Financial Wisdom – By Kalidas

Radical Solution for Credit Crisis from Kalidas

Confused Mind, Clear Answers (08-10)

with 53 comments

Ref: 08-10

Confused Mind, Clear Answers – New blog feature

I am starting this feature to reply to the general questions or enquiries irrelevant to the published article.  It will be published for each calendar month. 08-10 suggests 2008 – October; 08-11 = 2008 November and so on.  All enquiries that were not related to the concerned article, may be posted here. Please follow the norms as under:

 

1.   Post maximum 2 questions at a time.

2.   Ask here only those general questions that were not related to the article published.

3.   The article related questions may be posted under comments section of relevant article. They should not be posted here. They could be deleted

4.   Do not write by impulse. Write it in Notepad or editor, have them spell checked, be concise and precise. Use excellent freeware editor like Jarte 3.3 (Download link http://www.jarte.com/download.html) or your notepad.

5.   Avoid compliments and terms like Thanks, Sorry, Regret, Regards etc. or accolades.  Avoid unnecessary adjectives or adverbs.

6.   Please name yourself, city and country without fail. No reply will be posted to Guests.

7.   Post your questions for the current month. It will be closed 1 day before last date. I will answer below each question.

8.   Not that every question will be answered. If anything is replied or commented on earlier, it will not be replied to avoid duplication.

9.   Name the stock, your cost price, quantity and Current Market Price (CMP), if you want specific guidance for specific situation. For normal opinion, you may give the name of the stock, symbol and market.

10. At month end, I propose to consolidate into PDF file for say, 08-10 and post it on some server for download. The link will be mentioned.

 

Thanks for your cooperation. Start posting your comments from now on.

 

Kalidas, Hong Kong

20-10-2008

Written by anilselarka

October 20, 2008 at 5:10 pm

53 Responses

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  1. Need your opinions on Optocircuits, Sesa Goa and Adlabs.

    Kalidas Replies to Vijay Bhaskar (ref: 0810-005 Tuesday, October 21, 2008)
    I do not know these stocks well, so will post reply later. When I reply, it will appear here.

    Vijay Bhaskar,Bangalore

    October 20, 2008 at 10:36 pm

  2. Sector: Aviation

    Stocks: Spicejet

    Investment Horizon: 12 months

    Kindly share your opinion for the above mentioned scenario.

    Regards,
    Girish, Pune, INDIA
    Kalidas Replies to Girish (Ref: 0810-003 Tuesday, October 21, 2008)
    SpiceJet
    I have yet to study this stock in detail. Read the opinion about Airline stocks under Air Deccan (now King Fisher Airlines). I consider good price to enter now, but still feel that the price may falter to single digit due to rising trend in oil prices. Although the stock is within my buy range, I am holding back my instinct. The problem faced by the company is “industry specific problem” and not company specific. I own some at 21.75, having bought and sold at good profit earlier. Under current volatile environment, prediction is a dificult. But my own sale target in 24 months is 60 if not more. Downside risk is tolerable to me because my current investment represent only floating profit. More later after study.

    Girish

    October 20, 2008 at 11:55 pm

  3. sir (1)opto cuircits offering bonus @7:10 and shipping corporation @ 1:2 need to know if these two can be opted for max 100 shares
    2- bought 100 air deccan @56/ when u reccomended.could not sell at 90 as wife underwent major surgery during this peak.still holding.what to do now.ajay

    Kalidas Replies to Ajay Singh(Ref: 0810-002 Tuesday, October 21, 2008)
    Air Deccan:
    Right now, they appear to have liquidity problem, considering high interest being paid by them in the market at almost multani hundi rate. However, its change of name to Kingfisher Airlines, appear to suggest that Vijay Mallya may have some major plans, otherwise he would not have lent his brand name for use.

    The oil prices are on rise again in my opinion, and may rise to $ 100, if not more in less than 2 months. Airlines stocks react inversely to oil prices. further, I do not know why do not they raise the ticket prices. There is no price control. It is too late to sell and too early to buy. Since your position is only 100 shr, swap it into Spicejet trading at about 15. You may get 300 shares of Spicejet by selling 100 shares of KFA (Kingfisher Airline)

    ajay singh

    October 20, 2008 at 11:56 pm

  4. Dear Sir

    I have IFCI, at cost price RS50/-, quantity 10000 and Current Market Price (CMP)RS24/-.
    Should I hold or exit on rally. I can hold upto 2 years.
    Look forward to receive your valuable opinion.
    Manoj.
    Kalidas Replies to Manoj Kumar (Ref: 0810-001 of Tuesday, October 21, 2008)
    IFCI:
    No need to sell. Be prepared to buy. This used to be one of the most popular stock, so many will rush in later to average down. further, the government will be more determined to convert into a bank, especially in tight credit environments.

    In short period, it may trade between 21 to 36. Present entry point is now, 21.10, 23.50 and 25.75. Currently weak due to global trend to avoid the financials. India relatively unaffected. After buying trade the new lots and sell in rally if you want. Otherwise, be an accumulator. your entry price of 55 was not that high considering its fundamentals and potential.

    MANOJ KUMAR

    October 21, 2008 at 3:43 am

  5. Why are the commodity cycles so hard to predict and vicious in nature?

    Martin
    Goa India

    Kalidas Replies to Martin (Ref: 0810-004 Tuesday, October 21, 2008)

    Every market is easy as well as difficult to predict. The short term prediction works 40%, medium terms 20% and Long Term 80% depending on the knowledge of the predictor. Short term variables are known, so easy to predict; medium term variables may develop later on, so difficult to predict, long term variables depend on the fundamentals, so have reasonably higher chance for success. AGAIN, the most important factor is the knowledge of the analyst or economist or any type of predictor like me, you or others.

    In stocks, there is micro approach, in commodity, there is only Macro approach, where the demand and supply depend on host of factors from actual physical demand and supply, relative paper game of futures and options, interest rates, exchange rates, government policies, import/export policies, cartels (such as OPEC), storage demand (such as US insistence of Strategic Storage Reserve for oil), extraction time required, transportation speed, and many others.

    Today, we are living in the world of specialization, where each specialist knows only his field. An eye specialist does not know heart or liver or cancer or lungs problems, and vice versa. However, General Practitioner knows the whole body, so he can predict with reasonable accuracy (he can see the whole picture in flash). In understanding commodity cycle, one needs to be a generalist rather than specialist. Direction of Money Flow play important role in large volume business such as Commodities.

    Martin

    October 21, 2008 at 12:08 pm

  6. Dear Kalidas sir,
    Required your valuable advice.
    Orchid pharma @201.50 CMP 133 Qty 2000
    Sesa Goa @ 81 CMP 80 Qty 1500
    IDFC @ 90 CMP 52 Qty 1000
    Oriental Hotel @ 273 CMP 200 Qty 250
    Thanks and regards
    Ravi, Chennai, India

    Ravi

    October 21, 2008 at 12:14 pm

  7. HI Kalidas
    As suggested by you in a couple of articles, I have secured some gold in UAE when the price was around $ 890, now it is around $780. Could you let me know if at the end of Dec it will rise atleast above $1000, so that I can sell it.
    Xavier
    UAE

    Kalidas Replies to (ref: 0810-006 Tuesday, October 21, 2008)
    The stock market rally may continue for a day or two. There is no improvement anywhere as totted by authorities. Their main attack is to control the inflationary indicators like Oil and Gold, and I have clearly explained the reasons in the article – A Nation on the Grill

    Buy more in less than 3 days. In Friday meeting, the OPEC may drastically cut the oil supplies. It could be as high as 2 million barrels per day. By the time November expiration arrives, the dollar will dip, oil will probably shoot up over $50 or more in a day (provided they do not change the settlement system on NYMEX from physical delivery to cash settlement). Further, there is no more gold with Federal Reserve, and that might be known to the investors within 2 months. When it is known, the gold prices could jump by leaps and bound and there will be tremendous short covering. By that time, India’s wedding season will start, that will promote wholesale gold buying regardless of the price.

