Investor Connect Roadshow 2008
Investor Connect Roadshow 2008
Euphoria
Sensex crosses Sensex crashes to
18000 in Oct 2007 15332 on Jan 22 2008
Crash thereby retracing to
(sharp rally of 4000 Belief Aug 2007 levels
pts in 1 ½ mths)
(within 7 trading
sessions of
achieving a peak)
Disbelief
Se n 0 08
sex
unde s in Mar 2
l eve l
r 130 0
00 in t 150 0
Apr e x bac k a
2007 Sens
Last Leg for Up Move was backed by
- Liquidity
- Leverage
- Rumour mongering
- Huge Retail participation
3920
May 2000 – Trough
4 yrs
• Dotcom bubble
Source: Bloomberg
2001 - Statistics
Aug 2001 – Sensex Peak Nov 2001 – Sensex Bounce back
3318 3322
% of Stock Fall % of Stock Rise
2600
Sep 2001 – Trough
3 months
• September 9 /11
Source: Bloomberg
2004 - Statistics
Apr 2004 – Sensex Peak Nov 2004 – Sensex Bounce back
5925 5973
% of Stock Fall % of Stock Rise
4505
May 2004 – Trough
7 months
8929
Jun 2006 – Trough
5 months
• Concerns that US will raise rates and draw overseas investors away from
emerging markets and surging commodity prices will hurt company
earnings.
Source: Bloomberg
2008 - Statistics
Jan 2008 – Sensex Peak Sensex Bounce back - ??
20812
% of Stock Fall
> Sensex
Flows 81%
•FIIs – Rs (149) bn
•Domestic –Rs 54 bn
15357
Mar 2008 – Trough
?? months
• Sub-prime crisis
Source: Bloomberg
2008 Crash – Most Vicious
Date SENSEX INDEX change
From To From To %
1 Jan-08 Mar-08 21206 14677 -30.79%
2 Feb-07 Mar-07 14723 12316 -16.35%
3 May-06 Jun-06 12671 8799 -30.56%
4 Apr-04 May-04 5979 4227 -29.30%
Other comparisons:
• Only driver of markets in 2000 was the TMT sector
• Rally & the crash now much more broad based
• Tata Motors, Tata Steel, M&M making losses in 2000
• IT cos much stronger and much bigger
* estimates
Corporate Profits Surpass Index Growth
Date Sensex Agg BSE 500 Net Profit (Rs Crs)
Apr-98 3993 33755
Apr-99 3519 31101
Apr-00 5053 37019
Apr-01 3566 45487
Apr-02 3506 45371
Apr-03 3117 70028
Apr-04 5788 90077
Apr-05 6604 119719
Apr-06 11747 136909
Apr-07 12455 195769
• The above statistics show that the risk aversion is at a peak in equities
• Liquidity is ample but there seems to crisis of confidence
• Commodities cooling will release liquidity into oversold equity markets
The Crash and Carnage was backed by
- Low Liquidity
- Heavy Shorting/hedging activity
- Rumour mongering
- Problems with US financial system
Technical Analysis
Technical View - Crude oil
•The crude oil prices are looking heavily overbought on the charts
•The most likely scenario is a correction to USD 90 levels
•A breach of this level is likely to take crude oil to USD 80 levels
•Crude oil would lead the fall in other industrial metals and gold
Source: Reuters
Technical View - BSE 500
•The BSE 500 index has climbed back after breaching the long term support line in early March
•A move above the trend line will indicate that the long term trend remains intact
Source: Reuters
Technical View - BSE Midcap
•The BSE Midcap index has breached the long term trend line thrice over the last three years
•Typically this happens during times of panic
•The index is looking oversold in term of stochastics
•The index should bounce back over the long term trend line over the next three weeks
Source: Reuters
Technical View - MSCI Emerging Markets Index
•The Morgan Stanley emerging markets index is showing the formation of a double bottom on
the charts
•This reflects that the index might have bottomed out in the near term
Source: Reuters
Technical View - BSE Sensex Index
•The long term chart of the sensex reflects that the index has been able to come back into
the long term channel
•As long as this index remains in the channel the positive trend will remain intact and the
index should rally to the upper end of the channel over the next few weeks
Source: Reuters
Higher September - Way to go?
Sensex Values
Thank You !!