One day Post US Fed Interest rate "Lift-Off"

Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes. The US market may have mixed view as few fund houses who exited well before the Fed rate hike decision will now look for attractive bond options and better yield prospects; where as few investor would take Fed hike as a bullish sign on the economic frontier and reiterate their confidence in US stock markets at the same time be selective in their investment decision as well as horizon.

To add further Yesterday (17th Dec) the crude prices were once again on the down trend with the rise in US dollar index and base metal & precious metals also witness some heave profit booking dragging the counter towards their respective monthly low.  Especially lot of investors/analyst predicting the international gold prices to go below $1000 very soon. 

Most of the investor with Christmas fever sinking in will prefer to liquidate their funds; to top it up Dollar index will push the Treasury bond yield also to much attractive levels and thus shift of paradigm from equity to bonds could be visible in the US markets as well.

Please note:

Yesterday few of the US mid-cap heavy weight like Caterpillar Inc, Chevron Corporation witnessed 3-4% correction on the event of profit booking and metal companies like Freeport Mc Moran copper & gold saw correction of 8%. 

We expect such trend to continue and hence suggested the over all trend for US market could be sluggish till Christmas season.

US FED Rate hike hurdle crossed ...NOW what's next???

The Federal Open Market Committee raised the interest rate to 0.50 percent, effective December 17, 2015.

US Fed Chairwomen Yellen in her speech has mentioned clearly that, although the Inflation has continued to run below the Committee's 2 percent longer-run objective, the entire world was observing the US Fed rate decision and continuing with the hawkish tone set in September FOMC meeting, FED had to raise the interest rate first time since 2006.

One of the key factors for The Committee to raise the interest rate was due to considerable improvement in labor market conditions this year (lot of part timers shifting for full time jobs and unemployment rate was below average 5.1% and to add further an improvement of wage rate was a key motivator for rate hike)

FOMC was reasonably confident that inflation will rise, over the medium term, to its 2 % objective. Thus FED showed clear indication that inflation target of 2% was on medium term as compared to short term view as stated in September FOMC meeting.

Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise interest rate effective 17th December 2015 but has made it very clear, its target for FY 2016 is set at 1.375% and will not compromise on the medium term inflation target set at 2% as a key factor for next rate hike. Therefore the stance of monetary policy will remain accommodative after this increase and the initial rumors or apprehensions of back to back immediate rate hike will warrant only gradual increases that to totally depending on the economic outlook based on the incoming data/statistic in the forthcoming quarters of 2016.

With such hawkish tinge US dollar index rose sharply after the Fed hike and U.S. yields for treasury bills are also set to go higher in coming weeks. 

Effect on world economy

- China will be under pressure to devaluate its currency once again in next couple of months as it is determine to shift sentiments of the most demanded reserve currency from US to Chinese Yuan Renminbi in years to come. In turn commodity prices could witness one more correction in short term before stabilizing in long run gradually.

- USD/JPY which is considered a safe heaven will see further rise and resistance of 133~135 could be tested in coming months, making the Japaneses bond further attractive and shift of paradigm from equity to bonds is possible in coming months.

- EUR/USD parity is the next big question in mind, if ECB is unable to increase its bond buying activity as a part of their on going stimulus, investors are predicting USD = EUR in short term to medium term is inevitable and thus euro zone market could crack further and witness heavy sell off in their respective equity markets.

- India could witness few PE funds, Venture capital funds and few FII exiting the market for attractive and better risk appetite as supported by higher dollar index.

- India with its quarterly result round the corner will witness pressure due to EUR/USD correction, Yuan depreciation, commodity revaluations and higher dollar exchange (USD/INR may also witness the levels of 68~70 in coming months).

- Thus Q3 result could be game changer as well as the deciding factor for the next wave of bull run for Indian equity markets.

- India's Reserve bank could see this as an opportunity to reduce the interest rate further in short term but based on economic outlook and indicators like USD/INR, CPI, WPI, Inflation and GDP data in coming months.

- US market may have mixed view as few fund houses who exited well before the Fed rate hike decision will now look for attractive bond options and better yield prospects; where as few investor would take Fed hike as a bullish sign on the economic frontier and reiterate their confidence in US stock markets at the same time be selective in their investment decision as well as horizon.

Interstellar Movie: best Metaphor on how MURPHY's Law is the key driver for Financial Market's Turmoil

Murphy's law is a Proverb that is typically stated as "whatever can happen, will happen".... at the same time its also a Phraseme suggesting "Anything that can go wrong will go wrong"

At present, Murphy's Law is just a notion that's not provable by any theoretical or mathematical calculation. We sometimes think of it when things go wrong.

In the movie INTERSTELLAR , we learn about existence of a super advanced race in future. A race that can help humanity via gravitational anomalies and bending time-space in 4th dimension. Which means they have mastered the fifth-dimension as well.

