How to trade in a Bear or Bull Market

1. First we should see the index how it is behaving that is when it is making an intermediate high than we should see where it is taking its first major support at this point we should buy shares of a particular company that is most liquid stock of the Market.

2. Suppose the price of a compay's share at its recent peak is $100 than Buy its share a $62 from the fund you got. Note invest only 25% of your fund at a time and wait for some time where the market is going if the market rises than book profit when the price reaches at $80.

2. Suppose the market falls again and the share price reaches at $50 than again Buy shares of the same company with 25% of the remaining fund. Then see how the market is behaving and book profits accordingly.

3. Never invest all your money at a time.

4, In this way you should make you major buying or selling decision and book Profits.

By this technic you will always earn profit and will never loose money.

Sensex shrugs off GDP blues, gains 516 pts

BENCHMARK indices surged over 3% on Friday as bulls chose to look at the brighter side of a slowing economy. According to a government release, India’s GDP grew 7.9% in the June quarter, the slowest in three-and-a-half years, and much below the 8.8% growth rate clocked in the April quarter. This, and the slight drop in inflation to 12.4%, has raised hopes that RBI may not have to raise interest rates soon. Still, brokers feel it is too early to say if the market is now poised for a s u s t a i n e d u p s w i n g . The FM himself said no conclusion can be drawn from one week’s inflation numbers. Despite the 500-plus point rally in the Sensex, traded turnover on both exchanges combined was under Rs 60,000 crore, indicating the cautious mood among investors. “I don’t think inflation is fully behind us; the market is likely to trade in a 2000-point range on either sides for some time,” says BSE broker Ramesh S Damani. The Sensex gained 516.19 points to end the day at 14,564.53 while the broader 50-share Nifty gained 146 points to close at 4,360.

Nifty Resistance @ 4350

The market has opened on a positive note and follow-up
buying was also witnessed. The Nifty on the daily chart is
trading in a range of 4450 and 4200, which are crucial
levels. We expect the momentum to be positive and
volatility on intraday basis. Market breadth is positive with
936 advances and 195 declines. Daily momentum indicator
has given a negative crossover and is trading above the
zero line. On the daily charts, support at 4200 and strong
resistance at 4450 are indicated.
On the hourly charts, a triangle has formed and has also
broken on the down side, with a support at 4200 and
resistance at 4350. The momentum indicator has given a
negative crossover and is trading below the zero line. Strong
support at 4280 and a very strong resistance at 4331 are
indicated on the hourly charts.

Axis Bank has gained momentum and is likely to test Rs750
on the upside. Infosys seems to be having support around
Rs1,695 and on the upside is likely to test Rs1,850. Banking
sector has gained momentum and is expected to move
upward.

Sensex sheds 248 pts ahead of GDP numbers

EQUITIES continued their slide on Thursday, even as inflation data released post market hours could spell some relief for bulls on Friday. Benchmark indices hit a one month lows, with the 30-share Sensex coming precariously close to breaching the psychological 14,000 mark. Inflation for the week ended August 16 slipped to 12.4%, down from 12.63% the week before. However, market watchers feel a sustained recovery is unlikely till the time there is a significant improvement in the macroeconomic picture. The government will announce the preliminary GDP growth numbers for the first quarter of the current fiscal year on Friday. Brokers said a possible decline in the first quarter GDP growth weighed on market sentiment, prompting buyers to take a cautious view. The 30-share Sensex shed 248.45 points to close at 14,048.34, after having touched an intraday low of 14,002.43. The broader S&P CNX Nifty ended the day at 4,214, down 78 points over the previous close. The BSE Mid and Small cap indices too, ended in the red, shedding over 1% each. On the global front, crude oil prices continued to firm up for the fourth consecutive day, nearly nudging the $120 per barrel mark on speculation that tropical storm Gustav will be the most damaging since Hurricane Katrina. Analysts expect the Nifty to trade with a negative bias ahead near term. “There is huge selling pressure on the index heavyweights,” said Gurudatta Dhanokar, technical analyst, Almonds Global. “We expect Nifty to find resistance at 4,080-4,100 level next week,” he added. For the second consecutive session, all the sectoral indices on the BSE ended down with BSE Capital Goods and Oil and Gas Index losing over 2%. Hindalco shares ended 12% down as the stock price adjusted for the rights issue. Other blue chips like Reliance Industries, Reliance Infra, Bhel, TCS, L&T, ICICI Bank, Wipro, Reliance Petroleum, and DLF fell over 2-3%. There were nearly two declines for every one stock that gained. Lack of a clear trend in world markets also added to the weak trend. US stocks climbed for a third day on Wednesday, led by financial and technology companies, after the economy grew more than estimated in the second quarter. Robust exports and a smaller decline in inventories helped the US economy to grow at a 3.3 % annual rate in the second quarter, according to reports. However, markets across the Asia-Pacific region finished mixed. Hong Kong's Hang Seng index plunged 2.3% and South Korea’s Kospi Composite index declined 1.3%, while Japan’s Nikkei 225 index inched up 0.1% and China’s Shanghai Composite index rose 0.3%. Traded turnover on both exchanges combined was higher than usual at Rs 83,297 crore. However, this was due to the expiry of derivative contracts for the August series.

Market Volatile

The market has opened on a flat note but the Nifty has
witnessed selling pressure at higher levels. The Nifty on
the daily chart is trading in a range of 4450 and 4250,
which are crucial levels. We expect the momentum to be
negative and volatility on intraday basis. Market breadth
is negative with 423 advances and 703 declines. Daily
momentum indicator has given a negative crossover and
is trading above the zero line. On the daily charts, support
at 4235 and strong resistance at 4435 are indicated.
On hourly charts, a triangle has formed and has also broken
on the down side, with a support at 4235 and resistance
at 4400. The momentum indicator has given a negative
crossover and is trading below the zero line. Strong support
at 4235 and a very strong resistance at 4325 are indicated
on the hourly charts.


Century Textile has gained momentum and is likely to test
Rs400 on the downside. Infosys seems to be having support
around Rs1,695 and on the upside is likely to test Rs1,850.
Banking sector has gained momentum and is expected to
move downward.

Nifty Expiry time

The market has opened on a negative note. The Nifty on
the daily chart is trading in a range of 4450 and 4250,
which are crucial levels. We expect the momentum to be
positive and volatility on intraday basis. Market breadth
is positive with 581 advances and 535 declines. Daily
momentum indicator has given a negative crossover and
is trading above the zero line. On the daily charts, support
at 4235 and strong resistance at 4435 are indicated.
On the hourly charts, an inverted head & shoulder pattern
has formed with a support at 4248 and resistance at 4400.
The momentum indicator has given a positive crossover
and is trading above the zero line. Strong support at 4275
and a very strong resistance at 4331 are indicated on the
hourly charts.


Tata Steel has gained momentum and is likely to test Rs650
on the upside. Infosys seems to be having support around
Rs1,695 and on the upside is likely to test Rs1,850. Metal
sector has gained momentum and is expected to move
upward.

Gold gets its bounce back on global cues

Taking a cue from global markets, gold prices bounced back in local markets on Wednesday as surging crude prices boosted the yellow metal’s appeal as an inflation hedge. The sliding dollar also boosted buying sentiment to some extent. In Mumbai, prices of standard and pure gold shot up by Rs 200 and Rs 205 to Rs 11,895 and Rs 11,970 per 10 gm, respectively. While in Delhi the yellow metal breached the Rs 12-k-mark to close at Rs 12,030 per 10 gm, it rose by Rs 195 at Rs 12,135 per 10 gm in Kolkata. Chennai markets saw a gain of Rs 70 as the metal closed at Rs 11,955 per 10 gm. In London, spot gold rose to $828.35/829.55 an ounce from $822.90/824.30 in New York on Tuesday.

Oil rises for 3rd day on Gustav concerns

Oil rose for a third day on Wednesday, boosted by the possibility that tropical storm Gustav could become the first major storm since 2005 to threaten Gulf of Mexico oil and gas installations. Crude for October delivery was up 93 cents at $117.20 a barrel by 22:00 pm IST after settling up $1.16 on Tuesday. London Brent crude was up 74 cents at $115.37 a barrel. Oil could head towards last week’s near-three-week high of just above $122 a barrel in the next few days depending on the weather in the Gulf of Mexico, said Masaki Suematsu, analyst at broker Newedge in Tokyo.

