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A nice article

 

 

 

Where has my Money disappeared at the Indian Stock Market

 

 

Just the other day, it was a fine Sunday morning with cool breeze blowing. Through my french window which spanned the Arabian ocean, I was sipping coffee swinging on the Moroccan patio. It was light winter morning and I was contemplating of buying an additional flat two blocks away from my house from the proceeds that I made from the Indian Stock Markets. I thought, that the equity market was a piece of cake, invest and take some 40-50 per cent straight-up. Along with me were people from different industries like big diamond merchants, chemicals traders, exporters, mid-cap industrialists, new kid-on-the-block operators, cement manufacturers, steel tycoons, real estate players etc. we thought that there will always be FII's to bail us out, as India and China were the only two economies which posted robust growth. This was just two months back.

Today, I am having two minds whether I should actually withdraw money from the Indian equity markets (whatever little that is left), forget about buying anything else…. anywhere. During this last month, things seemed to have changed – I mean the fortunes of the companies seemed to have dwindled into thin air. Almost 85 per cent of my stocks have touched the June 16 ^th 2006 levels. And this despite, I having a portfolio spread evenly across various sectors.  Second time, this year a massive fall…..

 

Although there is no comparison, something which strikes immediately is the relationships between husband and wife. It is like the courtship period which last for such a brief moment. It was like the first meeting with your loved one ….whom you liked, the first coffee, the first movie and then dinner… and then endless phone calls through-out the night keeping awake till 2-3 am. And that mushy mushy talks , the intense feeling of togetherness and then you committed to marriage. And just after few months, you realise that, the opposite person is not the same as was before marriage or the past issues of the other person comes to light after marriage or for that matter that suddenly you cannot see eye to eye with the other person. Or you like dal-roti and she like Italian baked dishes – ravioli and pastas mixed in original olive oil with flavoured herbs.

 

My investments in equity markets seems to be having that effect strangely. I don't get sleep, seem tensed most of the time, worried and panicky a little, cannot relate completely when family members are enjoying, I am dazed…. Few of my friends have resorted to drinking every day , so that they could sleep over the problems, still others have ideas of taking faults on family members. Like, when the kids call out to the father, they growl like a dog. The effects of losses from the stocks could be multi-fold.

 

You will not believe me when I say that sectors like automobiles, cement, steel, real estates, constructions, infrastructure, chemicals, textiles, pharmaceuticals, aluminium, copper, offshore – shipping, airways, housing, fmcg, psu banks, oil refining companies, sugar are just making losses in the portfolio. The share values are just dipping one way.

 

Had it not been for handful of ten stocks in the Nifty like reliance, bharti airtel, Larsen , siemens, icici and hdfc bank, abb and few others…. My portfolio would be literally down by seventy to eighty percent. Today, the Nifty too seems to be rigged. You have a discount of 50 points running. And I guess, the final blow will come, when these ten stocks commence to lose its shin.

 

I clearly remember, years back, an oldman lingering on the by-lanes of rotunda (where the Bombay Stock Exchange is situated) gave a simple advise. When interest rates rise, the stock markets falls and vice-versa. Similarly when stocks like mtnl rise and penny stocks surge understand that it is the peak of the cycle. Fag end of the rally will always be dominated by reliance. Today FMP's (Fixed Maturity Plans) are available at 10.80 per cent or almost 11 per cent. And to think of it that just six months back, the interest rates were hovering around 6-8 per cent. That puts the question, do we actually need to invest money in the equity markets ?? Is 11 per cent fixed returns not good enough ??

And interesting view point comes to life after one gets committed with his or her partner. The initial years are always a little rosy and flowery. We do things for each other, but as time passes by , we kind of become immune to the other person and start taking things for granted. I too, took my stocks for granted and believed that they would give me profits endlessly.

 

The first blow came from the sugar sector. Sugar became a bad name from almost last April 2006 onwards. Bajaj Hindustan which was ruling around Rs 550 touched a low of Rs 250 on June 2006 and today is Rs 161. so is the case with balrampur chinni and other sugar stocks – dhampur, triveni etc. Reasons being given are, there is excess supply, over production in India, and internationally the sugar prices are falling. I thought, that probably this is a one-of situations and kept my investments in other sectors intact hoping that they would deliver substantial profits.

 

Then came Tata Steel and its acquisition, everyone on the street said it was a not a good thing to do and the stock has not seen much light thereafter. To make matters worse, Hindalco also did one acquisition whereby the stock fell from Rs 240 to Rs 125 currently from June 2006 levels. And after that, the steel manufacturers rolled back steel prices, just two day back and I had only losses on my books. I took consolation in the fact that there were many other sectors in the Indian economy which were promising.

