Saturday, October 31, 2009


Monday, Nov. 2


10 a.m.: Factory-sector index for October, released by the Institute of Supply Management.

10 a.m.: Construction spending for September, at the Commerce Department.

10 a.m.: President's economic-recovery advisory board meets, at the White House.

3 p.m.: Fed Gov. Daniel Tarullo speaks on executive pay, at conference sponsored by the University of Maryland.

Tuesday, Nov. 3

President Obama meets with German Chancellor Angela Merkel, at time to be announced.

10 a.m.: Factory orders for September, at the Commerce Department.

10 a.m.: Committee vote on consumer financial protection and systemic-risk legislation continues, at the House Financial Services Committee.

Noon: Federal Reserve Board's Federal Open Market Committee begins two-day meeting on interest rate and monetary policy, at Fed headquarters.

Wednesday, Nov. 4

8:15 a.m.: Private-payroll data for October, released by Automatic Data Processing.

9 a.m.: Quarterly refunding announcement, at the Treasury.

10 a.m.: ISM services-sector index for October.

2:15 p.m.: FOMC announcement on interest rates, at the Fed.

Thursday, Nov. 5

8:30 a.m.: Weekly jobless claims, at the Labor Department.

8:30 a.m.: Productivity and unit labor costs for the third quarter, at the Labor Department.

10 a.m.: Hearing on foreign bank-account reporting and tax compliance, at the House Ways and Means Subcommittee on Select Revenue Measures.

Friday, Nov. 6

8:30 a.m.: Nonfarm payrolls and unemployment rate for October, at the Labor Department.

3 p.m.: Consumer credit for September, at the Fed.

3 p.m.: National Vaccine Advisory Committee meets on the 2009 swine-flu influenza outbreak and response, via conference call

Sunday, October 25, 2009

ENTRY EXIT STRATEGY FOR NIFTY


In this article we will like to accentuate the upcoming fundamental status, trend, analysis and foresight of the current Indian stock market. In this article we have discused and opined the strategy one should follow while doing investment. In other words we have tried to opine an Exit and Entry strategy for the market as a whole.
The 2nd quarter corporate results of India have started flowing along with 3rd quarter results of US and other countries. In this article we have only focused on two countries economic data’s, US and China. We have taken these two countries since we find major economic and financial stability coming back in these two prime countries.
On 9th of October the Indian stock market started the day with the 2nd quarter results with infosys. In the next two weeks we got many companies results that scaled and boosted the optimize among us.

• We are in the mids of 2nd corporate results.
• Till now most of corporate results are in the comfort zone.
• The strengthening of the IIP numbers has increased the confidence of upcoming quarter results along with this term results.
• The market has more reason to scale up the nifty near to 5200 levels. Liquidity. Yes good inflow of liquidity has increased the nifty close to 5200.
• If we look at the net figures of FII’s inflow we find in the month of October till now investment in equity Rs.7651.90cr. and in Debt side Rs.6860.90 cr.
In the coming days we will get more results which will boost up the nifty with rollover in nifty in this week. RBI review meet will be keenly watched but no interest rates hikes in the immediate but will be well hinted. Some major heavy weights are waiting to declare their 2nd quarter results. So nifty is bound to remain up provided we don’t get major shocks from other economies.

An important factor to watch includes investor sentiments in the global as well as domestic markets, and the trend of funds coming in from abroad. Any upset in these two factors might trigger a deeper correction in the markets. Positive US and China economic data’s have increased the optimize into the market. Sentiments of the investors have boosted up but still a skeptical outlook is still maintained among them. In this month till now we find that China economy grew at 8.9%.Automobile sector of china touched since the beginning of this year to 10 million units when other auto majors struggling to survive. US companies also posted some brilliant results beating the low expectation. But most of the companies have posted profit due to extensive cost cutting, and takeovers. Consumption in real terms of goods and services are very low and yet to revive back to normal levels.

Even after all these positive cues the US market remains in deep fog in term of rising unemployment ,fiscal deficit and last by adding more fuel to the fire falling of dollar
• Unemployment is standing at 9.8% hitting 26 years high figure.
• The U.S. federal deficit of the 2009 fiscal year reached a record high of 1.42 trillion U.S. dollars.

The above two are enough to put pressure on the recovery path of US economy. High unemployment will reduce consumption and forcing the US citizen to save more than spend. The unexpectedly early recovery has largely been driven by expansionary fiscal policy, particularly in the U.S. and China. As these countries confront worsening budget deficits, they will face growing pressure to moderate their spending. This reduced support will slow the economic recovery. Both the government of US and china don’t want to squeeze liquidity. But excess liquidity is giving slow birth to a huge rising inflation. Once commodities prices increase the profitability of US and China will take a much bigger hit as compared to other countries economy.

The growth of Chinese economic should be taken as massive threat rather than security.
• Over capacity of Chinese production.
• This increase the dumping goods by china to other countries resulting to increased complains to WTO.
• Over production leads to increased inventory build up creating pressure on the Chinese companies working capital flow.
• In order to clear the excess production, the products are sold at cost price resulting less on the profits of the company.
• In coming days the Chinese companies will post huge losses instead of profits since they are only focused on excess production.

All these indicate a massive threat in the near term as the bubble of over capacity will kill many financial markets. The over capacity idea took the birth from that over capacity will lead to economic growth and increased profitability. More over the Chinese companies will be able to take benefit of the falling industrial position of many countries. But now the game is changed and Chinese companies are facing the hurdle of selling their over capacity and once this will become stagnant in coming days the bubble will burst out.
 Hence for the time being we are sitting on some comfort zone but in the coming days we might get some hard times. Among all these we need to look into our portfolio’s.


As the results season is coming to an end, it is also time to review the overall portfolio to make changes according to the changes in the economic and business conditions. The individual stocks are trading at a higher valuation resulting skeptical movement among the investors. All the Large cap and mid cap are trading at much higher levels giving less space for buying at this stage.

• In terms of stock portfolio for the next 6 months we will get some fine growth despite of ups and downs provided no major consolidation.
• Cement, auto, capital goods will be few of the sectors which will post fantastic growth.
• Steel sectors will also remain positive.
• Regarding oil sector its will be very difficult sector to post some favorable growth as falling dollar will increase the crude value resulting losses in the hands of the oil majors.
• In telecommunications segment RCOM remains under pressure due to audit and other regulatory probs. But the 3g auction remains a secret winning horse in the game. Who ever gets 3g license will be the key decider of telecommunication structure of India
• I am not placing any bet on banking sector since RBI in the next 6 months might go for hike in the interest rates to suck up the excess liquidity.
• So banking stocks will take hit but still that will not a major hit. We could find marginal fall in the profitability of the banking sector.
• SBI and ICICI bank still remains in the top slot for doing investment in banking space.
Invest in quality large cap since that will swim across in hard times that might come in the coming days. In mid caps space my opinion to invest will be in top mid cap scripts. Not doing investment in low profile mid cap space. As investments in small-cap stocks come with higher risk, especially during market corrections.
Those who have invested in the markets with short or medium-term perspective should look for opportunities to book profits.
During the year 2008, large cap (-52%) stocks continued to perform better than small (-72%) and mid cap (-67%) stocks.The below chart shows the comparison.


