Indian Economy: News and Discussion (June 8 2008)

[vsudhir]

'India not in recessionary mode':Subbarao

"India's growth will continue and even if there is some moderation, it will only be a modest moderation. But it will not be a recession...There will only be a slight deceleration," Subbarao told reporters here.

Pegging GDP growth for FY'09 at 7.5-8 per cent, he said, this was "our best growth estimate", even though there were other estimates ranging from 7.2-8.7 per cent.

As India's growth is mainly driven by domestic demand and consumption, the country would be less affected by the global financial turmoil but it would not go completely unscathed, Subbarao said.

RBI gov shri Subbarao is taking pains to belabor this point. Does seem like the system is under stress.

[darshan]

Is there any particular reason apart from the value of dollar increasing that the price of gold continues to fall?
I would have expected strong buying of gold by small players and public to neutralize the strong selling of gold by big players. For example, it is hard to find gold coins in the market right now.
Historically, indians, east asians, and arabs have always bought gold as a safety measure.
Has something changed? Especially with Diwali and marriage season approaching, would not the demand for gold in India increase to very high level?

[Singha]

not this year. retail sentiment is way down. everyone is just sulking at home with their
tails tucked between legs. in previous yrs you'd hear the sound of parties and kids running
around bursting crackers. this yr its like a ghost town.

[SwamyG]

My mom was saying how the groceries are so expensive. And she was feeling so sorry for the poor folks....Tamrind is around Rs100/kg ? Vegetables are Rs70/Kg? With the oil going down, the gas prices are reducing in America. But I have never known about the petrol prices in India going down. Prices once they go up, stay up.....

Is aam admi getting affected by all this slowdown, or is it just the IT folks? I am very bullish on India, but want to keep my legs on reality though.

[Muppalla]

My mom was saying how the groceries are so expensive. And she was feeling so sorry for the poor folks....Tamrind is around Rs100/kg ? Vegetables are Rs70/Kg? With the oil going down, the gas prices are reducing in America. But I have never known about the petrol prices in India going down. Prices once they go up, stay up.....

Is aam admi getting affected by all this slowdown, or is it just the IT folks? I am very bullish on India, but want to keep my legs on reality though.

You are absolutely right. aam admi is really affected. I have been to India in 2006 Jan and again in September this year. I always make a point to go to places where aam admi shops just to get the pulse myself. I went this time with my father in HYD and when he was buying vegetables at > 25 per kg, I thought it is too much. My dad was telling me that they are cheap when compared to what they were in May and June. Now the tomatoes are again 35/Kg in Hyd.

I did not get a chance to see the situation of rural inflation. In my opinion, in the past when India was reeling under inflation never was a situation where aam admi had to struggle for regular food as it is appearing when compared to this burst of inflation. I don't know may be gurus on BR can have a better explanation.

[Abhijeet]

Any idea what the P/E of the Sensex is currently? It must surely be in the low teens at least by now?

I was trying to figure out what might be a good level for the Sensex at present. In mid-2003, just before the run-up, it was at around 3000. Assuming that's a fair price, and that the companies in the Sensex grew earnings at at least 15% pa since then (reasonable if real GDP growth was 7-8% per year since then), it would indicate that a fair value for the Sensex currently is about twice its value in mid-2003, so about 6000 or so.

So the two major assumptions are:

1. The Sensex was fairly priced in mid-2003
2. The constituent companies in the Sensex grew their earnings an average of 15% per year since then.

So I'm guessing the Sensex may have a little way to go before it hits bottom. I really don't see it going down to 4000 or something like that, although if it did that would seem like a huge buying opportunity.

Comments?

[Vivek Sreenivasan]

Abhijet one of the major problems is that IFIs still hold billions of dollars worth of stock which they can sell the moment of a panic overseas.

I would say that 6000 points is fair value on the Sensex, 21500 was just a massive bubble waiting to burst. I see stabilization of the stockmarkets in the next few weeks. The impact of all the polices should take effect to rectify the structural problems in the financial system. The EU has done some good work, the US is following them.

BTW heard that the combined weath of the Ambani brothers has dropped $75B in this crash . Nows thats what i call wealth destruction.

[vina]

Abhijet one of the major problems is that IFIs still hold billions of dollars worth of stock which they can sell the moment of a panic overseas.

