PLAN YOUR BET ON STOCKMARKETS....

Wednesday November 23, 2011
Political parties and stock returns by Sy Harding, editor Street Smart Report
The lead-up to next year’s election will bring a lot of claims from both parties. So we looked at the record over 50 and 100 years to see which political party in the White House is historically better for stocks.
I thought I’d check the historical record to make sure I don’t fall into the ‘lazy trap’ of repeating popular beliefs as fact when they might not be. I was more than mildly surprised by my research. It’s common knowledge, popular belief, historical fact, that the Republican Party is better for business, corporate profits, and the stock market – isn’t it?
Democrats are more interested in pushing socialistic programs at the expense of business – aren’t they? But wait a minute! Here's a look at the Dow’s gains and losses under Republican and Democratic Presidents over the last 50 years.

•Kennedy/Johnson (Dem) administration (1961-1965) - up 41.9%

•Johnson (Dem) administration (1965-1969) - up 8.1%

•Nixon (Rep) administration (1969 to 1973) - up 7.9%

•Nixon/Ford (Rep) administration (1973-1977) - down 0.1%

•Carter (Dem) administration (1977-1981) - down 4.1%

•Reagan (Rep) administration (1981-1985) - up 25.6%

•Reagan (Rep) administration (1985-1989) - up 79.0%

•Bush Sr. (Rep) administration (1989-1993 - up 52.3%

•Clinton (Dem) administration (1993-1997) - up 95.3%

•Clinton (Dem) administration (1997-2001) - up 67.3%

•Bush Jr. (Rep) administration (2001-2005) - unchanged

•Bush Jr. (Rep) administration (2005-2009) down 18.6%

•Obama (Dem) administration (2009 through Oct. 30, 2011) - up 36.3%

Over six Democratic terms the Dow gained 247.9%, or an average of 41.3% per term. Over seven Republican terms the Dow gained 147.1%, or an average of 21.0% per term.
Could it be? Over the last 50 years, investors have made almost double the returns under Democratic Presidents as under Republican Presidents?
I then went back 110 years to 1900. The same pattern emerged, although the difference was not as striking as it has been for the last 50 years.
From 1901 to 1961 the Dow increased an average of 36.7% per term when the president was a Democrat, and 32.1% when a Republican was in the White House.
The influence of one party or the other on the strength of the economy, business prosperity, and the stock market has clearly not been as popular wisdom suggests.

ANALOGY- US-ELECTIONS AND PERFORMANCE...

Presidential election cycle: Stocks and profits?


A market historian reviews the long-term pattern of stock prices and the Presidential election cycle.

By TheStockAdvisors on Fri, Jan 27, 2012 1:38 PM
By Jim Stack, Investech Market Analyst
What lies ahead in 2012? That’s the big question, and the fact that we’re approaching a Presidential Election likely improves the chances that this will be a good year for the stock market.
Historically, there has been a clear visible link between the Presidential election cycle and Wall Street. Below, we look at the correlation between cycles in the stock market and the 4-year election cycle.
Off-election years are often preceded by bear markets or stagnant growth and typically provide some of the best buying opportunities for stocks.
However, one rarely sees the market swooning in the 12 to 18 months leading up to a Presidential Election – 1960 and 2008 are the notable exceptions.
If you think about it, this relationship makes sense. Any politician worth his salt knows that you should try to get bad news and bear markets out of the way as quickly as possible after taking office. That way, the economy and the stock market can get back on track and be ticking along smoothly when it’s time to run for re-election. You rarely see Washington passing controversial tax hikes or legislation once the Presidential campaigns get rolling in earnest, and even the Federal Reserve, which is not supposed to be politically influenced, is reluctant to rock the boat.
Historically (since 1941), the first two years after a Presidential Election have the lowest performance, with average annual gains less than 5.5%.Year 3, as politicians start gearing up for re-election, is usually the best on Wall Street by a wide margin. With an average gain of 17.3%, it more than doubles the return of the other three years.
Presidential Election years tend to be more moderate, but historically are still the second most profitable in the cycle. Before the financial crisis, the average annual gain for election years was 8.9%; however, the 38% drop in the S&P 500 in 2008 reduced the long-term average to 6.2%.
The current 2009-2012 Presidential Election cycle is anything but “average.” After the 2008 debacle, the bull market recovery came early.
Years 1 and 2 were far stronger than usual, which likely stole performance from Year 3. Consequently, 2011 fell far short of expectations, ending with 0% gain in the S&P 500 after it suffered a sharp bearish contraction mid-year. Although the progression up to now has been atypical, what are the odds that this election year will be closer to the norm? In seeking the answer we looked back at prior cycles, where historical precedent has not always prevailed.
Election years can be volatile (what years can’t), but they rarely end with big losses for investors.
We looked at every Presidential Election year since 1900 along with the gain or loss in the DJIA (excluding dividends). Note that:
•The average gain for these 28 election years is 7.3%, which is equivalent to the average annual market gain taking all 112 years into consideration. However, if we exclude 2008, which was the worst Presidential Election year in over a century, the election year average jumps to 8.8%.
•Two-thirds of the periods were positive for the market, while years with major losses were rare.
•Election years that showed double-digit gains outnumber those with double-digit losses by nearly 3:1 – and only one of those double-digit losses occurred after 1940. That was in 2008 when the economy was deep in recession at election time (which was also the case in 1960), and it cost the incumbent party dearly at the polls. Our study also revealed another secret in Presidential Election years… the market often rallies in the second half of the year.
• In all but six election years, the DJIA either hit a new yearly high, or came within 5% of the year’s high, in the 4th quarter.
•There have been only five elections where the market dropped to a new yearly low in the 4th quarter, and three occurred during major recessions – 1920, 1932 and 2008.
•In 2004, the 4th quarter saw both extremes. The low was hit in October, and the DJIA rallied to its high for the year in December.Looking at 2012, the year has started off with good news on the economic front – leading data is improving along with confidence and recession fears are receding. Also, the technical picture is more encouraging, with stronger market breadth and the disappearance of bearish distribution.
In our opinion, this evidence, along with the Presidential Election Cycle, reduces the chance that this will be a down year for the market.
In our Model Portfolios, we are currently 77% invested, but we’ll likely step up from this level if fundamental and technical models continue to improve.

INDIA CELEBRATED 63rd REPUBLIC DAY...

The World Congratulated, every INDIAN feel proud of the movement.

"The difference between what we do and what we are capable of doing would suffice to solve most of the world's problems" -Mahatma Gandhi

I believe the philosophy like " Work hard, make smart moves with Result Oriented Planned Efforts-approach to achieve your goals and differentiate with SUCCESS". 

My whole life revolving around the Indian Stock Market, ever since I started from 01-07-1987.