And since they can travel through time-space, or at least arrange for such advanced natural anomalies, you would expect them to take matters into their hands long before humanity realized they were facing extinction. They could have just as easily popped up in human history, met with the world leaders, given them direction and everything - before things got worse.

But they do none of those.

Why? Why - passively interact when they can save someone from going into the point of singularity inside black hole by creating 4D Tesseract? And then send him(Cooper) back safe and sound via wormhole?

It's because the race from the future, the next step in human evolution - they understand Murphy's Law better than what we do at present. It's like how we have more faith in Newton's Law,as over 350 years, Newton's Law holds true. There hasn't been a single case of contradiction.


Similarly its difficult to stop the bad news in financial market and every cause will lead to consequences:

- US interest rate hike will impact dollar index and other major currency

- Euro stimulus to be allotted -- which countries will benefit and which countries will face the brunt of it.

- Indian political party BJP losing in Bihar state election is the trigger Indian stock market were waiting for the 2nd wave of crash/correction in nifty.

- Japan's biggest IPO and infuse of billions of dollars in their system -- will it lead to yen devaluation ... a safe bet for traders

- Al nino effect making Indonesia the 5th Largest polluter in the history (Emitting more Carbon-dioxide itself through forest burning in just 2 recent months passed by from August 2015 then annual emissions by USA itself) -- will it lead to more hotter climatic conditions in months to follow.



All this can be justified by Murphy's law.

Even the movie INTERSTELLAR suggested One bad thing after the other ? But all of these events are linked, very crucially. All of them lead to the event of Cooper falling into the black hole, thus ensuring the fact that he can convince himself to come for the mission and also transfer the data to Murph.

....That's why super advanced race in future let things go bad. They let the humanity come to the brink of extinction. They let all those explorers die. All the things that could go bad, did go bad. They couldn't rectify those events, because of Murphy's Law, or rather a future modified version dictates so. Maybe they ran simulations over and over again, to detect those points in space-time where they could interfere with gravitational events. And all they could do was create that wormhole and the tesseract. Maybe their simulations reaffirm the colloquial version of Murphy's Law, that they have to let most things go bad to have something productive come out of it.



Conclusion:

Qualitative & Quantitative research will help Investors / Traders / Fund Managers over come financial market turmoil and emerge as victorious thus creating super advance analyst in future through more systematic trading (4th dimension - metaphor for financial market) and use of Algorithms (so called 5th dimension).

Regards,
Learn N Earn Team

RBI Bond Sale Boom for Govt ... Curse for small time investors

From fiscal 2008-09 to 2013-14 RBI had been very aggressive in bond market as Purchasing bond is one of the tools it used to infuse liquidity into the system and hence RBI bought bonds worth more than Rs 5500 Billion is this period (over six years).

However, since last 9 to 12 months Bond yield have been falling due to lower oil prices, falling inflation and improved government finances by easing liquidity conditions. But the main factor would be bond sales conducted by RBI which in turn have implications on market sentiments that actually affects the bond yield to a greater extent.

On Friday 23rd Oct'15, RBI auctioned the first ever 40-year government bond, which witnessed huge interest from long-term investors including insurance companies and pension funds. Infect latest report suggest Bond worth Rs 1000 Cr. scheduled to mature in 2055 (40 years) saw bids participation worth more than Rs 6000 Cr.

RBI plans to sell bonds throughout the remainder of the year and partly sterilize the liquidity released by SLR cut. However the government will not continue to run surplus balance with the RBI (generated through bond sales); infect government will start spending to pull up the economic growth to attain sustainable GDP of 7% and above in long run.

Thus demand for government long term bond would naturally go up along with lower than expected inflation; falling trend in fiscal deficit and effective system liquidity. However this will have a cascading effect on the market sentiments & FII participation; as gradually volatility in bond market will increase generating a paradigm shift from stock market to bond market / Forex for short term purely because of supply & demand rather than a long term view on the bonds.

To add further any immediate (before Dec'15) rate hike from FED's will suck the liquidity out of the stock market even further and Indian markets could witness a correction of up to 4% in short term from current levels of 8350.

What will it mean for the yuan to get IMF reserve-currency nod?

Bonnie Cao in New York and John Quigley in Lima contributed to this story:

Many major economies, including the US, Germany and UK, say they’re prepared to back the yuan’s inclusion if it meets the IMF criteria

Washington: International Monetary Fund (IMF) representatives have given China strong signals that the yuan is likely to soon join the fund’s basket of reserve currencies, known as Special Drawing Rights, Chinese officials with knowledge of the matter told Bloomberg News this week. Here’s a primer on what that means.

What is a Special Drawing Right?

The fund created the SDR in 1969 to boost global liquidity as the Bretton Woods system of fixed exchange rates unravelled. While the SDR is not technically a currency, it gives IMF member countries who hold it the right to obtain any of the currencies in the basket—currently the dollar, euro, yen and pound—to meet balance-of-payments needs. So the ability to convert SDRs into yuan on demand is crucial. Its value is currently based on weighted rates for the four currencies.

How much of these SDRs are out there?

