also Burj Dubai, the tallest free standing 818m high man made structure being built. 'The World' is another extravagant real estate development project which aims at creating 300 islands off the coast of Dubai resembling the continents of the world. All such projects come at an exorbitant price and are insanely expensive for all parties connected with such projects.

It is estimated that the actual debt burden of Dubai's government-related-entities is 116% of emirate's GDP. That's what has prompted economist to put the tag of 'debt laden' to Dubai. Such a tag is also being put on fancied European countries like Greece and Spain. Many East European countries have also earned this sobriquet. So the global investor was spoofed not by the size of expected Dubai default, but that one sovereign default may trigger an avalanche of other sovereign defaults.

But now for some good news. Last Monday was pay time for Nakheel's bonds which had matured and the creditors could be paid off $4.1 bn. A bond default was avoided at the very last moment when Dubai's oil rich neighbouring emirate Abu Dhabi came to its rescue with $10 bn dole, like a knight in shining armour. This total sum of $10 bn will see off debt servicing requirements of Dubai World till April 2010. What after that! Will Dubai have to periodically stick out the begging bowl for servicing debt of its state owned entities?

To get an answer to that and more, do watch this space in coming days.

Dollar Carry Trade - Easy Money in Difficult Times

What is driving asset prices to scale newer heights in year 2009? Answer is simple - weak dollar and near zero interest rates in US. It is very simple for global investors to make quick and easy money. Borrow at near zero interest rate in US, short dollar and invest that money in any asset in the country whose currency you have bought. Lets examine all the options available to global investors to make easy money :-

• Scenario #1. Borrow dollars in US. It is almost free to borrow since you have to pay near zero interest on the dollar borrowed. Put this money to work in US itself by buying any high yielding asset like stocks, commodities, gold etc. As these assets appreciate you will be making money from capital given to you almost free of cost by US Govt. Isn't this a simple equation for making easy money?
• Scenario #2. Borrow dollars in US. Then sell dollars to buy another currency of a country where interest rate is higher, say India. This arbitrage situation if tapped in India can fetch a global investor about 5% profit through interest differential for doing next to nothing.
• Scenario #3. Borrow dollars in US. Sell dollars and buy currencies of different emerging markets especially the BRIC countries. Then employ this money in various high yielding risky assets and enjoy rapid appreciation.

Well global investors are doing all the above and maybe more. Dollar has become the international currency for carry trade, a position that yen and Swiss franc used to enjoy till some time back. This drives dollar to depreciate as there is massive supply of dollar for buying various other assets. And that is how we are witnessing this spike in prices of all assets, from stocks to commodities to gold, while the dollar is plummeting.

I am certainly not complaining for what is presently happening across all assets because of dollar carry trade. If it is dollar carry trade plus other positive reasons like turn around from recession, then all the more reason to rejoice! Let us enjoy the spike till it lasts. But the question that begs an answer is 'till when?'. Certainly till US Feds keep the interest rates to near zero. Simple as that! But once the interest rates are hiked in US then the following can happen:-

• Investors who are short in dollar will cover their positions, making the dollar to appreciate with a spike.
• Massive unwinding of carry trade will take place with tremendous rush to buy back the dollar after exiting all trades like emerging market stocks, commodities, gold, et al.
• With dollar rallying significantly, prices of all other assets will plummet which will have the effect of bursting of asset bubble.

Asian Stock Market Blues - Frequently Looking to the West

This has become a routine for Asian Stock Markets - shake like an aspen leaf at every sneeze in the US. On 17th November almost all major Asian stock markets closed nearly in red, after trading the entire day in red. This was after US markets in last trading session had made a spectacular up-move, closing at a new high of 2009. So the least one expected was a slightly positive mood in Asian markets. But that was not to be! I am told that Asian markets wore such a sullen look on 17th November because Ben Bernanke made some not very rosy comment on US economic recovery. But tell me frankly, don't we already know all that.

Not withstanding the above ramblings, the reasons why markets across the globe are exhibiting high volatility are listed below :-

• Stock markets moved up from March 2009 lows primarily driven by huge liquidity, which in turn came into existence owing to generous stimulus packages from respective nations. Now there is apprehension that since the recovery in stock markets has been spectacular, there might be a case for withdrawal of stimulus packages by most nations. But the fact is that leaders of G-20 nations have promised to keep the stimulus packages in place for some more time. Premature withdrawal of stimulus can result in a prolonged depression as was witnessed during the Great Depression of 1929.
• Weakness in Dollar is pushing the commodity prices, oil prices, gold prices and also the stock prices higher. But any short term technical strengthening of dollar from here can send the other asset prices spiraling downwards. The moot question is when and that is creating nervousness in global markets. Lets see who blinks first!

It is certain that there is correction lurking in the dark, and suddenly it will spring a surprise on all of us. I have to admit that this forthcoming correction will be quite serious. In absolute terms I will venture to say that the corrective wave will wipe off about 1500 points from Nifty. If Nifty can climb to about 5500 in the current run up as predicted in my 8th November post (http://archana-archdeb.blogspot.com/2009/11/sensex-and-nifty-expected-movement.html), then the correction can make Nifty trade at 4000 level. That is how serious the anticipated correction can be!! No wonder the market participants are getting so easily spooked by every shred of negative news.

Coming down to brass tacks, we need to apply caution after Dow reaches 10500. Similarly in Indian markets we have to watch out for the selling zone between 5320 and 5580 in Nifty, after Nifty crosses 5182.

Trans Atlantic Triggers - Did You Receive Those Signals?

Did you receive those wealth creating signals we discussed in the blog post on 08 Nov 2009. For your quick reference here's the link - http://archana-archdeb.blogspot.com/2009/11/sensex-and-nifty-expected-movement.html. In that post we had understood that Nifty and Sensex will get a boost to scale higher heights only if there were positive signals from US markets. In that scenario Dow would close above 10160. We named those signals as Trans-Atlantic Triggers or TAT in short.

On 06 Nov 2009 Nifty closed at 4796 and Sensex closed at 16164 before the weekend. After markets opened from weekend break, Dow roared across 10160 and closed at 10227. Benign signals from US markets or positive TATs have helped Sensex touch 16914. Similarly Nifty could manage to touch high of 5018. If you were able to discern those positive TATs then you would surely have made some neat profit in trade.

Now is the time which is baffling and puzzling. As discussed in the last post (http://archana-archdeb.blogspot.com/2009/11/is-dow-jones-following-rule-book.html) Dow Jones has reached its target of 10360, which means that there will be serious correction in US markets from here on. However Nifty and Sensex have yet to reach their short term targets before tipping over. Nifty should find rigorous selling pressure in the selling zone of 5320 and 5580. Sensex on other hand should experience serious selling bouts in selling zone of 18000 and 18880. All these selling zones have already been discussed in my 8th November post which can be accessed from the first link on this post. But the dilemma is that since Dow has achieved its target, will Nifty and Sensex now achieve their targets as outlined above?

Lets see what the future holds for Indian markets from here on. Nifty and Sensex should reach their respective selling zones before correcting. Whatever be the case, its time to observe some caution on the long side since Dow has reached its short term top.

Is Dow Jones Following Rule Book? - A Reality Check

Thus far I have been quite satisfied with the disciplined behaviour displayed by Dow Jones. Right from the very beginning more than a century back, Dow Jones has always played by rules of the game. If we check the super-cycle bull run of Dow as per Elliot Wave, then we find that the 2nd motive wave up from year 1988 to 2000 corrected by about 50% by the year 2003.

After that, 3rd motive wave took Dow up by about 61.8% of 2nd motive wave. That is how we found Dow at its highest point of 14280 in Oct 2007. From there Dow again lost about 50% to trade at sub 7000 level in Mar 2009. Everything seems to be happening absolutely by the rule book!!

