sensex survey

i conducted a very small, unscientific survey of a few IT colleagues to guage the interest in the stock markets and what they thought about it, and how their investment habits have been affected by the sensex rising. the results are startling - majority are 'not interested' even answering the questions - forget about investing in the markets - some are possibly considering mutual funds investment but not giving very serious thought.

most are feeling left out of the boom and have decided that it is too late to get in now. even a correction of 2000-3000 will not lure those who have not at all invested in the market in these last 4 years. actually with such a drop in the index, they will grow strong in their coviction that they were right not to invest in the stock markets. for those, who are already invested and if their investment starts giving negative returns, will try to average out.

my feeling is that those who had the risk appetite already entered the markets with cash when the 'sensex was at 4500 - 7500' (i am going to abbreviate this as SWA4.5-7 and similarly in the rest of the article). out of these a few made an exit when SWA6.5-8.5. those who 'finally' took the plunge, invested in mutual funds. at the current levels, there might be very few retail investors who will start afresh. those who have continously made money in the boom are willing to take more risks and they are the ones who also like to shuffle their portfolios.

the current market movements are totally dependent on the foreign money coming in and all the analysts sitting in india cannot say now (nor could they say it when SWA6-7) when the inflow is going to stop (and when the outflow will start). all the discussions about crude oil price, dollar value and u.s. interest rates have been taking place since SWA6-7. at that time there was also a story going around about how the hedge funds were bringing in hot money and that that was the reason of the increase and will also be the reason of the crash (that never came). these days there are even fewer stories about these hedge funds.

i have been reading about the japanese boom and bust in the 1980s-1990s and trying to find what analysts used to say in those days. i am sure there is a comparison to be made with the current indian scenario. e.g. '... will be the leading power in the world'. in 1985, the blanks had 'japan', now 'india'.

btw, the 9 questions were as follows:
1. how much is equity a part of you asset allocation?:
2. the equity market is at all time highs and seems to be overvalued, are you inclined to increase/decrease equity as part of your assets?
3. do you think the sensex will fall (rise) in the next 6 months and to what levels from the current 11500+?
4. on the downside at what levels do you think the sensex can decline to (lowest) in the next 1-5 years?
5. on the upside at what levels do you think the sensex can touch to (highest) in the next 1-5 years?
6. if you have not entered equity at all, do you feel you have missed the bus or do you smile and say this is going to fall like a pack of cards and then i will have the last laugh and possibly re-enter?
7. did you ever think that the sensex will never go beyond 5000, 6000, 9000, 10500 etc.?
8. do you think a scam is going on?
9. which sector are you most optimistic about? (e.g. metals, manufacturing, fmcg, telecom, IT etc.)

sensex: where are we heading?

sensex has reached dizzy heights. some call this the 'last leg' of the 'bull run'. well that has been said many times on the previous life-time highs. i thought of checking some world indices and how they have behaved in the bull or bear phases and how long these phases were. i think the history of japanese markets can provide some answers.

the japanese nikkei was 10000 in 1984 and touched 38000 in 1990 (i.e. 400% returns in 6 years). this proves that the current dizzy heights are nothing compared to the nikkei run-up in 1990.
from there it fell to 18000 in 1993 (i.e. lost more than 50% in 3 years)...
jumped to 20000+ 5 times between 1993 to 2000,
fell to 7000 in 2003 (i.e. lost more than 50-65% in 10 years)
and is 17200+ (i.e. gained more than 150% in 3 years) now.

lets check the indian sensex
4000 in 1997 to 3000 in 1999 (i.e. 25% loss in 2 years)
3000 to 6000 in 2000 (i.e. 100% gain in 1 year)
6000 to 3000 in 2001 (i.e. 50% loss in 1 year)
3000 to 6000 in 2004 (i.e. 100% gain in 3 years)
6000 to 11600 in 2006 (i.e. 100% gain in 2 years)

i am not sure whether we are in a similar situation as japan in 1980's - world was in awe of japanese manufacturing and we were in school then :-). but somehow i feel there is a semblance with the indian outsourcing story (not just limited to IT, but also in motor parts, call centres, and a lot others and in addition there are all the other things about the huge middle class consumers and increase in demand for everything imaginable).

i will discuss the american indices later.

over the last 10 years (1996-2006) sensex has already given a return of 300%. another 100% gain and it will take the sensex to 22000. but the point i would like to make is you cannot rule out sensex touching 6000-8000 again. and at such levels you should have cash to invest, so dont allocate more than 25% in equity. but just don't wait on the sidelines - you have to have invested 15% in equity at all the times [why would you like to stay out in a scenario like the japanese nikkei moving from 10000 to 38000 or 7000 to 17000). and you can ask me why would you want to be in when it goes from 38000 to 7000, well the answer is 'to buy' of course.

