The Global FinCrisis: Article from BT

Cover Story
The global financial crisis
Puja Mehra
The green signal for a $700-billion bailout of US banks wasn’t enough to turn the tide in global financial markets. Even six of the world’s central banks coming together to release hundreds of billions into the system couldn’t stem the panic. It has to get worse before it gets better. Puja Mehra reports.
So, where is the money?
Bear hug
Sense of rumour
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Also read:
So, where is the money?
Panic grips Dalal Street
Is something wrong with ICICI Bank?
When bad loans are sown in good times
The Rs 60,000-crore time bomb
When exotic turns toxic
Economy in eclipse
Wall street woes, India’s opportunity
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Last fortnight, the US financial disaster- as expected-blew into a full-fledged global crisis. First stop: Nearly all of Western Europe. Just like the US legislation for the over $700-billion rescue package, governments and central banks across the Atlantic, too, launched into bailout mode. Next stop: Asia, with some real estate lenders in Japan getting wiped out; and Singapore's economy, which plunged into recession.
The International Monetary Fund (IMF) revised upwards its projection of the losses of the US banking system to $1.4 trillion. At which point, the financial tornado hit the west coast of India. For a whole week, it had Indian stock, currency and money markets in high panic. The Sensex lost nearly 2,000 points in a week, overnight inter-bank lending rates shot up to 22 per cent (from single-digit rates), the rupee slumped to Rs 48.72 to a dollar and scared investors in debt schemes of mutual funds pressed the redemption trigger. Within days, money and confidence in the Indian economy vanished into thin air. The Reserve Bank of India (RBI) stepped in swiftly with liquidity-releasing steps. Finance Minister P. Chidambaram proclaimed the Indian banks' strong credentials and low vulnerability of the system to the growing global financial mess. The Government cancelled its scheduled borrowing for Rs 10,000 crore from the money market. Chidambaram set up a group of who's who from the financial world to suggest, within a week, ways to ease the liquidity crunch. On October 13, Chidambaram guaranteed liquidity yet again before the opening bell at the stock markets.
Finally, sanity returned when the Asian stock markets posted relief rallies. But that may have just been temporary relief. The ghost of Wall Street is still out there. BT takes a look at the toll in India so far and what to expect next.
Worldwide woes
The financial crisis has spread way beyond its epicentre in the US and has engulfed most of Western Europe. Here's a country-by-country status and assessment.

UNITED KINGDOM
Has lined up a $850-billion rescue plan, May nationalise Royal Bank of Scotland
Will recapitalise banks by up to $88 billion. Abbey, Barclays, HSBC, Llyods, Standard Chartered, HBOS and Nationwide Building Society can draw from an aggregate of $44 billion to boost their Tier 1 capital
Bank of England will infuse liquidity of $351 billion through loans
The government will guarantee $439 billion worth of short-and-medium term debt
Britain has seized control of mortgage lender Bradford & Bingley
Earlier this year nationalised Northern Rock
Alarm: The total liabilities of Barclays of £1,300 billion (leverage ratio of over 60), surpass Britain's GDP

BELGIUM
The government took partial control of the struggling Fortis Bank
France, Belgium and Luxembourg stumped up $93 billion to recapitalise Dexia, a French-Belgian lender that ran up huge losses in its US operations
Alarm: Fortis Bank's liabilities are several times larger than the GDP of Belgium (leverage ratio of 33)

ICELAND
The government has nationalised three of Iceland's biggest banks
Accounts in these banks stand frozen

IRELAND
Has guaranteed all bank deposits

SPAIN
Will spend 50 billion euros ($68 billion) to buy bank assets, almost a third of the proposed 2009 central government budget

UNITED STATES
May pick up ownership in failing US banks (Morgan Stanley is reported to be one)
Fed ready to lend directly to stressed companies

GERMANY
Has guaranteed all bank deposits
Has organised a credit lifeline of euros 35 billion for blue-chip commercial real estate lender Hypo Real Estate Holding
Alarm: The total liabilities of Deutsche Bank (leveraging ratio of over 50) amount to 2,000-billion euro, which is more than 80 per cent of the GDP of Germany

JAPAN
Yamato Life Insurance failed with $2.7 billion in debt
The government may revive a bank-rescue law of the 1990s banking crisis
Tokyo may set up a $100-billion fund to prop up smaller lenders
Alarm: Real estate companies are folding up, forcing regional banks to raise reserves against bad loans
SINGAPORE
Eased monetary policy for the first time since 2003 after sinking into its first recession in six years, hit by the meltdown in financial markets
The government revised its 2008 growth forecast to around 3 per cent from an earlier estimate of 4 to 5
ITALY
UniCredit Bank has announced plans to raise its capital ratio by spinning of property assets

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Other BT articles:
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What is it? A free SMS service from YouMint, started by Ankush Johar, who claims to have pioneered the concept in 2002. Since then, Johar has moved to England and YouMint is his third entrepreneurial venture in the telecom space.