PEOPLE WHO MAKE THE DIFFERENCE......

HAPPY REPUBLIC DAY….

24 JAN, 2012, 10.24AM IST, KAUSIK DUTTA,ET BUREAU 

Amitabh Jhunjhunwala: Journey from a CA to Anil Ambani's top man

MUMBAI: It's not just blind loyalty that keeps Amitabh Jhunjhunwala and Anil Ambani together. Those who have seen the duo working together for years say it is a similar bent of mind that is responsible for the near-perfect fit. "There's nothing profound about his decision to follow Anil when the latter left Reliance Industries. Had he been an engineer, he would perhaps have continued with Mukesh," says a senior executive at the ADAG group. 

The two met for the first time in the early 80s when Jhunjhunwala, as cofounder of a CA firm, visited Reliance, one of his clients. Ambani was then in charge of finance. Ambani was impressed and, by 1993, persuaded the young CA to join a fund house brotherin-law Shyam Kothari had founded called Kothari Pioneer. 

A year and a half later, he came in as CEO of the newly-floated Reliance Capital, which started as a fund house and over the years transformed into a supermarket for financial services. Interestingly, Jhunjhunwala had co-founded the CA firm with Akhil Gupta, who is today to Bharti Airtel's Sunil Mittal what Jhunjhunwala is to Anil. Along with finance, the two share a passion for the entertainment business. 

That explains Anil's determination to get a foot into the door of Steven Spielberg's DreamWorks, the iconic Hollywood studio. Since that JV got underway , Jhunjhunwala has been closely involved with it; those working with him recall how he got misty-eyed when the studio received a letter from Neil Armstrong for the good restoration work of NASA's film on the first man stepping into the Moon. 

Yet, on many fronts, they're as different as cheese is from chalk. Whilst the professional keeps a cool head, the promoter is known to be excitable ; Jhunjhunwala is a light eater, the latter loves food; the former shies away from the limelight-he refused to comment to ET for this feature -- the chairman has thrived in it. Those who work around the duo point out that Ambani has played to Jhunjhunwala's strengths and accordingly given him responsibilities. 

For instance, his passion for human capital convinced the promoter to put him at the helm of businesses like media and entertainment and financial services. That gambit has worked at Reliance Capital, which with Jhunjhunwala as CEO diversified into life and general insurance; he also took Reliance MF to the top of the fund house sweepstakes. He built the entertainment business from scratch: the group acquired Adlabs in 2005. 

Now it's into radio, multiplex and film production. The creative and artistic bent may be courtesy of his mother, says a close friend of Jhunjhunwala, who was a journalist of repute, a Padma Shri awardee and an organiser of Kavi Sammelans at their Delhi residence. In fact, Jhunjhunwala even published a finance magazine called Money Matters for a year before he joined Kothari Pioneer. 

People who work with him at the entertainment venture say Jhunjhunwala looks forward to meeting Spielberg -- they meet least once a quarter -- and relishes the opportunity of meeting Hollywood stars who feature in DreamWorks' movies. Back home, however, the realities for the group are not all rosy. For starters, the combine has to find a way to reduce the mounting debt at Reliance Communications ; at last count it stood at Rs 39,000 crore, Rs 10,000 crore more than its top line and two times its market value. 

Their critics add that their record is far from unblemished on the finance front. For instance, they have not done any substantial acquisitions, although they attempted a few (the list includes two abortive attempts to buy South African telco MTN). Then, they may have overpriced the initial share of the group's power arm; and their mutual fund recently slipped to the No. 2 slot. 

The biggest challenge for the Ambani-Jhunjhunwala team is to prove that they are as good at executing projects as they are at spotting growth opportunities and raising capital for them -the group companies have some Rs 80,000 crore worth of infrastructure projects that have to be completed. For the next few days, however, Jhunjhunwala will be focused on one of the biggest projects of his personal life - the wedding of Abhinav and Prerna.

The article is very important to understand the future Indian Stock market shape...Please do read....

The Euro Zone crisis could mark the end of a paradigm adopted by the East Asian ‘Tigers', and later, China.
January 25, 2012: With the Euro Zone crises showing no signs of improvement and the prospect of recession confronting various member-states, how will the rest of the globe be affected?
The most obvious way was pointed out by the recently by WB and ADB in their respective outlooks for the global economy. In its Global Economic Prospects 2012 report, the bank urged developing countries to re-evaluate their “vulnerabilities' in the light of “dimming global growth prospects and the Euro debt problem.”
With surprising alacrity, India responded by admitting ahead of the Reserve Bank of India's third-quarter monetary policy review that the next two quarters could be “difficult”. For its part, the central bank stayed with its rates intact, but reduced CRR by 50 basis points to pump in liquidity. That was, at best, a symbolic gesture, because growth is decelerating, not so much on account of liquidity, but because, well, what is one to do with all those extra funds? Cash-rich firms are staring at a bleak policy environment, a bleaker investment landscape and scouting overseas or venturing sideways into acquisitions; but that won't add to the economy's overall corpus of productive investments.
In its global outlook for 2012, the Asian Development Bank repeated its pessimistic outlook for last year, reducing expansion yet again to 7.2 per cent for the East Asian region. As the Euro debt crisis deepens, the ADB warned, export-oriented nations in ASEAN, including China, would be affected, with lesser exporting nations becoming more vulnerable.
MODEL AT A CROSSROADS
What both the WB and ADB have cautioned against is the possibility of a full-blown financial and economic crisis; both wish policymakers in the region respond “decisively and collectively” to the crisis. Already, China, for instance, has recognised its own vulnerability, and is now ruefully examining the economy's structural imbalances.
The East Asian ‘tigers' or super-exporters are no less affected by the downturn in export demand. As recession kicks in with austerity measures in select Euro Zone countries, rising protectionism may compound the problems for East Asian super-exporters, warns ADB.
At a more fundamental level, what we may now be witnessing is a crisis in a development paradigm that had acquired the character of a synodal decree in the last three decades of the twentieth century.
The export-led growth strategy, first tried out by Japan following its post-WW-II reconstruction, rode roughshod on the extant import-substitution model that populist democracies like India had touted as the most appropriate model for developing countries. Exports inspired the success story of East Asian ‘Tigers' since the 1970s.
By the 1980s, the East Asian ‘tigers' had turned the export-led strategy into an inspiration for almost every developing country, confronting cumulative economic backwardness manifest in abundant, unproductive labour and non-traded goods in South-East Asia.
The ‘Tigers' — South Korea and Taiwan in manufacturing and high-tech, and Singapore and Hong Kong as global financial hubs — inspired the ‘tiger cubs', Malaysia, the Philippines, and Thailand, though with mixed success.
But it was when China stepped out in the latter half of 1978, virtually copying the model of export-centric industrial expansion line by line, that the model received its apotheosis.
Focusing on East-Asian policymaking as a key to its phenomenal success, Robert Wade's Governing the Market, in 1992, provided the most lucid and polemical statement of export-oriented growth in South Korea and Taiwan, with the state partnering markets in a synergistic allocation of resources to maximise productivity and output.
American and European expansion helped. In the 30 years to the end of the century, the export-led strategy catapulted nations with few natural resources, cheap and abundant labour, low industrialisation and lower per capita incomes, into high-powered economies and rising trade surpluses.
The strategy had a transcendental spin-off. Nations that were, in their early industrialisation efforts, scorned for poor quality, were now crowned with the reputation for quality at the best price: first Japan, then the East Asian economies and now, with its high-tech quality exports, China.
ZERO SUM GAME
In 2003, Thomas Palley of the Open Society Institute pointed to the dangers of a ‘demonstration effect' that was turning the export-oriented strategy into a zero-sum game by “poaching of domestic demand elsewhere, or by displacing exports of some other countries.”
As he wrote, “The evidence shows that there is significant cross-country crowding out, with exports to the US from the four East Asian tiger economies (Taiwan, South Korea, Hong Kong, Singapore) being subject to a large crowding-out effect from China.”
But export displacement wasn't a problem for the US or European consumers, who were just too happy with ever-cheaper products.
During the years, and on a global scale, an imbalance was working into flash points of newer tensions. The globe was now getting crowded with more exporters than were importers, more producers than consumers.
And it really began to pinch, when September 2008 set into motion an economic crisis that brought to the surface a simmering spat between China and the US regarding the latter's policy-driven exchange rate.
With a larger number of exporters and contracting import markets, the currency tension between China and US spread wider, since every exporting country wanted to retain a price advantage. Soon after 2008, when the effects of the Wall Street meltdown began to work into a recession, the US wanted even Germany to appreciate its currency; and when exporters didn't buy its argument, the US began “quantitative easing”, driving the dollar down.
RETHINK IN CHINA
The current economic crisis and its contracting demand for imports will strike at the very heart of the model of export-oriented growth, forcing a re-evaluation of its basic premise, even as policymakers contend with falling GDP rates down the line.
More so China than East Asia: in Beijing, policymakers may have already started pondering structural imbalances intrinsic to the growth model itself.
Director, China Centre for Economic Research, Yang Yao, says that owing to cheap labour and suppressed remuneration, returns from exports have flowed mainly to capital and to the treasury by way of tax revenues. Since the share of labour incomes has been declining, so has the share of consumption in GDP. Raising domestic demand may mean an inward-oriented strategy of growth.
That may sound familiar to Indian policymakers, but then there are only so many concepts to fool around with.
http://www.thehindubusinessline.com/opinion/columns/ashoak-upadhyay/article2831736.ece?homepage=true