I would say that 6000 points is fair value on the Sensex, 21500 was just a massive bubble waiting to burst. I see stabilization of the stockmarkets in the next few weeks. The impact of all the polices should take effect to rectify the structural problems in the financial system. The EU has done some good work, the US is following them.

BTW heard that the combined weath of the Ambani brothers has dropped $75B in this crash . Nows thats what i call wealth destruction.

True. But then Ambani's wealth was just paper wealth aka. Wampum and that is what got destroyed. BTW did you just check the valuation of BHP Billition and Rio Tinto and see what kind of wealth destruction has taken place there ?. Australia was riding both a commodity and real estate bubble. I told you that Australia was going to get flushed down faster than you could say "Bundaberg Rum". Fasten your seat belts and hang on tight. It is going to be one hellva ride down with the bottom falling off commodities and real estate bursting with a bang.

[Dileep]

I know aam admi's back is broken. The only thing you can eat here is rice from the ration shop and sardines. Even good old tapioca, at Rs 15-20 per kg is expensive.

I see much feebler crowd, and at last, I can cross the road within a couple of minutes, and get a parking spot near Varkeys.

[Singha]

I would place the start of boom around Jan05...from a level of 6000. there was some runup
before then but not too unusual.
so assuming 15% earnings growth for the components, pls do the calculation. multiplying it
by 1.15 four times brings 10400. quite a few components are trading below their book values.

its definitely a buying opportunity in textbook terms but since we are all sure the trend is
down until atleast 2Q2009, theres no harm in waiting.

[Abhijeet]

I was going off the Google Finance chart which seems to indicate a definite uptrend starting mid-2003. As I understand it that was also when the easy money bubble in the US was getting into high gear. Also IIRC in late 2003 the Goldman Sachs BRICs report came out which also must have convinced some FIIs to invest.

http://finance.google.com/finance?chdnp ... ESN&ntsp=0

My personal inclination is that if there's no personal need of cash in the near term (next 5 years, say), it's a good time to invest now when we are almost certainly much closer to the bottom than the top. Exact timing might be a few months early but that's better than trying to time it too closely? I don't foresee a Nikkei-like "20 year low" in 2028 for the Sensex just based on general expectations of GDP growth. So rather than trying to wait till the very last moment before the next upswing I'd be more inclined to invest now.

[Singha]

I would atleast wait until the US presidential elections and the end of yr sales by MFs/hedge funds to pad their returns (more like CYA this time). and RBI easing the interest rate a couple
times would also be a cue. and the G20 summit if it manages to soothe anyone.

whatever you do, dont commit everything in one throw of dice....phase it in.

[Abhijeet]

Yup, "rupee cost averaging" in this market is likely to be key to long term returns.

[rsingh]

Oil price at gas station are half as compare to July here in Bruselabad. How are things in India?

[svinayak]

India Eases Overseas Loan Rules as Rupee Touches Low (Update1)

By Vipin V. Nair

Oct. 22 (Bloomberg) -- India eased overseas borrowing rules for domestic companies, lifting curbs it had imposed last year, to spur capital inflows as the local currency slumped to an all- time low today.

Companies can borrow up to $500 million in a financial year without prior approval and can repatriate the funds as long as they don't invest the money in capital markets or real estate, the Reserve Bank of India said in a statement on its website. It also raised the cap on borrowing costs enabling companies to access funds. Last year, the government had told companies they couldn't repatriate more than $20 million.

Policy makers are stepping up measures to prevent a looming global recession from crimping India's economic growth. Asia's third-biggest economy faces a ``temporary slowdown'' this year, Prime Minister Manmohan Singh told lawmakers on Oct. 20 as the central bank slashed its benchmark interest rate for the first time in four years. The move may also be aimed at halting the slide in the rupee, which is the worst performer among the 11 most-active Asian currencies after South Korea's won this year.

``With the credit-market situation overseas, an iceberg has to melt somewhere for the water to flow in here when they open the gates,'' said Paresh Nayar, chief currency and bond trader at Development Credit Bank Ltd. in Mumbai. ``Funding has become difficult, and it is hard to say if this measure will help the rupee halt its losses.''

Immediate Effect

The changes in the overseas borrowing rules will come into force with immediate effect, the Reserve Bank said. The government had restricted such loans in August 2007 to stem gains in the rupee that rallied to the highest level in almost a decade in November 2007.