From the low of Mar 2009 Dow Jones, like a disciplined soldier, should have exhibited a pullback of 50% to reach 10360. That is exactly what I had anticipated on 02 Oct 2009 in a post titled "Dow Jones- Amazing Bull Charge". Check out the link here - http://archana-archdeb.blogspot.com/2009/10/dow-jones-amazing-bull-charge.html

On 11 Nov 2009 Dow Jones reached 10357.38 to qualify as having completed 50% pullback. Would you not agree that Dow has always maintained a very high degree of discipline? All its moves are by the Rule Book! If you agree to my point of view then do remember that after completing 50% pullback Dow has to retrace its steps from around the level of 10500. By now if you have already checked out the link to my 2nd October post then you must be privy to the likely retracement levels. If not then go right ahead and check out retracement levels from the link given above. Remember that forewarned is forearmed!!

Sensex And Nifty - Expected Movement Ahead

The correction in Indian markets has been swift and surgical. Now the pullback to the correction is in place. This throws up the most important question - how far will this pullback reach in Indian markets? That's a million dollar question! To find answer to this baffling question, we will resort to some calculations and some crystal ball gazing. Let us embark on this interesting voyage.

First of all we need to realize that from here on Sensex and Nifty will move in any direction as per signals received from across the Atlantic. Let us call these signals as Trans-Atlantic Triggers or TAT, which basically are triggers from US markets. In case there is absence of TAT then Indian markets will just drift sideways. This situation is of low probability. To make comprehension easier we shall deal with each situation separately as outlined below:-

• Absence of triggers from US markets will result in sideways movement in Indian markets. In such a situation you will find Dow Jones oscillating between 10150 and 9650. Likewise Sensex then could be lolling between 15000 and 16000, and Nifty could be lazying between 4700 and 5000. But if you ask my frank opinion, I will promptly label this situation as least probable.
• If there is positive TAT, then you will find Dow Jones closing above 10160 and racing towards 10360/10500 in subsequent sessions. In that situation you can expect Sensex to reach its tipping point between 18000 and 18800, and Nifty could be seen at level between 5320 and 5580.
• In case there is negative TAT, then Dow Jones will be closing below 9645 and tumbling towards 9100/9000 in subsequent sessions. In such a case Sensex could be seen trading between 14800 and 14200. Similarly Nifty could drop down between 4400 and 4200.

Whatever be the scenario, there seems to be one certainty. In next couple of sessions, Sensex will move to the zone between 16410 and 16660 and you will find Nifty trading in the zone between 4860 and 4930. After that, the story will unfold as per TAT received. Keep your antennae operational at peak performance!

Dow Jones In Belligerent Mood - Shorts Trapped

Of late there has been an air of uncertainty hanging in global equity markets. Every moment throws up diverging views and news, making life difficult for pure Bulls or staunch Bears. This was evident from high volatility witnessed in global markets this past week. And in the middle of such environ, Dow Jones yesterday surprised all Bears with a belligerent bull run.

During the course of the entire trading session yesterday, bulls took a firm grip on proceedings in US equity markets. Never once did the bulls show any nervousness and simply kept on accelerated buying. Day traders in the Bear Camp would have felt thoroughly disgusted with one way traffic in US markets on 05 Nov 2009. And traders, who have positional shorts, must be sweating profusely by now. Reason : if in today's trade Dow crosses 10160 then it is curtains for traders on the short side. Shorts will have to be covered in all promptness because US markets will then spike up. With shorts scampering for cover, Dow will gallop towards 10360 and beyond in quick trot.

Now that we understand the present plight and apprehension of positional bears in US markets, let us examine the reasons for absence of volatility in last trading session. Few of the important triggers for such a strong bullish demeanor of US markets are listed below:-

• Jobless claims had declined to their lowest levels in ten months.
• Productivity surged to 9.5% last quarter, which turned out to be much better than street expectation of 6.5%.
• Cisco systems delivered strong positive results.

If you closely examine the strong drivers of yesterday's US markets surge, it is evident that the reasons are not so powerful that Dow has to notch up 200 plus points and close above the psychologically important level of 10000. It is not about just gaining 200 points that is worrying the Bears, it also the manner in which Dow accomplished the same. It was as if with utter disdain that Dow trundled northwards, vanquishing all attempts to pull it down. Such imperiously confident strides by Bulls foretell bigger moves in coming trading sessions. No wonder the shorts have to hang on to the slender thread of prayers, fervently hoping against hopes.

Why Indian Markets Surged Strongly - A Holistic View

Indian stock markets on 04 Nov 2009 - a stellar performance by any standards!! Today's performance in Indian bourses has so far been the best amongst Asian and European markets. I hope this performance is bettered by US markets in trade today, which will provide fodder for further exceptionally good rally tomorrow. That is all part of hoping, but first let us holistically analyse the reasons for Indian equity markets' strong bullish behaviour in today's trade.

Some very strong reasons for fierce snap back of Indian equity markets are listed below:-

• Union Finance Minister, Pranab Mukherjee came out strongly to assert that he is not contemplating withdrawal of stimulus package as of now. This dispelled a big fear out of the minds of investors.
• Deputy Chairman of Planning Commission, Montek Singh Ahluwalia reassured that India was ready to absorb the surge in foreign investment flows and in fact welcomed the same. In other words, sharp surge in foreign investments into India will not meet entry barriers as was the case in past. This was seen by FIIs as a paradigm shift from hawkish stance of India in dealing with excessive foreign investments. And this was given a thumbs up by market.
• With Justice Raveendran of Supreme Court recusing himself from three-judge bench hearing a high profile legal battle between billionaire Ambani brothers, the stage was set for much delayed verdict in the case. Justice Raveendran cited potential conflict of interest before withdrawing from the bench. This means a new bench has to be constituted and hearing has to begin from the very beginning. Reliance Industries benefits from the case becoming a long drawn affair. This news was cheered by traders who bought Reliance Industries with gay abandon and the scrip rose 5.2% in today's trade. Can the broader market then stay away from exhibiting bullish sentiments? The answer is an obvious 'No'.
• Finance Minister, Pranab Mukherjee reiterated that there will be many more disinvestments in state owned firms. “We are aiming at stake sales in public-sector undertakings (PSUs) that have less than 10% public holding,” he said. “A few more PSUs have been identified for disinvestment.” Those words sounded very sweet to the ears of traders and they demonstrated their joy by going on a buying spree.

Besides all that we discussed above, there were technical reasons for the bounce in Indian markets. Those scrips which got the maximum drubbing in trade yesterday rebounded back today by almost the same percentage. But volume in today's trade was nothing to write home about. That means there were aggressive shorts created yesterday, and with general bullish sentiments prevailing today in global markets, the shorts were progressively covered up. And of course there was Institutional buying across the board. Hope the same continues into next few trading sessions also. Happy trading!!

Dow Jones Displays Character - Closes Flat

Big relief! Dow Jones in yesterday's trading session closed flat at 9771.91, only 17.53 points down from previous day's close. I mention this as relief because the buzz on the street was that there will be bloodbath on Wall Street. Some voices claimed that it is this anticipation which led to a sharp fall in Indian markets as also in all other Asian markets except China. Moreover the European markets also traded as if there was no tomorrow, red being the favourite colour among all markets there. With all that at the backdrop, you would now appreciate why I expressed relief at Dow closing flat.

On 02 Nov 2009 Dow Jones had showed its hand in moving northwards in short term. I had mentioned that as leadership for rest of the global markets in my last post. For quick reference click the link here- http://archana-archdeb.blogspot.com/2009/11/global-stock-markets-dow-comes-to.html

Leadership that Dow exhibited was to no avail. No global market was ready to follow Dow Jones' example. China was an exception, but then China always plays the market on its own terms - based on its economy's performance. But we were discussing Dow and its tenacity in holding on to sanity against global sell offs. The other way around is still not happening!!

