What are classic indicators of bear market?

Bear markets are not something that people enjoy talking about and infact of most people avoid using this term as far as possible. A correction in the long-term bull market is acceptable but an out and out prognosis of a bear market, there won’t be too many takers for that.
Bear markets are periods when prices keep falling down over a long period of time and the general consensus in the market is that they will continue to their downward movement for the foreseeable future.
Typically bear markets are associated with economic contractions, high unemployment and high inflation
How does one differentiate between a bull market correction and a bear market correction?

There is no simple answer to this. Some people are comfortable with a 20% number. A market fall of more than 20% over a sustained period of time is when the bear market lingo starts to creep in. these markets are also characterized by long periods of sideways movement.

Calling a bear market is always difficult but yet everybody wants to do that. Peter Lynch made an interesting comment about at every talk he gave he had people asking him whether markets were good or bad and he said that the only co-relation he had figured is that every time he got promoted the markets went down. The next question to him would have been –

Every time I buy a stock, the market goes down?

Lynch had a very interesting statistic to quote,”The price of an average stock fluctuates 50% in a year, so if you buy a Rs 100 then it could go up to Rs 150/- or it could go down to Rs 50 in the next year or so, say this price starts to move up from Rs 100 to about Rs 120 and you buy some of the stock expecting strong upmove but unfortunately the stock decides to move down before it goes up and it goes down to Rs 75 and the investor sells out in panic. Then you become a sucker and more so if the stock then decides to go up to Rs 150- this is a classic argument against timing the market.

They say that the classic contrarian is the one who doesn’t do necessarily do the opposite of what everyone else is doing in the market, he is the one who will wait for things to cool down and then go out and buy stocks that nobody else cares about. That is one way to play out bear markets. Keep your cool and start accumulating value scripts.

Bear markets can see 50% declines from their top. Looking back at history from April 1992-93 or if you look at September 1994, down to 1996, and the more recently of Feb 2000 to September 2001, all these period saw decline of upto 50% or so and these periods lasted between 1-2 years and within those periods there were many rallies showing as much as 30-60% of upswings which did not materialize into bull markets.

Bear markets so P/E contractions as well. In 2000 the forward multiples went from 20 down to 10 and while in 1994-1996 period they went from 17 to around 10. One thing is for sure, “sharper the preceding rise, the bigger the fall”.

Technically US markets are not yet down 20% from their highs of last October of about 14,000 odd levels. Coming back to our markets, we still have a robust GDP growth rate at the moment. We have to watch out for inflation and interest rate to see where we are headed.

what are the classic indicators of a bear market?
“The standard measure as per the developed markets is that if there is an erosion of more than 20% from the highs that have been reached during the bullish phase then it would normally be treated as a kind of bear market scenario but experience with our markets have shown that we are prone to showing declines greater than 30% during normal reactions also. So as a benchmark, we could use something like 30% pullback from the top of being a definition or an indicator of us slipping into a potential bear phase and we do have that as of now.” says CK Narayan – ICICI Secruties

Technically then it fits into the definition of bear markets for India at the moment?

You are right on the fringes of it because we have a pull back on the Nifty and Sensex an exact amount of 30% but if you were to make that list broader and look at it more in terms of stocks particularly the leading ones and perhaps the midcap ones, one will find a considerable number which are much more than 30%. So from such a context one would say that the odds are quite heavily leading towards us having slipped out of bull phase and leaning into what me may call as a bear phase