We see in the above chart that in 2009,that  large cap have fallen much less as compared to small and midcap.So its well clear that when ever after downfall we will get the first roll back in large cap at much faster space.

Now for those who have done investment in Mutual Funds and ULIP. Those who have done investment in mutual funds when the sensex was in the range of 13000-14000 should go for profit booking. They should book profit around 50% of their portfolio. If they books 50% profits they stand with few prime advantages.
• If the market goes down profit is booked 50% which acts as a cushion from major happenings.
• Major happenings will result to advantage of investing again in lower levels. Purchasing mutual funds units in low NAV.
• Major advantage is that if you stay invested with the remaining 50% you might get the advantage of further upside.
So in both ways you keep you door of entry and exit open.
In insurance those who have done investment in UILP should also follow the above principal. But here there is a twist.
• Investors should switch over their portfolio from equity fund to debt fund or balanced fund. The percentage of switch should remain the same as opined for mutual fund.
• As stock valuation and market is almost Double from its November 2008 lows its is now wise decision to book profits AND SWITCH OVER TO DEBT FUND FROM EQUITY FUND OPTION.
• So use switches now and Book your Appreciated Value of your Equity Funds and transfer it to Debt Option.

Investors should hold a cash position - liquid fund or other investments which can be easily liquidated - and wait for a correction in the markets. Switches enable the investors to rebalance their portfolio to maintain their asset allocation in the long term. This is one of the closely guarded secrets of Ulips and is to be used over and over again. However, remember that it can also backfire if you are not careful because frequent switching amounts to timing the markets. But don’t use too much switching as this might result to trading and hence might end up with loosing of Benefits of Switches.
So over all it indicates that bull journey of nifty is still lefta s few heavy weights to declare reports.At the same time over all economic condition of other countries remains a huge threat in the near term standing on the present staistics.

Saturday, October 24, 2009

NEXT WEEK'S ECONOMIC DATA 26TH TO 30TH OCTOBER


MONDAY, Oct. 26
None scheduled

Tuesday, Oct. 27
9  am Case-Shiller home prices
10:00 AM Consumer confidence

Wednesday, Oct. 28
8:30 AM Durable goods orders
8:30 AM Durables ex-transportation
10:00 AM New home sales

Thursday, OCT. 29
8:30 AM Jobless claims
8:30 AM GDP

Friday, OCT. 30
8:30 AM Employment costs
8:30 AM Personal income
8:30 AM Consumer spending
9:45 AM Chicago PMI
10:00 AM Consumer sentiment

CHINA'S REAL GROWTH OF ECONOMY


The above picture shows the illuminated sky touching buildings of China. All these tall buildings of china show the economic strength. But inside these building we find tremendous cracks which will break result to collapsing of the tall illuminated and well designed buildings.
China has reported some key economic data’s which reflects the economy is growing and expansion is happening like any things in their industries. In this article we will try to find the invisible trend, analysis and foresight of such data’s.
We have some issues on the table which needs some key attention:
1. Employment growth
2. ASEAN investment in China
3. Profitability growth of Chinese companies and
4. Robust sales of Chinese automobiles.
I hope this article will be able to clear some of the invisible facts of the above issues.
Employment growth
New employment positions filled in China's urban areas hit 8.51 million in the first nine months of 2009, accounting for 94% of the government's target of 9 million for the whole year. During the first nine months, 4.02 million laid-off workers in China found new jobs, accounting for 80% of the government's target of 5 million for the whole year So when other economies specially the US and Europe is struggling to reduce the sky skapper rising unemployment china stand well ahead of these problems.
China had attracted 52 billion U.S. dollars of investment over the past 30 years from the member states of the Association of Southeast Asian Nations (ASEAN), said an official with the China-ASEAN Business Council Wednesday. Increased flow of investments increases more the growth of the economy beyond any forecast of any economist.
ASEAN investment in China
As of the end of 2008, the bilateral investment reached 60 billion U.S. dollars, of which the ASEAN investment in China was 52 billion, taking six percent of world's total investment in China. So recession times made china to act more quickly to capture more share of investments to their country. China's investments are spread unevenly around the world, with Asia, and especially Hong Kong, receiving the largest share. But much of this investment is a round musical chair game. Where we find that much more of these investments comes from through a foreign company that are then reinvested back into China as foreign capital, enabling the investor to take advantage of special tax incentives for foreign investment. Tax havens such as the Cayman Islands and British Virgin Islands also disguise where Chinese investments actually go. Figures reflect strong growth but in other words it’s a bubble which will last as long the game continues.
Profitability growth of Chinese companies
Profits of China's state-owned enterprises (SOEs) fell 17.6 %year on year in the first nine months to 936.61 billion yuan (137.13 billion U.S. dollars), two percentage points lower compared with the Jan.-August period. Profits of central SOEs totaled 679.68 billion yuan from January to September, down 13 percent from a year earlier. Chinese over capacity have led to reduced demand and more supply. The later one has created the problem of reduced price sending the profitability of companies into tails spin. China over capacity is now a big burden. In my last article I well depicted the over capacity bubble of China. China is simply trying to dump its products to other countries and in the coming days many nations will complain to WTO for such activities. This over capacity production will simply reduce the competitiveness among Chinese industries, forcing them to sell below cost. Finally the loss bubble will enlarge more and in the coming quarters state-owned enterprises will incur much fall in its profits.
An important barometer of China's foreign trade, the Canton Fair a strong rebound in foreign purchase and buyers compared with the last session in April, an encouraging sign of the country's export amid the continuing global recession. China Import and Export Fair from October 15 to 19 saw an export volume of about 15.6 billion U.S. dollars. That's up by 19.6% over the last session. Low pricing of Chinese goods as compared to other countries has increased this export figure. If the selling comparison have been made at par with other countries then it should have been extremely difficult to have the export growth according to this time. Low prices are enabling chin to sell the over capacity production and generating increased losses for the companies.
Robust sales of Chinese automobiles
In the coming years US automotive sector will face more bad days as china have taken over that space too. US auto sector is struggling along with other countries to have their well designed cars to be sold at the counters. According to the China Association of Automobile Manufacturers China's production of automobiles since the beginning of this year hit 10 million units on Tuesday, making it the third country in the world to surpass the annual output mark. When US auto along with European market was struggling for bailouts and other financial rebalancing china made a silent approach towards the market and increased its market share and filled the auto show rooms with their own brands. The government support package for the sector at the beginning of the year made all the difference. Reduced cost of borrowings and taxes made a win-win deal for China automotive sector.
In the past only the United States and Japan have previously passed the annual production figure of 10 million. The country's auto output surged 78.85% year-on-year to 1.36 million units in September, while total sales hit a new monthly high of 1.33 million units, up 77.88% from a year earlier. But here also it will be interesting to watch that whether the increased sales have affected the profits of Chinese companies. Did they again sell at below cost? If so then another bubble in the wings for the automobile sector.
Overall it can be said that as much the data’s are looking impressive the inner story depicts some thing different. Sales volume increased at the cost of companies profitability will be high cost game. Over capacity is ruining the Chinese factories and industries cash flow. This bubble will have a huge effect in the coming quarters which might send the China to another recession phase. The global market is struggling to revive where as china might send it further back into dark woods.

