Blockbuster of the year: Saare Zameen Par @ Halal St...

Most people were of the opinion that Black Monday, January 21, 2008, was the bloodiest day in the history of the Sensex. Little did they know that the worst was saved for a Tuesday, the first Black Tuesday in the trading history when the sensex fell by over 2200 points before recouping some of its losses and closing down by 875 points! The last 2 trading sessions have collectively wiped out more than the losses incurred in the last week.. But the billion dollar question is: Is the fall over or will it resume again tomorrow?

The recovery in the European markets seem to suggest that we might be in for a short-term relief before selling pressures mount. However, the U.S. markets are still trading lower despite being off the day's low. I quite appreciate the Fed's decision to cut the federal funds rate by 75 basis points, which in turn led to a reduction of 75 bps in the PLR or the prime lending rate. The rate cut came a week ahead of the Fed's meeting on January 31 and it finally seems that the Fed is waking up to the looming danger of recession and act accordingly! It also shows that despite all that we may claim, the economies across the world remain dependent on the U.S. economy! U just need to take a look at the stock markets falls on Monday, January 21, 2008 to gauge the siituation for your self.

However, moving on to the Indian stock markets, clearly the investors have been shaken! The journey from 15k to 21k took over 3 months but the return journey took only 7 trading sessions! Many people have lost a mountain of money; saying a lot is just putting it very mildly! The Fed rate cut may give a boost to the markets tomorrow, however! Value hunting may begin again and believe me, I'm salivating here when I think of all the stocks which have bitten the dust during this bumpy ride! If they have fallen like an apple, rest assured they will go up like a rocket!

A simple trading strategy for tomorrow would be to buy a Nifty February expiry future and arm yourself by buying both a call and a put option with a similar strike price and expiry in February. This strategy is idle for a volatile market, one stands to receive a payoff if the market moves sharply, either up or down! One's cost is the combined cost for the put and the call option; your maximum loss is capped at the combined cost of the put and the call options! Try it out for any stock future and do get back to me if you find any problem with this approach. This strategy is not advisable for static markets or markets with little movement, however!

Meanwhile, the markets are going to represnt one giant see-saw, avoid any short-term trades! You may look to build positions in a few select stocks; however, stay from the mid- and small-cap till we see clear and visible signs of recovery; this advise applies for those with little or no risk appetite! The best stocks to gain at the moment will be banks followed by financial institutions!

Whatever happens, don't lose your patience, for the SenseXXXational Ride has its scares and moments of thrills!! So keep enjoying and tuning in to this space for more updates!

A look at what made the SenseXXXational Ride so bumpy!!

Well, the markets continued their slide this morning as well.. Oh, well, I guess slide isn't a proper word for it.. I guess free-fall sounds much better, what do you think?? That is, assuming you can still think after witnessing such carnage, a carnage I've been witness to three times in the recent past! The slide today can be attributed to panic selling; everyone is selling in this market, even the brokerage houses were the culprit today! These firms had accumulated large positions and consequently large debit positions. So, due to margin calls, they had to square off their positions. This led to a bout of short-selling which quickly spread to the retail investors and wham bham wham.. Here we are, we've just begin .. (Just a few lines of Bryan Adam's Here I'm .. )

The best advise which will come in handy will be: DO NOT PANIC and SELL ANYTHING! HAVE PATIENCE.. A similar message to the one my Dad messaged me a few minutes back! Traditional advise but how so true!! Anyways, for those of you still looking to trade, why don't you indulge in some future trading? Buying a miniNIFTY Jan future (margin required only Rs. 12k) at the current levels should pay off in the next 2-3 days.. Anyways, this is only a specualtive guess at the moment..

Trading remains risky, the market may have some more bottomside left in it; so please, those with a weak heart and blood pressure problems, stay away from the markets until we see clear signs of a recovery! You may miss out on some profits but hell, giving away a bit of your gains in favor of reduced health risks is always preferred and advisable!

So, riders, do not worry!! Stay invested and continue tuning in to the SenseXXXational Ride!!

Testing times for the markets ahead!!

At 10:30 a.m., the Sensex was down another 700 points, a second such successive fall!! The markets have been bearish for the last 4-5 trading sessions; the looing recession in the U.S. hasn't helped either. However, for those of you following the blog, I'm sure you all must be wondering how see-saw is India's growth story!! Hey hey hey!!

I would like to stress that the growth factors are still intact -- The economy is in sound shape, there is a booming realty drive sweeping across the country, money is being pumped in to improve every aspect of the country's infrastructure.. However, there is a lack of liquidity in the markets. The New Fund Offerings in the monet of December cleaned out a lot of money.. If that wasn't enough, Reliance came out with yet another IPO of another fundamentally (un)sound company, Reliance Power (atleast, if you compare the valuation with that of Tata Power and NTPC, which cleaned out close to Rs. 7 trillion .. Well, the sum is so astronomically huge that I request you all to forgive me if I'm a bit off the mark with respect to the number of zeroes.. Plus, the FII have been net sellers of equity worth Rs. 4500 crores in the last 2 trading sessions itself...

So, you may say that the dream of the Sensex continuing its dream run has been nipped in the bud by the lack of liquidity.. However, it is just a short-term effect! Normalcy will be restored in the later part of this week and the first week of Feb.. I believe that the Indian AMCs have ample fund with them to drive the next phase of growth, so we need not fret if the FIIs ignore us for the time being! These are testing times for any investors; I would advise short-term investors to either stay away from the market or indulge in only intra-day trading for the time being! Long-term investors need not worry.. The correction gives another chance to the Sensex to rise from the ashes like a Phoenix!! So, keep enjoying the SenseXXXational Ride!!

U.S. economy in dire straits!!

All speculations and theories regarding the direction which the U.S. economy is taking have been laid to rest!! Yes sir, the U.S. economy is well and truly heading for a recession.. Now the million dollar (just a million ;-) ??) question is: Will the inflow of 1% of GDP, i.e. $140 billion to $160 billion, into the U.S. economy help revive it or will it lead to a short-term dull before memories of the previous recession in '91-'92 come back to haunt the U.S. .. Where does Mr. Daruwalla disappear to when we really need his advise, his keen insight into the future?

Second interesting question, how will the outlook of the U.S. affect the economies of the world? With Big Daddy going weak in the knees, are we too supposed to follow the Boss into a recessionary period, or can we rely on our fundamentals and lead the way, not paying any heed to the negative signals emitting from the world's largest and the most developed economy?

Quite simply put, a lot of tall projections have been made about the future of India -- these projections, the so-called merry picture of stupendous growth now faces a litmus test!! Are we strong enough fundamentally to shield our economy from the fallout in the U.S. and continue growing, albeit a bit more moderately?

The times ahead are sure going to prove dicey, the path going forward ain't going to be full of roses.. The roses seem to have withered away but they have left behind their thorns, thorns which can prick us, hurt us, draw our blood out! So can we walk the path or do we choose to back off, consolidate for a while while Big Daddy tries to resolve its problems and show us the way forward??