Mr. Market's antics at its best
(Oct 11, 2008)
|A A A
In this issue:
» The week that was
» Nano finds a home
» Infy braves the headwinds
» Money vanishes. It is nothing.
» ...and more!
"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return." This was how Benjamin Graham defined 'investment'. And investment is what participants in equity markets ideally look for. However, the erosion of capital and swift displacement of blue-chip stocks from their multi billion dollar market capitalisation, the world over, seemed to have given jitters to the most conservative investors.
||Mr. Market's antics at its best
If Mr. Market's antics over the past few days have not bothered you or challenged your faith in fundamentally strong companies, you have every reason to be very pleased with yourself. That is because even the gentlemen at the helm of affairs of states and financial conglomerates have not managed to do so.
The entire week gone by witnessed central bankers and governments the world over trying to soothe the nerves of investors. They promised every bailout under the sun, offered to nationalise banks and inject billions of dollars of capital in the liquidity strapped financial system. The Reserve Bank of India in two calibrated steps reduced the CRR (cash reserve ratio) by 1.5%, the first such reduction since 2001. The SEBI offered to please the FIIs by inviting even the unregistered entities to Indian markets once again. Nevertheless, the tremendous volatility that followed saw stocks across the world defy every logic.
Mr. Market also displayed his antics by playing with the emotions of investors that seem to have become vulnerable to the most atrocious rumours. The latest one being ICICI Bank going illiquid due to its investments abroad, despite the RBI assuring of the bank's capital adequacy ratio (CAR) being fairly above the minimum requirement. The stock at one point lost one fourth of its market capitalisation in a single day. The rather disappointing August IIP growth number of 1.3% (one of the weakest in several years) as against 10.7% in August 2007 also played havoc with investor sentiments.
Crude oil prices corrected by 12% during the week and dropped to a 12-month low of US$ 78 a barrel. Even the serious disruption in production in the Gulf of Mexico from the hurricane Ike has not halted the decline in crude prices. The Gulf accounts for 25% of US oil and 15% of US gas production. Over 40% of this capacity is still shut. It doesn't matter because the decline in demand for gasoline in US is now spreading to Europe and China could be next. If that happens, crude oil speculators too might need a bail out package!
Gold prices strengthened during the week as investors chose to shun all other asset classes and invest in the yellow metal for safety of capital. However, the commodity shed gains on the last day by as much as 7% to finally close at US$ 849.9 an ounce. The demand for the metal is expected to remain strong with volatility in asset classes and currencies the world over offering little solace to investors. Also, the onset of the festival season will keep the yellow metal in favour.
Amongst global markets while Japan, France and Germany were the biggest losers shedding in excess of 20% of the market capitalisation on their benchmark indices, the Korean markets were relatively less affected.
------- Don't Miss! -------
The Equitymaster Stock Market Yearbook 2009
Your unbiased guide to 200 top Indian companies.
Releasing shortly. Book your copy today!
Nano finds a home
||The week's biggest news
After the Singur fiasco and the endless dilly-dallying with respect to where the production of Nano will be shifted, the Tatas can now breathe a sigh of relief as Gujarat has decided to house the 1-lakh car. The project will be located at Sanand, near Ahmedabad and the state government will give 1,000 acres of land for the same. For the Modi government, this could not have come at a better time as it aims to make Gujarat the most investor friendly state in the country.
Infy kicks off the result season
Infosys braved the headwinds by kick starting the September quarter results season with a strong set of numbers. The company has recorded sales and profits growth of 12% QoQ and 10% QoQ respectively for 2QFY09. What is more, its operating margins expanded to 33.1%, from 30.5% in 1QFY09. While citing a cautious outlook on the offshoring opportunity from the US, the management has maintained its guidance for FY09. The company added 40 new clients and 5,900 employees during the quarter.
The forthcoming weeks will test the nerves of investors as their favourite companies display their resilience or the lack of it to economic slowdown and hostile business environment.
"Money vanishes. It is nothing. The only solid reality is the word of God," says Pope Benedict XVI reflecting the crashing stock markets and capitalism. He further says and we quote, "He who builds only on visible and tangible things like success, career and money, builds the house of his life on sand."
||Best of this week's 5 Min. WrapUp - Money is nothing
As reported on Bloomberg, the Pope 'doesn't just have a spiritual interest in the current turmoil'. Earnings from roughly US$ 1 bn in stocks, bonds and real estate are what he and his institution in the Vatican City rely on apart from the donations they receive.
The Pope is right - money is vanishing round the world, more so in the US and Europe. But will 'greed' that created so much money in the first place ever vanish? Highly unlikely.
"I will tell you how to get rich. Go home, shut the door and be fearful when others are greedy and greedy when others are fearful." - Warren Buffett
|| Weekend investing mantra
The 5 Minute WrapUp Premium is now Live!|
A brand new initiative of Equitymaster, this is the Premium version of our daily e-newsletter The 5 Minute WrapUp.
Join us in this journey to uncover the sensible way of managing money and identifying investment opportunities across various asset classes including Stocks, Gold, Fixed Deposits... that over time can help you realize your life's goals...
| Get Access
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringementDisclosure & Disclaimer:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. The Author does not hold any shares in the company/ies discussed in this document. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services.
This document is confidential and is supplied to you for information purposes only. It should not (directly or indirectly) be reproduced, further distributed to any person or published, in whole or in part, for any purpose whatsoever, without the consent of Equitymaster.
This document is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity, who is a citizen or resident or located in any locality, state, country or other jurisdiction, where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject Equitymaster or its affiliates to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, the same may be ignored.
This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Our research recommendations are general in nature and available electronically to all kind of subscribers irrespective of subscribers' investment objectives and financial situation/risk profile. Before acting on any recommendation in this document, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the securities referred to in this material and the income from them may go down as well as up, and subscribers may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Information herein is believed to be reliable but Equitymaster and its affiliates do not warrant its completeness or accuracy. The views/opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. This document should not be construed as an offer to sell or solicitation of an offer to buy any security or asset in any jurisdiction. Equitymaster and its affiliates, its directors, analyst and employees will not be responsible for any loss or liability incurred to any person as a consequence of his or any other person on his behalf taking any decisions based on this document.
As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use
, available here. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407