The magic 'number'

Last week, I was reading a book called ' Gods and Godmen in India' by Khushwant Singh and it was a pleasure reading that book as very few authors have the guts what it takes to charge like a raging bull to attack the epidemic of Gods( i believe demi-gods would have been more apt) and godmen that has swept the nation in recent years. In that book , he has also mentioned about four things which are mostly in the minds of Indians and one of them is market ( For other three, Read the book).So what is  stock market all about ? Is it just a number or more than that ?

For some, its a 'support' level while for others its a  'resistance' level. Some call it a 'bullish' phase while other term it as a 'bearish' phase. But why such a hype about this number ? Perhaps no other number draws so much attention in middle and upper class as the numbers on the Sensex.It takes only few swings in the stock market for the people to change their opinion about equity market.Like, when sensex touched the 8000 level, everything about the stock markets looked uncomfortable and there were talks of further dips upto 6000.

And when the recent rally took place and the Sensex touched 16K, the very people who were then skeptical about the stock market are now not tired of predicting new 'Highs' for the Sensex with every passing day. We can see the changing mood of so-calledStock pundits & leading global investment houses, thanks to change in those 'Magic numbers'. There are many experts( rather Craps , saying all the non-sense things to further their own interests) appearing on the business channels trying to grab the attention of the people by predicting the new levels of the Sensex without even thinking about their blunders in the past.

But for us,the investors, while it is natural to go with the tide, some rules of investing don't change siply because the mood in the environment has undergone a change. Some understand it easily while others are forced to understand the hard way ( after loosing huge amount). But one thing is true that equity will always provide us a good earning opportunity ( a faster one) but can never give us the comfort of safety like the one in traditional investment opportunities. It holds well irrespective of the sensex level, bullish or bearish phase.

Here, I would like to quote, Benjamin Graham,the legendry investment Guru -

" In the short term, market is a 'voting'  machine whereon countless individuals register their choices that are product partly of reason and partly of emotion. However, in the long-term, the market is a 'weighing' machine on which the value of each issue is recorded by an exact and impersonal mechanism."

HAPPY INVESTING

Sugar Outlook

With reference to our earlier post “Market Outlook” , we again reaffirm our faith in the sugar stocks.But before giving the reasons for the same, its better to understand the factors which drive the prices of this commodity.

 

 

 

 

 

 

 

 

 

There are 4 factors that can determine the price direction for sugar in future.

1)  Dollar-A stronger Dollar usually means weaker commodity prices. We saw

this when the March Dollar Index rallied from 76.30 (9/22/08) to 89.74 (11/19/08). During this same period, March ’09 sugar prices dropped from 14.72 (9/26/08) to 10.44 (10/24/08). If the Dollar continues to rise, the upside potential for sugar could be limited.
2) Equity Markets-The price movement in the equity markets can have an affect on the sugar market. A weak equity market will continue to feed fears of slowing demand. This will pressure prices and/or limit the upside.

3) Crude Oil- There was a correlation between crude oil and sugar prices between 2004 and 2006. This was due to the increase use of turning sugar into ethanol. In 2004, crude broke above the $40.00 level. This “breakout” resulted in a 2-year bull run, in which prices topped out at 78.40 in 2006. During this same 2 year span, sugar prices rallied from 5.27 (2/2004) to 19.73 (2/2006).

The correlation ended after these markets topped out in 2006. As we all know, crude resumed its bull run in 2007 and pushed to a high of 147.27 in July 2008. Sugar, on the other hand, did not get near its 2006 high.
With crude prices back around the $40-$50 level, we may see the relationship return. Some Energy analysts have talked about crude prices down to $25.00-$30.00. If this happens, we could see sugar prices move significantly lower. This lower move in sugar could lead to a good buying opportunity in 2009.
4) Demand-As with any physical commodity, demand is a key factor for price
direction. As I mentioned earlier in this report, expectations were released in the last quarter of 2008 that demand would exceed production for the 2008-2009 marketing year.

**Extracted from Commodity report

 And the following factors have made us believe that the sugar story is far from over:

Parts of Brazil have had four times more than normal rain due to the El Nino effect, adversely affecting sugarcane crop. Due to this, Brazil’s sugar production is expected to fall short of the estimated 32 – 33 mt to 30.3 million tons in 2009-10.

Besides India, Pakistan and Bangladesh also plan to import the sweetener to cater to their domestic demand. Further Indonesia, Southeast Asia’s largest sugar buyer, may also step up imports to stem the domestic prices.

World outlook

 Worldwide demand for sugar will exceed output by 9.35 million tons in the year ending Sept. 30, more

than the 7.8 million tons projected in May, according to London-based International Sugar Organization.

Please Click Here to check the sugar prices.



We reiterate our buy call on sugar stocks with good fundamentals.Some of the good stocks which will give better returns in the near future are :

1. Bajaj Hindusthan,  --     Click for  Stock  Price Details
2. Shree Renuka Sugars --Click for Stock Price Details
3.  Simbhaoli Sugars --     Click for Stock Price Details
4.  Gayatri Sugars--          Click for Stock Price Details
5. Dwarikesh Sugars --    Click for Stock Price Details
6. Ponni Sugars Erode. --Click for Stock Price Details
   
   
   
    

"HAPPY INVESTING"