MARKET UPDATES

• L&T has bagged an order of Rs 2,000 crore for the development of Bombay Dyeing Mills, reports CNBC TV18 .
• Infosys has a price target of Rs 1,950, says R Ravi of Karvy Stock Broking on CNBC TV18. The stock is up 4.11% since results have been announced and is trading at Rs 1,480 on the BSE. Infosys guidance: FY09 revenues at $5 billion, FY09 sales between Rs 19,890 crore versus Rs 20,214 crore, EPS between Rs 92.32 - Rs 93.92. The company has raised dividend payout to 30% from 20% and has added 5,947 employees in Q4, ends with 91,187 employees.
• Liquor prices may go up by 20% .
• Polaris Software Lab Ltd said that a meeting of the board of directors of the company would be held on April 23 to consider, approve and take on record the audited financial results of the company for the quarter and financial year ended March 31 , 2008 and to recommend dividend for the financial year 2007-2008.
• GTL, engaged in providing telecom infrastructure facilities, announced good results for the quarter ended March 31, 2008, riding on a robust sector. The stock was up 4% post results on a day when the broader Sensex was up 0.72%.
• Zee Entertainment Q4 net at Rs 79.46 cr .......The Company has posted a net profit after tax of Rs 79.46 crore for the quarter ended March 31, 2008 as compared to Rs 59.22 crore for the quarter ended March 31, 2007. Total Income has increased from Rs 216.56 crore for the quarter ended March 31, 2007 to Rs 341.34 crore for the quarter ended March 31, 2008.
• On Monday, one barrel (159 litres) of crude produced by OPEC members stood at $104.02, up 35 cents from the previous day.
  OPEC followed international bullish trends Monday. In New York, Nymex index ended Monday's trading at $111.76 per barrel, the highest settlement on record, while Brent crude also posted a new high.
• Ambuja Cements said that it would not be able to export cement till the `Ban on the Export of Cements` remains in force.

Quippo to invest $3 bn for boosting telecom infrastructure biz

SREI Group's Quippo Telecom Infrastructure Ltd (QTIL) on Monday said it plans to invest $3 billion in 2008-09 to ramp up its telecom infrastructure business. The company is planning to invest $3 billion to grow both organically and inorganically, QTIL Managing Director Arun Kapur told reporters. Besides, the company is also in talks with Tata Teleservices to buy its telecom tower business. "We are in an advanced stage of negotiation with Tata Teleservices and the deal is expected to be concluded by next month, he added. However, he declined to divulge the financial details of the proposed deal. Tata Telecom service provider is examining hiving off a part stake of its tower business portfolio. "Consolidation is the order of the day. This is a capital -intensive industry. In this scenario consolidation is going to be the name of the game," he added. Ruias-led Essar group is also understood to be in talks with Quippo for a possible merger of its telecom tower business arm Essar Telecom Infrastructure Pvt Ltd. However, Kapur declined to comment on the issue. Quippo has about 4,500 towers and plans to increase this to 10,000 by March 2009. The company also plans to venture into active infrastructure sharing. "We are in talks with all the new players who are receiving spectrum such as Datacom, Bycell, Shyam for active infrastructure sharing," he added. The government had recently allowed sharing of active infrastructure, which includes sharing of antenna, feeder cable, Node B, Radio Access Network and transmission system by telecom service providers, enabling them to cut costs in network roll-out and pass on the savings to consumers by way of cheaper tariffs.

India bans cement exports, restriction on steel likely

India has banned export of cement from Friday and was considering a similar move for steel, the trade minister confirmed on Saturday, as the government aims to calm inflation that leaped to a three year high level.
"We have issued a notification last night banning export of cement," Kamal Nath told reporters after a business conference.
India's cabinet ministers, scheduled to meet next week, will also debate on a proposal to ban steel exports, he said.
Nath had already said on Friday that the government would ban cement exports and also withdraw export incentives for steel and cement products.
India's headline inflation raced to an annual 7.41 percent in late March, its highest since November 2004, due to higher prices of food and metals, government data showed on Friday.
Over the last few weeks, the government has cut duties on edible oils, banned export of non-basmati rice and withdrew export incentives for cement and steel to increase local supplies and tame inflation.
Policymakers also contemplate an upward pressure on cement prices, as demand outpaces supply in Asia's third largest economy that is scaling up its creaky infrastructure at a cost of $500 billion to sustain an average annual growth of 9 percent until 2012.
"India is growing by 8-9 percent. I largely see this momentum continuing," Nath said.