DOLLAR FALL- SMALL BENEFITS BUT LONG TERM PROBLEMS



American exporters, whose goods have become more competitive abroad, are happy with their weaker currency.
Falling dollar is now a boon for US economy but at the same time a major concern for replacing the green color with some other currency. If we look into the invisible benefits of falling dollar we find that US is the only country enjoying the benefits of falling dollar where as other countries are crying over it.We have few issues on the table regarding free fall of dollar.
1.Benefits of dollar fall to US and other countries,
2.The riiple effect of further fall of dollar,
3.Indain effect of dollar fall and
4.The oil price increase due to dollar.
In this article we will try bring foward some of the invisble facts and analysis of the above issues.

Low valuation of dollar helps to boosts exports. The falling dollar increased the export of US. The export sector is one of the best performing parts of the US economy, creating jobs and boosting domestic demand. Job creation is now one of the prime agenda of US government where unemployment is 9.8%. If exports increase then more manufacturing will happen resulting more job creation. US struggling with its never ending and rising unemployment benefits. These benefits are draining out the hard saved US citizens’ money which Federal Bank has collected via taxes and etc. Free falling dollar might not go for a longer time but still it can give new turn around to start the industrial activity of US. Similarly domestic producers may be cheered that rival, imported goods are more expensive. A lower dollar means goods cost less outside the U.S., which could spur U.S. exports. If overseas sales of U.S. goods increase, that could mean production at U.S. factories would need to increase and put some people back to work.So does US deliberately wants to keep dollar fall so that it can build its economy.
On the days when risky assets fall, the dollar tends to go up. When risky assets rise, the dollar falls. The dollar has fallen fairly steadily since March, a period which has seen stock markets enjoy a phenomenal rally.
The chart below, shows  the current index is being calculated by factoring in the exchange rates of six major world currencies: the euro, Japanese yen, Canadian dollar, British pound, Swedish krona and Swiss franc. This index started in 1973 with a base of 100 and is relative to this base. This means that a value of 120 would suggest that the U.S. dollar experienced a 20% increase in value over the time period. This level of dollar is being taken advantageous for the world economy.But currently in the chart we find dollar USDX at 75 which indicates critical high alert for other countries economic growth.



At the same time we should not forget that falling dollar have happened due to the large fiscal deficit and trade gap of US. But despite of all these US economy will benefit from this fall. Historically all countries have been making their currency grow at the cost of rising dollar and also on the citizen of US. Exporting countries sold their goods in US and sending the US made products to dustbin. After the fall of dollar US products are again getting their place back in the shelves of the shops.
The boost from net exports could be a significant factor in maintaining rates of economic growth. Imports will get negligible response, consumption a boost and investments a shot in the arm (as capital goods import becomes cheaper). A weak dollar will also reduce imbalances across the globe, forcing the US to import less and the Asian countries to encourage greater consumption. We already find that trends of export of wolrd have taken hit and is inclined to fall more due to falling dollar.The below chart shows the trend of world export.If dollar further falls exports will decline like anything of the world market.
EFFECT ON INDIA
For India, a weakening dollar has already had a substantial impact on exports because more than half of Indian exports are dollar-denominated. The real losers are sectors such as textiles, gems and jewellery, leather and handicrafts where the majority of the industry is in the small-scale segment and the companies have neither the balance sheet strength nor the financial leverage to make use of such advanced financial techniques such as hedging not to forget the tier-II IT companies, which work on slim margins. The below chart depecits the picture of current position of the India's export.Big Indian software companies are stepping up their hiring of American tech workers, who have suddenly become a lot cheaper to employ.We hold about $160 billion in foreign currency reserves. Most of it is reportedly in US dollar-denominated assets.falling dollar translates into a fall in the value of our currency assets.

A continual depreciation in the US dollar will reduce living standards in America; there is also the possibility of declining competitiveness in the long term. However, the depreciation has come at an opportune moment. With the prospect of recession and large current account deficit, the weak dollar is ironically helping to make the US economy stronger.
Although it is worth pointing out, it is making the economy stronger from the demand perspective; it does nothing to address the underlying problems facing the US economy. In other words the free fall of the dollar is a short term benefit but if it continues it will have worst effect on US economy in the coming days. But the real crisis for the US will be what happens to the dollar once the Asian central bankers start to sell the US treasury bonds, which they have hoarded over the years. This will result to increased supply of dollar making it rise and sending US economy in trouble waters.The US is in a win-win situation, as a result of the strategic bind in which reserve-rich economies find themselves. If countries China, India, Japan and Russia,  start shifting their reserves to other currencies, they face the risk that that very act could depreciate the dollar by reducing the demand for it. In consequence, they may find their reserves losing value.It seems that US is playing with dollar.

OIL IMPACT
In the coming days we might get oil breaching the level of $100/barrale since the free fall of the dollar have a negative correlation with oil price. Since crude oil is currently priced in dollars, the price of the world’s most precious commodity climbs as a result. Oil have fundamental reasons to go up due to increased demand. But here we try to find out the weak dollar ripple effects on oil prices. US dollar is the only currency to buy oil. Dollar devaluation increases inflation in the oil producing countries. Statistical analysis indicates that, among 18 oil producing countries, inflation was associated with dollar depreciation in 14. The four countries that did not fit this pattern were those with diversified economies, other major sources of income beside oil, and currencies not pegged to the US dollar. Dollar devaluation reduces drilling activities in areas where most of the costs are denominated in non-dollar appreciating currencies such as the North Sea. It also reduces drilling activities in the oil producing countries. So crude is the next item to heat over and increase the commodity prices across the world sending inflation more than expectation.
Free fall of dollar might bring some relief to US but not to the rest of world. It will be now interesting to watch how other countries deal with falling dollar.Moreover how long US will play with dollar.

