Friday, May 30, 2014

Diwali Week in 1998 (Blast from the past!)

While rummaging through  my Papers, I came across this article that I had written in 1998 and I thought I must share it.

The Diwali lights were still lit, but the shimmer was missing, the crackers were burning, but the sound was muffled. The “Muhurat Trading” was on but the excitement & fervour was clearly missing.

All in all, a very dull start to Samvat year 2055, was witnessed on Monday. The usual enthusiasm had clearly taken a back seat. Hoards of Brokers, with family in tow, were seen exchanging greetings on Dalal Street. The Muhurat tip was – “Go long on Onions & short on Shares”

The Sensex opened at 2855 and closed after an hour of trading at 2845, a loss of 8 points. The NSE was on upto 7.30 (i.e. one hour more than the BSE) and markets fell further. Truly a lacklustre Muhurat Trading session.

Tuesday saw the Sensex slip by another 90 points and it closed at 2764.16. This was partly due to continued selling by the FII’s and also end account considerations on the NSE. Vloumes were low due to looming holidays on the BSE. (Both Wednesday & Thursday the BSE was closed and NSE was closed only on Wednesday)

Thursday, was the first day of the new settlement on the NSE and markets saw some buying on counters like RIL, SBI, Tisco & Telco. Hectic selling was witnessed on HLL. By late Thursay evening the murmurings of buy-back was heard and the press reports on Friday only confirmed the same.

On Friday, both the NSE & BSE saw good all round buying as the Bears scurried for cover and the Bulls took charge. The Sensex closed at 2784 (+27 points). The Kerb rates were firm and continued to rise over the weekend. SBI posted results which were largely ignored.

On Monday the markets spurred by the buy back saw a rally of 105 points. The focus had now shifted firmly away form Unit 64 to the buy back euphoria.

Tuesday the markets held out the rally of the previous day and closed with a net gain of 6 points at 2895.

The outlook for the rest of the week depends largely on the market movements on Wednesday. One can expect bouts of selling as the markets have moved up but the ground realities have not changed significantly. The markets are expected to be range bound with a downside of 2750, where fresh entry may be considered.

Monday, May 26, 2014

BSE-USE Merger (Transcript of Interview on CNBC)

Below is the transcript of Rajnikant Patel and Alok Churiwala’s interview with CNBC-TV18’s Latha Venkatesh and Ekta Batra.

Latha: What does this mean, is this a big difference for BSE in terms of size? 

Patel: More than size I think it is positive for BSE in the way that both the exchanges now can look at synergy and a larger pie of business and consolidation which is a good thing. I think it is a step in the right direction. Now whether it will actually increase the BSEs volume, of course the addition of USE volume definitely will come in, in the segment in which they are trading but how positively it will impact the other segments of BSE's volume that remains to be seen.

Latha: What are the strengths of USE? Which segments of BSE gets strengthened you think?

Patel: Currency futures is what USE trades in. So, that is a segment which probably will add on to the BSEs overall pie. That is what the USE was initially formed for, to concentrate exclusively on that area which segment will now add more to BSEs existing volume in that particular region. What is happening otherwise the market was getting split on two or three – NSE is trading in the segment, BSE is there, USE, MCX-SX. Now, bringing BSE and USE together would consolidate at trading volume.

Latha: What do you see as the big gain for the BSE broker and more importantly for the exchange itself? 

Churiwala: I think it is a great deal both from the perspective of the BSE as well as USE. Primarily from the BSE, they are buying into a competitor so as to say because USE was on the currency segment. BSE has just launched its currency segment and they are doing volumes of little over Rs 5000 crore on a daily basis. So, that is one positive that immediately flows out of this deal. Secondly, the linkages that USE has with banks, BSE will be able to leverage on this relationship. Thirdly, the brokers who have erstwhile been on USE will now also be directly able to access the BSE platform to start with probably the currency platform and with the blessings of the regulator the futures and options and cash trading platforms as well. From the USEs perspective if we look at the shareholder of the USE, USE as a exchange was going nowhere and I think they will now be buying into an exchange which is got 130-140-year-old history, which is probably also on the verge of listing. From existing BSE brokers perspective if we see it is again a great positive because willy nilly a valuation is being discovered for the exchange, a valuation is being discovered through an M&A deal, through an independent third-party valuation, which is close to almost Rs 4000 crore. All in all I think it is a win-win for all parties concerned. 