Rosy looks.....

The makets are in jubiliance of FII inflow as the cash chasing the stocks is now unstopable. The markets are recovered from the lows and continue to consolidate at these levels for some time. Please do read my earlier postings in which I categorically said that the support at 4600-4500 for Nifty. Also mentioned that it doesn't matter whether it is 4400 or 4500. I recommended certain shares like Rel cap and RelInfra, most beaten down made a huge short covering rise, but people made lot of money.
Now the Nifty is well above the psycholical support of 4850-4900.The news flow will be good from now but the markets will ignore that to reflect in the price, but the news already priced in. The classic example is LT and BHEL. Now the news flow is -CAPITAL GOODS will do well infuture.
The RBI cut CRR ratse by 50 basis points is also a surprise to me. But the fact is that the market participants heavyly betted on the bull side that the RBI will make a rate cut atleast by 25 basis points.So there is a huge bonus. The liquidty in the system increased by 32000 crores is a good sign.I have my reservations at this point. The RBI is worried about growth rate and tight liquidity in the system but was encouraged by the falling inflation, gave confidence for a rate cut.
But the external market arround is not condussive to absorb the investments and make returns out of it. Then, the free availability of the cash may push for a bad investment decisions. As of now our growth at arround 7% is not a bad sign. So the RBI should have continued this tight CRR policy and used a OMOs for liquidity generation. The Open Market operations could have become as and when-infusion, rather than a blanket. Now our growth is surviving on the internal consuption and external dependency as usual. Now the markets are celebrating with Cheers!!!. Later the NPAs of banks will increase. The deffered/delay in payments will turn out to become as NPAs with cyclical effect that passes on from one sector to other and the industy will suffer badly.The Govt would have taken enough steps to boost the spending and would have generated some demand rather than allowing the industry to face the external music directly.
Now the markets are enjoying and will enjoy because of the short term euphoria of liquidity inflow and the STOP LOSS triggering. Techically the markets are now in bull grip. So long as SBI floats above 1860 level, the markets are in bull grip. The Nifty is enjoying the support of Reliance and the Banking majors. the only under prformer is HLL. I posted the reasons why HLL will under perform in my previous posting.The markets will be in bull grip due to DAVOS and in India at least till the first week of March-12.you know why?.....

cross roads but positive...

The Reliance results are disappointing but the buyback offer at 870 with more than 10,400 crores to purchase 12 crore shares. This is all to offset the bad news and keep the bears away. The history shows that Ambani family is not serious in buying. The RelInfra case of buy back is also became a joke. They promised to buy above 1200 but the stock came to 350 levels, the promoter himself did not subscribe to preferential issue. So they buy but they don’t. The new SEBI guidelines forces to buy at least 25% may whip for that portion.

The banking stocks are giving good results but the NPAs are increasing, seriously to alarming state. The following quarters will see more and across. The payment delays to defaults will start opening up. The good news is that the FII bought 1.16 billion dollars of stocks from Indian markets. They postponed in December, low valuations attracted, fueled by Rupee depreciation.

Technically speaking the strength of market to scale new highs is waning. The up move may get resistance at 5080-5180 for some time. The bottoms are well knit at 4830-35 and 4750-60 levels. So the bears also have limited opportunity to pull it down.

The Infy weak results, TCS is ok and Wipro is good likely to balance the tech sector as a whole. The Infy may !!!

Yesterday I couldn’t publish…..

I AGREE WITH THE AUTHOR...I AM HAVING SAME VIEW IN INDIAN MARKETS????......

Is Wall Street manipulating this rally?

As traders push stocks slowly higher, blissfully ignoring all that's still wrong with the global economy, there's evidence that something is amiss.

By Anthony Mirhaydari on Fri, Jan 20, 2012 12:56 PM

Stocks inched up Thursday for the 10th day out of 12 trading sessions in 2012, pushing various technical indicators deeper into oversold territory and reaching levels not seen in many cases since late last April, when stocks were putting in their bull market high. Volume and breadth were pathetic. Up volume accounted for only 65% of total volume on the NYSE.