Rollover worries pull Sensex down 185 points

BENCHMARK indices shed more than 1% on Wednesday, a day ahead of the derivative contracts expiry, as it is widely felt that most traders holding long positions are not keen to roll them forward to the next series. Lack of positive triggers — both at the local and international level — is keeping bulls on the backfoot, say brokers. Adding to the gloomy outlook, the 50-share Nifty slipped below the psychological 4,300-mark to close at 4,292.10, down 45 points over its earlier close. The 30-share Sensex fell 185.43 points to end the day at 14,296.79, down 1.3% over its previous close. Equities started off on a firm note, but were unable to hold on to their initial gains due to the indifferent trend in key Asian markets. Geopolitical tensions because of Russia’s aggressive stance over Georgia, and continuing worries over the subprime crisis kept investors in world markets jittery. Crude prices inching up towards the $120 per dollar mark, and record high inflation in South Africa completed the gloomy picture. Back home, investors were cautious ahead of the inflation data and GDP report to be announced in a couple of days. The finance minister is confident that the economy will log 8-9% growth in the current fiscal, but not many share his optimism. Analysts expect the market to be volatile on Thursday because of the current month derivatives contracts expiry. “We expect Nifty to find support at 4,200 and probably go to 4,600 within a month,” said Vinit Birla, technical analyst at Pranav Securities. The rupee strengthened 0.2% to 43.75 a dollar, but investors continue to be cautious. Of the 30 Sensex stocks, 26 ended in the red. Hindalco, Tata Steel, Infosys and Mahindra & Mahindra were among the handful of gainers. Overall, three shares fell for every two that rose. Overall trading volumes were muted, with both exchanges together clocking over Rs 60,000 crore worth of turnover. This is a low figure on the previous day of the derivatives expiry. Among sectoral trends, all the BSE sectoral indices ended in the red, with BSE Bankex and BSE Reality faring the worst. The rate-sensitive indices plunged 3.5% and 2.2% respectively. Global credit rating agency Moody’s expects RBI to further tighten monetary policy by way of rate hikes, to contain inflation. The government will unveil weekly inflation data after trading hours tomorrow.

Keep An Eye On Resistance

August 24, 2008- Market SummaryIt was a week of mixed results as market participants tried to discern the future direction of the broad market indexes. Many traders are attributing the market's indecision to nearby resistance levels. These levels of resistance, which are shown on the charts below, are causing many traders to question whether bullish rallies will be able to sustain a longer-term move higher. The chart of specific interest this week is of the Russell 2000 because it bounced off the identified resistance level and it is now trading near the support of the consolidation pattern that we mentioned in our previous report.
Last week, we also mentioned that the Nasdaq broke out of a period of consolidation (shown by the converging trendlines). As you can see from the chart, the momentum that was sparked after the rally faced resistance as the index neared the 1,995 level. It is important to note that the 50-day moving average remains below the 200-day moving average, so traders may want to wait on the sidelines in this market until confirmation of a longer-term reversal appears.

Inflation-defying gold offers a respite

AT A time when consumers feel the pinch on the back of spiralling prices of most essential commodities, the yellow metal has offered them some breathing space. The precious metal saw another round of free fall on Tuesday in the domestic markets in the wake of strengthening dollar and sliding crude prices. The relentless fall since its recent peak has weakened the metal’s appeal as a hedge against inflation. In Mumbai, the prices of standard and pure gold tumbled by Rs 95 and Rs 90 to Rs 11,695 and Rs 11,765 per 10 gm, respectively. “As the prices slump by nearly Rs 2,000 per 10 gm in six weeks, consumers have already started their festival and marriage shopping well in advance as the current prices are most ideal for them,” said a leading bullion merchant in Mumbai’s Zaveri Bazar. The fall in prices has brought in consumers back to stores where sales have reportedly jumped nearly 10 times since the price fell below Rs 12,000 per 10 gm. The price of yellow metal touched a historic high of Rs 13,680 per 10 gm on July 15 this year. If prices stabilise between the Rs 11,000-10,500 level, sales could see another jump, he said. But the future direction of the metal will largely depend on the movement of the US dollar and crude price, he added. Dealers attributed the rising US dollar against the euro and a slide in crude prices as the main reasons for the yellow metal’s fall. A similar trend was reflected in other metros, too. In Delhi, after touching an intraday high of Rs 11,960, gold plunged by Rs 160 to Rs 11,800 per 10 gm in late trade as stockist took profits after a meltdown in the global markets. While, in Kolkata, spot gold lost Rs 80 to Rs 11,940 per 10 gm, it, however, rose by Rs 25 to Rs 11,810 per 10 gm in Chennai. In domestic futures, gold for October delivery fell by 1.2% to Rs 11,593 per 10 gm on the Multi Commodity Exchange. In London, gold bounced back as investors returned to market after the dollar lost ground against the euro and spot gold rose to $828.55/829.55 an ounce from $820.20/821.40 in New York on Monday.

50% of demat a/cs hold no shares

IT’S not just asset management companies in the country that are into the number game for shoring up their assets under management. The two stock depositories, NSDL and CDSL, are not far behind. A significant number of demat accounts — as much as 50% — with the two depositories are without any shares in them, an official with one of the depositories told ET. The number of such accounts usually rises when the stock market goes into a downturn. However, the official said even if such periodic fluctuations were to be discounted, the number of zero share accounts at both depositories would account for nearly 50% of the total accounts. Market watchers say many investors would have opened multiple accounts within the legally-permitted limit, during the IPO boom in a bid to apply for the maximum number of shares under the retail investor quota. National Securities Depository (NSDL), promoted by the National Stock Exchange (NSE) is the larger and the older depository, but the Bombay Stock Exchange (BSE)-promoted Central Depository Services (CDSL) has been catching up in recent years. A detailed email sent to NSDL went unanswered despite repeated phone calls, but CDSL furnished some information on the empty demat accounts. It said around one third of its ‘active’ accounts are without any shares in them. This works out to a little over 17 lakh accounts. “It is observed that this figure increases in a bear market as a lot of investors liquidate their portfolios and wait for the bull phase to start when they resume purchases,” the CDSL official said while explaining the zero balance accounts. Despite the market moving sideways in the past eight months since January, both the depositories have shown fair growth in the number of demat accounts with them. While accounts with NSDL have grown 13% in this period to over 96 lakh accounts, those CDSL have risen by more than 50% to around 53 lakhs. The ongoing rivalry between the two depositories for claiming ownership over maximum demat accounts could be another reason why NSDL and CDSL are not keen to close down these empty accounts. When a stock market investor (called beneficial owner in technical parlance) opens a demat account with a broker or a bank, the latter in turn approaches either of these two depositories, which store shares in the electronic form. In the past 12 months, NSDL and CDSL, India’s two stock depositories, have been fighting each other on a host of issues. CDSL was formed in 1999 and has been aggressively trying to garner market share for opening demat accounts. However, NSDL even today owns more than two-thirds of all the demat accounts in the country.

Sensex survives oil flare-up Sensex survives oil flare-up

INDIAN equities eked small gains in Tuesday’s listless session, even as dark clouds gathered in the global skies. Crude oil prices rose more than $2 per barrel to $117.38 on fears that Hurricane Gustav may enter the Gulf of Mexico, home to more than a fifth of US oil production. Russia’s RTS Index hit a near two month low, and the ruble weakened to the dollar following the government’s decision to recognise Georgia’s breakaway regions, which could further worsen its relations with the West. The euro fell to a six-month low against the dollar as German business confidence dropped in August more than forecast. Things were slightly better on the other side of the Atlantic as the US Consumer Confidence Index rose more than forecast in August, and new-home sales improved in July. Back home, the rupee fell to a 17-month low of 44 to the dollar on Tuesday, which is positive for the IT sector, but spells bad news for the country’s trade balance. Select IT majors and a few index heavyweights were in demand as the BSE Sensex rose 31.87 points to close at 14,482.22. The broad-based Nifty ended almost unchanged over the previous close at 4,337. Indices were held in check by a 2.3% decline in Reliance Industries’ shares, as investors are unsure about the price at which the oil and gas behemoth will transfer its 80% holding in KG D6 to its wholly-owned subsidiaries. The market responded positively on the news of a healthy monsoon. India’s annual monsoon rains between June 1, 2008 to August 24, 2008 were just below the long-term average, the government said. Dealers attributed Tuesday’s gains in the key indices to short covering of positions ahead of the derivative contracts expiry on Thursday. But it is the bulls who are on the defensive, say some market watchers. “Traders are going short-selling at lower levels. We expect the market to remain range-bound between 4,000 and 4,500 levels,” said Pravin Agarwal, CEO, Lotus Investments and Securities. In sectoral trends, rate sensitive indices like BSE Bankex and BSE Auto led gainers, rising over 2% each. IndusInd Bank, HDFC Bank, Bank of Baroda and Kotak Bank rose 3-6%. However analysts feel that it is too early to take a call on these sectors as the RBI may hike interest rates further in its attempt to curb inflation. The BSE Auto Index rose 50 points, up over 1% to close at 3,916.49. Gainers were led by Bosch, Apollo Tyres, M&M, Maruti Suzuki, Exide Industries and Ashok Leyland, which were up between 1% and 6%. Technology stocks like NIIT, Satyam, Tech Mahindra, HCL Tech, Wipro and TCS gained over 1-3% as the BSE IT index closed at 3,895.48, up 33 points over its last close.