The central bank also raised the ceiling on interest rates that the companies were allowed to pay for their overseas loans. For loans with three to five years maturity, companies can now pay 300 basis points over the six month London interbank offered rate, or Libor, higher than an earlier limit of 200 basis points above Libor.

For loans more than seven years, they can now pay 500 basis points above six-month Libor, the RBI said.

The central bank said mobile phone operators can borrow overseas to pay for the so-called third generation, or 3G, radio spectrum.

Dollar Liquidity

India is trying to increase capital inflows after overseas funds sold a record $12 billion of local shares this year. Foreign-exchange reserves have dwindled by $42 billion to $274 billion as on Oct. 10, from a record $316 billion in May, on speculation the central bank sold dollars to curb the rupee's decline.

The central bank, starting Oct. 11, has added 1 trillion rupees ($20.3 billion) to the local banking system by telling lenders to keep a smaller proportion of their deposits as reserves to ease a credit crunch.

The rupee dropped as much as 0.8 percent to 49.50 a dollar today, an all-time low, before closing at 49.285 in Mumbai, according to data compiled by Bloomberg. The currency, down 20 percent this year, is headed for the worst year since 1991.

To contact the reporter on this story: Vipin V. Nair in Mumbai at [email protected].
Last Updated: October 22, 2008 12:53 EDT

[pradeepe]

Oil price at gas station are half as compare to July here in Bruselabad. How are things in India?

No change. Since its subsidized, all it does is ease the burden on GoI.

[vina]

Gosh, Like I said, it is not your father's SBI anymore. These guys rock! .

Today, the manager and a couple of other guys came in the evening , wished us Happy Diwali and gave us a box of sweets (Adayar Anand Bhavan, no less) . Who would have thought that sarkari bank babus would actually smile, be nice, say happy deepavali and come home with a box of sweets!.

If this is the "new India" and "new SBI" , I am lovin it!. Bye Bye faceless and terrible call center routing where you can speak with next to no one ICICI! .

[SwamyG]

Is the Rupee going to go lower anymore, or is it going to rebound?

[vina]

SwamyG , Yes and Yes.

[SwamyG]

Beautifully answered Vague just like my question . So let me get more precise, where would the rupee standard against the dollar in 3 months?

[svinayak]

Sensex crashes on eve of Diwali

Oommen A. Ninan

Index hits 8701 points in three-year low


MUMBAI: Joining a global equity rout on worries about a sharp global recession, domestic indices fell to their lowest levels in nearly three years on “Black Friday” as the benchmark BSE 30-Share Sensex tumbled by 1070.63 points to close at 8701.07.

The index had last tumbled below 9000 in November 2005.

The sell-off began in the morning session itself — led by realty, oil and gas, bank and metal stocks — as the half yearly review of the Reserve Bank of India disappointed the markets, which were expecting some more measures from the central bank to expand liquidity in the system.

Signalling what could be a dark Diwali on Dalal Street, as many as 350 securities hit their all-time lows.

These included big names like Reliance Power, Cipla, Ranbaxy, Ambuja Cement, Hindalco, Jet Airways, Suzlon Energy, Idea Cellular and realty majors DLF Ltd. and Unitech.

The RBI had announced a slew of measures to assuage markets in the last one month, including the repo rate cut by 100 basis points four days back and a cut in the Cash Reserve Ratio — a portion of the deposits that banks have to keep as a reserve — to 6.5 per cent from October 11.

However, the sell-off intensified with the domestic as well as the foreign funds hammering Indian stocks in line with its Asian peers whose stocks tumbled on fears of a severe global downturn.

In the bloodbath, 20 stocks from the 30-Share Sensex fell more than 10 per cent. This was the steepest fall in any single trading session after a 1,408-point plunge on January 21 this year. A broader index, the NSE 50-Share Nifty, lost 359.15 points to close at 2584. The Sensex fell 1204.88 points at the day’s low of 8566.82 in late trade, its lowest level since November 23, 2005. Nifty hit a low of 2525.05 in late trade, its lowest level since November 11, 2005.

Meanwhile, announcing its stance of monetary policy for the remaining period of 2008-09, the RBI kept all the key rates unchanged even as it lowered its 2008-09 growth forecast to 7.5 per cent to 8 per cent from a previous forecast of around 8 per cent.