All that matters, apparently, is that the European Central Bank dumped just over €200 billion in three-year money into the system a few weeks into a long-term refinancing operation to supply capital to banks. While not exactly like the quantitative easing done by the Federal Reserve a few times, this LTRO looks, smells and tastes just like the Fed's QE1 and QE2 to the Wall Street fat cats worried about their bonuses.

And they're using every trick in the book to juice the market higher. But here's the thing: Regular investors aren't buying what Wall Street is selling.

Just look at Thursday's action.

Investors ignored a batch of mostly bad news. There was a disappointing Philly Fed manufacturing report. Greece continued its efforts to negotiate a voluntary debt reduction with its bondholders, many of whom, as you know, are hedge funds that have undertaken a "basis trade" using credit default swaps and are poised to cash out no matter what happens (and therefore have an interest in holding out for the absolute best possible deal).

And there was some disappointing earnings news, too, in what is shaping up to be the worst earnings season (based on positive earnings surprises) since 2001, according to Sundial Capital Research. 

In response, Wall Streeters are buying now, asking questions later, and are beginning to foam at the mouth as they push their bets to try to encourage a buying frenzy. This, in turn, is pushing sentiment measures based on things like options trading, analyst sentiment or the relative volume in the Nasdaq vs. the NYSE to extremes.

Boy, are they pushing. TrimTabs compiled a list of data points showing the extreme optimism on Wall Street:

• Short interest at New York Stock Exchange members plunged 10.5% in December to the second-lowest level of the past two years.
• Options traders are growing more complacent. The put-call ratio averaged just 0.81 on the past five trading days, the lowest five-day average since July 2011. 
• The VIX fell to 20.5 on Jan. 12, the lowest level since July 2011.
• Of the hedge funds TrimTabs surveyed in cooperation with BarclayHedge in December, 42% were bullish on the S&P 500, while 30% were bearish. That level of optimism was the highest since July 2011.
• Investors Intelligence reports that 51.1% of newsletter writers are bullish, the highest level of optimism since April 2011, when the U.S. stock market topped out.
• Bank of America's survey of global fund managers found that asset allocators are more bullish on U.S. stocks than at any time since April 2010.

Despite all this, average investors are staying on the sidelines. TrimTabs estimates that U.S. equity funds have received only $3.3 billion in new cash so far this month, which is historically a very heavy month for inflows. Compare that with the $932 billion that flowed into checking and savings accounts, eight times the $117 billion that went into stocks and bond funds as well as ETFs.

Thus the low-volume, narrow-breadth, low-volatility grind higher we've witnessed so far this month. But here's the thing. The half-life of extraordinary monetary policy efforts is falling fast. Very fast.

It lasted for a year starting in March 2009 -- that was QE 1.5, when efforts announced in November 2008 were expanded -- thanks to the tailwinds from the market discounting the end of the recession and the end of the financial crisis. It lasted about seven months when QE2 was teased in August 2010 and was helped by the calming of the eurozone crisis after the first Greek bailout.

Now we're already in the third month of this new European variety of central bank largess.

Yet the economy faces a number of headwinds that are not going away: There are sovereign debt issues, fiscal austerity, rising trade protectionism, the debt-ceiling debate, the rise and fall and rise again of crude oil, a stalling of earnings growth, a whiff of inflation, moribund banks, a spate of elections, and mixed economic reports with sentiment high but job growth and housing still anemic.

Until this dynamic changes, we're stuck in the mud. The Fed, or the ECB, might try to pull us out with lifelines of cheap cash -- but that is now just making the problem worse by fueling inflationary concerns. Just look at the rise in shelter costs due to a tight rental market, a major component of the Consumer Price Index.

Wall Street isn't looking that far ahead, I guess. But folks on Main Street, the ones who are watching at-the-pump prices rise again as those holiday bills come due, or are trying to find a nice rental home, already know what's coming. And it's not good.

A MATTER OF JUSTIFICATION!!!!!!!!!!!!!!!!!

TO UPWARD MOVE NEGATIVE NEWS IS ALSO USEFULL

BECAUSE...... A MATTER OF JUSTIFICATION!!!!!!!!!!!!!!!!!

China’s Slowest GDP Growth in 2 1/2-Years Boosts Scope for Easing: Economy


By Bloomberg News - Jan 17, 2012 1:47 PM GMT+0530
China’s economy expanded at the slowest pace in 10 quarters as Europe’s debt crisis curbed export demand and the property market weakened, sustaining pressure on Premier Wen Jiabao to ease monetary policy.
Gross domestic product rose 8.9 percent in the fourth quarter from a year earlier, the statistics bureau said in Beijing today. Growth exceeded the 8.7 percent median of 26 estimates in a Bloomberg survey, staying above the 8 percent that signals a “soft landing” for China, according to SinoPac Financial Holdings Co., which correctly predicted the GDP number.
Asian stocks rose on speculation policy makers will ease lending curbs and increase fiscal spending to bolster the world’s second-biggest economy. Liang Wengen, China’s richest man and chairman of Sany Heavy Industry Co., told Wen this month that construction-machinery demand is weak and called for more infrastructure investment.
“Decelerating GDP growth will provide more room for policy makers to shift towards a pro-growth bias after an extended tightening cycle,” Jing Ulrich, chairman of global markets for China at JPMorgan Chase & Co., said in a note after the data. “At this juncture, the challenge for policy makers is to implement measures that boost domestic demand without setting back progress made in curbing inflation.”
The Shanghai Composite Index (SHCOMP) climbed 4.2 percent today, the most since October 2009, on expectations for more monetary easing and on speculation the government will support equities. The MSCI Asia Pacific Index gained 2 percent at 5:14 p.m. in Tokyo.
Property Meltdown Risk
Full-year economic growth slowed to 9.2 percent from 10.4 percent in 2010, today’s report showed. Industrial production increased 12.8 percent in December from a year earlier, more than the median estimate of 12.3 percent in a Bloomberg survey and a 12.4 percent increase in November. The economy grew 2 percent last quarter from the previous three months, when it expanded 2.3 percent.
China is prepared for a slowdown in economic growth and a mild moderation is “desirable,” Ma Jiantang, head of the statistics bureau, said at a briefing today. The government has set a target of 7 percent annual expansion for the current five- year plan that runs through 2015 and will focus more on the quality of growth, he said.
“The data confirmed no hard landing is likely, more so given the loosening stance already adopted by the policy makers,” said Shen Jianguang, Hong Kong-based chief greater China economist for Mizuho Securities Asia Ltd. Still, there is “no room for complacency, given the risks of a property sector meltdown and global crises,” said Shen, who expects further relaxation in credit, an expansionary fiscal policy and loosening in the property sector in the second quarter. ......contd.........

