WINNING TRENDS IN STOCK MARKETS

“PEOPLE ARE NOT DISTURBED BY THINGS RATHER BY THE VIEW OF THINGS” –ALBERT ELLIS, AN AMERICAN PSYCHOLOGIST WHO DEVELOPEDRATIONAL EMOTIVE BEHAVIOUR THERAPY.

THIS PSYCHOLOGICAL APPROACH IS APT TO MANY BUSINESS HOUSE DECISIONS BUT VERY TRUE IN STOCK MARKETS AS VIEWS BECOME PALE & FEARFUL DURING THE TIMES OF DEPRESSIVE NEGATIVE ENVIRONMENTS, JUSTLIKE NIGHTMARES IN  THICK FORESTS OF ABUNDANT DESOLATION.

THE STOCK-MARKETS CLEARLY REPRESENT A FRIGHTENING CLUMSY PICTURE AT TIMES WHEN VOLITITIY AT ITS PEAK & FALL CONTINUES!!, NO MATTER HOW SEASONED SOMEBODY BUT TO OVERCOME THE NERVE WRENCHING FEAR AND FORESEE THE FUTURE BECOMES DREADFUL.

TO AVOID UNCERTAINTIES IN STOCK MARKETS ARE NOT AT ANYBODY'S COMMAND OR CAPACITY BUT EVERY PARTICIPANT'S WISH....

TO MITIGATE THE FEAR AND UNDERSTAND THE EMERGING OPPORTUNITIES IN CHAOS, THE FOLLOWING APPROACHES CAN BE ADOPTED FOR BETTER RESULTS AND TO KEEP PACE WITH THE MARKET TRENDS...!!

A) CONVERGENT PROCESS:

THIS APPROACH IS MORE WIDELY ACCEPTED AND FOLLOWED BY THE FIIs, DIIs AND ESPECIALLY FOR THAT MATTER MORE PRECISELY BY HEDGE FUNDS. THESE HIGH RISK SEASONED CUTTING EDGE SMART PEOPLE PLACE HIGH BETS WITH AN ANTICIPATION OF HIGH RETURNS. THE BLOOM AND GLOOM CO-EXIST MANY A TIMES BUT THEIR SPIRITS ARE VERY HIGH.

HERE, STOCK PURCHASE CONCENTRATION IS SO HIGH THAT HUGE MONEY PUMPED AND LARGE CHUNK ACQUIRED AT A REASONABLE PRICE. THE COMPANY FUNDAMENTALS, ECONOMIC &BUSINESS TRENDS AND OTHER IMPORTANT PARAMETERS ARE LITTLE KNOWN TO OTHER RETAIL PARTICIPANTS BUT GET SURPRISED WHY AND HOW THESE COUNTERS ARE HOLDING ON TO THE TOP. 

LAST BUT NOT LEAST, THE VERY IMPORTANT MARKET MANAGEMENT MECHANISMS ARE PUT IN PLACE TO SEE THE PRICES RISE STEADILY AND GRADUALLY TO A LIMIT AND THEN A FINAL SHOOT UP …?. UNFORTUNATELY THE GREEDY POOR TRADERS AND RETAIL INVESTORS GET TRAPPED WHEN PARTICIPATE HEAVILY AND OFCOURSE THE WELL INFORMED SEEK AN EXIT…???

B) DIVERGENT PROCESS:

MAINLY FOLLOWED BY HNIs AND SMALL FUND HOUSES. THE PHILOSOPHY IS TO PROTECT THE CAPITAL AND INCREASE PROFITS IN BABY STEPS. THESE INVESTORS NEVER KEEP ALL EGGS IN ONE BASKET BUT PREFER DIFFERENT SECTORS. THIS DIVERGENT MEANS OF MAKING MONEY CAN OFFER SOLACE THAN ANY OTHER MODEL AS THE MARKET WAGGERIES ARE WELL TAKEN CARE. 

THESE PLAYERS ARE MODERATE IN RISK TAKING APPROACH, HAVE GOOD CONFIDENCE IN MARKETS BUT FEARFUL IN APPROACH. THEY ADOPT LONG-TERM PLAY WITH AN EYE ON SHORT-TERM GAINS, PLACE THEM IN GOOD POSITION AS THEY OFTEN TAKE-OUT PROFITS AT HIGHER LEVELS AND RE-ENTER AT LOWER LEVELS. SO, SAFE AND SECURE ALL THE TIME.