Thursday, October 22, 2009

POWER GOLD MINE OF INDIA



Power is an essential requirement for all facets of our life and has been recognized as a basic human need. It is the critical infrastructure on which the socio-economic development of the country depends. The growth of the economy and its global competitiveness hinges on the availability of reliable and quality power at competitive rates. The demand of power in India is enormous and is growing steadily. 

For any economy to growth consumption of power is vital. The opening up of the energy sector to private investors as part of the Indian economic reform gave an   energy boost  desperate needs Indian power industry is now a highly opportunistic place of investments. Private equity (PE) players to invest around  $1.64 billion worth of infrastructure funds, mainly in power sector.

PE investment in the power generation sector dropped by around 80% between April and September 2009, to $157 million (around Rs 770 crore) from $902 million (Rs 4,419 crore) a year earlier.But still it remains the high alert zone for getting good return over investments. According to Venture Intelligence, a research service focused on PE and mergers and acquisitions, investments in the power sector took jump  were $122 million in 2006 to  $495 million in 2007.



So now a many question swill come in our mind asking

  1.  What are the growth prospects of power sector?
  2. Upcoming new power projects and its prospects.
  3. Invisible negative impact and fate of doing investment in power IPO.
  4. Long term outlook 2-4years.
Growth of Power Sector infrastructure in India since its Independence has been noteworthy making India the third largest producer of electricity in Asia. n its quest for increasing availability of electricity, India has adopted a blend of thermal, hydel and nuclear sources. Out of these, coal based thermal power plants and in some regions, hydro power plants have been the mainstay of electricity generation. Oil, natural gas and nuclear power accounts for a smaller proportion. Of late, emphasis is also being laid on non-conventional energy sources i.e. solar, wind and tidal. Growth of the industry today is not standing on the traditional method of power generation. Newer forms have expanded the diversification and growth of the Industry. The economics of the power sector is almost entirely driven by the domestic market and the attractive demand-supply dynamic. If we look at the demand supply of the power industry of India we find that

India needs incremental power capacity of one lakh Mw over the next five years. Peak power deficit in India goes to as high as 18.6%. The onus is on private players to add 40,000 Mw by 2015.




UPCOMING NEW POWER PROJECTS IN INDIA.

We also find a strong list of upcoming Power projects in India. Some of them as follows:
  • Neyveli Lignite Corporation Ltd is setting up the Barsingsar power project with Rs 1,368.25 crore, which is under execution. It consists of two power units each of 125 mw capacity. The project is expected to be complete by 2009.
  • Another project by  Neyveli Lignite which is setting up a 500-mw thermal power project at Bikaner, which is in planning stage.
  • Rajasthan Rajya Vidyut Utpadan Nigam Ltd is setting up the Giral lignite power project with Rs 1,350 crore investment. The state government's project is partially complete and is coming up at Giral, Barmer. It consists of two lignite-based power units each of 125 mw capacity.
  • The Nigam's Chhabra thermal power project with an investment of Rs 1,750 crore is also under execution. The project has two power units each of 250 mw capacity. It is expected to be completed by 2008.
  • RRVUNL's Suratgarh power project stage-IV with an investment of Rs 750 crore is under execution. The 250-mw coal/lignite-based thermal power project is expected to be completed by 2008.
  • Also under execution is the Kota power project stage-VII with Rs 800 crore investment. The project is of 195 mw capacity and is expected to be completed by 2008.
  • Marudhar Power Ltd's lignite-based power project with an investment of Rs 750 crore is under execution at Bikaner. The project consists of two power units each of 135 mw.
  • Raj West Power Ltd, a company belonging to Om Prakash Jindal Group, is setting up a lignite-based power project at Barmer. It is under execution and is expected to be completed by 2008. The project cost is estimated at Rs 4,804 crore.
So many projects will attract huge foreign inflow as well as domestic which will drive the sector growth to new heights. More over the return from these investments will be time consuming as break even level will be achieved after certain time frame from start off. But the hidden treasure of growth lies once the projects crosses the break even and start generating future cash flow. This list stand for the demand that is being generated at present situation. In coming days many more will add on which will make this power sector lucrative as gold mine.

INVISIBLE NEGATIVE IMPACT

In coming days we will find many more huge investments being drawn by this sector.

But at the same time too many players in to a particular segment leads to optimized growth as well as far more increased decline. Their is a saying in English too many cook spoil the broth. It’s same here. Too many projects and will increase price bargaining. Companies will be compelled to go for reduced margin sales, resulting less profitability. The companies will fight against each other to make the most competitive bidding. Despite of all these the power sector will remain lucrative for private equity and venture capitalist in the long run.


Since demand for this sector is never ending process and will continue to grow in the coming days. In recession times the demand might drop for a certain time but it will again shoot up like any thing. In the past couple of the capital market witnessed some major power share IPO hitting and went off speechless. Investors frowned over the return they got from the IPO on the listing day. Investors were in this expectation that the share ipo will make their investment to double. But again here we made too much expectation from the initial phase. The place where we failed to identify the capability of these share ipo’s to give return is our short term out look. We never looked in to the process of the industry, when it will generate return over investment. This sector is highly capital intensive and major generator of negative cash flow in the initial phase.Once the projects gets started and power generation and supply begins from these projects the sector will be nothing next to a gold mine.


Investors who are doing investment in this sector via capital market will have to wait for their investments to grow since all the projects are on establishment process. The companies who are engaged in building these projects will not get positive cash flow from the first year. It will take some time to break even and then generate future positive cash flow. The sector might face hard times in the initial phase as too many investors expect too much expectation. According to the industry process it will take time to establish power plants till then it will  generate meager return to investors which  will lead to investor  pull back from investments. This pull back is only driven by too much expectation in the initial phase and not on long term outlook.



Those investors or private equities and venture capitalist who desires to do investment should look into the invisible future growth of the sector that will take birth from the huge upcoming never ending demand of power in India. This sector is as good as a gold mine. Pricing issues and others factors of so many power players will be their but as more demand will increase this factor will get more reduced.


LONG TERM OUTLOOK

The reason for this bullish growth emanates from two reasons. One is the continued capacity expansion plan and investment outlay from the government. Two, growing demand in the domestic market. India’s power deficit is about 14% during peak hours. Again, this varies from state to state. The more industrialized a state is, the more its demand for power. Maharashtra for example, faces a deficit of more than 30 percent. Chronic power shortages and widening power supply-demand gap is creating tremendous opportunity for privat investment encouraged by government policies.


