The sensex has finally shown some clear weakness after defying global trends for many sessions. The support at the top of 7th February 2007 (14562) was breached with a clear gap and the sensex did not cover the gap during day’s trading. This shows clear weakness in the market.
However, charts have not yet formed any clear trend reversal pattern. We can expect the markets to bounce back before completing a trend reversal pattern. The bounce back is likely to start from near the trend line levels of 14300 (or slightly lower levels). Normally, such a rally should touch upper trend line around 16500 (depending on slope of rise). But upper trend lines are never sacrosanct in upward trend and bounce backs may falter much before that level. It would be wise to leave some gains to the market instead of trying to squeeze out every point from the rise.
However, any show of strength should not be taken immediately as continuation of bull market. Rather it would be advisable to use new highs as opportunity to exit risky stocks (with high beta). It will be safer to have only conservative stocks in once portfolio till there is a clear signal.
Thursday, August 16, 2007
Saturday, August 11, 2007
Bull Market coming to an end?
Indian stock markets have seen an impressive rally since April 2005 (Sensex 6154). With Sensex trading around 15000, investors are naturally wondering if they should stay put instead of booking profits.
Fundamentally, Sensex is trading around a P/E multiple of 20 while historically Indian markets have been valued at P/E of around 14. Have the things changed so dramatically? I doubt it.
Globally the party seems to be coming to an end. US subprime loan defaults are threatening to spill over to other markets. Countries like India that are overly dependent on foreign funds may feel the heat if that happens. At the same time Chinese inflation scenario is looking very bad with expectations that the inflation may be highest in 10 years. Also, the strengthening rupee is playing spoil sport to the IT sector in India. Although the restrictions on ECB is likely to provide some reprieve to this sector, with enormous liquidity in the market RBI may face a tough time controlling rise of rupee and inflation at the same time. If RBI buys dollar to support rupee, then the excess rupee that comes into the market may cause inflation to go up.
Technically, there are two clear warning signs. First, the markets have been ignoring the red flags in last few days and performing against fundamentals. Second, the there is a marked increase in volatility. Both these things happen when market is peaking and gullible public is entering the market whereas shrewd experts are quitting. In the climax of every rally, the euphoria muddles market’s vision and people rush to buy and sell stocks at the most insignificant news while ignoring real warning signs. This creates a very volatile markets far removed from fundamental realities. Now, we are certainly witnessing such markets. In fact we may be very close to end of the bull rally.
Yet, we must remember that markets never follow our dictates. Even if we are right in our assessment of end of the bull market, it may take its own sweet time before confirming our opinion. Resistance to fall or even upward movement is something which an analyst can never rule out.
So where does that leave an investor? The answer is given by Dow’s theory. A rally is assumed to be in existence till a clear sign of reversal is evident. As long as the markets continue to make higher tops and higher bottoms, the trend is upward even though the warning signs may be there. Till date the markets have not shown any clear weakness. Sensex made its first significant bottom around 8800 in June 06 not falling below the previous top of 8770 of October 05. In March 07 it made another bottom around 12400, again around may 06 top. Naturally, the top of 14650 made in Feb 07 must be considered a strong support till it is evidently broken. (Note that a clear break requires both price and volume confirmations). So, it will be wise to stay invested if you are already in the market. Further, a rally from this support point should be considered a good entry point for those who have missed the bus. But, as pointed out earlier, the rally may not last for long. So, on breaks below the support of 14600 it may be wise to exit the market and re-enter later at a lower price.
Always remember, “It takes buying to push the prices up but they can fall on their own.” So when you have made profits do not hesitate to convert it to real money at the slightest weakness. Markets fall much faster than they rise and if you hesitate even for a short time during a fall, all your paper profit may be wiped out quickly.
Note: I do not have a professional charting software. So the values given here are only general markets levels. precise support and resistance maybe slightly different from values given here. Though, that should not make much difference to a genuine investor.
Disclaimer: This article only comments on general market conditions. Investing in equity markets is inherently risky and you should seek professional advice for specific guidance or in case of any doubt. I have no exposure in equity markets.
