Categories
Politics

What if Israel attacks Iran?

Read an article in Bloomberg which underlines the case why Israel attacking Iran is historically inevitable.(see article here).

The odds of this event happening in the next 6 months is around 50-50

If such an event were to come to pass, what will be the implications for the Indian markets?

In case of a surprise attack, the following will happen as a knee jerk reaction:

  1. Oil prices will go up
  2. FIIs will sell
  3. Rupee will weaken considerably
  4. Nifty will crash
  5. Interest rate sensitives will crash-Banking,Infra,Long term Financing,Auto etc

What happens next depends on the duration of the war.

If it is a short lived war (like the First Gulf War), then it can set the stage for a rally in equities.

If the war turns out to be a longer one and one where the Straits of Hormuz are threatened,then oil prices will continue to remain elevated and the market will slowly and surely grind downwards.

Lesson for long term investors:Keep your powder dry, better opportunities may be round the corner !

 

 

Categories
Signals

A good bearish sign

In the Stock Market Wizards, Dana Galante mentions that high management turnover  is a good red flag that things are not hunky dory in the company.

This certainly holds true in the Indian context as well.

Consider for instance the aviation sector in India.Numerous CEOs have come and gone in Jet Airways,Kingfisher Airlines and Air India.This should have served as a good warning sign to investors to stay clear of the sector.

The resignation of the CFO/Compliance officer often indicates bearish times ahead for the stock.This is true for midcap and smallcap companies and not so much for A Group companies.

These officials are usually professionals (non promoters) and have no qualms in deserting a sinking ship !

Consider the following three examples:

CFO of MPS Ltd resigned on 15th Feb,2012.Since then, the stock is down 16%

CFO of Electrotherm resigned on 4th Feb, 2011.Since then, the stock is down 70%

Company Secretary of Clutch Auto resigned on 15th Nov, 2010.Since then, the stock is down 60%

No doubt market conditions had a role to play in the decline of the market caps of these companies.But the fact is these companies fell harder than the rest of the market as they were weaker fundamentally.

This is illustrated by the following example:

CFO of AshapurMin resigned on Dec 1, 2011.Despite Jan 2012 & Feb 2012 being very bullish months, this stock hit a 52 week low on 26 March, 2012-a fall of around 18%

 

 

 

Categories
Links

Front Running : 26 March 2012

Some stuff I am reading this morning:

Another win for Narendra Modi-Maruti to shift carmaking to Gujarat (ET)

Hedge funds make wrong way commodity bets (Bloomberg)

Mukesh Ambani closer to achieving his gas pricing goals (Firstpost)

Tea Stocks may be a hot favorite(BusinessLine)

Is this the best stock market indicator ever? (AdvisorPerspectives)

Categories
CoatTailing

Coat Tailing Warren Buffett Style

Warren Buffett in his younger days followed a technique called coattailing

In this method, you usually follow an experienced investor into a stock.You assume that the experienced investor knows what he is doing and financial fireworks will commence shortly after the experienced investor enters the stock.

Are there such investors in the Indian equity scene that one can follow?

I believe there are.

Take for example, Dilipkumar Lakhi.

He is a very well known diamond exporter from Mumbai (see article). He is quite renowned for his shrewd stock picking prowess.He picked up Uflex very cheap in Dec 2009.(still owns around 4% assuming fully diluted)

Now he has picked up around 6.75 Lakh shares of Dhanbank around Rs.70.33 . (27/02/2012). Another related party Girdharilal Lekhi has picked up 5.4 Lakh shares around Rs.63.66 (23/02/2012)

Dhanbank faced a lot of turbulence recently due to the ouster of its CEO Amitabh Chaturvedi. Despite this ,the stock is up around 22% since then.Maybe Dilipbhai and the markets know something we don’t !!

 

Categories
Links

Weekend Reads

Interesting reads for the weekend:

A fascinating portrayal: The rise of Narendra Modi

Arundhati Roy goes after Mukesh Ambani and everyone else (see link)

Is Ben Bernanke a villain or a hero ?(read here)

A great read for all traders/gamblers-The man who broke Atlantic City

The problem with Indian Railways – Tehelka