Suddenly, just one fine morning, about a month back there was news across all tv channels and newspaper that the interest rates have started rising, inflation was going out- of-control above 6 per cent and elections are just round the corner for Uttar Pradesh and Bihar. RBI wants to curb lending to real estate and infrastructure sector. CRRs and SLRs were being tempered with. The TV commentor announced that Rs 2500 crore would be sucked away from the system. What actually happened was my stock prices crashed and my money was being sucked away from me. So far, these things which were understandable. Then came, things like Yen-Carry-Trade, Chinese markets falling by 8-10 per cent in one day, Hang Seng falling by 775 points, US ex – Alan Greenspan announcing that probably the US economy may face a recession 3-4 quarters down the line. All these and much more …… when one interacts with the so called the relationship managers at some of the well know research and brokerage houses – it kind of feels funny. FIIs were buyers , mutual funds were sellers etc. some reason to be given for the losses in my account. Jim something from CLS and Jim Jub from somewhere and someone in US is commenting on Indian economy that it is expensive… the reasons are endless…

 

To tell you honestly, it was like, I am trying to understand so many things in life at one go from the stock markets. I had actually never taken so much pains to understand why my child was not understanding simple mathematics or why my daughter had a fascination for my smile and would come and cuddle me whenever I came home and my son would ask me when we could go out to the park so that we could play like other parents. However, I was giving full attention to become a pro on stock markets. To the attention which was suppose to be given for my family in terms of peace, relaxation with family members, going out with family for dinners, walks, talking about matters relating to the house and a simple hi , hello , how are you today…….. it became ohhhh now the dow jones and nasdaq will open… or the dow futures is down by 100 points… Europe has opened lower and dow will dwindle today and my stocks will now this very moment correct downwards today itself before dow jones industrial average opens today evening… God where was I headed.

 

Anyways, the scenario in India seems mixed. On one hand, the minister was bent on reducing cement prices to curb inflation – (what is the extent or percentage of cement contribution to inflation). The cement manufacture have a meeting and say that they will not roll back cement prices and then the minister say's he is contemplating ban on exports and then in the same evening the cement manufacturers decide to take a price cut. My cement stocks like India Cement , Grasim , Gujarat Ambuja , ACC and other have almost touched a low of June 2006… Infact, now the technicals specialist at the TV channels say it will go the sugar way as excess capacity is going on stream after 8-9 months, besides elections are going to be conducted during the next 2-3 months  as a results cement prices would remain subdued to partial roll back to Rs 170 levels , by that time, the monsoon season will commence and it is not a good season to increase cement prices as off-take is luke-warm. So why should an investor invest in a sector which has no growth for the next 9-12 months. Today all my stocks are down by average 35-60 per cent in cement sector from their peaks.

 

Still not shaken by the extent of damage, I continue to hold on positions like banks, but there too I was tossed and turned upside down. Except for the two private sector banks like ICICI and HDFC, all the PSU banks have literally touched the June 2006 levels. Infact they have become almost half…be it corporation or bank of baroda or bank of India or syndicate..

 

Facing the challenges of life with the boss was one goal and then there was the demon called the Sensex and Nifty which grabbed my attention every moment. Lesser then cricket or the most beautiful girl passing by or the constant need for a cigarette which incidentally became a pack a day .. was my attention to the Nifty movements. I would swing, jive , gyrate to the tunes of the Nifty. It made me do a yo yo every once in a while. I mean , without the actually physical burnout…. It literally burnt me out in terms of stress.   So volatile was the Nifty movement, that during early part of the day I would be happily singing while an hour later I would be sitting in the toilet estimating the cheque that I had to give to my broker for mark-to-mark margins and short falls.

 

With few bandages and a plaster in one hand, but still not retired, adding that life was beautiful and God would be kind to me, I had to face the adversities from automobiles - two and four wheelers. Tata Motor is almost quoted at its lowest level of June 2006, while TVS motors has gone far below to Rs 50. Maruti too have chipped off badly while hero Honda and bajaj auto continue to fight with each other and erode shareholders value.

 

Ohhh and I almost forget the safe heavens like defensives. FMCG sector was one which was insulated – at least that was the notion. However not this time, Hindustan Lever fell from Rs 225 to Rs 170 and Tata Tea, after the acquisition has not seen one bright morning… it continues to astonish me everyday by taking the downward plunge every single day even on a day when the markets are up by 500 points (incidentally volatility are common now a days - up now and down one hour later). ITC will all its merits is still available at a tade higher then June 2006 price.  

