India's five richest businessmen, including Mukesh and Anil Ambani, are estimated to have lost close to Rs 2,00,000 crore in the stock market meltdown that started last Monday.
The five individuals account for nearly one-eighth of the total erosion of close to Rs 16,00,000 crore in past seven trading sessions.
The losses are related to the five groups headed by Mukesh Ambani, Anil Ambani, KP Singh, Azim Premji and Sunil Mittal. Their Companies have lost almost 90 billion dollars
(Rs 3,36,000 crore) in this period.
The total investors' wealth, measured in terms of market capitalistion of all the listed Companies, has plunged by Rs 15,80,000 crore since last Monday.
Mukesh Ambani group, comprising the country's most valued firm Reliance Industries as well as Reliance Petroleum and Reliance Industrial Infrastructure, has lost Rs 1,45,245 crore.
Tuesday, January 22, 2008
Mayhem on, investors lose Rs 10 lakh cr in 2 days
In the continuing meltdown, the stock market lost nearly 900 points, leaving investors poorer by about Rs 10 lakh crore in two days of mayhem triggered by fears of a recession in the US Economy.
The government, on its part, did well to assure investors scared by the carnage on Dalal Street that adequate liquidity would be ensured for market players - many of whom had borrowed money to invest in stocks at higher levels.
The promise led to a remarkable recovery after a loss of over 2,200 points in initial trading that was marred by suspension. The Sensex closed the day at 16,729.94, a net fall of 875.41 points or 4.97 per cent from yesterday's close.
Besides the development in the US that prompted Foreign Institutional Investors (FIIs) to take a sell call, investors were also stalked by the fear that drying up of margin money could lead to a payment crisis.
In fact, the market has shown a declining trend during the whole of last week and investors have lost a wealth of over Rs 15 lakh crore in the seven trading sessions – a meltdown whose magnitude is unparallelled, during which the Sensex shaved off nearly a fifth of its level.
The soothing touch was, however, provided by blue chip Companies Bharti Airtel and Tata Motors, who were the only gainers among the 30 shares that make up the Sensitive Index.
Finance Minister P Chidambaram sent out a confidence boosting message to investors immediately after the BSE authorities suspended trading within a minute of commencement.
"I am assured by RBI and all the banks that enough liquidity will be provided to brokers and market players.
Liquidity will not be an issue," Chidambaram said.
"We had anticipated that Markets will open today on a downward note and may hit the circuit breaker," he said in New Delhi.
The government, on its part, did well to assure investors scared by the carnage on Dalal Street that adequate liquidity would be ensured for market players - many of whom had borrowed money to invest in stocks at higher levels.
The promise led to a remarkable recovery after a loss of over 2,200 points in initial trading that was marred by suspension. The Sensex closed the day at 16,729.94, a net fall of 875.41 points or 4.97 per cent from yesterday's close.
Besides the development in the US that prompted Foreign Institutional Investors (FIIs) to take a sell call, investors were also stalked by the fear that drying up of margin money could lead to a payment crisis.
In fact, the market has shown a declining trend during the whole of last week and investors have lost a wealth of over Rs 15 lakh crore in the seven trading sessions – a meltdown whose magnitude is unparallelled, during which the Sensex shaved off nearly a fifth of its level.
The soothing touch was, however, provided by blue chip Companies Bharti Airtel and Tata Motors, who were the only gainers among the 30 shares that make up the Sensitive Index.
Finance Minister P Chidambaram sent out a confidence boosting message to investors immediately after the BSE authorities suspended trading within a minute of commencement.
"I am assured by RBI and all the banks that enough liquidity will be provided to brokers and market players.
Liquidity will not be an issue," Chidambaram said.
"We had anticipated that Markets will open today on a downward note and may hit the circuit breaker," he said in New Delhi.
No need to worry about West, economy growing at 8.9%: FM
Union finance minister P Chidambaram said the economy is expected to grow 8.5% next year and 8.9% this year. So there is "no reason to allow the worries of western world to ovewhelm us, our economy is very strong," he reassured, adding that liquidity is not an issue.