C) CHANNELLED PROCESS:

THE LADDER LIKE APPROACH IS ADOPTED BY SMART INDIVIDUALS TO ENSURE SUCCESS AT EVERY MOVE  WITH A LIMITED RESOURCE/MONEY. THEY KEEP MAINTAIN A WINNING STEAK ON BOTH THE DIRECTIONAL MOVES, SAIL ALONG WITH BULLS AND BEARS AS THEIR ADAPTABILITY & LIQUIDITY AT HAND ALLOWS SUCH FACILITY. THEY KEEP INCREASE VERY CALCULATED BETS, ALSO MAKE SUCCESS, A COMMON PHENOMENA LIKE CLIMBING A LADDER.

THESE PLAYERS ARE KNOWLEDGEABLE AND QUITE SMART IN CATCHING TRENDS IN THE MARKETS AND PLACE THEIR BETS SAFELY, ALSO MAKE SOME GOOD MONEY. THE PLAYERS SUCK EACH EMERGING OPPORTUNITIES IN STOCK MOVEMENTS BUT THEIR WELL ESTABLISHED APPROACH IS NOT KNOWN IN THE MARKET CIRCLES BUT MAKE DECENT COOL MONEY.

D) ZIG-ZAG JUMPING PROCESS: 

THIS APPROACH IS MOSTLY ADOPTED BY THE DAY TRADERS AND SWING TRADERS, ENJOY BUYING AND SELLING MANY A TIMES DURING THE DAY.THESE ENTHUSIASTIC TRADING PLAYERS ARE BACK-BONE TO MARKET LIQUIDITY AND FOR STOCK-TIPS ADVISORS. THEY KEEP ENGAGED EVERY TIME AND EACH TIME THEY TAKE A CALL AS THEIR GAME IS HIGHLY VOLATILE AND NO-BODY UNDERSTANDS WHY A BUYING IS MADE AND INSTANTLY A SELLING IS INITIATED. MANY A TIMES THEY BUY AT ONE COUNTER AND ALSO SELL ANOTHER SCRIP. ULTIMATELY, THEY ENJOY PARTICIPATION RATHER THAN MAKING MONEY.

THESE SMALL TIME RATHER INSTANT PLAYERS NEVER MAKE HUGE MONEY STORED IN THE MARKETS BUT LOSE MONEY FOR SURE, BECAUSE OF BUNDLE OF CONFUSIONS!. THE MORE THEY PLAY THE MORE THEY PAY. THEY HARDLY MAINTAIN ANY ORDER/METHOD, FIND NO TIME TO STUDY, PREFER EXTERNAL DEPENDENCY, MAINTAIN ADAMANT BEHAVIOUR TO A LOSING DEALS, RELY ON IRRATIONAL MEDIA COVERAGES & LIVE IN RUMORS AND PLACE HUGE BETS, BELIEVE IN CARRY ALONG WITH THE MOB IN THE MARKETS...ETC. ALL THE MORE, TAKE VERY FRAGILE DECISIONS AND UN-MINDFULLY INVITE HIGH-RISKS, UNFORTUNATELY GO INTO DUST...UN-NOTICED!!!!

SENSEX-RUN

Year	Open	High	Low	Close
1991	1027.38	1955.29	947.14	1908.85
1992	1965.68	4546.58	1945.48	2615.37
1993	2617.78	3459.07	1980.06	3346.06
1994	3436.87	4643.31	3405.88	3926.9
1995	3910.16	3943.66	2891.45	3110.49
1996	3114.08	4131.22	2713.12	3085.2
1997	3096.65	4605.41	3096.65	3658.98
1998	3658.34	4322	2741.22	3055.41
1999	3064.95	5150.99	3042.25	5005.82
2000	5209.54	6150.69	3491.55	3972.12
2001	3990.65	4462.11	2594.87	3262.33
2002	3262.01	3758.27	2828.48	3377.28
2003	3383.85	5920.76	2904.44	5838.96
2004	5872.48	6617.15	4227.5	6602.69
2005	6626.49	9442.98	6069.33	9397.93
2006	9422.49	14035.3	8799.01	13786.91
2007	13827.77	20498.11	12316.1	20286.99
2008	20325.27	21206.77	7697.39	9647.31
2009	9720.55	17530.94	8047.17	17464.81
2010	17473.45	21108.64	15651.99	20509.09
2011	20621.61	20664.8	15135.86	15454.92
2012	15534.67	19612.18	15358.02	19426.71
2013	19513.45	21483.74	17448.71	21170.68
2014	21222.19	28822.37	19963.12	27499.42
2015	27485.77	30024.74	26776.12	27011.31

US Fed: India safe but for how long?

