Swine Flu depresses the market

The stock market had to absorb a number of unsettling headlines on financial and economic matters over the past several months. But it was news of an event outside the realm of finance—an outbreak of swine flu in Mexico and other countries—that rattled the market on Apr. 27.The outbreak of swine flu in Mexico and its spread to other countries has inevitably raised questions about the broader economic and market implications.The worst-case scenario is the sort of global flu pandemic that the World Bank estimated last year might eventually cost up to 4.8% of world gross domestic product (more than $3 trillion).

The positive sentiment in the market has been badly hit by this flu scare. Mexico is the epicentre of the crisis and the Mexican Peso has fallen in thin Asian trading, with the threat of bigger falls ahead.While the White House down plays swine flu as to not disrupt the financial system which has been seen as stabilizing over the last month it could back fire with dramatic consequences. A weak banking system who just underwent a stress test never anticipated an epidemic much less a pandemic.  A sheer drop off in spending by consumers might spell doom for retailers that have struggled to survive until now.

In a reprise of what happened with the SARS panic, airline and tourism stocks are under pressure in early European trading on fears that the swine flu pandemic will curtail travel.

This will deepen the global recession and will probably have a contagion effect on export-led economies in Asia such as South Korea, Thailand, Indonesia, Malaysia, China. All of them depend on the U.S. economy to recover. The stock market will suffer, but the bond market will not be affected that much.The swine flu is undermining confidence and contributing to risk aversion in an array of assets,This is going to hurt at a time when we've had a pickup in stock markets. On the other hand, it could just be an excuse for people to take money off the table.Hence,the market rises or falls according to its own cycle of fear and greed, not the history books.

Worst stocks become the best

The recent stock market rally which has delivered close to 20% returns in just one month, has surprised many market watchers. A quick look into the stock returns reveals that laggards over the past year delivering best returns.According to BSE 500 data, which constitutes 90% of the market capitalisation on Indian bourses, the best returns came from those stocks which lost heavily in the preceding 365 days.

Dividing all the stocks in the BSE-500 in groups of fifty, showed that the top 50 stocks delivered 52% gains (on an average ) in the last 30 days and also boasted of 57% losses in the last 365 days — the worst returns.

ET reports:a stock like Financial Technologies, part of the top 50 group, definitely gained 61% in just 30 days but has incurred 58% loss in the last one-year period. This analysis not only holds true for the top 50 stocks but progressively for the next 400 stocks: As the average 30-day gains reduce, so do the average 365-day losses.

The second 50 stocks recorded 36% gains in the 30-day period but also clocked 56% losses in the one-year period .This continues for third, fourth, fifth and sixth fifty stocks.

One needs to bear in mind that India's bear markets have historically lasted 30 months on average and longer than India's bull markets. The market is more likely to crawl rather than spike out of its current trading band that is getting a bit wide," said the head of equity of a foreign brokerage.

Rs 100 cr wiping out in every 5mins from Dalal street

ET reports:After a whopping loss of over Rs 40,00,000 crore in 2008, the stock market is continuing its free-fall and investors have lost an average Rs 100 crore in every five minutes of trade in first two months of 2009. Cumulatively, the total investors' wealth has got eroded by about Rs 2,82,000 crore so far this year. However, the meltdown has been less severe so far this year, as compared to 2008 when an average of Rs 100 crore was wiped off in just two minutes of trade, as per an analysis of stock market losses during 2008 and first two months of 2009.

Taking into account a trading session of five hours and 35 minutes every day (markets open at 0955 hours and close at 1530 hours), an average of Rs 20 crore has been lost in every minute of trade so far this year. This average was, however, more than double at Rs 50 crore in every minuter of trade in 2008.

However, if we take into account the price-earnings ratio, the Indian market seems to have become a bit more expensive in the first two months of 2009. It had become cheaper by more than half during 2008 by this measure. The price-earnings ratio of the Sensex currently stands at 12.82, which is higher than 12.16 at the beginning of the year. However, it had fallen sharply during 2008 from 26.94 at the end of the previous year.

Interim Budgets and the business sentiments

The interim budget failed to uplift the business sentiments and positivity in the market, particularly the IT industry and banking sector IT Industry:IT industry had big expectations with Interim budget. Prior to the budget presentation the IT industry was pointing at the need for extensions of Software Technology Parks of India (STPI), Export Oriented Units(EOU) schemes, Employee Stock Ownership Plans (ESOPs) and some more Standard Operating Procedures (SOPs) with tax benefits

Banking Sector:The Government did not give any benefits to the banking sector in this year’s interim budget rather the Government indicated that the cost of borrowing might go up.

Impact on Indian stock market: Indian stock market opened on a weak note and dipped further as the Interim budget was not able to meet expectations. Bank stocks were among the worst performers on the Bombay Stock Exchange. Banking index opened weak and saw further downtrend to about 4-5%. The market closed with:

Sensex: 9305.45 (down -329.29 points)

Nifty: 2848.50 ( down -99.85 points)

The 5 Biggest Stock Market Myths

It's important to keep a realistic view of the stock market. Regardless of the real problems, common myths about the stock market often arise. Here are few myths in order to bust them.

1) Investing in stocks is just like gambling.

2) The stock market is an exclusive club in which only brokers and rich people make money.

3)Fallen angels will all go back up, eventually.

4) Stocks that go up must come down.

5) Having just a little knowledge, because it is better than none, is enough to invest in the stock market.