    Xavier

    October 21, 2008 at 3:31 pm

  8. Sir,
    My question is not about specific stock. I have been reading often a word from my broker is “Operator’s Game”. If market goes down he says that operators are Buying stocks (My qiestion : If there are buyers then why stocks going down? then who is selling ?) And he has failed almost in 75-80 % cases because Bulls Phobia and India Growth story is still in his mind.According to You who the so called operators are (big Brokerage house, Mf or HNI or FII?). What is their strategy ? How do they control the Stock price in their hand?
    And Your Practical rule for Index is working fine. It just closes 5-10 points away from your rule. I know you also might have found any Specific theory of Operators. BTW you were stock broker for a long time.
    Sorry for asking too many questions…
    Thanxs Jayesh Ghatkopar Mumbai

    Kalidas Replies to Jayesh (ref: 0810-007 Tuesday, October 21, 2008)
    In smaller counters, the operators game may work, not in large cap stocks that determine the market. These are loose talks, and I never read or listen to it so as not to shroud my judgement. These rumors are floated to boost the price of the stock so that rumor monger can sell it with good profit. This is why it does not work in most of the cases.

    There are genuine market makers (called Operators by many in deshi language). Without market makers, the market does not exist. They create interest, make both way market so as to impart liquidity, and provide depth in the market. In USA they are known as Specialist. There is no theory for operators. Again, these are loose talks

    jayesh

    October 21, 2008 at 9:23 pm

  9. Dear Sir,
    Your guideline on flat/real estate purchases was really useful for many.
    Confused with stock fundamentals now? When stocks was at PE=20+ lot of analysts were bombarding the media to buy those stocks, now the same stocks are at PE=2+, people are questioning now whether it’s a good stock to own or not??
    Can you please give some guideline on fundamentals analysis to pick a good stock sector wise(banking, cement, oil/refineries, utilities etc) ie PE range sector wise, whether book value is important for that sector, market capitalization, current ratio, quick ratio, debt ratios (how much debt is acceptable) etc . In general how to identify a overvalued stock and undervalued stock??

    Shubguru(MMB)
    Singapore

    Kalidas Replies to (ref: 0810-010 Wednesday, October 22, 2008)
    I can not write in few para. I intend to write full article later (within 10 days) that will answer all your questions.

    shubguru

    October 21, 2008 at 11:07 pm

  10. I have question about power stocks though you are not interested on these stocks. In the state of Tamilnadu, there is heavy power shortage and announced power cut is more than six hours per day. From November onwards, there is a pressure to reduce consumption by 40% to Industries and Commercial Establishments consuming more than 1000 units per month and 20% to residentials using more than 300 Units per month other wise pay 50% extra on highest slap of Tariff. It is said there is a shortage more than 2000 Megawatts in single state (Tamilnadu). This shortage will be continued upto 2012. Government of Tamilnadu said that it had purchased power at around Rs 15 per unit. Highest slap of Subsidised selling price is Rs 3.05 to residents, Rs 4.70 to SSI Units, Rs 5.80 to Commercial establishments. Who will benefit on selling this high prices? Power producing companies or Power trading companies? At which Price Earing Mutiples, we must invest in these stocks?

    Mathi, Madurai, Tamilnadu, India

    Kalidas Replies to (ref: 0810-009 Wednesday, October 22, 2008)
    First of all I am not sure whether Tamilnadu government would have purchased power @ Rs 15/Unit. Even for Dabhol plant, the cost of power came to less than Rs 5/Unit. When the power is subsidized, obviously the consumers benefit at the cost of State who consider as its social obligations. Indians are lucky to have policies of this nature, that may look anti-market oriented.

    Who the Tamilnadu Government is buying from? The power companies are few that can be counted on fingertips. If they are paying that high, some ministers may be making huge money. There are two companies – Power Producer (like Tata Hydro in Mumbai, And Tarapur Atomic Plant) ) and Power Distributor like BSES (reliance energy), MSEB (Maharashtra State Electricity Board) in Mumbai (do not know about Tamilnadu).

    Power being price controlled item, even the producers lose or have least flexibility. Calcutta electric suffered most during leftist regime – they were having dual function – producing and distributing. It is better to have separate companies for each function – production and distribution.

    Power producers do make money. Distributing companies are generally unlisted companies of respective state government to my knowledge. Thus, only listed companies will be in production stage. I do not know which power companies are listed in Tamilnadu, so unable to help.

    Electricity is expensive than Gas, and India is very rich in gas resources,. There is also no price control or even if there is one, it is laxed one. Transmission of gas is much cheaper than electricity, so distribution becomes cheaper. Normally, cost of gas power is 60% cheaper than coal and electricity besides being more greener than others. This is why I am bullish on Gas sector especially companies like GAIL, GSPL, Indraprashta Gas (retailer), Petronet, ONGC, Reliance (RIL), RNRL (if they can resolve the case with RIL – they are strongly placed legally) and other SOE like HPCL, BPCL who also sell LPG. With more and more cars and auto-rikshas being forced to use gas, the gas sector is poised for bumper years ahead.

    Mathi

    October 22, 2008 at 2:19 am

  11. Kalidasji,
    The SMART MEN in the financial world have led to the ruin of many a financial institutions & even countries. Will India be saved by our SMART WOMEN considering that they probably own enough Gold to combat any impact of the financial crisis on average Indian Households.
    Deekay, Indore (India)
    22/10/2008
    Kalidas Replies to (ref: 0810-008 Wednesday, October 22, 2008)
    At the moment, from the information available, India is spared big time even by Men. Further, women in India are smart enough not to part their savings for the follies of their men. the best course for men is to go belly up if they have contracted huge debt, and then negotiate with their creditors to pay fraction of what they were indebted for.

    Deekay

    October 22, 2008 at 12:56 pm

  12. Dear Kalidas

    Many of us are working for American companies in India ( I am working for a Capital Goods Co.). Due to the present financial crisis my opinion is that the Americans will have to out source more & more to remain competitive and will actually help us. There are a few others who predict that these American companies will fold up their overseas operations to cut down costs. I realise that this may be company specific, in one of your posts on money control I remember you saying that the turmoil in US is with financial companies and normal companies who are not over leveraged are OK.
    What do you think is the prospect of American subsidary company in India.

    Regards, Mohan

    Kalidas Replies to Mohan (ref: 0810-010 Wednesday, October 22, 2008)
    Let us be realist.

    I agree with your few points – the turmoil is presently limited to Financial sector. Other sectors are okay. This would continue if the correct measures are taken to correct the problems facing the financial sector, but that is not happening. The crisis is spreading slowly from one sector to another because finance is key for any business operation. The lack of credit and inability to raise capital from the market is beginning to hurt them.

    If the banks are not lending, alternative is IPO or Public offering, But almost all major brokers are dead. Their own houses are burning. It is the brokers who make the market, and they are absent.

    However, those companies can still raise the money from private moneylenders who charge higher rate of interest. Warren Buffet charged 10% to blue chip companies like Goldman Sachs and General Electric. What I am trying to say is that there is money but waiting to come out if some one is willing to pay higher rate of interest commensurate with the higher risk. My article “Defrosting Liquidity Freeze” is very specific on this subject.

    I disagree with you that American corporations will need to outsource more from overseas, instead of cutting down overseas operations. There is huge domestic unemployment in USA and it is rising. When the labor supply is more, the wages tumble and they become more productive and competitive. Further, there will be pressure from Government to exhort the local companies to engage more domestic workers, and if they do not listen, force them to hire the local talents.