The equivalent of about $280 billion in SDRs were created and allocated to IMF members as of September, compared with about $11.3 trillion in global reserve assets. The US reported about $50 billion in SDR holdings as of August.

Why does China want this status so badly?

In a 2009 speech, People’s Bank of China Governor Zhou Xiaochuan said the global financial crisis underscored the risks of a global monetary system that relies on national reserve currencies. While not mentioning the yuan by name, Zhou argued that the SDR should take on the role of a “super-sovereign reserve currency,” with its basket expanded to include currencies of all major economies.

Chinese officials have since been more explicit. After meeting President Barack Obama last month at the White House, President Xi Jinping thanked the US for its conditional support for the yuan joining the SDR. Winning the IMF’s endorsement would allow reformers within the Chinese government to argue that the country’s shift toward a more market-based economy is bearing fruit.

Why is the IMF likely to approve this?

Global use of the yuan has surged since the IMF rejected SDR inclusion in the last review in 2010. By one measure, the currency became the fourth most-used in global payments with a 2.79% share in August, surpassing the yen, according to the Society for Worldwide Interbank Financial Telecommunication, known as Swift.

The IMF uses several indicators to determine if a currency is “freely usable,” the benchmark for inclusion in the SDR basket. IMF staff members said in a report in August that the yuan trails its global counterparts in major benchmarks, such as its use in official reserves, debt holdings and currency trading. But staffers have also stressed that the fund’s 24 executive directors, who will make the final call, will need to use their judgment.

Many major economies, including the US, Germany and UK, say they’re prepared to back the yuan’s inclusion if it meets the IMF criteria. Supporting the yuan may boost relations between China and countries such as the UK, which has sought to make London a major yuan trading hub.

Adding the yuan to the basket may also help the IMF improve its standing with the Chinese. China and other emerging markets were supposed to gain greater representation at the fund under reforms agreed to in 2010, but the U.S. Congress has yet to ratify the changes.

What’s likely to happen to yuan assets in the longer term?

At least $1 trillion of global reserves will migrate to Chinese assets if the yuan joins the IMF’s reserve basket, according to Standard Chartered Plc and AXA Investment Managers.

Foreign companies’ issuance of yuan-denominated securities in China, known as panda bonds, could exceed $50 billion in the next five years, according to the World Bank’s International Finance Corp.

“Once the Chinese yuan becomes part of the SDR, central- bank reserve managers and institutional investors will automatically want to accumulate yuan-denominated assets,” Hua Jingdong, vice president and treasurer at IFC, said in an interview in Lima earlier this month during the IMF and World Bank annual meetings. “It will be strategically important for China to welcome all kinds of issuers to become regular issuers in China’s onshore market.” Bloomberg

Regards,
Learn N Earn

The next yuan shock

China has cut interest rates for the sixth time in a year. Its latest rate cut shows that its economy continues to lose momentum despite a rapid decrease in borrowing costs. In the month of August 2015 also when the rate cut was done it was a 2 Step devaluation of the yuan stock which surprised the global markets. 

This time the move could be categorized as tinge of desperation; especially these rate cuts should be seen against the massive monetary expansion since 2007....because China has added more to its stock of broad money than the rest of the world put together, fueling an unsustainable asset boom.

The question worth asking right now is whether the world should be preparing for another yuan shock. The Chinese tried to sell the sudden move as a step towards making its currency more flexible. It was actually an attempt to spur the economy through an export push. Monetary expansion is, in effect, an attempt to make the domestic currency cheaper. 

Is another yuan devaluation around the corner?

China's Central Bank Cut Interest Rate... Investors Cheer !!! Economists Worry???

Although China’s surprise, middle-of-the-night move to cut benchmark interest and deposit rates Friday is yet another sign of weakness in the world’s second-largest economy, investors around the world are taking the news as a positive sign that Chinese central bankers are actively engaged in efforts meant to stimulate growth.

Markets in Europe and the U.S. rallied on the news. The FTSE index of European stocks climbed 1.1 percent on the day, and the S&P 500 erased the last of summer’s losses, bringing 2015 into the green again.

“This interest-rate cut is the latest card China’s government is playing in order to right its economic ship,” said Gregory Stoller, an expert on Chinese economics who is a senior lecturer at the Boston University Questrom School of Business.

The People’s Bank of China (PBOC) complements the rate cuts --- its sixth round in 11 months -- with measures easing bank reserve requirements.

Despite these repeated rounds of monetary-policy accommodation, strained Chinese businesses were still facing real interest rates on the rise, said Alessandro Theiss, a China economist at Oxford Economics. In its announcement, the PBOC said its moves were aimed “to create a favorable monetary and financial environment for economic structural adjustment.”

That means extending a helping hand to flagging industries. “The biggest downward pressures on growth are the downturn in real estate and the weakness in heavy industry,” Theiss said. “Most of the really highly indebted companies are in these sectors.”