Speaking about the drastic fall, the finance minister said "the fall does not impact long term markets" and "fundamentals are sound."
His advice to investors at this point of time is to stay calm.
He assured that corporate profits are high and corporate tax is at all-time high too. He doesn't feel the need to advise domestic institutions on any action, as the institutions are best judges of market valuation. "The crash does not impact long-term sentiment", he said and thar "enough liquidity will be provided".
The FM has ruled out the possibility of any foul-play.
Chidambaram said, “We had anticipated that the markets will open on a downward note and may hit even the circuit-breaker. My advice to investors is to stay calm. Economy will grow this year at close to 9% and even according to Dr Rangarajan’s Committee’s report, it will grow at 8.5% next year. Bankers have reported that investment is running very high, demand for credit is very high; several bankers have stated that the investment in the pipeline is very strong, the fundamentals are very sound, corporate profits are high, corporates income tax is at all time high in terms of growth. There is no reason at all to allow the worries of the western world to overwhelm us.”
He added that the Indian economy is very different from the economies of some developed countries. Our economy is a strong economy, our corporate sector is very strong and I think when the market opens at 10:55am, investors would come back to the markets and investors will stay calm and allow this wind to blow over, “ he said.
The FM is not advising any institution anything at the moment, he said. He added, “I think all advisers, all analysts yesterday and today have advised investors to stay calm and stay invested. I am sure that investors will take informed and mature decision; as we have said in the statement yesterday, not give any room for unwarranted apprehensions or to market rumours.”
Chidambaram does not think the long-term market sentiment will be affected by the current happenings. “If the economy will grow this year at 8.9% and is expected to grow at 8.5% next year, the market sentiment must be an extremely positive sentiment - why should there be any negative sentiment at all,” he argued.
He is not worried about the liquidity situation in the markets. He said, “I am assured by the Reserve Bank as well as all the banks that enough liquidity has been provided and enough liquidity will be provided to brokers and other market players; liquidity will not be an issue.”
As Dalal Street turned red, the mood in the Finance Ministry got more somber. After the PM’s call for calm on Monday, the Finance Minister reassured investors about the strength of the economy. CNBC-TV18’s Abhijit Neogy says it is the loss of the "feel good factor" that is pinching the government.
A fall was anticipated, given the weak opening across Asia, but nobody expected that within five minutes of the markets opening, the Sensex would hit the 10% lower circuit. As a result, trading was halted for an hour. Meanwhile, in the capital, a concerned Finance Minister met the PM to take stock of the market situation.
In fact, the PM on Monday while addressing a joint press conference with British PM Gordon Brown had urged investors to stay calm.
“We want orderly growth in the Indian capital markets,” said Dr Manmohan Singh, Prime Minister.
But the Prime Minister’s reassurance could not compete with global market cues. In fact, sources say officials in the Finance Ministry's capital markets division were constantly monitoring every move in the market. As if on cue, the FM who did not comment on the bloodbath on Monday, came out at 10.35 am to try and ease badly frayed nerves.
“No, I do not think the long-term market sentiment will be affected. The fundamentals of the economy are intact. But my advice to the investors would be to exercise caution. When the markets open at 10.55, there will be a new beginning,” said P Chidambaram, Finance Minister.
While the markets did recover, it was not quite the new beginning the FM had hoped for. As the markets continued to fall, the opposition got into the act and former Finance Minister Yashwant Sinha blamed the fall on government inaction.
"This market has been in the grip of speculators for some months now. In fact, there has been excessive speculation in the markets," said Yashwant Sinha, Former Finance Minister.
While the opposition is keen to capitalise on the market capitulation, the Left parties do not seem particularly perturbed.
“The markets affect a small section of the population. We have been telling the government to check the source of fast money,” said D Raja, Leader, CPI.
Market experts say badly bruised investors will need more than government reassurance to enter troubled waters. Far away from Dalal Street, the market meltdown promises to heat things up in Davos as government and corporate leaders get together for the World Economic Forum.
Speaking about the drastic fall, the finance minister said "the fall does not impact long term markets" and "fundamentals are sound."
His advice to investors at this point of time is to stay calm.
