Indian Stock Markets Analysis

PIIGS EATS FIGS

2011-11-19T09:22:00.000-08:00

Read a beautiful article on

PIIGS : Portugal, Ireland, Italy, Spain, Greece eating up

FIGS: France, & Germany

Do read it at www.seekingalpha.com.

Seems our markets will collapse too.........BIG TIME!!!!

http://seekingalpha.com/article/309028-the-fins-4-horsemen-of-the-stock-market-apocalypse

The eurozone story has escalated. Forget about the PIIGS. It now all comes down to the FINS. And these will be critical for stock investors to monitor in the coming days and weeks to help determine whether the market will soar or crash.
The PIIGS, of course, is the acronym for the five eurozone economies that have been on the brink since the outbreak of the financial crisis several years ago. These include Portugal, Ireland, Italy, Greece and Spain. Until the past few months, the most severe sovereign debt risks had been confined to the much smaller economies in Portugal, Ireland and Greece. But starting in August, signs of extreme stress began to spread to the vastly larger nations of Italy and Spain. And in the last two weeks, the game has started to completely change altogether.
The focus of the problem has now spread in earnest to the very largest economies in the eurozone. These include the FINS – France, Italy, the Netherlands and Spain – that together make up 56% of the entire eurozone economy (Germany accounts for another 26% - thus these five economies constitute 82% of eurozone GDP). It’s not that Portugal, Ireland and Greece still don’t matter, as they make up 6% of eurozone GDP in their own right, but here’s the difference. The eurozone had the capacity to effectively absorb the debt problems in these three smaller economies if necessary. But a debt crisis among these larger FINS nations would almost certainly be too overwhelming and could ultimately lead to a uncontrollable banking crisis that brings down the entire euro currency altogether.
What is at the core of the problem? The primary holders of the sovereign debt of these countries are the major banks and financial institutions across the eurozone region. If countries began defaulting on their debt, banks would be forced to write down the value of this debt on their balance sheets. And given that capital levels are already thin at many institutions across the region, such write-downs may quickly place some banks at the risk of insolvency. This would likely lead to contagion effects, as banks would likely begin liquidating assets including the debt of other at risk sovereigns, which would compound the problem. At the same time, short-term liquidity markets would also likely seize up, as banks become increasingly cautious about providing money to other institutions under the concern that they may be on the brink of collapse and unable to repay the loan. Given the interconnectedness of the global banking system, this could quickly lead to a late 2008 style global crisis outcome.
Obviously, such an outcome would have a severely negative impact on the stock market. And recent stress has been evident. While the U.S. stock market is hanging in there for the moment at around 1,220 on the S&P 500, it is struggling mightily to hold this support level. This is why global leaders continue to remain engaged in aggressive monetary stimulus since the crisis began several years ago in order to prevent another 2008 style crisis from erupting again. This is likely the primary if not only reason that stocks have not already broken sharply lower by now.
Click to enlarge
But one key factor differentiates the situation in 2008 from today’s crisis in Europe. In 2008, the problem was first a U.S. banking problem concentrated in mortgage loans. When the crisis struck, the U.S. government as well as other major sovereigns around the world had the capacity to step in and more than absorb the overall impact of the crisis. Thus, the sovereigns provided the backstop to the banking system in 2008. Fast forwarding to today, the problem is first a European sovereign problem that threatens to spread to the banks. Thus, if another banking crisis erupts, many sovereigns across Europe will not have the capacity to backstop their banks and stem the crisis. This is why the current problem in Europe could end up being much worse than the 2008 crisis.
Thus, the situation in Europe must be watched extremely closely by stock investors and markets in general as events unfold in the coming days, weeks and months. And this becomes increasingly true as the problems across the region continue to escalate.
In order to quantify the magnitude of the problem on a daily basis, the following are the four key indicators to watch. These are the 10-year government bond yields for France, Italy, the Netherlands and Spain. Direct links to each are provided below along with yield levels on selected dates. In short, if yields are rising, this indicates signs of increasing stress, as the cost for countries to finance their debt is increasing. And in the case of Italy and Spain, in particular, if yields rise above 7% or beyond for a prolonged period of time, this indicates that stress has elevated to unstable extremes.
The FINS
France
France 10-Year Government Bond Yield
July 22: 3.41%
August 8: 3.15%
October 4: 2.56%
November 18: 3.48%
France is no longer serving as a safe haven for investors. While German 10-Year Government Bond Yields have continued to decline to levels below 2%, the comparable yields in France have spiked sharply higher. This indicates that stress is spreading toward the higher quality core of the eurozone, which is a very bearish signal, as France is one of the countries that is being relied upon to help rescue the others.
Italy
Italian 10-Year Government Bond Yield
July 22: 5.41%
August 8: 5.29%
October 4: 5.49%
November 18: 6.64%
Italy is under severe pressure at the moment. On several occasions in recent days, it has seen its bond yields spike well over 7%. While bond purchases by the European Central Bank have helped pull these yields back below the 7% threshold, this is not the first time that the ECB has intervened to bring Italy’s bond yields lower in recent months. Unfortunately, any past success by the ECB to contain the problem has proved temporary at best.
Netherlands
Netherlands 10-Year Government Bond Yield
July 22: 3.17%
August 8: 2.69%
October 4: 2.13%
November 18: 2.51%
While the debt situation in the Netherlands remains relatively stable, it is worrisome that yields have begun to diverge from Germany and move higher in the past two weeks. A continued rise in these yields going forward would present yet another potentially brewing problem for the eurozone to overcome.
Spain
Spain 10-Year Government Bond Yield
July 22: 5.77%
August 8: 5.16%
October 4: 5.10%
November 18: 6.38%
Until about two weeks ago, Spain was the PIIGS country in which investors could take comfort. Although Italy’s bond yields had spiked higher, Spain’s had remained under control. This is no longer the case, however, as Spanish yields have skyrocketed in the past two weeks and were flirting with 7% in recent days. If the fires burning in the Italian debt market weren’t bad enough, now the ECB has fires ranging on two fronts with Spain now in the mix.
The yields from the FINS provide a leading indicator for the market outlook. If yields become markedly better on a sustainable basis in these countries, attention can then revert back to the smaller PIG countries with problems that are more readily contained. Although more stock market turbulence could be expected along the way, such a shift lower in yields would be an overall bullish outcome for stocks. Conversely, if these yields continue to rise in the days and weeks ahead, the stress on European banks and the subsequent threat of a global financial contagion is likely to escalate. Stay closely tuned.
This post is for information purposes only. There are risks involved with investing including loss of principal. Gerring Wealth Management (GWM) makes no explicit or implicit guarantee with respect to performance or the outcome of any investment or projections made by GWM. There is no guarantee that the goals of the strategies discussed by GWM will be met.

S&P USA downgrade!

2011-08-05T23:57:00.001-07:00

link: http://seekingalpha.com/article/285315-s-p-downgrades-u-s-to-aa-we-re-tied-with-belgium

Theres a beautiful picture that describes the current USA condition published on seeking alpha (attached above)

With the S&P rating getting reduced, US economy looks more fragile than ever before. There is already a talk of QE3, 4 & 5 post which usa would not have money for another QE & eventually default. With this lowered rating, fund borrowing for usa would increase leading for further increasing in costs & hence lowering of growths further for them.

