Information Bite
by Prahasi Paper Pvt Ltd - [private circulation. Weekly Newsletter] - email: information.bite@gmail.com
The pessimist sees difficulty in every opportunity. The optimist sees the opportunity in every difficulty.
Story of the Week
Subprime Fallout –
What’s the way ahead?
The last 4 weeks have been quite eventful for
the markets. Things that were thought impossible have
happened and crumbled the confidence of seasoned
market participants. There were several days where we
saw brokers and technical analysts not giving any calls.
People are now sure that markets will go to 12000
levels from here.
As Sensex scaled new peaks, the belief was
that it will scale newer peaks with the same pace and
hence people resorted to excessive leverage making
bigger bets in the stock market. The last few years
had made people confident that it was quite easy
making money whether through IPOs or through
Futures. In fact it had become so easy to make money
in IPOs (of course most people received paltry or no
allotments) that people started to borrow to invest.
When the market is in a uptrend it is not only stupid
but excessively risky to borrow and invest, or to take
exposure in futures with a view of making a quick
buck. But the lure of money is so much that sane
advice goes on deaf ears. rates for new borrowers and only a couple of them have
When a couple of things start to work for you,
you feel super confident and feel that the markets
have nowhere else to go but up. In this process one
loses sight of the overall risk that exists in the market.
Take the case of an acquaintance whose portfolio of
Rs 1 crore in 2002 had grown to around Rs. 21 crore
on January 20, 2008. This was through excessive use
of futures. Two days later his portfolio was biting dust
and I could give an award for guessing the value of
his portfolio. All margin calls were triggered on his
portfolio because of his excessive exposure and he was
down to a negative 10 crore (I am sure the next target
in his mind was Rs 200 crore). Yes his portfolio was a
staggering negative 10 crore. This is the result of over-
confidence, and excessive greed. Your formula might
work well in the short term but that doesn’t mean it is
appropriate for your long-term financial health.
Here are some pointers:
--The markets post the crash the markets have
been volatile and it is a natural phenomenon after
any crash of this magnitude where a large number of
investors have lost a lot of money in the leveraged
futures positions and large IPO’s. The markets are
today down nearly 16% from the highs of January and
the sentiments of euphoria having got converted into
despair.
VOL. 1 ISSUE 29 Weekly
8th March, 2008 Change
15976 q 1602
4772 q 451
Inflation rate rose to a ten-month high of 5.02 % for
the week ended February 23, Vs. 4.89% last week, as
food and some manufactured products turned costly.
--Gold has done well and hit new highs. In the
current scenario, do not be surprised to see gold rising to
higher levels.
--Fed is expected to cut rates once again in the
third week of March and this will increase the interest
rate differential between US and India. This could be
a positive for equity markets. Ideally this could
signal that RBI would lower rates, but we feel that
RBI might not do so considering inflation numbers and
high asset prices. Banks meanwhile have started reducing
interest rates. However most banks have reduced interest
reduced prime lending rates.
--Globally the situation still is not favorable and
nothing has fundamentally changed in the US
except that the Fed is gearing itself to tackle the situation
through interest rate cuts and other stimulus packages.
We anticipate that there will be more write-downs from
insurance companies and bond insurers. Additionally
there could be new defaults relating to credit card
payments and this could probably be the next big mess
(Plastic Mess). Based on these news flows, the markets
could continue to be under pressure and there would be
selling coming in on subsequent rises.
The next triggers for the markets would
be improvement in global news (which is very
difficult to predict and only ones we can predict would
be interest rate cuts and stimulus provided by the Fed)
and earnings season starting from the second
week of April. Strong Earnings growth could be a big
trigger, however any negative surprises here could exert
additional pressure on the markets.
However our fundamental story is still intact
considering GDP and earnings growth and today
we have a lot of value in many sectors and stocks.
Infact the risk of investing is always the lowest when risk
perception and pessimism are both at high levels. Risk
reward equation today is in favor of rewards with very
low downside risk.
 to nail your
stocks

STOCK EXTREME PROBABLE ACHIEV- CLOSING ACHIEV- PROBABLE EXTREME

ABLE ABLE
Nifty (Spot) 4110 4448 4550 4772 4943 5030 5228
REL capital 1207 1297 1301 1383 1500 1618 1776
RPL 132 139 146 154 160 168 176
L&T 2678 2743 2900 2999 3261 3366 3430
RIL 1946 2017 2120 2257 2326 2463 2644
Extreme Here traders can go short (higher side) or long (lower side) with minimal stop loss

Probable Which is the probable achievable if the stock trades above or below the closing price

Achievable Which is achievable if the stock trades above or below the closing price (trade as per the trend of the mkt)

In this section we have chosen the volatile scripts to give you good momentum.
We will also try to keep the stocks same so that we can extract maximum benifits from them as
our focus will be on a limited number of stocks.
This is still in its beta phase and we recommend caution while trading.