But to be candid I must admit that Dow's strength yesterday had lot to do with some important events that took place. Take a look :-

• Warren Buffet's Berkshire Hathaway bought the railroad company Burlington Northern Santa Fe Corp in a mega-deal of $44 billion. This signals that Warren Buffet is betting big on revival of American economy. In his own words Warren Buffet described the deal as "It's an all-in wager on the economic future of the United States". With strong American revival there will be increased demand for power and Berkshire owns coal based power company MidAmerican Energy. This company will require coal to be hauled over long distances. That is also where acquisition of a railroad company comes into play, if you get the bigger picture. But in all intricate calculations, US economy surging ahead is what Warren Buffet is betting his last penny on. That is certainly good news for global markets, considering how coupled we all are!
  
• Experts expressed their considered opinion that Fed is not likely to hike any interest rates in its November meet. That acted as firm anchor for Dow in trade yesterday.

The salutary effect of Dow showing strength will be felt today across global markets. At the time of writing this post, all Asian markets were trading in positive territory. Indian markets have also opened in green, the colour most elusive for the last eleven trading sessions!!

Global Stock Markets - Dow Comes To Rescue

Look to the West! Dow Jones has finally made up its mind to temporarily halt downward slide of global markets. In trading yesterday Dow could gain a decent 76 points to close at 9789. That will send Asian markets to spiral upwards today, leaving behind all apprehensions of yesterday. Wonder when will these Asian markets have their own strength of conviction in their respective economies! When will they stop looking to the west for day-to-day cue?

Be that as it may, the good news is that Dow has yo-yoed back to green territory in its last trading session. But in initial trade it zoomed 145 points higher than previous close, on the back of some good manufacturing numbers. To be precise the ISM index rose to 55.7% in October, up from 52.6% in September. This is also its highest reading since April 2006 which was cheered so merrily by the street that it seemed as if Dow was determined to break some kind of record in single-day gains. If you ask me, personally I was of the opinion that Dow was properly geared to gain at least 250 points yesterday. That's how it seemed in early trade on 02 Nov 2009. But alas!

By midday one found Dow languishing 35 points down, having given up all of its 145 points gain. That in effect was an intra-day loss of 180 points from its high. What spooked Dow were the Financials, Tech and Energy stocks. Investors got so nervous that all good news and reassuring signs of recovery from manufacturing data were brushed under the carpet and selling again took center-stage.

However Dow did recover some of its lost ground and thankfully so for health of Asian markets today. The recovery was witnessed both in Financials and Tech stocks. Somehow I fail to understand as to how anyone can possibly be selling Tech stocks like Apple at this point in time. With Christmas around the corner, Apple is likely to have a strong sales season of Mac computers and iPhones. But then that's how markets are!

As for Financials, I guess US market participants did not like a key Federal Reserve official saying all that he said about executive pay in large financial institutions. I have a hunch that big boys on the street didn't like that one single bit. How can you even hint that a substantial portion of executives' pay (incentive-compensation) in big banks should be deferred over a multi-year period? So what if they have turned around with massive help from tax-payers' money!!

But somehow Dow in late trade yesterday made a nice effort to claw back into green. That is leadership, because now the Asian markets will follow suit. Indian markets should open with a gap up and sustain their rally today.

Dow Jones Bleeds - Will Nifty Arrest The Global Downtrend?

Dow Jones in its last trading session made no attempt to recover from low and kept its steady southwards journey in trade yesterday. It looked almost like a surrender of the bulls to bear hug. That does not augur well for global markets. What spooked US markets which resulted in Dow closing 120 points in red on 28 Oct 2009? Nothing out of the way. Just the same old stuff, same old conditions, same old story. It seems global investors are pulling out money from equity markets and parking it in Dollars. Hence increased demand for dollar and that's how you can see the Greenback rise against all currencies except yen. But wasn't it just the opposite situation last week? There was unambiguous opinion across the planet that dollar was losing its sheen and was likely to depreciate against all major currencies. Well news flows as per market behaviour and not the other way round.

The long and short of all this is that Asian markets are trading deep in red today ie 29 Oct 2009. That sends shivers down the collective spine of bulls in India. With bulls quivering, bears will naturally seize control. That is how the situation would seem to any of us for today's trade. Moreover its expiry day for derivatives today and hence there will be lot of nervousness on the part of traders. However it seems to me that Indian markets will arrest the downward trend in global equities by showing the way up, starting today. News will follow later to justify the move and that is why I can't put a finger to any reason at the moment. All I can say is that the Elliot Wave calculations suggest an upward move from here in Nifty and Sensex. Remember we still have an upside Nifty target to reach at 5280 before this year ends or maybe just at the beginning of New Year.

Whatever be the case it will be nice if you can pick up any or some of the shares suggested below:-

• Punjlloyd buy at 180/185 for a target of 225 in short term.
• Canara Bank buy at 324/327 for a target of 357 in short term.
• DCHL buy at 45/47 for a target of 62 in short term.
• Dena Bank buy at 61/63 for target of 70 in short term.
• Dr Reddy buy at 950 for target of 1050 in two weeks.
• Voltas buy at 141/144 for target of 168 in two weeks
• Crompton Greaves buy between 340 and 350 for a target of 425 in short term.
• IDBI buy at 113/115 for a target of 128 in short term.
• IOB buy at 113/114 for a target of 126 in short term.

Day Trading - Status of 23rd Oct Positions

On 23 Oct 2009 before the Indian markets opened, I had given buy recommendations for six stocks futures. for quick reference visit this link here : http://archana-archdeb.blogspot.com/2009/10/why-day-trade-today-recommendations-for.html

Now let us run a cross check on the status of these positions. Out of the six recommendations one buy price of DLF Oct Fut was not met in trade. For rest of the five positions here is my outlook for each position:-

1. Centurytex Oct Fut. This position had an intra-day low of 488.35 and closed at 493.2. If you have bought around 495 you should be holding your position for next trading sessions. In worst case scenario it will give you 498.5 where you may exit without any injury. But if you are a little brave hearted then you should keep the position for a target of 550 till expiry. Maximum downside risk is 467. This I am advocating because this scrip is still maintaining its swing, and has also completed two long term bullish patterns, viz 'Cup and Handle' and 'Rounding Bottom'. Its actual worth is 920/950 in one year's time.
2. LITL Oct Fut. This position had an intra-day low of 510.3 and closed at 513.75. If you have bought around 513 then you should be holding this position for next trading sessions. You will get an opportunity to exit between 533 and 541. Its actual potential though is 620 in short term.
3. Nagarconst Oct Fut. The position had an intra-day low of 156.95 and closed at 159.2. If you have bought around 164 then you should be holding the position till minimum target of 170. Its actual worth is 220/240 in medium term of about six months because it has completed the long term strong bullish pattern of 'Rounding Bottom'. However before surging to 240 level it may retest the levels between 120 and 140.
4. HDIL Oct Fut. The position made an intra-day low of 370.7 before closing at 375.85. If you have bought around 375 then you should be holding the position till minimum 390. The scrip is worth 500/515 in medium term of six months.
5. Punjlloyd Oct Fut. The position touched an intra-day low of 255.2 and finally closed at 259.55. If you have bought at around 270 then you should be looking to exit at 277.

Why Day Trade Today - Recommendations For 23 Oct 2009

Why didn't I give any day trading recommendations on 22 Oct 2009? Yesterday I had given no recommendations for trading in stocks futures. In fact I had not posted anything and remained just a silent spectator throughout the day. For compulsive traders in the market it will seem to be almost a Herculean task - not do anything on a particular day. But then it is one of the qualities you will have to consciously develop if you want to survive in futures trading over the long run.