IMPORTS TO HELP
Trade Secretary, G.K. Pillai said the country was aiming at doubling cement imports from neighbouring Pakistan to 4,000 tonnes a day, and the latest ban on exports could help meet the demand-supply gap.
"When there is a shortage, why allow exports? We are going to double imports from May."
India allowed duty-free import of cement from Pakistan in 2007, as domestic firms like Grasim Industries Ltd, UltraTech Cement, ACC Ltd. and Ambuja Cements Ltd are running almost at near full capacity and can not match the growing demand in near future.
Indian firms plan to add another 100 million tonnes in capacity by 2010 at a cost of 400 billion rupees. "This would ease the pressure on prices," Pillai added.
India's cement output grew by 7.5 percent from a year earlier to 151.24 million tonnes during April-February in the 2007/08, of which exports were at 3.33 million tonnes, according to industry body Cement Association of India.

ANNOUCEMENTS

BHEL-led consortium may sell Rs 55k-cr equipment to NTPC

It’s being billed as one of the biggest stand-alone power equipment contracts in recent memory. NTPC is in talks with a Bhel-led consortium, also involving Alstom and Siemens, to buy boilers/turbines worth Rs 55,000 crore for its string of upcoming 600-mw and 800-mw units. Significantly, NTPC will require Cabinet clearance as it proposes to award the contract on a negotiated basis and not the tendering route. The company’s top brass has already sounded out the Union Cabinet secretary and the power minister in this regard, sources in top government circles said. The Bhel-led consortium will supply boilers and turbines for NTPC’s power ventures that embrace super-critical thermal technology. Boilers and turbines form the core of a power station. Though details are not known, the contract will involve procurement of boilers/turbines for some 10 to 12 odd upcoming NTPC projects. On receiving Cabinet clearance, NTPC plans to award the Bhel-led consortium the boiler/turbine package for the 650x2-mw Barh super critical project in Bihar. Alstom will supply boilers while Siemens will supply turbines. Interestingly, construction at Barh is yet to begin even though the project was inaugurated three years ago. At this stage, NTPC officials remain tight-lipped. The company’s spokesperson declined to comment on the issue. However, a source close to the development said: “Bhel along with Alstom and Siemens had approached NTPC some time ago for a bulk contract to supply boilers/turbines for units with capacities of at least 600 mw. NTPC wanted a bulk contract since it doesn’t have the requisite super-critical technology for manufacturing equipment. But Bhel’s partners are ready to transfer the technology only if it can bag the bulk order.” The source further said, “If the tendering process is adopted, Bhel’s partners will also not be ready to a transfer technology since there is no assurance of contracts even for a single project being awarded. Hence, instead of piecemeal contracts for super-critical projects being awarded to Bhel, it will be easier if it receives a large contract,” said an NTPC source. ET could not get an official comment from either Bhel or any of the other consortium partners on the technology-transfer issue. Going forward, in its target to remain the largest generating utility of India, NTPC has decided to maintain or improve its share of India’s generating capacity. Towards this end, it has targeted to build an overall installed capacity of over 66,000 mw by 2017.

Drug firms seek to trade off controls

Drugmakers, worried about the prices of more brands in the market coming under regulation, have offered to sell essential medicines to the government at 50% of their maximum retail price (MRP). They have also offered to finance a mechanism to deliver these drugs at a concessional price by contributing 0.25% of their total profits to the government, which could be a little less than Rs 10 crore. If the government accepts this proposal, it could signal a major shift in the way rising healthcare costs are addressed in the country. However, these offers come with a condition. The government will have to agree not to increase the scope of cost-based price control. The proposed new drug policy, which is being examined by a panel of ministers, seeks to extend cost-based price control to 354 medicines classified as essential by the health ministry, from the existing 74. While the government says this would expand the extent of price control by merely 7% to about 32% of the Rs 32,000-crore market, the industry says nearly half of the market would come under direct or indirect government control. According to an ORG-IMS survey covering about three-fourths of the National Essential Drug List, the new policy would lower the prices of more than 7,000 ‘formulation packs’. These are strips of different sizes (say, 10 or 20 pills in one) of various strengths (say, 5 or 10 mg) of these 354 medicines, covering 27 therapeutic segments like painkill-ers, antibiotics, psychotic drugs, cancer and HIV drugs. Cost-based price control has been referred to as an aberration in a free market economy by experts.