“The global downturn may be deeper, and the recovery longer than expected earlier,” said RBI Governor D. Subbarao, here. The central task for the conduct of monetary policy has become more complex than before, with increasing priority being given to financial stability. The current challenge, according to Dr. Subbarao, is to strike an optimal balance between preserving financial stability, maintaining price stability, anchoring inflation expectations and sustaining the growth momentum.

European shares — the U.K., French and German — lost between 8.1 and 9.79 per cent on data suggesting Britain would enter a prolonged recession.
Rupee breaches 50-mark

The rupee breached the historic 50-mark intra-day against the U.S. dollar on sustained demand for the greenback amid its sharp rise against major currencies. It, however, recovered after the announcement of the monetary policy review and closed the day a little lower at 49.95/96.

[ShauryaT]

Any idea what the P/E of the Sensex is currently? It must surely be in the low teens at least by now?

About 11. If it is a buying opportunity or not, individuals have to decide. To me it is a no brainer. However, if you are looking for it to go to the absolute bottom, and time it precisely then good luck. Ask a simple question, when was the last time the Sesnsex traded at about P/E of 11?

PS: Also a good idea would be to move your non Rupee denominated funds to a Rupee denominated account.

[Singha]

Shensex down to 8K today, mostly 10-15% drop in all components. even
PSU banks are down 10-15%. I wonder what naughtiness corporation or
dena bank have been upto after hours to deserve this beating?

[vina]

No paap Singhaji, it is the ritual pollution of living in the same neighborhood and market as hot fancy schmanzy stocks like L&T, reliance , Suzlon etc and "land bankers" like DLF, Unitech etc. not to leave out Reliance Power and others. The sensex at 21k had little of the SDRE IT/Vity stocks like Infy, Wipro etc, sectors with proven and solid cash flows and growth history. No sir, Infy was languishing at 1250 when Sensex was at 21k. Infy is still at around those levels while the others have gone pfftt..

After they have bee put in purgatory and the wampum has been purged, and the chaff separated from the wheat, go pick out the solid stocks that you can hold for life (something like your wife ) and have a life time of (wedded) bliss for you to retire on.

This sensex at 25K boosterism and the bust has is all halaal and sunnah. After all at pee aar eff, didn't we issue a fatwa to sell at 19K and 20K levels and go to cash and put it in the fixed deposit at 9.x% ?

Indeed the sura was.

"Hear ye all, verily shall thoust sell at these inflated levels and go to cash and plonk it down at these high interest rates in PSU banks. After all, Allah knowest that on a risk adjusted basis, you will come out smelling of roses with a 10% return (and capital safe) " .

Now, unbelievers did things like buy at 21k and are now wiped out. False prophets like Udayan Mukherjee and Shweta Rajpal Kohli of NDTV have been advising to buy all along, down after the sensex crashed from 21k to 16k at the twinkle of an eye.(coz, 16K was "great value" ), depsite, the fatwa of sell out and get out still being in effect!.. Now at 10K sensex too, they urged you to buy becuase of "great value", forgetting the fatwa still in effect.

In the mean time, we issued fatwas to buy gold and commodities at the right time and to exit also at the right time, to the great potential benefit of Momeen Dileep al Kochini. All for great increase in momeen's wealth.

True beleivers benefited. with health, wealth and happiness.. Those who watched Nachees and unclean, forbidden and haraam Kufr inventions like business channels on TV perished. Allah thus protects the true believers.

Wait for the fatwa to buy. Allah does work in strange ways.

To paraphraze the prophet we had sent down to the land of China, Sun Tzu, when the enemy advances, you retreat, when he rests, you harras!.

Thus when they sell, you stay out, when they buy at ridiculous levels, you sell!. When they are exhausted, you dart in and buy!

[Katare]

ICICI Bank Performance Review – Quarter ended September 30, 2008

[ramana]

Guess one can call them biggest losers? But dont cry for me Argentina.

Deccan Chronicle, 27 Oct., 2008

Crash cost 10 rich Indians $440bn


Mumbai, Oct. 26: The focus is always on who is richest among the Ambani brothers and Lakshmi Mittal; but Mukesh and Anil are ahead of the India-born steel tycoon in terms of losses suffered due to the global stock meltdown. In terms of loss in percentage terms, Mr Ramesh Chandra of Unitech and Mr K.P. Singh of DLF are among the top losers, an analysis of group market capitalisation and shareholding value of the 10 richest Indians reveals.