Copper marginally high

Base metals: Copper higher on US existing home sales
data
Yesterday, copper closed with minor gains on the COMEX as
the US existing home sales data topped the forecast. Sales
of previously-owned homes in the USA grew by 3.1% in July.
However, on the flip side unsold inventory rose. There were
record 4.67 million unsold houses and condos on the market
in July, representing 11.2 month's supply at the current sales
pace, matching the highest ever. The jump in the inventory
was driven by an increase in the supply of condos, as projects
started one or two years ago came on the market, the Realtors
group said.
Yesterday, the London Metal Exchange was closed, so the
trading in the rest of the base metals was in line with that
of copper.
Today, oil prices in Asia rose on concerns that the hurricane
Gustav may disrupt oil operations in the Gulf of Mexico.
However, strong tone in the US Dollar is keeping it down,
though crude oil is expected to find support around $111.
Today, we had German consumer confidence data that
weakened further as fears that Europe's largest economy
will lose more steam than anticipated weighed on the
sentiment. German market research group GfK said that its
forward-looking consumer climate index continued to decline
sharply to 1.5 points for September from a downwardly
revised 1.9 points in August. A Dow Jones Newswires survey
of 14 analysts expected the index at 2.1 points for
September. The Euro is sharply down on this data and has
fallen below its low around 1.4630. The Euro could fall to
1.44 in this cycle. This is bearish for the base metals.
In a further bearish development for the base metals, we
see that China's production is climbing. China's zinc mines
increased their output by 21% in July compared with a yearago
period, producing 331,200 metric tonne of the metal,
while lead production gained 23% to 212,700 tonne in the
same month. Copper output climbed 6% to 2,34,900 tonne.
Various reports suggest that Chinese, the world's biggest
buyers of copper have put off purchases on expectations of
further price decline amid rising US Dollar.
We still remain bearish on copper. A slide in copper could
lead to a downward movement in all the base metals.
Bullion: Flat close
Yesterday, the bullion complex had a flat closing as spot
gold closed nearly $1 lower, while silver was up nearly 17
Cents. Today the complex is taking a hit on sliding Euro. As
crude is expected to stabilise around $111 and a decent
pick up in physical demand for gold is being witnessed at
lower levels, gold could find a support around $800, while
silver could find support around $13.
Sharp plunge in bullion prices in August is due to massive
sell off by some of the US Banks. In short-term as the US
Dollar rises we would see further pressure on gold and silver,
however with festival season round the corner and the US
Dollar fast approaching its short-term target of 1.44/1.43
against the Euro, downside in bullion appears to be limited.
A slip below $800 could take the spot gold to $780. Similarly,
a decisive breach of $13 could take spot silver to $12.40.
These levels could very well be the bottom for these two
metals.

Nify Support @ 4248

The market has opened on a negative note. The Nifty on
the daily chart is trading in a range of 4450 and 4250,
which are crucial levels. We expect the momentum to be
positive and volatility on intraday basis. The market
breadth is negative with 335 advances and 750 declines.
The daily momentum indicator has given a negative
crossover and is trading above the zero line. On the daily
charts, support at 4235 and strong resistance at 4435 are
indicated.


On the hourly charts, an inverted head & shoulder pattern
has formed with a support at 4248 and resistance at 4400.
The momentum indicator has given a positive crossover
and is trading above the zero line. Strong support at 4275
and a very strong resistance at 4331 are indicated on the
hourly charts.

What are penny stocks

Penny stocks can be defined by:
Price Per Share: Sometimes any shares that trade under a certain price are considered to be penny stocks. For example, the SEC considers all stocks that trade for less than $5.00 per share to be penny stock. Different individuals and organizations have their own cut-off.
Market the Stock Trades Upon: In some schools of thought, any shares that trade on a certain market (ie- the OTC-BB, or the OTC, or the 'Pink Sheets,' or the CDNX) are treated as, or considered to be, penny stocks.
Market Capitalization: Market cap is simply the total trading value of the entire company. The value of each share of a stock, multiplied by the total number of shares outstanding, equals the market cap.
For example, 12,343,000 shares of ABC at $0.29 each gives ABC Corp. a market cap of $3,579,470 (12,343,000 shares times $0.29 per share = $3,579,470). That is kind of like saying that the company's total value is 3.5 million dollars.
In some cases, organizations or individuals will treat any company beneath a certain market cap (for example, less than $10 million) as a penny stock.
Interestingly, using option 1 or 3, a company can have its shares change in price moment by moment, and may drop in or out of the definition of 'penny stock' over time. What may be a "penny stock" when the market open in the morning, may not be a penny stock by noon.
In some cases the definition of penny stock is generated by a combination of the above criteria. For example, any stock trading on the OTC-BB with a market cap of less than $20 million is considered a penny stock.

Penny stocks are high risk, high reward investments. It is easy to lose money on a penny stock investment. However, if your shares do begin to move, they can produce hundreds of percentage points of gains, and they often do this in only a short time frame.

Penny stocks are often very volatile, and just as often unpredictable.

Double Moving Average Bounce

The double moving average bounce trading system is a variation of the original moving average bounce trading system. The variation still uses a short term timeframe (such as a five minute chart), but now uses two exponential moving averages. The second exponential moving average is used as a filter for the direction of the trade, so that the trading system only includes trades in the longer term direction of the market.
As with the original moving average bounce, the default settings use a 1 to 5 minute bar chart, but use two shorter exponential moving averages, instead of one longer average. Both exponential moving averages are based upon the typical price (HLC average), with the longer average being a 20 to 30 bar average, and the shorter average being a 10 to 20 bar average. Both the chart timeframe, and the exponential moving average lengths, should be adjusted to suit different markets.

What is Day Trading

Day trading (and trading in general) is the buying and selling of various financial instruments, such as futures, options, currencies, and stocks, with the goal of making a profit from the difference between the buying price and the selling price. Day trading differs slightly from other styles of trading in that positions are rarely (if ever) held overnight or when the market being traded is closed.
Day trading was originally only available to financial companies (such as banks), because only they had access to the exchanges and market data. But with recent technology such as the Internet, individual traders now have direct access to the same exchanges and market data, and can make the same trades at very low cost.
Trading Styles
There are several different styles of day trading, suited to different day trader personalities. The styles range from short term trading such as scalping where positions are only held for a few seconds or minutes, to longer term swing and position trading where a position may be held throughout the trading day. Most day trading systems have a lot of flexibility, and can have open positions for anywhere from a few minutes to a few hours, depending upon how the trade is doing (whether it is in profit). Some day traders will trade multiple styles, but most traders will choose a single style and only take that type of trade.
Day trading also has different types of trade, such as trend trades, counter-trend trades, and ranging trades. Trend trades are trades in the direction of the current price movement (i.e. buying if the price is moving up), and counter-trend trades are trades against the direction of the current price movement (i.e. selling if the price is moving up). Ranging trades are trades that go back and forth between two prices, and are used when the market is moving sideways. Most day traders will choose a single type of trade, but some traders will take different types, and choose which one to trade depending upon the current condition of the market.
In addition to the style and type of day trading, there are other variances between day traders. Some day traders like to make many trades throughout the trading day, while others prefer to wait for what they consider the best conditions for their trade, and perhaps only make one trade per day. However many trades are made, the trading process that is used, and the desired goal of making a profit, are the same.
Markets
There are many different financial instruments, or markets, that can be day traded, and they are offered by various exchanges throughout the world. The main types of day trading markets are futures, options, currencies, and stock markets. Within these types, there are groups of markets based on stock indexes (such as the Dow Jones, and the DAX), currency exchange rates (such as the Euro to US Dollar exchange rate), and commodities (such as gold, and oil). Day traders can have access to all of the exchanges and their markets via direct access brokers, so called because they offer direct access to the exchange, which provides faster trade execution at lower cost.

Dreary close

After opening 242 points higher, the Sensex traded in a
narrow range during the early hours. However in the
second half of the trading session, the index could not
build on its early gains and finally wrapped the session on
a flat note--only 49 points higher than its yesterday’s
close. The Sensex opened near the day’s high and closed
near the day’s low, which points to weakness in the camp
of the bulls. Further, on the hourly charts, the Nifty faced
the hurdle of 40 HEMA from which the sell off came in the
afternoon session. The Nifty also closed below 20 HSMA,
which is one more sign of weakness. On the daily chart,
the level to watch out for support and resistance is 4,250
and 4,400 respectively. Apart from the above story, the
daily momentum is also dying as the indicator KST has
breached the zero line on downside. Market breadth,
which was positive, with more advances than declines
during the earlier half of the session turned in the favor
of bears with 636 declines and 574 advances. This shows
that the bears have overpowered the bulls.
On the hourly chart, though the momentum indicator KST
has not given a negative crossover, it has turned down
facing the resistance of falling trend line. Our mid-term
target is at 4,000 with the reversal at 4,650 while our
short-term bias is still down for the target 4,200 with the
reversal at 4,435.
The Sensex closed 49 points higher, while the Nifty gained
8 points for the day. The BSE Midcap index closed
marginally higher by 0.25%, whereas the Smallcap index
closed 0.05% lower. Of the 30 stocks of the Sensex, HDFC
(up 3.63%) and Tata Motors (up 2.04%) led the pack of
gainers, while Ranbaxy Laboratories (down 2.05%), BHEL
(down 1.6%) and Tata Steel (down 1.49%) led the pack of
losing stocks.

