Indian Stock Market Analysis - For Today and Tomorrow

Nifty Intraday 18th Jan 2010

2010-01-18T08:00:00.000+05:30

Short Term (5 days) : BULLISH Medium Term (21 days) : BULLISH Long Term (63 days) : BULLISH

Level Type R5 R4 R3 R2 R1 Pivot Point S1 S2 S3 S4 S5
PIVOT POINTS 5407.77 5370.37 5332.97 5295.57 5273.88 5258.17 5236.48 5220.77 5183.37 5145.97 5108.57
FIBONACCI PIVOTS 5318.68 5305.74 5295.57 5281.28 5272.45 5258.17 5243.88 5235.05 5220.77 5210.59 5197.65
CAMARILLA PIVOTS 5293.34 5272.77 5262.49 5259.06 5255.63 5258.17 5248.77 5245.34 5241.92 5231.63 5211.06

SMAs 20D: 5169.85, 34D: 5134.71, 50D: 5082.14, 89D: 5016.92, 200D: 4518.07

EMAs 20D: 5192.25, 34D: 5145.73, 50D: 5097.50, 89D: 4962.50, 200D: 4408.06

BOLLINGER BANDS Upper Band: 5378.83, Lower Band: 4960.87, Mid Band: 5169.85

PARABOLIC SAR 5169.55

Nifty Intraday 15th Jan 2010

2010-01-14T21:35:00.000+05:30

Short Term (5 days) : BULLISH Medium Term (21 days) : BULLISH Long Term (63 days) : BULLISH

Level Type	R5	R4	R3	R2	R1	Pivot Point	S1	S2	S3	S4	S5
PIVOT POINTS	5416.48	5376.13	5335.78	5295.43	5277.67	5255.08	5237.32	5214.73	5174.38	5134.03	5093.68
FIBONACCI PIVOTS	5320.37	5306.41	5295.43	5280.02	5270.50	5255.08	5239.67	5230.15	5214.73	5203.76	5189.80
CAMARILLA PIVOTS	5304.29	5282.09	5271.00	5267.30	5263.60	5255.08	5256.20	5252.50	5248.80	5237.71	5215.52

SMA 20D: 5158.89, 34D: 5130.48, 50D: 5068.38, 89D: 5009.68, 200D: 4506.51

EMA 20D: 5185.94, 34D: 5139.27, 50D: 5091.18, 89D: 4956.00, 200D: 4400.53

BOLLINGER BANDS Upper Band: 5372.38, Lower Band: 4945.40, Mid Band: 5158.89

PARABOLIC SAR 5169.55

Shatakshi

2010-01-11T15:34:00.000+05:30

2010-01-11T15:24:00.000+05:30

Simple Charts

2009-12-21T12:07:00.003+05:30

Simple Charts ( http://simplecharts.blogspot.com/) is for people who believe that Price is all inclusive and you need no more than Price itself to trade. The blog shows the Charts for various timeperiods - 1Day ( Intraday), 5 Day ( Intraday), 1 Year ( Daily), 1 Year ( Weekly). These charts for various time periods show us various Moving Averages ( Simple and Exponential) which are respected by markets everytime. This is still in development phase and future improvements are in pipeline. Happy Informed Trading because beauty is in being simple.

Update: Now trade Bank Nifty ( http://nsebank.blogspot.com/ ) charts also on similar lines

Trading System for Making Profits in Confusing Markets

2008-12-14T18:01:00.000+05:30

Friends, I am trying to implement an Trading Strategy proposed by Mr Bill Williams called Chaos Trading( read his book Trading Chaos: Applying Expert Techniques to Maximize Your Profits) on excel to give an insight in current confusing markets. This is an honest endeavour to understand what is the present trend and following steps which will lead to identify profitable trades. What I have done is to understand the theory through various sources ( books & websites) and present it in an easily comprehensive manner for all and sundry. I will be more than happy to receive your comments to improve this for future trading. Also, I am ready to remove this if it violates any copyright/intellectual rights issues.

Coming back to the Chaos Trading Strategy.
This trading strategy is a simple logic based strategy which tells us to first identify the trends, verify the trends, identify the trading signals, verify the trading signals and execute them if the sentiment is conducive. Seems like very easy and logical but I am amazed as to how it has been done in a very orderly manner in this trading strategy along with verifiable results.

<p>&amp;amp;amp;lt;p&amp;amp;amp;gt;&amp;amp;amp;amp;amp;amp;amp;lt;p&amp;amp;amp;amp;amp;amp;amp;gt;&amp;amp;amp;amp;amp;amp;amp;amp;amp;amp;nbsp;&amp;amp;amp;amp;amp;amp;amp;lt;/p&amp;amp;amp;amp;amp;amp;amp;gt;&amp;amp;amp;lt;/p&amp;amp;amp;gt;</p>

Check out full Trading System at http://niftylivechart.blogspot.com/

Trading Tip For A Profitable Life

2008-08-02T09:03:00.000+05:30

Are you looking for a short cut in Indian Stock Markets but were unable to find one.....

Your wait is over. No Technical Analysis , Stock Tips, Rumors. Its open out there and warrants your attention. Just five seconds before the market starts and you know how Nifty/Sensex would behave today. No speculation, its hard reality which forms the basis of what I say.

Check my post FII's - The Open Secrets You Would Like To Know on my blog Nifty Live Charts which has all the secrets which were never communicated to you before.

You will miss this post at your own risk.

Terrific or Terrible

2008-07-18T20:39:00.000+05:30

What do you thing next week can be? The focus is Tuesday .. so is it going to be Terrific or Terrible week for Nifty and Sensex?

Learn more on the same in Mangal ya Amangal

Something to chew on

2008-06-08T11:57:00.000+05:30

Lets dispel some myths with some hard facts. I did an analysis of Sensex for last two years data and this is what I found.

Free Live Nifty Trading Terminal

2008-04-07T18:22:00.000+05:30

It gives me immense pleasure to share with my valued visitors that I have created a new blog Nifty Live Chart for effective short term trading for 4-5 days range. Now people like me don't have to go hunting for tips and techniques from other sites and analysts. We have it for free.

The unique part of the blog is that I have created a live technical indicator Slow Stoch which is not commonly available for free. The technique to trade with this technical indicator is that you have to BUY when the BLUE line is on the TOP of the RED line and SELL when the RED line is on the TOP of the BLUE line. If you notice the chart for Slow Stoch you will notice that it moves in cycles and thus you can easily trade the TOPS and BOTTOMS in share market.Just keep noticing the Slow stoch live indicator for the day. If positive then bullish and if negative then bearish.The best part is that it is FREE for use of my valued visitors. Try it for yourself!!!!

Charts available on this live blog includes:
5 Day Nifty Spot Interactive chart
Live Nifty Futures Chart
Live Nifty Spot and Futures Chart

Live Quotes for major global indices are also displayed on the blog.

Happy Trading!!!!

Great Site for trading

2007-12-07T20:38:00.000+05:30

Check out this great site I came across. I found it very useful for trading. The only drawback is that it has info only on NSE stocks.

Buzzing Stocks

The best part is that it has real time data and updates every 2-3 minutes. Now you don't have to go hunting for tips. This site gives real time tips for intra day trading. To top it there is Short Term Stock picks, Medium Term Stock picks, Long Term Stock picks, all for free.

Check out the left hand bar it has all what you need for trading

My best picks are

REAL-TIME MARKET REPORTS

Intraday Stock Screener

NIFTY Dynamic Heatmap

NEWS, RESEARCH& ANALYSIS

Instant Stock Analysis
Stock Search/Screener
Search Builder

The malaise of "Stock Advisors"

2007-10-23T17:55:00.000+05:30

I was surfing one of my favorite sites Valuenotes.com and spilled over to the new forum which was started a few days back. A common question doing rounds was "Market Crash" . I am quite surprised at the fickle mindedness of the people who are glued on to TV channels to get some "Tips" by the "Advisors". I am damn sure that these very people might have been banking on the "advisors" who were shouting on all business channels about how soon Sensex will be touching that 25000 mark. I still remember how quick people were in giving their own judgement on how Sensex would touch 20000 in 2-3 days after it touched 19000.