    For overseas operations, there are two aspects. If operations are in high growth area like Brazil, Russia, India and China (BRIC) and they are marketing or selling their products there, operation will not be curtailed. If those countries are used as manufacturing base to sell the products in other countries, due to saving of labor costs, they may be affected. A company like Caterpillar is needed more in India for selling their products rather than manufacturing there. They may cut down marketing operations in Europe rather than in India. However, while the axes are waxed, sometime even good operations are also cut down.

    Your question was more complex than it appear to be. It has multiple scenario, so I have taken care to explain in somewhat detail.

    Mohan

    October 22, 2008 at 7:15 pm

  13. Pl.can you let us know in the present market status which Sector/Industry should be benefiting the investors short term/long term or any particular stocks? Have following stocks for your advice on action(the list is pruned after your suggestion to keep around 12 scrips)

    Kalidas – my reply under each scrip
    ADLABSFIL.NS:-Qty-51, @337 CMP- 201
    Not so cheap by current standard. Still good growth stock. I would prefer to buy at Rs 160 or about due to depressed market. You are in right industry. Alternatively, you may swap to Balaji Telefilm which is very cheap at the moment with good line up in products. They also pay good dividend
    GSPL.NS:-Qty-700 @ 36, CMP-36
    Good to own at good prices. solid company with solid growth. Add 300 more
    INFOSYSTC.NS:- Qty–41 @ 1726 CMP-1299
    Core investment, but lot of capital will be tied up. Not that cheap. This stock could gain 40% to 60% in 2 years, whereas other stocks could triple or quadruple. Think of swapping it into other counters that have corrected most. If you wish, you may swap into GAIL at Rs 212 which will get you 6 times more shares + excellent potential
    (TULIP.NS):-Qty-75 @743 CMP- 649
    Always write full name of the stock and symbol. I do not specialize in high tech stocks, but this counter is very tightly controlled with over 68% with promoters. I would rather prefer other at half the price like Wipro
    WIPRO.NS:- Qty-60 @482 CMP-279
    Good blue chip, but large value cap. I would rather swap to others, rather than buying high value stock in market in which the people will be lot poorer in future.
    SUZLON.NS:- QTY-75 @258 CMP-85
    Green stock with lots of hypes. Just look at the price and buy it. If it falls below 81, it may fall more – but be ready to pick it
    TATATELE(TTML.NS):- Qty-670 @24 CMP-16
    I do not like this group which is in heavy debt. They may ultimately sell out this company to retain core business. The company is not so profitable, but the current price is attractive. However, at this price, I would buy Dish TV which has better potential. or even chose Arvind Mills with almost similar price with greater potential
    TATASTEEL.NS:- Qty-87 @ 474 CMP-245
    Looks cheap but its performance will be hinging on Corus where heavy debt has been incurred. Swap to some other steel stocks like SAIL which does not have negatives of Tata Steel
    TATAMOTOR.NS:-Qty–65 @ 676 CMP-228
    Stock is cheap but the group is saddled with the debt. Nevertheless, it is better to buy it in stages. In recovery, it will rebound strongly and it has capacity to raise the capital Buy at 210, 187, 160 level stages. You can buy even some now.
    TCS.NS:- QTY–13 @1130 CMP–546
    Tata has been selling this counter to raise cash to fund its other acquisitions like Corus, Jaguar etc. On its own, it is good to own but will discount the price by 40% from current level. Its dividend may be cut.
    RELIANCE.NS:- QTY-63 @847 CMP–1316
    Coming close to my buying range. May come down to your buy level – what were you doing when it reached 3200?
    RCOM.NS:- QTY-20 @ 506 CMP–235
    Still one of the most expensive telecommunication stock. I would swap to other counters. Better sell this and buy 3000 or Arvind Mill or 2500 of IFCI. In % terms, they will give you better return in short time frame. Nevertheless this is fancied by many, but the days of high P/E stocks are gone.
    L & T(LT.NS):- QTY-80 @1208 CMP-815 (POSITION AFTER BONUS)
    My original assessment was that it may drop to Rs 600 (Rs 300 after Bonus). I still maintain it. NEVER buy the stock because of bonus. It is just paper,. Nothing changes

    thks Rang-Jama. Bangalore, India.

    Rang-Jama

    October 22, 2008 at 10:11 pm

  14. Kalidasji,

    From Bloomberg website, a story stating what you mentioned long back:

    http://www.bloomberg.com/apps/news?pid=20601087&sid=agu0LWZrdQrg&refer=home

    The article is big. So i just extract this:

    ============ Start===================
    Investors are taking losses of up to 90 percent in the $1.2 trillion market for collateralized debt obligations tied to corporate credit as the failures of Lehman Brothers Holdings Inc. and Icelandic banks send shockwaves through the global financial system.

    The losses among banks, insurers and money managers may spark the next round of writedowns on CDOs after $660 billion in subprime-related losses. They may force lenders to post more reserves after governments worldwide announced $3 trillion in financial-industry rescue packages since last month, according to Barclays Capital.

    “We’ll see the same problems we’ve seen in subprime,” said Alistair Milne, a professor in banking and finance at Cass Business School in London and a former U.K. Treasury economist. “Banks will take substantial markdowns.”

    And….

    Investors may sell the CDOs back to the banks that structured them, which will unwind protection they wrote to hedge swap transactions, Barclays said. The chain of events will push up the price of default protection and company borrowing, according to Barclays.

    =============End=============================

    Sir, sorry if im unable to recollect it properly, but your calculation had once suggested far more than $1.2 trillion in losses. Which means we have not even crossed 25% of writedowns as of now!! (Scary!)

    My question is:
    How can the investor sell the CDO’s back to the banks, if the value is 0?

    Regards

    Girish

    October 22, 2008 at 11:01 pm

  15. Kalidas Replies to Ojal (ref: 0810-014 -Thursday, October 23, 2008 )
    In stock market, prospective P/E ratio is counted for the price expecteation. In present scenario, current P/E acts as solid guide because the future is relatively bleak or negative for most companies. it is impossible for me to read every stock. I do not follow most of what you own or interested in. I will give a specific comment if you really own the stock – otherwise there are more than 8000 stocks.

    Ojal Suthar

    October 23, 2008 at 12:32 am

  16. Also Anilji,

    See the list below:

    Company, LTP(CMP), PE Ratio
    ———————————-
    CHENNPETRO, 137.40, 1.75
    GMDC, 50.20, 1.44
    INDIAINFO, 52.55, 1.96
    NMDCLTD, 166.80, 0.83
    SESAGOA, 82.15, 0.17

    These are some of the stocks having PE < 2… that means their price is less and earning per share is more…So these are a steal???A golden opportunity to own these??? Moreover, SESAGOA and NMDCLTD, with PE ratio < 1, suggests that the current price of both these is less than their earning per share.Plz suggest am on the right way???

    Rgrds, Ojal, Udaipur, INDIA
    Kalidas Replies
    I will see them in weekend. Often, financial website do not adjust for bonus shares. So the EPS looks large and PE smaller, because CMP already reflects the after bonus price.

    Say L&T rerently went ex-bonus and 1 share became 2. We have to see whether EPS is also halved or remains same? I would not jump to conclusions until I have verified the facts.

    Ojal Suthar

    October 23, 2008 at 12:48 am

  17. Kalidas Replies to (ref: 0810-013 – Thursday, October 23, 2008)
    Merril has already merged with Bank of America. your positions are with DSP Merril which is an Indian entity. Check where they are parking physical gold owned by the fund, and whether they are held without any encumbrances or charge or lien. Write to them specifically by Registered Post, so that you get clear answer. You may also send a copy to SEBI and NSE where the funds are quoted.