And after school (shala)... college, obviously

five point someone by chetan bhagat seems like a sequel to milind bokil's shala (and i am happy now that i read shala first). on literary (and few other) parameters, there could be no comparison. shala is way ahead of fps but then fps also has its own style. fps is supposedly very real to how life on campus is in iit. and as for students everywhere, there are a lot of distractions around for them to lose the focus from studies. but indian politics, bollywood, cricket do not figure in fps. yea, gulf war does provide one out of campus distractions - maybe that is a difference between iitians and mortals - they are distracted for sure, but possibly by much more important issues.

some incidents seem to be bollywood inspired - a completely dch shot (yes, filmy very filmy - maybe chetan had a fps film in mind anyway and gave a shot at the novel first), hari's first meeting with his future girlfriend, the one about her father ... okay, i will not spoil the fun. the story is about how three very different characters become friends after getting in iit and the four tormenting years of an engineering college (well not an engineering college... one of the top technology .... yea yea yea) that follow. iit has always been an enigma for many (mostly to those who gave a go at the iit-jee and got depressed but this book allows us a sneak peak at what goes on there (only an iitian can tell me how close to truth that is). just like everywhere in life, there are toppers, average, and losers and the losers there have the same (or similar or relatively speaking) insecurities as (losers and average - spot anything?) elsewhere. gpa's are not just a part of the iit, they are everywhere.

frankly, it seems a slightly more than a refined blog - but maybe that is one of the reasons it is utterly enjoyable. i finished reading fps in one and a half day - that just proves it is unputdownable, a must-read. for non-engineers, it might feel a bit like auto-rickshaw ride with some bumps - i mean if a chartered accountant-author tries to interspread some details about his CA studies in his novel, that is how it would feel to me.

what next... a novel about starting work after engineering, compromises in work, frustrated in work, and suddenly attaining nirvana in work?

Shala - Milind Bokil

Marathi novel 'Shala' by Milind Bokil is a wonderful journey in the world of adolescence. It is a story of a group of friends who gather on a building under construction before going to the school - throwing tantrums at the other school goers (students and teachers alike) and falling in love (many would like to call it crush but I don't mind saying love) among other many other things one does during the years 12 - 15 of life. I was sure reminded of my school days and badly so. It was difficult not to imagine the pictures when reading the novel.

The Comic Project

If you have read Indrajal comics during your childhood, you will love to visit the Comic Project at http://thecomicproject.blogspot.com/ and if you have your own Indrajal Comics collection, I envy you. It seems one of the pappus had around 500 of these comics and one fine day sold off in raddi - that must count as one of the ultimate tragedies.

TPG

So finally Raj has launched his new party. And pappus have launched The Pappu Group which can on fine day grow into a big political movement - you know the kind which you plan to do when your see a movie like Prahaar or recently Rang De Basanti ---- naaaah, TPG, The Pappu Group also stands for FTP, Full Time Pass and the pappus only like to ridicule others, don't expect any great acts from them. Given a chance, we will just have our CPP (Chai Piya Piyega) in a nice and comfortable corner and comment on the rest of the world. I don't promise they will not disappoint anybody but I promise they can make a few people angry and some merry. Enjoy the power of TPG!

My Stock Picks

Chambal Fertilisers has been one of my favourite stocks and I was delighted when it finally crossed 40. The way the promoters have been buying for the past one year, I had expected a higher price since long. But it has never made big jumps during the recent bull run. Of course, everybody who has interests in the Indian stocks knows that Chambal has been a very good dividend yielding stock. Hopefully, it will remain above 40 and touch new highs.

Biocon and Tata Teleservices are my other top picks for long-term, that is at least for the next few years.

Biocon has a charismatic leader, and biotechnology is considered to be the next big thing. Also, the share price is drastically down as compared to the prices during the initial hype. There have no changes in the fundamentals of the company since then. Only the shares are cheaper now - that itself is a strong argument to buy.

Tatas do not like to remain in any spot other than number one or two and they have started making huge plans for Tata Teleservices. The publicly held TTML will be merged with Tata Teleservices when it goes public and it will go public when Tatas become number one or two in the Indian telecom industry. I know that seems a wishful thinking with the other players in the market but you have the examples of TCS, Tata Motors, Tata Steel or Tata Tea.

I also have had high hopes from iGate. I have been patient enough to hold it for the last three years while it had remained range bound when all the other stocks were having a great time. Anyway, I have decided to hold it till Phaneesh quits.

The share picking logic that I follow is to find ones which are fundamentally sound companies and those which have not had huge run ups in their share price recently. The downside of this logic has been that these shares don't participate in the frenzied rallies and are thus termed as market laggards. But I have been reading Warren Buffet and Benjamin Graham and I believe that investment is for a lifetime. I have been part of the stock market scene only for the last 3-4 years and I don't want to judge my investment decisions in such a small timeframe (doesn't mean that there were no spectacular gains).

