Weekly Updates-10.11.08-Will Nifty give a Big move

Dear Friends,
The previous week was a week of small cap FNO stocks.Almost across the board there was Buying (or if i am allowed to use the word covering of short positions) in them.What else can make people buying small ticker stocks right now.Yes there are news report of investments by renowned investors like George Soros in Gvk Power and infrastructure limited.Now before you jump in the wagon kindly note that he had sold the same at above 50 and is now simply covering the same back.Was it a short sell of holdings I have no idea.Gvk has been one of the laggards as compared to Gmr Infra since its Ipo days.The days of ample liquidity are gone and so are the good days of some of the leveraged Infra players.I wont Buy Gvk power because a legendary investor bought the same you can exercise your own due diligence.Moreover the same legendary investor lost 120 mln$-392 mln$ in buying Lehman brothers stock when it was at 16$ between march 31st and June 30th.Someone has rightly said you need Brains even to copy.
Now as i have already started the discussion on what to Buy and what to sell,I am in my personal capacity adding diversified companies with low debt equity ratios in my folio.for me cash is king and will be the king for coming quarters.Traders along with the above parameter can look out for dividend yield,past performance in previous bear runs and also the background of promoters before investing in any stock.This investment in my folio is not more then 5% of available cash at this moment of time.I do know that the stock market will bottom out before the bottoming out of the economy(Both local and global) at the same time I believe that the local economy has only started to deteriorate.Will share some of my picks in coming days if I feel they are a buy.
I was having a look at the latest Clsa Tits and Bits issue.One of the articles did surprised me was about large number of companies in Clsa universe going belly up in Hongkong.For the last four-five years except global trust bank and united western bank(If i remember the names correctly) no other major company went belly up.Yes some mid cap stocks become small cap stocks but then no companies were closed.I believe we will see some of these happening before we call the bottom in the downward cycle.What else can one expect with automotive companies reporting 50% YoY drop in sales.
I believe the best thing one can do when he doesn't know what to do is to start the concept with basics.I was reading some of the Introductory books on economics from my earlier collection again.One article in one of these books by Prof Greg Mankiw was on the experience of a Hot Dog seller.The Hot dog seller had a shop near a Highway in USA.He used to sell the same happily to the consumers.With his positive feel and view his sales grew year after year.One day his son a High school educated chap joined him in his business.The boy with all his known textual knowledge told his father that a recession is coming and it will effect everything.The Father reduced his enthusiasm in the business and his sales dwindled due to the same reason.Seeing the dwindling sales his Father told his Son on how right he was.I don't know whether we are experiencing something similar due to the widely reported downturn in the print and electronic media.
Emkay Global finance( Many investors curse themselves for investing in this share at 400 near the days of Hyped Motilal oswal public issue.cmp 39.) technical research division has come out with a report Titled that Bulls set for Big Innings with target price of 4250. in four to six months.My limited technical and fundamental knowledge dont allow me to agree with the theory.I might be wrong but if I hold cash it is never wrong.:) I personally want more brokerage houses to believe that the bear run is over so that i can come out with some long term non performers from my folio.( some bad investments in Infra space.)I believe we will now see a time wise bear market move and the best strategy in bear markets are to take your profits home and Trail using strict SL.
Last week was remarkable as most of the companies for the first time agreed on increasing inventories.I decided to take a personal feedback from a PVC pipe manufacturer.In his words the drop in prices forced him to check his old ledgers and he was surprised to see the price level of 2003.A deflation is the worst physiological effect that happens for a country and its citizens and do believe me when i say that it is worse then Inflation.I don't know whether we are heading for one of those gloomy days.Companies which were valued highly because of there well managed commodity division will be the ones which will suffer the most in coming months.I precisely mean companies which locked there raw material needs at the time of signing a contract.
I am not bearish for November at the same time i am not Bullish for the month.I expect sideways consolidation with range bound trading and a major move coming in December.Again i have been wrong in preempting market moves previously (I believe my success ratio will be more then Failure ration on the above,do let me know your comments.)and i can again be wrong but as i always say if I am wrong by holding cash i wont be that much wrong at this juncture.Just one more point before i conclude that even after drastic unprecedented reduction in Repo rates,SLR and CRR we are seeing 11-11.5% interest rate advertisements on first page of any pink paper.The reasons i leave for you to conclude.Do write in the reasons in the comments section below.

Nifty support-2973,2860

Nifty resistance-3149,3289