Pls visit for further reading......

http://www.bloomberg.com/news/2012-01-17/china-gdp-expands-at-slowest-pace-in-10-quarters-may-prompt-policy-easing.html
 
FOR NOW ENJOY THE BULL RUN ACCROSS THE GLOBE.......DESPITE THE RATE CUTS,
GLOOM IN THE EUROPE GROWTH....BUT....

 Slash your expectations: RBI to investors

AGENCIES

Posted: Monday, Jan 16, 2012 at 1924 hrs IST

Hyderabad: Indian bourses have started to display positive signs, but investors need to scale down expectations of returns on their capital to avoid creating imbalances in the system that will result in financial instability, RBI Deputy Governor K C Chakrabarty said today.

"People who are trying to invest in India, who are investors, they have to scale back their expected return on capital otherwise there will be imbalance and it will create more problems," Chakrabarty told reporters on the sidelines of a function at the Jawaharlal Nehru Institute of Banking and Finance here.

"... Every day the Sensex cannot give a 30 per cent return on equity. There has to be a relationship between debt and equity. But when the overall debt comes down, return on equity has to also come down," he said.

Replying to a query on the liquidity position in the country, the RBI deputy chief said the central bank is happy with the situation.

The apex bank has increased key policy rates 13 times since March, 2010, to tame high inflation.

However, it took a pause on the hawkish monetary stance at its policy review last month as inflation started cooling down.

Chakrabarty refused to answer requires related to inflation and rupee depreciation against the US dollar, saying these will be answered at the RBI's forthcoming monetary policy review on January 24.

The Reserve Bank of India official said there are two fundamental imbalances all over the world that need to be resolved to avoid financial instability.

Explaining the imbalances in the financial system, he said one is the cost of capital and the second is that in any economy, the rich must save and the poor must borrow.

"The second issue is that in any society which has to develop, which has to prosper, it is the rich (that) must save and the poor must borrow. Today, the world-over, economies are such that the rich borrow and poor save. If the rich borrow, it becomes inefficiency. If the poor borrow, it becomes efficient and more productive," he said.

According to him, India does not contribute to any such imbalance.

Earlier, in his speech titled, 'Crisis Management in Interconnected Markets', Chakrabarty said the best crisis management framework is one that prevents crisis and no financial system can be completely immune from episodes of financial instability from time-to-time and there will be a need to manage crises.

"There are important lesson to be learnt from each crisis. Yet, we can count on each crisis to be sufficiently different from every other crisis so as to make their identification a challenge. We can but be alert and flexible to evolving risks," the banking regulator said.

In India, an early intervention system in the form of prompt corrective action based on three indicators – capital to risk weighted assets, non-performing advances and return on assets -- has existed for a long time, he added.

Thanks to Financial Express...

S&P RATE CUT- AXE ON FRANCE????

THE INDIAN MARKETS RELENTLESS FALL DESPITE OF 7-8% GROWTH!!!!!!!!!

BECAUSE THE GROWTH HAS EXTERNAL DEPENDENCIES....LIKE...OR DON'T LIKE....

THANKS TO BUSINESS LINE....

For now the rise of hopes has been spooked by the rate cuts of EURO zone nations. The France and Astria and other nations credit ratings were stripped down. There are 19 nations on the negative watch list.

The borrowing cost of the Sovereigns and the Companies will increase, leads to a vicious cycle of pressure and failure impacting the performance of the companies, the workers and the nation as whole.

The fear factor of DOWN grade, in the spines of our FM and Japan PM, calling for fiscal prudence.

So our markets may take longer period to cope up with the external pressure, may cap the rise and the speed of recovery. For now the the bottoms are in place but sustained pressure can make the fissure wide-open for a free fall.....

THE LIKELY RATE CUT.....!!!!!!!!!

THANKS TO ET FOR BOTH THE ARTICLES....
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Good time invest in rate sensitive stocks like Tata Motors, Mahindra & Mahindra, HDFC Bank, Bank of Baroda
http://economictimes.indiatimes.com/markets/analysis/good-time-invest-in-rate-sensitive-stocks-like-tata-motors-mahindra-mahindra-hdfc-bank-bank-of-baroda/articleshow/11401421.cms?curpg=1

Experts are almost unanimous in predicting the direction of interest rates for 2012. This is because of two major factors. First, barring unforeseen circumstances like a spike in the global crude oil prices, domestic inflation should come down. Second, economic growth has slowed drastically forcing the RBI to shift the focus from inflation to it. "The RBI will start cutting rates when inflation numbers improve to kickstart growth," says Sameer Kamdar, CEO & MD, ASK Investment Managers.

So, it might be a good time to invest in rate-sensitive sectors now, but don't do so blindly. "While rate-sensitive sectors should yield good 12-month results, they will face some tough times before they start reversal," says Kislay Kanth, senior director, research, MAPE Securities. This is because falling interest rates will reflect in the fundamentals of the company with a lag. For example, it takes a few quarters before the 'low interest rates' start reflecting as 'low interest costs' for the companies because the loans taken at higher interest rates need to be repriced.

So, investors should concentrate only on the stronger segments of the rate-sensitive sectors, which means avoiding infrastructure and real estate. Also, pick only large caps. This is because there are several other factors that will affect the market price of these stocks and falling rates is only one of them. For instance, the biggest worry facing the banking sector currently is the delinquency on its loan books, and these write-downs may continue for some more time even after the RBI starts reducing the rates. Here are our top picks.

Tata Motors 

Domestic interest rates will impact Tata Motors on two counts. First, it will help lessen the huge debt on its books. "With the rates coming down, Tata Motors will be able to refinance at a lower rate. This will help reduce its interest cost burden," says Kishor Ostwal, CMD, CNI Research. Second, the falling rates will boost its domestic sales. The company has already posted good sales for December, which went up by 47% compared to the same period last year. While its light commercial vehicles and diesel passenger cars are doing well, an economic pickup will boost its currently sluggish heavy commercial vehicles. The market is bullish on the firm more for its excellent performance on the Jaguar and Land Rover business, whose demand is up.

Mahindra & Mahindra 

M&M could show decent volume growth and report much better numbers when the rates go down. Its domestic passenger vehicle sales for December increased by 24% compared to the same period last year. Considering the buoyancy in demand, the company could pass on the impact of the falling rupee and rising input costs by increasing the price of its new car, XUV 500, by up to Rs 55,000 this month. Though the tractor segment may show lacklustre growth in the third quarter, it is expected to improve in the fourth quarter. This evergreen segment should continue at 10% annualised volume growth in the coming years.