USA slowing down further is even further bad news for emerging markets, since most of the exports are pegged to developed countries. With this there would be renewed demand for stable world currency too. Going ahead on Monday, our markets might react negatively and it might be a good panic bottom to buy some long term equities

Usa debt default

2011-07-28T11:04:00.000-07:00

There is a strong possibility of usa defaulting. There is a good article on what it means for us.

http://www.marketoracle.co.uk/Article29518.html

The Worst Case Scenario: Seven Potential Consequences of a U.S. Debt Default
Plummeting equities: When Lehman Brothers failed, the Dow Jones Industrial Average dropped 504 points in one day, and kept falling for months afterward. A default by the United States on its debt could hit even harder. Lance Roberts, CEO of Streettalk advisers, told The Fiscal Times that stocks could fall 50%. That would torpedo retirement accounts and hurt investors large and small.
Missing payments: the government borrows about 40% of what it spends every day. If it can't borrow, then it will have to cut spending by 40% immediately – more than 10% of gross domestic product (GDP). That could mean missed payments to government contractors and recipients of government assistance. It may also mean that hundreds of thousands of federal workers will be furloughed without pay. In addition to the personal pain, billions of dollars in government spending will vanish from the economy.
Interest rates: Credit rating agency Standard & Poor's already has warned of a 50% likelihood that it will downgrade the credit rating of the United States in the coming months – as much for its high debt levels as the possibility of default. If lawmakers allow a U.S. debt default, S&P says it will cut the country's credit from AAA to D. That would mean higher interest rates (and higher costs) not only for U.S. debt, but for all credit. Because other types of lending – including home loans, credit card rates and student loans – are based on U.S. Treasurys, the cost of borrowing would skyrocket for consumers and businesses alike.
States and cities: Likewise, states and municipalities would face higher borrowing costs, since their rates, too, are tied to Treasurys. That will make all capital projects – roads, water systems, hospitals, schools – more expensive.
Credit crunch: Higher borrowing costs and financial turmoil could lead to another credit crunch like the one we saw following the Lehman Brothers collapse. And that would further strangle the U.S. economic recovery.
Bank crisis: A less obvious problem arising from a U.S. debt default would be how it affects large banks, which use Treasurys as collateral for their own borrowing. "What happens if treasuries as collateral aren't seen as the risk-free instruments they have been?" said Money Morning Contributing Editor Shah Gilani, who is worried about the impact of discounted Treasury holdings on the banks' leveraged positions. "Could an ugly round of global de-leveraging undermine investor confidence again and derail hoped-for economic growth?"
Lower dollar: Already in a years-long slump, the dollar will sink even further against the world's other currencies. S&P has estimated a U.S. debt default could cause the dollar to drop 10% or more. A weaker dollar will make imports more costly, but that's not the worst of it. A default or credit downgrade could cause the dollar to lose its status as the world's reserve currency. And that would be very bad for the U.S. economy.
Combine all of the above and you can see how a U.S. debt default could implode an already shaky economy. Not only would the recession return with a vengeance, but the economy could sink even lower than it did in 2008-2009.

Rate hike coming!

2011-05-02T10:14:00.000-07:00

Sorry guys, havent been writing much lately. Actually have been caught up in other things and well testing certain models so havent had much to change from my previous position of investing in 10% bonds. However its very difficult to be away from trading & I have been working on certain models lets see how they come about.

The view on the markets hasnt changed much. I was net long on the expiry and well had taken a tactical trade, however the markets are in a confused state, but the headwinds seem to be weighing very heavily. The most critical of those being the current state of economy isnt good at all. We seem to be in a overheated economy in which we are actually facing hyperinflation. The real rate of inflation might be showing little by way of numbers, however the actual rate of inflation has different weightage of different articles. E.g. petrol has a major component, and petrol prices have been artificially kept low, however that doesnt mean that high petrol prices wont seep through in the other parts of the economy. One e.g. is the raw material prices of most basic things, e.g. shampoo, soaps, detergents etc which all use petroleum as a raw material. Hence as stated earlier the real rate of inflation for the things we use might be in the range of 15-25%. With this kind of sustained inflation the interest rates are bound to go up to stop the overheating, which will lead to further slowdown.

The results havent been anything great, except for a few such as ICICI etc. However a rate hike would hurt everyone, and the momentum can be broken. So if Nifty breaks below 5700 we are in deep trouble, however if the Nifty crosses 5900 then it should break the old highs of 6300, not because the fundamentals are getting better, but that would be an indication that money would be chasing paper irrespective of the valuations.

Tomo Nifty would be crucial to see, however FII's have already heavily sold the markets & it would be prudent not to go long in this market. I am short, till Nifty crosses 5800

Bonds are better!

2011-02-27T02:06:00.001-08:00

Indian markets are behaving like we are in a bear market. Although officially a bear market is defined as 20% drop from the peak, hence a market of around 4800-4900 would officially classify as a bear market. However the way we have gone, its nothing less than a bear market's making. and the worst part is that even after the correction the market is not looking cheap. Some stocks are interesting but still not a screaming buy. In such a scenario it makes sense to go in for 10% bonds, being offered by secure companies like SBI etc.

My worry is that with the fiscal deficit going up, the budget might sink the markets further. If we break the previous lows of 5180 we might go below 5000!!!

Time to be in cash or enjoy with the 10% yielding bonds, till the market corrects 10-15% or so from these levels.

Nifty Volatility going up!

2011-01-15T09:13:00.000-08:00

Nifty volatility has gone up with the sharp downmoves. The volatility was so high on Friday that it was a challenge to trade the Nifty and the stoplosses had to be in place, else one could have got wiped out in 15 min flat. The Nifty moved 300 plus point on one single day. So whereas in the morning it opened at 5750, it quickly went down to 5700 and then to 5850 and then closed at 5650 odd levels.

I had longs at 5728 which I had to cover in the morning, and went long at 5750 & then Nifty went to 5850, at that point I had put a stop loss of 5825, which quickly got triggered. The only mistake I did was not to go short at 5800, but honestly that was because the markets went down so fast that it did not even give me the chance to go short.

Finally I shorted at 5730 and then covered at 5665. So in a day I could only catch 120 odd points on the nifty whereas the nifty swinged by around 300 + points!!!

In such markets it is a good opportunity to make money very quickly however with stops else its the easiest way to completely lose the capital in a single day.

Moving ahead the markets still look weak, however the bottom cannot be very far, infact I think if Monday is a gap down open then it might be prudent to go contrary long, however with very very strict stoploss and again its just a very short trading bounceback. However the trend is down only until the Nifty breaches 5850, then 5875 and finally 5950. So for people who are not savvy in trading there is no point going long before 5950 or short now since the markets have already gone down by 600 points this month!!!

Happy Trading!

Went Wrong !!!

2011-01-12T04:43:00.001-08:00

Sorry guys my call for new years went wrong and the markets corrected sharply. Well but whatever calls I give I also put my money onto it. So well lost some in the process. The fall was completely unexpected and the sheer ferocity of it, surprised one and all.

Nifty seems to have gone in a downtrend, however whether it will break 5700 is highly debatable. as of now I am long, I went long at 5728 and markets closed well above that today at 5868 odd levels. This current pull back should take us to 5950, from where I will reassess the strategy to hold onto long or reverse the position.

Till then happy trading and keep the faith.

Time to hold Longs

2011-01-02T06:06:00.000-08:00

As per the last post, it was time to go long, and since then markets have given a good breakout. Its time to remain long and looks like we might be headed for new highs, very soon. If we are lucky even in January.

Hold the longs, with a stop of 5950.

Happy New Year!!!

Time to go long!

2010-12-24T08:38:00.001-08:00

Nifty finally has moved out of the negative zone today and entered into the positive territory. time to shed the shorts and go long. Nifty is likely to break all time highs in January itself and should be a great month to take positions. I am net long on the markets and I am figuring out what would be a good way to switch to Jan futures, as currently the premium is crazy at around Rs 50. Hence it would be a challenge not to pay excessive premium to roll over the positions. I suspect that on the expiry date there would be lot of fun and games just like they have happened for the past 3-4 months, wherein suddenly on the expiry day Nifty moves 100 points in a matter of minutes, completely wiping out people who have taken option positions in a hope to make a quick buck.

Anyhow stops need to be there just in case of unforeseen circumstances, but markets are highly positively disposed and its a good opp to go long.