I still haven't answered my question.Why I didn't give recommendations to trade futures yesterday was because I was not certain. I didn't like the general sentiment developing across global markets. Whenever there is doubt creeping up in your mind just stay away from market. Let it do whatever it wants to do. The worst that will happen is that you will miss out a profitable trade or two. But then that is erring on the positive. At least this scenario cannot burn a hole in your pocket, nor take your peace of mind away. No sleepless night!

But today is different. The US markets have again taken the lead to show the direction and mind of the markets. Asian markets are pleasantly trading in green at 8.30AM IST and all seems to be fine up above.For day trading, today my recommendations are as under :-

1. Buy Centurytex Oct Fut at 495/500 for a target of 534. If you plan to keep it for tomorrow then this position should give 561 in couple of day's time.

2. Buy LITL Oct Fut at 513/518 for a target of 568. In case you hold the position till expiry then it should give you a target of 588 to 600.

3. Buy Nagarconst Oct Fut at 164/167 for a target of 171.If you plan to carry your position then you can see a target of 171/180 and finally 188/190 being achieved in couple of days.

4. Buy HDIL Oct Fut at 375/380 for a target of 400.

5. Buy Punjlloyd Oct Fut at 270/274 for a target of 286. If not today then you can keep it for tomorrow.

6. Buy DLF Oct Fut at 445/450 for a target of 465. You may plan to keep your position open also for a couple of days for a target of 500 plus

Day Trading Recommendations for 21 Oct 2009

For day trading today ie 21 Oct 09 the following are my recommended scrips :-

1. HDIL Oct Fut. Buy one lot (lot size 774) of HDIL Oct Fut at 375/377 and square off after taking a profit of Rs 10/15.
2. DLF Oct Fut. Buy one lot of DLF Oct Fut (lot size 800) at 447/449 and square off after taking a profit of Rs 15/20.
3. Nagarconst Oct Fut. Buy one lot of Nagarconst Oct Fut (lot size 2000) at 160/162 and cover it after taking a profit of Rs 4/5.
4. ICSA Oct Fut. Buy one lot of ICSA Oct Fut (lot size 2000) at 200/202 and take profit of Rs 5/6.
5. Punjlloyd Oct Fut. Buy one lot of Punjlloyd Oct Fut (lot size 1500) at 276/278 and take profit of Rs 8/10.

Recommended buy prices given above are little defensive in nature. They are not aggressive buy prices because there is need for taking caution today. US markets having closed in red and Asian markets at 9.25am 21 Oct 09 also in red, it is prudent to buy at little lower levels. It may so happen that these buy prices may not be met in trade today. But then that's fine. Day trading also means that on some days you need to sit out and watch the market.

I am yet not giving sell recommendations because as of now the market momentum is still up. So we will respect that, till it is confirmed that sell orders can be safe for day trading in futures. Until then it is better to stay on the buy side of bullish stocks, observing due precautions.

NTPC Stake Sale - Trading action

For entering trade today in stocks futures I had given recommendations on 19th Oct, both for day trading and swing trading. For easy reference please check these two links -

http://archana-archdeb.blogspot.com/2009/10/swing-trade-for-19th-october.html and http://archana-archdeb.blogspot.com/2009/10/day-trading-recommendations-for-19-oct.html

However you may also add NTPC to the list because of the news flow yesterday.

NTPC has been accepted by Indian Govt for disinvestment. The cabinet has agreed for 5% stake sale of this state owned thermal power generation company, the largest in India valued at around Rs 1.7 trillion. Presently Govt owns 89.5% shares in the company, rest being held by the public. In 2008-09 the company had a profit of about Rs 78,270 million to a revenue of about Rs 4,21,820 million. The sale of shares of NTPC could net Rs 86,000 million to the Govt. This sure is sentiment enhancing news and one that could propel the stock northwards in today's trade. So my recommendation would read as follows :-

NTPC OCT Fut. Buy NTPC Oct Fut at 213/214 for day trading. You should target 220 as the initial sell point. However break above 220 should see the scrip sailing to 230 in 2/3 trading sessions.

Day Trading Recommendations for 20 Oct 2009

In the last post I had given recommendations for entry into swing trading when Indian stock markets open today ie 20 Oct 2009. But if you cannot stomach the waiting game while holding position in Futures then the best answer for you is to day trade. So the swing trading recommendations given in the last post ( http://archana-archdeb.blogspot.com/2009/10/swing-trade-for-19th-october.html) can be utilized as day trading opportunities with small profit targets of 3 to 5%.

Apart from that, given below are some more scrips in which you may like to day trade today:-

LITL. Buy LITL Oct Fut at 550/552 for a target of 580/585. You may have to wait for one more trading session for this target.

DLF. Buy DLF Oct Fut at 448 and cover the position at 500. This target may take one more trading session to materialize.

Nagarconst. Buy Nagarconst Oct Fut at 164/166 and cover your position at 174/176. In case you are unable to square off position today then hold for just one more trading session as BTST position.

Swing Trade for 20th October

Today I am going to recommend another bunch of scrips for swing trading This will be our second attempt to trade some scrips who qualify for swing trading. The first attempt gave nearly 40% return on an investment of Rs 1.5 lakhs in 04 days. Check this out through the link here - http://archana-archdeb.blogspot.com/2009/10/culmination-of-swing-trade.html

Today's recommendations :-

Tatapower. Buy Tatapower Oct Fut between 1370/1390 for a target of 1490/1510 in 4/5 trading sessions.

Centurytex. Buy Centurytex Oct Fut at 526/528 for a target of 560/564 in 4/5 trading sessions. In fact you may see the target being met in today's trade itself.

Day Trading Tips : Mahurat Trading

Be prepared for some surprises this Diwali Mahurat Trading. You will need to be careful of sharp volatility. I will be recommending October Futures of few scrips for trading today. But in case you find that your buy position remains open by the end of Mahurat Trading, then you can keep the position for next trading session. What I mean is that you need not panic with your buy positions taken today at my recommended price, in case you cannot exit in profit. Hold them as BTST positions. Here are your trading tips for today:-

Nagarconst. You can buy Nagarconst Oct Fut at 170.5 for taking quick profit of Rs 3/4. The next entry buy point will be 165/166 which you can keep holding for a gain of Rs 10/12.

HDIL. Buy HDIL Oct Fut at 378/382.5 for a target of 390. There is a strong possibility that you may not get the buy price in trade today, but then it is better to be safe than sorry especially while dealing with Futures.

LITL. Buy LITL Oct Fut at 526/530 for an upside profit of Rs 15/20. While going down you can again re-enter at 502/506 and keep it for 2/3 days. Of course you may decide to quit if such a position gives you profit of Rs 30/- plus.

ICSA. You can buy ISCA Oct Fut at 203/207 for a gain of Rs 8/10/-.

Century Textiles. Buy Centurytex Oct Fut at 511/514 for profit of Rs 15/20.

Relcapital. You can buy Relcapital Oct Fut between 907/915 for a profit of Rs 20/25.

Punjlloyd. Buy Punjloyd Oct Fut at 280/282 for profit of Rs 7/10.

Culmination of Swing Trade

Today has been the last trading session for swing trade recommended in my blog post dated 12 Oct 2009. What a swing it has been!!! For quick reference please click the link given below.

http://archana-archdeb.blogspot.com/2009/10/swing-trade-for-12th-october.html

If you have been trading the swing as per my recommendations, then today you must be laughing all the way to your bank. Lets evaluate the performance of the swing trade recommended in the link above. I had recommended buying October Futures of three scrips, viz HDIL, Nagarconst and Asian Paint. Out of these three, Asian Paint could not be bought since the recommended buying price was not met in trade. For the other two scrips lets calculate your total profit from this swing trading strategy as of today, since I had advised you to keep the trade for 3/4 trading sessions.