According to a McKinsey study ‘Powering India: The Road to 2017’, if India is to grow at 8% for the next ten years, its power requirement may rise from 120 GW to 315 to 335 GW by 2017, requiring an investment of $600 billion on adding the required capacity So we find a never ending demand and huge untapped potentiality for venture capitalist and private equities.


So while on one hand India is developing new and enhancing existing traditional power sources, at the same time it is also laying emphasis on non-conventional sources such as solar and wind power. Moreover, post Budget 2009-10, the Power Minister has announced an addition of 16,000 MW by independent power producers by the end of the Eleventh Five Year Plan and that the target of 78,750 MW would be met by 2012. In addition to this, the Government has announced plans to set up a first-of-its-kind energy efficiency company under the purview of the Union government.

The below chart shows the demand and supply shortage of power supply.This never ending mismatch makes this sector more lucrative for expansion and growth.

Having equity participation from four PSUs -- NTPC, Power Grid Corporation, Power Finance Corporation and Rural Electrification Corporation -- the company will be called Energy Efficiency Services Ltd (EESL). This company will engage in energy efficiency and consultancy.


The profitability of the power generating companies is expected to improve in the coming quarters as the GoI is well on track to provide long-term fuel linkages to the po wer plants. Coal India Ltd. (CIL), which mines about 85% of the coal produced in the country, is expected to sign a fuel supply agreement (FSA) with certain PSUs,with an assurance to supply coal for 90% PLF. In the current scenario of fuel shortages, the power generating companies should benefit extensively from this development. With reliable fuel linkages, the Peak Load Factor of the power plants should improve and correspondingly result in better margins for the power generating companies.


The excessive demand scenario for power in the country also implies significant growth potential for the power sector. India has historically been a power-starved country, with the peak power deficit standing at 16% in FY07-08. The GoI has charted out its mission of ‘Power for All by 2012’, which calls for a YoY capacity addition of 18,000–20,000 MW during the ongoing five-year plan. The mission also targets an increase in the per capita consumption of electricity from 631 Kw/hr in 2006 to more than 1,000 Kw/hr by 2012.



So the never ending demand increases the value of the power sector. Once the companies start off their power supply distribution the companies will generate huge reserves which will give them more space to expand and generate future growth. My advice to the investors is not to look for short term outlook of the sector. Look into the long term prospects and stay invested for long term. Its India’s another untapped gold mine. Private equities and venture capitalist will find huge return over their investment in the coming days.

Tuesday, October 20, 2009

INDIA CEMENT EXCELLENT LONG TERM



When the country was mourned with low rainfall in this monsoon at that time some one else was on a smile mood. The cement industry was the only benefited sector due to low rainfall. Delayed rains in several parts of the country, helped to ensure strong demand conditions in the September ‘09 quarter from segments such as government-funded infrastructure projects and the housing sector in smaller towns and rural areas. As demand was their, constructors were busy in building and cement consumption was happening at robust speed.


This article will bring out few of the following facts of India Cement along with others key issues:
1. Sector outlook for long term
2. India Cement prospects-its order book, plans for expansion and financial overview.
3. Technical Outlook –current prospect of investments and future.
4. Investment strategies

This time the delayed monsoon became a boon for the cement industry as a whole projects of constructions were on better capacity as compared to previous financial years.In this years monsoon the government took a keen focus on injecting more funds to improve the country's rickety infrastructure, along with the activities in the realty sector, which was passing through a major slump, is picking up.

India’s governments have poured funds into the infrastructure projects demanded by domestic and foreign capital. Cement consumption across the country grew 14.6% during the July-August period driven by a strong growth in the northern and eastern regions according to monthly data provided by the Cement Manufacturers Association. Demand during the quarter, from July and August particularly , picked up owing to higher consumption from semi-urban and rural infrastructure and construction backed by infrastructure spending.
In the coming days cement sector will witness huge demand due to India's infrastructure sector has the potential to attract investments worth $1.5 trillion (Rs 75 lakh crore) over the coming decade. So even if we take a conservative outlook over a decade we find that still Indian cement companies will grow like any thing. The return on theirs expansion plans will yield them healthy return without doubt. The 11th Five-Year Plan envisages an outlay of over $500 billion of investment for infrastructure.
The investment in infrastructure has risen from 4.9 per cent of the gross domestic product (GDP) in 2002-03 to 6 per cent last year.Even if we look at the investment route that derives the demand of infra projects in India we get private equity (PE) players are rushing in to raise funds of. Rs 8,500 crore for the infrastructure sector. At present, close to Rs 8,541 crore is in the process of being raised. Out of this, Rs 6,800 crore is being raised by India-dedicated infrastructure funds.At the same time we find that Cement industry is being questioned regarding the prospevt of huge capacity utilization and its pricing effect. We all know that Indian economy can only grow at the rate of 6%-9% backed on infrastructure growth. So just envisage the growth of infrastructure that will be required to achieve the 6%-9% growth of the Indian economy. Now all these infra projects will need huge quantum of steel and cement the prime inputs of infrastructure sector. So the future prospect of cement industry is very strong and will face the situation of shortage of material if production capacity is not expanded. Hence its is well justified to increase the production capacity and match the future demand.

INDIA CEMENT PROSPECTS.
India’s cement industry is expected to mark a record expansion in capacity this year, reaching about two hundred and seventy six million tonnes. India Cements is now one of the cheapest stocks under various valuation metrics — be it price-to-book value, price-to-earnings multiple. For instance, India Cements trades at just 1.2 times its book value.The other key areas which makes the prospects of the company more visible are:

1. The company has been attempting to diversify its presence beyond the southern markets.
2. It made its first foot mark of diversification by buying up one million tonnes cement grinding unit capacity in Maharashtra. India Cements’ installed capacity at the end of FY 09 was 12.95 million tonnes compared with 8.81 million tonnes a year earlier.
3. Capacity addition has been made in order to increase its market share and meet more upcoming demand.
4. In last two years, the company had invested around Rs 1,960 crore in capacity expansion. This expansion has been funded largely through internal accruals.
5. Very recently the company acquired Indo Zinc, a loss-making zinc producer. It was taken over due to Indo Zinc was implementing a project for setting up a cement plant in Rajasthan with a capacity of 1.5 million tonnes, but this project will now be implemented by India Cements.
6. Estimated cost of setting up this plant will be around Rs. Rs 600 crore and also it raised Rs 592.5 crore via a QIP for its expansion plans .
7. So less cost debt to effect its profitability that will be generated from its expansion .
8. The company is well placed in terms of expansion and capacity utilization. Its capacity utilization is 70.3%.

