PREPARE FOR THE WORST?????

In an interview with ET Now, Shankar Sharma, Global Trading Strategist, First Global, gives his views on the current market scenario. Excerpts: 

Three months ago you had predicted this decline. Are you feeling very happy about your call? 

Not feeling happy or sad in the stock market or for that matter in cricket because you will win some you will lose some. Hopefully over a period of time you should win more than you lose, but you will lose a few as well. So the one thing that sports and markets both teach you is that always remain humble and remain rooted to the ground. So I am not very happy at the way it has worked out, particularly for our local markets. Globally it was anyway looking very-very shaky, but be that as it may, anybody who was careful and conservative three months back is probably a lot happier than somebody who was more aggressive. 

So are we approaching a panic bottom or this is just the beginning? 

I do not think we are done at all with the fall globally and within that context I do not think we are done with the fall in India. When we spoke last time three months back, my view was that I think we were at about 18,000 or 18,500 or so on the Sensex back then thereabouts give or take 500 points. My view was that we would see 16,000 at the bottom and in markets you do not think that far out when you will make your view as newer levels come. We have kind of very effortlessly reached the levels of 16,000 and that zone a lot more effortlessly than probably I also envisaged and visualized, but that having been reached I do not see where is the redemption. 

I do not see what will change so dramatically even whilst I was away from the market I did glance at the headlines and I did glance at the earnings numbers etc. and they did not seem at all enthusing. So without that and then you have obviously the big global factor, the big overhang of those factors and then you have our middle class going totally bananas over a movement which has absolutely complete disaster written all over it for the future of this nation. All things put together I am very-very sobered by all that I am seeing around me. 

THANKS TO ET for this , 

I completely agree with Shankarji as the dependency with world markets ai not totally ruled out  and the markets in WEST and US washed out for all practical reasons. Any comeback is aonly a short covering and the buyers/investors will sell now. The depth of the market in the west is higher than ours but the volatility is extremely high. The Indian markets will face the real heat once the FIIs starts pull out some of the profits from our shallow markets will create a catastrophic effect in the next few months. The technical supports and resistance will get violated by wide range is the biggest problem with these kinds of situations.

SAVE THE PORTIFOLIO

THE VOLATILITY IN MARKET IS UNAVOIDABLE BUT IT CAN BE MANAGED ......

Use beta method to control your portfolio's volatility

Abhay Rao / Mumbai August 18, 2011, 0:45 IST

In volatile market conditions, one needs to be aware of the risk one's portfolio is facing. The simplest way is by calculating the beta of your portfolio.

In financial terms, beta is the measure of your portfolio's volatility. A beta of one would indicate your portfolio is not more volatile, nor less than the market as a whole. If your portfolio beta is more than one, then it means your portfolio is more volatile than the market, while less than one indicates it is less volatile.

Raamdeo Agarwal, joint MD and CEO, Motilal Oswal Services Ltd, says, "In these days, a lot of portfolios show losses. This causes investor panic, leading to hasty or sentimental decisions. However, if you believe in stocks, absorb the paper/notional losses without panicking and make your decisions based on hard facts.
 

HOW TO CALCULATE YOUR PORTFOLIO BETA

Total corpus in equities: Rs 10 lakh Number of scrips = 5 scrips (ITC: Rs 1 lakh, DLF: Rs 3 lakh, ICICI Bank: Rs 3 lakh, HUL: Rs 2 lakh and Maruti: Rs 1 lakh) Weight of stocks in portfolio: ITC and Maruti (10 per cent or 0.1), DLF and ICICI (0.3) and HUL (0.2) Beta of stocks: ITC (0.74), DLF (1.4), ICICI (1.38), HUL (0.57) and Maruti (0.82) (Data from BSE website) Multiply beta weight of stocks:(0.074+0.42+0.414+0.114+0.082)= 1.104A A portfolio beta of 1.104 indicates that your portfolio is a little more volatile and risky than Sensex. It also means, if Sensex were to rise or fall 10%, your portfolio would gain/lose 11.04%

One calculates portfolio beta by the weighted average of each individual stock's beta in your portfolio. "Portfolio beta is a very important part of making a portfolio, as it takes past records into consideration. It also helps us know how the portfolio would react in relation to a particular benchmark, and if it fits within the client's requirement," says Zankhana Shah, CFP and founder, Money Care Financial Planning.

Generally, during bullish times, a high beta is preferred, and one could choose funds or stocks with a higher beta (more than one). While during volatile and uncertain times, or when the markets are bad, a lower beta is better.