Range to Continue.

2010-12-12T08:26:00.000-08:00

Nifty has got fixed in a range, albeit a lower one. For this series the range seems to be 5700-6100. And with Fridays upmove the range seems to have gotten from 5800-6100. Friday was a perfect time to go in long, I took long positions on Thursday itself after the huge drubbing Nifty got this week. Actually last monday had set the tone for the rest of the week with nifty appearing to be quite weak. FII's selling momentum had started to gather pace, and it only recided after thursday and Friday saw good FII buying in Nifty Index futures. Tomorrow should be good and we should gin further ground with positive bias. I would be looking at 5950 levels for markets to take a breather and then go sideways before ending at 6100 types at the end of the series. However a word of caution if markets correct sharply from 5950, it would be great position to change your position and go short. Cause in that case 5700 might not hold (but the chances of that happening are very low). So next week should be a go long with a stop of 5880 (Fridays closing).

Niftys back broken

2010-11-22T10:15:00.000-08:00

Guys as predicted, Nifty got decimated. Did anyone of you profit from it. More weakness to follow. I hope shorts are in place. Till Nifty breaks 6120 odd, shorts is the way to go. These bouncebacks like today should be used to make intraday money if you are quick enough to trade them. But the main trend needs to be kept in mind. Which is down as of now.

Nifty looks weak

2010-11-17T09:43:00.001-08:00

Nifty has slipped into a very weak territory. The second day of weakness broke the back of the markets. And the fourth day, that is on tuesday it was the complete collapse. Now expecting some recovery from tomorrow, however any move up on the nifty will be a good time to short the nifty. Its only if the nifty goes above 6140 then only longs can be considered, else it is a perfect time to short the nifty on any rise.

Also what is interesting is that FII's have sold huge call options at 6100 so that should act as a top for the markets.

The long term outlook of the market remains positive until Nifty breaks 5400. which seems to be a very long distance away.

Samvat 2067

2010-11-06T02:33:00.000-07:00

Celebration time for the markets with new highs being reached. Seems we are in for some exciting times ahead for new highs. The only opportunity that looks good right now is to wait for some kind of pullback of 50-100 points on the nifty and enter for long positions. However the issue is that even that might or might not come.

None of the stocks currently are trading cheap. Infact they are trading at highest PE multiples awarded to them, however there seems to be no signs of correction in them. This reminds me of 2007 when the markets were fairly valued at 14000-15000 and then they just ran up to first 18000-19000-20000-21000 eventually. And there were talks of 25000 :) which thankfully never came. Also on the way down markets went below the fair value of 12000 to 7500!!! and just 2 years they are back to more than fairly valued again.

Its impossible to predict the long term movement of the market, guess the only way to make money is buying when the values are cheap ( and mind you that also might be for prolonged periods of time). i remember in 2008-09 tata motors was trading at 200 and below and they came out with a 10% - 12% bond. At that time the stock of tata motors was itself giving a yield of >10% however there were no takers for it. 2 years laters its a 6 bagger at 1200!!!! hence the benefits of value investing....

Well the stocks do look expensive however I have shortlisted some of the stocks that look interesting from this to next Diwali. If the markets hold these large cap stocks would tend to outperform the markets. But a big word of caution the markets must hold :). Reliance, ICICI Bank, HDFC Bank, ITC. I am not fully convinced about there values since all of them are richly valued however if the markets go up these stocks should tend to lead the rally.

Well so the mantra is invest, wait for the corrections. Utilise the IPOs. and do a systematic investment in good quality stocks only.

Happy Samvat 2067 :)

October Fall it did!

2010-10-27T12:14:00.001-07:00

As written in the previous post, october did indeed fall. However the fall wasnt as sharp as anticipated. Infact if at all it was very difficult making money inspite of getting the direction right. As each time shorting was done, there was a huge counter move to wipe out any stoploss put. Finally however for the last 2 days the shorting worked and markets obliged after a long long long time with some decent correction.

Now the markets might be entering a corrective phase, however how long does it last is anybodys guess. Now from now on if we see a 100+ point rally that might be the end of the bearish move. Even today with all the negative the FII's didnt net sell anything. It was the DII that have been huge net sellers.

I would now keenly watch the market to start its upmove after this current downtrend is over. And the indicator to that would be the huge rebound, which may occur soon. Though a point of note is that this curernt downmove might take us to 5600 or it might end at 6000, that is anybodys guess. Till then happy trading.

Will October haunt again?

2010-10-17T06:45:00.000-07:00

October usually is a month wherein markets correct and it is more so true in the second half of october, wherin the corrections are swift. Chartically speaking, we have been set for a correction many times in September, but each small hint of correction in September was bought in with full force and instead of the markets correcting, they just went up. This led to a huge difference between nifty and futures of around 40 points. This kind of difference has not been seen for a long long time. Also the put-call ratio in the market in september had reached levels of 2. Usually markets have a peak of 1.8.

Now after some time the charts are showing the correction patterns again. If Nifty starts to break then its 10 days of nice correction and we have a stop of around 5600. If not then theres no stopping nifty from breaking the all time top. But the odds are stacked for a correction now. It might be prudent to short with stoploss in place. If markets correct and reach 5600 then it would be great time to buy for long term investment.

Color of Money!

2010-09-12T01:51:00.000-07:00

With an unrelenting inflation, that refuses to go down, a moot question arises is holding cash a wise option. Banks are offering interests in the region of sub 8% (even for 3 years holding) and with real cost of money (inflation) above 10% and some estimates suggest (over 15%). Hence if means if your money is lying in a bank (at 3%) you are losing money to the tune of 12% a year!!! Now that is a really scary scenario. Hence the days of keeping the money in a FD or a bank account might not be a wise option after all.

So what is the solution, with most of the investments not giving even the inflation adjusted returns.

Well for one the answer might be in leveraging. Heres why. Let us take the example of investing in real estate.

Suppose you have Rs 10 Lakhs with you and you take a housing loan of 50 Lakhs on it. The total cost of the house is Rs 60 Lakhs and is expected to go up by 15% for the year. The total outflow for the year would be 50,000*12 = 6 Lakhs (assuming you have taken a loan for 50 Lakhs for 20 years for the house).

Rental income from the house = 15,000*12 = 1.8 Lakhs.

Value appreciation of the house = 60L*15%= 9 lakhs.

Opportunity cost of the 10 Lakh invested = 10*.06= .6 Lakhs.

Hence the total maths comes as follows:

Total Outflow= 6+.6= 6.6 Lakhs
Total inflow= 9+1.8 = 10.8 Lakhs

Net Flow = Inflow = 4.2 Lakhs.

which basically means that by investing 10 Lakhs you have made a 42% return by leveraging.

this suggests a good way to beat inflation and stay ahead of the money curve. Hence it is imperative that the money does not stay idle for a long time, else the real value of money will decrease over time in an inflationary economy.

Virtually impossible to trade Nifty!

2010-08-24T06:38:00.000-07:00

There have been certain changes in the indian markets over the past 2-3 months. Primarily these changes being

1) Very very low volatility: I dont remember the last time when we had volatility in the region of 15. (Anything above 20 is considered as volatile). Hence I dont remember last when Nifty did not open a gap up or down and moved in a less than 1% range. This has been happening over the past 2 months and a virtual grind up for the market, which has been very painful for the traders.

2) Options Play: Options trading has hit an unprecedented mark of 1Lakh Cr. This high options volume has never been seen in the indian market. This again primarily is due to the low volatility and hence the options are priced so cheap that people are preferring to play with options rather than index futures.

3) Negative divergence: There have been 2 negative divergences on the MACD charts and both of them have been fake. I cant remember in the history of the markets wherein 2 negative divergences have appeared on the MACD charts and both turned out to be fake signals.

