Markets Grumble and Rumble….and then Tumble !……what did you expect !

It took just a  week to rub off the New Year sheen

Sensex grumbled and tumbled 493 points today to close at 19692…lost nearly 900 points this week….Nifty too rumbled and tumbled 144 points to close at 5905 as we closed the first week in the new year 2011 

What did you expect !

Just look at some of the worrying Macros….and they are yet not fully reflected on the Indian Bourses

• Winter Sesssion of Parliament hijacked as BJP refuses to relent on their demand for a JPC to probe the 2G Telecom Scam and the ruling UPA Government equally adamant on not agreeing to this
• Tight Liquidity Conditions
• USA showing signs of revival…will slow down FII Inflows as monies will flow towards Wall Street
• Europe Debt & Deficit Crisis in several nations raising it’s ugly head again and again
• Interest rates firming up fast…IDBI Bank is even offering over 10% pa to Senior Citizens
• Onions,rather the lack of them, and Inflation made you cry…For the fifth straight week Food Inflation jumped and was a record disturbing level of 18.32% for the year ending December 25,2010 !
• Commodity Prices…Oil…Metals…Agri produce…are scaling newer recent highs as global imbalances play out
• The Rupee has hit a three week low today of Rs 45.37 against the US Dollar in anticipation that the continuing US Revival will be confirmed by better latest economic indicators 
•  Scams after Scams after Scams….. Revelations are affecting Sentiment…Wealth Management and PMS Schemes are on the intense review radar after the Citibank Fraud of over Rs 300 crs exposed last week 
• Hawkeyes and Hawkaction of Regulators and Enforcers on Market and Corporate and Banking Hoodlums…market operators are less blatant and are unwinding huge positions …retail and high networth investors are getting a raw deal as lack of  Integrity of Operations and Advice affects them and they find themseelves on the wrong end of the Road
• Mutual Funds have been struggling with most of their Equity Schemes..redemption pressures remain high and new schemes are unable to attract a big corpus…Abolishing Front Load of 4% and poor relative performance of many fund houses have been the twin reasons
• Hint of Babu Raj returning as Government delays,denies or disturbs approvals for Private Sector Project Plans    

…and you hoped Micros will behave well under such Macro pressures !

Sensex returned 17% returns in 2010…a shade below it’s CAGR since inception 33 years ago…in 2011 looks like the Sensex may merely repeat this…the base is high at 20k….It’s like the ‘Pause’ Button has been pressed…with at times Markets under ‘Slow Rewind’ or ‘Slower Fast Forward’…..Consolidation is beckoning in many sectors…telecom,cement,banking to name a few…..so clearly not very exciting unless you are looking much beyond 2011 like ofcourse you should…..India Story remains intact with high GDP Growth Rates being forecast and the two drivers of Domestic Consumption and Investment in Infrastructure picking up pace in the years ahead..regardless of whether Congress or BJP is in the Drivers Seat 

Have a look at the Sensex Valuation matrix I had created end November 2010 on a Blog Page …I yet hold my normal sense and see the Sensex rangebound 18000-22000 atleast in early 2011

Sensex Levels Projected for 2012…25000 ?….My normal sense is a range bound 18000 to 22000,atleast in early 2011

But if your focus is on 2011 and chasing alphas in it….chasing alphas consistently is arguably a pipedream……. then  2011 has to be a ‘bottoms up’ approach year…benchmarks will be beaten only by taking the higher risk of specfic and concentrated stock selections…rather than adopting the Index Investment and Constitutent Weightage strategy…..and to manage this higher risk one is well advised to seek good fundamental and expert advice on a one to one basis for their Equity Portfolios….Stock Market Channels will not fulfill this need……if you got a Heart condition,do you seek opinions of 50 cardiologists ! ?….varied and conflicting opinions will only add to your confusion and misery

For the past month or two I have held that the Markets were running a little ahead of Fundamentals,driven by record FII Inflows and higher Earnings Expectations in the Quarters to come…there should be a strong healthy correction before the fresh march upward again….these disturbing macros are now causing this correction

Opportunities are always there to make Money…and at lower price levels the risk’s lower too….Look for Cash Rich,Low or No debt companies…there are quite a few….a hint…some have just sold lands in 2010 and are available at a fraction of their Cash Book Values…and they were steady or up even in today’s correction

…and if you have conviction that last year laggards in Telecom will bounce back in the years ahead then I would have to agree with Abhishek Bachhan..”Get Idea”, he asserts…It’s down at Rs 67/68 today…but tight fundamentals might dissuade you…Equity is Rs 3000 crs..It earned over Rs 1000 crs in FY 10 but is vainly struggling to repeat this performance this year…will not….3G,Consolidation and Number Portability hold out hope for the coming years…52 Week High/Low is Rs 80/Rs 49..so volatility is not an issue…no hurry to make up your mind though…you may get it towards it’s 52 week low of Rs 49 it registered in June 2010…that will lower your risk too…but if you’re inclined to invest don’t expect strong returns to ring in 2011…this is a longer term ‘Idea’ 

Get the Idea ?

Cheers !