Sensex closes with just 49-pt gain despite a good start

EQUITY benchmarks closed with marginal gains on Monday, after a firm start, as a weak opening in the European market and a minor rebound in oil prices sparked some selling midway through the session. Analysts said investor sentiment remains nervous, even though the cooling-off of oil prices has eased nerves, in the absence of money flows from foreign institutions. Market participants are awaiting the expiry of the August derivatives contracts on Thursday for a clearer picture of the market. “The volumes were low and market was pretty much dull. The initial gain in the morning was clearly a result of profit booking and we expect the market to remain at these levels till the expiry date of derivatives contract this week,” said Venkatesh Iyer, vice-president-equity sales, Brics Securities. The BSE-30 share Sensex ended at 14,450, up 48.86 points or 0.34%, giving up over 220 points from the session’s day high. The broader 50-share Nifty closed at 4,335, shedding over 63 points from the day’s high. The broader market also showed an indecisive trend, with gainers just about managing to outnumber losers 1347:1287 on the BSE. Shares of Tata Motors rose over 2% to Rs 425, despite uncertainty over the small-car project, as investors expect a favourable pricing of the rights share issue. Shares of interest-rate sensitive sectors, real estate and banks outperformed the benchmark indices on Monday, led by short-covering but analysts maintain it would be too early to turn bullish on the sector fearing further monetary tightening by RBI. With inflation expected to rise further, after touching a 16-year high, the broader consensus is that a rate hike or more measures to mop-up money from banks by the RBI, could be round the corner. “With persistent inflation and monetary policy officials giving the highest priority to stabilising inflationary expectations, we expect RBI to raise policy rates at least once more this year. However, given the policy stance to keep liquidity conditions tight, the CRR (cash reserve ratio or the minimum cash banks need to keep with the RBI) could be used more than once,” said Citigroup economists in a research note. Analysts said further dip in oil prices could ease the pressure on the central bank to tighten monetary policy, but they feel this factor alone would not be enough to renew a bull rally in Indian equities, as its economy continues to face the specter of a sharper-than-expected slowdown. on Monday, crude oil on the New York Mercantile Exchange rose as much as 1% to $115.80 a barrel, after falling 6% on Friday.

Smart investors have to wonder who’s dumb now

EVERY time financial markets become unhinged, there are calls to protect investors. Twenty-one years ago this October, global stock markets crashed, dragging down investors who had been persuaded to buy shares in companies they had never heard of, with names they couldn’t pronounce, engaged in businesses they didn't comprehend and located in places they couldn't find on a map. It’s no different this time — except that the acronyms have changed, the losses are bigger and the investments more complicated. On August 6, the Counterparty Risk Management Policy Group III — a 16-person private-sector initiative representing major investment and commercial banks, moneymanagement companies and a top law firm — released a 176-page report aimed at reducing risk and ultimately making the financial system more efficient. It includes measures to better understand and manage risky, complex securities. “The policy group strongly recommends that high-risk, complex financial instruments should be sold only to sophisticated investors,” reads the report. That raises the question of what constitutes a sophisticated investor. The group’s goal is to complement official oversight in encouraging industry practices that will help mitigate systemic risk. The report, “Containing Systemic Risk: The Road to Reform,” contains many good proposals. But when it comes to listing some of the characteristics that might define a sophisticated investor, it comes up short. Sophisticated investors should be able to understand an instrument's risk and return characteristics and have the ability to price and run stress tests on a security, says the policy group, which is headed by E. Gerald Corrigan, a managing director at Goldman Sachs Group and former president of the Federal Reserve Bank of New York, and Douglas Flint, deputy head of global markets at HSBC Holdings Plc. Investors should also command the procedures, technology and internal controls needed to trade an instrument and manage the risks associated with it, the policy group says. Furthermore, they should be wealthy enough to be able to absorb potential losses. Authorisation to invest in complex, high-risk investments should come from the highest levels of management. UBS AG, Merrill Lynch, Citigroup, HSBC and Wachovia presumably satisfy these criteria and surely regard themselves as financially sophisticated. Yet they and other institutions worldwide have racked up $505.5 billion in losses and writedowns because of the mortgage meltdown. Given such a performance, the folks who steered clear of collateralized-debt obligations and similar instruments may be considered the more sophisticated, if only because they were smart enough to acknowledge what they didn't understand. The policy group also advocates that investment term sheets, a summary of a transaction's details, and offering memoranda carry “financial health” warnings displayed in bold print. Yet given the propensity with which smokers ignore health warnings on cigarette packages, there is no reason to assume that investors will be any different. In addition, the group calls for stronger relationships between financial intermediaries and counterparties in sales and marketing and ongoing communications relating to complex financial instruments. “The policy group believes there is a responsibility on the part of large integrated financial intermediaries to provide clients with timely and relevant information about a transaction,”

MF Distributors Load It Over

SEBI’S decision to waive entry load for investors approaching mutual fund houses directly instead of going through distributors, has evoked a tepid response so far. Eight months since the waiver has been introduced, most investors prefer to go through distributors while investing in fund schemes. There has been only 1-2% rise in customers approaching AMCs directly for investing in funds, officials at fund houses said. The exemption on direct applications also extended to investments in existing and new schemes and for additional purchases by the investor under the same portfolio. Investors switching over to a scheme from other schemes also got an exemption from entry load. “Investors (more than 90% of them) still prefer to come through distributors. Direct investments into mutual funds schemes may have hardly increased by 1%,” said UTI Asset Management chief marketing officer Joydeep Bhattacharya. By approaching the AMC directly (or through any of the affiliated bank or collection centres), investors could save 2.25% entry load on open-ended schemes and 6% amortised charge on close-ended schemes. Mutual fund companies waive entry charge only for large investors who invest more than Rs 5 crore. “Investors prefer coming through distributors as they service clients much better than AMC-appointed counter staff. It is a difficult task for investors to select better schemes from a lot of 500-odd funds,” said the marketing officer of leading fund house. According to Lotus India AMC chief executive officer Ajay Bagga, investor volumes have dropped significantly due to bearish market conditions. “There has not been many NFOs or large inflows into equities over the past eight months; so it is not very clear as to how investors will react to this Sebi ruling when markets are bullish. But, I don’t think investor will be comfortable investing in funds without the help of distributors,” Mr Bagga added. According to industry sources, there are over 450 open-ended schemes in market now, which include both equity and balanced schemes. The top 5 fund houses control 50% of the market. Distributors bring in more than 97% business for fund houses whereas banks earn Rs 650 crore annually by selling existing schemes and earn more than Rs 1,200 crore annually by selling NFOs. Less than 3% investors (overall) apply directly or approach fund houses. “Investors need professional advice while investing in mutual funds. AMC-appointed staff will not be able to report frankly about a fund; much more than distributors, it will be AMC officials who will forced to push to their own products to investors,” said Bajaj Capital managing director Rajiv Bajaj. “An independent distributor is in a better position to advise clients on redeeming or skimming fund portfolios. All the more cumbersome (as a result of huge paper work) are the procedures for applying/redeeming fund schemes,” Mr Bajaj

Valuation is still high, but look for growth picks

The recent carnage has seen many investors shift from momentum stocks to fundamentally-good companies with good growth prospects and value. However, equity investment is a long-term game with a time horizon of around 3-5 years. Government actions/inactions on divestment, etc., impact the markets only in the short-term. Long-term value investors do not base their investment decisions on such factors. With the general elections due soon, it is difficult to assume that there will be any large-scale disinvestment action this year. Even if that happens, long-term investors particularly institutional investors will wait for the outcome of the elections to judge policy stability. What is your sense of the kind of sentiment that is building around emerging markets and Asian economies? Where does India stand vis-à-vis other emerging markets? Indian valuations still look comparatively high compared to other emerging markets. However, there are lots of stocks that are available at much cheaper valuation. If one can identify such value and growth stocks trading at moderate-to-cheaper valuations, one can emerge a winner in the long term. The relatively high valuation in India is justified on the assumption that the rate of growth of India’s economy will be high in relative terms compared to other emerging market economies. What do you make of the recent changes in the QIP norms? Do you think India Inc is now better equipped to raise money vis-à-vis ADRs (American Depository Receipts) or GDRs (Global Depository Receipts) route? Good companies have never faced problems to raise money from the market in the recent past at fair valuations. However, new QIP norms would certainly benefit in the pricing strategy, as last 6 months average price would work out quite low when compared with last 15 days’ average prices. However, our market along with the regulatory administration must ensure that there is no price manipulation in the market for the success of the new norms. Foreign flows continue to look bleak, do you think we will have to live with lesser flows? Indian economy is worth $1 trillion, growing at around 7% per annum. Now, that works out to annual accretion of $70 billion worth output in the economy, a large part of which will be generated by companies engaged in manufacturing, services, infrastructure, etc. Our savings rate is higher at 30%- plus. So, that means $300 billion worth money flows into different asset classes like real estate, bullion, bank’s fixed deposits and of course, equities. That flow also keeps growing by $21 billion annually. However, as Indians are under-invested in equities, even a slight incremental flow from the domestic savings pool going into equities will see a surge in liquidity in the equity market. In this backdrop and over a period of time FII inflows would impact market sentiment less and less. Given that equity markets are in such turmoil and currency futures are to kick off by month-end, what would be your advice to investors? Currency futures will be an excellent instrument for knowledgeable investors and speculators to swiftly shift their assets from one to another and hedge the risk associated with the asset class. The way equity traders speculate on the basis of quarterly results there could be large speculative action in the currency futures ahead of weekly inflation data making the instrument a very liquid and vibrant one. Conventional risk takers in currency market, like exporters and importers, will find it very useful and transparent for hedging their risk.