So the company is well planning regarding diversification and expansion and more importantly expanding with reasonable step calculation. Its not making miscalculated robust expansion and misuse of funds and reserves of the company. Its funds raising plans are in parallel with upcoming demand. The company is making diversification and not remaining south centered.

FINANCIAL OVERVIEW.
Quarterly Report Analysis March 2009 v/s June 2009
1. Operating profit we find a jump of 24.98%.This reflects the company operation is efficient enough and no misuse of resources.
2. Interest cost goes up by 9.97% which is consistent with previous quarter reports. The company is not exposed to high risk and leverage.
Half yearly report analysis (September 2008 v/s March 2009) and Year to Year comparison (March 2008 v/s March 2009).
1. Other income goes astronomically high by 3100%.In the previous quarters we find inconsistency in other income.
2. Operating profit drops by 29.56%.
3. EPS drops by 43.73%.
4. The reserves of the company grew by 16.5%.This indicates healthy growth and later we will also find consistency of reserves growth.
5. For the YoY we find reserves grew by 15.9%.Again we get consistency.
6. Secured loans grew at normal % as compared to previous financial years at 6.7%.
7. Unsecured loans also grew at 13.24%,consistent with previous YoY.
8. Capital work in progress also grew by 57.24%.This reflect the company have enough working capital supply and consistency in previous YoY. Working capital management is excellent.
9. YoY expenses dropped by 43.04%.Less expenses results to more savings and increased profitability.
10. But the companies Fixed deposits dropped by 80.8%.This indicates that company looses more in terms of fixed interest incomes.
11. The most important things which makes the company more competitive is its reduced contingent liabilities. We find 47.19% reduced contingent liability.
The below chart shows the Earnings,Dividend and Price relation.



TECHNICAL OUTLOOK
1. The RSI indicates oversold levels. Its stand below 30 and looks for buying.
2. But when we look beyond RSI to Stochastic RSI we find more specific outcomes. We find that Stochastic RSI indicated too much oversold according to the present calculations. It’s below 20 marks and deep below which indicates rock bottom valuation.
3. William %R indicates also rock bottom oversold valuation.
4. The MACD graph depicts that both MACD line and Signal line are standing at zero levels. The signal line is crossed from below the MACD line and gets ready for a rising above MACD line.
5. When we look into accumulation and distribution of the stock we find that stock has sold off too much. It might be due to skeptical outlook of the market and cement industry prospects. The too much stretched valuation of the market as a whole has led to a decline in the valuation along with sell off of the stock to rock bottom levels.

I would like to make clear that all the above findings are based upon the calculation standing at the present market situation. It might change with the next market movement timings. This outlook is only provided to identify the present position of the stock and to provide a guideline to only those who have invested and remained invested till now. I am not suggesting at present to invest in this stock at these market conditions. At the same time, I am not asking to stop from investment and rely completely on these technical calculations. The calculation being discussed to give you an over view of the present position of the stock.
The below chart 1 shows the RSI,Stochastic RSI,William %R followed with MACD.



The Chart 2 shows the Accumulation and Distribution


INVESTMENT STRATEGIES
The strong financial position of company followed with efficient use of assets and resources gives the company a competitive prospect. The companies well calculated decision regarding expansion within its limitation makes the company more strong with reduced risk. The financial position of the company makes it more strong and competitive. Reduced contingent liabilities make it sounder to drive new expansion plans without borrowed capital. We only find strong consistency in building reserves and control over expense growth. One more important point to be noticed here is that the company is expanding within its limitation. In other words very calculated steps are being laid before expansion. The company did not go for a wild idea of expansion. The company desires do diversify and market it goods to other states also. For this the company purchased two different plants in Maharashtra and Rajasthan. The interest cost is very less and reasonable although we find inconsistency in the previous quarters and yoy . The company is very cost conscious. Since in order to reduce the power cost the company went for building up a separate power unit for the company. The two power plants would give the company the advantage of cost as the variable cost is estimated at about Rs 2.50 a unit against Rs 3.75-4for grid power, which is not always available. On an average, every tonne of cement needs about 80-85 units of electricity
This will give the company more cost advantage with expansion. It gets the advantage of pricing its goods to competitive levels.
The below chart shows the stock price movement.



So investing in this stock will fetch good return over a log term prospect. The expense, cost, diversification, separate power plants all increases the prospect of healthy return over investments. The company technically remains oversold. But the over all market condition doesn’t suggest to go for buying at these levels. It should be chosen and kept separately for long term investment. For long term it’s a good stock to add in your portfolio. India cement have all the components that’s a stock performance requires over a long term.

Monday, October 19, 2009

SUZLON TROUBLES.



I have got numerous queries from investors regarding the prospects of Suzlon in the short term and long term. This article brings out the trends, analysis and foresight of Suzlon .Investors should use this article for information basis and not for trading strategies.

EXPANSION FORESIGHT
Suzlon Energy Ltd., India’s biggest maker of wind-turbine generators, said it completed a global blade retrofit program after spending about $100 million. Suzlon Energy Limited (SEL), the world's third leading and India's largest wind turbine manufacturer, announced the completion of its worldwide program to strengthen and reinforce all Suzlon blades of the V2 type on its S88 - 2.1 MW turbine fleet. Instances of blade cracks were discovered in late 2007 during the operation of some of Suzlon's S88 wind turbines in the United States. Suzlon acted immediately and rectified the work. The company initially provided Rs 19 crore towards damages. But the complaints kept on increasing. As of June 22, 2009, 179 damaged blades were reported. For the quarter ended March 2009, the company provided Rs 104 crore for the blade retrofit and replacement availability compensation, taking the total provisions towards this to Rs 553 crore till date.This will give suzlon some space to prove its capability of service as well as its lost good will be recovered.The below image depicits the Suzlon business area.




In parallel with strengthening the S88-V2 blades, Suzlon also introduced the next-generation S88-V3, which is consistently delivering and exceeding performance standards at windfarms around the world. One of Suzlon's S88 turbines produces enough energy to power approximately 500 average American homes. This new venture of projects will help suzlon to develop the products that will meet the requirement of new US wind and Energy and Water Development and Related Agencies Appropriations Act..As of March 2009, order backlog declined 57 per cent y-o-y to Rs 7,900 crore which translated to a 58 per cent decline to 1,464 MW (1389 MW exports and 75MW domestic). It has also completed and commissioned a 19.5 MW wind farm project for Gujarat Mineral Development Corporation in Rajkot district of Gujarat.In the month of April the North America arm of Suzlon Energy Limited, has signed a repeat order with Duke Energy, of Charlotte, North Carolina, to provide 20 units of the S88-2.1 megawatt wind turbine.It have even signed deals with that will comprise of 63 units of Suzlon's S88-2.1 MW with austarlia.In other words the company have made multifold expansion in addressable market and new order wins - US, Brazil, China, Australia, Spain & EU.