As in my previous article I enumerated the anomalies doing rounds in the market, I feel a desire to prick the bubbles created by the "advisors" on business channels . I would like to remind that I am not averse to such advisors but I take their advice with a pinch of salt. I'll tell you why. First things first, the "advisors" business is thriving only because the market is doing good.This point is very important and has the hidden message why you should not believe these "advisors" 100%. Have you seen any advisor who was not advocating for further investment when everything was hunky dory? I have not seen any one. This because they know that their business happens only when the market is on an upward rally. Any break in that would mean people being apprehensive and a downfall in their business. This is why all "advisors" like rallies and even when they know in their heart that something is wrong, they would still suggest investment. Today only I saw a question put up by an investor on future course of action on investment of 500 shares of Reliance Energy @ 1850's in the current market. Do you sense something wrong here? That poor investor got himself in the market at a time when the scrip was running amok. Now he is in mess because he is not clear what to do now. Who are the people who are driving such innocent people into the D-street? The "advisors" offcourse. The investor is also not so innocent because its your hard earned money and you should have given a thought when you invested at such high levels.

A piece of advice for all new gurus of stock market. Think before you invest.

A sensible take is to wait for 3 important triggers in a very short term
1. SEBI decision on P notes on Oct 25
2. RBI’s mid term review of annual policy due on 30 October 2007
3. US Fed take on interests

Any definite course of action can only be determined after these near term triggers.

Till then ... Peace Ho!

Wobbly Wednesday - Sensex,Nifty in Turmoil - October 17 2007

2007-10-17T11:09:00.000+05:30

The last few weeks have seen what the experienced hands had not seen in their lifetime - Equity markets at all time high, Gold at 28 year high and Oil at unprecendented heights. This is an anomaly in the flow of money from one markets and other. Traditionally money moves from one market to another with the results visible from gaining and losing markets. However this time the markets had behaved as if there was no logic and only exuberance had a say on sentiments.

Time to be cautious is old gents say when such times are prevalent. Market were trading at P/E of 26 which rose from P/E of 22-23 just a few weeks back. Do fundmentals change so quickly? This creates doubts and rightly so our FM said which was taken lightly by the bulls. The bulls didn't notice that the bubble which arose from the easy liquidity comng from the Fed cut since September 18 was as hot as water on a hot pan. It can vanish as quickly as it appears on the scene.

The other side of the story was that the friendly FII's were not sentimentally attached with the stock markets and they were simply minting money where it is possible. Recent Fed cut coupled with strong rupee transaled into a money spinner for the FII's who cannot manage such returns in the recessionary US and European markets. This resulted into a slosh of hot liquidity which chases strong returns. The concerns on such liquidity was evident when all concerned with the Indian economy viz SEBI,RBI and Finance Ministry collabrated to come out with a way to control such liquidity. Todays clamp on the Participatory notes was just the kind of trigger which can prick buubles and take air out of them.

Talking about PN's or P notes action taken by SEBI is not unwarranted as some would say. SEBI has actually tried to control the quality of funds and not the inflow of funds. FII's who are still bullish on the India Story will still be interested. It's just that the regulator initated at the wrong time for the raging bulls.

However things should not be gloomy and markets are still fundamentally strong when you compare with other bubbles in the past. Japan stocks traded at an unrealistic P/E of 100
at the high of the Japanese bubble. So, we are still miles away from that kind of bubble but it is good be cautious because Precaution is better than cure.

A word of advise for the retails investors. When your doodhwala and panwalla starts investing in stock markets, its time that you make exit.

Stock Tips - Thursday 13 September 2007

2007-09-13T10:02:00.000+05:30

Stocks with Uptrend on Thursday 13 September

Name
ABB
ACC
BAJAJAUTO
BHARTIART
DABUR
GAIL
GRASIM
HDFC
HDFCBANK
IPCL
ITC
LT
M&M
MARUTI
NATIONALU
RANBAXY
RCOM
RELIANCE
RPL
SAIL
SBIN
SIEMENS
STER
TATAPOWER
TATASTEEL
ZEEL

SENSEX

For 12/09/2007 the closing price was 15,505.3604.

Overall, the bias in prices is: Upwards.

Short term: Prices are moving.

Intermediate term: Prices are trending.

By the way, prices are vulnerable to a correction towards 15,130.33.

The projected upper bound is: 16,185.39.

The projected lower bound is: 14,853.29.

The projected closing price is: 15,519.34.

NIFTY

For 12/09/2007 the closing price was 4,496.8501.

Overall, the bias in prices is: Upwards.

Short term: Prices are moving.

Intermediate term: Prices are ranging.

The projected upper bound is: 4,699.93.

The projected lower bound is: 4,299.34.

The projected closing price is: 4,499.64.

Stocks with Downtrend on Thursday 13 September

Stock Tips - Wednesday 12 September 2007

2007-09-12T08:20:00.000+05:30

Stocks with Downtrend on Wednesday 12 September

Name
BHEL
BPCL
CIPLA
DRREDDY
GLAXO
HCLTECH
HEROHONDA
HINDPETRO
ICICIBANK
INFOSYSTC
MTNL
ONGC
PNB
REL
SATYAMCOM
SUNPHARMA
SUZLON
TATAMOTOR
TCS
VSNL
WIPRO

SENSEX

For 11/09/2007 the closing price was 15,542.7695.

Overall, the bias in prices is: Upwards.

Short term: Prices are moving.

Intermediate term: Prices are trending.

By the way, prices are vulnerable to a correction towards 15,112.69.

The projected upper bound is: 16,228.17.

The projected lower bound is: 14,892.51.

The projected closing price is: 15,560.34.

Note: these price projections are for reference only, and can be easily exceeded by the market.

NIFTY

For 11/09/2007 the closing price was 4,497.0498.

Overall, the bias in prices is: Upwards.

Short term: Prices are moving.

Intermediate term: Prices are ranging.

By the way, prices are vulnerable to a correction towards 4,398.26.

The projected upper bound is: 4,701.74.

The projected lower bound is: 4,299.69.

The projected closing price is: 4,500.72.

Note: these price projections are for reference only, and can be easily exceeded by the market.

Stocks with Uptrend on Wednesday 12 September

Stock Tips - Tuesday 11 September 2007

2007-09-11T09:38:00.000+05:30

Stocks with Downtrend for Tuesday 11 September 2007

Name
ACC
BHEL
BPCL
CIPLA
DRREDDY
GLAXO
HCLTECH
HEROHONDA
HINDPETRO
ICICIBANK
INFOSYSTC
M&M
MTNL
ONGC
PNB
REL
SATYAMCOM
SUNPHARMA
SUZLON
TATAMOTOR
TCS
VSNL
WIPRO

SENSEX

For 10/09/2007 the closing price was 15,596.8301.

Overall, the bias in prices is: Upwards.

Short term: Prices are moving.

Intermediate term: Prices are trending.

By the way, prices are vulnerable to a correction towards 15,086.93.

The projected upper bound is: 16,282.88.

The projected lower bound is: 14,948.63.

The projected closing price is: 15,615.76.

NIFTY

For 10/09/2007 the closing price was 4,507.8501.

Overall, the bias in prices is: Upwards.

Short term: Prices are moving.

Intermediate term: Prices are trending.

By the way, prices are vulnerable to a correction towards 4,396.08.

The projected upper bound is: 4,712.60.

The projected lower bound is: 4,310.68.

The projected closing price is: 4,511.64.