About 66 per cent of the Tatas’ capital is allocated by Tata Sons

for which purpose?
a) Philanthropic trusts b) Return to shareholders c) Research & Development
Tickle Your Brain
 News Virgin & Tata to tie the knot
bite The UK-based Virgin Group has forayed into Indian telecom market by launch-
ing Virgin Mobile brand in India through a brand franchise pact with Tata Teleservices.
Under the pact signed by the chairman of Virgin Group Sir Richard Branson, the
group will offer value-added services to the Tata Group arm aiming customers in the
age group of 15 to 30. Tata Teleservices Limited (TTSL), which is the second largest
CDMA operator with 22 million customers, will sell the youth-based mobile service
under the brand name of ‘Virgin Mobile.’ Mr. Branson said, “India is an exciting market. There are more
than 215 million Indians aged between 14 to 25 years. Over the next three years, we expect this seg-
ment to be adding over 50 million new youth subscribers and to have revenues of over 350 billion rupees
(about 8.74 billion dollars). We will target 10 per cent of the urban youth market.”
Though Virgin act as an MVNO in its existing six markets in the world, but it will not be entering India
as a Mobile Virtual Network Operator. An MVNO (Mobile Virtual Network Operator) is an operator that does
not own infrastructure, network or spectrum but leases these to offer services.
Virgin will brighten up the Indian mobile shops with six colour mobile handsets, having a price range
from Rs 2000 to 5000. Virgin Mobile products and services would initially be available in 50 cities and, by
2008, in over 1,000 cities and towns.
The financial details regarding the deal has not yet disclosed by the two companies.

Gold resumes at an all-time high of Rs12,885:

Shift from equities to bullion sees surge in yellow metal; silver follows suit, crosses Rs25,000
mark.
Gold prices resumed at an all-time high of Rs12,885 in the bullion market here on 7 March, on fresh
stockists buying in view of rising trend in the global markets.
Silver also crossed the Rs25,000-mark on good industrial demand. Some investors moved to bullion due
to the fall in equities market, traders said.
Standard gold (99.5 purity) rose by Rs300 per ten grams to Rs12,885 from the last closing level of
Rs12,585.
Pure gold (99.9 purity) rose to Rs12,940 from Rs12,635 previously.
Silver ready (.999 fineness) shot up by Rs1,000 a kilo to Rs25,100 from Rs24,100.
In New York, gold futures soared to record highs and silver to a 27-year peak on Wednesday as crude
skyrocketed following a fall in the US oil reserves, leaving the metals market focused on the possibility of
hitting the long-talked-about level of $1,000 in gold.

Facebook founder is world’s youngest billionaire:

Mark Zuckerberg, the 23-year-old founder of social networking site Facebook, is the youngest ever self-made
billionaire, according to an annual list published by Forbes magazine.
“He is the youngest billionaire in the world right now and we also believe he is the youngest self-made billionaire in
history,” said the magazine’s Associate Editor Matthew Miller, unveiling this year’s super-rich list.
The magazine put the former Harvard student’s personal wealth at 1.5 billion dollars, based on what it said was a
conservative valuation of five billion dollars for Facebook and Zuckerberg’s estimated 30 percent stake.It played
down speculation that the site could be worth as much as 15 billion dollars, which was based on Microsoft paying
240 million dollars for a 1.6 percent stake in the company last year.
“Would it really fetch that much today? Some analysts -- and a few Facebook investors -- doubt it,” the magazine
said. It said it based its valuation on Facebook’s estimated annual sales of 150 million dollars.
 Time to get out or get in?

Market condition has forced the leading brokerages and equity strategists
to come out with short-term direction calls and tactical advices. Pre-
dictably, not all suggestions are alike. The opinions varied between two
extremes — reduce probable loss and get out, or enter, this is an oppor-
tunity. But some have chosen to tread the middle path with a suggestion Worried onlookers see
of staying put for some more time. the market tumbling.

Religare has given a call to its clients to quit the market and stay in cash. Angel Broking’s
CMD has suggested that this is the time to build a portfolio, may be for lifetime.

The Religare team advised against averaging in a falling market. It also suggested preference
for booking losses in penny and momentum stocks. “Shorting strategies in derivatives could
be an option,” they said. They, however, said that the negatives might not last long. Tenta-
tively April, when the quarterly results and clarity would emerge, could be the time to re-en-
ter. By then, worst should be over.

Mr Gul Teckchandani, an independent market strategist, felt that when many people are talk-
ing about a further fall and preparing for exits, serious investors would look for individual op-
portunities. “The economic fundamentals are intact. There would be values, but one has to be
discerning and should have stomach to stay tight amid volatility.” Those who have mid caps
might find holding out worth rewarding. But, he disfavoured playing the futures now.

Mr Thakkar of Angel Broking Ltd., recommended traders to stay away from

trading for the same reason. “As you would be tempted to go short, and
may even be successful on one or two occasions. However, the day the
markets reverse, it will not only wipe out all your gains, but also will leave
you with short positions in appreciating markets and incite a bearish mind-
set in you. Hence, wait for the markets to turn and be on the long side.”

Market is expected to be range-bound and also volatile as there is no clar-

ity on external factors. It is the testing time to the level of patience or the
wisdom of the investor. There may be decent returns in the long run as the
long-term fundamentals are robust.

Ultimately it’s a greed and fear story and there was greed on the upside and now there is
fear on the down side and one has to possibly find a mid-path where this capitulation would
also stop and people will start looking at valuations with a positive frame of mind. That fear
element will also drive away. Its just a question of people are just trying to find the bottom,
which is not a very advisable thing to do, what is more significant is that one should possibly
start buying and not look at it for sometime, that will be a better approach to it.

Answer to TICKLE YOUR BRAIN: a

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