HDIL. Recommended buy price of HDIL Oct Fut was between 352 and 362. Supposing on 12th Oct you bought your position in HDIL at 357.5 (day low was 357.2) then you would have sold today at 398.5 (day high was 398.95). Lot size is 774.

Profit per share = 398.5-357.5 = Rs 41/-

Total profit = 41 x 774 = Rs 31734/- less brokerage.

Nagarconst. Recommended buy price of Nagarconst Oct Fut was between 164 to 166. Presuming you bought one lot of Nagarconst at 165.5 (day low was165.1) then you would have sold on 14th Oct at recommended price of 179.5, which incidentally was also the day high. Lot size is 2000.

Profit per share = 179.5 - 165.5 = Rs 14/-

Total profit = 14 x 2000 = Rs 28000/- less brokerage.

Grand Total Net Profit = 31734 + 28000 = Rs 59734/- less brokerage = Rs 59000/-

So now you would agree that the swing trade did give you handsome return. Your total capital investment was around Rs 1.5 lakhs and the return on your investment (ROI) was 39.3% in just four days. If you have liked my swing trading strategy then do give your comments and follow my blog for more of such trading insights and game plans. Hope my recommendations continue to enrich you consistently by way of startling wealth creation.

I have also been giving day trading recommendations every day before the start of the market. Please check out today's recommendations or click on the links given below.

http://archana-archdeb.blogspot.com/2009/10/day-trading-recommendations-for-16-oct.html

http://archana-archdeb.blogspot.com/2009/10/taking-stock-day-trading-tips-for-16.html

Happy Trading! Happy Diwali!

Taking Stock : Day Trading Tips For 16 Oct 2009

With the market having closed for today, its time again to take stock of the day's trading recommendations given in the last post before the market opened (http://archana-archdeb.blogspot.com/2009/10/day-trading-recommendations-for-16-oct.html ). Those who traded my tips would have realized handsome profit from today's trading. If you have benefited then my appeal to you would be to post your comment as also to join my blog as a follower. It will give me immense pleasure to know that there are retail investors who are making money from stock market based on my recommendations. So lets now start stock taking of today's proceedings :-

Nagarconst. Recommended buy price of 174 for Nagarconst Oct Fut was not met in trade today. So no profit no loss.

HDIL. Recommended buy price of HDIL Oct Fut was 378/379 . Supposing you bought at 378.5 then you would have covered the position at 398.5 (recommended sell price was 397/400).

Lot size = 774; Profit per share=398.5-378.5= Rs 20/-

Profit= 20 x 774 = Rs 15480/- less brokerage.

LITL. Recommended buy price of LITL Oct Fut was 531/532. Supposing you bought at 531.5 then you would have squared your position at 563 as per target given.

Lot size = 638; Profit per share = 563-531.5= Rs 31.5/-

Profit = 31.5x638 = Rs 20097/- less brokerage.

ICSA. Recommended buy price of 208/209 for ICSA Oct Fut was not met in trade today. So no profit no loss.

Total Net Profit = 15480+20097 = Rs 35577/- less brokerage = Rs 35000/-

Day Trading Recommendations For 16 Oct 2009

In case you are convinced that Sensex and Nifty still have 5 to 10% upside left before correction then do participate in day trading of strongly bullish scrips. But you must be very quick in taking trading decisions during the day and lock small profits. Consider the following scrips for day trading today:-

Nagarconst. Buy Oct Fut of Nagarconst at 174 and book quick profit by exiting around 178. Even with this small target you can make Rs 8000/- since the lot size is 2000. If the scrip comes down to 168.25 you can again buy and exit quickly at Rs 170/171. Finally you can buy again at 164/165.

HDIL. Buy Oct Fut of HDIL at 378/379 for a target of 384/385 and then 397/400.

LITL. Buy Oct Fut at 531/532 for a target of 544/550. In case the scrip shows lot of strength then you can get target of 563 and then 575/579. Going down, the level to enter trade will be 513/514 for quick profit of Rs 10/-.

ICSA. Buy Oct Fut of ICSA at 208/209 for a quick target of Rs 6/10.

Taking Stock : Day Trading Tips For 15 Oct 2009

Market today surprised most of us. From a moderately strong first half an hour, it petered out into a bearish slide. It gained some lost ground in the last hour to close flat for the day. Nifty lost 9 points and Sensex was 36 points down at close. Since the direction of the market was opposite to what was expected, day trading tips given in the last post for today did not do much. In fact the net business would show no profit no loss. Lets evaluate the day's accounts :-

LITL. Supposing you bought at the recommended buy price of 534, the scrip closed at526.7. If you have closed your position then the loss in this position with lot size as 638 should be around Rs 5000/- including brokerage (7.3x638=4657).

HDIL. If you bought HDIL Oct Fut at 378 then there is loss of about Rs 600, including brokerage, from this position as the scrip closed at 377.55 and lot size is 774 (0.45x774=348).

Punjlloyd. Presuming you bought one lot of Punjlloyd Oct Fut at 290 then you would have booked a loss of about Rs 1800 including brokerage. This is because the lot size is 1500 and the scrip closed at 389.

Nagarconst. In case you bought Oct Fut of Nagarconst at 175.5 and exited at 179.5 then with a lot size of 2000, you would have made a profit of about Rs 7700 including brokerage (179.5-174.5=4x2000=8000).

Net Profit= 7700-5000-600-1800= 300. In other words like a flat market closing the account book also closed flat with no profit no loss.

Day Trading Recommendations for 15 Oct 2009

With Asian markets trading in positive territory and US and European markets closed on strong bullish sentiment we are also expecting some decent up move for Indian markets today. In the back drop of this scenario , given below are some of the day trading picks for 15 Oct 2009:-

LITL. Buy Oct Fut of LITL at 534/535 for initial target of 553 and then finally 579.

HDIL. Buy Oct Fut of HDIL at 378/379 for initial target of 390 and then final target of 400.

Punjlloyd. By Oct Fut of Punjlloyd at 290/291 for initial target of 314 and finally 325.

Nagarconst. Buy Oct Fut of Nagarconst at 174/176 for initial target of 180, then 185 and finally at 190.

Happy Trading and Happy Diwali !!!

Sultans of Swing

On 12 Oct 2009 we started on our journey in swing trading through the blog post titled 'Swing Trade For 12th October' (http://archana-archdeb.blogspot.com/2009/10/swing-trade-for-12th-october.html). We still haven't completed that journey since I had suggested to hold the positions for 3/4 sessions and as of yesterday we had completed only two sessions. Today when the markets open in about a couple of hours time we will enter the 3rd trading session for our swing.

So what's the big deal to chronicle all this. There is reason because one of two open positions has already achieved its target. Oct Fut of Nagarconst was traded at the recommended buy price of 165.2 or at worst at 166. Target given was 179.5 for squaring off that position. In yesterday's trade the day high of Nagarconst was 179.5. Those of you who had bought this futures position would have closed your open position. This one position alone must have fetched you net profit of Rs 28000/- in 2 days.

But we still have one open position of Oct Fut in HDIL left. As per recommendation you would have entered trade at 358 and yesterday the position closed at 379.15. Target given for this scrip is 400. In all probability the target should be achieved in today's trading session. In case the scrip fails to reach 400 and you feel it is going to fall, then exit trade without hesitation. The arithmetic is simple. Even at yesterday's closing price you are making a profit of Rs 16000/- plus. Any time in today's trade you fear that the scrip might correct, or you are not feeling comfortable with its movement, just cover your position. You already are sitting in a neat profit of 28000+16000= Rs 44000/-. This profit has accrued in two trading sessions with capital investment of Rs 1.5 lakhs (approx). Wouldn't you agree that Nagarconst and HDIL have been Sultans of Swing!!