Stocks with Uptrend for Tuesday 11 September 2007

Stock Tips - Monday 10 September 2007

2007-09-09T23:21:00.000+05:30

Stocks with Downtrend for Monday 10 September 2007

Name
ACC
BHEL
BPCL
CIPLA
DRREDDY
GLAXO
HCLTECH
HEROHONDA
HINDPETRO
ICICIBANK
INFOSYSTC
M&M
MTNL
ONGC
PNB
RANBAXY
REL
SATYAMCOM
SUNPHARMA
SUZLON
TATAMOTOR
TCS
VSNL
WIPRO

SENSEX
For 07/09/2007 the closing price was 15,590.4199.
Overall, the bias in prices is: Upwards.
Short term: Prices are moving.
Intermediate term: Prices are trending.
By the way, prices are vulnerable to a correction towards 15,049.79.
The projected upper bound is: 16,281.36.
The projected lower bound is: 14,942.91.
The projected closing price is: 15,612.14

NIFTY
For 07/09/2007 the closing price was 4,509.5000.
Overall, the bias in prices is: Upwards.
Short term: Prices are moving.
Intermediate term: Prices are ranging.
By the way, prices are vulnerable to a correction towards 4,385.04.
The projected upper bound is: 4,715.46.
The projected lower bound is: 4,312.64.
The projected closing price is: 4,514.05.

Stocks with Uptrend for Monday 10 September 2007

Making your money work for you

2007-08-24T09:59:00.000+05:30

Beta
Risk is an important consideration in holding any portfolio. The risk in holding securities is generally associated with the possibility that realised returns will be less than the returns expected.

Risks can be classified as Systematic risks and Unsystematic risks.

Unsystematic risks:
These are risks that are unique to a firm or industry. Factors such as management capability, consumer preferences, labour, etc. contribute to unsystematic risks. Unsystematic risks are controllable by nature and can be considerably reduced by sufficiently diversifying one's portfolio.

Systematic risks:
These are risks associated with the economic, political, sociological and other macro-level changes. They affect the entire market as a whole and cannot be controlled or eliminated merely by diversifying one's portfolio.

What is Beta?

The degree to which different portfolios are affected by these systematic risks as compared to the effect on the market as a whole, is different and is measured by Beta. To put it differently, the systematic risks of various securities differ due to their relationships with the market. The Beta factor describes the movement in a stock's or a portfolio's returns in relation to that of the market returns. For all practical purposes, the market returns are measured by the returns on the index (Nifty, Sensex), since the index is a good reflector of the market.

I have provided Beta values ( from NSE) with volatility for many companies.A good combination can ensure stable profit

Sr. No > Security Symbol > Industry > Beta > Volatility %
1 > ABB > Electrical Equipment > 0.91 > 2.69
2 > ACC > Cement & Cement Products > 1.02 > 3
3 > BAJAJAUTO > Automobiles - 2 and 3 wheelers > 0.74 > 2.46
4 > BHARTIARTL > Telecommunication - Services > 1.11 > 1.83
5 > BHEL > Electrical Equipment > 1.13 > 2.84
6 > BPCL > Refineries > 0.66 > 1.75
7 > CIPLA > Pharmaceuticals > 0.85 > 1.94
8 > DABUR > Personal Care > 0.54 > 2.1
9 > DRREDDY > Pharmaceuticals > 0.6 > 1.3
10 > GAIL > Gas > 0.56 > 1.89
11 > GLAXO > Pharmaceuticals > 0.5 > 1.48
12 > GRASIM > Cement & Cement Products > 0.85 > 1.81
13 > AMBUJACEM > Cement & Cement Products > 0.89 > 2.24
14 > HCLTECH > Computers - Software > 0.97 > 1.92
15 > HDFC > Finance - Housing > 0.89 > 2.28
16 > HDFCBANK > Banks > 1.02 > 1.95
17 > HEROHONDA > Automohiles - 2 and 3 wheelers > 0.52 > 2.09
18 > HINDALCO > Aluminium > 0.88 > 2.85
19 > HINDUNILVR > Diversified > 0.84 > 2.71
20 > HINDPETRO > Refineries > 0.71 > 1.41
21 > ICICIBANK > Banks > 1.1 > 1.4
22 > INFOSYSTCH > Computers - Software > 0.8 > 1.67
23 > IPCL > Petrochemicals > 1.05 > 1.64
24 > ITC > Cigarettes > 0.64 > 2.35
25 > RPL > Refineries > 0.55 > 1.61
26 > LT > Engineering > 1.18 > 2.79
27 > MARUTI > Automobile - 4 wheelers > 1 > 1.41
28 > M&M > Automobile - 4 wheelers > 1.12 > 2.28
29 > MTNL > Telecommunication - Services > 0.9 > 1.94
30 > NATIONALUM > Aluminium > 0.67 > 2.96
31 > ONGC > Oil Exploration > 0.9 > 1.71
32 > STER > Metals > 1.24 > 2.89
33 > PNB > Banks > 1.32 > 2.54
34 > RANBAXY > Pharmaceuticals > 0.7 > 2.47
35 > REL > Power > 0.85 > 3.09
36 > RELIANCE > Refineries > 0.99 > 1.68
37 > SAIL > Steel & Steel Products > 1.4 > 3.28
38 > SATYAMCOMP > Computers - Software > 1.09 > 2.8
39 > SBIN > Banks > 1.26 > 2.04
40 > SIEMENS > Electrical Equipment > 1.11 > 2.35
41 > SUNPHARMA > Pharmaceuticals > 0.66 > 1.13
42 > SUZLON > Electrical Equipment > 1.1 > 2.73
43 > TATAPOWER > Power > 0.71 > 1.97
44 > RCOM > Telecommunication - Services > 1.36 > 2.17
45 > TATAMOTORS > Automobile - 4 wheelers > 1.11 > 2.22
46 > TCS > Computers - Software > 0.95 > 2.02
47 > TATASTEEL > Steel & Steel Products > 1.11 > 2.55
48 > VSNL > Telecommunication - Services > 1.11 > 1.53
49 > WIPRO > Computers - Software > 1.15 > 1.58
50 > ZEEL > Media & Entertainment > 1.11 > 2.49

Sr.no. > Security Symbol > Beta > Volatility
1 > ANDHRABANK > 0.99 > 2.44
2 > APOLLOTYRE > 0.59 > 2.79
3 > ASHOKLEY > 1.11 > 1.63
4 > ASIANPAINT > 0.4 > 1.27
5 > AUROPHARMA > 0.59 > 0.89
6 > AVENTIS > 0.39 > 1.26
7 > BANKBARODA > 1.36 > 2.32
8 > BANKINDIA > 1.67 > 2.61
9 > BEL > 1.04 > 1.49
10 > BHARATFORG > 0.89 > 1.41
11 > BIOCON > 0.59 > 2.04
12 > BONGAIREFN > 0.76 > 2.04
13 > CADILAHC > 0.51 > 1.47
14 > CANBK > 1.54 > 2.6
15 > CHENNPETRO > 0.69 > 2.15
16 > RELCAPITAL > 1.37 > 2.48
17 > ULTRACEMCO > 0.95 > 2.92
18 > CORPBANK > 1.27 > 2.52
19 > CUMMINSIND > 1.15 > 2.51
20 > INDHOTEL > 0.78 > 0.72
21 > CONCOR > 0.44 > 0.94
22 > I-FLEX > 0.58 > 1.37
23 > GMRINFRA > 1.33 > 4.83
24 > IDBI > 1.72 > 2.1
25 > IFCI > 1.7 > 3.91
26 > INGERRAND > 0.69 > 3.49
27 > IOB > 1.08 > 2.87
28 > JPASSOCIAT > 1.29 > 2.86
29 > KOTAKBANK > 0.94 > 1.9
30 > LICHSGFIN > 0.99 > 2.15
31 > LUPIN > 0.64 > 1.95
32 > MOSERBAER > 1.13 > 2.23
33 > MPHASIS > 1.1 > 2.98
34 > NICOLASPIR > 0.84 > 1.86
35 > NIRMA > 0.42 > 0.82
36 > PATNI > 0.74 > 2.26
37 > PFIZER > 0.43 > 0.81
38 > POLARIS > 1.27 > 2.09
39 > PUNJABTRAC > 0.4 > 1.51
40 > RAYMOND > 0.42 > 1.12
41 > IDFC > 1.44 > 2.81
42 > TECHM > 0.85 > 2.03
43 > SYNDIBANK > 1.33 > 2.45
44 > TTML > 1 > 2.53
45 > TVSMOTOR > 1.14 > 2.02
46 > UNIONBANK > 1.25 > 3.45
47 > UTIBANK > 1.01 > 1.6
48 > VIJAYABANK > 1.12 > 2.41
49 > INGVYSYABK > 0.71 > 2.78
50 > WOCKPHARMA > 0.75 > 1.5

Monday Blues

2007-08-20T09:48:00.000+05:30

Good news : Bounce in US markets.Dow up on Friday

Bad news : Left Right problems over nuclear deal.

