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Showing posts with label Market Outlook. Show all posts
Showing posts with label Market Outlook. Show all posts
Saturday, October 22, 2011
Sunday, August 08, 2010
Monday, July 05, 2010
Thursday, May 27, 2010
How long and deep the ongoing correction will last?
One of the leading financial services and research firm, Morgan Stanley said its operating assumption is that the ongoing fall in the market is a correction of the bull market that began in March 2009. Indeed, given where the growth cycle and equity valuations are, it seems to be a reasonable assumption. What is history`s guidance on how long and deep the ongoing correction will last?
Morgan Stanley goes back 17 years of market (BSE Sensex) history to assimilate data on bull market corrections.
Here are the observations from history:
a) There have been four bull markets over the past 17 years (including the current one), and within those bull market there have been 30 corrections of 5% or more (including the current one).
b) The average fall during these corrections has been 13%, and the average duration of these corrections is 17 days. The worst fall (May-June 2006) was 31%, whereas the longest fall excluding the ongoing correction (July to September 1993) lasted 28 days. The standard deviation from the average fall is 5.6%.
c) The average realized inter-day volatility during corrections is 1.6% slightly more than the average during rallies.
d) The subsequent rally post the correction produces an average return of 31% over 48 days. e) India has historically underperformed emerging markets during corrections and outperformed on rallies, save for a couple of occasions.
f) It is not that FIIs are always sellers during corrections. They have been net sellers in 12 out of the 30 corrections (including the current one). Indeed, on a cumulative basis, FIIs have sold USD 6.6 billion of stocks over the past 30 corrections. FIIs have sold USD 515 million of stock in the current correction.
g) The BSE Sensex has fallen below its 200 DMA only on two occasions during these 30 corrections, i.e., in 2004 and 2006. Over the past 30 years, the market has penetrated its 200 DMA four times during a bull market with an average fall of 9.3% below the 200 DMA with the average time spent below the 200DMA being 46 days (excluding the ongoing correction).
h) There is no clear cut message from the valuations at which the market troughs, i.e., the valuation range is 11x trailing earnings to 45 times, with the average over 30 corrections being 20 times trailing earnings. We are currently at 21 times trailing earnings.
About the ongoing correction:
a) It is the longest bull market correction since FIIs starting investing money in India. This correction has already 33 days old exceeding the previous longest correction by five days.
b) The fall is in line with the average and ranks 15th in the pecking order of corrections. If the market finds a floor at one standard deviation below the average fall of the past 17 years, it could take the BSE Sensex to 14,800.
c) This is only fifth occasion in 30 years that the Sensex has fallen below its 200 DMA. As of yesterday`s close, the BSE Sensex is 4.5% below the 200 DMA and the index has spent five days below the 200 DMA. If this fall below 200 DMA matches the average of the previous fall, the Sensex will trough at 15,200.
Conclusion:
The domestic macro is strong, and the government continues to push reform (the recent gas price increase is an example). The 3G auction proceeds imply that the government`s fiscal deficit targets will be met, even exceeded, easing the pressure on the 10-year bond yield - setting the road for a bullish flattening of the yield curve. Earnings continue to be strong, with two out of three companies surprising positively in the ongoing earnings season. The fall in crude oil prices increases the chances of a decontrol of auto fuel prices. The settlement of the Ambani family dispute should also be a positive for the market, in its view.
India`s defensive behavior through the latest bout of global turmoil seems to be driven by a combination of an improving policy environment, resilient domestic growth, healthy corporate balance sheets, an improving government balance sheet and a central bank that has not been hesitant to raise rates to ward off inflation threats. Thus, the logic that India should have suffered more than the average of emerging markets, given how its external deficit is funded, has been defied, and this has come as a surprise to it. Only if the European crisis deepens further (not its base case) will India struggle to retain its defensive response to this global development, in its view. Its view is that unless this is the start of a new bear market, the ongoing correction is a buying opportunity. Its base case is that this is not the start of a new bear market.
Sunday, November 08, 2009
Sunday, May 10, 2009
Poll Results - This Market Rally is a
is Bull Market beginning
71 (49.x%)
is Bear Market Rally
73 (50.x%)
TOTAL VOTES: 144
Thursday, February 19, 2009
Monday, January 05, 2009
Sunday, January 04, 2009
Tuesday, November 11, 2008
Saturday, October 25, 2008
'Market Experts' - expect 5000!
With the stock market benchmark Sensex breaking over a dozen thousand-point milestones in less than a year of downslide, the market experts now believe that even a fall below 5,000-point mark could not be ruled out.
The Sensex today fell below 9,000-point mark for the first time in about two and half years to close at 8,701.07 points, but the experts said the bottom of the current bear- rampage on the bourses is yet to come.
After today's fall of 1,071 points -- steepest ever after a 1,408-point crash on January 21 -- the Sensex has plummeted by as many as 12,500 points from its record high of 21,206.77 points scaled on January 10.
The experts said that more pain could be in store for the Indian market as there are no signs of recovery in global markets and the panic has spread even further after reports of economic giants like the US and the UK heading towards an imminent recession.
"In the current scenario, everything is possible. The current free-fall in the market and the rate of fall can witness the 5,000 levels in another six months," Taurus Mutual Fund Managing Director R K Gupta said.
There could may be slight recovery in the coming weeks, but only to be followed by further losses, Gupta said, adding that as long as the bailout does not come for the global economy as a whole, the concerns of recession would continue pulling domestic market down.