He assured that corporate profits are high and corporate tax is at all-time high too. He doesn't feel the need to advise domestic institutions on any action, as the institutions are best judges of market valuation. "The crash does not impact long-term sentiment", he said and thar "enough liquidity will be provided".
The FM has ruled out the possibility of any foul-play.
Chidambaram said, “We had anticipated that the markets will open on a downward note and may hit even the circuit-breaker. My advice to investors is to stay calm. Economy will grow this year at close to 9% and even according to Dr Rangarajan’s Committee’s report, it will grow at 8.5% next year. Bankers have reported that investment is running very high, demand for credit is very high; several bankers have stated that the investment in the pipeline is very strong, the fundamentals are very sound, corporate profits are high, corporates income tax is at all time high in terms of growth. There is no reason at all to allow the worries of the western world to overwhelm us.”
He added that the Indian economy is very different from the economies of some developed countries. Our economy is a strong economy, our corporate sector is very strong and I think when the market opens at 10:55am, investors would come back to the markets and investors will stay calm and allow this wind to blow over, “ he said.
The FM is not advising any institution anything at the moment, he said. He added, “I think all advisers, all analysts yesterday and today have advised investors to stay calm and stay invested. I am sure that investors will take informed and mature decision; as we have said in the statement yesterday, not give any room for unwarranted apprehensions or to market rumours.”
Chidambaram does not think the long-term market sentiment will be affected by the current happenings. “If the economy will grow this year at 8.9% and is expected to grow at 8.5% next year, the market sentiment must be an extremely positive sentiment - why should there be any negative sentiment at all,” he argued.
He is not worried about the liquidity situation in the markets. He said, “I am assured by the Reserve Bank as well as all the banks that enough liquidity has been provided and enough liquidity will be provided to brokers and other market players; liquidity will not be an issue.”
As Dalal Street turned red, the mood in the Finance Ministry got more somber. After the PM’s call for calm on Monday, the Finance Minister reassured investors about the strength of the economy. CNBC-TV18’s Abhijit Neogy says it is the loss of the "feel good factor" that is pinching the government.
A fall was anticipated, given the weak opening across Asia, but nobody expected that within five minutes of the markets opening, the Sensex would hit the 10% lower circuit. As a result, trading was halted for an hour. Meanwhile, in the capital, a concerned Finance Minister met the PM to take stock of the market situation.
In fact, the PM on Monday while addressing a joint press conference with British PM Gordon Brown had urged investors to stay calm.
“We want orderly growth in the Indian capital markets,” said Dr Manmohan Singh, Prime Minister.
But the Prime Minister’s reassurance could not compete with global market cues. In fact, sources say officials in the Finance Ministry's capital markets division were constantly monitoring every move in the market. As if on cue, the FM who did not comment on the bloodbath on Monday, came out at 10.35 am to try and ease badly frayed nerves.
“No, I do not think the long-term market sentiment will be affected. The fundamentals of the economy are intact. But my advice to the investors would be to exercise caution. When the markets open at 10.55, there will be a new beginning,” said P Chidambaram, Finance Minister.
While the markets did recover, it was not quite the new beginning the FM had hoped for. As the markets continued to fall, the opposition got into the act and former Finance Minister Yashwant Sinha blamed the fall on government inaction.
"This market has been in the grip of speculators for some months now. In fact, there has been excessive speculation in the markets," said Yashwant Sinha, Former Finance Minister.
While the opposition is keen to capitalise on the market capitulation, the Left parties do not seem particularly perturbed.
“The markets affect a small section of the population. We have been telling the government to check the source of fast money,” said D Raja, Leader, CPI.
Market experts say badly bruised investors will need more than government reassurance to enter troubled waters. Far away from Dalal Street, the market meltdown promises to heat things up in Davos as government and corporate leaders get together for the World Economic Forum.
Lessons from January 2008: Udayan Mukherjee
The thing about life is that one makes mistakes. Many mistakes were made in the second half of 2007 and those sins have to be washed away by blood, such is the way of financial markets. Some participants will go down under and never be able to get back to the market again but most will survive. The pain will linger for many months, maybe years but lessons have to be learnt. Every such debacle has lessons for us and the sooner we forget them the more we suffer.