So all the very best in today's trading with the open position of Oct Fut HDIL. With global markets having closed in green and Asian markets presently trading also in green you should be able to add at least Rs 10000/- more to your existing profit of Rs 44000. Keep your eyes glued to HDIL.

Taking Stock:Day Trading Tips For 14 Oct 2009

In the last post on 13 Oct 2009, I had given some recommendations to buy Oct Futures on 14 Oct 2009. Now that the market has closed for the day its time to take stock of the day's happening vis-a-vis those recommendations. Throughout the day the market showed remarkable strength with Nifty closing 64 points up (+ 1.27%) and Sensex adding 205 points to yesterday's close i.e. 1.2% up. However even in this belligerent bullish mood, we found some sectors and scrips dipping into red, which was little disheartening. Be that as it may, let us now evaluate the performance of our day trading picks :-

HDIL. Buy for Oct Futures of HDIL was given between 369 and 376. Day low was 373.4, day high was 382.35 and it closed at 379.15. Since the lot size is 774, in the worst case scenario you would have made Rs 2438 (379.15-376=3.15x774=2438). And if you were lucky you would have made Rs 6000 plus.

Nagarconst. Buy price recommended was 165/167 but day's low was 169.1 and so there was no trade. No profit no loss!

LITL. Recommended buy price of 501/509 was not met in trade today since the day low was 516. Again no profit no loss!

Net Profit from day trading on 14 Oct 2009 ranged from Rs 2000/- to Rs 6000/-plus.

Day Trading Recommendations for 14 Oct 2009

If you have missed the boat on 12th October for swing trade then don't be disappointed much. Here I shall be providing day trading advice so that you may join the same trades on 14 October, in case you missed the 12th October swing. In addition I am also recommending something extra for day trading on 14 Oct 2009.

HDIL. Buy Oct Fut of HDIL anywhere between 369 and 376 for a target of 385. If you find the market as well as the scrip displaying unusual strength then you may decide to wait for target of 400 also.

Nagarconst. Buy Oct Fut of Nagarconst at 165/167 for a target of 171. You may also like to wait for 179.5 as exit point, provided the scrip and the market is flexing strong bullish muscles.

LITL. This scrip was not in my swing trading list of 12th October. For day trading on 14th October buy Oct Fut of LITL anywhere between 501 and 509 and look to square up your position at 540. In case you find very strong bullish sentiments prevailing in the market then you may like to wait for a target of 585.

Tracking Swing Trade Recommendations For 12 October

Today's price action has confirmed that the swing is in place for the recommendations given in the last post for swing trade for 12 Oct 2009. Lets track the performance of the stocks futures recommended:-

HDIL. Lets assume that you have taken position today at 358. Position closed at 372.1 after making day high of 376.4. In case you are holding position for target of 400 as recommended, then its fine. But if you have done day trade, you would have profited Rs 14/- to Rs 18/- per share. As the lot size is 774 your intra-day profit should range between Rs 10000/- to Rs 14000/-.

Asian Paint. Day low was 1510 and so missed trade by Rs 10. Hence no profit no loss.

Nagarconst. Assuming you bought one futures position at 165.2, it went to high of 168.4 and closed at 167.3. If you are holding position for a target of 179.5 as recommended, then its good news. But if you have day traded then you would have made a profit between Rs 2/- to Rs 3/- per share. Since lot size is 2000, your profit should range between Rs 4000/- to Rs 6000/-.

Overall Day Profit = 10000+4000=Rs14000/-(minimum); 14000+6000=Rs20000/-(max), less brokerage.

Swing Trade for 12th October

For last two trading sessions I have been giving recommendations for day trading some stocks futures and I hope you have made reasonable money from these recommendations during each day. Today I shall be giving some recommendations for swing trading with targets. However my suggestion will be that if you happen to make considerable profit within the day itself then do take that profit and square off your profitable positions.

HDIL

On 9th Oct I had recommended a buy for HDIL Oct futures at 357 and the scrip made a low of 356.1 before closing at 358.2. In case you had closed your trade on that day then its time to pick it up today anywhere between 352 to 362 for a target of 400 in 3/4 trading sessions. But if you are still holding it then ride it till 400. However if you achieve a target of 386 in today's trade then do grab it with both hands.

Asian Paint

Buy Oct Fut at 1500 for a target of 1700 in 3/4 sessions. However if you can get 1570 in today's trade then do take it.

Nagarconst

Buy Oct Fut between 164 to 166 for a target of 179.5 in 3/4 sessions. You may decide to exit trade if you can get a price of 171 in today's trade.

Day Trading Report Card For 09 Oct 2009

The report card for day trading recommendations given for 09 Oct 2009 in my last post reads as follows:-

1. HDIL bought at end of day at 357 and closed at 357.2. Since it was for day trading, the position was to be squared up with no profit no loss. (Day low 356.1)

2. Nagar Const bought at 164 and squared up between 169 and 172 ie at 170.5. This trade gave a profit of Rs 13000(6.5x2000). (Day low 162.05)

3.Canbk bought at 343 and closed at 342.85 with a loss of Rs 120(0.15x800). (Day low 340)

4.ICSA bought at 205 and closed at 202, giving a loss of Rs 3600 (3x1200). (Day low 202)

Net profit = 13000-120-3600-1000(brokerage)= 8280, say Rs 8000/-

ICSA Oct Fut on both days did give return ranging from Rs 2500 to Rs 4000. But on both these days profit was not taken and finally ended up taking loss at the end of day. Futures' Day Trading lessons need to be drawn from this ICSA trade.

Lesson No 1

If you are day trading with multiple positions of different scrips, and if you have made handsome profit in one position, then protect that profit for the day by exiting other positions which are giving normal profit.This should be done even when these positions may not have reached the targets you have in your mind for them.

So Futures It Is - Day Trade FOr 09 Oct

In my last post on 08 Oct 09 before Indian market opening, I had recommended three future stocks for day trading. Two were on the buy side and one was a sell. The report card reads like this:-

Ambuja Cement. Recommended sell at 96.25 or 100. No trade, so no profit no loss.

ICSA. Recommended buy at 206 to cover at 210. Trade took place but cover target not achieved. The position closed at 205.5 and therefore a loss of Rs 600 (lot size 1200).

BHEL. Recommended buy at 2470 with target of 2500. Trade took place and target achieved with a profit of Rs 4500 ( lot size 150).

Net Profit Rs 3500 approx after taking into account brokerage.

Day Trade Recommendations For 09 Oct 2009

Buy HDIL Oct Fut at 357 for target of 375/386.

Buy Nagar Const Oct Fut at 164 for target of 169/172.

Buy Canbk Oct Fut at 343 for target of 352/358.

Buy ICSA Oct Fut at 205 for target of 211/214.

If Your Future Is In Futures - Then No Options

There are many attributes you require if you want to be a successful Stock Futures' player. You need deep pocket, strong heart, accurate judgement, nimble footed, firmly flexible mind ( sounds oxymoronic !) , et al. But above all these you need Lady Luck on your side. And those who have that, they should not fritter away the opportunity to indulge in the game of stock futures. For such individuals some wonderful opportunities exist as of today which are presented as under. Take a look.

Ambuja Cement

In case initially market shows weakness on 08 Oct 09, then sell Oct futures at 96.25 for an intra-day target of 94. Since lot size is 4124 you can decide to book quick profit at 95 also. The other scenario is that the market shows initial exuberance of Reliance 1:1 bonus share and opens with bullish strength; then sell Oct futures of the scrip at 100 and cover your position at 97.5/98.5.

ICSA

If market opens with bearish look then buy Oct futures at 200.5 and then cover the position intra-day at 210. Since lot size is 1200 you can decide to exit position at 206 also. However if market opens with a bullish flurry then buy at 206 and sell at 210/217. With a little help from the market on 08 Oct 09 you may even see ICSA touch 221.