US Fed: India safe but for how long?Thursday, 19 March 2015 - 11:00am IST | Place: Mumbai | Agency: dna webdesk

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  Shubhashish

This capital flight could also impact currency markets and rupee might lose some of its value like it did a couple of years ago.

• Representational illustration File Photo dna Research & Archives

The much-awaited statement from US federal Reserve is here and the emerging markets globally are rejoicing. Dollar was weakened against global currencies (Rupee opened 34 paise stronger) and thestock markets are elated (BSE and NSEjumped over 1% on Thursday morning). 

The press release of US Federal Reserve stated, "The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction." What this effectively means is that the Fed is not raising rates at the moment but is not averse to the idea in near future. 

It said, "When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%." 

What elated the stock markets globally is Fed's statement that it might still keep rates unchanged even after employment and inflation are in comfort zones. The statement read, "The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run." 

But what came as a music to ears of stock markets was the announcement that a rate hike in April meeting also remains unlikely. 

Global stock markets, especially emerging markets (incluing India), were expecting a huge sell-off from foreign investors if the US Fed signalled rate hike. However, as its possibility is ruled at the moment, the markets cheered the move. 

The last time Fed raised rates was in 2006. 

What this means for India? 

Raghuram Rajan, governor, Reserve Bank of India:

Even though Indian stock markets remain in a precarious situation as foreign money dictates the direction of the market, Raghuram Rajan, governor, Reserve Bank of India (RBI) remained confident. 

Even though he did not rule out the possibility of volatility in the Indian stock markets if US indeed raised rates, he assured that the country is fully prepared to deal with any situation arising out of US Fed's statement. 

Couple of years ago, when the US Fed signalled tapering off of its quantitive easing program, dollars flew from the stock markets sending the markets in a tizzy and eroding rupee's value against the dollar. 

However, India's current account deficit (CAD) at that time was over 4% and forex reserves to tackle the capital flight were low. 

This time around, India's CAD is firmly in control and is expected to be 1.2% of GDP in the current fiscal and RBI has built up record dollar reserves of $337.8 billion. 

Christine Lagarde, chief, International Monetary Fund (IMF): 

Lagarde, who was in India on a two-day tour earlier this week said that India is a bright spot in the gloomy global economy. She said that emerging markets including India must prepare itself to risks arising out of the US Fed rate hike. 

She warned that US might begin to unwind its monetary stimulus later this year and it might cause volatility in the stock markets giving rise to stability issues in the emerging market economies. 

She added that the central banks must intervene with foreign exchange interventions and supporting domestic economy with liquidity push. 

Lagarde said that Indian companies with high leverage, especially in dollar loans, are likely to get affected when US Fed begins to hike rates. 

How will US rate hike affect India: 

US rate hike would mean that foreign money would leave stock markets in India and go back home for safer avenues. This would bring volatility in the Indian markets.

This capital flight could also impact currency markets and rupee might lose some of its value like it did a couple of years ago.

Rupee strenghtened today morning against dollar simply because US Fed ruled out rate hike for April at this weakened dollar. An opposite effect will happen when rate hike actually takes place and money flies back to US from Indian markets.

Moreoever, Indian companies don't have proper hedging strategies in place as they expect rupee dollar to be in 62-63 zone. Any fall in rupee is likely to affect their balance-sheets on the back of currency losses.

India is safe from the volatility at the moment but any rate hike by the US Fed could cause a ripple affect beginning from the stock markets to impacting the profits of companies because of fall in rupee's value against the dollar.

India's external debt, which is ballooning at the moment, would increase further and falling exports would make the matters worse. 

India's exports during April-February period stood at $284 billion as against imports of $411 billion. Export growth, earning precious dollars, continues to be muted and is only helped by a lower import bill becaue of lower oil prices. 