    Ojal Suthar

    October 23, 2008 at 1:13 am

  18. Hello Kalidas, kindly refer to my earlier querry and your response here and the response to some other person today. It is a bit confusing as you have said that gold will start to rise after 3 days or at least by the end of Dec and in today’s repsonse I am geting to understand that it would take long time. Could you clarify the exact position – Please.
    Xavier
    UAE

    HI Kalidas
    As suggested by you in a couple of articles, I have secured some gold in UAE when the price was around $ 890, now it is around $780. Could you let me know if at the end of Dec it will rise atleast above $1000, so that I can sell it.
    Xavier
    UAE

    Kalidas Replies to (ref: 0810-006 Tuesday, October 21, 2008)
    The stock market rally may continue for a day or two. There is no improvement anywhere as totted by authorities. Their main attack is to control the inflationary indicators like Oil and Gold, and I have clearly explained the reasons in the article – A Nation on the Grill

    Buy more in less than 3 days. In Friday meeting, the OPEC may drastically cut the oil supplies. It could be as high as 2 million barrels per day. By the time November expiration arrives, the dollar will dip, oil will probably shoot up over $50 or more in a day (provided they do not change the settlement system on NYMEX from physical delivery to cash settlement). Further, there is no more gold with Federal Reserve, and that might be known to the investors within 2 months. When it is known, the gold prices could jump by leaps and bound and there will be tremendous short covering. By that time, India’s wedding season will start, that will promote wholesale gold buying regardless of the price.

    Kalidas Replies
    What is the confusion? I still maintain what I have said as quoted by you. Friday has not yet come, and November expiry and December are far away from now. The dollar strength is manipulated with reference to oil, and there are some unwinding exercise being conducted by hedge funds, who being unable to raise the finance, are liquidating their long position. They are quite swift, and that process may end soon. The manipulation of dollar versus Oil (and to Gold indirectly) will continue until expiration date.

    Please note that today’s trades and settlements are interlinked in for various commodities. You never know which factor surfces first. Hedge funds were absent a few days ago, and they surfaces in short while because of redemption pressure; Credit crisis in dollar, as it appears, is deliberately generated to bring down the commodity, oil and precious metal prices. They are also trying to weaken (in strategy terms) Soviet Union financially. As such, it is very difficult to tell you what happens tomorrow. There will be huge short term gyrations.

    The settlements for futures are still far away ( in November and December) , and Paulson, Rubin, Bernanke & co. with $700 billions of check, are playing havoc in the market place. Until the expiration date comes, the weaker trend may continue unless the companies used for such trades bust. (It happened in the past when Enron was busted) Please note that huge portion of $700 billion appear to be used in financing these trades, and this is why, Paulson did not want to be answerable for any trades.

    There are two types of trades now – Physical and other Paper. No one is throwing away gold at 10% loss overnight if it is a physical trade. However, in paper trades where delivery is not necessary, the prics are going up and down only on paper. What you read today are the prices on the futures and options, and even if the physical trades are shown at lower prices, there are very very few trades.

    And if you find confusing, please quote the other source of my opinion, so that I could relate properly.

    Xavier

    October 23, 2008 at 11:27 am

  19. Dear Sir,

    With reference to your reply to Xavier (ref: 0810-006 Tuesday, October 21, 2008) and also to Jones in MMB (sub Gold:23 Oct2008 8.06AM i.e Today) and your many old messages it is evident that Gold price is manipulated by US through JPMChase/CITI etc to popularize the dollar in last 40 years or so. JPMC went on shorting gold like there is no tomorrow.:-)) Now in such a financial crisis demand for the gold is tripled in last couple of months. As per some reports in bloomberg Gold coin sellers have huge pending orders and no supply. But the beauty is prices are falling down. You have stated it is due to redemption pressure on hedge funds to raise cash they are selling gold. My question is why don’t’ you think it is also manipulation by US FED through JPMC /citi etc shorting it so much to reduce prices. Once prices are down they can accumulate physical GOLD across the world. They may bring prices to say 500-600 $or so and then accumulate . So when time comes to show to the world that they have gold it may maximum jump by 1000$ . So price would be around 600+1000= 1500$ max . This is what mostly FED wants. Otherwise If they don’t manipulate now they will loose control over the world.. They will do what ever it takes to keep $ floating.

    Shiva,
    Bangalore India

    Kalidas Replies to (ref: 0810-012 -Thursday, October 23, 2008 )
    Today’s crisis is similar to Asian Monetary Crisis, when everything fell – Asian currencies, properties, bonds, equities, commodities, oil, gold EXCEPT US dollar. The main manipulator Rupert Rubin, then Treasury Secretary and architect of strong dollar policy, engineered the Asian Monetary crisis so that Asian reserve does not migrate into EURO which was just about to be borne.

    Look around what is happening. Which sane person will ever buy US dollar when its economy is crumbling, banks and brokers are collapsing, rising unemployment, falling home values, bankruptcy from Corporate to Individuals, falling Stocks, Bonds and even Certificate of Deposit market.

    And yet, almost all world currencies, commodities, oil, gold, stocks, bonds, etc are falling. Who is felling them? Why should they fall at all?

    Paulson got the check for $700 billions so he has gone nuts, and using all paper derivatives to cause crash everywhere so that dollar survives. Who will throw away Gold and embrace sub prime related CDO, CDS etc? The transactions are very few, in OTC market, many done near the close of the market, so that gloomy picture is picked up by Asian markets when they open.

    I have mentioned this scenario when I penned the article “What the Hell is Going On” under the main caption “A Nation on the Grill”. The trouble is that United States never learn the lesson. The time has come that it does – otherwise entire world economy will become hostage to these ruffians.

    What is happening now is the operation of two distinct markets – Physical or Spot market AND paper market where paper instruments like Futures, Options turn around with the speed of light. In early days of 1990s, the future and option prices used to dictate the Spot prices. Now it is other way round – Spot prices are dictating the Future market, although some old traders still look to future market for guidance.

    This is why there is no physical metal Gold for coin purposes. There is no longer physical silver as well. I used to buy 10 Tael (375 grams) of pure silver 9999 purity from Po Sang Bank (now became Bank of China). for over 2 years they have stopped selling silver bar – they are prepared to buy from me, but would not sell. There is not much physical silver available in the international market as well.

    And yet, their prices are falling in futures market where there is no physical settlement – you settle the difference in cash – like you do on NSE F&O segment – so that they continue to push the market down and settle in cash, not in delivery.

    Three major banks will fail big time – and then everything will reverse. Although the paper market sees the lower prices, there are no sellers in physical market. This deviation is amazing. Watch for the November expiration and also tomorrow OPEC meeting when you may see huge cut. They would be naive to cut at one time – I would cut in 3 stages leading to November – 1 Mln now, 500K after 10 days and 500K 3 days before so that short sellers will be on run for cover and book such huge losses that they can never return.

    The $700 billions package was not meant for banks. If you see the recent events, they started happening at fiery pace only after $700 billions were approved. This large sum is playing havoc in the market place – and take it from me – They will fail big time. This is why I had warned there that the bigger Enron is in the making and it will be 20 times larger.

    shiva

    October 23, 2008 at 12:01 pm

  20. I am in the process of building up a portfolio for the long term. Long term means holding period of 3 to 5 years and am targetting that the portfolio also goes up by 3 to 5 times in that period.
    As of now I have identifies the following
    LIC Housing, have been buying in phases, bought at 300 & 240.
    HPCL – Have bought at 200 & again at 240. As the script / industry is dictated by oil prices and oil prices keep on fluctuationg wildly, Is it a good script to hold on to for such long term ??
    Sesa Goa – have bought at 180, then 80. The mgt is increasing production and at some stage may float the captive power generation plant as a separate entity.
    Siemens – Have bought at 400, Turn Around story, company is currently in losses but the business is fundamentally strong.
    Reliance Capital – Plan is to buy below 600 and then add for every Rs 50 fall in price. High beta stock and as and when the mkt improves, it should fly.
    Can you please comments on the shares and reasons and also suggest some shares.