The first lesson is not to let stock price performance become the sole reason for buying, a mistake which was made in abundance in the last 3 months. What couldn't be explained by fundamentals was credited to liquidity. The present lost all relevance as people chose to focus on the distant future, perhaps simply because the present could never justify those ticker prices; only a hazy dream of the future could. Traders and investors had no time for fundamental analysts, in many cases they were labelled "cribbing fools". Chartists became the most celebrated tribe on the street as only they could see and predict the one way run to glory for many of the hot stocks even as fundamental watchers cringed at valuations....till the music stopped. Don't get me wrong, charts do work in trending markets but once stock prices veer away completely from fundamental value, people need to get careful. But they never are. Now that the blinkers are off, people should ask themselves why stocks like RNRL, Ispat, RPL, Essar oil and Nagarjuna fertilisers have lost 50-70% of their value. It is simply because their stock prices had snapped all connection with underlying business fundamentals, earnings and value. Their stock prices became the only reasons for buying them which works for a while but not forever.
The other big lesson, one which should have been driven in earlier in May 2006, is the danger of overextending oneself in the futures market. The lure of stock futures is easy to understand. Put in some margin, take a big exposure on a fast moving stock, make a killing when prices shoot up. Repeat exercise. Just that people forgot that prices may also come down and at a pace which noone can even imagine, maybe their friendly stockbrokers forgot to tell them that part of the story. The result : unbridled speculation that ran into lakhs of crores, excesses that we are paying for today. Even this fall will not cure investors of their love for futures speculation but if at least some amount of caution is injected it would have been a worthwhile learning. Futures are not toys for amateurs, they are time bombs in the hands of inexpert and inexperienced traders, it's only a matter of when the fuse runs out.
The other learning which I hope will play out in the future, as it has in the past, is that it pays to be brave in times of panic such as these. If I was allowed to invest myself , which I am not, I would have no hesitation in deploying serious money into the market today, knowing fully well that prices may fall more tomorrow. And I would be standing there tomorrow to buy more of the same, till my money ran out. India is going to be a terrific stock market story for many years to come, even an intermediate bearish patch cannot shake that conviction of mine. At best, one will have to wait a bit for the returns to follow. That's alright. You are happy to put money in a bank FD and then wait for one full year to collect that measly 8%, aren't you? Then why does the stock market need to give you 20% every month? In the last one year, I haven't seen so many good stocks trade at such mouth watering levels. Forget trading, avoid the duds which were fuelled up by operators, just go out and buy those bluechips. They will deliver, even if there is a global market meltdown for a while, and if you are a bit patient you will be rewarded. But do remember January 2008, as history will repeat itself again in the future. Just that our memories tend to be too short and our greed too much.
Udayan Mukherjee
The first lesson is not to let stock price performance become the sole reason for buying, a mistake which was made in abundance in the last 3 months. What couldn't be explained by fundamentals was credited to liquidity. The present lost all relevance as people chose to focus on the distant future, perhaps simply because the present could never justify those ticker prices; only a hazy dream of the future could. Traders and investors had no time for fundamental analysts, in many cases they were labelled "cribbing fools". Chartists became the most celebrated tribe on the street as only they could see and predict the one way run to glory for many of the hot stocks even as fundamental watchers cringed at valuations....till the music stopped. Don't get me wrong, charts do work in trending markets but once stock prices veer away completely from fundamental value, people need to get careful. But they never are. Now that the blinkers are off, people should ask themselves why stocks like RNRL, Ispat, RPL, Essar oil and Nagarjuna fertilisers have lost 50-70% of their value. It is simply because their stock prices had snapped all connection with underlying business fundamentals, earnings and value. Their stock prices became the only reasons for buying them which works for a while but not forever.