Since the market peaked in January, the groups led by the 10 richest Indians have lost over $400 billion (Rs 20,00,000 crores), with promoters accounting for more than half of this. A list of the world’s richest billionaires published by American business magazine Forbes in March had Mr Mittal ranked as the richest Indian, followed by Mr Mukesh Ambani, Mr Anil Ambani, Mr K.P. Singh, Mr Shashi and Mr Ravi Ruia, Mr Azim Premji, Mr Sunil Mittal, Mr Kumar Mangalam Birla, Mr Ramesh Chandra and Mr Gautam Adani in the top 10.

The groups led by these 10 saw a 50-93 per cent erosion in their market value since January 10, the day the Sensex scaled its lifetime peak, and after which the downslide began on Indian bourses. The collective market value of these groups slumped by nearly one-fourth in this period, to about $138 billion from a high of $541 billion.

[Vipul]

SwamyG,
Rupee may test 54 by 2008 end.

[Katare]

This should act as a global stimulous package.....

Oil price dives to 59 dollars in London

Pretty soon congresswallah would cut fuel prices in India for poll gains

[Katare]

I think its more sentimental than fundamental but some of those sentiments are based on fundamental macros .......like worsening trade deficit (~10% of GDP) persistent and widening balance of payment/current account deficit. Mounting subsidies causing fiscal deficit to reach close to ~10% of GDP, double digit inflation, thigh liquidity and slowing export markets economies. These are ideal conditions for real depreciation in Rupee value.

Again the depreciation may not be all that bad (except for inflation control) actually it was the whole point of having a partially floating currency. The Rupee’s direction is reflecting the ground realities of worsening macros and sentiments driven by global turmoil.

I hope Oil prices will come down and sustain @ $60-70 level in next couple of months.

I wrote this on Sept 15, It seems my wish was granted by gods of economy on oil prices but my fear came true on Rupee depreciation too

[ramana]

From Hindu, 27 Oct., 2008

India Inc's valuation slips below its revenue base
Mumbai (PTI): The meltdown at the bourses has left corporate India not even worth its revenue base with the collective market capitalisation of all the listed companies slipping below their cumulative latest fiscal revenues.

After a 1,071-point Sensex plunge on Friday, the market value of all the listed companies plummetted to about Rs 27,75,000 crore -- which is less than the total full-year revenue of close to Rs 30,00,000 crore reported by these companies in their latest financial years.

Besides, two fiscal quarters have already passed for a majority of the companies -- as most of the Indian companies follow April-March financial year -- and the industry has witnessed a considerable revenue growth in this six-month period.

Even a modest estimate of 10 per cent revenue growth for the current fiscal would take the total revenue to near Rs 33 trillion, while the market capitalisation are said to be under further pressure given no signs of recovery in global markets.

In another interesting turn of events, the market value figure for a majority of the companies have slipped below their latest fiscal revenues, marking a reversal of the trend till early this year prior to the beginning of the downslide on the bourses.

As on January 10, the day when the Sensex had scaled its all-time high of 21,206.77 points before embarking on its downhill path, close to 2,000 companies had a market capitalisation figure higher than their full-year revenues. In comparison, just about 1,000 companies' market values were below their full fiscal revenue figures.

In comparison, there are only about 800 companies left today which have their market value higher than their latest fiscal revenues, against more than 2,000 firms having a market value lower than their full-year revenue.

What is he saying?

[SwamyG]

SwamyG,
Rupee may test 54 by 2008 end.

Thanks Vipul, that gives me an idea for certain things I have on my mind

[Satya_anveshi]

What is he saying?

I think he is whining about some stupid metric that he or others of his ilk were following. All I can gather from there is capitalization is less than fiscal revenues. Those two do not necessarily be related unless you are an upstart.

There is no word called "earnings" in that post and I don't know what assumptions he is making. It is like one of those analogies like GE is bigger than Pakistan or Timbuktoo.

[Katare]

Satya,
revenue per share is a very important matrix for evaluating value of a stock. Zero profit doesn't mean you'll get shares of that company for free. Topline and bottomline both are equally important factors when evaluating a stock/company. This matrix usually is the determining factor when a company buys another one. Usually company valuation is a multiple(usually significantly greater than 1) of the yearly revenue.

