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Category Archives: Thoughts

Recording the history of Indian stock market

24 Friday Oct 2008

Posted by JV in Equity, Indian Stock Market, Stock Market, Thoughts, Uncategorized

≈ 1 Comment

Tags

Equity, Indian Stock Market, Investment, long term, NIFTY, PANIC

If you have entered in the Indian stock market anywhere during the recent bull run (2003-2007) , you are witness of one of the biggest bull run for Indian stock market. Now you are witnessing the worst performance of the markets. Each day , each week is worse than the previous.

Today NIFTY/Sensex made its biggest single day loss nearly touching November 2005 lows. This week is worst performing week. Reliance touched 990, losing nearly 18% in one day, shivering the entire market and players. Unitech lost 50 % , 30 Rs., in one day.

No analyst/market ,local or global, expert had anticipated such fall, the fall is simply unprecedented , just like the last bull market.

Dow Jones future is in 550 points down, and is not falling further because of the bottom is restricted by the regulators. US market is also expecting worst trading day. UK has gone in recession technically on account of negative GDP data published today.

Anybody who has entered into market during 2005 and holding any scrips of that level is also in loss also.

I recall headlines of magazine/news papers during 2003-04 about the bull run in stocks and gold (also in real estate) at the same time. It was pleasant surprise , as generally gold and equity always meet at cross road , one is rising when other is going down. Now the same thing is being repeated gold and equity both are going down as gold has touched one year low and at 684 USD.

Panic is everywhere, and panic has become so routine that newspapers/television channels have stopped taking note in its headlines.

However, such fanatic fall can be compared with equally fanatic rise in the market. During the bull run I recall the cheers at every 1000 mark achieved by Sensex some time in a single day. Now the fall is also mimicking the trend, but that sounds good. The rise was much more than fair values on account of GREED, and therefore the fall gollowed. But now the fall is also appear much below than the fair values on account of FEAR.

Today will be unforgettable (?!) day in the history of equity market all over the world, unless worse is still to come.

Will talk more in next post.

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Spending habits of America and stock market

16 Thursday Oct 2008

Posted by JV in Equity, Indian Stock Market, Investment, Stock, Stock Market, Thoughts

≈ 2 Comments

Tags

America, bullrun, Equiy, India, Investment, US

It has become apparent that the last bull run was caused by the over-spending of American consumers which increased the demands over all world. Read the report of  Dr. Peter Morici of the University of Maryland, wherein he said that at about 5% of GDP, the huge current account deficit indicates Americans continue to consume much more than they produce, and borrow too much from the rest of the world.

Now voices are raising about for changing  the overspending habits of American. Julian Robertson has emphatically stated in his recent interview with CNBC “that the United States is just getting into the recession,” and that the poor economy will last as long as 10 to 15 years“.

He further added that “I don’t mean to imply that this is going to last quite as long as what’s been happening in Japan, but when they went into their decline in 1990, almost 20 years ago, their people were loaded with savings—but [Americans are] all broke,” he said. “…If we leave out the home in the calculations, I’d say that 80-85 percent of Americans are broke. So they have to cut back on their spending.”

In one of the article at Kiplinger, Erin Burt clearely expressed the requirement of savings by the Americans.

“Yet somewhere in the past few years, we — along with Uncle Sam — have lost sight of that. We’ve fallen victim not only to keeping up with the Joneses, but also to keeping up with our own fantasies. Credit came easy, and we thrived on money we didn’t have. We could afford bigger houses, exotic vacations and huge TVs. As our whims ran wild, so did our debt. Live within our means? How archaic. If you can afford the minimum payment, why bother getting out of debt?

And as for savings, you have plenty of time to make up for it later, right? In the mid-1970s, American consumers saved about 9% of their after-tax income. Today, that figure hovers around zero, according to the Bureau of Economic Analysis. After all, you may have rationalized, why bother saving for tomorrow when you can have what you want today?

Welcome back to reality. Living within your means isn’t old fashioned — it’s smart and relevant, perhaps more today than ever. Debt isn’t a way of life — it’s bondage. Saving isn’t a drag — it’s rewarding, not to mention a great comfort in tumultuous times. These are eternal truths that stand in any economy.”

The Indian stock market also ran the tallest with the increase about 500% during 2003-2007 , as NIFTY went to 1000 points to above 6000 points  by that time. It is clear that bull run ,with such intensity, is unlikely in future as the engine, US economy, is falling apart in pieces.

In future equity will still give highest retun comapre to other investment avenues in long term, but do not expect the return what you ,perhaps, have had during this rally.

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Right to Information Act and definition of Information

02 Saturday Aug 2008

Posted by JV in India, Law, Thoughts

≈ 7 Comments

Tags

Bombay HighCourt, definition, judgment, Right to Information, RTI

Legal definition of “Information” in the context of the Right to Information Act, 2005 (PDF) is incorporated in section 2(f) of the said act, which reads as under :

S.2…(f) “information” means any material in any form, including records, documents, memos, e-mails, opinions, advices, press releases, circulars, orders, logbooks, contracts, reports, papers, samples, models, data material held in any electronic form and information relating to any private body which can be accessed by a public authority under any other law for the time being in force;

Ordinarily it is presumed that the definition provided by the legislation is precise and complete in respect of the particular Act. Further, the cardinal rule of construction of is to read the statute literally, that is by giving to the words their ordinary natural and grammatical meaning.