Where from here, is a very very tricky question. The charts are becoming increasingly tricky to read and the markets are just not falling. Something has to give way, the volatility has to increase, and if it does the markets would break out in either direction. The risk reward currently is stacked in favour of the decline, wherein a 10% kind of correction cannot be ruled out, however the tricky part is that correction of even 1% is being bought into. I am away from the Nifty since currently it is virtually impossible to trade it profitably.

Nifty sluggish

2010-07-29T09:03:00.000-07:00

Nifty is looking weak & I have opened short positions. Negative divergences have appeared and if Nifty goes below 5250 it will head to about 5000, giving us the 10% correction we have been waiting for. A move above 5460-5480 would be stoploss level.

Nifty breaks the range

2010-07-13T08:21:00.000-07:00

Nifty will break the range tomorrow and is headed higher. I am taking a break for some time and need to reassess my strategy as I was going short on the market however the markets are supreme and sometimes markets do make you feel humble...I think being long and being stock specific is the need of the hour in this market.

Happy trading!

Range bound markets!

2010-07-03T13:38:00.001-07:00

Nifty could not sustain the uptrend and now seems it is stuck again in the range. Monday will be a final confirmation for this. However if on Monday we donot significantly go up, then my fear is we would go down. 4950 should not break in this downturn, and the markets would reverse before that. However cannot hold longs for a 200 point drop, hence if markets take a dip it will be prudent to cover the long and infact go short. In these sharp whipsaws and ranges it is very important to be nimble footed and change positions if markets are not acting according to plan

Nifty Long

2010-06-30T11:49:00.000-07:00

Went long on the nifty today at 5250. Couple of reasons for this decision

1) From the long term charts of the nifty it is very clear that Nifty has been in an uptrend for the past 1 year, though it will be difficult for many to see this (some things are not so evident as they look). I will post a complete post on why it is so. However safe to say that it is. Although I must confess I did not see this a month back, but on spending a lot of time on the chart I think I could see the pattern that is not easily observable.

2) Fiscal deficit: Policy changes slowly are moving towards fiscal prudence. With 1 Lakh crore coming in from the airwaves auction, and now fuel price decontrol will go a long way inreducing indias fiscal deficit. These are some policy changes that were needed since a long time, and thankfully they have come. These will go a long long way in improving India.

3) Europes tumbling, China is shaky, Japan stagnant, USA recovering. Global money has to flow in somewhere. And India seems to be a good bet at this stage.

Now this current upmove should take us past 5400 (hopefully), hence if one is long, holdingposition with a trailing stoploss is the way to go.

Options Play

2010-06-13T08:06:00.000-07:00

Now that Nifty is trading above 5100 with reasonable comfort, the question comes, till where will this pullback sustain. Well to be very frank, it is virtually impossible to predict levels. Nifty has been in a range for the past 1 year and it has to break it sometime. However will this range get broken in next series is anybody's guess. As for me, I had initiated longs at 5016, hence I am sitting on 100 point nifty, however where will this series eventually end is difficult to predict. Hence the logical thing to do at this point in time is to protect the 100 points made. I would be selling the call options if the markets come closer to 5200. The logic is simple, if the markets come closer to 5200 considering the number of days left, the premium for the calls would be around 70-80 Rs. If I sell the 5200 call at 70-80 Rs then I stand to lose money only if Nifty closes above 5280. The good part is that I already have long position in the Nifty hence any move over 5280 will be protected since I already have futures. Which basically means that the profit would come for 200+80 = 280 points guaranteed, in case Nifty goes above 5200. However if Nifty slides down from 5200 then also I am protected as the premium of entire Rs 80 will stay with me. Hence option writing is a lucrative thing, if it is done in combination with futures. However most of the retail investors (and at one point of time I also did it) end up buying options without any cover and end up losing all the money!!!

Happy Trading!

Nifty tricked

2010-06-10T11:06:00.001-07:00

This week I must admit nifty completely whipsawed me. With movements up & down like a rollercoaster, it was a nightmare. I went long short everything cause every breakout & breakdown looked convincing, however none was coming. But thankfully I trade with stoplosses, hence my losses are usually small. I had short positions yesterday however I covered them at close yesterday since Nifty chart patterns were not breaking. Today morning I went long and knew as long as Nifty would be over 5000 I am safe. The breakout came in the afternoon and once it was over 5050, it was clear we had broken out. The most imp part in trading is to cut your losses short and let your profits ride.

Nifty sluggish

2010-06-08T08:22:00.000-07:00

Todays cut came in at 2 in the afternoon & came with heavy volumes. The charts were recovering for the nifty however todays fall again took it below the 200 dma, thereby making it weak. FII's have started to short the market again. Yest the shorts were to the tune of 1600 cr, and in all probability todays cash selling was done by them. Vix rose by 13%, which is always bad. Hence now if nifty falls the fall should be a hard one...Next target of recovery would be 4775 thereabouts and further weakness would continue if we dont trade above 5050. I have initiated short positions, with a stop loss of 5050.

Tricky Situation!

2010-05-29T05:11:00.000-07:00

Nifty futures are currently trading at almost 30 point discount. That is never a good news. Chartically speaking however there is a slight positive situation emerging if we can hold above 5000. FII's have been net buyers of Futures to the tune of 600 cr on Friday thereby indicating that days of 1000 cr shorting might be behind us.

Hence situation is tricky and going aggressively in any one direction is not advisable, however if Nifty doesnot break 5000 I would much rather go in for long position rather than go short.

Relief Rally!

2010-05-27T20:05:00.001-07:00

Relief rally has started with the short positions getting closed on the expiry. I took some adventurous longs at 4854 but covered at 4940 levels, since I was not expecting the Nifty to break the 200 DMA at 5000. The rally seems to continue and if we can trade above 5000, the trend can reverse, however if nifty breaks 5000 then it is a big issue. The trading bias ispositive for a day or two.

Short it still is?

2010-05-23T09:19:00.000-07:00

Well I see lot of analyst on the TV coming and saying lot of crap, it pains to see all sorts of opinions being floated, without any basis and the worst part is that these guys donot even concede when they go wrong....Anyhow so now the consensus of the analysts is that Nifty will not go down beyond these levels....Well if someone were to ask me can we go down below these levels, my answer would be "Yes We Can". Heres why we can.

1) Euro zone is in a big mess

2) Germany has reluctantly given a nod to the bail out package, however put a ban on shorting Euro debt

3) There is rumour that Greece might not be a member of Euro anymore, this means that Eurozone is not an integral economy, a member goes bust, they might be ousted.

4) Dollars are being bought as if they are diamonds. This is never a good sign, it basicallymeans money is being pulled out to the safest possible option

And the pertinent question remains, what if Portrugal,Spain & UK is next in line to default? Did you guys know that there are bets that can be had at 2:100 for US defaulting :)

Well anyhow coming back to our dear old nifty....the weakness remains, you might see some covering on Monday and Tuesday and that will lead Nifty slightly higher, however the weakness is there. And in my opinion nifty can go way low from these levels. Hence taking aggressive long positions is definitely a no-no, till the Nifty starts to trade above 200 dma. Hence if markets remain sideways on Monday & Tuesday, then it be a nice time to short!

Nifty 200 dma touched!

2010-05-17T08:35:00.001-07:00

Had written in my previous post, how Nifty is looking weak. Well today it touched a critical point, its 200 day moving average. Now one thing that happened today was that Nifty touched 200 dma but closed above it. That is usually expected, as markets bounce from 200 dma's. I went long at that level just for the dead cat bounce, and it came. However I dont think that this might be sustainable if Nifty breaks 200 dma, we are headed for worse times...Ladies and Gentlemen please tighten your seatbelts, roller coaster ahead!

Did Anyone Make Money?