BHEL

With weak market opening buy Oct futures of BHEL of lot size 150 at 2415 and then cover it intra-day at 2465/2500. On the other hand if market opens on a strong note then buy Oct futures of the scrip at 2470 for a target of 2500/2560. With strong market continuing through the day BHEL may touch 2600 also.

Contrarian Picks - For Risk Takers

Contrarian investing can at times pay handsome dividends, provided it is weighed properly against various considered inputs. The general consensus of the market is not to be discounted but at times you stand to gain immensely by taking just the opposite stance to that of majority of market participants. When financial institutions were falling like nine pins and every shade of investor treated them like lepers, Warren Buffett took a contrarian view. He went ahead and bought $ 5 bn preferred stocks of Goldman Sachs. One year down the line he grew richer by $ 3 bn.

There have been many instances of taking calculated and considered risk by contrarian investors and succeeding with a bang. Laxmi Mittal of Arcelor Mittal fame bought distressed steel plants around the globe when steel as a commodity was in slump and prospects looked bleak. Result of that brave contrarian investment decision is for all to see.

Coming to Indian markets as of now, to my mind there are some distressed stocks one can consider for contrarian investment. It should be done with a view that one is ready to average the same scrips at lower levels and hold for long term if short term view does not work out. Under no circumstances should one discard the stocks at loss if the trade goes unfavourable. Lets see some of these scrip in succeeding paragraphs.

Unitech

Buy the scrip at current market price ( closing price on 06 Oct was 98.75) for initial target of 160 to 180. If trade goes awry then keep accumulating from 83 to level of 60 in small packets and hold till its long term target of 320/330.

Suzlon

Buy the scrip at current market price (closing price on 06 Oct was 87.15) for initial target of 140. In case trade goes in opposite direction then start accumulating from 77 to the level of 70 in small packets and then hold for for its long term target of 320.

Rcom

Buy the scrip at 250 ( closing price on 06 Oct was 268.3) for initial target of 350. In case trade goes in opposite direction then start accumulating from 220 to the level of 180 in small packets and then hold for its long term target of 600.

Nifty - Crystal Gazing for Coming Week

Nifty still looks good for some more upside. That's little odd to say at this juncture what with Dow closing in the red for last four trading sessions. The fall in Dow has been against the back- drop of some bad data released last week. How can you expect consumption in US to rise when the unemployment rate hit 26 year high in September 2009? With confidence ebbing down, liquidity is sure to dry up. So my assessment that Nifty still has some headroom will seem a little out of place. But there are reasons for my foretelling so. Lets take a look of some of the reasons which prompts me to suggest that odds are in favour of bulls for some more time :-

• Though Dow has been falling of late, but it is likely to take support from its trend-line and expected to move up to 10500 level as discussed in my last post.
• Nifty has resistance at 5300 which it should now test.
• Nifty is presently sailing near its supply zone of 5137-5300 which could be used as a Bear-Trap by bulls.
• Such a strong move up has to culminate in a strong sell signal in majority of indicators and patterns which should also include candlestick pattern and maybe an exhaustion gap. We have yet to witness any of that in Nifty's graph.

The correction will take place but it will take place when you least expect it. If Dow despite last week's bad economic data surges towards 10500, then it will be very difficult to stop Nifty from touching 5500.

Dow Jones - Amazing Bull Charge

From the level of sub 1000 in 1971, Dow Jones (Dow Jones Industrial Average) has recorded its all time high of 14000 plus on 11 Oct 2007. In other words Dow has notched up around 13000 points in 38 years, or simply put it blossomed 14 times. That is an average annual return of 36.% which is not bad at all. In this journey northwards there has been some major corrections. Leaving aside a quick and serious dip in 1988, Dow has given overall good returns to its long term investors till year 2000.

Periods of excellent returns have been many but from year 1995 to 2000 Dow went ballistic and notched up roughly 8000 points. This leg of journey saw Dow cover ground from 4000 to 12000. To my mind this has been the most audaciously steep rise in a span of 5 years.

Then in year 2000 it started its tumble and lost nearly 5000 points in 3 years, scaring the wits out of investors with all pervasive climate of gloom and doom. Just when people thought everything was lost, Dow again picked itself up and almost did an encore of 1995 bull run in next 5 years. From year 2003 to 2008 Dow repeated its stellar performance of period 1995-2000. However this time around it managed to notch up about 7000 points, traversing the distance from 7177 to 14279.

No sooner did the 5 year period of joy for bulls got over that we became spectators to one of the worst mauling by bears on Wall Street. In next to no time Dow Jones lost approximately 7800 points. You can remember the ferocious agility when you recall this major index on planet earth lost more than half its worth in about 18 months. Phew! What devastation that would have caused to millions of investors !!

Since Mar 2009 Dow Jones is on a recovery path. In fact it has recovered almost 50 % of lost ground. Now the question that begs our attention is whether Dow is finally out of the woods or not. I am presenting some pointers which may help you to decide for yourself :-

• Last correction of year 2000 lasted 3 years and we have completed only 2 years since this correction began in Oct 2007.
• Bottoming out process is generally a long drawn affair for such a vicious fall. That indicates some more time may be required for Dow to finally recover and surge ahead for another bull charge.
• Already news flow is turning negative in US, showing ugly signs of loss in confidence data.
• 50% pullback to the bear phase means Dow Jones should reach 10360, which it nearly has. So one can expect a fall from level of 10500.

In all likelihood history would like to repeat itself. So you can say that Dow Jones may take another year to fully recover from the bear mauling. Till that time I guess we should be ready to witness another bout of selling which may take Dow down to 6500 level and maybe even lower. In the best of conditions expect Dow to touch at least 8500 level in coming months.

Power of Wind - Coming of Age

In this century, apart from water, we are bound to face tremendous problems in power generation to meet the exploding power requirement? We will have to explore alternative sources to oil for meeting the burgeoning demand. All avenues have to be explored seriously - from nuclear to hydro to even ethanol. I say seriously because that's what the situation warrants. And that is exactly what the West is currently doing - seriously investing mega bucks into developing alternative sources of energy. Why the sudden seriousness? To find answer to that please take note of the following points:-

• US alone has to import oil worth $ 10 trillion to meet its demand over next 10 years.
• US economy can ill afford such ugly oil bill with real economy in tatters and debt situation getting out of control.
• With demand rising the existing oil fields may not be able to cope up with it, which can trigger a runaway oil price situation.
• The Wall Street Journal reported that output from existing oil fields is dropping by about 4.5% every year and by up to about 18% in some of the biggest oil fields in the North Sea, Alaska and the Gulf of Mexico.
• New York Times reported that many of the major oil exporting countries may have to begin importing oil within a decade to meet the rising energy demands from within their borders.

The scenario as sketched above has prompted US President Barack Obama to give Wind Energy a top priority for his administration. US is deftly positioning itself in Wind Energy to be ahead of the pack in the next revolution after IT. Researchers at Stanford University concluded that even if 20% of available wind can be harvested, it will meet the global energy demand seven times over. This is how serious US is about wind energy:-

• Green Chip Review estimates that by 2020 wind capacity in US will have grown by 360%.
• US Department of Energy recently confirmed that 20 % of America's electricity requirement can be met through wind energy by 2030. Presently only 1% is being met through wind energy.
• The wind industry in US is about to explode 20 times.
• New York mayor Michael Bloomberg has unveiled plans to outfit dozens of the city's skyscrapers, waterways and bridges with wind turbines.
• A cluster of wind farms south of Los Angeles will soon supply a large part of its electricity.