Surprise factors: Some more news on Subprime crashes from the US. Bank of Japan meet on Aug 23.

Nifty Intraday support & resistance:

S 2 3924.80
S 1 4016.40
Pivot 4093.75
R 1 4185.30
R 2 4262.65

First Quarter Review of the Annual Policy Statement on Monetary Policy for the Year 2007-08

2007-08-01T09:00:00.000+05:30

Highlights

Bank Rate kept unchanged.
Reverse Repo Rate and Repo Rate under LAF kept unchanged.

Withdrawal of the ceiling of Rs. 3,000 crore on daily reverse repo under the LAF with effect from Monday, August 6, 2007. The Reserve Bank, however, retains the discretion to re-impose a ceiling as appropriate.

The second LAF, conducted between 3.00 p.m. and 3.45 p.m. on a daily basis, is withdrawn with effect from Monday, August 6, 2007.

Cash Reserve Ratio to be increased by 50 basis points to 7.0 per cent with effect from the fortnight beginning August 4, 2007.

GDP growth projection for 2007-08 retained at around 8.5 per cent, barring domestic or external shocks.

Holding inflation within 5.0 per cent in 2007-08 assumes priority in the policy hierarchy, while reinforcing the medium-term objective to condition policy and perceptions to reduce inflation to 4.0-4.5 per cent on a sustained basis.

While non-food credit growth has decelerated, the acceleration in money supply and reserve money warrants an appropriate response.

Recent financial market developments in India and potential uncertainties in global markets warrant a higher priority in the policy hierarchy for managing appropriate liquidity conditions at the current juncture.

Barring the emergence of any adverse and unexpected developments in various sectors of the economy and keeping in view the current assessment of the economy including the outlook for inflation, the overall stance of monetary policy in the period ahead will broadly continue to be:

To reinforce the emphasis on price stability and well-anchored inflation expectations while ensuring a monetary and interest rate environment that supports export and investment demand in the economy so as to enable continuation of the growth momentum.

To re-emphasise credit quality and orderly conditions in financial markets for securing macroeconomic and, in particular, financial stability while simultaneously pursuing greater credit penetration and financial inclusion.

To respond swiftly with all possible measures as appropriate to the evolving global and domestic situation impinging on inflation expectations, financial stability and the growth momentum.

Domestic Developments

Real GDP growth during the quarter January-March 2007 is placed at 9.1 per cent as against 10.0 per cent in the corresponding quarter a year ago and real GDP growth for the year 2006-07 is revised upwards from 9.2 per cent to 9.4 per cent.

Inflation, measured by variations in the wholesale price index (WPI) on a year-on-year basis, declined from 5.9 per cent at end-March 2007 to 4.4 per cent as on July 14, 2007.

The average international price of the Indian crude oil basket increased from US $ 56.2 per barrel in January-March 2007 to US $ 66.2 per barrel in April-June 2007 and to around US $ 73.5 per barrel on July 27, 2007.

Growth in money supply (M3) at 21.6 per cent on a year-on-year basis on July 6, 2007 was above the projected trajectory of 17.0-17.5 per cent indicated in the Annual Policy Statement for 2007-08 and higher than 19.0 per cent a year ago.

The year-on-year increase in aggregate deposits of scheduled commercial banks (SCBs) at 24.4 per cent (Rs.5,31,881 crore) up to July 6, 2007 was higher than 20.9 per cent (Rs.3,77, 392 crore) a year ago.

The year-on-year non-food credit growth of SCBs at 24.4 per cent (Rs.3,67,258 crore) on July 6, 2007 was lower than 32.8 per cent (Rs.3,70,899 crore) a year ago.

The total overhang of liquidity under the LAF, the MSS and cash balances of the Central Government taken together declined from an average of Rs.97,449 crore in March 2007 to Rs.72,823 crore on July 27, 2007. An assessment of the total liquidity overhang, however, should also reflect the transfer of Rs.35,351 crore from the Central Government to the Reserve Bank during this period on account of transfer of shares from the Reserve Bank to the Central Government.

During the first quarter of 2007-08, financial markets experienced sizeable fluctuations in liquidity and attendant episodes of volatility in the money market with overnight rates in the call, market repo and collateralised borrowing and lending obligations (CBLO) segments displaying close co-movement.

Banks had generally increased their deposit rates by about 25-50 basis points across various maturities between March 2007 and June 2007, but reduced them during July 2007, especially in the shorter maturities. The majority of public sector banks (PSBs) adjusted their deposit rates upwards by10-25 basis points on maturities above one year, particularly at the longer end.

By the beginning of the current financial year, several banks had drawn down holdings of statutory liquidity ratio (SLR)-eligible securities close to the statutory floor. Exclusive of liquidity adjustment facility (LAF) operations, however, banks’ investments in Government and other approved securities increased by Rs.27,331 crore during the current year so far (up to July 6,2007) as compared with an increase of Rs.751 crore in the corresponding period of the previous year.

Gross market borrowings (dated securities and 364-day Treasury Bills) of the Central Government during 2007-08 at Rs.85,628 crore up to July 27, 2007 (Rs.70,813 crore a year ago) constituted 45.4 per cent of the budget estimates while net market borrowings at Rs.46,047 crore (Rs.34,822 crore) constituted 42.0 per cent of the budget estimates.

External Developments

During the first two months of 2007-08, export growth rose to 20.2 per cent from 19.2 per cent in the corresponding period of the previous year. Imports also posted a sharp rise of 33.0 per cent as compared with 16.9 per cent in the corresponding period of the previous year.

Non-POL imports rose by 47.3 per cent whereas oil imports remained broadly stable at the level recorded a year ago. As a result, the merchandise trade deficit widened to US $ 13.3 billion during April-May 2007 from US $ 8.2 billion in April-May 2006.

As on July 20, 2007 India’s foreign exchange reserves increased by US $ 22.9 billion over their end-March 2007 level to US $ 222.0 billion.

During April-June 2007, the rupee appreciated by 6.63 per cent against the US dollar, by 5.19 per cent against the euro, by 4.41 per cent against the pound sterling and by 10.44 per cent against the Japanese yen.

Global Developments

According to the World Economic Outlook (WEO) of the International Monetary Fund (IMF) released in April 2007, global real GDP growth was expected to decline from 5.4 per cent in 2006 to 4.9 per cent in 2007 and 2008. The update of the WEO released in July 2007 has revised this estimate upwards to 5.5 per cent for 2006 and its forecast for 2007 and 2008 to 5.2 per cent.

Globally, headline inflation has picked up in the wake of increase in commodity prices and core inflation has also generally remained firm. The inflation outlook remains a matter of concern on account of energy and other commodity prices, increased capacity utilisation rates in developed and major emerging economies and the impact of rising wages on inflation in advanced industrial economies.