2010-05-07T11:57:00.000-07:00

Hi, hope you guys made some money by shorting the Nifty. I had written in my post on 18th April, that its time to be very careful & I would have shorted Nifty had I not gone abroad :)

I dont get to hear too much from you guys, it will be nice to hear from you all.

Coming back to the markets, I am little worried. The kind of selling that is happening reminds me of the correction of 2008. That is never a good sign. This selling is an indication of change of power from Europe to US & ultimately to Asia. Indian markets till now have been quite resilient however once the selling increases it would start to move down faster than US.

I dont have any positions as of now...markets will give some technical up (but it would be a nice opp to short than to go long). I dont have the conviction to go long at all now. I would rather wait for some time & see where & how to buy stocks rather than do futures.

Lets hope for the best!

Europe's Tumbling!

2010-04-27T11:48:00.001-07:00

European markets crashed today evening by as much as 3-5%, and US markets are trading down, wonder how hard will our fall be tomorrow morning!

Chartically speaking, we have to be above 5140 to remain positive. If markets go there, one can assess whether longs can be taken, till then happy shorting :)

Time to go short?

2010-04-18T03:39:00.001-07:00

Nifty is showing signs of lethargy....With FII's selling big time in Nifty Futures. Last count on Friday they sold off Rs 1000 cr on Nifty Futures. Volatility index rose to 21, which is not a good sign either, since Vix rose from a minimum of 15. When the market was going down the Vix was hovering in the late 20's and early thirties.

There is nothing to panic as of now, infact the market is currently still in the positive zone, however it is showing signs of lethargy. Hence any new positions that you take on the nifty must be calculated and backed by strict stoploss. I am not sure, whether it is the right time to go in for shorting the markets, one can go in for adventurous shorts however the markets are seen to be rebounding fast hence one must have a trailing stoploss in place.

Hence if you had long positions, perhaps its time to cover them up, shorting well it depends on your profile (whether you are a high risk taker). I dont have time, as I had written earlier I am off to australia, else I might have been tempted to go short....

Happy Trading!!!

Nifty Stay Put

2010-04-15T20:09:00.001-07:00

In my last post, I had written if Nifty crosses 5200, I would square off my long positions. So I did on 17th March, and I squared off my positions at 5228. Today with the opening of the market, the market would be touching the same levels. Hence, Nifty did basically nothing just zig zag random movements amounting to nothing. Whenever I dont see any clear pattern, I try to stay clear from the markets. For the past one month, there was no clear signal for going up, and in this market it is really difficult to short. Hence in such situations it is best to stay put, rather than to overtrade and lose money. One important lesson in making money on nifty is that it is equally important to do nothing at times.

Will see if the markets move in a zone, with downward bias, I might take short positions. However I am going off to australia for 10 days, hence will not take positions till that time.

Happy Trading~

Happy went Long!!!

2010-03-16T10:46:00.000-07:00

As written in my last post on 1st March, I went long on the Nifty. Well the move has payed off. I squared up my positions couple of days back basically because markets were not doing anything. I reentered yesterday at 5135, and markets today closed at 5200 :)

I think I will square off again if markets touch 5200+ something. My target of 300 points for the year, on the nifty is thankfully getting met in the third month itself so I am quite happy on that.

Keep trading....

202 points on Nifty

2010-03-12T23:35:00.000-08:00

Covered the position at 5100, though markets still look ok and are ready for some good upmoves. Hence I might reenter. I made 202 points on the nifty, that is 67% of the 300 point target i had set out to do at the beginning of the year. Lets see how it goes. Stay invested!

Time to go long!

2010-03-01T09:42:00.001-08:00

Markets are looking good. Its time to go long...I had made long positions before the budget, it was kind of a risk that I took, however the thing going positively for this move was that the charts were supporting a pattern of receding MACD and moving towards the 0 mark indicating that things would be changing direction soon....This has got validated with the huge buying of FII's in F&O to the tune of 1600 cr in index futures.....

More so now with the Greece bailout package being discussed, things look as if they would be ok for some time....I have taken positions at 4862, and my aim is to make 300 points in the nifty in one year. Cause just with 300 points you can make around 50% return on ones capital...sounds simple...lets see how it goes :)

Nifty Sluggish

2010-02-10T07:40:00.000-08:00

Nifty could not hold onto any gains. What is more problematic is that we had reached 4650 odd in June. Today is feb, 9 months later we are still hovering around these levels. This does indicate that its very difficult making money in this type of a market. In such markets it makes perfect sense to trade, and trade in futures as you can take both directions.

I went long at 4712, however markets fell down and my stoploss got triggered at 4685. However when the markets immediately came up, I again went long at 4722, and covered at 4797. And glad I did it as markets fell down today.

Markets look weak and will look at a good chance to get in.

Trend Sluggish

2010-02-10T07:23:00.000-08:00

Markets look weak and will look at a good chance to get in.

Going Long

2010-01-31T10:11:00.001-08:00

Hi, sorry havent written in a month...actually havent done much except being on the sidelines... saw the markets tank from outside....did not have the courage to go short....

Well will be taking long position tomorrow. 3 reasons

1) RSI has come down to 30 levels they will go up, (although it might be small only)

2) New series with perfect set up to go up

3) Encouraging global data, with US economy going up by 5%

Although a word of caution, keeping a stoploss is warranted

Happy trading!

Markets in a happy mood

2009-12-29T10:07:00.001-08:00

The markets seemed to have entered a new upturn with the resounding U turn that they took on 23rd. Nifty is nearing to touch the 52 weeks highs and same is the case with sensex. Most good stocks have already crossed their 52 weeks highs. All seems to be hunky dory and there seems to be money to be made in holding on to your stocks. I am just attaching a sample of the graph showing how, Nifty was supposed to go into a downtrend, as MACD had approached 0, and usually MACD goes below 0 and it is a start of a downtrend. However the converse is also true that MACD goes above 0 is a good time to go long. I guess now the same thing is happening with the MACD bouncing from 0 levels, the markets are in a rally mode. The futures are still at a premium underscoring the fact that lot of people have burned their fingers / hands trying to short the market, and are now extremely positive of a good closing.

Will keep posting as some interesting developments happen. Till then it seems that the party is on...Wish you all also a happy new year!

Directional Change

2009-12-23T11:22:00.001-08:00

Sorry, havent been able to post for a long time, will try to rectify this.

Markets did a surprising U turn today. It was a perfect set up for a decline, with all indicators pointing for a breakdown, however todays move changed all that. I dont remember the last time, when indicators changed so quickly. It was a good case of bulls getting trapped and huge short-covering. Nifty futures from a discount, ended with a 10 point premium.

The moot point is that it would take a lot to break the markets, as each & every down move is faced with more wall of money coming in. With a promise of 8% gdp growth, the markets have more reasons to smile.

Allahabad Bank !!!

2009-11-17T06:30:00.001-08:00

It seems to be a good buy, with a forward PE ratio of around 4, a dividend yield of around 2% and a price to book of just 1!!! Most of the other public sector banks are in the range of 1.5 Price / book, which means that there is scope for further upside. Also the stock has just made a 52 week high, and the charts are also looking good.

Also what i have observed is that these PSU stocks were 8-10 times cheaper in 2002-03, now this basically means that they have appreciated 8-10 times in 7-9 years!!! Now thats impressive performance, and yes not to mention that these stocks have given a constant stream of dividends, and add to it the stability offered by the govt

Nifty short covering rally!!!

2009-11-09T03:31:00.001-08:00

I shorted the nifty and the move went wrong!!!

Markets went up by 2%, and I think this might be the start of another uptrend, since the speed with which the markets covered up was amazing. So in 3 days we have covered more than 300 points on the nifty, from a low of 4530 to 4906 (futures). So all the people who shorted in between would have lost a lot (including yours sincerely). And well this is inspite of the fact the US job losses figure is at a 23 year high of 10.2%, and the markets still rallied!!!! Now it sometimes confuses me, whether the markets see more than what meets the eye, or is it some play larger than what normal mortals can think off!!!!