Bottoming Out

THE MARKET declined for the second successive week, with the Sensex finishing 2.19% or 323 points lower, the Nifty losing 2.33% and the CNX Midcap falling 2.71%. Ranbaxy was the biggest winner among the Sensex stocks with a 4.6% gain. The other gainers were HUL, HDFC Bank, Tata Power, Sterlite, Bhel and Infosys with accruals ranging between 2.5% and 0.3%. ACC was the biggest loser among the Sensex stocks with an 8.4% loss. The other losers were SBI, Satyam Computer, Grasim Industries, NTPC, M&M, ONGC and ITC with losses between 7.7% and 4.7%. Vishal Information Technologies was once again the biggest winner among the more heavily traded non-Sensex stocks with a 29.7% gain. Other non-Sensex winners with gains ranging between 11.3% and 3.1% were Core Projects & Technologies, Dish TV India, Rolta India, GHCL, KS Oils, SAIL, Indian Bank, Balrampur Chini Mills and Gujarat NRE Coke. SEL Manufacturing was once again the biggest loser among the more heavily traded non-Sensex stocks with a 29% loss. Other losers were Indiabulls Financial Services, India Infoline, Sesa Goa, HPCL, IOC, Wire & Wireless, Nagarjuna Construction and HDIL with losses between 15.8% and 7.9%.

INTERMEDIATE TREND:The market remains in an intermediate downtrend, with the indices having closed at three-week lows a day before Friday’s rally. The downtrend started on July 12, and is nearly two weeks old. The levels to be crossed for a new intermediate uptrend have moved closer to 14,746 for the Sensex, 4,435 for the Nifty, and 5,791 for the CNX Midcap. A moderate rally lasting just two sessions can do the trick, if it takes place early in the week. Almost all global indices are in intermediate downtrends, and most markets are some distance below their uptrend triggers, unlike the Sensex. This is not surprising, as it has been the strongest global index since mid-July.

LONG-TERM TREND:The indices have falling intermediate tops and bottoms, and are therefore, in major (i.e. longterm) downtrends. This means we are still in a bear market. The market’s long-term trend will turn up if the Sensex closes above its last intermediate top of 15,580. The equivalent for the Nifty is 4,650, and that for the CNX Midcap is 6,016. The odds will shift in favour of a new bull market if this intermediate downtrend were to end at a higher level than the previous intermediate bottom of 12,514 for the Sensex. Global indices also have falling intermediate tops and bottoms, and are also in major (long-term) downtrends. Our market looks more likely to end its bear phase than most others.

TRADING & INVESTING STRATEGIES:Long-term investments should be made as soon as this intermediate downtrend ends, and especially if a bottom is established above 12,500. There is not much point in getting out of existing holdings now, as the bear market is now over six months old and had resulted in a 40% fall in the Sensex when the July lows were hit. Going by the history of the past 20 years, we should be closer to a market bottom. In fact, some investments can be made even now in technology and pharmaceuticals, as these are not being affected much by the downtrend. Swing trading may not be that successful, as the market is tending to change direction overnight. Day-trading opportunities appear to be available on both the long and short sides. Remember that proper risk and money management is more important for profitable trading than a bet on the market’s direction.

GLOBAL PERSPECTIVE:Major international markets are in intermediate downtrends, and most are above their last intermediate bottoms, typically established in mid-July. Hong Kong, Shanghai and Brazil are among the markets that have fallen below their last intermediate bottoms. The Dow Jones will enter an intermediate downtrend if it crosses 11,800, and it will have to stabilise above 12,000 to enter a possible bull market. A fall below 10,700 will mean a continuing bear phase. The Sensex was almost exactly at the same level after the 12 months that ended on Wednesday, taking it up one spot to the sixth position among 40 well-known global indices considered for the study. Brazil still heads the list with an 8.1% gain. Slovakia, Belgium and Spain occupy the next three spots. The Dow Jones Industrial Average has lost 13.6% and the Nasdaq Composite 6.8% over the same interval. (These rankings do not take exchange rate effects into consideration).

The Worst May Be Over

CALENDAR YEAR ’08 has seen a very volatile domestic capital market. From the highs of about 21,000 in January ’08, the BSE Sensex came down to a low of about 12,500 in July ’08, before recovering to its current levels. In the process, it wiped out all the gains accumulated since April ’07. Before forming a medium-to-long term strategy for the stock market, one should look at the reasons for this volatility. In late ’07 and January ’08, the market marched higher on the back of high gross domestic product (GDP) growth, and good corporate performance. Significant foreign institutional investors (FII) inflows in late CY07 (September-December ’07) helped the market ride higher. This euphoria led to the Indian market outperforming its Asian peers by about 15% in December ’07-January ’08. However, during this period of euphoria, the stock market ignored the factors which were impacting global bourses negatively. These included rising crude prices, the subprime crisis in the US and depreciation of the dollar vis-à-vis major currencies, including the Japanese yen. On the valuations front too, at 21,000 levels, the market was already discounting next year’s (FY09) earnings by about 21x, which was at the higher end of the valuation band. These global concerns led to an eventual withdrawal of liquidity from the Indian market, resulting in a steep fall. Subsequently, domestic factors like rising inflation, increasing interest rates, rising fiscal deficit (due to ever-increasing crude/commodity prices and subsidies) and prospects of an economic slowdown took over. This led to the under-performance of the domestic market in the second quarter of ’08, vis-à-vis other emerging markets. If we look at the current scenario, inflation has touched 12.63% (due to high crude and commodity prices) and is expected to remain at higher levels in the coming months, according to the Reserve Bank of India (RBI). The monetary and fiscal measures taken by the RBI and government are impacting growth. The high commodity/crude prices and interest rates are affecting corporate profitability. While this is negative from the stock market perspective, we think that the same is now already getting factored in. In fact, the consensus GDP growth for FY09 is already lower than RBI’s estimate of about 8%. The market also recognises the fact that inflation may inch up further in the near term before cooling down and interest rates may move up marginally over the current levels. However, a further deterioration in the US economy and a surge in crude prices remain the key risks. Crude and commodity prices have fallen appreciably from their highs, of late. But with the global economy slowing down, demand is expected to moderate. Some members of the Organisation of Petroleum Exporting Countries (Opec) have also increased the supply of crude. This is expected to provide relief to global equity markets. The monsoon in India has also revived in recent weeks, providing a much-needed relief on the inflation front. Recent developments on the political front suggest that stalled reforms may see the light of the day in the near term. We expect the market to move up once it gets more confident about FY10 earnings. This is expected to make the market more attractive from a medium-term perspective. This should lead to improved FII liquidity especially, as India, despite the slowdown, is expected to be the second-fastest growing economy in the world. Post the recent under-performance, we believe that the valuation premium of the Indian market has also reduced significantly. Though negative global and domestic factors have impacted the economy, corporate performance and the market in CY08, things appear to have taken a positive turn in the recent past. With FY09 valuations looking fair, we expect the market to undergo a correction in the short term before seeking a trend. The triggers which are expected to provide the medium-term direction are FY10 earnings, inflation, crude prices and the US economic scenario.

Not Everybody Is Selling

While it’s demoralising for investors to hear about the exodus of deep-pocketed FIIs, they can take heart from the fact that LIC, the big daddy of the Indian equity market, is on a shopping spree. Krishna Kant tells you why
THE WAY the Indian equity market has moved during the year so far, it seems a big sale is going on at the bourses. The biggest party poopers have been foreign institutional investors (FIIs). They have reportedly sold nearly Rs 50,000 crore worth of equity in the first seven months of the current calendar year, or an estimated 6% of their cumulative portfolio at the end of ’07. This has created an impression that all large long-term investors have lost faith in Indian equities. Nothing can be further from the truth. While it’s demoralising for retail investors to hear about the exodus of deep-pocketed FIIs, they can take heart from the fact that the big daddy of the Indian equity market — Life Insurance Corporation (LIC) — is on a shopping spree. Taking advantage of the fall in stock prices of India’s top companies, the insurance behemoth is meticulously preparing for the next bull run by accumulating additional stakes worth Rs 11,000 crore in India’s top 21 companies across sectors. LIC now owns an average of 6% of the equity capital of these companies, compared to around 5% by the end of the June ’07 quarter. In many top-rung companies including Tata Motors, Siemens, Grasim Industries, Cipla and Kesoram Industries, LIC’s holding has now crossed or is approaching the technically important mark of 10%. Combined with its already large stake in companies such as Larsen & Toubro (L&T), ACC and ITC, the life insurance major is truly emerging as a force to reckon with on Dalal Street. Interestingly, a bulk of the incremental investment came during the bear phase. Nearly three-fourths (73%) of LIC’s total incremental investment was done in the past two quarters of the current calendar year. And in quite a few companies, LIC’s net buy ratio in the first two quarters was in excess of 100%. This means that LIC was booking profits when the market was at its peak during the December ’08 quarter and used the profits to raise its stake in these companies when their stock prices subsequently fell in ’08. And that’s where the lesson lies for retail investors: Make long-term bets, but don’t lock in your entire investment in any stock, and don’t exit completely unless you have lost faith in the company or its management. Divide your investment in two parts — core and floating. Keep your core portfolio untouched across the ups and down, but churn the floating part to take advantage of market movements. Say you own 500 shares in ACC, then you can define 250 shares as core and keep churning the other half (the floating part) to take advantage of a rally. The profits so booked will raise your purchasing power when ACC is in a bear phase, as it is right now. This is exactly what LIC has been doing over the past year. It used last year’s rally to book partial profits in some of its oldest equity investments. For instance, it was continuously shedding its stake in L&T and Tata Steel during June-December ’07, when their stock price was rising. As the tide reversed in January this year, LIC become a net buyer on both these counters. In the past two quarters, it picked up an additional stake worth Rs 1,500 crore in these two companies, overwhelmingly financed by nearly Rs 1,100 crore raised by selling them at their highs. In all, LIC raised nearly Rs 4,000 crore by diluting its stake in the 21 companies during the latter half of the last calendar year. This cash came in handy when the market turned bearish in the new year. The bull run profits financed nearly 40% of LIC’s bottom-fishing during the January-June ’08 meltdown. And in quite a few counters such as Tata Steel, LIC is cash positive even after hiking its stake, thanks to its right timing. LIC’s moves during the past 12 months also demonstrate that it pays to go against the market mood if the company has a compelling growth story in the long term. The insurance major has been accumulating Tata Motors, Kesoram Industries, Indian Hotels and Bharat Heavy Electricals (Bhel), among others, for more than a year now, even as these stocks continue to underperform the market. While bottom-fishing in these counters is yet to pay off, LIC has made a small fortune on its incremental investment in ITC and Cipla during ’07. Till last year, both these counters had underperformed the market, but have since then become two of the top performing large-cap stocks. Who knows what lies ahead for the current underperformers in LIC’s portfolio. However resourceful you may as an investor, predicting the future course of the market with full certainty is impossible. But it is very much within your means to minimise the downside in a meltdown and increase your chances and quantum of gains when good times arrive. And this is exactly what the bigdaddy of D-Street is doing. LIC has ensured that when the tide in the currently unpopular sectors such as auto, capital goods, cement and hospitality reverses, it will be sitting on fat profits, which will more than make up for the losses it has endured so far. Nothing stops you from following in LIC’s footsteps. So, go ahead and be brave.