Beijing’s official data show headwinds in the Chinese economy, with its growth in gross domestic product falling to a six-year low of 6.9 percent in the third quarter, compared with 7.3 percent in the same period in the previous year. And analysts point to evidence of a deeper funk. Chinese equity markets moved from correction to bear-market territory in the middle of this year. And the country’s producer price index fell to a historical low of -5.9 percent in September, signaling a steep decline in domestic demand.

China’s interest-rate cut came a day after European Central Bank President Mario Draghi opened the door for further monetary easing in the eurozone, citing continued economic unease and low growth.

The rate cut should appear on the radar screen of the U.S. Federal Reserve, whose chair, Janet Yellen, held onto expectations that the Fed’s rate-setting committee will opt to raise historically low benchmark interest rates by the end of the year. In the Fed’s September announcement that rates would remain near zero, Yellen cited falling demand from China as a potential economic hurdle in coming months.

For worried stateside investors, the prospect of cheaper Chinese credit could be welcome. “Internationally, the perception of these stimulative measures is generally positive,” Theiss said. “It shows that the Chinese authorities are aware of the weaknesses the economy is facing.”

But not everybody is sanguine about the move. Many analysts predict at least one more rate cut from China by the end of 2015, as growth continues to sag. “We’re still waiting for clear evidence of an economic turnaround,” analysts at Capital Economics wrote in a note to investors.

Others see evidence of China delaying the inevitable. Speculation in real estate followed by a rush into the stock market helped drive successive credit bubbles in China that have still not fully deflated. “We’re not close to the deleveraging,” Theiss said.

In a note Friday, economist David Levy took China’s rate cut as a sign of a coming global economic shakeup. He wrote, “China has been growing so long with huge overinvestment that it needs to slash investment so much that the other profit sources cannot make up the difference.”

Especial thanks to Owen Davis for his tweets on this articles. 

Regards,
Learn N Earn Team

What is Quantitative Easing (QE) & how it Effect's an Economy!!!

Quantitative easing (QE) is an action taken by a central bank to stimulate the economy that it presides over.

The action that the central bank takes is to buy financial assets. These assets are usually in the form of government, bank or business bonds.

In order to make these purchases, the central bank electronically creates more money – contrary to the associated term 'printing money', they do not actually print physical paper money.

What are the assets?

In order to understand how QE works, an understanding of what the actual assets are that are being purchased is essential.

Government and banks issue bonds to borrow money

When banks, businesses or governments want to raise money, they can sell an 'asset', usually in the form of a bond. You'll see that this is another way of simply borrowing money and the buyer of the bond is lending money.

When banks, businesses or governments want to raise money, they can sell an 'asset', usually in the form of a bond. When an institution sells a bond they pay the money back at a set date in the future and pay interest on it.

The buyer of the bond hands over money to the institution and the buyer receives the bond in return. The buyer will hold this bond for a set period of time, so in other words, the bond 'expires' on a set date in the future.

When the period of time is up, the institution pays the buyer back. Of course, the buyer would never purchase the bond if there wasn't a good reason to do so, and so the institution pays the buyer interest. So the bond buyer makes a profit.

Bonds are intangible – a contract agreement

A bond is not a physical thing, it's actually just a contract between two parties, but they can be sold and traded. As such, in a free market, they are subject to supply and demand, meaning that if there is not much demand for the bonds, then the institutions will lower the price of them and pay a higher interest rate to the buyers to entice them. If there is a lot of demand for these assets, then the price of the assets will go up and the interest rate that the buyer receives will go down.

The 'assets' that central banks purchase with newly electronically created money are usually the bonds of governments, banks or private firms.

Whatever the interest rate is, the seller of the bond has raised money to invest into other things and will make a return on those investments. But the higher the interest rate, the more money has to be paid out and the less money is left over after the seller has invested the money.

So when a Central bank states that they will purchase assets, they are effectively buying these bonds. To illustrate further, if a central bank states that they are about to undergo $50bn of quantitative easing, they are buying $50bn worth of financial assets or bonds. The seller of the bond can then use that money to invest into other things.

Quantitative easing is designed to stimulate the economy

Usually, the most powerful tool that the central bank uses to stimulate the economy is the lowering of the base interest rate it charges national banks. However, when the interest rate is already the lowest it can go, the central bank has to resort to other means to stimulate the economy and QE is one of them.

Quantitative easing stimulates the economy in the following way:

1. New money is created and used to buy financial assets of institutions.
2. These institutions get a fresh injection of cash that they can use to invest and spend.
3. The extra money injected into all these firms in the economy increases the money supply overall.
4. The price of financial assets go up under the new demand and the yields of the assets (the interest rate paid to the buyers) falls.
5. Institutions start buying assets of other institutions, further increasing the price and lowering the yields paid out.
6. With less money being paid out in interest, these institutions now have more money to spend, lend and invest.

Lower yields on assets lowers the interest rates for borrowing money overall

When central banks buy substantial quantities of assets, they force the price of them up and the amount of interest that needs to be paid (the yields) down. This means the sellers of bonds have more money to spend and invest.