People
In August company
It is an honour from his Alma Mater, but Anand Mahindra, 53, Vice-Chairman & Managing Director of Mahindra & Mahindra, calls it “a recognition of the India growth story, and of Indian entrepreneurialism in general”.

Current
Savvy investor
Rahul Sachitanand
Wipro chief Azim Premji is quietly picking up stakes in companies with strong business models.
Khattar’s second innings
Modi hosts India Inc.
TCS rides to the Citi
Divided we stand
IBM’s discovery of India
Another airport expansion
Opera’s challenge

Money
Avoid your own financial crisis
Manu Kaushik
The global financial crisis has highlighted the ruinous effects of over-spending and over-borrowing. Here’s how to avoid your own financial crisis.
On the right track
Back in business
Fix it right

Trends
Just wondering...
What happened to Dilip Chhabria’s plans of launching a made-in-India sports car? Well, the plan is on track.
The gap Is growing
New launches
“We will dominate the Indian market”
The big fall
Tugging at your heart strings
Instan tip
Now, get paid to receive SMSes
Numbers of note
Ranked
Now, shop online for loans
The 6 most over-hyped gadgets
Out in the open
Economy watch
Talebearer
How times have changed
Reprieve for ad industry
India slips on competitiveness
To be precise
Liberal ECB norms on the cards

Special
Laying down the gauntlet
Rahul Sachitanand & Kushan Mitra
With the Indian IT market expected to grow at an estimated CAGR of 18 per cent over the next five years, foreign IT giants aren't just dominating the market, they're opening up new segments and setting the agenda for some categories. Rahul Sachitanand and Kushan Mitra tell you about the twists and turns.
Re-inventing Indian IT
BPO firms learning tricks
Beyond the obvious

Noted
Ranked
SBI, which has assets of over Rs 7 lakh crore, 57th in the list of the world’s Top 1,000 banks this year, by the UKbased banking publication The Banker. SBI was ranked 70th last year.

Source: BusinessToday

Stock,Sector Views from Deadpresident

Power Grid Limited
Ranbaxy Limited
Punj Lloyd Limited
Suzlon Energy Limited

Insurance Portfolio - Top 40 Stocks
Mutual Funds Portfolio - Top 40 Stocks
FII Portfolio - Top 40 Stocks
LIC Portfolio - Top 40 Stocks

Nestle Ltd
India Cements Ltd
HPCL Ltd
Job cuts galore...

Hindalco Industries Ltd
IMF sees recession in advanced economies
Suzlon to reschedule stake purchase in REpower
Britannia Ltd

BPCL Ltd
Bharti Airtel Ltd
Apar Industries
Kingfisher Airlines faces rough weather

FMCG Sector Result Review
RIL shares tumble on plant closure reports
Auto Sector Result Review
IT Sector Result Review

Telecom Sector Result Review
Hotel Sector Result Review
Cement Monthly Update
Auto Monthly Update

Weekly Stock Recommendations - Nov 8 2008
Export growth slumps in September
Core sector growth rebounds
Fitch sees steep decline in GDPs of advanced econo...

Weekly Newsletter - Nov 8 2008
Punjab National Bank
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Monthly Newsletter - Nov 8 2008

Source:Deadpresident blogs

Sensex,Nifty outlook for the week

Index Outlook



Sensex (9964.2)
Even as the world raised a toast to United States of America that voted for a new order in which racial hierarchy ceases to matter, stock markets reversed downwards. It was probably President-elect, Barack Obama’s grim reminder about the “worst financial crisis in a century” that brought the six-day-old party in equity markets to an abrupt end.
Indian markets moved in tandem with the rest of the global markets, rallying merrily up to Tuesday and reversing sharply lower on Wednesday. Volumes were high in the first half of the week but it petered off towards the weekend. Light open interest in the derivative segment implies that trades are unwilling to take bets on the market’s next move, given the high volatility.
Sensex declined 63 per cent from its January peak when it hit the low at 7697 on October 27. This fall exceeds the other declines witnessed in the Indian stock markets over the last three decades. The decline following the dot-com bubble was 57 per cent from the peak while that in 1992-93 was 56 per cent. The correction in 1986-88 was a milder 40 per cent. As per Elliott wave analysis, corrections can be deemed complete if they fulfil either the time or the price criteria. This decline has already met the price criteria and deep corrections generally consume lesser time.
Can we then infer that the market has formed a long-term bottom at 7697? The answer is, no. This decline is akin to nothing that we have seen before and the rule-books of technical analysis would have to be rewritten once this down-trend is through. It is therefore best not to jump to premature conclusions and to let the market show us the way forward.
The 10-day rate of change oscillator is moving in to the positive zone and the 14-day relative strength index too has moved up from over-sold area and is placed at 43. The implication is that the short-term outlook is mildly positive. There are however no buy signals yet in the weekly oscillator charts. A spinning top candlestick pattern was formed in the weekly chart denoting indecision; that is, a move in either direction is possible next week.
Our medium-term view too is ambivalent. Sensex reversed from the peak at 10945 on Wednesday. Our medium-term trend deciding level at 10,700 was breached only fleetingly on that day. This remains an important resistance level and penetration of this level will pave the way for a rally to 11630 or 12879. It is however difficult to envisage a move beyond the second target just yet.
The short-term trend in Sensex is positive. If it holds above last week’s trough at 9600, there can be a surprise rally to 10945 or even 11630. Immediate supports for the index are at 9320 and 8930. The index needs to close below the second support to negate this view and re-kindle the gloom and doom scenario.