 

Chemicals and Fertilisers are sectors which were not in flavour, but they too have been losing ground. Nagarjuna Fertilisers has fallen back to its originally levels of Rs 10-11 from a high of Rs 19. Tata chemicals a trades at Rs 203 – June 2006 prices Rs 193.

 

Pharmaceuticals sector is something like the wife waking you up with a shock – "My mother and father and her big fat lousy good-for-nothing brother is going to come and stay with us for few months". The stock just falls by 10-15 per cent when an international major files some suits against an Indian company. Reddy and Ranbaxy's –sigh what losses. And whom to blame the wife or international companies.

 

Construction and real estates stocks….there is nothing to say except that you have to stand in a queue…yes that is what it is……..you have to stand in the queue to sell your shares. I remember the time, when we would stand in a queue to fill up fees or outside principals office, or interviews at post graduate institutes or filling up some government requisition forms.

 

Be it Unitech , or sobha or parvashwanth or lok housing, Jai Corp,  or some real estate stocks. The losses on these are nothing less than 50-80 per cent. Besides no exit… it is as if I have been forced to serve my boss for the rest of my life (although these days naukri , monster , times job ) have innovative advertisements. Most are dipping as if there is no tomorrow….. make a beeline early in the morning and plead your broker to put in you trade first at 9.54.01 seconds so that atleast today your shares could be sold and you would freed from the bondage. God only knows when will I ever come out of this misery…. I guess it must be something similar to being paired or stuck-up with a partner that you don't approve of….. it is really bad scene. And yes the property prices continue to rise…. Ask for house next door and prompt would be the reply that it is selling at almost 3 times the cost which was just 2 years ago…. NO correction there…. I guess it is double edged sword…. Pay high interest rates and principal costs while your stocks investments keep sliding…. Ohhhh what do I say now,… I start getting stomach problems.  

 

Refining companies were something that I had long accepted nothing would happen…. It was the favourite whipping boy… inflation not under control, reduce petrol and diesel prices… crude oil scaling to high, tell ongc to give subsidy or market oil bonds. Refining companies not making money.. no problem but this year no such thing as raising prices and linking it to international prices… it was a goner for a long not many surprises here atleast.

 

And of course the textile manufacturers, the quota being lifted and India would have great potential to exports goods to different countries. It seems to have exported my entire profits to other countries to accounts which I don't know of. Alok , Arvind , Welspun , raymonds..etc.. I see the advertisement of raymonds and think what an advt….. but I am left with only that feeling while my stock balance (prices) keeps going the smooth way downwards.. I truly think that Bombay is dyeing. Be it literally or otherwise.

There are still others like ongc, great offshore, nirma, neyvile lignite, jet airways, gateway distripacks, etc. I mean the mid and lower cap… I have not discussed, because it just falls by 5-8 per cent daily… or locks at the lower circuit end….. God saves us.

 

The article is written to lighten you up and sit back and contemplate what are we doing and where are we headed, be it mutual fund , or direct equity.

 

Equity Markets are volatile and will continue to be nerve racking. Suddenly, it will turn and you shall be profits again. However, it is important for you to invest in quality stocks more some of money in bad times and allocate more resources, because only then will you make decent returns. Try not to catch the bottoms, but allocate judiciously.  It is like always stick to the main road or the highway and try to avoid by-lanes.

 

It is best to be prudent and take sensible calls. Today, the futures market has higher turnover then the cash segment – this being that the segment is leveraged. One is of the opinion, that the USA economy is a borrowed economy from cards to plastic money for everything be it house , car , mortgage or otherwise…. What   is our economy…. A big bundle of speculation on the Nifty – just few handful of stock rising and others falling. It is like the rich is getting richer and richer while the poor does not even have two morsels a day.

 

Today, as things stand, property prices have gone through the roof, interest rates are at its peak, EMIs are being increased and extended, costs are increasing , expansion is on the cards for major Indian companies, inflation is out of control, essential commodity prices of potatoes , onions , dal , rice , jowar are on the rise… is this what you had asked for…..

 

I guess no…. are we headed in an economy which is running at a speed which is faster than you and I can catch up….. may be…. So then why bog down with these problems… anyways we are going to be slaughter like pigs.

 

It is best that we reap our profits periodically and pay attention to large and more important things in life like prudent investment in quality stock which has a future 5 years down the line. Invest now in love , care , family , children , education , respect for the partner, parenting, social responsibility. In this rat race of earning more money we are loosing our precious time which will never come by… so the next time the markets are down and you are in a bad mood, learn to leave your problems in office and appreciate that you have a family…. Understand what they want and what they expect from you… It is best to give something to a person and feel the joy with the happiness that the other person enjoy… I guess , that is called being HUMAN and a being an MAN.

 

God Bless You.