HDFC Bank 

"The current sell-off in the banking sector has brought down the valuations. Investors should use this opportunity to buy good banks, such as HDFCBank, at current valuations," says Murali Gopal, banking analyst, BRICS Securities. The bank was able to sustain a high 30%-plus growth rate in its net profit despite the difficult operating environment. As the interest rates come down, the demand for corporate loans should improve further. Expanding reach, with the help of more branches, should help HDFC Bank to improve market share. More importantly, it is able to maintain its non-performing assets (NPAs) close to the 1% band and so, is relatively free from asset quality worries.

Bank of Baroda 

While Bank of Baroda can boast high asset quality and its gross and net NPAs are placed only at 1.4% and 0.47%, respectively, it is quoting at much lower valuations compared to private banks with similar asset quality. This is because the comparisons are usually done among the PSU banks where increased delinquencies are a major threat. However, analysts insist that Bank of Baroda is the best among public sector banks and should be treated separately. "Bank of Baroda has conservative accounting practices and we believe that it should report much less NPAs compared to other PSU banks," says Dinesh Shukla, banking analyst, Sharekhan. 

IT future, Rupee appreciation.....

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I am of the same view that the Software giants will see a serious decline in their Market Cap down the line despite some surge in 2012. The markets already discounted the mid cap and small cap IT stocks. I see the Rupee will appreciate to 42-45 level by 2014-15 level. I even shared my personal view that the IT bellwether Infy will trade at 1200-1000 range in future. this will happen over a period of time but for now the short term rise could benefit the Bulls and likely to touch 3050 level
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Serious reforms wiill see Rupee return to mid-40s level: Bill Belchere, Mirae AMC


In an interview with ET Now, Bill Belchere , Global Chief Economist, Mirae Asset , shares his outlook for emerging and developed markets. Excerpts: 


ET Now: What is your forecast as we start 2012 specifically for emerging markets versus developed markets? 


Bill Belchere: At this juncture, we are passing through a period of uncertainty where most of the world looks like it is slowing down. So, we are looking for economies that have greater policy flexibility and larger domestic demand which gives them a greater degree of control over their own destiny. In the developed markets, it looks like the US is decoupling from the rest of the world right now and is accelerating. 


So, we are more favourable towards the US, but not theEU and not Japan. In the Asia space, we continue to like the big domestic economies and particularly China and Indonesia which we think will be announcing continue to reinforce policy easing. This will ultimately begin to show up in better economic performance and equity performance as the year progresses. 


ET Now: Dollar index is at 81 which is at a one year high and we know that is not the real value for the dollar index. So what is your view first on dollar and then the dollar index for rest of the year? 


Bill Belchere: For the first half of the year, the greenback is going to be very strong. The US is strengthening and accelerating in terms of economic growth compared to the rest of the world. However, Europe is going through the worst phase of their economic performance. This year we see the economy moving under recession. The central bank is adding a lot of liquidity. That tells us that the euro could fall to 115 to the US dollar in the first half of the year. So, we look for the dollar to continue strengthening. 


ET Now: Given that the European situation is getting a bit more complex as the data shows, are you worried about the status of the euro because a lot of economies in emerging markets are dependent and they derive export revenues from the region? 


Bill Belchere: Yes, we are a bit concerned about the euro area's fortune in the spill over to emerging markets and particularly Asia. The EU area is the biggest trade destination for Asian exports. Its banks also finance a lot of Asian activity. So, any hiccup or downturn in Europe is going to be felt fairly strongly in Asia. We do not think this causes Asia to slip into recession, but certainly it does present a headwind to economic growth and reduced economic prospects until the euro area clears up. 
ET Now: What about emerging markets? For the year gone by, emerging markets were down, developed markets were up. Do you think tables could reverse this year? 


Bill Belchere: There are a couple of things that look interesting to us, those that have policy flexibility and large domestic economies. That would include Brazil, we think China qualifies there, we see Indonesia is already off and running. Thailand is beginning to cut rates as well; we are looking for fiscal responses across the region and particularly Southeast Asia. However, those 4 economies look good. We would like to add India to that, but it still looks like India is struggling a bit and it is just a tad too soon. 


ET Now: India has seen quite a bit of pronounced weakness. So what is the view overall on India especially in terms of fund flows and the interest post state elections as well as the budget? 


Bill Belchere: That is certainly possible but precondition for that is India needs a serious reform effort. It has exhausted its easy growth at this without those serious reforms. We do not think growth will recover much above 7% and inflation will remain a persistent problem running well ahead of that over the rest of the world. This will create a lot of volatility and instability in this economy which is a detriment to funds flowing in or a challenge to encourage entice funds to flow in. 


ET Now: Indian rupee has depreciated and appreciated down about 20% in 2 quarters. For this year and for this quarter, are you bullish on rupee or are you neutral on Indian rupee? 


Bill Belchere: We are investors and we remain optimistic. Once India settles down, we will see the rupee begin to recover. We think it is awfully weak, which is very good for the exporters. A precondition to this is a sounder macro policies and particularly on the reform front. If we did get serious reforms, we could easily see the rupee return into the mid-40s and inflation fall fairly significantly. 


ET Now: We have the RBI credit policy which is around the corner and there are lots of expectations of rates being cut in India, perhaps in the first or the second quarter of FY13. Do you subscribe to that view and what is your year end projection for inflation? 


Bill Belchere: Our year end growth and inflation targets are for 7% growth and 7% inflation. We do think that interest rates will be cut in the first quarter of this year and at the end of March probably by 50 basis points. We would expect a total of 100 basis points at least over the course of this year.

Good economic outlook

The Nifty is finding support at every fall. The rebounded of stocks are more than the faring negative ones. This is a classical sign of bottoming of markets. It is evident that the Indian economy is not doing well when it compared to yester years but the fact is that when the world economy is in crisis we are talking about a growth rate around 7%. The India’s economy growth is contracted and stood at less than 7 % in July-Sep-11 but the other favourable indicators are started flooding in. The negative growth in inflation is a very positive sign and the RBI’s preparation for a rate cut any time soon will help the industries to cut the debt burden and the serviceability will be improved. The current challenge is due to FCCB conversion or payment and the higher load on companies’ equity due to rupee depreciation is a cause of concern.

The Central Govt lead by UPA is preparing to face the elections in Hindi heart land. Any favourable signs of improvement in their tally will boost the confidence to reforms. The RBI is willing to go for a rate cut in March-12. The study reports are giving encouraging results as the Indian economy is going to be 2.5 trillion by 2021. The Govt. is planning to spend and expecting at least one trillion on infra structure by 2017. In similar lines, the reports suggesting that the per capita income likely to grow by 900USD to 1800 USD by 2012. Reliance is not showing required strength to float above 729 is a cause of concern.