    Goel, London, UK

    Kalidas Replies to Goel (ref: 0810-017 – Thursday, October 23, 2008)

    LIC Housing is okay. So also HPCL.
    Not sure of Siemens andReliance Capital – both have to go down much more.

    Goel

    October 23, 2008 at 10:00 pm

  21. Parliamentary Elections are due in India in the first half of next year. As of now the political situation is fluid and the possibility of a coalition govt looks strong. That involves a lot of horse trading and compromises on issue that the party stands for, hence there is no clarity and that would lead to a fall is the markets, is that a correct observation ??

    Secondly I have read about US presential cycles which basically says that the first 21 months of a new presidency are not good for the stock markets but the last 27 months are the best period for the markets. It does make sense as any new president would prefer to take unpopular decision in the first half and turn populist in the second half. What is your opinion on the same and do we have any comparable study for the Indian markets. (although I understand that we have had lots of mid term elections etc, so cycles are not well defined in India)

    Goel, London, UK

    Kalidas Replies to Goel (ref: 0810-015 -Thursday, October 23, 2008 )
    Diagreed for two reasons – Facts and Belief.
    Facts: If what you say is true, last 27 months should have been rewarding of Bush Presidency – but the facts are otherwise.

    Belief: History does not repeat itself as often stated. It is always created like Olympic records that created every year. Things are always on move.

    Politicians are small players as deciding factors for the market. further, politicians are like black crows – they are same everywhere.

    Goel

    October 23, 2008 at 10:13 pm

  22. Kalidas Replies to (ref: 0810-016 – Thursday, October 23, 2008)
    Agreed. But bottom is not reached yet. However, we have to be stock specific. I follow 80:20 rule. Where the price destruction is 80%, invest 20% of allocated amount in the selected scrip. If the stock goes down by another 10% to make it 90:10, invest 10% more because the trend is still downward.

    When the stock goes up to 70% down from peak from way down, the ratios is 70:30, so invest another 30% of allocated budget for that stock. that is, you are trying to catch upward trend. You are always below the market.

    I am now bullish on metal stocks. The present debacle in commodity prices is caused by US Authorities to destroy the world economy so as to have its continuing supremacy. It is time to get long on commodity again. The growth in Asia is in tact. If US does not buy, Asia will buy.

    By this weekend, I will give here a list of my proposed investment.

    Sreeraj

    October 23, 2008 at 10:48 pm

  23. I have read on bloomberg and another blog that there is a possibility of SHUT DOWN of US MARKET & Banking Holiday in US for 1-2 weeks. And when market will open again then Dow will be opened Several THOUASND POINT DOWN. If this shut down happen then Sensex will be 5000-6000 in the Shut down period of DOW. And will Crack More if Dow open as they predict.
    They are Predicting Situation like 1987 crash. But They are forgetting that That time Trading was Restricted due to Sorting the Orders Which came beyond the ability of Computer Technology of That Time.
    So How do you Agree with them ?
    Thanx Jayesh Ghatkopar Mumbai

    Kalidas Replies to Jayesh (ref: 0810-018 -Friday, October 24, 2008)
    A wishful thinking. The market never closes, especially in US. Every investor has right to buy or sell in the market at any time, anywhere. If such actions were ever taken, there will be millions of lawsuits against the authorities.

    The crash of 1987 is not comparable with today. the people often compare % (Percentage) statistics against Absolute (Real quantitative numbers) in bad times to mute the bad effects, and talk about absolutes in good times.

    The loss of market cap in 1987 was hardly a few billion dollars. Today’s crash has caused market cap losses of over $10 trillions in US market alone. The crash during Harshad Mehta, Mumbai caused the loss of market cap of say hundred thousand crores, whereas today, the market cap lost from Sensex 21000 to 10200 is over several hundred thousand crores. We are in the period of all time high market losses – do not underestimate it.

    jayesh

    October 23, 2008 at 11:44 pm

  24. When RIL went up to 3200, I was out of country. Missed the bus. L & T was bought before bonus @2426 qty 40 CMP 832. Can you advice now for action, pl?

    Rang-Jama, Bangalore, India

    Kalidas Replies to Rang-Jama (ref: 0810-019 -Friday, October 24, 2008
    When you miss an opportunity to sell at higher price, do not wait longer. Take whatever you could get if you are in good money. Most investors often set the missed higher price as target to sell, telling them, I will sell once RIL reaches 3200 again, forgetting that there are several others in the line to do the same.

    The stocks move down like semi fast urban train. If you wanted to get down at Ghatkopar, but missed it, then next station will be Kurla, then Dadar, Byculla and Mumbai VT where it stops – the train rests there for long at the terminus.

    Your money is loyal to yourself. It screams at you “Get me Out, get me Out” . The Investors do not listen such “help” call from real money. Instead, they listen to paper (equity) that tells him “Don’t do that. I am climbing higher”

    There is a saying in Gujarati. “When Goddess Lakshmi visits your home to place a “tikka” on your forehead, you do not have to rush to bathroom to wash your face”. She will be gone – she has more homes to visit.

    To be specific to your answer – it is too late to sell both RIL and LT. Sell LT where the loss is minimal, and swap to RIL. There will be slow down in India’s infrastructure that will hurt LT (facing order cancellation or postponement) whereas for RIL, its RPL will come into production and also gas production in Krishna-Godavari basin. I would do that, rather than sitting like a duck on twin eggs.

    Rang-Jama

    October 24, 2008 at 12:33 am

  25. Sir,
    Your post ref: 0810-016
    Is this my calculation Correct ? If I have Rs. 1 Lac to invest in Stock A. It’s Peak is Rs. 100 and currently trading at Rs. 20. So I Invest Rs. 20K at First. If then it corrects to Rs. 10 So Invest Rs. 10K more at Second. Now If it goes up to Rs. 30 so according to you I should to Invest Rs. 30K in this script. But in this volatile market Should not I Book Profit earned 200% on 10k and 50%on 20K?

    thanks Jayesh, Ghatkopar Mumbai

    Kalidas Replies to Jayesh (ref: 0810-020 -Friday, October 24, 2008)
    I have given you a stage for re-entering the stock again to average down as you may say.

    I have already given a formula in “Re balancing… article” that if your stock has become 1/4th, you invest 4 times, 1/5th, 5 times (reverse the ratio) in 3 stages – two on way down, one on way up. Also, treat each deal as separate transaction – DO NOT count average. Sell it whenever the new deal get you into money and does not go up further.

    To be specific to your query, 200% profit looks too good to miss, but it has risen from low base. Of course you must book it if you had bought higher quantity as per above ratio. The idea is to catch the upward trend, rather than getting stuck into downward spiral. Usually, 80% loss is a good point to start reinvesting.

    jayesh

    October 24, 2008 at 1:36 am

  26. Recently, I studied a research report from Morgan Stanley (dated 09.10.08) titled as “Heightened Alert on Many AXJ Currencies”. In it, they predict 57 for USD/INR, 10000 for USD/IDR, 1750 for USD/KRW, 53 for USD/PHP, 1.57 for USD/SGD and 35 for USD/TWD for March 2009. Are you sure INR depreciates up to 57 to USD? I think that there was no speedier appreciation (as of now depreciation) when FII money inflow increases. What is the reason, Sir? Will Inflation increase?

    Kalidas Replies to Mathi (ref: 0810-020 -Friday, October 24, 2008
    This confirms my fear that US authorities have decided to cause crash in world currencies so that US $ supremacy is maintained. This is repeat of Asian Monetary Crisis. Paulson and Rubin of Goldman Sachs have joined hands again. This firm Goldman Sachs should be disbanded and de-licensed in every country for 20 years

    I always followed a principle – if you want to know what US government thinks, go no further than two leading brokers who handle their treasury deals – Goldman Sachs and now Morgan Stanley – both of whom were saved from bankruptcy and converted into bank.