Fear of monetary tightening may keep market edgy

EXTENDED uncertainty over the direction in global crude oil prices in the near-term may keep Indian equities volatile this week. With the chances of more monetary tightening measures by RBI increasing, and inflation rising to a 16-year high, the market undertone is nervous. Analysts said the government’s increased desperation to bring down inflation before the general election in May next year could trigger monetary tightening measures that could be more than desirable. “This political factor (elections) is why the risk of further monetary tightening cannot be dismissed out of hand, be it more hikes in interest rates (repo rate, at which banks borrow from RBI for short-term) or further increases in the cash reserve ratio (CRR or the minimum amount banks need to deposit with RBI in cash) to reduce bank liquidity,” CLSA’s Christopher Wood, said in his write-up, Greed and Fear. India’s inflation rose its fastest in more than 16 years, by 12.63% in the week to August 9 from 12.44% last week. A section of the market speculates that monetary tightening measures by the central bank may happen over the next 2-3 weeks in an anticipation of further rise in inflation, as the recent salary hikes for government servants could fuel further consumption, feel analysts. Against this backdrop, Woods notes: “Indeed, from an absolute-return point of view, Greed and Fear is far from clear that the market has yet bottomed despite the anticipated further decline in oil prices.” On Friday, crude oil on the New York Mercantile Exchange (NYMEX) fell 5.4% to settle at $114.59 a barrel, the biggest drop on a percentage basis since December 27, 2004, led by a stronger dollar and reduced demand for the commodity from the US, which consumes almost 25% of the world’s oil production. “We believe that a virtuous circle of a stronger dollar and lower oil prices is what the world needs now. Calmer commodity prices should also temper the hawkish bias that some inflation-targeting central banks have had,” Morgan Stanley said in a research note. Amid lingering concerns over the impact of strong oil prices on the economy, companies and the government’s finances, brokers said influential foreign institutions will defer their return to India till the situation improves. They feel their return was highly unlikely in the foreseeable future, as valuations of Indian equities remain at premium levels compared with other emerging countries. Foreign institutions have net sold shares of Rs 28,411.50 crore so far in 2008. “It is fair to state that the picture for the Indian stock market should be much clearer by the middle of next year. By then, the elections will be over and with them the need for pursuing economically irrational policies. And by then, reported inflation should be dramatically lower and RBI should have commenced monetary easing,” CLSA’s Woods said.

Gold, silver soar as $ falls, crude rises

GOLD and silver moved by over 5% this week due to physical demand, fall in US dollar against major currencies and increase in the crude oil prices. Gold October contract on Comex division of New York Mercantile Exchange closed up 5.23% at $833 per ounce against previous week. Silver September contract on Comex closed up 5.1% at $13.59 per ounce against previous week. Locally on MCX gold October contract closed up 3.76% at Rs 11,681 per 10 grams against the previous week making a high of 11,865. Silver September contract on MCX closed up by 3.49% at Rs 20,009 per kg before making a high at Rs 20,590. Physical demand from India and other consuming countries and a shortage of American Eagle bullion coins due to soaring demand supported the gold prices. Even the dollar which was down 1.2% this week against the euro supported commodity prices including crude oil. Crude oil prices also increased on speculation that rising tensions between the US and Russia may disrupt supply. Going forward, Subodh Gupta from Anand Rathi Commodities feels that one important point to look at is the money flow into gold. He said that despite gold rising fund managers continue to liquidate their long positions in gold. “We expect gold prices to resume its bearish trend for the coming week with prices expected to touch previous lows of $772. Possible breach of this level will lead to prices coming down to $750 in coming days,” Mr Gupta added. The critical indicators which may affect gold prices include US home sales data and the minutes of Federal Open Market Committee meeting which will give further direction on the policy of Federal Reserve in coming days. However a research report from Angel Commodities is bullish on the precious metals if oil prices move up and dollar weakens. “Fundamentals are supportive for precious metals with rising geopolictical risk, deepening worries about the financial sector. Gold prices can trade between $800 and $850 per ounce in coming weeks,” the report adds. Physical demand from India and Middle East countries is expected to rise in coming months. “This can lead to short term supply shortages and sharp rise in gold and silver prices in coming months,” the report said.

US stocks brace for a whipsaw week

WHAT should be a holiday lull of a week looks set to be anything but, with Wall Street on high alert for the latest twists and turns in the credit crisis, more volatility in commodity prices and key developments in the race for the White House. Fallout from the credit crisis continues to plague markets, with investors increasingly believing in the likelihood of a federal bailout of home-funding giants Fannie Mae and Freddie Mac. Some market watchers expect the Federal Reserve and US Treasury Secretary Henry Paulson to take action as early as this weekend. Lehman Brothers will also remain firmly in the spotlight, after state-run Korea Development Bank said on Friday that the US investment bank was one of its options for acquisitions. That announcement came a day after veteran bank analyst Dick Bove said Lehman could become a target of a hostile takeover. Financials aside, the sharp and frequent turnarounds in the direction of the price of oil have played a key role in the market’s daily fortunes. Mounting geopolitical tensions between the West and Russia and any economic data showing slowing global growth could tug oil either way. The US presidential campaign also will take a more central role, with Republican John McCain and Democrat Barack Obama set to reveal their vice presidential running mates and the Democratic Party’s national convention in Denver. Investors will look for how Wall Streetfriendly the vice presidential picks are, analysts said. “There are a lot of cross-currents here. You’ve got oil, financials and politics coming together, and it’s hard to see that combining in a way that’s a perfect storm to the downside or a perfect environment to the upside,” said Jeffrey Kleintop, chief market strategist at LPL Financial Services in Boston. All these cross-currents come in the week before the Labor Day holiday, and analysts said the low trading volume could exacerbate swings in the major stock indexes. “I think it’s important that the week ahead is the last week in August and so whatever happens, we should take it with a grain of salt,” said Linda Duessel, market strategist at Federated Investors in Pittsburgh. For the week ended August 22, the Dow Jones industrial average dipped 0.3%, while the Standard & Poor’s 500 Index declined 0.5%, and the Nasdaq Composite Index lost 1.5%. Housing will be a dominant theme at the beginning of the week, with July existing home sales on Monday, followed on Tuesday by the S&P Case-Shiller home price index and new home sales for July. Consumer confidence data on Tuesday, plus consumer sentiment and personal income data on Friday could give the market more clues about the health of consumer spending and the economy as the boost from tax-rebate checks wanes, said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey. The personal income data includes the Fed’s preferred inflation gauge. Preliminary real GDP data is expected to show second-quarter growth at an annual rate of of 2.7%, compared with 1.9% in the first quarter.

Resistance @ 4350

The market has opened on a negative note but has bounced
back. The Nifty on the daily chart is trading in a channel,
which is in the downward direction. The Nifty is at the
lower end of the channel with a support at 4235 and a
resistance at 4350, which is the upper end of the channel.
We expect the momentum to be negative and volatility on
intraday basis. Market breadth is negative with 495
advances and 649 declines. Daily KST has given a negative
crossover and is trading above the zero line. On the daily
charts, support at 4159 and strong resistance are indicated
at 4523.