With so much seriousness how can the serious investors stay away. Bill Gates has picked up 9% stake in a wind energy company. Also consider the following investments in US:-

• British Petroleum is teaming up with Clipper Windpower to build a 5050 megawatt wind farm in eastern South Dakota.
• The Blackstone group, one of the top US private equity firms, has committed $ 1.6 billion to construct an offshore wind farm.
• Shell and TXU Energy have joined hands to build a 3000 megawatt wind farm in Texas.
• J P Morgan has already invested $ 4.4 billion into more than 40 US wind farms.
  

It seems that wind energy has finally arrived on the scene. Since 1990s cost of generating electricity from wind has dropped by about 80% and it is further getting more and more cost efficient by the day. That is why this industry is growing worldwide at a fast clip of 30% year on year. Experts feel that over next 5 years the number will further go up to 50% per year, thereby generating some $ 300 billion in revenues.

If you believe in this next revolution in offing, then do invest in some wind energy companies for at least 5 years. Returns can be astronomical!

PORTFOLIO ANALYSIS - SAMPLE 8 (Jalal Basha)

Here we have a very unique portfolio of Mr Jalal Basha which comprises of some rare gems and is also well diversified. I hope it will serve some of you to select a few scrips from the portfolio to add to your own. Lets begin the analysis then.

3iinfotech
Holding 250 shares @ Rs 88.5. Closing price on 29 Sep 09 was 83.25

6 mnth tgt- 135, 1 yr tgt- 172

You should plan to exit the scrip with no profit no loss. You should re- enter the scrip at 70 and keep accumulating till level of 60.

Alembic Ltd

Holding 250 shares @ Rs 49 . Closing price on 29 Sep 09 was 52.3

6 mnth tgt- 72, 1 yr tgt- 100

Alembic can run up to 65 so keep holding till at least 62. Exit there and be ready to pick up the scrip again between 45 and 50. You can than look forward to sell your holdings at one year's target of 100.

Apollo Tyres

Holding 100 shares @ Rs 39.5 . Closing price on 29 Sep 09 was 46.2

6 mnth tgt- 55, 1 yr tgt- 85

Book your profit in Apollo Tyres at current market price. Wait for correction and buy it again at 30 level for 1 year's target.

Crompton Greaves

Holding 15 shares @ Rs 300. Closing price on 29 Sep 09 was 311.7

6 mnth tgt- 440, 1 yr tgt- 560

Play safe and exit your position from Crompton Greaves at current market price. Close below 300 will be disastrous for the scrip. It can find support at 260 level but at that point if market shows consistent weakness it may even revisit 180 level. So its better not to take any chance since you are still not in loss by exiting at CMP. You can start buying from 220 till 180 and then hold the scrip for one year's target of 560.

Ess Dee Aluminium

Holding 60 shares @ Rs 359 . Closing price on 29 Sep 09 was 352.8

6 mnth tgt-550 , 1 yr tgt- 700

Ess Dee Aluminium can touch 385 in current run-up or even higher. But on the flip side it may even drop down to 250 during market correction. But if you are not hard pressed for capital then you can cling on to it for one year's target of 700.

Exide Industries

Holding 100 shares @ Rs 88.5 . Closing price on 29 Sep 09 was 89.9

1 yr tgt- 160

You should consider off loading this scrip at current market price. You may like to pick it up again at level of 65 for its one year target of 160.

KSK Energy Ventures

Holding 100 shares @ Rs 210. Closing price on 29 Sep 09 was 203.4

Frankly speaking there can be explosive move either way in this stock. Below 195 it can tumble to a zone between 110 to 140. Above 210 it can race to 280. Since the probability to move southwards is more, exiting the stock at CMP will be more prudent play.

Mahindra Lifespace

Holding 50 shares @ Rs 373 . Closing price on 29 Sep 09 was 385.1

6 mnth tgt- 500, 1 yr tgt- 650, 2 yr tgt- 900

Mahindra Lifespace can move up to 400 but you may be better off to exit the scrip while still in green. You will then have the option to re- enter at 225/250.

Nava Bharat Venture

Holding 15 shares @ Rs 433 . Closing price on 29 Sep 09 was 380.7

1 yr tgt- 850

Though Nava Bharat Venture can correct a great deal, but in my opinion you should keep holding the scrip and plan to double your holding at 260/280. Then you can profitably exit your complete position at one year's target of 850.

NHPC

Holding 785 shares @ Rs 36 . Closing price on 29 Sep 09 was 34.6

1 yr tgt- 42

NHPC can fall down to 22. Keep accumulating from the level of 30 right up to 22. By averaging so you can plan to exit from the scrip in one year's time with a decent profit.

Noida Toll

Holding 300 shares @ Rs 44.3 . Closing price on 29 Sep 09 was 41.9

6 mnth tgt- 60, 1 yr tgt- 85

Noida Toll should correct from here up to 32. Double your position at around 32 level and hold for one year til the target of 85 is achieved.

Praj Industries

Holding 150 shares @ Rs 107 . Closing price on 29 Sep 09 was 102.1

1 yr tgt- 180

Praj Industries can witness serious selling below 96 which may take it all the way down to the zone between 60 and 70. Plan to accumulate the scrip at that level and book profit at its one year target of 180, which may even stretch up to 200.

Tinplate

Holding 200 shares @ Rs 69 . Closing price on 29 Sep 09 was 55.25

1 yr tgt- 145

Keep picking up the scrip from 50 right up to 45 , and just in case it falls further down to 40 do add some more to your portfolio. You can then plan to sell your complete holding at one year's target of 145.

Indian Budget 2009 - Road Map For Future Growth

There had been tremendous expectations on the street from Indian Budget 2009. That was purely on the assumption that with no millstone of Communist Party baggage around its neck, the UPA Govt would take the developmental plank in a big way. Hence the hoopla around Budget 2009. But when the day arrived, the package delivered was quite contrary to expectations of the market. And as it always happens, when market doesn't like some piece of news - it tanks. Imagine how badly hurt its sentiment would have been since it was waiting for this Budget with glee and a certainty of content therein? Hence on Budget Day of 06 Jul 2009, thoroughly annoyed with the Finance Minister, market did a Tandav Nritya - the dance of Anger. From intra-day high of 4480, Nifty crashed to day low of 4134 - a massive thumbs down of 346 Nifty points to Budget 2009. Thereafter it continued to fall and registered a low of 3919 on 13 July 2009.

Indian Budget 2009 has been criticised by all and sundry for lacking direction. It has been vilified as being neither developmental nor populist. Finance Minister has been accused of giving no tweak to the growth engines of India. But I was satisfied. Satisfied because what I had hoped for was finally delivered. Budget 2009 recognised the need to give impetus to two sectors - education and rural development. For acknowledging so, it can be termed as a watershed budget. The foresightedness of this budget needs to be appreciated. In the long run if India wants to be an economic superpower then these two sectors will have to be given due importance from now onwards. And Budget 2009 finally delivered on that score, albeit on an humble scale. I fully agree that such a tough decision was long overdue, but it is never too late to wake up. And India, it seems, is finally waking up!

Why I sound so emotional at this point is owing to the fact that I feel my prayers have been answered by Govt of India. In my blog post titled 'Indian Democracy - Road Ahead' on 16 Mar 2009, I had outlined two major areas, that is of education and rural development, towards which we should focus our energies. This is required to eradicate the ills that this country suffers from. And these ills have shackled us to a large extent from becoming what we richly deserve - a Global Superpower. I hope you can take some time off to revisit the blog post in order to co-relate my line of argument with the visionary provisions of Union Budget 2009. You may click the link for quick reference - http://archana-archdeb.blogspot.com/2009/03/indian-democracy-road-ahead.html

Now to business. If you agree to my point of view and that of Indian Govt, start investing in companies engaged in education and rural development sectors. Do a top down analysis and home on to scrips in these two sectors for long term investment. Not only will you be making a killing , but also be participating in the growth drivers of strong India. A win-win situation for all, wouldn't you say?