    They know the ultimate goal and are working towards it. When the GBP was at 1.97, Goldman Sachs gave a call that it will go to 1.50 – and now at near 1.60 close to their goal.

    By causing fall in world currencies, they want to bring down all commodity prices. They are shorting everything with $700 billion generated out of vacuum and buying only $ Index on NYMEX. They force it down in the name of global recession, and not even once they admitted that US is in recession.

    Stupid Bank of England Governor Lord King went on announcing that UK was near entering recession. Shut up, you idiot – listen to the game of your master across the Atlantic. He, the initiator of all crisis, does not say that his country is in recession, why you have to go to the podium and announce to the world with mega speaker that your country is near to recession.

    US is equipped with an art of acute deception. Rest of the world leaders, including some learned one, fall prey to such gimmicks of con men.

    What you see today in the market place – the falling currencies, commodities, gold, oil etc are the result of product design from USA. They want to get out on top whatever it takes.

    There will not be inflation. Because the value of commodities also come down by same %

    Mathi

    October 24, 2008 at 4:34 am

  27. Dear Kalidas Sir,
    You have often stated that property market is on downside and the effect will be more prominent after 2-3 months of the stock market collapse. I think you stated the above fact with regard to price of apartment/flat. Does the same concept holds true for residential or commercial site. I am looking for a good residential site in Bangalore for last 6 months and inquiring to the builders, though the price is not rising much as such, but it looks builder’s are not quoting either falling price.
    -Santosh,Bangalore

    Kalidas Replies to Santosh (ref: 0810-024 -Friday, October 24, 2008)
    Yes, but the site prices are more stable than built up apartments. Unused sites do not attract outgoings. The property market thrives on credit, and it is now tight. Continue to work, and you will get result

    santosh

    October 24, 2008 at 2:12 pm

  28. Dear Kalidas Sir,

    All the metal stock are coming down heavily.
    Most of them have come in a P/E range of less than 5.
    Hindalco is trading at around 0.5 times book value.

    As you said earlier your preference is core economy stocks. Right now there is an environment of extreme fear in Metal stocks. What do you think would be a good buying price for Tata Steel and Hindalco. I understand that Tata Steel is having trouble to digest Corus. However when I check the debt equity ratio I find it 0.67. Please let me know your views on Metals stocks and these two stock in general.

    Regards,
    YSB

    Kalidas Replies to (ref: 0810-023 -Friday, October 24, 2008)
    Agreed. This is time to buy commodity and metal stocks. The first stage is now. The companies like Hindalco and Tata Steel made acquisitions and do not appear to have got funding. This is why they had to rely on right issue that could have chance of failing.

    Current PE has no relevance, though they offer broad guidance. I think Hindalco at this price appear good choice. Look at other steel stocks, base metal stocks and commodity suppliers. I will tell you specific in 2 days.

    YSB

    October 24, 2008 at 4:06 pm

  29. Dear Kalidas Sir,

    Plese suggest your views on :

    Videocon Industries and Jindal Saw. Videocon Industries P/E is somewhere close to 3 and its price to book value is 0.5.
    Jindal Saw has P/E of close to 5 and ROCE for last year was close to 22%.

    LIC housing Fin:
    i understand that you are bearish on Real estate sector in India (i concluded that based on your 120-180 multiplier formulae). In that case why do you think LIC housing Finance is a good buy?

    GSPL:
    You said times of high P/E are over. GSPL has P/E of close to 17. Isn’t that high by current standards.

    MTNL:
    This stock is very cheap. However do you see this company growing its reveues or pursuing an aggressive strategy to increse market share. If it does not grow its revenue do you think its stok price would grow?
    (i Understand it has huge cash reserve because of tax rebate it go but dont you think revenue growth is more important)

    IFCI:
    Do you think this company will have revenue growth in the current scenario? I am assuming that selling of stake would be delayed in current market turmoil.
    If there is no revenue growth isn’t it safe to assume that stock value will not grow considering the current scenario.

    Regards,
    YSB

    YSB

    October 24, 2008 at 4:20 pm

  30. Dear Sir,

    Today’s carnage across world including commodities, currencies indicates the intentions of US as per your response “Kalidas Replies to Mathi (ref: 0810-020 -Friday, October 24, 2008”
    Is there any way to counteract US in the capitalist world.? What strategies other governments should do?
    Sir, I read some where In the capitalist world never bet against $ . Looks like this adage is true in this world.
    Looks like US will escape the recession by bringing every thing down.
    Shiva
    Bangalore India

    Kalidas Replies to Shia (ref: 0810-022 -Friday, October 24, 2008)
    There is always better than one glorify. US can not dominate any more. The world knows its true colors. What the governments can do is to withdraw their Forex reserve by 80% – then they will learn lesson

    Shiva

    October 24, 2008 at 6:32 pm

  31. Sir,

    Due you track Jai Corporation. If yes, your views on it. Its 90% below from its previous high. Mainly creating 2 SEZ in Navi Mumbai. It managed largest PE sale in Indian Equity Market History last year at 1100 Rs / share. (High = about 1400) Currently the share is trading at 143 Rs. I am holding it at 100 shares at 220 Rs.

    I invested in Gold Yesterday. Want to invest in silver also maintaining 1: 10 Ratio in gold:silver.

    And wishing you a Happy Diwali.

    Vivek Dhariwal, Gurgaon, India

    Kalidas Replies to vivek Dhariwal (ref: 0810-021 -Friday, October 24, 2008)
    No, I do not track this stock. These are hyped up and relationship stocks. As you have mentioned, the stock was trading at 1100 times, that is, the EPS projected was just Rs 1.3. I would not touch such stocks even at Rs 10, so there is no point of discussion.

    Vivek

    October 24, 2008 at 7:57 pm

  32. Dear Kalidas sir,
    Required your valuable advice. I am holding following shares. Sorry for bothering you. i am asking the question second time. But this time current market price have gone down
    Orchid pharma @201.50 CMP 100 Qty 2000
    Sesa Goa @ 81 CMP 74.5 Qty 1500
    IDFC @ 90 CMP 52 Qty 1000
    Oriental Hotel @ 273 CMP 190 Qty 250
    Thanks and regards
    Ravi, Chennai, India

    Ravi

    October 24, 2008 at 10:16 pm

  33. Gold has come down & so is stock market. Both are going to go up in future. So where should one invest for better returns & safety? Is it wise to think of real estate investment at this stage?

    Kalidas Replies to (ref: 0810-025 -Friday, October 24, 2008)
    Gold and Stocks normally have opposite journey. Gold is usually an alternative cash for slumping stocks. Currently Gold is down due to manipulated strength in the US$ Index on Nymex. Right now, the prices of many assets have some down so much that one may buy any asset that has been driven down the hole a lot. Gold is terrific investment considering the drop in prices by 14%. There is a hidden news about gold that has not yet come out. And when it does, it will play havoc in the gold market.

    Hasmukh Rathod

    October 24, 2008 at 10:42 pm

  34. Kalidas, you said, ” Gold is terrific investment considering the drop in prices by 14%. There is a hidden news about gold that has not yet come out. And when it does, it will play havoc in the gold market. ”

    What kind of this news is? What kind of havoc it is going to play? upward or downward? And upto what extend? Pls clear this confusion.

    Thnx n RGDS.

    Hasmukh Rathod

    October 25, 2008 at 12:32 am

  35. We have all heard things like markets are always right and market finds its own level. What do you do when the most powerful administration in the world is playing the manipulator?
    How to survive in this mayhem, falling stock prices I can understand what about strengthening currency of a sinking economy?
    When at least partial will logic return?

    Martin
    Goa, India

    Martin

    October 25, 2008 at 1:46 am

  36. Your prediction “We are in deflation, not in inflation. Money will disappear. Everything will cheap. Then, there is no money to buy” seems near true. Market force may make all indexes and stocks as valueless. Investors’ heartbeat rise alarmingly. Apart from 700 billion USD package, When will work G7 countries unlimited dollar support for saving them from credit crisis? Is this works positively or negatively?