The other big lesson, one which should have been driven in earlier in May 2006, is the danger of overextending oneself in the futures market. The lure of stock futures is easy to understand. Put in some margin, take a big exposure on a fast moving stock, make a killing when prices shoot up. Repeat exercise. Just that people forgot that prices may also come down and at a pace which noone can even imagine, maybe their friendly stockbrokers forgot to tell them that part of the story. The result : unbridled speculation that ran into lakhs of crores, excesses that we are paying for today. Even this fall will not cure investors of their love for futures speculation but if at least some amount of caution is injected it would have been a worthwhile learning. Futures are not toys for amateurs, they are time bombs in the hands of inexpert and inexperienced traders, it's only a matter of when the fuse runs out.
The other learning which I hope will play out in the future, as it has in the past, is that it pays to be brave in times of panic such as these. If I was allowed to invest myself , which I am not, I would have no hesitation in deploying serious money into the market today, knowing fully well that prices may fall more tomorrow. And I would be standing there tomorrow to buy more of the same, till my money ran out. India is going to be a terrific stock market story for many years to come, even an intermediate bearish patch cannot shake that conviction of mine. At best, one will have to wait a bit for the returns to follow. That's alright. You are happy to put money in a bank FD and then wait for one full year to collect that measly 8%, aren't you? Then why does the stock market need to give you 20% every month? In the last one year, I haven't seen so many good stocks trade at such mouth watering levels. Forget trading, avoid the duds which were fuelled up by operators, just go out and buy those bluechips. They will deliver, even if there is a global market meltdown for a while, and if you are a bit patient you will be rewarded. But do remember January 2008, as history will repeat itself again in the future. Just that our memories tend to be too short and our greed too much.
Udayan Mukherjee
Monday, January 21, 2008
Strategies to adopt after 1000 plus point crash
It was the worst day of trading in the history of our markets. The Sensex saw its biggest ever fall ever of over 2000 points. During the course of the day it went below the 17,000 mark while the Nifty dipped below the 5000 mark. Sensex shut shop for the day down 1,408.35 points or 7.41% at 17605.35, and the Nifty ended the day down 496.50 points or 8.70% at 5208.80.
Panic selling was seen across sectors. If investors are confused about their next market move, help is at hand. Speaking exclusively to CNBC-TV18, Vallabh Bhansali of Enam and Girish Nadkarni of Avendus Advisors chalk out strategies that investors could now adopt.
Vallabh Bhansali,Chairman, Enam said, “At these levels, the markets have become attractive again as the fundamentals have not changed. That’s what the investors should think of, the fundamentals haven't changed at all, valuations have become reasonable. That’s the way to look at it.”
Meanwhile, Girish Nadkarni of Avendus Advisors believes that it’s mainly the primary market offerings have led to the secondary market liquidation and that from a retail perspective, it's always good to buy in panic rather than sell in panic.
Nadkarni believes that markets can come off from these levels. He said that the global situation is draining liquidity away from markets. Results-wise also, there aren't any significant outperformers. So it's going to be a function of liquidity, going forward. All these factors will have an impact on Indian markets, he added.
"From a retail perspective it is always good to buy in panic or rather than sell in panic. While the overall index is down by 2-3% there are stocks, which are down by 10-12%, and therefore there could be some value buying especially among the midcaps in sectors that one is bullish about and may not be today but I guess from a retail perspective it is important to keep a watch on the midcap stocks, which have fallen significantly more than the market and look for value buying at the lower levels maybe sometimes later in this week if the valuations do seem attractive," Nadkarni said.
According to Raamdeo Agrawal, Director & Co-Founder, Motilal Oswal Securities it’s really a question of knowing your companies. “I would not look for new names today but would rather buy the companies which are in my portfolio and where the corrections happened deeply,” he explained.
“If I am holding them in any case, I consider them as a worthy of investment even at earlier prices. So today at 20-25% lower, clearly they must be good companies. So I would rather look into own portfolio,” he explained.
Agrawal said that in a correction like today’s, he would rather gather courage and go and put whatever little incremental money he has in those kinds of stocks rather than trying to find completely new stocks and start a new story.
Panic selling was seen across sectors. If investors are confused about their next market move, help is at hand. Speaking exclusively to CNBC-TV18, Vallabh Bhansali of Enam and Girish Nadkarni of Avendus Advisors chalk out strategies that investors could now adopt.