The banking and housing finance stocks did not fall as they are expected, is a good sign to bulls. The metal stocks like Tatasteel and SAIl alomost bottomed out. The TataMotors is out performing the market. The stock may not fall below 186-185 level even Nifty slide. The has stock has a potential to go above 225 and may touch 240-250 level in coming months. The other stock is M&M which is lagging the over all market. It has strong resistance at 693 level, once crossed likely to touch 740-750 level easily. The next fall that takes place in Nifty, M&M very likely to cut it's  yearly low but may not fall far below it"s yearly low. The SBI is taking two steps back ward and one step forward. The ICICI Bank managed to build its bottom at 685 level is a good support, fair chances are it may touch 620 level.

THE BOTTOMS ARE BUILDINGS!!!!!

The Nifty is in a very narrow band. I posted the same in my earlier posts.The markets are in a sense building the bottom. The strength in the market is intact. The Nifty is getting support at 4700 level.

During my personal interaction, people are interested to buy large caps because of the liquidity. They wanted to invest 2-5 lakhs in one go. Where the tiny stocks which multiply by 5-10 time need separate patience to acquire. The SIP- Systematic Investment Plan is a model known to many market participants. The SIP term is a popular one but a coined a word like -KoI-Keep on Investing with Knowledge of Investment.

The multi-baggers are not possible with large cap and mid cap stocks. The small caps take the advantage of becoming large. The tiny stocks though look weak on fundamentals but they takeoff like fire. It is very difficult to identify such stocks but the small cap universe is quite large.

During my recent discussions, I suggested friends to buy Relcap rather than SBI, since then it gave a 30% return and it has much more potential stored in. The insurance business will give good valuation in coming months. This a sector having very bright future apart from the infra structure.

the market fall from the current levels are very good for long-term investors who can build their portfolio over a period of 12 months. The best case to start buying the value stocks from 4400 level Nifty touches.
The RIL likely to touch 620 level and it may touch 550-585 level but the market as whole looks gloomy but that is not the true colour!!!!.....

THE NARROW BAND MOVE....

Nifty is recovering form the 4580 level likely to cross 4850 and even 5100 if it can maintain above support level of 4780 and Reliance stay above 739-41 level. Since November 16^th to day the average band of Nifty is between 4850-4740. So we can expect that the narrow band is on the negative side but for temporary rally is possible as the ray of hope in India is emerging.

The govt may take all necessary steps to revive the economy and the pre-budget rally and global support will help the Nifty to float above 4850 level for some time.

I clearly mentioned except Nikkei every other market is in bull grip. The DAX is now the indicator. In my October 9^th post and other post kept on mentioning the relative relation. So long DAX trades above 5770 level the markets are in bull grip. The S&P above 1150 is in Bull grip. Our markets are correcting but only on local matters will rebound with vengeance but one has to wait for some time….

The well wishers and close friends are asking the timing the market and the exact bottom price of the index so that there won’t be any further down side. This gives a psychological edge that the capital invested is safe and may reap good results instantaneously. The idea is relatively good for traders but for the investors it is not a good approach as far as I am concerned. The stock investment is not a one time job but has to be invested over a period of time with small amounts and then do like a farmer, as the cultivation requires fertilizers and weeding out and so on with a careful monitoring continuously. The people close to me asked why TV-18 a buy, I said wait for the news, might have noticed the TV-18 deal.

important data for some thoughts.....

bhavesh share.bhavesh@gmail.com to sg2, bcc: aiii

show details 4:11 PM (6 hours ago)

sandip sabharwal 2012                                                                                 Posted: 31 Dec 2011 12:24 AM PST

It is quite amazing but true that the year 2011 has been the second worst year in the history of Indian markets with a decline of 25% in the Nifty and 35% in the Mid cap indices (since the 1980s atl east). No prizes for guessing which was the worst year i.e. 2008. In USD terms the performance was even more disastrous with losses of 44% given the 19%decline in the value of the INR. The year began with cautious optimism after the fall that the markets had seen post peaking off in November 2010. However a sequence of events, foreseeable and unforeseeable made this a disastrous year for equity investors. A lot will be written on the year ahead and I have touched on some subjects in my previous articles a few weeks back. However sentimentally one thing is very apparent from all the strategy reports that I read today, as well as the commentary in various media.

2012 will be a very tough year for equity investors and it is unlikely that there will be significant returns during this year.
India will continue to under perform given concerns on inflation, high interest rates and poor governance.

I have infact not read more pessimistic commentary on India for a very long time as we see today. The same brokerages/research houses that were predicting Sensex at 23-24000 by the end of 2011 a year back are now forecasting markets at 12000 (at the lower range) to 18000 (at the median ofthe upper range). There are some who, albeit apologetically are predicting a move above 20,000 levels this year. However this is being done with a lot of caveats. The funniest are those reports where there are bull case, base case and bear case views where the difference between the bear case and the bull case is over 50-60%.

My take on the markets in 2012 is that we will see the Nifty/Sensex return anywhere between 15-25% and the broader markets by 25-35%. I believe that sentimentally the markets have bottomed out and the bottoming out, value wise will happen over the next few days or weeks. This should lead to a durable bottom being formed for the markets. I have touched on the logic for the same to a large extent in my article on the 5th of December, an updated version of which I will present in brief and then more on the domestic situation and the markets.

The Euro zone Crisis – The Euro zone crisis and the debt issues related to Greece, Italy and Spain have been the main contributory factors to the nervousness in the global equity markets over the last several months. The crisis has got accented by a lack of faith in the political system and its ability to resolve the issues. This issue has been discussed a lot so I will not go into the details of all of this, however I do have a contrarian view on the future direction of news flow from Euro zone. We now have new governments in Italy, Spain and Greece i.e. all the troubled countries. Two of them are lead by technocrats and one by the right wing party. As such, in my view the worst of the news flow from Europe is now in and we might not get incremental negative news flow over the next 4-5weeks. This is likely to be similar to the negativity due to news out of the US around3-4 months back, which suddenly died out as the economic data started to improve. The entry of the IMF in the entire discussion combined with greater urgency to resolve the issues is also encouraging.  Overall I do not expect Europe to create any deep cuts in the markets going forward.  This was the view that I had put out a few weeks back and seems to have played out well. It seems clear now that although Euro zone will go through a cycle of de-leveraging, slow growth, intermittent issues related to fiscal issues of troubled countries etc, the probability of a Euro zone breakup seems remote at this stage. Intermittent occasions of bond issuance of Italy and Spain will create volatility on those days. In-fact if investors were so concerned on the Euro it would not have fallen by just 2-3% against the USD in the year 2011. As I wrote a couple of weeks back“Europe has clearly avoided its Lehman Moment”

US News flow – The news flow from the US has been mixed. Over the last few weeks there seemed to be clear indications of an improvement in economic activity. The Fiscal issues will keep on creating volatility periodically, however low borrowing costs and an improving economy could lead to a Fiscal surprise next year. Overall economic activity seems to be improving, albeit at a slow pace in the US and there does not seem to be the likelihood of a double dip recession at this stage. Most corporates in the US are cash rich and market valuations are at just around 11X P/E for next year. Earning expectations for the year 2012 are pretty low with earnings growth forecast in the range of 0-5%. As such US news flow will create volatility but it does not look that it can create a fresh down move at this stage.