[CalvinH]

Sensex took a beating yesterday (again) but methinks the sh** has not hit the fan yet. There is no talks about exposure to Financial institutions for their exposure in RE. There are lot of similarities in this with US RE but the last part is yet to come in Indian context:

1. Cheap home loans, people buy, RE values goes up, bank look other way while giving loans coz asset value is increasing. RE prices touch the highest point
2. People stopped buying and wait for it to cool down, meanwhile the supply remains high as many builders have joined the party (late) and construction is in full swing. Demand wavers and price start to come down. People start defaulting and banks are laden with assets which are depreciating fast.
3. Banks balance sheet started to reflect the exposure and all hell broke loose.

In India banks has loaned money to Builders as well as buyers (Home loans). Once builder starts to default (they have hard time paying installments for land they bought and money for ongoing construction as credit is drying due to global turmoil) and people follow, banks will take a hit but this isnt quantified yet by banks. One or two major builder (top 10) may fold up in next 2 months and trigger the slide.

net net..keep away from RE and banking scrips though the valuation looks attractive. Rest are game.

[rsingh]

Over heard today" Heng Seng falling by 10% is actually good news.......we are going to find the bottom quicker "

[rsingh]

SwamyG,
Rupee may test 54 by 2008 end.

Thanks Vipul, that gives me an idea for certain things I have on my mind

N no do not make your mind as yet............in June same guys were saying Rs will touch 34 level soon . Most of these gurus are "thali ke beingin".........that slide with slope.

[Satya_anveshi]

Satya,
revenue per share is a very important matrix for evaluating value of a stock. Zero profit doesn't mean you'll get shares of that company for free. Topline and bottomline both are equally important factors when evaluating a stock/company. This matrix usually is the determining factor when a company buys another one. Usually company valuation is a multiple(usually significantly greater than 1) of the yearly revenue.

agree it is important but other bottomline perspective is usually more important. Generally I base valuations on revenues if its a startup (with other assumptions) else EBIT or EBITDA based measure is something I use to value. For the whole of indian capital market, using revenue only metric was something amusing to me (there was no "earnings" word in the whole of the post).

[svinayak]

http://www.bloomberg.com/apps/news?pid= ... refer=home


Diwali Brings Indian Investors Chance to Erase Losses (Update1)

By Pooja Thakur
More Photos/Details

Oct. 27 (Bloomberg) -- Arun Kejriwal will raise pressed hands to his forehead tomorrow before lighting a lamp to welcome Lakshmi, the Hindu goddess of wealth, praying she'll deliver a recovery from India's record stock market rout.

The 51-year-old investor will then join traders and brokers making ceremonial purchases of equities during a one-hour, late- evening session at the Bombay Stock Exchange. Determined by the new moon, so-called Muhurat trading, held every year on Diwali, the festival of lights, is considered the most auspicious time to start investments, and to put aside losses from the past year.

``I'm going to pray for sanity to prevail in the market,'' said Kejriwal, who says this is his worst year for investing in equities. ``Markets have gone mad.''

The centuries-old tradition of seeking blessings at Diwali has taken on added impetus this year after the destruction of $1.3 trillion in investor wealth, more than India's annual economic output. Indian stocks have outperformed in the month after Diwali, compared with the 30 days before the festival, in nine of the past 10 years, Fidelity International said in a report from London on Oct. 20.

``Though the market looks like a dark tunnel right now, we will see a ray of light at the end,'' said Ulhas Chitharia, a broker at Hasmukh Lalbhai Share Brokers Pvt. in Mumbai, who trades during the Diwali session every year.

Celestial Guidance

Seeking celestial guidance is commonplace among India's 800 million-strong Hindu community, which plans weddings, opens new businesses, and chooses children's names according to the position of the stars and planets.

Astrologer Bejan Daruwalla says he doesn't need charts or company earnings to tell him global stock markets will rebound next year. He's got Ganesha, the Hindu god of wisdom and the remover of obstacles, on his side.

Stocks will rally by April as the rest of this year will be depressed, Daruwalla predicts, citing the movement of planets. Jupiter, the sign for banks, will change position around February, and that's when markets battered by the global financial crisis will start to rebound, Daruwalla says.

``Markets will be as happy as a young bride in April,'' explains Daruwalla, 78, who writes newspaper columns on astrology and says the number of investors seeking his advice has risen by 25 percent since the market plunged.