When the yields of these bonds in the economy fall, this has a very clear benefit for everyone else, because it lowers the cost of borrowing for everyone else.

This is because, now that the institutions do not have to pay as much to the buyers of their assets in yields, they now have extra cash on hand. With the extra money that these institutions now have, they can invest into new things, hire more staff and expand. They generally buy other assets with the money they get to invest and grow.

Those companies that lend money, such as a bank or other financial institution, have more on hand to lend and can therefore afford to lend more and at a cheaper interest rate.

If you think about a single loan, where a bank lends money to a customer for a certain amount of interest (fixed or otherwise), this is essentially a so called 'financial product' that the borrower purchases from the bank. What the central bank has effectively done with QE, is allowed the supply of financial products on the market to increase as a whole (across all of the banks) – when the supply of something increases, then the price of it falls.

Of course the banks don't have to lend at a lower rate, they can lend at any rate they want to (above the base rate of the central bank sets). However, banks make money on the loans that it issues out to borrowers and they want to make as many loans as possible. But of course, all the other banks are able to make more loans at a cheaper rate too and as the bank will want to entice as many people to take out loans with them, they will lower the interest rates to compete with other financial institutions.

In theory, this lowering of interest rates is probably the most direct benefit that consumers feel from quantitative easing.

Lower borrowing costs encourages spending and stimulates the economy

When the cost of borrowing money falls, consumers and businesses borrow more money and buy more goods. The following – very rudimentary – example explains how this works:

If the cost of borrowing falls, people naturally borrow more and spending in the economy increases.

Say, for instance, the more vans you have for your delivery business the more you can expand. You consider a $20,000 loan to buy a van and the payments are $250 per month. If the cost of borrowing falls by half, then you can now be take out a loan for £40,000 to buy two vans for the same cost of $250 per month and so you are likely to buy two vans and expand your business even more.

More spending leads to inflation

As this effect starts to take place and spending and investment picks up across the whole economy, prices overall start to increase leading to inflation. This is either a good thing or a bad thing, depending on how high the inflation is.

Central banks will engage in QE if there is a danger of deflation. Deflation is bad for the economy because it encourages people and businesses to not spend and invest.

It is generally accepted that a small amount of inflation is a good thing for the economy, because it encourages spending and investment. If prices are rising, then investors are likely to buy or invest in assets because they believe they will get a return for it in the future. If prices do not rise, or even fall (deflation), then investors are more likely to hold onto their money, because they do not want to invest in something that is going to be worth less over time.

So, a direct result of quantitative easing is inflation and a central bank will engage in quantitative easing if it believes that there is a danger of deflation.

So you can see that quantitative easing has the same effect of lowering the interest rate, but can be used when the interest rate can go no lower.

The debate around QE

Quantitative easing and its benefits are heavily debated in terms of the actual effects and the extent of them, and so it is worth bearing in mind that the text book theory of how QE works remains under scrutiny.

For instance, it has been widely reported in the 2008 crises that QE did not in fact end up stimulating investment, but rather allowed big banks that lost money on heavy speculation in the sub-prime mortgage industry to re-capitalise their own balance sheets. So far from encouraging lending in the economy, banks sucked up the readily available capital to affirm their own footing in a financial crisis.

Regards,

Learn N Earn  Team 

US Fed Hold rate Hike

Good Day ALL

I know its very late Indian time but US FED finally decided to hold the Interest rate hike this time around but left with slightly hawkish view projecting to meet once again in Oct '15.

World market has already started reacting to the news as Euro and Nikkei initial went in red but later as the minutes passed by every 30 sec volatility increased and finally after 20 mins of rigorous trading the market in green. Its just first few hours after the outbreak lets see the EOD.

Learn N Earn Team
Jiten Savla

Market update for 16th Sep

Good Morning All,

Global cues are mixed especially with Euro & Nikkei recovered last night and today Nikkei opened down but recovered in the early hours of trade...only to make a new low again.

If average gap up opening for nifty/banknifty
Caution: Sell on rise also with proper signal can fetch good money today...Buy on dips will be highly risky trades but with proper signal and Strict SL @ cost ...you will get good valuations.

Following sectors to watch for today's for few opportunities:
- Metals (Coal)
- Infra
- Banknifty (selected banks as well).
- Pharma
- Auto

Global Cues

Global Cues are very critical today especially with the US fed rate hike clarity will be finally revealed tonight.

Few analysts have already bet on combination of nifty derivatives to take the benefit of the huge volatility possibilities.

Few say: The time is just right for the US Federal Reserve to increase rates; but the stock market rallied late evening (IST) only to suggest that FED may not be 100% sure on rate hike this month. India can emerge as a leader and RBI base rate calculation norms may help monetary policy but only time will tell. 

So its better to get a investment plan ready.

Market Update for 15 Sep

Good Morning All,

Global cues are mixed especially with Nikkei opened 1.5% up but gave all the gains in the early hours of trade.