I am now taking a break, as I think I need to rework on my strategies to play the markets profitably. In any case would keep on posting, if I find something interesting coming along....Happy investing....going long....

Change of timings!

2009-10-25T01:45:00.000-07:00

Sebi has given an ok, to the change of timing of trading on the markets...from current 9:55 a.m to 3:30 p.m to 9:00 a.m to 5.00 p.m (proposed). Hopefully this would help the retail investors to trade with much more ease...good move!

You could soon be able to trade for an additional two-and-a-half hours on stock exchanges with the Securities and Exchange Board of India (Sebi) on Friday allowing trading between 9 a m and 5 p m to align timings to international standards.
At present, trading hours are between 9.55 a m and 3.30 p m.
Sebi, however, raised the caveat that the exchanges would have to ensure that risk management systems and infrastructure commensurate to longer trading hours were in place before investors transact for eight hours a day.
TRADING PLACES
Local trading hours (a m to p m)
Cash Futures & Options
New York 9:30 to 4:00 6.00 to 5.00*
Singapore 9:00 to 5:00 9:00 to 5:00
Tokyo 9:00 to 2:00 9:00 to 7:00
London 8:00 to 4:20 8:00 to 9:00
India (now) 9:55 to 3:30 9:55 to 3:30
India (soon) 9:00 to 5:00 9:00 to 5:00
Source : Bloomberg * 23 hrs
The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) welcomed the Sebi move and added that they would soon extend trade timings. They, however, did not clarify whether timings would be extended to 5 p m, though executives indicated that trading would start at 9 a m.
Last year, NSE had first proposed a change in trading hours at a time when foreign institutional investors and hedge funds preferred to trade on the Singapore Stock Exchange (SGX), where NSE Nifty futures were also listed. With longer trading hours because SGX opened for trading at around 6.30 a m India time, the open interest positions on Nifty futures traded on SGX had reached close to the levels seen on NSE.
“Extending trading hours will improve liquidity and volumes in the market,” said Motilal Oswal, chairman and managing director, Motilal Oswal Securities, adding that the move could also help shift a part of the trading back to the Indian exchanges.
Asked about longer trading hours, a BSE spokesperson said, “We welcome the Sebi directive and we are well-prepared.”
Currency derivatives trading starts at 9 a m and ends at 5 p m, so extending trading hours to equity and equity derivative segment should not be difficult.
Market participants, however, said widespread changes would be required for exchanges to allow trading for eight hours a day. Banks that are involved in settlement, brokerages and exchanges could see an increase in manpower costs , executives said.
They said the risk and collateral management systems would need to be revamped. Further, trade margins would have to be increased and the infrastructure at brokerages, banks and depositories need to be upgraded to handle the additional pressure.
"Though it's a good move that will help us synchronise with the global markets, it may affect productivity because the time for analysis will get squeezed. It will delay the net asset value declaration of mutual funds by at least an hour," said a fund manager with a domestic mutual fund.
“It’s a very positive step. It’s just that market participants will have to realign some processes to deal with longer trading hours,” said Bhavesh Zaveri, head of wholesale banking operations and cash management products at HDFC Bank, the country's largest settlement bank.
An executive at a leading settlement bank said counters would have to open around 8 a m to allow brokers to move funds before trading started. Similarly, the Reserve Bank of India would have to allow real time gross settlement up to 6 p m instead of the 4.30 p m deadline at present, another banker said.
Further, exchanges would have to realign their systems to ensure that pay-in-pay-out files related to settlements are completed faster. At present, when trading finished at 3.30 p m, banks and depositories receive the information related to payments and transfer of shares around 8.30 p m. “This needs to be crunched because we would already be open for 12 hours a day,” said a bank executive.
In addition, a bank executive said entities that are not settlement banks would also need to work longer hours to deal with broker transactions.

source: business standard

nifty 2009 highs

2009-10-14T10:50:00.000-07:00

Nifty seems to have rebounded well from 4930 odd. What happened on Monday was phenomenal. The markets went down to 4955 and around 1:30 pm, it just burst up. I had shorted the market at 4980, but thankfully I had put a stop loss of 4990, which got triggered. The markets went up from 4955 to 5020 in minutes, and eventually closed at 5050. And that is where the current weakness seems to have ended. So far so good. Have gone long with some select stocks, lets see whether the markets hold up.

Sharp Rebound

2009-10-06T10:54:00.000-07:00

Shorted the nifty at 5030 yesterday, covered it at 4940 (luckily) today. So got around 90 points from Nifty. Now the level of 5070-5090 becomes very very important to see. If Nifty breaks over the 5070-5090 level, then I dont see much of a possibility of a break down. . .Trading on Nifty is becoming increasingly tricky, and although I made 90 points on the Nifty (and thankfully most of the calls I am making are more or less accurate) yet it is difficult to make money...so its not only important to know app what is going happen, but also use the right setups to ride profitably these trades. Like for e.g. day before yesterday, it was impossible to predict if Nifty would go down, yesterday it was still predictable, but if someone would have shorted yesterday and not covered today then there would have been loss instead of making any profit....

So where do we go from here...caution is very important...now more so than ever...I dont have the conviction to go long and nifty is not allowing to short for a long time...lets see will keep on posting if I find something interesting. And yes I sold off Paradyne (Glodyne) for no profit no loss...though its a multibagger, yet when markets go down, all stocks go down with it....lets hope Oct end is nice shopping time :)

Why you should be cautious in October!!!

2009-10-02T23:55:00.000-07:00

World markets have started to correct and we are precariously hinged on top...doesnt look good.

October traditionally has not been favorable in any case & this one doesnt look good anyways....

Yest the FII's bought a great amount of money (i think around 700 cr) and yet markets were flat, my fear is what will happen if they start to pull out. FII's put in around 20K crores in the month of Sep, so if they stop markets might not have the support to hang on where they are.

Chartically also we are not looking great, with RSI going above the danger mark and making a double top....the point is that its better to be cautious. . .specially now that the global markets have started to correct. . . .

Lets see where this series leads us....I wont be taking long positions until we break 5200....

A long term pick!!! Glodyne Technoserve

2009-09-21T00:45:00.001-07:00

This was one stock that I picked up a couple of years back. At that time it was called Paradyne Infosystems. Now the company has changed its name to Glodyne Technoserve. Well the good part is that i picked it up around Rs 70 odd but the bad part is I sold it off at Rs 140 odd...today the stock after 3 years is 750!!! (now with the split it is quoting around 390!!!

And going strong. . .

The good thing about the stock is as follows:

1) A high growth company, from 87 Cr in revenues in 2006 to more than 450 Cr in 2009.

2) A very lowPE: 5.86

3) A good dividend yield: > 10%

4) ROE: > 50%

Going forward this stock looks interesting and still looks cheap. . .

Risk Reward

2009-09-16T10:23:00.001-07:00

Its just been 6 months since march lows of 7500 on sensex and all seems forgotten! Just as there was all round gloom then, there is huge euphoria now. . .however perhaps the only saving grace is that still the panwalla near us has not started to give advice on stocks (which had happ at 21,000). Anyhow coming back to the markets, markets seem to be happy as ever. . .with individual stocks doing well. . .

I had bought Cummins back at 334, could not stay away from the markets, so had the good fortune to ride the 10% wave yesterday. Though I squared my positions today. . .Now I am looking for some less strenuous trade. . .