Investment has not been totally risk-averse though. I believe that animation and special effects outsourcing might become the next big thing after software in India. And I have picked Color Chips in this area. Also need to study something in the ready food products area. Agro Tech might be a good choice.

But I would agree that having a few good index shares might have been a good idea.

Pappus

Not sure where the name came from - possibly some bollywood movie with a character called 'pappu mobile'. The pappus are a group of friends from a software company in Mumbai with a whacky sense of humour. The humour sometimes borders on the line of irritation, ridicule, or tragedy; depends on the listeners capacity to take it. Rakesh and Vaibhav are the irritators; those who have taken a taste of their humour might be ready to call them the terminators. Vinod and Rajendra are the ridiculers who are ready to find wrong with anything in the world - the subject could be as valid as George W. Bush, Sourav Ganguly, or Mandar and as unacceptable as Sachin Tendulkar and Amitabh Bachchan; but I think the favoured subjects are the bright ideas of managers they work or don't work with.

Each from the group gets a name e.g. 'pappu vilaayati' for somebody who has been to onsite very often. The pappus had a very dynamic member (and interestingly never called a pappu) called 'major'. Wittingly or unwittingly major provided a lot of ammunition to the pappu reign of terror (aah, as they say... those were the days). All the pappus miss major a lot as one fine day fate played a cruel game and major was out of the company. Major visited the pappu group once in a while - he was also very depressed with having to leave the pappu group. But now the whole pappu group is joining major's company. And that is major's power.

Vaibhav introduced a lot of TLA's to the pappu dictionary. Yep, Three Letter Acronyms. I am sure he can speak complete meaningful sentences using TLAs (great idea to rename Vaibhav as the 'pappu TLA'). A couple of the all time favourites are CPP (Chai Piya? Piyega?) and LKK (Lunch Khaya? Khayega?). The pappu group was so used to these TLAs that some may have used it at home to some astonished faces. No surprises though if somebody at Vaibhav's place give a call for DKK (you may have guessed what that means by now).

Grilled Chicken and Potatoes

Last Sunday, I took up the task of cooking lunch to provide some respite to Mili who has to slog all the week. For a very dumb cook like me, you would think microwave is the greatest help. But I haven't mastered the microwave art - it has been limited to warming up leftovers. But I use it to thaw the frozen chicken. For a half kg. chicken (four drumsticks), it takes around 15 minutes in the defrost mode.

Depending on your preference, you can leave the skin on or remove it. For coating the chicken prepare a mixture of 1 tablespoon fine semolina (or ground rice), half teaspoons of chilly powder and turmeric powder. Take an egg and break it in a bowl, mix the yellow and white well. Add a pinch of salt to both the coating mixture as well as the egg. You can also apply a bit of salt on the chicken directly. Dip the chicken drumsticks one by one in the egg and then coat with the semolina mixture. Cut the potatoes in four pieces (leave their skin on) and similar to the chicken pieces, coat them too. Things are ready to go in the grill now. Add some oil on the chicken and potatoes and put them in the grill on medium heat for 6-7 minutes. Turn everything once and continue grilling for another 6-7 minutes. Check if it is done and continue grilling for 2-3 minutes, if required. That's it, ready to serve and make your wife/partner/friends happy.

Please let me know if you were ever to try this and any variations you may do.

Mile by Mile, India Paves a Smoother Road to Its Future

An interesting article on the NYT on the Golden Quadrilateral project in India and the changes it is bringing in India http://www.nytimes.com/2005/12/04/international/asia/04highway.html
The slashdot article where I found it and the discussion is available at http://slashdot.org/articles/05/12/04/1812205.shtml?tid=126

Obsession with Apple

From the day I was able to afford my first Apple Mac - an eMac, Apple has induced me into spending continuously. I have since then bought an iPod Shuffle, an iPod photo, Mac OS X (Tiger) and now succumbed to the temptation of the iBook. But sense prevailed and I got a used one from eBay. I had doubts whether a 3/4-year old G3 would be able to handle the latest OS, but the doubts have been laid to rest. It is unbelievably smooth. [Imagine Windows XP on a 500Mhz machine]. And it looks just fantastic. Icy white and apart from the letters on the keyboard and the name iBook on the lower portion of the screen, there is no color other than white.

I am not sure whether it is the hardware or the software which makes Apple devices better than anything else, but possibly it is due to the flawless design in either of them. There are no rough edges on either the hardware or the software. This lack of rough edges is what makes the products so unique. Smooth and sharp go hand in hand in all the Apple products. Each product looks so complete that you think that this cannot be improved anymore, and then Steve Jobs comes up with a Keynote announcement.