For investor Niranjan Koradia, the rally can't come soon enough. The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, had its biggest drop in four years on Oct. 24 and is on course to post its worst annual decline, as the turmoil in credit markets spurs concern the global economy may slip into a recession. It declined 2.2 percent today.

`Wiped Out'

``I have been investing in the stock market for the past 50 years but never seen a day like this,'' said Koradia, staring at the ticker tape of share prices outside the Bombay Stock Exchange, Asia's oldest bourse. ``Whether I invested one, two or even five years back, the wealth has been wiped out.''

Investors say using the orbiting of planets around the sun to predict future stock prices isn't a guarantee that the markets will align.

``I prepare astrology charts daily to guide me in my trading bets,'' says Kishore Shah, 66, who lost 7 million rupees ($140,000) in wrong-way wagers on derivatives this year.

Shah's betting the market will rally from a three-year low after Nov. 3, when the Sun aligns with Mars, as the current combination of Saturn and the red planet is inauspicious. ``That will be a very good time to buy stocks,'' Shah said.

Attractive Valuations

The Sensex's plunge this year, after doubling in the past two years, has made stocks in Asia's third-largest economy cheaper, 27-year-old Hardik Chheda said in Mumbai.

The price to earnings ratio, a measure used to value a company's shares in relation to its profits, for the 30 stocks on the benchmark has dropped to 8.83 from 31.16 in January, when the index hit a record, according to data compiled by Bloomberg.

``I don't know about the Diwali effect, but valuations have become too attractive to ignore,'' says Chheda, a six-year investor in the stock market who says he sold at the peak.

Mumbai-based investor Kejriwal said he will do his usual auspicious trades tomorrow and hope the gods will answer his prayers. ``We are very close to the bottom now.''

To contact the reporter on this story: Pooja Thakur in Mumbai at [email protected].
Last Updated: October 27, 2008 07:38 EDT

[ramana]

And people here were hesitant to post in the Diwali thread
Even the usual suspects were feeling under the weather. Look at the post count versus the number of views. No wonder Goddess Lakshmi frowns on all of us.

[vina]

Hmm.. So, it is back to voodoo stats!. Last year the 30 days before Diwali was worse than the 30 days after, meaning what? . That this time the market will tank only 20% over the next 30 days than the 40% before ?. Doesnt seem like a good enough reason to put in money. .

Point is, what is happening in India right now is very simple. The yen-carry trade has burst. The Yen going up has caught all those who borrowed in Yen (Japanese interest rates were super low like even negative on a real basis for a long time remember?), that is close to $15trillion of historical Japanese surplus used to make leveraged bets all around the world. That is going pop and the money is flooding out of these markets and back to Yen.

So the guys who use cheap money the most, hedge funds and prop books of banks have been caught with their pants down. Hence the liquidation all over the world. India cannot be immune to this. Japanese currency is going up, the math doesnt add up anymore. You have to unwind and take money out if you are a hedge fund.

Look out for more large hedge fund crashes and withdrawals by customers.

Actually what is happening is a DSE/JNU commie economist / Nehruvian Socialist nut's best wet dream. This is what happens when India gets disconnected from the world.. Those guys were always fantasizing and erecting a "fortress" India , and we saw what market valuations and growth were for 40 years. Sensex took off vertically only when foreign money flooded in. If it is going to be all Indian money that is going to be supporting the market, go back to 1995 to 1998 and you will know the level of the sensex., after applying some assumptions on growht, monetary expansion etc. not too difficult.

The foreign money flooding out is like returning back to the commie wet dream era. Obviously the market is coming down with a huge thud.

The upside,is that it is a once in a lifetime chance to scoop up assets like what your parents and mine could. They could actually buy the shares of best companies at par.. for Rs 10 and that too at different calls (1 , 2 , 3 etc). The "controller of capital issues" capped share prices of "premiums". My parents wont sell at any levels, cos, the prices they picked the shares up are at historically low prices. The period when the foreign guys finish pulling out the money and are exahausted , before it starts flowing back in is the time to buy.

Dont worry, worry and wait. You will have to trust your instincts and buy. Pray to Lakshmi that she gives you the right judgement and blesses you with perfect timing. Do that, rather than the hocus pocus of 30 day before and 30 days after statistics of the Shanghai kind put out by the brain dead Bloomberg columnist.