Minister of State for Commerce and Industry Nirmala Sitharaman said that exports are declining because of muted global demand, stagnation and deflation problems in European Union.

http://www.dnaindia.com/money/report-us-fed-india-safe-but-for-how-long-2070132

US-FED-RATE HIKE WORRIES...

Why US interest rate hikes are a problem for emerging markets

The US Fed on Wednesday said it would watch economic parameters before raising rates, but suggested one could come as early as June

Shishir Asthana  |  Mumbai  

March 19, 2015 Last Updated at 08:36 IST

Markets have been a bit lacklustre and in a state of fear on account of two main reasons. The first is the passage of the Land Acquisition Bill by Indian Parliament and the second is what the Federal Reserve in the USA would do in terms of interest rates. Parliament’s Budget session is still on and chances are that the government will have to call for a joint session of both houses to see the bill through. However, it is the development in the US that will have an immediate impact on the markets.

Much to the relief of markets across the world, the US Fed late on Wednesday night said it would hold on for a little longer before considering raising rates, and would wait for both economic growth and inflation to stabilise. Experts suggest an interest rate might come only in June 2015. 

India is well prepared to deal with any rate hike by the US Federal Reserve IMF chief Christine Lagarde said on Monday. RBI Governor Raghuram Rajan, himself a former chief economist of IMF, had also said earlier that there would be some volatility in emerging markets once the Fed decided to raise interest rates, but India is well prepared deal with the market volatility.

The mere fact that IMF chief and the central bank governor had to mention US interest rates suggests they were trying to pacify the markets from an expected turmoil. So how big is the US interest rate impact that sends global market in a tizzy every time the Fed meets?

We walk you through the impact of a hike in interest rate in USA in the Indian markets.

What does a rising interest rate in USA symbolise?

The end of easy money. Since the start of the financial meltdown crisis triggered by the collapse of Lehman Brothers, the US Federal Reserve has resorted to various measures to pump in liquidity in the economy. Three rounds of so-called Quantitative Easing (QE) failed to bring in the required impact on the economy. Though the Fed has withdrawn the QEs, they kept the ‘easy money’ tap open by keeping interest rates near zero. Money was available for free to conduct businesses in the USA. But most of the money was channelized into equity markets and that too in riskier assets like equities. Unlike previous bull runs, the one after 2008 saw money moving into equity markets only. None of the other asset classes like commodities attracted this money. So if interest rates are increased, access to this money will be costly. Chances are that inflow of funds will reverse if interest rates are increased.

Will only equity markets bear the brunt?

Any rise in interest rate has a direct impact on the country‘s currency. Rise of interest rate in the USA will strengthen the dollar. A strong dollar attracts money from other markets causing a ripple effect. While mentioning that India is prepared from an interest rate hike in the USA, Lagarde warned that a strengthening dollar will have a significant impact on Indian financial system.

Which markets are expected to be the worst affected?

Since the time of withdrawal of QEs, to every time Fed sneezes, emerging markets catch a cold. Being at the long end of the investment stick, the first markets from where allocations are withdrawn or reduced are the emerging markets. The recent selloff in emerging markets is on account of withdrawal of money from emerging markets’ equity traded funds (ETF). India however, is one of the strongest markets and most preferred ones in the emerging market basket.

What does history tell us about US interest rate hikes?

There have been 16 cycles since World War II during which the Fed has boosted interest rates. The risks are higher when the Fed first raises rates. During the six months before or after the first rate hike, the S&P 500 experience a decline of 5% or more 13 times. In other words, markets were hit negatively more than 80% of the time. Any hike in interest rate, if it happens will signal the end of the bond bull market that dates all the way back to 1981.

How bad is it for Indian market?

FII investment in Indian equities for the current year stood at over Rs 93,000 crore. In the debt market investment stood at over Rs 150,000 crore. It is the ‘hot money’ or the money that is invested in Indian equity markets for short term purposes that are at the risk of leaving the country. But if dollar strengthens against rupee, chances are money from the debt market will also leave Indian shores. Reserve Bank of India is on the process of reducing interest rates but if USA is increasing rates, the arbitrage opportunity will diminish, that is the biggest exit door that will open up if interest rates rise. RBI will have to use its forex reserve wisely to prevent the volatility in the rupee.

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