Fundamentally, Sensex is trading around a P/E multiple of 20 while historically Indian markets have been valued at P/E of around 14. Have the things changed so dramatically? I doubt it.
Globally the party seems to be coming to an end. US subprime loan defaults are threatening to spill over to other markets. Countries like India that are overly dependent on foreign funds may feel the heat if that happens. At the same time Chinese inflation scenario is looking very bad with expectations that the inflation may be highest in 10 years. Also, the strengthening rupee is playing spoil sport to the IT sector in India. Although the restrictions on ECB is likely to provide some reprieve to this sector, with enormous liquidity in the market RBI may face a tough time controlling rise of rupee and inflation at the same time. If RBI buys dollar to support rupee, then the excess rupee that comes into the market may cause inflation to go up.
Technically, there are two clear warning signs. First, the markets have been ignoring the red flags in last few days and performing against fundamentals. Second, the there is a marked increase in volatility. Both these things happen when market is peaking and gullible public is entering the market whereas shrewd experts are quitting. In the climax of every rally, the euphoria muddles market’s vision and people rush to buy and sell stocks at the most insignificant news while ignoring real warning signs. This creates a very volatile markets far removed from fundamental realities. Now, we are certainly witnessing such markets. In fact we may be very close to end of the bull rally.
Yet, we must remember that markets never follow our dictates. Even if we are right in our assessment of end of the bull market, it may take its own sweet time before confirming our opinion. Resistance to fall or even upward movement is something which an analyst can never rule out.
So where does that leave an investor? The answer is given by Dow’s theory. A rally is assumed to be in existence till a clear sign of reversal is evident. As long as the markets continue to make higher tops and higher bottoms, the trend is upward even though the warning signs may be there. Till date the markets have not shown any clear weakness. Sensex made its first significant bottom around 8800 in June 06 not falling below the previous top of 8770 of October 05. In March 07 it made another bottom around 12400, again around may 06 top. Naturally, the top of 14650 made in Feb 07 must be considered a strong support till it is evidently broken. (Note that a clear break requires both price and volume confirmations). So, it will be wise to stay invested if you are already in the market. Further, a rally from this support point should be considered a good entry point for those who have missed the bus. But, as pointed out earlier, the rally may not last for long. So, on breaks below the support of 14600 it may be wise to exit the market and re-enter later at a lower price.
Always remember, “It takes buying to push the prices up but they can fall on their own.” So when you have made profits do not hesitate to convert it to real money at the slightest weakness. Markets fall much faster than they rise and if you hesitate even for a short time during a fall, all your paper profit may be wiped out quickly.
Note: I do not have a professional charting software. So the values given here are only general markets levels. precise support and resistance maybe slightly different from values given here. Though, that should not make much difference to a genuine investor.
Disclaimer: This article only comments on general market conditions. Investing in equity markets is inherently risky and you should seek professional advice for specific guidance or in case of any doubt. I have no exposure in equity markets.
Friday, August 10, 2007
Booming economy, Sleeping RBI and Consumer Suicides
The controversy over harassment by loan recovery agents just doesn’t seem to stop. The situation is so bad that even the ICICI bank page on wikipedia (http://en.wikipedia.org/wiki/ICICI_Bank) has links to several instances of use of “goondas” by the bank. There are horror stories of people being kidnapped and even driven to suicide because of harassment by the bank. Such instances not only discourage individuals to take loans but also create an atmosphere of general distrust of banks. This, obviously, is extremely bad for any economy because it diverts funds away from its most productive uses.
Second, as always, RBI is yet to be stirred out of its deep slumber. Simple measures like getting a copy of schedules of charges signed by customer when opening an account can be of great help to harassed public. How many of us really know charges levied by our bank? Of course almost everyone has one or two experiences of being cheated by sales agents about charges. Yet, RBI fails to take any notice of them.
Third, our criminal justice system is hardly anything to rely on. Individuals just can’t hope to win a legal battle against banks who keep a coterie of lawyers on payroll just for the day when some unfortunate victim takes them to court. Even if some individual shows courage to complain against these banks, what chances he has of getting a verdict in his lifetime?