I have a hypothesis though. . . . . .in October sometimes, markets see a huge sell off. . .it happened last year, it happened in 2005. . .I am not saying it will happen this year also. . .but what if it does. . .I am planning on a strategy to ride it profitably, if it happens again. . .however a word of caution it is 2 times more difficult to make money shorting. . .rather than going long. . .anyways lets see if there can be a profitable trade somewhere. . . Also I am looking at the banking sector that has suddenly caught the fancy of the investors, specially the public sector banks. . .wonder why now!!! guess they deserved their due to for a long time . . .e.g. most of them were trading at a PE of around 4-5. with dividend yields of around 5%!!!

interesting times ahead. . .risk reward though does not feel right currently to go blind long. . .will post as soon as I get into some position. . .I just remembered the famous quote today. . ."be fearful when others are greedy and greedy when others fearful". . .

NHPC IPO

2009-09-06T07:31:00.001-07:00

Glad I did not invest in the nhpc IPO, since now it is trading below its issue price . . . Pls read my article I had written on the NHPC IPO. on 8th august. . .It seemed to be overly priced sp considering power is a dicey affair.

I am not trading now, squared my positions on Cummins and markets went up instead of coming down. Hence need to reassess where I went wrong... will do some paper trading till then or if I get hold of some real gem. Will keep you guys updated. . .

Good returns!!!

2009-08-29T23:23:00.001-07:00

Based on the last weeks calls, the returns are as follows:

Cummins @ 324; current price: 335 = Gain 4%

Ge Shipping @ 260; current price: 294 = Gain 13%

Siemens @ 484; current price: 509 = Gain 5%

Although I squared off my positions, yet I am happy that the stocks I picked, did moveup...Will let you know when I make my next move

Going Long!!!

2009-08-24T08:06:00.001-07:00

Bought

Cummins @ 324;

Ge Shipping @ 260;

Siemens @ 484

Lets see how it goes

Taking a forced break!!!

2009-08-23T09:11:00.000-07:00

Still taking a break, primarily because I don't see any good trades still. . .glad did not trade last week, as you saw the markets went down on Monday only to come back to the same levels by Friday . . .and in such markets its virtually impossible to make money!!!

Again scouted for a good trade, somehow still cant get my hands on a good one. . .Though I think after Fridays move, one would be inclined to go long only. . .and markets might go up. . .however I don't know how to enter them. . .I mean I am not able to find any good opportunity to enter. . .I have contemplated lots of strategy including bull spreads, buying NIFTY futures, selling puts, buying NIFTY BEES, even buying MF still cant place my hand on a favourable risk return ratio. . .

Lets see if I can see something more clearly would definitely scribble it down here. . .till then guess holiday time. . .

Valuations are not cheap anymore! But who can question liquidity

2009-08-16T06:06:00.000-07:00

I was just reading an article on a blog on how the markets have been a roller coaster ride throughout 2008-09, and the article beautifully summarised the feeling that the investors went through starting 2008 January. A feeling of euphoria, in Jan 2008, to a feeling of buy on dips in June 2008, to a feeling of let me put it all (but am i doing the right thing) in Oct, to a feeling of let me book my losses and I will never come back to equities in March 09, to a feeling of oh no did I miss the bus in May 2009. . .

I agree that most of us would have gone through this feeling, leaving perhaps some of the few who had the vision and the good luck to time the markets to perfection . . .well as far as my personal experience goes, I was not invested much in Jan 2008, I was mostly in cash. . .in June 08 I had started to invest but not much I would say, in Oct 2008 I put in all I had with the fall in the markets. . .(read my article I wrote in October) in March I also questioned my decision, however I remained invested (read my article I wrote in March) and well started a FD side by side (you cant have all the money in equities, this feeling dawned into me for the first time then). . .I stayed invested in May (obv trading positions) and gradually i have booked profits since then. . .but one thing is for sure, March tested my conviction in the markets as well. . .

Also I was thinking actually its very very difficult for an average investor to make money in the market, if you don't do your analysis well. . .If you don't trade with paper money first, if you don't know technical analysis, if you haven't seen a bull and a bear market (and hopefully survived the bear market) then your chances of making money actually start to dwindle . . .However even if you know all these one bad move can wipe you out of the markets. . .E.g. if someone had shorted NIFTY futures just before the election results. . .Lets say shorted 4 Nifty futures (which is not much for the fun of it, or lets say someones friend had advised him to short or someone might have got a tip! whatever might have been the reason) but lets say 4 Nifty futures worth 1Lakh. . .As the margin money for one future is Rs 25,000. Now with 35 sec of trade (which I am sure all amateur traders would have missed on the opening of the markets post election results) that particular gentleman would have lost . . .any guesses??? Rs 200*800= Rs 1,60,000. Now that is a lot of money to lose in 35 seconds. . .now to make that 1,60,000 would require a capital of 20 Lakhs (assuming you get a 8% return). . .Hence that'sthe end of our amateur investor who invested on tip. . .The point I am trying to make here is that for the average investor the odds are sometimes stacked heavily against. . .hence the decision to buy and sell should be taken with utmost care and guess the bottom line is that minimise your losses and book your profits. . .

Now where to from here. . .Closed my stock positions on Cummins and booked the profits.. . . Actually markets are in a range wherein they can go anywhere from here. . .there are no clear signs for the downturn however for the upside the valuations pose a challenge. . . I spent this weekend looking for some good buys, however could not even pick up a single stock that I would pick up blindly. . .some of the stocks look ok on valuation e.g. Siemens etc but again relatively speaking. . .and I dont like this feeling of not getting good bargains . . .Lets see what the next week has instore. . .

Position Vindicated

2009-08-11T08:04:00.000-07:00

As written in yesterdays post, that I am going long on Cummins, Cummins went up by 9%, good to see some profits trickle in today. . .Glad my stand stood vindicated with going long. . .

Nifty was a tricky Trade today!

2009-08-10T09:36:00.000-07:00

Well its not a pleasant feeling to be wrong. . .however it is important that the losses should be minimised. So at the start of trade I took some positions on the Nifty at 4528 however soon realised that the market was not obliging, I closed my positions at 4497, I had kept a stoplossof 4480 for today as I knew if the market breaks below Fridays close then it means that the Nifty is showing signs of weakness. . .Hence I lost 30 points on the Nifty, lesson learnt . . .( lesson of not to jump into trade within the first 30 min of trade).

Anyhow I think what broke the back of the market, was the announcement of drought, also the pandemic in the country would also perhaps weigh on the markets at some point or the other. Anyways the good thing I did perhaps today was to go long on stock. . .bought cumminstoday, however will have to be careful if the markets collapse, then nothing much would be able to stand the selling pressures. . .

What worries me is the huge discount between spot and futures. . .this basically means huge huge shorting has happened on the nifty futures. . .but this also means that if the marketsdont fall then there would be huge huge shortcovering and this might lead to a real swift rally on the upside. . .

I am not giving any directional call, since I am not sure the way markets would move. . .the charts are still positive. . .however the discount on the nifty does worry me. . .well one thing is for sure markets are supreme and they teach you that you would be wrong, so one needs to be humble and accept mistakes :)

NHPC IPO

2009-08-08T08:26:00.000-07:00

I am not a big fan of investing in IPO's, primarily because there is no clear vision in terms of earnings, or track record to follow. . .however whenever an IPO comes, there is a huge exuberance in the market and well almost all the people want to get a share of the pie. . . I clearly rem the reliance power IPO, wherein almost every one I knew had invested. However what has happened since is for everyone to know (inspite of the company issuing additional shares to people who had subscribed, which I believe was a very good thing). . . Not to mention issues such as Jet airways, DLF etc etc. . .which went below their issue prices.

The point is there are lots of good issues also that hit the market and are priced reasonably, however there is no track record of them or there is no technical analysis to fall back on, hence it becomes important to value them precisely. . .

Came across a nice article on the NHPC IPO , seems like an expensive IPO. . .but then I guess even this one is oversubscribed. . .

My Strategy for next week has been firmed up, would be going long. . .on selective stocks.