Nifty (2973)

Nifty reversed from the peak at 3240 on Wednesday and closed the week with an 87 points gain. Our medium-term resistance level was tested very fleetingly and it remains the key level to watch out for. However, the fact that the index is holding above the 2860 in the recent pull-back is a positive for the short-term and if this level holds, Nifty can rally once more to 3240 or even 3471. Support below 2860 would be at 2628. The near-term view will turn overtly negative only on a penetration of this level.
Though the short-term view is positive, the medium-term view is neutral. The zone between 3175 and 3250 will try to thwart any up-move. However, if this level is surpassed, there can be a surge to 3470 or 3740. Global Cues
Global markets rallied in the first half of the week but reversed sharply from Wednesday. However, most of these markets are well-above the lows recorded in the last week of October. The CBOE volatility index declined to 44 on Tuesday, but it rebounded sharply to end the week at 56. Dow Jones Industrial Average recorded an intra-week peak at 9653, below the medium-term resistance at 10,400, indicated last week. The sideways move between 8000 and 10000 appears likely to extend for a few more weeks in this index.
Asian equities put up a relatively stronger performance last week. The Shanghai Composite is the only index that is unable to make headway and is close to its October lows. Commodities gave up most of the gains recorded in the previous week. CRB index that tracks commodity prices declined 2 per cent for the week.



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Nifty future may see sideways movement



Thanks to sharp gains on Friday, the spot Nifty and the Nifty futures were able to end the week on positive notes. Short-covering coupled with additions of fresh long positions, particularly on Thursday and Friday, helped the Nifty future fetch a premium to the spot. It ended the week at 2989.1 points, gaining over 3.7 per cent over its previous week’s close. Long positions were added even in select stock futures such as Reliance Industries, SBI, Suzlon Energy and Bharti Airtel.



Follow-up
Last week we had presented strategies based on two scenarios 1) if the market opened with a huge positive gap, we had advised traders to go short, with a stop at 3250; going short was also recommended if the market opened flat. Last week, the market did open with a big upside gap on Monday. Though the Nifty future did go on to touch a low of 2883, traders who went short may have borne losses as the Nifty future hit the stop level of 3250 during the pull back rally.



Outlook
As mentioned in this column, the Nifty future has a crucial support at 2600-2550 level and a strong resistance at 3250 level. The possibility of Nifty future touching 1880-1950 levels will loom large only if it breaches below 2550 level. On the other hand, any move above the resistance can lift the Nifty future to 3550 levels. That said, one can turn bullish only if the Nifty future moves past its crucial resistance level of 4350.



Recommendation:
Despite sharp pull back on Friday, India VIX or Volatility Index, which gauges the likely near-term volatility in the market, still remains high at 67.22. This suggests that the Nifty may be set for another bout of heightened volatility and may even see a sharp slide. However, the accumulation of long positions, both on index and on select front line futures may provide comfort.
Traders with a high-risk appetite can consider the following strategies.
In the coming week, Nifty is likely to move in a narrow band of 2750-3250. And since, we expect it to open on a calm note, traders can consider going long on Nifty future, with a stop-loss pegged at 2750 (this is suggested only if market has a soft opening).
The other strategy that traders can consider is a short straddle. This can be initiated by selling 3200 call and put that ended on Friday at Rs 140 and Rs 255. This strategy can be held for slightly longer period. The only fallout of this strategy is the hefty margin requirement as traders will be required to write options to execute a short straddle.Stock futures
Reliance Industries (1220): After falling heavily from its peak, the stock made a smart turnaround from lower levels. It is now crucially placed; it faces resistance at 1310 and has a strong support at Rs 1,150. Any move above its resistance can lift the stock to 1440-1450 level; on the other hand, a dip below the support can take it to a low of 1020. We expect the latter to happen. Traders can consider going short on the stock future, with a stop-loss at 1350.FIIs trend
The cumulative FII positions as a percentage of total gross market position on the derivative segment as on November 6 decreased to 38.73 per cent. Foreign institutional investors turned net sellers during the later part of the week. They now hold index futures worth Rs 9,136.92 crore (Rs 7,840.38 crore) and stock futures worth Rs 10,731.46 (Rs 8,984.74 crore).Their holding in index options also increased to Rs 13,588.96 crore (Rs 10,004.98 crore), according to latest NSE data.