On the hourly charts, KST, a momentum indicator, has given
a negative crossover and is trading below the zero line.
Strong support at 4316 and a very strong resistance at
4400 are indicated on the hourly charts.


Aban Offshore has gained momentum and is likely to test
Rs2,800 on the upside. Reliance seems to be having
resistance around Rs2,260 and on the downside is likely to
test Rs1,850. Banking sector has gained momentum and is
expected to move downward.

Banks, metals save the day

KEY indices posted decent gains on Friday, but the near-term outlook remains cautious in the absence of any fresh triggers. Bulls took heart from the steady trend in European markets, though overall trading volumes remained thin. With Friday’s rise, benchmark indices have managed to restrict their weekly loss to a little over 2%. “Activity in banking and metal counters helped trigger the rise. We feel oil (crude) will once again take a battering and the market will remain range-bound between 4250-4500,” said Prabhudas Lilladher head of institutional sales Rahul Jain. The 30-share Sensex rose 157 points to close at 14401.49, a gain of more than 1% over the previous close. The broader S&P CNX Nifty gained 44 points to close at 4327. The interest for second line shares seen the previous day was missing on Friday, with the BSE Midcap gaining a mere 18 points to close at 5,726. Among frontline stocks, Sterlite Industries, SAIL and Hindalco were the best performers, each gaining over 4%. Other notable gainers included HDFC, Hindustan Unilever and BHEL, up 1-3%. Major losers included Satyam,Grasim and NTPC, down 1-3%. Brokerage firm Morgan Stanley said that price earning ratio would be a more critical driver than earnings. “At the portfolio level, it is advisable to avoid stocks and sectors that are most susceptible to a fall in price-toearnings ratio. They include stocks and sectors where the P/E is trading well above average and has risen a lot over the past five years,” the Morgan Stanley note to clients said. According to the broking firm, industrials, financials, and utilities appear to be the most vulnerable sectors. Total turnover trade in market stood at Rs 58,989 crore, which is very much within the average daily volumes for the past few months. On the global front, crude oil dropped from $121 a barrel on Thursday to close at $119.40 a barrel on Friday. Analysts say that a strengthening dollar and a report of higher output from OPEC helped correct oil prices. Meanwhile, the nuclear supplier group (NSG) proposed conditions to lift a global ban on fuel and technology exports to India at a meeting in Vienna on Thursday. Market observers are keeping a close watch on the developments over the issue, as a green light from 45-nation NSG is imperative for the nuke deal to proceed to US Congress for final ratification. European markets were trading strong early on with shares in the UK and Germany strong by 2% and 1.7%, respectively. Asian markets ended lower, with China and South Korea falling over 1%.

Exit Parameters

1. Exit at a retest of intraday high/low or swing high/low
2. Exit at fixed profit objective in dollars
3. Exit at an objective chart point
4. Exit at a time interval (i.e. four days)
5. Exit at a combination profit time: i.e. first profitable
open or second profitable close
6. Don’t exit but just reverse
7. Exit on a range expansion
8. Trail a stop off the low
9. Trail a stop off the high
10. Exit on close
11. Exit if the day’s close is less than a certain percent of
the daily range in the direction you are trading

Entry plan for breakout trades:

Use the first few hours’ range for a breakout trade
· Pre-publications and criteria will be for a narrow range
market that has been consolidating for at least five trading
days
· Let the market breakout of its first hour’s range and look
to buy a bull flag on a one-minute chart
· Should the market trade back and test support of a high of
first hour range this would be a good time to buy
· The exit will be just under the support of the first hour
range. Shorts are reversed. Profits will be taken for more
than x points on 50% of position, and move stops up to
breakeven. Look for continuation patterns for pivots to
adjust stops and seek to exit into recent resistances or
higher timeframes’ EMAs.

Entry plan for trending environment:

· Markets to retrace 38-50% off its highs
· A support at its 20-period exponential moving average
· A bull-flag formation
· On a smaller timeframe, look for a ABC corrective wave to
confirm bull flag pattern
· Test of the lower trend-line of the bull-flag pattern
· Stochastic to have reached oversold condition of 20 or lower
· Once the market confirms all this criteria, place a buy order
at the market
· Exit at the pivot low below its 20 EMA as risk point, typically
no more than x points of risk on any one trade. Exits will be
as follows: when profitability is more than x points, seek to
take off 50% of my position immediately and move the stop
up to the break-even point. Short sells are simply a reverse
of the above.

What is a Bull Market

In a Bull Market the Market is dominated by buyers.

There is huge pressure from buyers buying shares in the Market.

Huge demand for share is seen in in the Market.

When the Market closes at the High Point of the day than it is a Bulls day.

When the Market forms high tops and high bottoms over a continues period of time than it is a Bull Market.

Suppose in a month if a market closes at the high point of the day for at least 25 days than the market is in full grip of the Bulls.

iPhone comes to India

“Your wait is about to end! iPhone 3G arrives on 22 August. 8GB model is for Rs 31,000 and 16GB for Rs 36,100… Confirm your booking by paying Rs 10,000…” And it's not Vodafone that's going all out to promote the phone, Airtel launched the Apple iPhone 3G at its centre in Salt Lake at 11.20 p.m. on Thursday. Members of the Press were invited to interact with the “first celebrity customer”! How would representatives of these companies react when something like Richard Branson's WhiteKnightTwo arrives in India? Yes, customers in the USA drooled for months before iPhone 3G became available and they queued up during the wee hours, speaking geeky terms. Here it's more to do with the “show off” factor. The question is why should anybody pay Rs 31,000 for a cellphone that was priced at $199 (8 GB model) on 9 June in the USA? Mr Sridhar Rao, CEO of Vodafone East said: “The phone has been designed basically for people belonging to the high-income group and we hope that it will attract our customers to buy the product.” Echoing similar view, a spokesperson of Airtel said: “Not only the model but there are certain enhanced features in this iPhone which will compel the users to buy this model.”

Inflation marches forward

Inflation touched a high of 12.63 per cent for the week ended August 9 on the back of higher food and fuel prices even as the government announced more steps to ensure adequate supply of essentials.
In the previous week, inflation was 12.44 per cent, while it was 4.24 per cent during the corresponding week last year.
The government today announced measures to control the hoarding of cereals and pulses as well as ensure more wheat and rice in the open market.
“Annual inflation of 30 essential commodities, however, continues to be range bound (5.7 per cent to 6.7 per cent) in the 19 weeks of the current fiscal,” a finance ministry statement said.
At a cabinet meeting today, it was decided to extend till April 2009 the power of states to regulate the stocks of rice, wheat, pulses and edible oils with traders.
The government also decided to sell surplus stocks of wheat and rice in the open market. The Food Corporation of India will sell directly to bulk buyers through an open tender system. The quantity and timing of the sale will be decided later.
To manage iron ore prices, steel makers and iron ore producers are holding a meeting tomorrow in Bangalore, at the behest of the government.
Officials said the government was likely to persuade iron ore producers to sell the raw material at reasonable rates to steel makers and enter into long-term contracts for the supply of the ore.
The next meeting will be held in Calcutta on August 27.
Analysts, however, differed on the possibility of an interest rate hike.
“The upward trend of inflation continues and has belied the hope that it has stabilised. The Reserve Bank of India could increase the credit reserve ratio and the repo rate by 25 basis points each,” said D.K. Joshi, principal economist with rating agency Crisil.
However, N.R. Bhanumurthy of the Institute of Economic Growth said, “The central bank is unlikely to take further monetary tightening measure until inflation peaks at 13 per cent. I expect inflation to touch this level by November-December.”

Sensex shock

The sensex today dipped over 430 points on heavy selling in interest-sensitive banking and realty stocks. The BSE bellwether settled the day at 14243.73, a loss of 434.50 points, or 2.96 per cent, from its previous close.

A Wild Ride To Nowhere

THE US STOCK market has had more swings lately than a gymnast on the pommel horse. Stocks rallied August 8, with the Dow Jones industrial average up more than 300 points, or up 2.65%, and the S&P’s 500-stock index gaining 2.4%. A rally like that might look like a decisive move higher, but this summer it seems almost routine. In the past 10 days alone, the Dow has seen triple-digit swings up or down on seven days. Despite the wild ride, stocks have gone nowhere in the past six weeks. More than a week into August, the S&P 500 trades almost exactly at the same level as late June. Many long-term investors seem to be leaving their money on the sidelines, while they waver between optimism and pessimism. Meanwhile, short-term traders jump at every piece of news, pushing the market hard in one direction for a day or less. Lifting investors’ spirits every few days have been frequent drops in the price of oil. Yet the persistent financial crisis continues to weigh on the market. The stock market tends to look ahead to the future — but that future’s hazy now. The US and world economies seem to be at turning points. It’s hard to grasp the complexities of the financial system’s distress or the stress on the world economy. Despite the wild swings, there has been no spike in the VIX, a market volatility index based on the options traded on the S&P 500 that often reflects the level of fear and panic in the market. The VIX hit a recent high of 32.24 on March 17, after the collapse of investment bank Bear Stearns. And it rose above 28 in early July amid worries about Freddie Mac and Fannie Mae. But the VIX, which trades on the Chicago Board Options Exchange, was barely above 20 on August 8, three points below the past year’s average. The lack of fear may reflect confidence among professionals that, eventually, the stock market will settle down and find a direction.