I think this iBook will chug along for the next couple of years and that is really good value for money. I hope I can keep away from the temptation of getting a new one with Intel chips next year. Anyway I already have made a couple of plans if I couldn't resist it then.

Comments on issue of Raj...

It was good to see that my blog did start a healthy discussion within the Pappu group (more about Pappus later - suffice to say they are a close group of friends with whacky sense of humor).
Vinod was angry because of the recent issue of Shiv Sena and Kannadigas over Belgaum. Rajendra, being from Konkan, had a view of Rane and Raj getting together but not in Congress. Whereas Rakesh had important suggestions about bringing quality processes in the management of a political party. Though the suggestion was made in a lighter vein, I think it does have certain merit.

The following are the excerpts from the chain of mails:

I agree with you on most of the points, BUT it was true when Balasaheb was in full swing. Now the TIGER being quiet old and Shiv Sena is being run by four clerks as said by Raj recently. I am no longer in favour of Uddhav led ShivSena. Lets see whether Raj is going to Start a new Party and how many existing ShivSainiks join him. Also I think it would have been better if Rane and Raj had decided to quit together and started a new party.

Existence of some political party that stongly acts in the interest of Maharashtra is must, may it be Shiv Sena or Shiv Raj Sena. Balasaheb Thakare had such party, but all power was concentrated in one person, and now when that person is planning to resign from active politics, existence of the entire party has become a concern. One of the point in CMM is that the organisation should not be person dependent. Even in the project management sessions it is thought that if dependency on one person increases then conduct knowledge sharing sessions and create a strong backup for that person. So that in absence of that key person the project is not sufferred. Similar logic can be applied to a political party.

So as per Vengu's logic we can expect Partys such as Congress CMM level 5, Shiv Sena CMM Level 3 , Rashtravadi Congress ISO 9002 etc by the next election and Voters (Client) will decide whom to give the Nation (Project) depending on their certification.....

Actually, not sure if political parties (at this point in India) can be compared to Projects… the level of transparency is the key as many other factors as execution/delivery commitments/penalties if breached and many others. Of course, common thing is sacking…

Rakesh's idea of quality based process can really provide a good start to Raj Thackeray - no kidding. But I disagree on the not to depend on a personality / leadership point. Because good managers can be groomed/created with defined processes, leaders cannot - leaders have to be born. I think history can provide lot of these examples - not just in politics or religion, but also in the industry.

Raj: The final blow to Shiv Sena...

maybe not...

As an avid Shiv Sainik, I think this may actually be the beginning of a new era (Raj).

Would Maharashtra have been better without Shiv Sena? I don't think so. I say so because of personal reasons. I stood first in Palghar taluka of Thane district in the SSC examination of year 1991 - no other organisation had congratulated me, whatever the reasons - but me and my family have always thought it was due to us belonging to a lower middle class family without any higher class or intellectual group connections. One fine day, I received an invitation from Shiv Sena's Anand Dighe for a felicitation by Balasaheb and that's it - the function that had followed was one of my unforgettable moments of life.

The following year, while in Mahim, Mumbai, studying for my XII standard, I witnessed one of the most horrific riots in Mumbai's history. Those who know Mahim, know the demography of the area and can possibly imagine the situation. Again, without the Shiv Sena there, it would have been bloodier for us - the lower middle class families living in the one-room kitchen chawls.

When I applied for a passport after being employed as a software engineer, since we were staying in a rented place, there was nobody to accredit my application. Again the local Shiv Sena corporator, Milind Vaidya, helped me with the supporting letter without any questions. I would stress, I didn't go with any political connections.

A long time has passed since then but my repect for Balasaheb Thackeray has been etched by these experiences with Shiv Sena. I don't deny and justify the goondaism that has been attributed to Shiv Sena. But this goondaism has been the trait of every political party in India - be it BJP, Congress, Communists or the other regional parties. It is a problem with the Indian political system and if anybody thinks that it is just limited to Shiv Sena, they are wrong. But yes, there is a need to cleanse the system out of such kind of political violence.

Now to the current situation - like many others I think Raj Thackeray was a much better successor to Balasaheb than Uddhav Thackeray. He had demonstrated his leadership qualities with Bhartiya Vidyarthi Sena (BVS). I guess even other Shiv Sena leaders knew this - but I am sure, they were too afraid to tell this to Balasaheb. And the problem may have started there itself. But now I think, Raj Thackeray has got a solution. And now we will see a new Shiv Sena. It is secondary whether it will be the same name or a new name, but no doubt a new Shiv Sena is being born. And this Shiv Sena will be a much better one if it learns from its past mistakes.

The lower middle class in Maharashtra needs a Shiv Sena and it will be a sin to deny them one.