Perceptions of inflation pressures ahead have prompted monetary authorities generally to persevere in withdrawing monetary accommodation. The central banks that have tightened their policy rates include the ECB; the Bank of England; the Bank of Japan; the Bank of Canada; the Reserve Bank of Australia; the Reserve Bank of New Zealand; the People’s Bank of China; the Bank of Korea; the Banco de Mexico; and the Banco Central de Chile. Some central banks, such as China and Korea, have used supplementary measures for tightening, besides increasing the key policy rates such as increases in reserve requirements.

In the first half of 2007, emerging markets outperformed stocks in developed markets. Foreign investor demand for emerging market assets was reflected in a broad-based rise in inflows into dedicated bond and equity markets of the EMEs. Emerging market corporate bond issuance in international bond markets rose to a record level in 2006. The exposure of emerging markets to risky financial assets of the mature markets has increased, and therefore, the overall global financial risks have increased.

Overall Assessment

Domestic economic activity has continued to expand at a strong pace and there are indications that the impulses of growth are getting broad-based. The recent gains in bringing down inflation and in stabilising inflation expectations should support the current expansionary phase of the growth cycle.

It is, however, necessary to note that demand pressures and cyclical effects persist, mirrored in investment and consumer demand, monetary and banking aggregates, capacity constraints and a widening trade deficit. Financial markets are reflecting the interplay of these factors, although increases in capital inflows and large changes in liquidity conditions are obscuring an accurate assessment of risks, with attendant uncertainty.

While there is an abatement of inflation in the recent period, upward pressures persist. In this regard, it is essential to carefully monitor developments relating to aggregate supply conditions and the supply response to the impulses of demand in the short-term, while stepping up efforts to expand production capabilities over the medium-term.

It is also necessary to continuously assess the risks to the inflation outlook emanating from high and volatile international crude prices, the continuing firmness in key food prices and the uncertainties surrounding the evolution of demand-supply gaps, both globally as well as in India.

Risks from global developments continue to persist, especially in the form of inflationary pressures, re-pricing of risks by financial markets and danger of downturn in some asset classes, with implications for EMEs in general. International food and energy prices are likely to settle at higher levels than before with indications that the sharp acceleration recorded in 2006 will not reverse. In addition, there are risks emanating from the developments in global financial markets.

Stance of Monetary Policy for the Remaining Period of 2007-08

The projection of real GDP growth in 2007-08 at around 8.5 per cent, as set out in the Annual Policy Statement of April 2007, is retained, barring domestic or external shocks.

The outlook for inflation in 2007-08 remains unchanged. Accordingly, holding headline inflation within 5.0 per cent in 2007-08 assumes priority in the policy hierarchy; while reinforcing the medium-term objective to condition policy and perceptions to reduce inflation to 4.0-4.5 per cent on a sustained basis.

For the purpose of monetary policy formulation, the Annual Policy Statement of April 2007 projected growth of money supply (M3) at around 17.0-17.5 per cent for 2007-08 in consonance with the outlook on growth and inflation. Consistent with the projections of money supply, the growth in aggregate deposits in 2007-08 was placed at around Rs.4,90,000 crore while non-food credit including investments in bonds/debentures/shares of public sector undertakings and private corporate sector and commercial paper (CP) was projected to decelerate to 24.0-25.0 per cent in 2007-08 from the average of 29.8 per cent over 2004-07. While non-food credit growth has decelerated, the acceleration in money supply and reserve money warrants an appropriate response.

The global outlook is positive with continuing prospects for strong and stable growth but there are concerns about inflationary pressures worldwide. Monetary authorities are inclined to regard the current levels of real interest rates as warranting further withdrawal of monetary accommodation and are indicating a preparedness to respond to the manner in which the inflation scenario evolves. Financial markets have been aggressively re-pricing risks; however, the wide diffusion of risks and the abundance of liquidity have imparted considerable uncertainty. These developments are necessitating intensified policy monitoring with a policy preference for insulating domestic real activity from these shocks.

Monetary policy in India would continue to be vigilant and pro-active in the context of any accentuation of global uncertainties that pose threats to growth and stability in the domestic economy. The domestic outlook continues to be favourable and would dominate the dynamic setting of monetary policy in the period ahead.

It is important to design monetary policy such that it protects growth by contributing to the maintenance of stability. Accordingly, while the stance of monetary policy would continue to reinforce the emphasis on price stability and well-anchored inflation expectations and thereby sustain the growth momentum, contextually, financial stability may assume greater importance in the months to come.

Recent developments in financial markets in India and potential uncertainties in global markets warrant a higher priority for managing appropriate liquidity conditions in the policy hierarchy at the current juncture.

The Reserve Bank will continue with its policy of active demand management of liquidity through appropriate use of the CRR stipulations and open market operations (OMO) including the MSS and LAF, using all the policy instruments at its disposal flexibly, as and when the situation warrants.

Barring the emergence of any adverse and unexpected developments in various sectors of the economy and keeping in view the current assessment of the economy including the outlook for inflation, the overall stance of monetary policy in the period ahead will broadly continue to be:

• To reinforce the emphasis on price stability and
well-anchored inflation expectations while ensuring a monetary and interest rate environment that supports export and investment demand in the economy so as to enable continuation of the growth momentum.

• To re-emphasise credit quality and orderly conditions in financial markets for securing macroeconomic and, in particular, financial stability while simultaneously pursuing greater credit penetration and financial inclusion.

• To respond swiftly with all possible measures as appropriate to the evolving global and domestic situation impinging on inflation expectations, financial stability and the growth momentum.

Monetary Measures

Bank Rate kept unchanged at 6.0 per cent.

Reverse Repo Rate and Repo Rate under LAF kept unchanged at 6.00 per cent and 7.75 per cent, respectively.

In view of the current macroeconomic and overall monetary and liquidity conditions, it has been decided to withdraw the ceiling of Rs. 3,000 crore on daily reverse repo under the LAF with effect from Monday, August 6, 2007. The Reserve Bank, however, retains the discretion to re-impose a ceiling as appropriate and has the flexibility to conduct repo/reverse repo auctions at a fixed rate or at variable rates as circumstances warrant.

The Reserve Bank retains the option to conduct overnight or longer term repo/reverse repo under the LAF depending on market conditions and other relevant factors. The Reserve Bank will continue to use this flexibility including the right to accept or reject tender(s) under the LAF, wholly or partially, if deemed fit, so as to make efficient use of the LAF in daily liquidity management.

The second LAF, which was introduced from November 28, 2005 and is conducted between 3.00 p.m. and 3.45 p.m. on a daily basis, is withdrawn with effect from Monday, August 6, 2007.

On a review of the current liquidity situation, it is considered desirable to increase the CRR by 50 basis points to 7.0 per cent with effect from the fortnight beginning August 4, 2007.

http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=16995

Masters don't gamble

2007-07-31T07:58:00.000+05:30

The masters don't gamble. \"They invest deliberately and purposefully, and they outperform the average investor as a result.\"

Markets have been going down and up. If that makes you feel queasy, here is help. \"You can achieve success in the stock market if you follow a set of well-defined investment principles and refuse to abandon them when the market acts irrationally,\"

First check if you belong to the majority in the world of investment that comprises those who want hot stock tips. \"Unwilling to learn the rudiments of investing, they invest in companies because `they\'ve been going up.\' The thrill of the action is as important to them as the profits they make.\" To them, investing is not about maximising the returns over time.