Ekta: Do you think that the possible BSE listing would fructify or is even on the cards?

Churiwala: The BSE brokers who also hold almost 40 percent shareholders of the BSE Limited have been waiting for this listing since the last seven years. I believe that BSE has also applied for in-principle permission to list with Securities and Exchange Board of India (Sebi) for over a year now. So, there are moves in that direction and in a market place so dynamic I think we should be seeing the BSE listing sooner rather than later. Across the globe you will see large cross-border exchanges buying into each other and it is only a question of time before Indian exchanges also come on that radar. While on this I would also like to make one more point that foreign bourses cannot buy into Indian exchanges over 5 percent as the regulation stands today. I think it is about time that is seriously looked into because until any foreign player can take a serious stake in an Indian entity the strategic nature of a relationship will never fructify.

Sunday, April 20, 2014

Full text of Interview with The Afternoon D & C dated 21st April 2014.

Q-do you feel the markets at the current levels are overbought

The Sensex is currently in the mid 22000 range and Nifty is upwards of 6500. The Sensex has given a return of 4.8% (3 months), 9.10% (6 months) and a whopping 18.80%(1 year). So one can safely surmise that the smart money has not only already invested but is already reaping good returns. At current levels the dice is loaded against the market with a major event risk that has to be factored in. That said, traders and investor have shown a cautious approach and the rally has not run wild. This can be borne out from that fact that the markets have witnessed healthy corrections from time to time and post each such correction the market has continued its upward move. Even if we look fundamentally, the markets have not been discounted very richly over the earnings of the next couple of years. Hence I would not say that the markets are over priced but it can be said that they may be temporarily over bought.

Q- The rally would be short term and we will see major correction in the short term, your comment .

Most of the current euphoria in the markets is based on the ‘Modi Wave’ and its resultant impact on the economy and markets. The elections will throw out the results in less than a months time, but even in the event that the best case scenario also come true, the markets will see a healthy bout of selling, as the traders would like to take home profits. Alternately If the election result is anything short of a healthy majority then there would be severe selling by both, the long purchasers (who will scurry to book whatever little profit that may be left) and the short sellers who will then try to capitalise on the below expectation election results. This would be the major correction in the short term.

Q-there seems to be no retail participation in the rally .your advice to the common investors.

The current state of participation or rather lack of participation by the Retail Investors is a cause of concern for not only the entire broking community but also the Regulators and Senior Officials of Ministry of Finance. But the causes of low investor interest are many.

To name a few dearth of good quality IPO’s, The indiscriminate destruction of confidence & wealth caused by throw away pricing of follow up Offers of Public Sector Undertakings by Govt. of India, The inability to create confidence in the minds of the retail investing public that the Markets are a credible place to invest savings and Promoting the Future & Options System of trading as against Investing wisely for the long term.

That said, at the current moment the investors should not get swayed by the current momentum but draw out a strategy based on a long term approach. I think the common investor should pass the one time opportunity of seeing an election rally and concentrate on building a quality portfolio, consolidating it from time to time based on sound advice from professionals. The expectations of returns should be pegged at a realistic levels keeping ones risk appetite in mind.

Q- which are the sectors u would say are safe to invest in the current markets?

The market has been favouring  IT, Pharma, FMCG and Banking but the best companies in these sectors are not cheap. Whereas it does require some expertise to identify the potential gems hidden in the midcap scape in these sectors. Investors could consider some rather beaten down and out of favour sectors like Realty and Metals.

Q- According to many global fund managers European markets as well as the US markets are likely to do well in the coming quarters... your comment and what do u see happening to Indian markets in such a scenario...

In my recent interactions with Global Investors, Intermediaries & Fund Managers the one thing that clearly comes across is the fact that they are once again watching India closely, and would they like to re invest in the markets with renewed vigour, but that will happen after there is clarity as to who forms the new Government and what are their policies. Irrespective of the US and European markets doing well, if we can address the niggling worries and set on a course to remove bottlenecks and encourage businesses,  money will once again flow from all those Foreign Investors who are still waiting on the sidelines.

Q- What are the short term and long term levels do u see in the markets.

The Sensex will be in the range of 20500-24500 (which means a 8-10% range in either direction) for the next 30-45 days. Over the long term (a horizon of 3-5 years) the Sensex should be in the range of 19000 – 32000.