Market Matrix: Is it the profit tail of long term bull market run?
By krsna Khandelwal - A veteran market analyst
Friends,
The Sensex/Nifty tumbled by 385/85 and 190/60 points on 5 and 6 Nov 2007. This is no big deal but the concern emanates from the developments that are indicating that the future course of market will be like ‘up one step down two step’ in a sober fashion which may fool some gullible investors in to investing or it may be sudden falls and gradual gains for a few days followed by sudden falls. The weakness now can not be wished away.
The capital goods (particularly in power) sector has to suffer for the diminishing margins. The power ministry is contemplating to remove the 15% price preference clause for the domestic suppliers, as they have to also see that the power is supplied at cheaper rates. Secondly, there is dearth of trained work force to the extent of even making DLF to go out to woo the expatriate construction labour who has developed skill in modern building construction.
The India Inc is going to raise salaries by about 14% this year, the biggest amongst the growing economies. This is not out of love for the employees but due to dire need of retaining them at any cost.
Rupee has made imports cheaper. Chinese corporations have been noticed to come for bidding of projects. The factors forcing a slow down in other sectors are well known and need no repetition.
It was the capital goods, infrastructure, banking, oil, and gas sectors, which were being shown in a different light. I have already tried to bring before you the reality concerning the capital goods and infrastructure structure. As for banking, I may say that the coming times will see increasing competition and the industry itself would damage the profitability in this sector. Lastly, about oil and gas I am not having enough material to decide this way or that, particularly when the govt. has the strangle hold on all major aspects of the sector. The necessary things are not done at the right time and matters are distorted so illogically that assessing the future of the sector becomes a very difficult exercise. Here, you have to speculate now or later and your judgment is difficult on facts or projections.
In what way can you justify the rise of split Reliance share being sold for five times the value within two years? It is a clear case of keeping thing under wraps and then over playing them. The Ambani Brothers are capable of seeing the share prices of their companies behave as per their designs as was the case with the patriarch.
Wish you all happy Diwali times,
Hari Om
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