Caution: Market poised for Export Data around 10:30 am and PM meet with power producers in the afternoon. Great Britain (UK) to disclose critical economical indicators later as well. Buy on dips but with proper signal and Strict SL @ cost if average gap up opening for nifty/banknifty...Sell on rise also with proper signal can fetch good money today.

Following sectors to watch for today's if possible book profits:
- Power & Energy
- Metals (Steel & Aluminium)
- Banknifty (selected banks as well).
- Cement

Is US Fed policy a key catalyst for RBI's rate cut ???

Is US Fed policy a key catalyst for RBI's rate cut ???

Market today 14th Sep

Good Morning All,

Sorry for the delayed Start...but Bank Nifty short last week Friday our level of buy back @16510 still not broken.

Market poised for WPI Inflation data later in the afternoon.

Following sectors to watch for today's trade buy on dips if possible or wait:
- Power & Energy
- Metals (Steel & Aluminium)
- Infra
- Banknifty (selected banks as well)


Following sectors to watch for today's trade sell on rise (high risky traders only):

- IT

- Tyre
- Auto

Critical Pit Stop (Formula 1 Style) for Indian Market's

Good day Folks!!!

It was a Critical 2nd week of Sep 2015 for the market and just reminded me of the Monza Formula 1 race that was just concluded last week. Indian Market are also going through a roller coaster ride and have been waiting for global cues to decide its own pit stop strategy.

Brokerages have begun cutting their Sensex and Nifty targets as worries over a Chinese slowdown and hike in US interest rates weigh on the markets.There are worries that earnings have not caught on and most investors are disappointed. So India is loosing its grip and way back on the Starting line of F1 race....figuratively speaking

SO WHAT NEXT??? 

Will India take the lead post this pit stop....

LEARN N EARN .....with the help of different JETAGE analytical break down.

On 12th Sep 2015, US non-farm payrolls data came in weaker than expected at 173,000, but, analyst are split whether there would be an interest rate hike by the US Fed at its Sept 16-17 meeting.

The consensus estimates was for a 223,000 figure, but despite that other data such as wage increase and a fall in unemployment raised the prospect of an interest rate hike. A drop in the employment and an increase in wages might lead the US Fed to hike interest rates (BUT WHEN ???)

JETAGE: FINANCIAL-MARKET

- The US Dow Jones ended the day sharply lower on Friday and was down almost 3 per cent for the week.
- European markets also dropped following the US nonfarm payrolls data.
- The German DAX and French CAC saw cuts of almost 2.5 per cent.
- Asian markets have also reacted with the Indian markets falling to a 13 month low and facing the worst week (Sep 14 to 20Sep) for the markets in the last 4 years.
-  Analysts are also not sure as to what could be the outcome of the US Fed meeting, but, the way markets have reacted suggest that investors could be looking at a US Fed interest rate hike for the first time in many years.
- Interesting food for thought:- Foreign Portfolio Investors (FPIs) have been constantly selling in the Indian markets, while domestic institutions have been buyers

JETAGE: ECONOMY INSIGHTS (China effect)

A slowdown in China would lead to commodities like metals being badly hit. Lower metal prices would have an adverse impact on steel manufacturers in India as they have to compete with imports.

Indian exports to China is not very much. In fact, it is around 10 per cent of India's total exports. India exports items like iron ore, chemicals and allied products to China. If the Chinese economy is hit, exports, which are now at 10 per cent could be hit. But, this is really not very significant to worry about.

Other East Asian economies really need to worry, because they export a greater deal to China. The worry is not really that trade would get hit. The real worry is that the world economy has integrated so such, that the indirect effects are plenty.

For example, if and when China crash lands, it would hit many companies that have significant manufacturing base in China, especially US based companies. When US based companies are affected, contract for Indian IT services from US companies may shrink.
It also leads to a pull-put of money from Foreign Portfolio Investors in India, which can than lead to a fall in the Indian stock markets and also the Indian rupee.


JETAGE: CONCLUSION

It's all a indirect impact of a Chinese economic slowdown on India, rather than a straightforward one. A economic slowdown in China will affect other countries, which in turn would indirectly affect India.

India insulated to a large extent
India is a domestic consumption story. We have not been an export driven economy like China. We largely produce and consume ourselves. Hence, we are relatively insulated, though as explained above, one can never be entirely insulated from the global economy and there are some indirect affects that are going to be there. But, India is in a much better position that most countries, especially from other parts of Asia, which have significant presence in China through exports and manufacturing.

Like F1 Championship is not over ... few more races to go this calendar year. Indian Market's can still fight back post Sep till DEC and emerge as a LEADER!!!

Refer to previous post "Better SAFE than SORRY" for investment ideas....

Regards,
Learn N Earn Team.

11 Sep Report

11th Sep AI report Market insight

Better Safe than Sorry...

Better Safe than Sorry... is not a Mantra, its a tool for smart investment opportunities.