Infact US has not only created conditions for a down move, but it has actually supported global markets due to continuously improving economic data, especially related to employment numbers. Technically too the movement of the key indices above 200DMA’s and the breakdown of the similarity of the move from 2008 indicates further gains for US equities. The breakdown of VIX below 23-24 levels also indicates reduced risk aversion and greater confidence. Typically such breakdowns are followed by multi-week up moves.

GOLD – As I have written in detail in my previous article I expect2012 to be a difficult year for gold. I expect a 20-25% correction before prices come to a level where actual demand rather than pure investment demand can support prices. Since I have written in detail earlier I will not repeat, however the most fancied asset class will have a tough time holding on.

China – China is one aspect about which I have not written earlier mainly due to the fact that it is difficult to analyze it. However pessimism on China seems to be at its peak with the Chinese markets trading at valuations that are at multiyear lows. The expectations of some, of a hard landing in China do not seem to be playing out. The move from investment to consumption led growth seems to be moving slowly. By letting the Yuan appreciate in light of pressure on exports seems to have played out well. Inflation has also been controlled well by demand & supply led measures as well as administrative dictates(which can only work in that country and not in countries like India). The moderation in economic growth has been happening at a steady pace. However the key challenge will be holding up growth in light of falling export demand, controlling excessive investments in unproductive areas and the biggest factor will be the asset quality of Chinese banks and how they will hold up in light of increasingly challenging environment and pressure on profitability of Chinese corporates. The corporate sector in China is likely to be hit on two fronts i.e. higher wage costs due to rapidly increasing salaries as well as the strong up move of the Yuan against most other competing currencies. Just as an example, over the last one year the Indian rupee is down 20% against the USD and the Yuan is up nearly 6%. The way things look to me it seems the base case will be a soft landing rather than a hard landing for China in the near term. The two big surpluses that China has i.e. Current Account& Fiscal are vastly undervalued by the markets in my view. Officially China seems to be aiming at an 8% growth next year which is extremely strong in the current environment. The challenge is health of the banking system and how much it needs to be capitalized in order to support this growth as well as the state of health of the Provincial Governments about which there is very less transparency.

India domestic factors & outlook

The Indian markets had to make do with not only global issues but also several domestic issues in the year 2011making it one of the most turbulent years in recent memory. Although 2008 was challenging for India, it was generally perceived at that stage that the factors are largely external and as such should not have a lasting impact on the performance of the economy. We had also started giving lesser importance to the government as the economy became more and more open. However 2011 was a year which showed the importance of governance in promoting and sustaining economic growth as well as macroeconomic stability. The year 2011 was a year of high inflation, high interest rates, lack of policy making as well as the most challenging year for the Indian rupee since 1992 (ex of 2008).

The Rupee - The fall in the rupee is being attributed to high current account and fiscal deficits, which is true to some extent. However it is more due to a lack of confidence in the economy in the near term as well as cash flow mismatches on exports and imports. This aspect is extremely important to understand. Given the way the rupee fell and the continuous statements by policy makers that we are helpless in managing the rupee all importers have run to hedge their positions and no exporter is hedging. This creates a very huge mismatch in the short run. Let me try to explain. India has exports of broadly USD 20 bn a year and imports of USD 30 bn. Now this is a gap of USD 10 bn which is bridged by invisible flows, capital receipts, foreign borrowings, FDI etc etc. Now in a situation where everyone believes that the rupee can only fall all importers want to hedge, however no exporter wants to do the same. This creates a huge mismatch in the short run till the export proceeds flow in after a period of 90-120 days. This also creates a tendency to delay export inflows in order to realize a better rupee value. This actually makes me believe that the first quarter of 2012 can be a good period for the INR as the panic fall period now seems to be over and export realizations will start to come in. Other measures like reduction in holding period of Government and Infrastructure bonds as well as higher interest rates on NRI deposits should boost inflows. My base case view will be for a 3-4 % rupee appreciation in the first quarter of 2012 unless and until there are huge capital outflows.

Policy making – Initially we had a period in late 2010 and early2011 when a large number of projects got held up on environmental issues. Later on after the 2G issue we have seen a significant decline in project approvals, takeoffs etc. This has got exacerbated by the continuous increase in policy rates by the RBI which has made lot of projects unviable. Reform measures have also got stalled. I believe that we are now at the absolute nadir of the decision making cycle and things can only improve from here on. I expect this to happen post election in February after which things would be much better.

Inflation would have come off much more sharply had it not been for the decline in the rupee. However the absolute correction in commodities and food prices combines with the strong base effect will take inflation down to nearly 5% by March 2012. In case the rupee also appreciates as I expect it too the overall scenario could be much better in 2012. As such we should have improving liquidity and much lower interest rates as we go through 2012 and this will provide a tailwind for economic activity to pick up.

Markets

Taking most things into account and also taking into account the market psychology as well as valuations I am of the view that the current situation of the markets is akin to early 2009where one could see only negativity and that was the time that markets bottomed. Valuations, especially of the broader markets are today nearing historic lows and the overall market is also trading at 12X 2013E earnings which is very attractive. My view of the markets over the next one year is that of a worst case of 14500-14800 for the Sensex (at 12X P/E) and 26000 as the best case (on a 20x P/E.)

The markets are today trading at a Mcap/GDP of 50%; in the beginning of 2008 this had gone up to as high as160%. The Profits to GDP ration of corporates goes through phases of compression and expansion. Right now both gross margins as well as net margins are suppressed due to the huge input cost pressure that we have seen over the last 18 months as well as high interest costs. This is likely to reverse over the next two years. Eventually the Market capitalization will move towards the100% level to GDP, if not more. This will provide strong returns over the next3-4 years.

Markets seem to have taken most negatives in their stride as of now. The risk reward is strongly in favor of investing into equities at this stage. As inflation falls and interest rates come down there will be a revival in the economy and growth prospects will start improving. The timing of the bottom formation is difficult to predict, however it will happen in weeks not months.

Markets should be able to return 15-25% at the middle of the pessimistic/optimistic range over the next one year.

BEST WISHES TO EVERYONE AND HOPING FOR A GREAT 2012

-- 

"When someone shares something of value with you and you benefit from it, you have a moral obligation to share it with others" :)........

i shared .....happy new year 2012