FINANCIAL VEIW.
Three promoters of wind power major Suzlon Energy have sold approximately 70 million equity shares, representing 4.5% of the paid-up capital of the company. The funds generated through the stake sale will be ploughed back into the company either in form of debt or equity. The promoter holding after the sell-off will be reduced to 53.08 % of the paid-up capital. During the past three quarters, the promoters of the Pune-based company have sold part of their shareholding in the company three times to reduce the overall debt that currently stands at Rs 11,800 crore. The company has been extensively engaged in selling its ventures and raising funds for its expansion. It reveals that the company have less fund in its hand to go for any expansion based upon its internal accruals. The company is also flooded with huge debt.
Quarter profit on June 2009 drops by 84.56% as compared to quarter March 2009.We don’t find any consistency in quarter profit although their was no loss but too much wide variations. Other income of quarter June 2009 drops by 82.92% as compared to quarter March 2009.For the June 2009 we find operating income went into minus.Operating income deals with the profit that is generated via operation of Suzlon.
Interest cost increases by 130% in half yearly March 2009 as compared to half year September 2008.This eats away the profit pie of the company giving less profit and more loss in the hands of the share holders.
Secured loans grow by 495% in March 2009 yearly report as compared to March 2008. Unsecured loans go up by 37.76% for the same period. Companies fixed deposits drops and current liabilities jumps by 69.61% for March 2009 yearly report.
Other income for the 12 months period from March 2008 to March 2009 drops by 4481%.Yes I am correct and you read also correct. The drop we find  is enough to freeze bones. Other income for the period of March 2007 to March 2008 we find a drop of 63.20%.So we get a consitency in fall. And finally asministrative  expenses goes up by 425%,selling expenses goes up by 37.87% for the March 2008-2009.More starnge is that manufacturing is happening very less.We find that manufacturing expenses goes down by 24.67% for the period 2009-09 compared to 2007-08.Expense increase makes outflow of cash more as compared to inflow.Its also reveals that management inefficient use of resources and assets.

TECHNICAL OUTLOOK
According to William %R we find that Suzlon is in climbing over brought levels . We find distribution of shares and no accumulation. In the month of September and August we find accumulation but from the month of October we get distribution trigger falling into minus zone. This indicates that investors are skeptical regarding its 2nd quarter results and moves away from buying. Stochastic RSI reflects that its above over brought level and correction is in the wings. We will not get much movement in the scripts. Even climbing the level of Rs.100 depends on some major turn around within the company and 2nd quarter results, other wise the look out is very poor.The chart below indicates the William %R,Accumulation and Distribution,Macd and Stochastic RSI.


LONG TERM/SHORT TERM.
The company is over burden with huge expenses and debts. The interest cost eats up majority of its profits, leaving less for share holders investment appreciation. Its expansion plans are quite highly in dark as when ever the company will plan for expansion it needs to borrow funds. It cannot fund any expansion without raising funds. So when ever the company plans for expansion its profits will decline. The company can only improve its profitability by reducing debt. No other support is required apart from other source to increase profit. Obviously it also needs to put a tab on its rising  expenses which have climbed to avearge 350%.The company have projects in hand and is also tapping new projects but the operational profit of the company remains under pressure. Its overseas acquisition have created the burden of debt and now its also engages himself in selling those ventures as well as reducing the promoters share holding. This might lead the company in the long term to face hard times in management holding. It have faced quality issues for which the company spends four times more than its initial estimate of $25 million made in March 2008.So this will also add on the increased burden on the profitability of the company.The belwo chart depicits the price of Suzlon for the past 1 year.

In one place the company is growing in positive line is that its still gets small and big projects in over seas countries. But what ever order it has will take time to complete and generate profit from those projects. So it’s a very long term call. Moreover big projects have taken a hit due to recession and delay of projects. The US solar and wind projects may not come in the hands of suzlon as US climbing unemployment raises a question that whether to go for Indian market or US own domestic market for turbines. Since the latter will create more jobs for US. Moreover the falling dollar will effect its overseas payments. As a whole rising debts and expenses followed with less internal funds for expansion will results less return to the share holders. Investors will not get much gain by doing investment in this script and should exit from this script. Long term investment can only be done only based on two factors.
1.The scripts is available around 30%-40% below from present price and 2.Once its loan book get reduced since that will result to less interest cost and higher profit. So its long term recommendation depends on these factors. We need to keep an eye on its debts. Once they start reducing, investment can be done where investors will gain on their investments.

OVER CAPACITY LEADS TO TRADE WAR



US govt have imposed import tariff on Chinese made tires. In the first year, the tariff will be 35%, falling to 30% in the second year and 25% in the third year. The tariff would be on top of the current 4% tariff. The tariffs will take effect in 15 days.
Before we pass out any comments we need to dig out the true reasons behind such a move when in the next two weeks before a high-profile summit of the leaders of the Group of 20 nations.
China enjoys the position of huge export of its goods in US market. In the case of tires we find that china have done an export of tires which rose from 14.6 million in 2004 to 46 million last year, accounting for about one-sixth of the U.S. market. Moreover to add fuel to the fire the volume of Export of tires made by China to US have made Four U.S. tire plants to close their production and more than 5,000 workers have lost their jobs
The rate of US unemployment has jumped to 9.7%, the highest since 1983, and employers cut another 216,000 jobs. This figure is only increasing and the real reason behind this high unemployment is only due to the exports of various countries in the US market. USA is the top export market for almost 60 trading nations worldwide.
US govt to bring stringent regulations not only regarding imports but also on outsourcing which is a major bread and butter of many economies across the World .In other words we should not get surprised with the coming steps of the US govt .A country cannot keeps its own people half feeded and feed the rest of the world. Its similar like a mother cannot feed some other child remaining its own child hungry.

Sunday, October 18, 2009

CHARTS OF DOW,HANG AND NIKKEI---SELL OFF




Dow Jones climbed to 10000 followed by many other indices reaching new highs of 2009.Investors are bit confused to decide their course of action.Should they invest or wait for some more time is the prime thought within the minds. 
This article depicits the picture of World Indices,funadamentaly and technically.This article will help the investors to decide what should be their course of action when indices are making new highs.I have excluded Indian market from this article so that I can bring out only the current position of US,China and Japan economy and their technically position.As we all know that Indian market is very much close to any effect of western and other asian economies this article is of great importancy in that context.For our investments we need to know about the western and asian economies/indices movements. This will bring out the true position of those indices and will help you to decide what should be your next step of investment.