These factors make
But how does one protect oneself against such harassment. I think its wise to abide by age old wisdom- “live within your means”.If you genuinely need a loan, make sure that you can fulfill your commitments even in worst possible scenario. Then, if you are sure you can afford to take the loan, ignore offers of loans from banks with bad reputation and head straight to good old public sector banks. After all, some documentation and patience is surely better than being driven to suicide…
http://timesofindia.indiatimes.com/articleshow/msid-1315099,prtpage-1.cms
…or being murdered…
http://timesofindia.indiatimes.com/India/4_loan_recovery_agents_arrested/articleshow/2148758.cms
Friday, August 3, 2007
Korean Taxi drivers
It was around 9 pm of a cold day in early January when we reached Pusan (South korea). By the time maneuvering was finished and our beautiful ship was secured to shore, it was already 10. But, as always, I was itching to go out on shore where earth seems reasonably stable.
So, my buddy Nayak (he was a cadet) and me left for the only street in Pusan that we knew of. This street is a night creature’s dream with dozens of beautiful pubs lined up on both sides where party never stops. Unlike other days, that day we walked till the end of the street just to see what all shops were there. At end of the street, I found something irresistible- a small camera shop that stocked some of the best cameras ever made. Nayak had a watch (night shift) and he had to leave around 12. Since, I was busy checking out various cameras, I planned to go on board later.
By the time I left the shop it was 1.45 and I headed for a quick bite of crispy pakodas from a roadside stand. It was then that I realized that my wallet was with Nayak! Now, that would unnerve many. But I was surprisingly calm- maybe because of familiarity of the place or maybe because of the slow processor that I carry in my head that takes time to respond to things. Anyway, I checked my pockets and found 8 dollars in change. That was a great relief- it was 5 bucks taxi ride to the ship!
Luckily, I forgot about pakoras and headed straight to taxi stand. As I was entering a taxi, the driver politely reminded me,
“the night time fare is in effect sir, so you will have to pay the double of day time fare, ten dollars equivalent!”
“See, I am not new here. come very week.”, I replied,” look for someone new to fleece.”
“You can come here every day sir. But that doesn’t change the fare- you can verify it with the cops.”
I did enquire with the constable on watch- the fare was indeed 10 dollars equivalent. Now, the grim reality sunk in- There I was in an alien country with not enough money to get to my ship. So, I went back to the taxi and told the driver- ok, I have got only 8 bucks. I will pay you the remaining once we reach there. You will have to wait for 10-15 minutes till I fetch the money. To my relief, the cabbie smiled, “Sure sir. Happens all the time in this street”
I hopped into the cab and he took me to the pier 12 where my ship was berthed. I thanked him and told him to wait till I fetched the money, because he couldn’t enter the port area. He replied, “Don’t take all that trouble. Its only two dollars. I would have brought you here even if you had no money”. What a shame! I suspected such a kind person of cheating me about double fare! I could just mumble a low voiced “thanks” and got out of the taxi.
As I was entering the security check, the driver shouted back
” which country?”
“India”
“Please speak good of Pusan taxi drivers there!”
No wonder, I do speak well of the Sonata cabs (yes the cabs there are sonata.), wide clean roads, and honest and courteous cabbies, who follow traffic rules as religiously as we Indians follow babas who preach on TV
So, my buddy Nayak (he was a cadet) and me left for the only street in Pusan that we knew of. This street is a night creature’s dream with dozens of beautiful pubs lined up on both sides where party never stops. Unlike other days, that day we walked till the end of the street just to see what all shops were there. At end of the street, I found something irresistible- a small camera shop that stocked some of the best cameras ever made. Nayak had a watch (night shift) and he had to leave around 12. Since, I was busy checking out various cameras, I planned to go on board later.
By the time I left the shop it was 1.45 and I headed for a quick bite of crispy pakodas from a roadside stand. It was then that I realized that my wallet was with Nayak! Now, that would unnerve many. But I was surprisingly calm- maybe because of familiarity of the place or maybe because of the slow processor that I carry in my head that takes time to respond to things. Anyway, I checked my pockets and found 8 dollars in change. That was a great relief- it was 5 bucks taxi ride to the ship!