"There is sheer panic selling and frustration in the market. No body knows where is the end and when it will end. However, one thing is clear, the bottom has not yet been established," Kejriwal Research and Investment Services (KRIS) official Arun Kejriwal said.
Bonanza Portfolio's President (Research) P K Agarwal also said the market has not touched its bottom as yet, although it could be close to that level.
Saturday, October 18, 2008
More losses expected
Investors and speculators watched the Indian stock markets crash and a key index dip to the four-digit level with a distinct sense of déjà vu during the week ended Friday with sentiments completely battered by the fears of a US recession and an overall global slowdown.
Looking ahead, they feared more losses in the ensuing sessions, since some key measures by India's Finance Ministry and the central bank to infuse additional liquidity into the country's financial system over the past week had failed to lift the market sentiments.
As the market saw one of the worst drubbings in recent years, the sensitive index (Sensex) of the Bombay Stock Exchange (BSE) ended with a loss of 5.25 percent over the week, completely negating the impressive gain of 7.42 percent and 1.54 percent, respectively, during the first two days of trading.
"The fall was in line with what is happening across the globe. I'd expect the market to touch 9,500 points by next week," said Amitabh Chakrabarty, president of Religare Securities.
On most of the five trading days of the week, Finance Minister P Chidambaram sought to calm the nerves of anxious investors, saying there was no need to fear and that steps had been taken to infuse additional liquidity into the coffers of commercial banks to help them extend more corporate credit.
And the statements did work on the first two days.
But on each of the last three days of trading during the week, the index took a major beating - falling as much as 606.14 points, or 5.73 percent, on Friday alone.
The Sensex, which was ruling at an all-time high of 21,206 points barely nine months ago, has fallen nearly 25 percent over the past month and more than 45 percent over the past 52 weeks.
As many as 24 out of 30 shares that go into the Sensex basket ended with losses. The other six were led by Hindustan Unilever, up 8.56 percent and ICICI Bank, up 7.58 percent.
Hindalco led the losers, down as much as 20.40 percent over the week, followed by Tata Motors, down 16.49 percent, Oil and Natural Gas Corp, down 15.28 percent, Reliance Industries, down 14.52 percent, and Tata Steel, down 13.67 percent.
Foreign funds, which have been the main drivers of India's stock market upswing in recent years, were net sellers of equity in Indian bourses on each of the five days of trading this week, pulling out over a billion dollars.
These foreign institutional investors have been net sellers of equity worth USD 2.46 billion in October and USD 11.56 billion during the calendar year, latest data with the markets watchdog showed.
"There is a lack of interest from foreign institutional investors as well as retail investors due to the financial meltdown," said Ashok Jainani, head of research with Khandelwal Securities.
"Everybody is holding back on investing, as most of them feel the market will crash further."
Sunday, October 12, 2008
Stocks at 3/4 year lows
Ever wondered what it would have been like to buy stocks at rock-bottom prices before the recently ended bull run gained pace?
You needn’t travel back in time for the experience. With stock prices falling steeply, buying into the Nifty basket today would be tantamount to buying it at October 2005 levels!
The 47-per cent fall in the Nifty from January has taken the absolute level of the bellwether index back to its August 2006 value of 3,200.
But the price-earnings (PE) multiple for the Nifty, a measure of what the market is willing to pay per rupee of earnings, is back to levels prevailing a good three years ago.
The Nifty’s current PE of about 14 times (trailing earnings) was last seen in October 2005. If blue-chip names that figure in the bellwether index have seen their PEs crumble, mid-cap stocks have simply collapsed.
At a PE of 8.5 times trailing earnings, the CNX Midcap index now trades at a valuation not seen since June 2003. When the markets peaked in January this year, the Nifty was valued at a lofty 28 times and the Midcap index at 23 times.
The sharp fall in the PE means the market is now factoring in the same growth expectations from Indian companies that it did way back in 2005. Is it justified in doing so?
Views on this are divergent. Some fund managers believe the markets are being quite pessimistic and that the fall in valuations is more a function of poor liquidity, than of prospects for Indian businesses.
‘Time to buy’
Says Mr A. Balasubramaniam, Chief Investment Officer of Birla Sun Life Mutual Fund, “Valuations are extremely attractive, no matter what parameter you pick today — the price-earnings ratio, price to book value or dividend yield. In fact, market volatility is more of a concern now than the fundamentals of Indian companies. With oil prices correcting much more than expected, commodity prices falling and inflation worries receding, interest rates too may soften over the next few months. That means three major macro concerns will be out of the way for Indian companies. Liquidity will remain the only issue.”
He believes that while the next two quarters may be difficult for Indian markets, this remains a good time to buy stocks, as the “policy framework is also becoming more favourable to attracting capital flows.”
Earnings slowdown
Ms Srividhya Rajesh, Fund Manager at Sundaram BNP Paribas, holds a diametrically opposite view. “Though they look cheaper on a historic basis, the markets really aren’t cheaper today, because PEs have corrected. We see earnings deceleration next year. While some earnings downgrades have happened, a lot of it is yet to play out. When the earnings decelerate, PEs also will get compressed further,” she says, explaining why she would like to wait out this market fall
via Businessline
Saturday, October 11, 2008
Thursday, September 18, 2008
Poll - How are you feeling ?
Let us know your state of mind -
If you have comments about the market situation now - please leave a comment (moderated)
VOTE now in the POLL (on the right side of this page)
Sunday, August 10, 2008
Tuesday, July 29, 2008
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