BEARS BACK WITH A BANG

BEARS seem to be moving in for the kill, aware that the micro as well as macro conditions are in their favour. A low profile market operator — famed for his bearish calls, and known to have made a killing in the past few months — is said to have built significant short positions, convinced that the market is set to breach its July lows shortly. Given the absence of any positive triggers on the horizon, traders with long positions in the derivatives segment do not have any incentive to carry forward their positions. On the macro front, inflation climbed to a fresh 16-year high of 12.63%, raising concerns that interest rates may be hiked further. Globally, the situation is even more gloomy, as experts feel that the worst of the sub-prime crisis is yet to unfold.

Given these factors, market watchers expect another round of sell-off in the next few days. Many brokers feel this bout of selling could be far more painful than the ones seen so far.

On Thursday, the 30-share Sensex plummeted 434.50 points or nearly 3% to close at 14243.73, with sellers targeting banking and real estate shares. The 50-share Nifty shed 131.90 points to close at 4283.85. Dealers attributed the steep fall in real estate and banking shares to the build-up of long positions recently, as many traders felt that the worst for these sectors was over. But with inflation still mounting, it appears that RBI will have to announce further liquidity tightening measures. “We are likely to see a sideways movement for the next one year at least,” says Edelweiss Capital chairman and managing director Rashesh Shah, adding that the next 3-4 months could be tough.

“There are no positive triggers in sight. Inflation and crude oil prices are still not under control, and corporate earnings are set to plateau over the next couple of quarters,” he added.

Thursday’s decline was not backed by strong volumes. Market watchers say this is an indication that the market may not have bottomed out yet. Traded turnover on both exchanges combined was around Rs 65,000 crore. ICICI Bank, HDFC Bank and State Bank of India were among the worst-performing frontline shares, falling between 5% and 7%. Technology shares too were not spared, despite the fact that the rupee is likely to stay weak against the dollar. TCS, Wipro and Infosys were down between 2% and 3%.

Sensex snaps losing string, gains 135 pts

The Bombay Stock Exchange benchmark sensex on Wednesday spurted by over 134 points to snap its five-day long losing spree with metal, capital goods and realty sectors attracting buying support amid positive cues in Asian bourses. The 30-share sensex, which lost nearly 960 points in the past five sessions, rebounded to post a gain 134.50 points at 14,678.23. The key index touched the day’s high of 14,746.20 and a low of 14,584.03 points. The 50-share nifty of the National Stock Exchange also gained 47.50 points, or 1.09%, to close at 4,415.75 from its last close. Market participants said the domestic bourses were driven by global factors in the absence of any major local trigger and a strong bounce in Asian markets pushed up domestic stocks on Wednesday.

Sensex climbs 134 points as bears take a break despite

EQUITY benchmarks snapped a five-session losing streak on Wednesday, shrugging off global concerns like rising inflation in the US and signs of renewed strength in crude oil prices. Yet, market watchers are not hopeful of a sustainable rally anytime soon as the engines of the economy appear to be under strain. The 30-share Sensex rose 134 points to close at 14,678, up 0.9% over the previous close. The broader S&P CNX Nifty closed at 4,415, up 1% its previous close. But the real action was in mid-cap stocks, with the representative BSE Midcap gaining over 1% to close at 5,826. “There is a lot of promoter buying in mid-cap stocks, which indicates that the companies see value at these levels,” Religare Securities president Amitabh Chakraborty. This is the time to invest in selective stocks instead of taking a view on the sector as a whole, he added. Among sectoral indices, BSE Realty, Power and Capital Goods were the best performers, rising more than 1% over their previous close. Key fertiliser stocks rose between 2-6% after the ministry of fertilisers approved a proposal to give Rs 22,000 crore in cash to fertiliser companies as subsidy, apart from the budgetary allocation of Rs 32,000 crore. Union minister of chemicals & fertilisers and steel Ram Vilas Paswan has said that the finance ministry has cleared Rs 22,000 crore in cash as subsidy for fertiliser companies. He said that the second tranche of Rs 32,000-crore subsidy would also be paid in cash. With the move expected to improve the cash flow positions of fertiliser companies, investors loaded up on shares like Tata Chemicals, Chambal Fertilisers & Chemicals, Nagarjuna Fertilisers & Chemicals, Zuari Industries, National Fertliser and Rashtriya Chemicals & Fertilisers. Hopes of a hike in tyre prices stirred up interest in tyre stocks. Among key gainers, shares of JK Industries, Goodyear India, Ceat, Apollo Tyres and MRF rose 1-5%. Analysts expect manufacturers to hike product prices to offset steep rises in prices of natural rubber and rubber chemicals.

Fibonacci Retracement

A term used in technical analysis that refers to the likelihood that a financial asset's price will retrace a large portion of an original move and find support or resistance at the key Fibonacci levels before it continues in the original direction. These levels are created by drawing a trendline between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.

Fibonacci retracement is a very popular tool used by many technical traders to help identify strategic places for transactions to be placed, target prices or stop losses. The notion of retracement is used in many indicators such as Tirone levels, Gartley patterns, Elliott Wave theory and more.

What you Must not do in a Stock Market

1. Don't panic

The market is volatile. Accept that. It will keep fluctuating. Don't panic.

If the prices of your shares have plummeted, there is no reason to want to get rid of them in a hurry. Stay invested if nothing fundamental about your company has changed.

Ditto with your mutual fund. Does the Net Asset Value deep dipping and then rising slightly? Hold on. Don't sell unnecessarily.

2. Don't make huge investments

When the market dips, go ahead and buy some stocks. But don't invest huge amounts. Pick up the shares in stages.

Keep some money aside and zero in on a few companies you believe in.

When the market dips --buy them. When the market dips again, , you can pick up some more. Keep buying the shares periodically.

Everyone knows that they should buy when the market has reached its lowest and sell the shares when the market peaks. But the fact remains, no one can time the market.

It is impossible for an individual to state when the share price has reached rock bottom. Instead, buy shares over a period of time; this way, you will average your costs.

Pick a few stocks and invest in them gradually.

Ditto with a mutual fund. Invest small amounts gradually via a Systematic Investment Plan.
Here, you invest a fixed amount every month into your fund and you get units allocated to you.

3. Don't chase performance

A stock does not become a good buy simply because its price has been rising phenomenally. Once investors start selling, the price will drop drastically.

Ditto with a mutual fund. Every fund will show a great return in the current bull run. That does not make it a good fund. Track the performance of the fund over a bull and bear market; only then make your choice.

4. Don't ignore expenses

When you buy and sell shares, you will have to pay a brokerage fee and a Securities Transaction Tax. This could nip into your profits specially if you are selling for small gains (where the price of stock has risen by a few rupees).

With mutual funds, if you have already paid an entry load, then you most probably won't have to pay an exit load. Entry loads and exit loads are fees levied on the Net Asset Value (price of a unit of a fund). Entry load is levied when you buy units and an exit load when you sell them.
If you sell your shares of equity funds within a year of buying, you end up paying a short-term capital gains tax of 10% on your profit. If you sell after a year, you pay no tax (long-term capital gains tax is nil).

What you should do in a stock Markert

1. Get rid of the junk Stocks
Any shares you bought but no longer want to keep? If they are showing a profit, you could consider selling them. Even if they are not going to give you a substantial profit, it is time to dump them and utilise the money elsewhere if you no longer believe in them.
Similarly with a dud fund; sell the units and deploy the money in a more fruitful investment.
2. Diversify Your Porfolio
Don't just buy stocks in one sector. Make sure you are invested in stocks of various sectors.
Also, when you look at your total equity investments, don't just look at stocks. Look at equity funds as well.
To balance your equity investments, put a portion of your investments in fixed income instruments like the Public Provident Fund, post office deposits, bonds and National Savings Certificates.
If you have none of these or very little investment in these, consider a balanced fund or a debt fund.
3. Believe in your investment
Don't invest in shares based on a tip, no matter who gives it to you.
Tread cautiously. Invest in stocks you truly believe in. Look at the fundamentals. Analyse the company and ask yourself if you want to be part of it.
Are you happy with the way a particular fund manager manages his fund and the objective of the fund? If yes, consider investing in it.
4. Stick to your strategy
If you decided you only want 60% of all your investments in equity, don't over-exceed that limit because the stock market has been delivering great returns.
Stick to your allocation.

General Market Advice:

1. Never chase a stock.
2. Buy when markets are in the grip of panic.
3. Only buy fundamentally strong stocks, which are undervalued.
4. Buy stocks grown in top line and bottom line over the past years.
5. Invest in companies with proven management.
6. Avoid loss-making companies.
7. PE Ratio and Growth in earnings per share are the key.
8. Look for the dividend paying record.
9. Invest in stocks for sure returns.
10. Stocks have been the high yielding asset class over the past.
11. Stocks are an asset class.
12. The basic property of any asset class is to grow.
13. Buy when everyone is selling and sell when everyone buys.
14. Invest a fixed amount each month.

Introduction

Stock Market is a very complex Business to understand. It behaves in a very uncertain way. It has to be understood and one should do investment in a very systematic way. Here I will give you my personal views and experience which has been learned by me in my association with the stock Market in last 20 Years.