Luckily, I forgot about pakoras and headed straight to taxi stand. As I was entering a taxi, the driver politely reminded me,
“the night time fare is in effect sir, so you will have to pay the double of day time fare, ten dollars equivalent!”
“See, I am not new here. come very week.”, I replied,” look for someone new to fleece.”
“You can come here every day sir. But that doesn’t change the fare- you can verify it with the cops.”
I did enquire with the constable on watch- the fare was indeed 10 dollars equivalent. Now, the grim reality sunk in- There I was in an alien country with not enough money to get to my ship. So, I went back to the taxi and told the driver- ok, I have got only 8 bucks. I will pay you the remaining once we reach there. You will have to wait for 10-15 minutes till I fetch the money. To my relief, the cabbie smiled, “Sure sir. Happens all the time in this street”
I hopped into the cab and he took me to the pier 12 where my ship was berthed. I thanked him and told him to wait till I fetched the money, because he couldn’t enter the port area. He replied, “Don’t take all that trouble. Its only two dollars. I would have brought you here even if you had no money”. What a shame! I suspected such a kind person of cheating me about double fare! I could just mumble a low voiced “thanks” and got out of the taxi.
As I was entering the security check, the driver shouted back
” which country?”
“India”
“Please speak good of Pusan taxi drivers there!”
No wonder, I do speak well of the Sonata cabs (yes the cabs there are sonata.), wide clean roads, and honest and courteous cabbies, who follow traffic rules as religiously as we Indians follow babas who preach on TV
My encounter with ICICI Direct
Any MBA would have heard of customer being the king and how customer service is critical for success of any business. But do we really practice what we learn in classroom?? Here is my experience with ICICI bank of "Hum hain na" fame. I had heard that in spite of high brokerage, service of icici direct is bad. However I decided to open an account with them only because of lack of a better option. What happened after that was totally unexpected even from their notorious customer service.
I do not trust sales agents of any bank. So, I took the trouble of going to the icici direct center near BSE in fort, Mumbai and submitted my application form there around 15th may. I was told by a smiling (financially illiterate) “executive” that account would surely be opened within 15 days. However, I knew that I should get a confirmation call from the bank before the account is opened. So when I did not receive any call within one week I called the salesman and he again cheerfully assured me that I would get a confirmation call soon. After another one week I called him again. This time he told me that the proof of address given by me was not acceptable. Obviously he didn’t check my form when I submitted it or even when I called him after a week. And he kept assuring me that the application was under process! Of course, I don’t expect icici to call me when there is some problem with the application- its too much to expect from them. But at least they could have told me of the problem when I called them. Anyway, next day I went with my bank account passbook and told them to get photocopy of entire passbook if they want. The executive kept smiling shamelessly and again assured me that the account will be up and running in 10 days.
Once again I waited for a week and then called him. He told me that he has lodged my form and I will soon get a confirmation call. This went on for another week and then another week. Finally I suspected some foul play and called their customer care instead of the executive who had been dealing with me. The customer care told me, “Your application has not yet been received”!! So I again called up this guy and asked him about it. Now the height of shamelessness- he had the guts to assure me again that the form had been lodged. He said that it takes some time before customer care can locate it in their system! - That’s complete lie, as I know now.
This game between customer care and the executive went on for 3-4 times before I decided that it was best to record these things in writing rather than on phone. So I sent a mail to customer care on July 18, 2007 giving all details. Magic! the very next day this salesman calls me up and says “we have misplaced your form. You will have to fill a fresh form”… now that’s something even for lousiest customer service in the world! Naturally, I told him that I wouldn’t be a fool to open an account with a bank that has employees like him. Thanks God the form was lost!
Unfortunately that didn’t end my encounter with icici direct. The next day I got a call from their customer care with the salesman on conference call. The salesman had found the form and lodged it in the system. To be fair to them, the form was actually lodged on 25th July after more than a month of harassment. Then the very next day the status of the form was changed to “rejected”. This is what the website says:
“Your application for opening an Idirect account has been rejected on 26-Jul-2007 on account of the following reasons:
BANK STATEMENT SUBMITTED SHOULD BE LATEST OF THREE MONTHS. PL. CONFIRM THE BANK BRANCH NAME AND CODE..