Recently Bomaby High Court (Goa Bench) has delivered a judgment (Dr. Celsa Pinto v. Goa State Information Commission ) under the Right to Information Act, 2005, wherein after interpreting the definition of “Information” the High Court has ruled as under

The definition cannot include within its fold answers to the question “why” which would be the same thing as asking the reason for a justification for a particular thing. The Public Information Authorities cannot expect to communicate to the citizen the reason why a certain thing was done or not done in the sense of a justification because the citizen makes a requisition about information. Justifications are matter within the domain of adjudicating authorities and cannot properly be classified as information.

However, interestingly, the Act itself expressly mandate that every public authority shall provide reasons for its administrative and quasi-judicial decisions. Section 4 ,with elaborate details, speaks about the obligations of public authorities. Section 4(1)(d) reads as under :

S.4 Obligations of public authorities :

(1)Every Public Authority shall –
……
(d)provide reasons for its administrative or quasi-judicial decisions to affected persons

Therefore, from the express intention of the legislation as provided in the section 4(1)(d) every public authority is bound to provide reasons or justification for its decisions. Therefore, it appears that while passing the abovesaid judgment section 4(1)(d) has been completely overlooked by the High Court.

If the definition of “Information“ is taken as interpreted by the High Court in the abovesaid judgment, then it would restrict the purpose of the Act to a very narrow scope. If public authorities and officers cannot be asked about the reasons for their decisions then no public authorities or their officers can be made accountable for their duties and functions toward the public. Here it is also helpful and necessary to read the preamble of the Act, to understand the intention of the legislation behind enacting the Act.

An Act to provide for setting out the practical regime of right to information for citizens to secure access to information under the control of public authorities, in order to promote transparency and accountability in the working of every public authority, the constitution of a Central Information Commission and State Information Commissions and for matters connected therewith or incidental thereto.

Whereas the Constitution of India has established democratic Republic;

And whereas democracy requires an informed citizenry and transparency of information which are vital to its functioning and also to contain corruption and to hold Governments and their instrumentalities accountable to the governed;

And whereas revelation of information in actual practice is likely to conflict with other public interests including efficient operations of the Governments, optimum use of limited fiscal resources and the preservation of confidentiality of sensitive information;

And whereas it is necessary to harmonies these conflicting interests while preserving the paramountcy of the democratic ideal;

Now, therefore, it is expedient to provide for furnishing certain information to citizens who desire to have it.

Be it enacted by Parliament in the Fifty-sixth Year of the Republic of India as follows:—

Ordinarily, if the language of the Act is clear, the preamble is to be disregarded, however when the object or meaning of an enactment is not clear, the preamble is to be looked into to explain it. Therefore, if the definition of “Information” is taken as limited as provided in the section 2(f) that would frustrate the entire object of the Act.

Therefore, in my view, reading section 4(1)(d) with the preamble,  it can be safely concluded that legislation positively intends that “Information” includes reasons of Public Authority for its decisions and as such the abovesaid judgment of the High Court incorrectly interprets the Act, and requires reconsideration.


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My first future/option trade of MINI NIFTY

08 Sunday Jun 2008

Posted by JV in Indian Stock Market, Investment, NIFTY, Quotes, Reliance Money, Sensex, Shares, Stock, Stock Market, Stocks, Thoughts

≈ 4 Comments

Tags

Chart, Future and Option, Indian Stock Market, Investment, Mini Nifty, NIFTY, Technical analysis, Trading

It as been near 2 years I have been investing in stock market, but always of delivery basis. I have been often told about Future and Option is for traders, and have been advised to stay away from it. But when you are advised to abstain from something, it attracts. I have been analyzing the charts of various scrips including NIFTY, but never had enough courage to act on my own analysis.

Finally, I entered in the future/option trading and this to record my first trade, first profit and first loss too. 🙂

NIFTY TECHINCAL CHART

A. In my first FnO trade I bought MINI NIFTY at 4565 on 4th June. My decision to buy NIFTY was based on RSI (Relative Strength Index) indicator. During the previous two days (2nd and 3rd June) NIFTY had cracked from 4869 to the low of 4565 and RSI indicator was just on 30 indicating oversold position. Therefore I assume that NIFTY would give some technical bounce back. I wanted just small pie of my share and was ready to sell NIFTY if earned 50 points or so. However, Uma advised my not put cap on my profits , but I was over cautious and as it was my first trade, I wanted to end it with some profit.

So, I sold NIFTY on next day at 4616 earning my first 50 points , but had I waited, I could earn more 80 points. But , then again patience is rare virtue. Nevertheless I was excited with my first trade and profit, and enjoyed enormously. By then everybody around me were painfully aware, that I have become “NIFTY Trader” 8)

B. Encouraged by first the success, I ventured again on 6th June. On that day the market was at its volatile best. In the afternoon I decided to go long, as CMF showed reduced distribution on the previous day (5th June) and I bought NIFTY at 4697. But the market, as if to teach me a lesson, started sliding down and with the ‘able‘ assistance of Reliance Money I eventually squared off the trade at 4644, losing all the gains of the previous trade with some additional loss.