The minority are the few who study the art of investing \"in a constant effort to increase their knowledge and improve their skills.\" Kays points out that these people take time to learn what matters when buying the stocks. \"They don\'t gamble; they invest deliberately and purposefully, and they outperform the average investor as a result.\"

Stocks in news: M&M, Tata Steel, NTPC, HUL, UTV Software

· Ex-dividend:
Varun Shipping (Rs 1.50/sh), Apar Industries (Rs 2/sh), Atul (Rs 3/sh), Heritage Foods (Rs 3/sh), Parsvnath (Rs 2.50/sh) and Cyber Media (Re 1/sh)

· Results Today:
M&M, Tata Steel, HDFC, NTPC, HPCL, BEML, BHEL, Glenmark, IOC, Jet Airways, OBC, AV Birla Nuvo, Cairn India, GMR Ind, Sun TV, NALCO, India Cement, GE Shipping, DCB, Divis Labs, TTML, India Bulls Real Estate, India Infoline, I-Flex Solution, Akruti Nirman, Andhra Bank, Syndicate Bank, Torrent Power, TV Today Network, Vijaya Bank, Sical Logistics, Ajanta Pharma, Archies, Asian Paints, Jindal Steel & Power, JK Tyre, JM Financial, Nova Petro, Advanta India, Asian Electronics, Atlanta, BL Kashyap, Cambridge Sol, Crest Animations, Dishman Pharma, Easun Reyroll, Hanung Toys, Harrison Malayalam, Helios & Matheson, Inox, Maharastra Seamless, Mangalam Drugs, Mercator lines, Sical Logistic, Syndicate Bank, Voltamp, Wyeth, Balkrishna Ind, Bharti Shipyard, Classic Diamond, DCM, Dredging Corp, Gitanjali Gems, Heritage Foods, Hinduja TMT Hotel Leela, D-link Jindal Drilling ,Khaitan Nission Copper ,Nitin Spinners, Northgate, TFCI, Vijaya Bank, Eastern Silk,GMDC,ICSA India and JMC Projects

· Hindustan Unilever board approves share buyback at maximum price of Rs 230/sh up to 25% of capital

· UTV Software board approves GDR/ADR/FCCB issue up to USD 100 mn

· Binani Cement board approves investment in JV in China for manufacture of clinker/cement

· Peninsula Land board approves 1:5 stock split

· Godrej Industries board approves raising long-term resources up to USD 150 mn

· JBM Auto board approves 1:2 bonus issue

· Praj Industries board approves raising funds up to USD 125 mn for expansion, including strategic acquisition abroad; Rakesh

· Jhunjhunwala resigns as director of board

· Lloyd Electric board approves QIB issue up to Rs 200 cr

· Grasim board approves transfer of textile units at Haryana to subsidiary co

· GMR Infrastructure board approves FCCB/GDR/ADR issue up to Rs 5,000 cr

· Eicher promoters may sell majority holding along with management control to Daimler Chrysler - HT

· Renault confirmed holding talks with Bajaj Auto for small car project

· Tata Tele tower biz valued at Rs 13000 cr – TOI

· Govt has decided not to offer CDMA players 3G spectrum - ET

· IDFC buys 6.6% in Andhra Cement for Rs 25 cr - ET

· RIL may drop USD 5.2 bn gas project on pricing delays - FE

· Dish TV to roll out DTH service in cars, trains; in talks with FIIs to raise funds- BS/BL

· MTNL is losing Rs 2 cr each month as ITI failed to put up new broadband capacity in Mumbai - BS

· Baring makes 20% open offer for JRG Securities at Rs 49/sh

· Balasore Alloys board approves expansion plans with investment of Rs 1215 cr

· Paramount Communications board approves increasing FII investment limit 49%

· Petron Engineering bags Rs 49 cr order from Samsung Engineering

Interview with Value Investor Mohnish Pabrai

2007-07-27T11:54:00.000+05:30

InvestorGuide: You have compared Pabrai Funds to the original Buffett parternships, and there are obvious similarities: investing only in companies within your circle of competence that have solid management and a competitive moat; knowing the intrinsic value now and having a confident estimate of it over the next few years, and being confident that both of these numbers are at least double the current price; and placing a very small number of very large bets where there is minimal downside risk. Are there any ways in which your approach differs from that of the early Buffett partnerships (or Benjamin Graham's approach), either because you have found ways to improve upon that strategy or because the investing world has changed since then?

Mohnish Pabrai: The similarity between Pabrai Funds and the Buffett Partnerships that I refer to is related to the structure of the partnerships. I copied Mr. Buffett's structure as much as I could since it made so much sense. The fact that it created a very enduring and deep moat wasn't bad either. These structural similarities are the fees (no management fees and 1/4 of the returns over 6% annually with high water marks), the investor base (initially mostly close friends and virtually no institutional participation), minimal discussion of portfolio holdings, annual redemptions and the promotion of looking at long term results etc. Of course, there is similarity in investment style, but as Charlie Munger says, "All intelligent investing is value investing."

My thoughts on this front are covered in more detail in Chapter 14 of The Dhandho Investor.

Regarding the investment style, Mr. Buffett is forced today to mostly be a buy and hold forever investor today due to size and corporate structure. Buying at 50 cents and selling at a dollar is likely to generate better returns than buy and hold forever. I believe both Mr. Munger and he would follow this modus operandi if they were working with a much smaller pool of capital. In his personal portfolio, even today, Mr. Buffett is not a buy and hold forever investor.

In the early days Mr. Buffett (and Benjamin Graham) focused on buying a fair business at a cheap price. Later, with Mr. Munger's influence, he changed to buying good businesses at a fair price. At Pabrai Funds, the ideal scenario is to buy a good business at a cheap price. That's very hard to always do. If we can't find enough of those, we go to buying fair businesses at cheap prices. So it has more similarity to the Buffett of the 1960s than the Buffett of 1990s. BTW, even the present day Buffett buys fair businesses at cheap prices for his personal portfolio.

Value investing is pretty straight-forward - you try to get $1 worth of assets for much less than $1. There is no way to improve on that basic truth. It's timeless.

InvestorGuide: Another possible difference between your style and Buffett's relates to the importance of moats. Your book does emphasize investing in companies that have strategic advantages which will enable them to achieve long-term profitability in the face of competition. But are moats less important if you're only expecting to hold a position for a couple years? Can you see the future clearly enough that you can identify a company whose moat may be under attack in 5 or 10 years, but be confident that that "Mr. Market" will not perceive that threat within the next few years? And how much do moats matter when you're investing in special situations? Would you pass on a special situation if it met all the other criteria on your checklist but didn't have a moat?

Pabrai: Moats are critically important. They are usually critical to the ability to generate future cash flows. Even if one invests with a time horizon of 2-3 years, the moat is quite important. The value of the business after 2-3 years is a function of the future cash it is expected to generate beyond that point. All I'm trying to do is buy a business for 1/2 (or less) than its intrinsic value 2-3 years out. In some cases intrinsic value grows dramatically over time. That's ideal. But even if intrinsic value does not change much over time, if you buy at 50 cents and sell at 90 cents in 2-3 years, the return on invested capital is very acceptable.

If you're buying and holding forever, you need very durable moats (American Express, Coca Cola, Washington Post etc.). In that case you must have increasing intrinsic values over time. Regardless of your initial intrinsic value discount, eventually your return will mirror the annualized increase/decrease in intrinsic value.

At Pabrai Funds, I've focused on 50+% discounts to intrinsic value. If I can get this in an American Express type business, that is ideal and amazing. But even if I invest in businesses where the moat is not as durable (Tesoro Petroleum, Level 3, Universal Stainless), the results are very acceptable. The key in these cases is large discounts to intrinsic value and not to think of them as buy and hold forever investments.

InvestorGuide: For that part of our readership which isn't able to invest in Pabrai Funds due to the net worth and minimum investment requirements, to what extent could they utilize your investing strategy themselves? Your approach seems feasible for retail investors, which is why I have been recommending your book to friends, colleagues, and random people I pass on the street. For example, your research primarily relies on freely available information, you aren't meeting with the company's management, and you don't have a team of analysts crunching numbers. To what extent do you think that a person with above-average intelligence who is willing to devote the necessary time would be able to use your approach to outperform the market long-term?

Pabrai: Investing is a peculiar business. The larger one gets, the worse one is likely to do. So this is a field where the individual investor has a huge leg up on the professionals and large investors. So, not only can The Dhandho Investor approach be applied by small investors, they are likely to get much better results from its application than I can get or multi-billion dollar funds can get. Temperament and passion are the key.