Vallabh Bhansali,Chairman, Enam said, “At these levels, the markets have become attractive again as the fundamentals have not changed. That’s what the investors should think of, the fundamentals haven't changed at all, valuations have become reasonable. That’s the way to look at it.”
Meanwhile, Girish Nadkarni of Avendus Advisors believes that it’s mainly the primary market offerings have led to the secondary market liquidation and that from a retail perspective, it's always good to buy in panic rather than sell in panic.
Nadkarni believes that markets can come off from these levels. He said that the global situation is draining liquidity away from markets. Results-wise also, there aren't any significant outperformers. So it's going to be a function of liquidity, going forward. All these factors will have an impact on Indian markets, he added.
"From a retail perspective it is always good to buy in panic or rather than sell in panic. While the overall index is down by 2-3% there are stocks, which are down by 10-12%, and therefore there could be some value buying especially among the midcaps in sectors that one is bullish about and may not be today but I guess from a retail perspective it is important to keep a watch on the midcap stocks, which have fallen significantly more than the market and look for value buying at the lower levels maybe sometimes later in this week if the valuations do seem attractive," Nadkarni said.
According to Raamdeo Agrawal, Director & Co-Founder, Motilal Oswal Securities it’s really a question of knowing your companies. “I would not look for new names today but would rather buy the companies which are in my portfolio and where the corrections happened deeply,” he explained.
“If I am holding them in any case, I consider them as a worthy of investment even at earlier prices. So today at 20-25% lower, clearly they must be good companies. So I would rather look into own portfolio,” he explained.
Agrawal said that in a correction like today’s, he would rather gather courage and go and put whatever little incremental money he has in those kinds of stocks rather than trying to find completely new stocks and start a new story.
Markets will grow in orderly manner: PM
Prime Minister Manmohan Singh said he was confident the local stock market would grow in an orderly manner despite a vicious sell off on Monday.
“Let me say orderly growth of the capital market is a priority concern for our government,” Singh told reporters.
Indian shares tumbled almost 11 per cent to a four-month intra-day low on Monday, suffering their biggest intra-day points fall ever on margin calls and foreign selling, before paring their losses to end down 7.4 per cent.
“Let me say orderly growth of the capital market is a priority concern for our government,” Singh told reporters.
Indian shares tumbled almost 11 per cent to a four-month intra-day low on Monday, suffering their biggest intra-day points fall ever on margin calls and foreign selling, before paring their losses to end down 7.4 per cent.
Rupee weakens against US dollar
January 21: The rupee was quoted more than five paise lower against the US currencies at 39.3450/3500 a dollar in morning trade on Monday largely to due sliding equity Markets.
Asian stock Markets, particularly China, Hong Kong, Japan and India, were down by over 2 per cent during early trade on fears of the US recession.
In dull trade at the Interbank Foreign Exchange (forex) market, the local currency resumed weak at 39.34/36 a dollar from Friday's close of 39.2950/3050 a dollar and later moved in one and half paise range either-way. It was quoted at 39.3450/3500 a dollar in late morning trade.
A fall in the benchmark Sensex by 692 points to 18321.33 in late morning trade weighed on the rupee sentiment, forex dealers said.
The rupee, which resisted the change in the last couple of weeks following heavy capital inflows, came under pressure after Foreign Institutional Investors (FIIs) who pulled out heavily from equity during last week.
Asian stock Markets, particularly China, Hong Kong, Japan and India, were down by over 2 per cent during early trade on fears of the US recession.
In dull trade at the Interbank Foreign Exchange (forex) market, the local currency resumed weak at 39.34/36 a dollar from Friday's close of 39.2950/3050 a dollar and later moved in one and half paise range either-way. It was quoted at 39.3450/3500 a dollar in late morning trade.
A fall in the benchmark Sensex by 692 points to 18321.33 in late morning trade weighed on the rupee sentiment, forex dealers said.
The rupee, which resisted the change in the last couple of weeks following heavy capital inflows, came under pressure after Foreign Institutional Investors (FIIs) who pulled out heavily from equity during last week.
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