    Mathi

    October 25, 2008 at 2:30 am

  37. Dear Kalidas Sir,
    Indian investors are at the mercy of the FIIS. Permitting FII’s
    to invest in Indian stock market is the main reasons for the current crash in the market. They are investing in India not for charity.They will escape at opportune time. All the investors are suffering from substantial erosion of their life savings. Sales of anti depressant medicines increased substantially. Suicides are reported all over India because of the market melt down. I request you to write an article about spirituality and how to face the current chaos in the stock market and loss of jobs.
    Alvin Joseph, Kerala,India.

    Kalidas Replies to Alvin Joseph (ref: 0810-029 -Sunday, October 26, 2008)
    Disagreed. SENSEX moved up from 2780 to 21000 + due to FII inflow. Do not blame them. All invest to gain and then dis-invest. FII lost more than Indian investors. They lost over 50% in equity and in exchange from 15% to 20%. All are opportunists including FII, Indian Investors, you and me included. The stock market is not pilgrimage center. It was FII who brought awareness of Indian economy. When the index rose from 2800 to 21000 or 700%, the domestic investors gained because FII bought in cash segments.

    Suicides are unfortunate. Most suiciders are speculators in F and O game. The Government should not have started Futures and Options at first place (I had voiced this concern at that time). My article Rebalancing Portfolio in depressed market was aimed at those who might have become distressed, and this is why I included picture of Jesus that everything will be fine, exhorted investors to do meditation before Candle light and also told them the real meaning of ” These days shall not remain forever” just to console them and not lose faith, hope or confidence.

    Our education system is flawed. Although the stock investment goes across the spectrum of the society, from normal investors to professionals like doctors, engineers, etc., there is no curriculum in final 2 years of graduation, which trains and prepare the students how to face the life head on and deal with any crisis as it comes. All our top notch Business Schools teach their own subject, without core studies as above. How many schools teach the students how to behave in family, society, neighborhood, office, with wife, children, elders, colleagues, commuters in the train, etc. How many schools teach how to invest, disinvest, face crisis situations, tools to come out of the problem etc. These business schools charge hundreds of thousands of rupees towards tuition, and DO NOT teach the students realities of life they will face every moment, every day in real life.

    The government should come out with TV Ads encouraging the investors not to worry and inform them what should they do to face the real problems at home due to stock market downturn.

    The institution like Tata Institute of Social Science, and some Samaritans too, will be of great help, and government should specially fund this institute to spread the message to the distressed people to contact them for help and get redressed. Even print media should spread similar message and open up special form for discussion.

    Some professionals from stock market should be hired by the government to organize the talk show on every channel at certain time as compulsory broadcast to ensure that people get the real knowledge and message. THIS IS A MUST REQUIREMENT at this point of time. It is the government’s fundamental responsibility to protect the lives of its citizens from total disaster. Not all persons have strong will power, the government officials must understand.

    An open seminar in the places like Brabourne Stadium or Wankhede Stadium may be organized by the RBI, SEBI, Association of Chartered Accountants, professors from management institutes like IIM, and let the people air the open questions and hear the open answers. TV is the strongest media, and instead of broadcasting the popular serials, they should introduce this ad hoc program at least for a few months. This is real “Kahani ghar ghar ki” , not the sop broadcast earlier.

    FII are just investors. One should not blame them for investment or divestment. An investment is one where the investors have right to sell it at any time any hour regardless of the market state. The market will take care of itself

    Alvin Joseph

    October 25, 2008 at 12:48 pm

  38. Sir,

    May be a lot of people commenting here will find this request odd or misplaced, but I am hoping that you write an article on the principles of Bond Investing (within the context of an NRI investing and a resident Indian investing in Bonds).

    Some time back (almost 4 months), I was keen on finding out a better alternative to FMP’s (my earlier favorite fixed returns instrument, but I had achieved my total targeted FMP investments) and researching on the same, when I read your article on zero coupon bonds and found my answer. This has effectively ensured annual pre-tax return of 13.5%, with absolute zero risk (lesser than FMP’s), for the next ten years, for my investment in the instrument. The result; I could sit on cash and pick up prize stock like LICHF (@194) and MTNL (@61) very cheap yesterday (24th Oct’08) + brought GOLDBEES and QGOLDHALF and am waiting to buy more in case of further falls.

    May be a forum/an article on Bond Investment originating from you will answer a lot of questions for your readers and address a lot of the insecurity issues for investors (at the very least for your readers)…

    Ashish Dandekar, Doha, Qatar

    Kalidas Replies to Ashish Dandrkar (ref: 0810-027 -Friday, October 25, 2008)
    Right you are. I will devoting some time to write the basics of bonds selection from NRI and also domestic investors’ point of view soon. Since right now the equity has become so cheap that it is better I pay more attention to this subject so that the investors do not let the opportunity pass by.

    Ashish Dandekar

    October 25, 2008 at 3:25 pm

  39. To All Readers,

    This month is coming to end soon. The column for this month will end and new one will start for November to have serial referene No: 0811-oo1 onwards where 08 represent year and 11 the month, followed by serial reply number.

    There will be change. i will not write more than 9 lines in reply, and while I will not avoid questions from same person again, preference will be given to the new comers if someone is already replied to once before.

    Subject will be more important than who enquires. If subject is serious enough to warrant separate article, I will do that. The reason is that sometime some really difficult questions have easy answers or solutions, whereas some easy questions have very difficult solution.

    anilselarka

    October 26, 2008 at 2:04 am

  40. Dear Kalidas sir, On behalf of me and thousand of readers i request you to write a list of stocks that can be purchased from medium to long term point of view and the price level which can be purchased. In the current conditions is it better to average the existing stocks or go for new one which has come to very low levels like Hindalco or Lic housing finance etc. Also tell us which sector to avoid completely irrespective of market sentiments.
    Thanks and regards
    Ravi, Chennai, India

    Ravi

    October 26, 2008 at 11:16 am

  41. Dear Sir,

    Few things we, people, are looking forward to get from you in near term are:

    1) Please include Kalidas Rules on best way of monthly investments from salary in stockmarkets in your best-picks article.

    2) A separate article on Past, Present and Future of Gold/Silver and how to take maximum advantage from this opportunity.

    3) Kalidas rules on Equity selection and which company to avoid in which specific circumstances.

    4) How big traders/investment banks play these stock market games and if there is way to take advantage of it.

    Vivek Dhariwal, Gurgaon, India

    Vivek

    October 26, 2008 at 12:43 pm

  42. Dear Sir

    WISH YOU AND YOUR FAMILY HAPPY AND PROSPEROUS DIWALI.

    Shiva
    Bangalore India

    Shiva(shia)

    October 26, 2008 at 8:00 pm

  43. Dear Sir,

    Wish You a Happy Diwali

    Rajmohan babu
    Ponite-Noire Congo

    Rajmohan babu

    October 26, 2008 at 10:31 pm

  44. I have asked a question about Rupee on ‘India’s ON & OFF policy’.Now, pls let me ask one more question here which was unrelated to that topic which is About HPCL, BPCL and oil and gas sector.
    You have once mentioned that Fed has not 15% gold what it shows in it’s balancesheet. As far my knowledge of finacnce, fed can print Usd equal amount of Gold Value. If now we reduce Gold reserve 85% from their balance sheet then Usd will collapse like house of teenpati.And current dollar Value will also be reduced 85% (Rupees 8= 1 Usd). And gold value will also be reduced because International trades are in USD. If it is like so then Usa’s export industry will be finished forever & Recession will bring Crude at 25-30$ per barrel.
    Above are my just assumptions there may be many mistakes and i m not a like analyist who have degree MBA . I am just Graduate of commerce . If my above assumptions are correct then what the Price of HPCL you see in next 2 years in stock market?more than 2000.
    Thanx Jayesh Ghatkopar Mumbai

    Jayesh

    October 27, 2008 at 2:31 am

  45. Sir,

    you have time and again said that 3 big banks will fail and then everything will reverse. Can you let us know which bank and again some explanation on why do you think this time the manipulations by US will fail. Will that point, be the bottom for every markets.