InvestorGuide: You founded, ran, and sold a very successful business prior to starting Pabrai Funds. Has that experience contributed to your investment success? Since that company was in the tech sector but you rarely buy tech stocks (apparently due to the rarity of moats in that sector), the benefits you may have derived seemingly aren't related to an expansion of your circle of competence. But has learning what it takes to run one specific business helped you become a better investor in all kinds of businesses, and if so, how? And have you learned anything as an investor that would make you a better CEO if you ever decide to start another company?

Pabrai: Buffett has a quote that goes something like: "Can you really explain to a fish what it's like to walk on land? One day on land is worth a thousand years of talking about it, and one day running a business has exactly the same kind of value." And of course he's said many times that he's a better investor because he's a businessman and he's a better businessman because he is an investor. My experience as an entrepreneur has been very fundamental to being any good at investing.

My dad was a quintessential entrepreneur. Over a 40-year period, he had started, grown, sold and liquidated a number of diverse businesses - everything from making a motion picture, setting up a radio station, manufacturing high end speakers, jewelry manufacturing, interior design, handyman services, real estate brokerage, insurance agency, selling magic kits by mail - the list is endless. The common theme across all his ventures was that they were all started with virtually no capital. Some got up to over 100 employees. His downfall was that he was very aggressive with growth plans and the businesses were severely undercapitalized and over-leveraged.

After my brother and I became teenagers, we served as his de facto board of directors. I remember many a meeting with him where we'd try to figure out how to juggle the very tight cash to keep the business going. And once I was 16, I'd go on sales calls with him or we'd run the business while he was traveling. I feel like I got my Harvard MBA even before I finished high school. I did not realize it then, but the experience of watching these businesses with a front-row seat during my teen years was extremely educational. It gave me the confidence to start my first business. And if I have an ability to get to the essence of a subset of businesses today, it is because of that experience.

TransTech was an IT Services/System Integration business. We provided consulting services, but did not develop any products etc. So it wasn't a tech-heavy business. While having a Computer Engineering degree and experience was useful, it wasn't critical. TransTech taught me a lot about business and that experience is invaluable in running Pabrai Funds. Investing in technology is easy to pass on because it is a Buffett edict not to invest in rapidly changing industries. Change is the enemy of the investor.

Being an investor is vastly easier than being a CEO. I've made the no-brainer decision to take the easy road! I do run a business even today. There are operating business elements of running a fund that resemble running a small business. But if I were to go back to running a business with dozens of employees, I think I'd be better at it than I was before the investing experience. Both investing and running a business are two sides of the same coin. They are joined at the hip and having experience doing both is fundamental to being a good investor. There are many successful investors who have never run a business before. My hat's off to them. - For me, without the business experiences as a teenager and the experience running TransTech, I think I'd have been a below average investor. I don't fully understand how they do it.

InvestorGuide: Is your investment strategy the best one for you, or the best one for many/most/all investors? Who should or shouldn't consider using your approach, and what does that decision depend on (time commitment, natural talent, analytical ability, business savvy, personality, etc)?

Pabrai: As I mentioned earlier, Charlie Munger says all intelligent investing is value investing. The term value investing is redundant. There is just one way to invest - buy assets for less than they are worth and sell them at full price. It is not "my approach." I lifted it from Graham, Munger and Buffett. Beyond that, one should stick to one's circle competence, read a lot and be very patient.

InvestorGuide: Some investment strategies stop working as soon as they become sufficiently popular. Do you think this would happen if everyone who reads The Dhandho Investor starts following your strategy? As I've monitored successful value investors I have noticed the same stocks appearing in their various portfolios surprisingly often. (As just one example, you beat Buffett to the convertible bonds of Level 3 Communications back in 2002, which I don't think was merely a coincidence.) If thousands of people start following your approach (using the same types of screens to identify promising candidates and then using the same types of filters to whittle down the list), might they end up with just slightly different subsets of the same couple dozen stocks? If so, that could quickly drive up the prices of those companies (especially on small caps, which seem to be your sweet spot) and eliminate the opportunities almost as soon as they arise. Looked at another way, your portfolio typically has about ten companies, which presumably you consider the ten best investments; if you weren't able to invest in those companies, are there another 10 (or 20, or 50) that you like almost as much?

Pabrai: As long as humans vacillate between fear and greed, there will be mispriced assets. Some will be priced too low and some will be priced too high. Mr. Buffett has been talking up the virtues of value investing for 50+ years and it has made very few folks adopt that approach. So if the #2 guy on the Forbes 400 has openly shared his secret sauce of how he got there for all these decades and his approach is still the exception in the industry, I don't believe I'll have any effect whatsoever.

Take the example of Petrochina. The stock went up some 8% after Buffett's stake was disclosed. One could have easily bought boat loads of Petrochina stock at that 8% premium to Buffett's last known buys. Well, since then Petrochina is up some eight-fold - excluding some very significant dividends. The entire planet could have done that trade. Yet very very few did. I read a study a few years back where some university professor had documented returns one would have made owning what Buffett did - buying and selling right after his trades were public knowledge. One would have trounced the S&P 500 just doing that. I don't know of any investors who religiously follow that compelling approach.

So, I'm not too concerned about value investing suddenly becoming hard to practice because there is one more book on a subject where scores of excellent books have already been written.

InvestorGuide: You have said that investors in Pabrai Funds shouldn't expect that your future performance will approach your past performance, and that it's more likely that you'll outperform the indices by a much smaller margin. Do you say this out of humility and a desire to underpromise and overdeliver, or is it based on market conditions (e.g. thinking that stocks in general are expensive now or that the market is more efficient now and there are fewer screaming bargains)? To argue the other side, I can think of at least two factors that might give your investors reason for optimism rather than pessimism: first, your growing circle of competence, which presumably is making you a better investor with each passing year; and second, your growing network of CEOs and entrepreneurs who can quickly give you firsthand information about the real state of a specific industry.

Pabrai: Future performance of Pabrai Funds is a function of future investments. I have no idea what these future investment ideas would be and thus one has to be cognizant of this reality. It would be foolhardy to set expectations based on the past. We do need to set some benchmarks and goals to be measured against. If a fund beats the Dow, S&P and Nasdaq by a small percentage over the long-haul they are likely to be in the very top echelons of money managers. So, while they may appear modest relative to the past, they are not easy goals for active managers to achieve.

The goals are independent of market conditions today versus the past. While circle of competence and knowledge does (hopefully) grow over time, it is hard to quantify that benefit in the context of our performance goals.

InvestorGuide: Finally, what advice do you have for anyone just getting started in investing, who dreams of replicating your performance? What should be on their "to do" list?

Pabrai: I started with studying Buffett. Then I added Munger, Templeton, Ruane, Whitman, Cates/Hawkins, Berkowitz etc. Best to study the philosophy of the various master value investors and their various specific investments. Then apply that approach with your own money and investment ideas and go from there.
http://www.investorguide.com/mohnish-pabrai.cgi

SWOT analysis of Indian Share market

2007-07-23T10:32:00.000+05:30

Strengths: Senex and Nifty scrips are top made up of top performing scrips that should capture much of India's growth ove the next 10 years. Companies that stand to gain the most as Indian economy gallops at 8-9% pa.

Weakness: Illiquidity outside the scrips in futures and options may lead to large scale price manipulation in illiquid scrips and lower price realisations in such counters.
Poor Indian Accounting disclosures may lead to large scale manipulation of figures by publicly traded companies.

Opportunites: A large domestic market that is still into traditional fixed income and other government savings is all buy bound to enter the market sooner if not later.

Threats: Global Economic slowdown, Currency mismangement, High global commoditiy prices, Over valuation in Index scrips, Non liquidity in non derravatives related scrips, Change in governement focus on controlling inflation, the attitude of government relating to FII's taxation etc

Brief about SWOT Analys

A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, straightforward model that assesses what an organization can and cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to take the information from an environmental analysis and separate it into internal (strengths and weaknesses) and external issues (opportunities and threats). Once this is completed, SWOT analysis determines what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimized to achieve desired results.