DOW JONES
Dow Jones climbed to 10000 backed by profits from JPMorgan Chase & Co. and Intel Corp. surpassed estimates in their 3rd quarter results. But it again climbed backward due to drop in profit of General Electric Co. and Bank of America Corp and poor US consumer confidence data. Bank of America posted a loss of 1billion loss arising due to defaults of consumers to pay their debts. Dollar also remained under pressure as compared to other currencies. Output at U.S. factories rose 0.7% in September, led by impressive increases in auto, mines, and metals output. industrial production rose at a 5.2 percent annual rate in Q3 -- the metric's first quarterly increase since the recession started in December 2007. Excluding autos, industrial production rose 0.5 % in September and 3.8 percent in Q3.
So in one hand we find US economy is trying hard to come out of the dark woods where as on the other side mounting job less, weak income growth, failure to pay debts and free fall of dollar makes the process of recovery very slow more than envisaged about it. In the coming week

TECHNICAL READINGS
Dow Jones is over brought as per William %R of 14days.It has made a top above 20 level. In the past we find in the mid July and August 2009 Dow Jones crossed the level of over brought and after that went down. As per RSI we get Dow Jones in the middle of over brought. So some steam might have been left out which will push the Dow Jones further again to 10000 level but it will be very short lived and bound to climb back. The MACD reflect that the signal line is crossing from above so it indicates a bearish outlook and a fall is eminent. As per stochastic RSI we get Dow Jones got a sell trigger and have climbed back .So as I said earlier some steam is till left which will take the Dow Jones back in to 10000 levels. But it will be short lived. The economic data’s followed with more 3rd quarter results coming out in this week might fill up the gap of remaining over brought.
Chart 1 shows William %R,RSI and MACD.


Chart 2 shows RSI and Stochastic RSI.


HANGSENG
China’s foreign-exchange reserves climbed about $141 billion in the third quarter to a record $2.273 trillion as per the People’s Bank of China. Swelling reserves highlight imbalances in trade and investment. China's export volume hit $115.9 billion in September alone, up 11.8 percent over the month before, but still down 15.2% from the same time last year, according to data released today by the General Administration of Customs of China.

The country is facing the high risk of over capacity. In manufacturing, real estate, and infrastructure the country is simply producing more than the world requirements. China’s bank lending explosion has led to credit to GDP during the first half of 2009 rising to 140%.Chinese financial institutions extended $1.2 trillion worth of local-currency loans in the first eight months of this year, an increase of 164% from the same period in 2008. China’s banking regulator has raised the voice over the quality of loan disbursement. The country's five major banks, the Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of Communications, took 47 percent share of the total bank loans in the country during the first three quarters this year as per China Banking Regulatory Commission (CBRC). As China’s exports takes a hit when it is running at over capacity, it is now dumping goods to India and US. This over capacity and huge credit leverage of banks and institutions makes the China more venerable to a crisis. In other words the bubble will go for a burst any time soon .The china government should take adequate steps to put tight leash over the climbing over capacity in manufacturing ,real estate and infrastructure.

The China government will release data next week on economic growth for the three months ended in September. So a bubble burst out in china will create a effect on Indian browsers.

TECHNICAL READINGS

HANG SENG INDEX is over brought as per William %R of 14days.It has made a top above 20 level. In the past we find in the September 2009 HANG SENG INDEX crossed the level of over brought of 20 level and after that went down. As per RSI we get HANG SENG INDEX is in the middle of over brought. So some steam might have been left out which will push the HANG SENG INDEX further again to 22000+ level but it will be very short lived and bound to climb back. The MACD reflect that the signal line is crossing from below so it indicates a bearish outlook and a fall is eminent. As per stochastic RSI we get HANG SENG INDEX got a sell trigger and have climbed back .So as I said earlier some steam is till left which will take the HANG SENG INDEX back in to 22000+ levels. But it will be short lived. The economic data’s followed with more 3rd quarter results coming out in this week might fill up the gap of remaining over brought.
Chart 1 shows William %R,RSI and MACD.

Chart 2 shows RSI and Stochastic RSI.


NIKKEI
Japanese steelmakers are trying to develop new export markets. According to the Japan Iron & Steel Federation, the volume of steel exports increased to 3.41 million tonnes in August, up by 3.4% YoY, the first time in 11 months. Japan is also facing a similar position like US in Unemployment which is at an historically high level; consumer confidence is low; deflationary pressure is strong and the Yen remains strong; putting a strain on Japanese exports. Against this background, the Bank of Japan has decided to maintain interest rates at 0.1%.The August unemployment rate fell to 5.5% from 5.7% in July, said the Ministry of Internal Affairs and Communication. Japan’s unemployment is at its highest in 53 years reaching 5.7% level or 3.59 million unemployed as of July 2009, a million more than in July 2008.So here also we don’t find much positive cues which might support the upward rally of Nikkei. Its a tough fighting situation for Japan economy to come out with impressive recovery.
TECHNICAL READINGS
Nikkei is over brought as per William %R of 14days.It has made a top above 20 level. In the past we find in the September 2009 Nikkei crossed the level of over brought of 20 level and after that went down. As per RSI we get Nikkei have just in the mid of over brought. So some steam might have been left out which will push the Nikkei further again to10200+ level but it will be very short lived and bound to climb back. The MACD reflect that the signal line have crossed from below and goes up. So it indicates that a bullish trigger have already being generated and a fall is within the range. As per stochastic RSI we get Nikkei got a sell trigger as it crosses above to 100 level. So a sell off will take place in Nikkei.
Chart 1 shows William %R,RSI and MACD.

Chart 2 shows RSI and Stochastic RSI.


So overall projection reveals that US Chinaand Japan market are either over valued or some more increment is in the cards.Once the steam is over we will get sell off in these indices which will give opprtunities for fresh buying @ reduced valuation and leverage.The risk at present is too high.So a correction will make not ony reduced risk but will aslo bring some clarity in the market.The over economic outlook is not very impressive and it will take more time for recovery.Fiscal deficit,job loss,conusmer debt,over capacity will slow the pace of growth of these countries.Global investors are skeptical regarding investments.A sell off in the indices will bring them back.In the present scenario it will better to book profits and keep in the sidelines.Once a sell off begins and valuation comes down stock picking will be idle at that time.Those who are planning to pick up stock now should drop their plans and wait for the fundamental and technical correction to begin.

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