    Vivek, Gurgaon, India

    Vivek

    October 27, 2008 at 11:45 am

  46. Kalidas, I fully agree with you about “investor education”, so that they can minimize their loses & control their greed. Half knowledge always damage in every field of life. For this, if you start a thread about actual functioning of stock market, F&O, broker’s role, etc, where people can share their experiences & knowledge. It should not be a ‘stock specific’ forum. Most investors are truly ignorant about terms like ex-bonus, ex-date, split, roll over, short, long, T+2, short & long term gain tax, ect. If people can share their experiences & seek experts comments on the topic from you, I strongly feel it will help lots of investors.

    With Best wishes for DIPAWALI !

    Thanks n RGDS.

    Hasmukh Rathod

    October 27, 2008 at 6:58 pm

  47. Kalidas Sir,

    I had earlier asked few questions. I am repeating them again. Please answer them even if you think they are dumb:

    1. LIC housing Fin:
    I understand that you are bearish on Real estate sector in India (I concluded that based on your 120-180 multiplier formulae). In that case why do you think LIC housing Finance is a good buy?
    Kalidas: Yes. Developers are dependent on other people’s money. They are highly leveraged. In tough times like this, they will disappear leaving buildings half completed. LICHF is a different ball game. The long term assets like home/House may be financed by long term finance such as Housing Loan. LIC has reach to even smallest village where even HDFC can not penetrate. This is why LICHF will excel. further, home value and housing finance are directly related. Most people are middle class and except for big cities, the cost of apartment in smaller city is still moderate. Deeper penetration of telecom and other communication will slow the migration of village, town and small city’s population to Metro cities like Mumbai, Delhi, Bangalore, Chennai etc. this is why Metro cities will have less growth. LICHF is strongest BUY. It may reach 1200 or equivalent in 5 years with rich dividend pay out. It is possible, it could be converted into a specialized bank for housing finance to reduce its funding cost.

    2. GSPL:
    You said times of high P/E are over. GSPL has P/E of close to 17. Isn’t that high by current standards.
    Kalidas: You have to count the prospective PE ratio. The company has been growing @ 33%. its real profit is nearly 3 times because of heavy depreciation allowed for its pipeline network. Major products are under execution. Its earning may rise nearly 3 times in next 3 years, making its PE less than 6 times. Dividend may also rise 3 times from 5% to 15%, that is, Rs 1.50 giving potential dividend yield of 5%, good for a growing company.

    3. MTNL:
    This stock is very cheap. However do you see this company growing its revenues or pursuing an aggressive strategy to increase market share. If it does not grow its revenue do you think its stock price would grow?
    (I Understand it has huge cash reserve because of tax rebate it go but don’t you think revenue growth is more important)

    Kalidas: Cash is king in debt laden market. If it does not grow, it may have to distribute the cash which may be as high as Rs 30 per share or 60% of CMP. This is one of the most undervalued, debt free company in the market.

    4. IFCI:
    Do you think this company will have revenue growth in the current scenario? I am assuming that selling of stake would be delayed in current market turmoil.
    If there is no revenue growth isn’t it safe to assume that stock value will not grow considering the current scenario.
    Kalidas: Your concern is reasonable. However, in the era of credit tight environment, the term lending will be relied on more by companies rather than on short term finance. The company’s bad debts have been whittled down. There is a fresh growth line in credit for this institution. Its EPS is nearly equal to its current share value. The stock is valued minimum Rs 60 based on earnings alone regardless of slowdown. While stake sale is now ruled out for next 2 years. the possibility of converting into bank is maximum due to higher funding cost.

    Regards,
    YSB Delhi

    YSB

    October 27, 2008 at 8:25 pm

  48. Kalidasji,
    Wish you & all Indians a very Happy Diwali & a prosperous year ahead.

    Deekay

    October 28, 2008 at 12:55 pm

  49. Dear Kalidas,

    My current Indian portfolio is:
    1) Development Credit Bank: 1100@30 Rs CMP 24.85
    2) IFCI: 1000@15.50 and 1000@18.30 CMP 16.90
    Kalidas: This is the best stock you can own now. Even if you buy 40,000, it is good. The company’s EPS is almost Rs 11/shr on diluted basis. This stock is bound to go to over Rs 60, if not Rs 100, on 18 months horizon basis. Even if one invests Rs 1 crore, it should be in this stock. When the stock rises by 150% or reaches Rs 39, sell 50%. You recovered your capital + 20% profit. Balance lying is your floating profit – you never lose

    3) LICHF: 160@177 Rs CMP 177 –Kalidas: Stay with it. Go on enlarging on any weakness. It is jewel of the crown.
    4) Adlabs: 100@160 , 65@135 CMP 147
    Kalidas: Okay. Also Buy Balaji Telefilms and Tips Industries (strong buy) at Rs 22.05 with only 2 times PE and good dividend yield (over 10% on market price)
    5) Kingfisher Airlines 1000@41 CMP 27:
    Kalidas: Okay. The company does have liquidity pressure, but it is more industry specific than company specific. So stay with it. Invest more, when the oil prices really stabilizes, not moving in volatile fashion. I am buying more of Spicejet instead, but KFA is cheaper relatively.
    6) GSPL 1000@31 CMP 29.6
    Kalidas:Buy more on any weakness and do not sell until reaches over Rs 56
    7) NoidaToll: 1300@26.10 CMP 19.65
    Kalidas: Do not know much about this stock. If it is a toll road, nothing to worry.
    8) RNRL 1000@37 CMP 39.5
    Kalidas: Good to buy up to Rs 60
    9) 50 Gm Gold at almost current prices
    Kalidas: in what form – jewellery or bars?
    10) 1 KG Silver bought yesterday
    Kalidas: Stay with it over 3 years. You may have handsome return. These precious metals better than currency.

    I been a silent reader of your post for almost an year. Yesterday I invested significantly in Indian Markets. I will have almost 1 Lac INR in next couple of months to further invest.

    Could you please advice on my current holdings and if there is some chance of betterment. Also now everybody is predicting it going to 6000 levels like the one you predicted almost 10 months back. Do you think, I shall again sell and buy back at 6000 levels. Also advice on how to proceed with my further planned 1 lac of INR.

    Best Regards,
    Deepak

    Deepak Mohnot

    October 28, 2008 at 1:30 pm

  50. Dear Sir,

    With Diwali muharthum blast we are seeing temporary reversal of the market across the world. Looks like we saw the temp bottom on Narka Chaturdesi 27/09/2008 . Hope that would be the bottom no one wants to see it again. Now some relief rally has started.
    Market may start stabilizing around this point . Do you feel so or Nov end oil future closure will play key role? Sir did you buy any thing around 8000? I bought few IFCI,GSPL,LIC, HPCL, GESHIP on 27th.

    Shiva
    Bangalore India

    Shiva

    October 29, 2008 at 9:17 am

  51. There was a typo date should have been 27/10

    Shiva

    October 29, 2008 at 9:18 am

  52. This column will end tomorrow. I will start new one for November under Ref: 0811-

    After today, better post your comments there.

    anilselarka

    October 30, 2008 at 9:32 am

  53. In the distressed markets, disturbed mental situations, you have come as a messaiah to soothe investor feelings, we are all grateful to you. God will definetely favour you for the service you are rendering to all of us.

    Expecting much more enlightement from you,

    Regards,

    Siva Kumar

    SIVA KUMAR

    October 31, 2008 at 11:12 am


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