While a beta is not the foremost decision on which an investment is made, it is essential. It helps determine how much risk a particular investment carries and how it affects your overall portfolio.

"If a client is bullish on a particular stock, sector or asset class, based on the data available, one can calculate how much more exposure the client can take in that investment. Beta allows us to determine how much will a particular investment will affect the overall portfolio beta, and based on how much more risk one is willing to take, we can accordingly allocate the funds," adds Shah.

When one is being swayed more by sentimental market movements, pressure and other hearsay, calculating the beta would help understand the risk one is taking. Company fundamentals and macro and micro economic factors are useful, but portfolio beta is a more personal tool to check how the portfolio is looking vis-à-vis the market as a whole, and base decisions on how comfortable you are with your current portfolio beta.

THANKS TO BS

OUT PERFORMANCE

MANY REASONS TO OUT PERFORMANCE……LOOK AT THIS….

Equity of firms with low promoter stake rises

N Sundaresha Subramanian & Sameer Mulgaonkar / Mumbai August 15, 2011, 0:47 IST

Companies with low promoter holding, especially those where the promoters have between 20 and 25 per cent stake, have seen their share prices spurt despite a falling market.
A significant number of these companies have given positive returns between July 28, when the Securities and Exchange Board of India (Sebi) announced the new takeover trigger of 25 per cent, and August 12. Many others have performed better than the broader market, which has fallen around seven per cent during this period, largely due to global uncertainties. The BSE Sensex fell 7.5 per cent during this period and the broader market, represented by the BSE 500 index, shed 7.2 per cent.

Experts feel while some of this rally could be due to promoter action, others must be moving on expectations of such action. Business Standard had reported last week how a number of promoters holding over 20 per cent in their companies but short of the new trigger of 25 per cent announced by Sebi, are looking to increase their shareholding to the new trigger limit. This is a crucial safeguard against hostile takeovers and a key enabler for further consolidation.
 

SOARING EXPECTATIONS
	Promotor  stake in %#	% Chg*
Shreeyash Industries	24.44	36.49
Intens Air Systems	20.51	23.93
Arcee Industries	23.74	12.67
Trijal Industries	22.12	10.54
Himachal Fibres	24.14	9.57
Odyssey Tech	20.67	6.41
Sikozy Realtors	21.08	5.52
Vora Constructions	24.48	4.98
M&M	24.86	3.52
Rajasthan Tube Mfg	20.71	1.83
Sensex		-7.52
BSE 500		-7.25
# as on Jun 2011    *Price % change: 12 Aug over  28 Jul Compiled by BS Research Bureau

A study by the BS Research Bureau shows at least 17 of 88 such companies which were actively traded during this period gave positive returns since the board meet. Mahindra and Mahindra, where promoters held 24.86 per cent, gained 3.5 per cent. In the past week alone, between August 5 and 12, the stock gained 13 per cent. Sical Logistics has gained one per cent since the Sebi board meet. A number of smaller companies have gained even more. Shreeyash Industries, where promoters held 24.4 per cent, was the biggest gainer at 36.5 per cent (see table).
The BSRB study further showed that another 15 companies outperformed the broader market by falling less than the respective benchmark indices, though they have shown negative returns. HDFC Bank, where the promoters hold 23.28 per cent fell just under four per cent, against the Sensex loss of 7.5 per cent. Gujarat Natural Resources fell 2.82 per cent.
Promoters of these companies still have a small window before the notification is out to get past the 25 per cent line, if they have not got there already, takeover law experts say.
Takeover Code 1997, in force at present, allows promoters who have at least 15 per cent stake to increase their holdings by five per cent every financial year without making any open offer, under the creeping acquisition route. Promoters who hold 20 per cent or more can use this facility to get past the 25 per cent mark before the new rules come into force, say bankers.
Under the new norms, which will take effect once the gazette notification is issued, creeping acquisition will be available for promoters only if they hold 25 per cent or more, the new trigger limit. Creeping acquisition is an important weapon for promoters to consolidate holdings without the burden of open offers and to discourage hostile takeover attempts. Further, the new code also provides for a voluntary open offer by promoters to consolidate their holdings. Even this offer, which can be for a minimum of 10 per cent stake, can be made by promoters only if they have a minimum holding of 25 per cent, according to the takeover panel recommendations, making the number all the more important for promoters.

THANKS TO BS FOR THE NEWS….