Let's understand why in an economy like India it will work.

Investors are always confused to invest in Stocks/Mutual fund, or bank fixed deposit/bond etc etc.
Especially when interest rates fall, shares tend to move in opposite direction. In India shares prices have fallen with the Sensex at a near 13 month low and interest rates have followed. A year back it was easy to get an interest rate of 9.25 per cent on a deposit at State Bank of India. Today, the maximum interest rate that one can get is 8 per cent. Clearly, in the last one year interest rates and share prices have fallen. In fact, even gold has fallen in the last one year.

Choosing between shares and fixed deposits?

The question now is: If both are falling where to put money. In 2015, the Sensex has thus far given negative returns. On Jan 1, 2015, the Sensex closed at 27,507 points. We are nearly 2000 points below those levels at Thursday's close of 25,622 points. Many analysts see the Sensex EPS at around 1450 for the financial year 2015-16. This translates into a price to earnings ratio of around 17.6 times one year forward earnings. This makes Sensex valuations at long term averages, which means it is fairly valued at current levels. So, after a nearly 14 per cent fall on the Sensex from the highs of 30,000 points in March, the markets are still not a screaming buy. Hence, if you think that after the fall you should be buying shares at these levels, you could certainly nibble selectively as the valuations are fair. Selective purchases can be done and if there is a further reaction in stocks of around 5-10 per cent, it would be an excellent opportunity to buy into blue chip stocks like ICICI Bank and Tata Motors. If you have fixed deposits which have been placed almost a year back at interest rates of 9.25 per cent and more for the longer term, it would be unwise to break them and put money in shares, since these have been locked at high interest rates. If you want to buy shares you can start nibbling selectively and in case the market falls lower from here, you can keep buying stocks at lower levels and averaging your costs. Please do not buy shares in large quantities until the US Fed meeting ends on Sept 17. This would give you a clear indication on where interest rates are headed in the US. If there is a hike in interest rates in the US on Sept 17, you could see massive sell-off in Indian markets. This would give you an ideal opportunity to buy into shares. For the time being just hold onto cash for at least a week.

Important to seek advise before you $$$ buy

Good Morning Everyone....

Lot of people have been asking; is this the good time to invest in Mutual Fund, Which fund and what price. Lets us understand how Mutual fund works and how its priced @ NAV.

Mutual Fund Net Asset Values (NAV) are the most important indicator for a mutual fund investor. In fact, unless you are investing through the Systematic Investment Plan (SIP) it makes sense to look at the net asset value of a mutual fund scheme very closely. How is mutual fund NAV calculated? Mutual fund net asset value takes into consideration the total expenses of the fund, including salary and other administrative fees and its investments, whether they are debt or equity. These are than divided by the number of units.

This is a very simplistic way of explaining how a NAV of a fund is calculated. Let us now understand this with the help of an example. Let us say for simplicity that the total investments of a fund including debt and equity is Rs 1 lakh. If the cost to manage the fund and the other expenses are Rs 2,000/- p.a and the outstanding units are 5000 than the calculation is as follows: Rs 1 lakh /5000 - Rs 2,000/5000 = 19.6 So, we can say that the net asset value if Rs 19.6. This is just a example.

Importance of lower and higher NAV for the investor:-
The net asset value is perhaps the single most important factor to look for, especially if you are investing in equity linked mutual fund schemes. It is also extremely important if you are investing a lump sum and not through an SIP. Now, let's see why the NAV is very important. If you are planning to invest a lump sum you must track the NAV. Let's assume you want to invest Rs 100,000 in a mutual fund scheme. If the NAV a month back was Rs 10, you would get almost 10,000 units. Now, let's say you have waited patiently and the NAV has fallen to Rs 9.50. You would now get 10,526 units, which is certainly more. However, in most of the cases it is almost impossible to know at what NAV to buy, as a funds performance would largely depend on the markets.

But, generally speaking you should seek expert advise before investing a lump sum. For example, when the Sensex was at 30,000 points many investors thought that it would cross 32,000 points and they invested in mutual funds. In fact, that did not happen. Today, the last three month return of mutual fund schemes has been negative and many funds have just about managed to generate positive returns in the last one year.

It is therefore important to seek advise before you buy.

Happy Investing!!!!

Complexity Of Trading

10th Sep AI report Market insight

10th Sep Report

10th Sep AI report Market insight

Confidence v/s Will Power

The Only reason I am uploading this piece so soon in our season; is because this is the key to everything you do ...not only in market but in real life as well.

Since last few months working with few FII and fund managers; i have got a chance to learn something more in-depth and come to "in terms" with this ideology

There are three types of confidence:

•  False/Imaginary Confidence

• Temporary/On-Off Confidence

• True Confidence

False confidence —  This type of person will talk big and poses like a big shot. he often takes big risks in an effort to either impress others or to message their own ego and discomfort, and the outcome is terrible sometimes as it leads to busting there trading account.