Then , at the closing moments I decided to go short and I have short sold NIFTY at 4604 , considering that the NIFTY is in intermediate bear trend (CMF is also again in hight distribution mode) and it would be wise to go short instead of long which is more difficult in the present situation.

Now, with all the circumstances has happened during the week ends, NIFTY seem to be cracking nearly 100 points of not less. I am keeping my fingers crossed.

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My first year in stock market investment

02 Sunday Sep 2007

Posted by JV in Bombay Stock Exchange, Business, India, Investment, Stock, Stocks, Talking to self, Thoughts

≈ 13 Comments

In August’07 I have completed my first year in stock market investment. Not that this is my first experience with the market. I had invested (rather wasted) some good money during my college years around 1993-94. At those time I never used to study much in details, partly because of lack of availability of information and I had to rely on few magazines and my broker, both the sources were equally unreliable , and untrustworthy sometime.

When I look back and check my portfolio of those time, most of companies (most of names you probably haven’t heard of, unless you have also burnt your fingers like mine) I had invested are wound up , un-listed and few of them trading at anything between Rs. 1 to 10. An exception was Oriental Bank of Commerce which gave me reasonable (absolute return of 100% – annual return about 14%) return when I sold in 2003 after holding it for seven years.

However, when I started studying the market last year, I had plethora of information sources, and some wisdom gained through the years. After some understanding(!?) I adopted delivery based investment method. Initially I had chosen percentage based return method. I wanted my investment to give me 20% annual return. Suppose I purchase shares of A company at the rate of Rs.100 and the price reached at 105 within one month, then absolute return is 5% and annual return is 60% , so I would sell the scrip.

But soon I found some disadvantages to such method. Firstly , I had to pay brokerage at about .75 % + Security Tax + Demat Charges + Transaction Charges on buying and selling and additionally I had to pay 10% short term capital gain on the profit. So in the end I ruefully I found that the broker and the government were earning as much (more in case of loss) I was earning whether I make profit or loss.

Secondly, when I had sold some of scripts with some good returns on short term basis and soon I found that prices were boomed with the market thereafter and I regretted for that. Check the table below for the scripts I sold within 1-3 months of purchase:

Script Purchase Sell price Current
DENA BANK 23-00 32-00 56-00
JINDAL STAINLESS 99-00 106-00 164-00
VOLTAS 92-00 100-00 136-00
GE SHIPPING 200-00 240-00 316-00
RELIANCE ENERGY 477-00 587-00 779-00
ASHAPURA MINECHEM 200-00 232-00 392-00

Thirdly, to make short term transactions I had to spend more time concentrating on the market and price movement which was not possible every time.

Lastly , and more importantly even if I could overcome above shortcomings I often found it difficult to find another suitable script to invest from the amount received from the last sale. One can expect to good over all profit if the short term profits are re-invested regularly.

So I have decided to be a long term investor as I was able to fulfill most prerequisite of a long term investor. I have age factor in my favor, some decent savings, regular income and the favorable Indian economy with long term growth story. Now, I mostly select the scripts from the long term investment perspective of 3-5 years and with readiness to hold it for longer period if necessary.

In one year I have seen and two crashes of Feb’07 and August’07 and enjoyed them as they allowed some good purchases. Stock market is unpredictable as it should be and nobody can claim to predict. Many analysts still do predict, as the part of their job, and helpfully they say “from here the market either can go up or down” ,quite commendable!!

So on the serious note whatever I will be writing about stock markets and scripts , please do not take me seriously. I have learnt one thing that in stock markets ,like life, one has to gain expereinces by making the mistakes of one’s own.

I will write about the stocks and mutual funds I have picked up.

Thanks Nita for the encouragement.

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Ummmm….

20 Tuesday Mar 2007

Posted by JV in Stocks, Talking to self, Thoughts

≈ 13 Comments

It has been quite some time I have’t posted anything, ofcourse commented here and there. Firstly, I was on the roller coaster ride, again. Secondly I was busy with my Sony Ericsson K790 shooting photos and uploanding few of them to Flickr.

Meanwhile, stocke market crashed to lowest of many months, and provided me opprtunities to buy some good scrips like TCS and Reliance Communiation at attractive price. Still investors in panic and confused about the trend.I am not fan of cricket, but losing against Bangladesh is something I cannot digest being an Indian. Rahul Dravid makes statement “we need to plan a lot more”, hell, then what the Team India has been doing all these time. Busy in shooting ads? Shameless fellows.

I have been reading Power and Conquest of Happiness, by Bertrand Russell. Good read they are.

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The more alive the person, the more problems there are

24 Saturday Feb 2007

Posted by JV in Photography, Photos, Thoughts

≈ 8 Comments

The more alive the person,

the more problems there are.

But there is nothing wrong in it because

struggling with problems, fighting with

the challange , is how you grow.

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