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?