Temporary confidence — Which is conditional on recent performance. This type of person's self-esteem is tied to their account equity or P&L.  When they are in a good run, they feel confident and like to take larger risks (often the prelude to giving it all back). And when performance is lousy they start grasping at anything, maybe exiting winners prematurely or taking on excessive risk to get their money back.

 True confidence — This is confidence that does not depend on recent results. It is based on a deep sense of inner trust.This is the person who has a history of doing the right thing, regardless of the outcome. Doing the right thing in the sense that they act in their own best interest and trust and understand that doing so over time has a positive impact on results.  The trust runs deep enough to provide resilience in the face of disappointment.  This is true self-confidence, the kind you want in trading and in life.

In my many years of experience and learning from it, I’ve discovered confidence is a major part of the foundation for discipline.

Why is self-trust and resilience in the face of disappointment the  foundation for discipline? 

Disappointment in trading, in it’s myriad of  manifestations – missing out, leaving big money on the table,  taking a loss, etc – is inevitable for even the best traders. It’s an elemental fact that traders who  understand this, internalize it, and make it a part of their trading strategy are the most successful.

 Almost everyone says that discipline is a requirement to succeed in trading. But most people never talk about  what really underlies  discipline. And now you know.

 Are you surprised it’s not will-power? Will-power is not sustainable, it also results in fatigue by significantly reducing glucose (blood sugar levels).

In fact, empirical research shows that extended use of will-power results in cognitive fatigue and lower glucose levels. And cognitive or mental fatigue is dangerous for a trader, it makes us susceptible to making the kind of mistakes we regret later.

 Now that you know that will-power is not enough, do you want to develop the necessary ingredients for discipline?

Stay tuned for next post with market update and insight.

WELCOME BACK FOLKS!!!

Hello Everyone!!!!!

Welcome Back Friends....we have lot of new exiting things this season.

WHAT -  The purpose of restarting this blog is to identify analysis and evaluate the role of knowledge in financial market based on heuriskein method with excel based arithmetical progression within a given time frame, probability of various permutations & combinations;  also known as heuristics algorithms or as modern science would name it AI "Artificial Intelligence"

WHEN / WHY - As you know today among-st the top groups of TV channels aired today most of then would be related to financial market. An industry that has more then 7+ channels dedicated 24 * 7 to share and express views of experts on global market outlook as well as local... just imagine the media info floating everywhere & anywhere ... day in and day out.

WHERE - More than 5000 Registered Brokers, 5 Lac Sub-Broker, 50 Lac Sub Dealers ... Contributing more than 27% of National Employment…Indian Financial Market is the 2nd largest with regards to monthly volume in Trillions of dollars… HR department in any (global & local = glocal) ... GLO-CAL Financial Market have always stressed on the importance of getting investors with not only the right book knowledge but also people who fit into the advisory criteria for appreciation of your portfolio.

HOW - Now just comprehend how advisable it is to gain adequate knowledge before start trading and investing especially insights to analyze key info and evaluate day trading behavior, and provide recommendations in order to improve it. This Blog will also reveal the importance of the direct relation between goals and investments. In order to gain a strategic profit making system in our case AI and exercise the strategic goals of investing, the day trading objectives should be directly aligned and followed with simple and realistic follow ups on timely basis as well....... need for AI is at its prime and will be part of necessity in near future to come.  

The mission and vision statements into one statement called “Our Future” working hand in hand and aligned with profit making objectives is the bottom line for this BLOG!!!

TRADERS’ BIGGEST PROBLEM

Trading is likely the most exciting way to make a living and/or accumulate a fortune. You are your own boss and your own worst enemy. You alone must deal with the frustration of your own choices. If you lose, there is no one else to blame. You made the losing decision, even if that decision was to let someone else make your decision or to follow someone else’s approach. On the other hand, if you win, don’t have to say “Thank you” to anyone. You are not obliged to anyone but yourself. There is no politics nor anyone to whom you must cater. You are truly “sliding down the razor blade of life.” 

But here is the problem. Most of the time, the market goes nowhere. Only 25 to 40 percent of the time does the market trend, during the remaining 60 to 75 percent of the time the market goes nowhere. Most professional traders make nearly all of their profits in a trending market.

Here is our problem: we don’t want to spend out time entering and exiting a market that is going nowhere. If the market is going nowhere, then the opportunity is NO-WHERE. We want to change that to opportunity is NOW-HERE.

Daily Mantra

Daily we get lots emails asking for any technique for day trading, any specific calculation for day trading, any fixed procedures to follow, I am new comer and want to earn in day trading, I want to start the day trading, I made losses in day trading please tell me how to recover and so many questions we get on day to day basis.

Broadly speaking there is no any fixed calculation or technique to earn money in day trading.
Also there is no any specific technical indicator or charting with the help of which you can do successful day trading.

For successful day trading you have to combine couple of indicators to analyze the trend and strength of the market and specific stock.

So the bottom line is you need to have experience to do successful (profitable) day trading and earn money in share market.