Our Sales executive from MAHALAKSHMI - REGION will get in touch with you for rectification of the application within 2 days.”
This, when I had given them the whole passbook and they could have photocopied whatever was needed. I am also sure that they photocopied at least last 12 months transactions!
Of course, no one contacted me to rectify it. So I called up the customer care again on 1st August and asked them to register a request for the same and the call center promptly replied that they couldn’t take a request before two days have passed. I tried to explain her that its four days between 26th and 1st august. But, trust icici to employ people who cant count. What about introducing a training program for employees for counting and alphabets!
Meanwhile, I mailed the customer care about it on 2nd august. Their reply was a short and sweet one “we have registered your request regarding arranging an executive for rectification of the account opening form 9001668020. The Service Reference number is SR33033782. We will confirm the status by SMS or email within 4 working days. ” Knowing how they measure days in icici direct, I have decided to apply for an account with reliance money.
I do not trust sales agents of any bank. So, I took the trouble of going to the icici direct center near BSE in fort, Mumbai and submitted my application form there around 15th may. I was told by a smiling (financially illiterate) “executive” that account would surely be opened within 15 days. However, I knew that I should get a confirmation call from the bank before the account is opened. So when I did not receive any call within one week I called the salesman and he again cheerfully assured me that I would get a confirmation call soon. After another one week I called him again. This time he told me that the proof of address given by me was not acceptable. Obviously he didn’t check my form when I submitted it or even when I called him after a week. And he kept assuring me that the application was under process! Of course, I don’t expect icici to call me when there is some problem with the application- its too much to expect from them. But at least they could have told me of the problem when I called them. Anyway, next day I went with my bank account passbook and told them to get photocopy of entire passbook if they want. The executive kept smiling shamelessly and again assured me that the account will be up and running in 10 days.
Once again I waited for a week and then called him. He told me that he has lodged my form and I will soon get a confirmation call. This went on for another week and then another week. Finally I suspected some foul play and called their customer care instead of the executive who had been dealing with me. The customer care told me, “Your application has not yet been received”!! So I again called up this guy and asked him about it. Now the height of shamelessness- he had the guts to assure me again that the form had been lodged. He said that it takes some time before customer care can locate it in their system! - That’s complete lie, as I know now.
This game between customer care and the executive went on for 3-4 times before I decided that it was best to record these things in writing rather than on phone. So I sent a mail to customer care on July 18, 2007 giving all details. Magic! the very next day this salesman calls me up and says “we have misplaced your form. You will have to fill a fresh form”… now that’s something even for lousiest customer service in the world! Naturally, I told him that I wouldn’t be a fool to open an account with a bank that has employees like him. Thanks God the form was lost!
Unfortunately that didn’t end my encounter with icici direct. The next day I got a call from their customer care with the salesman on conference call. The salesman had found the form and lodged it in the system. To be fair to them, the form was actually lodged on 25th July after more than a month of harassment. Then the very next day the status of the form was changed to “rejected”. This is what the website says:
“Your application for opening an Idirect account has been rejected on 26-Jul-2007 on account of the following reasons:
BANK STATEMENT SUBMITTED SHOULD BE LATEST OF THREE MONTHS. PL. CONFIRM THE BANK BRANCH NAME AND CODE..
Our Sales executive from MAHALAKSHMI - REGION will get in touch with you for rectification of the application within 2 days.”
This, when I had given them the whole passbook and they could have photocopied whatever was needed. I am also sure that they photocopied at least last 12 months transactions!
Of course, no one contacted me to rectify it. So I called up the customer care again on 1st August and asked them to register a request for the same and the call center promptly replied that they couldn’t take a request before two days have passed. I tried to explain her that its four days between 26th and 1st august. But, trust icici to employ people who cant count. What about introducing a training program for employees for counting and alphabets!
Meanwhile, I mailed the customer care about it on 2nd august. Their reply was a short and sweet one “we have registered your request regarding arranging an executive for rectification of the account opening form 9001668020. The Service Reference number is SR33033782. We will confirm the status by SMS or email within 4 working days. ” Knowing how they measure days in icici direct, I have decided to apply for an account with reliance money.
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