With the price regulator claiming that price monitoring has been a success in keeping a check on spiralling prices, the industry wants to shift to a monitoring system from the cost-based system. The Indian Pharmaceutical Alliance (IPA), the leading industry association of research-focused companies like Ran-baxy and Sun Pharma, has told the government and regulator that the country should move away from the cost-based system of price control to a monitoring system. IPA secretary-general DG Shah told ET: “The industry has made a conditional offer to sell essential drugs to the government at half the MRP. Also, the industry is willing to contribute a quarter of a percent-age of their total profits to the government for setting up a medicine delivery system to the masses, if the government does not expand the number of drugs under price control to 354 from the existing 74, based on cost-based price monitoring.”

MARKET PREDICTION

TODAYS MAIN TRIGGER FOR THE MARKET IS INFOSYS RESULT,
STREET EXPECTATION IS RS1253 CR PROFIT FOR THE QUATER AND RS 90.5-91.5 EPS GUIDENCE FOR THE FY 09.
GOOD OI BUILD UP IN INFOSYS APRIL SERISE THAT IS 62.78 LK SHARE.
GLOBAL MARKETS ARE BIT WEAK,NIFTY LEVEL OF THE DAY IS 4620-4730-4800.
BUY FROM LOWER LEVEL AND GO SHORT FROM 4800.
ALL OIL&EXPLORATION SEGMENT IS ON FIRE DUE TO HIGHER CRUDE GUIDENCE.
MAIN BAD NEWS IN THE MARKET IS GALLOPING INFLATION AND USD 1 TRILLION LOSS THROUGH SUBPRIME.
HAVE A NICE TRADNG DAY

-MR SAM

MARKET UPDATES

• Tata Communications expands VPN services to Egypt .
• India's top biotechnology firm, Biocon Ltd, is in talks to acquire a US firm in a deal valued at $400 million to boost its overseas pharmaceutical distribution network, a newspaper reported on Monday.
• Crompton Greaves is planning acquisition in the industrial systems sector, reports DNA.
• Shyam Telecom plans to apply for pan-India GSM license under the dual technology license, reports Economic Times.
• Assam Company is planning to launch four varieties of branded tea, reports Business Line.
• Provogue India has raised Rs 4.77 billion for financing new malls and its expansion plans, reports Business Standard.
• Mercator Lines arm Mercator Lines (Q, N,C,F)* Singapore (MSL), has acquired a Panamax dry bulk carrier from a Japanese company for Rs 2.60 billion or USD 65 million, reports Business Standard.
• Unfazed by the stock market volatility, leading financial institution Macquarie says 2008 could still turn out to be a great year for the Indian investors, who should stay put.
• UCO Bank approves plan to raise Rs 625 cr .
• RBI has signed a memorandum of understanding (MoU) with the Uttar Pradesh government for setting up a task force to monitor development of the urban cooperative banks in the state.
• US slowdown not to impact Indian IT growth.
• AUSTRALIA: Shares fell 2.2 per cent on Monday, with resource firms such as BHP Billiton Ltd and the banks leading declines after yet more evidence that the US is in recession.
• Driving the growth of the sector, the deodorant segment of the industry has achieved the highest growth of 40% followed by hair dye at 30% and chemical segments including cleaner and repellents at 23%, the survey pointed out.
• FMCG industry grows 16% in 07-08.
• Spencer plans 8 new outlets in Nashik .