Satyam Stock on Indian Stock Exchanges

Satyam Stock lost 90% of value in the last 2 trading sessions. Companies like Larsen and Toubro suffered huge losses in the Satyam investments. LIC along with these Companies and funds are still hoping for some miracles in the Satyam Computers. They are sitting on huge losses. We will know exact amount of losses when they actually sold their shares. Andhra Government is trying for a bailout package to save Satyam. Who will take such risk?

Just see how investors from Ramalinga Raju's native place have faith in Satyam Computers. Ramalinga Raju is now in Kompally guest house near Hyderabad and his health is deteriorated. Many people in Andhra Pradesh are still in absolute shock. More than 30,000 Satyam employees sent resumes to job portals. Satyam Computers will not give salarees to the employees for the next 2 months. Ramalinga Raju will appear before SEBI enquiry board on Saturday evening.

Inflation is at 5.91% against 6.38%. But inflation number is no longer a significant statistic. It is a reflection of drastic consumption slow down.

Satyam share after making a low of 10 sharply rebounded to 22. I don't know why someone is still buying this stock. According to my friends, Satyam is still a strong Company in some verticals like SAP etc.

Latest news: Telugu Desam Party asked for enquiry on the irregularities in the books of another Andhra Company, Lanco Infra (Congress M.P's Company).

India can no longer command significantly high valuations (20-30% premium) over other emerging economies. Companies with rumors about Corporate Governance will see huge fall in their valuations. They can no longer attract foreign investors except blind people like LIC who have significant holdings in Companies like Tata Motors and Satyam. Stocks like Suzlon, DLF, Unitech and Hyderabad based Companies are suffering huge losses in the markets.

Satyam Computers will soon face many law suits along with exodus of employess and customers. Who will want to do business with Satyam? Who will want to buy a Company like Satyam? Fundamental value of Satyam is zero because it is in services sector where trust represents 100% of value. If you lose the trust, your value is nothing. But what about political value of Satyam? It will depend on how Central Government will react to Andhra Government's request for Satyam's bail out.

Read this sentimental news about Raju's father-in-law.

Hope: Miracles are posible in India. This is a scam involving Andhra Pradesh politicians. I hope that they will do some thing to save investors and employees (in trying to save themselves). According to Times of India, 49,000 employees out of 53,000 will not get jobs anywhere else in this down turn. According to Telugu News papers, big banks (both local and foreign banks) are also involved in this scam.

Request to readers: As I am writing repeatedly in the blog that "don't go by old posts". We are living in a dynamic economy where things are changing on a daily basis. This market is strictly not for new investors. Even experienced investors are suffering big shocks (Satyam episode). New investors can earn life time lessons if they closely follow markets regularly but stay away from investments.

Another advice: Stock markets behave in strange ways. Sometimes, it will take just 2-3 sessions to gain/lose 50-80% of value unlike in other investments. Just see what happened to Real Estate and Hyderabad based companies.

DLF is trading above 300 when I gave a target 160 just 3 days back. What is the lesson?

When fundamentals are weak, it will fall to any level in just few sessions. But it is difficult to say when will it occur exactly? Even fundamentally strong companies like IVRCL Infra is falling just because it is a Hyderabad based Comapny. I will buy it after seeing the results or if it falls to 50 range.

But I no longer look at comapnies like Nagarjuna Costruction whose management has close ties with Satyam family. Nagarjuna Raju is a spiritual man but what is the logic behind the purchase of 1 acre land in Hyderabad for Rs 400 crore some time ago. Do you believe it? Absolute madness. Andhra Government gave advance payments to irrigation contractors in 2005-06 which helped them to take such bold decisions and helped for skyrocketing of real estate prices in Andhra Pradesh. Sudden credit squeeze spoiled the big plans of Andhra Businessmen.

About GMR Infra: One reader asked me about his purchase of GMR Infra at 83. Forget about rumors and political links. Is it make any sense to hold a company stock at a P/E of 130 that too in this market? Is it necessary to take such unnecessary risks?

One example about our management: Even a Company like Honda exited from Formula one to reduce costs. But our Mallya is sticking with Force India. That is all about business and management.

Stay tuned for more news and updates.

About IKF Technologies:

Many readers are raising doubts over the Promoter's corporate Governance. It is better to exit this Company unless you are a very high risk taker.

Request to readers:

Till date, I am writing what ever I wanted to express in the blog. I am requesting readers to suggest their opinions.

1. What are the other things you want to see in the blog?

2. When I first saw Raju letter on screen, my first thought is "Short it". Do you want to see such things in the blog?

3. I have some aggressive investment ideas for high risk takers. Is it right to write about such ideas in a blog mainly read by new investors?

4. Please share your other thoughts that you want to see in the blog.


Note: I am not responsible for your investment decisions. Interaction should be done only through comments in the blog. Please do not call/mail me with stock/portfolio related queries.

Note: Mail to dr.nvkrishna@gmail.com to know about my investment offers for long term readers.