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Wkly Tech Analysis: Nifty resistance likely at 3,200



The Sensex ended higher for the second straight week on Friday on the back of selective buying. The index began the week with a bang and touched a high of 10,945, before paring gains and slipping to a low of 9,632. The Sensex finally ended the week with a gain of 176 points at 9,964.



Whether or not the recent low of 7,697, is a bottom or not can be confirmed only if the index moves up above the 12,100-mark. Since we are closer to the year-end, we will only look at the short-term picture. As long as the Sensex stays above 8,980, the recent low can be assumed to be a bottom. However, a break of this level could see the index retesting its recent low and it may even drift lower towards the 7,000-mark.
On the upside, the 12,100-mark would be a key resistance. As and when the index breaks this mark, it may see a strong upmove towards the 15,000-mark. This week, the index may face resistance in the 10,730-11,000 zone. On the downside, the index is likely to find support around the 9,100-level.




KEY LEVELS

Sensex Nifty
S3 9150 2735
S2 9300 2785
S1 9460 2830
Close 9964 2973
R1 10465 3120
R2 10620 3165
R3 10780 3210
S-Support level

R-Resistance level


The Nifty, the NSE index, moved in a range of 380 points. From a high of 3,241, the index dropped to a low of 2,860 and then rebounded and finished with a gain of 87 points at 2,973. The Nifty chart looks better when compared to the Sensex. It suggests that the bottom is probably in place, for this year at least. In case of a downturn, the index is likely to find support around the 2,500-mark.



The Nifty, the NSE index, moved in a range of 380 points. From a high of 3,241, the index dropped to a low of 2,860 and then rebounded and finished with a gain of 87 points at 2,973. The Nifty chart looks better when compared to the Sensex. It suggests that the bottom is probably in place, for this year at least. In case of a downturn, the index is likely to find support around the 2,500-mark.
On the upside, as long as the index stays above 2,930, it has potential to rally up to 3,500 in the short term.
The bollinger bands suggest a wide trading range of 2,500-3,580. The short-term (20-day) daily moving average (DMA) is at 3,038. Once the index closes above this level, it can then test its mid-term (50-day) DMA, which is placed at 3,696. This week, the index is likely to face resistance around 3,120-3,200, while support on the downside is around 2,830-2,740.

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STOCKS: Mahindra and Mahindra: BuyThe Mahindra and Mahindra (M&M) stock has shed over 30 per cent since our earlier recommendation in end-September. While a large part of the fall can be attributed to broader market volatility, a fall in profits in the second ...

STOCKS: YES Bank: BuyInvestors can consider accumulating the YES Bank stock at the current market price (CMP) of Rs 81.9. The stock has gained 49 per cent from its all-time low of Rs 55 on October 27, but remains a good investment option for investors with ...

STOCKS: IRB Infrastructure Developers: BuyWe reiterate a buy on the stock of IRB Infrastructure Developers. The stock had taken a sharp hit over the last few months on concerns of high interest rates affecting project internal rate of returns (IRRs). Signals of a softening interest ...


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TECHNICAL ANALYSIS: InfosysThis stock reversed from the peak at Rs 1,457 on Monday and closed the week with an 8 per cent decline. If we consider the movement of the stock over the last four weeks, it is moving in a band between Rs 1,100 and Rs 1,400. The short-term ...

TECHNICAL ANALYSIS: Maruti SuzukiMUL built on the gains made in the previous week and went on to an intra-week peak at Rs 635. Though it retracted a little from this level, the short-term view on this stock stays ...

TECHNICAL ANALYSIS: Tata SteelIt was another disappointing show by Tata Steel. The sharp decline from the peak at Rs 250 shows that bears have a stranglehold on this counter. It is currently hovering around the key short-term support at Rs 180. If this level holds, the ...

TECHNICAL ANALYSIS: Reliance IndRIL reversed downward with a giant engulfing candle formation in the daily chart. The high volumes recorded on this day make it a key ...

TECHNICAL ANALYSIS: ONGCONGC rose to Rs 808 by Wednesday and spent the rest of the week moving sideways. The short term trend in the stock continues to be up. Near-term supports for the stock are at Rs 700 and then Rs 640. Short-term traders can hold their trading ...

TECHNICAL ANALYSIS: SBIThe stellar rally in SBI in the first half of last week was stalled at the resistance at Rs ...



Source: Business Standard,BusinessLine