When using SWOT analysis, be realistic about the strengths and weaknesses of your organization. Distinguish between where your organization is today, and where it could be in the future. Also remember to be specific by avoiding gray areas and always analyze in relation to the competition (i.e. are you better or worse than competition?). Finally, keep your SWOT analysis short and simple, and avoid complexity and over-analysis since much of the information is subjective. Thus, use it as a guide and not a prescription.

Indian equity market - Marc Faber

2007-07-20T08:23:00.000+05:30

An interview with Marc Faber
**
*How do you read the current correction and pull back in the Indian equity
markets?*
**
The market had risen from less than 3,000 points in 2003 to nearly 15,000
points recently. We had a 26 per cent correction in 2004, a 13 per cent
correction in 2005, and a 30 per cent correction in May-June 2006.

So far we have declined by 13 per cent from the February 11 peak (as on
March 5) and the question is obviously whether this is just a correction or
the beginning of something more serious.

Based on the position of overseas markets and international liquidity, I am
leaning toward the view that we are faced with something more serious.

*There are a lot of worries on inflation and rising interest rates in India.
These could have a negative impact on the equity as well as corporate
profits. In this scenario what is your outlook for calendar year 2007?*

It looks as if most asset markets around the world, including the Indian
stock market made a high between November 2006 and February 2007. And
whereas since 2002 the right strategy was to buy the dips, from now on
investors should sell the rebounds.

Once the Dow is down by 10 per cent, I expect the US Federal Reserve to
begin cutting interest rates and that this may lead to a sharp rebound in
stock prices around the world.

However, I doubt that we shall make new highs. So, my expectation is for the
present downturn to last for between one and three months.

This will be followed by a strong rebound, which will then give way to
renewed weakness in the second half of the year. I may add that India, while
having a great potential, is certainly not problem-free with inflation
accelerating and a not particularly investor-friendly Budget!

*Would you agree that India is witnessing a secular bull run, which could
last for many years or will it deflate?*

It is possible that India and also other emerging markets are in a secular
bull market. However, we should keep in mind that India rose from the lows
in 2003 to its recent high by almost five times.

Valuations are not compelling when compared to other markets and when
compared to local interest rates. Moreover, even if the secular bull market
story is correct, which I somehow doubt, big intermediate corrections or
even bear markets can interrupt this glowing scenario.

*How do you see global liquidity going forward?*

Global liquidity, coming principally from the US current account deficit, is
still there. But it is no longer expanding at an accelerating rate.

Moreover, we have some illiquidity that developed in the US sub-prime
lending sector. This means, in my opinion, across the board tighter lending
standards - leading to less liquidity. It is not the Fed that tightened
liquidity, but the market place.

*What will be its impact on global stock markets in general and India in
particular?*

When liquidity expansion slows down usually some problems occur in asset
markets. Moreover, nothing boosts liquidity as much as rising asset prices.
It is when asset prices decline that liquidity can vanish very quickly.

*What is your advice for the retail investor in India?*

My advice is to sell at any rebound.

*Where do you think the commodity cycle is headed, especially gold?*

Since all asset prices including real estate, equities, bonds, commodities,
art, and even the prices of mistresses increased in value since October
2002, I would expect in an environment of relative tighter liquidity all
asset prices to decline - even precious metals.

*Gold ETFs have recently been introduced in the Indian market. Could you
please share your experience and whether retail investors should look at
them?*

I am still positive about gold and silver in the long run. However, a better
buying opportunity should occur over the next three months.

*Do you see any particular investment themes, which can work over the next
two-three years in India?*

I think the key will be to avoid losing money. I like cash and possibly
bonds should do okay in India.

*Do you see Indian markets as over-valued compared to other emerging
markets?*

I am not sure the word "overvalued" is correct, but certainly the market is
"overstretched" and vulnerable to a 30 per cent or 40 per cent decline.

*In a rising interest rate scenario, how do you look at Indian real estate
prices? And investing in real estate companies?*

There has also been a lot of speculation in real estate and I would be
somewhat careful at this point. I would avoid real estate companies for now.

*Oil is no more boiling, but the opinion is still divided on its direction.
What are your expectations for this year?*

Since I expect the global economy to slow down, oil may correct down to
$45-55 per barrel. Long term, I am positive.

*And its impact on Indian economy?*

Declining prices are moderately favourable, but since I expect prices to
eventually rise significantly, I would think that it will add to the current
account deficit and to inflationary pressures.

*Indian metal companies have acquired companies abroad recently. What is
your view on the valuations and the synergies? How should investors look at
these deals?*

I am not sure that these acquisitions are timely and wise. I would not buy
these companies and focus on India, which has a higher growth potential.
http://groups.google.co.in/group/aiii/browse_thread/thread/e5ea698dac47246e/2ca8fc4effedadcb?lnk=st&q=real+estate+stock+india&rnum=3&hl=en#2ca8fc4effedadcb

Does investing in IPOs make sense ?

2007-07-19T07:03:00.000+05:30

IPO's ... Investors another dilemna

For investors today, there are also more companies to consider than ever before. Every day it seems another batch of companies is going public.

In this highly competitive market, some of them need quick and large injections of capital just to survive. But sometimes this race to an IPO comes at the expense of laying the foundation for a viable, long-term company. As long as investors stay hungry for public offerings, there will be even more IPOs.

When a company goes public these days, the number of shares offered to the public often represents only a small percentage of the company's total shares. Now, simple economics tells us that with heightened demand and a limited supply, the price is going to climb. But when current demand is already at extraordinary levels, the price tends to skyrocket.
By limiting the number of shares that are offered to the public, however, the underwriters, venture capitalists, and other select participants have much to gain. They are the ones who own the rest of the stock that was not offered in the IPO. While the rest of us are scrambling for a few shares and driving up the price, these company `insiders' can sell their own shares down the road for a much higher price.

So the moot question is "Does investing in IPOs make sense?"

Anand rathi group has come out with an excellent report on answering the same question. Some excerpts from the report

"Highlight

Is the euphoria about IPOs justified?
􀂾 The last four financial years saw ~ Rs. 900 billion primary public equity mobilisation.
But the demand is clearly ahead of supply as reflected in large oversubscription of
many IPOs. The question is whether this euphoria is justified?
Do Indian book built IPOs really yield 'abnormal' return?
􀂾 We examine 159 book-built initial public offerings (IPOs) in India between 2000
and 2007 and find two-thirds of these issues resulted in listing gains. But it is disturbing
to note that such gains have eroded sharply in the recent years.
What makes an IPO hot?
􀂾 We explore relationships between listing gain or money left on the table with factors
such as the sector of IPO issuing company, market cap, issue size, valuation, standing
of the lead manager, post issue promoter holding, etc.
􀂾 In general, we find a kind of 'central tendency' whereby mid-cap companies, midsized
issues, middle-aged (7 - 10 years old) companies, issues managed by midsized
investment managers generally yield the best listing gain.
Do investors really gain from participating in IPOs?
􀂾 Due to large oversubscription, significant interest and opportunity cost of funds
blocked during listing period, absolute listing gain is a not a good measure for
realisable gains from participation in IPO.
􀂾 Our exercise on the realised listing gain of different classes of investors show that
such gains are generally much lower than absolute listing gain.
How long to hold an IPO scrip?
􀂾 Our exercise suggests that listing day and around 100 trading days after listing can
be two important exit points from IPO scrip. However, even after 100 trading
days, our IPO scrip index continued to outperform broad market index indicating
'abnormal' return for the buy and hold investors.
What next?
􀂾 Falling absolute listing gains and low realised listing gains are not in line with the
longer term interest of the primary equity market or the economy. We propose
certain measures, which could be explored to address this situation."