Profits booked at the right time

2009-08-07T11:05:00.000-07:00

As written in the previous post, on my other blog, profits booked at the right time. . .markets crashed big time in these two days. . .now where from here. . . well the charts have not gone into negative territory, infact I think it might be a smart time to buy for people who know what they are getting into. . I think the risk reward has become favourable ( but you must know which stocks you are getting into) although a word of caution it might not be the same for all the stocks. . .

My strategy for the next week is not firmed up yet. . . though one thing is for sure I wont go short. . . .will keep posting . . .

Do write in with your comments. Its always nice to hear your thoughts. . .

Money Multiplier!!!

2009-07-25T00:38:00.001-07:00

Well so markets indeed went up, I am glad they did. As written in my previous post, I had added more positions in GE Shipping, and well it paid off very well. GE Shipping closed with 5% up, and well thankfully now both my trades are in positive. . .Now what will I do from here, well ride the wave till it lasts (depending on the technical signals) but yes I would be cautious for how long to carry these positions. . .

However once the positions are closed and profits booked, where should that money be deployed. Well there are two thoughts to it. One add more positions or second invest that additional money to take unduly high risks (well so that the profits are unduly high. . .) I am not sure which strategy would I adopt, but I am inclined for the latter. . .This type of strategy usually comes in as a money multiplier strategy, as one is employing the money that has been made as profits well to earn super high profits . . .Well some of you might be wondering what these highly risky strategies are, for a starter buying naked options is one. . .naked options are when one buys calls or puts without covering the positions in actual stocks or futures. . .

Now where from here. . .my sense as written earlier Nifty seems to be comfortable at the moment. . .no heavy signs, no overbought situation etc. . .so one can breathe easy till the time new developments take shape. . .And as far my 2 stocks goes they have kind of entered an uptrend so the moves would be sharp on the upside (provided the broader markets hold)

One Trade positive, waiting for the other too!

2009-07-21T08:01:00.000-07:00

Well one of my two investments goes into positive. . .Cummins crosses 261, whereas GE Shipping goes into a downtrend. . .So added more positions for GE Shipping today. . .lets see whats instore for tomorrow. . .however one important thing to note is that even while trading, I only trade in stocks that are fundamentally sound and although my calls are based on technical analysis, I spend much more time picking up stocks based on fundamental analysis. Hence I had decided to pick up these 2 stocks, since fundamentally these 2 stocks appeared undervalued and when the correct timing presented itself, I went ahead and picked them. . .

For Nifty, I think this is just a small correction. . .if we can get over it without too much price damage then I think we are in for some surprise on the positive side. . .its been long overdue when the markets reach euphoric levels. . .just rem when was the last time that the newspaper headlines quoted markets make a new high. . .earlier I recall every 1000 points were cheered by the dailies. . .

Markets going up. . .

2009-07-19T03:02:00.000-07:00

Well, in my last post in www.Niftydaily.com I had written that markets going down is a happy scenario as it would present very good opportunity to buy, also I had written that the upmoves would be very sharp. . .well both the things happened, what did not happen was that the downtrend could never take off to present the investors with a buying opportunity. Hence this upmove was practically impossible to catch (according to me...). Now NIFTY is presenting a very interesting scenario, wherein the downtrend seems to have ended, and the upmove is about to begin. Now I think its very difficult to short, instead maybe its time to go long. . .but with a caveat, again being fearful of the sharp downmove. . .Hence this seems to be a little confusing time wherein no clear signal for a downmove is there and upmove looks more likely, however one would have to have some strict stoplosses. Well as a disclaimer, I have bought a couple of stocks GE Shipping and Cummins. Both these stocks I have bought from a fundamental perspective, since I think these stocks are quoting at very reasonable valuations and if the market holds then there is some good upmoves that can be expected. . .

Markets going down, a Happy Scenario !!!!

2009-07-11T23:17:00.000-07:00

Markets are going down on expected lines, well because of what? Well because of an old age maxim of wall street, buy on rumours sell on news!!! So the budget promised much but delivered little (for the markets) hence the correct time was to buy on the expectations and sell before the budget. . . Now all that is in hindsight, but I hope some of you might have read my previous article why-buy-and-hold-does-not-make-sense and booked some profits. . .at least I did (and am gloating over it). I also know that the markets will again give good opportunity to buy. . . actually there are so many strategies for the markets that its just not simple buying and selling of shares that one needs to do. . .one can play with any of the so many financial instruments available. . .so if ones money is lying idle you can buy debt MF to get daily income. . .If you believe that markets are going to go up, one can buy ETF (exchange Traded Fund), also there are sectoral funds to play with, then more so there are commodity traded funds, gold funds etc etc. . .If nothing else then one should keep their monies at least in sweep accounts. . .

Now coming to where from here. . .well markets have gone into short term downtrend, if thistrend continues then we might slip into deeper downtrend. . .although a word of caution, the turn around in the markets will be equally sharp . . .so one will have to very nimble footed to catch the upswing. . .

A picture of MACD of Nifty pointing out how we have slipped below 0 (A line below 0 indicates negative trend or the markets). . .The point is that the markets will give us a great chance again to play the upswing and downswing, its just a matter of timing and not getting caught on the wrong foot!!!

Buy and Hold Strategy, not so profitable anymore?

2009-06-20T05:19:00.000-07:00

Well we all have heard of the old adage of stock market, "buy and hold" and you would end up making lots of money, but does it really work? and does it work in all sorts of market conditions?

I think the answer to that is perhaps no. . .

Why? Here is a small analysis of why. . .If one had invested ones money in a software co in 2000 then it would perhaps take another 10 years just to get the return back. Nasdaq is still half of where it was in 2000! If one had invested in the year 2008, then one and half year later perhaps the value would be just half. . .now if someone even had invested at the time when the markets were at the way down, at 19000, 18000, 17000, 16000, 15000 even then one would still be having negative returns. Then also it is not that the stock that one had invested would have come back to the same levels. Some companies have performed very badly, the market conditions are very different. E.g. financial sector that was hot fav until a year back is not in favour anymore. Brokerages that were commanding 25+ multiples are not being owned even in single multiples anymore, and not to mention if one had invested in companies that have gone bust, then it is a completely different story. . .

So whats the learning. . . .The story is that the financial world has changed. . .with real time information the response times have changed. Now a news can impact a stock price in seconds. Now it does not take years for markets to fall, it happens in one month (what we saw in October) similarly when markets have to go up they can be on circuit and that's enough to increase the wealth of the shareholders in a day. . .

Hence it becomes important to set goals, keep strict stop losses, and if a trade becomes profitable then sustaining it till the time it starts to retrace ( I think a 20% kind of trailing stop loss should be kept). The age old adage of buy and hold is not completely baseless however it is important to review ones investments, cause things can change and as we have seen things change very very fast!!!

Time to Relook into your portfolio !

2009-06-13T07:01:00.001-07:00

Well i have come across lots of my friends who have liquidated their portfolios so that they can be in cash, cause this crash has shaken the confidence of everyone from equity markets. . .Well I am also in the same camp who have sold off their equity well but my reason is little different. I am not in the camp that believes the markets would go down, but I am in the camp of those who feel that risk reward is perhaps not so favourable anymore. . . and well its nice to take some profits off once in a while :)

I am just taking some time to rejig my portfolio, wait for the opportune time to enter and then try to make some smart returns . . .

Coming back to the NIFTY, the signs are still positive, the MACD is still positive indicating that Nifty is trading with a positive bias. . .the range for Nifty has moved up to 4100 - 4500. Hence Nifty is doing alright. . .but really cant say whether Nifty will move ahead of its fair valuation or retrace back some of its gains, however as they say you dont lose your shirt by taking some profits of the table !!!

Is the rally sustainable???

2009-05-03T04:40:00.000-07:00

Now with the rally in place and most of the people already forgetting the lows of March and October, things have started to look better. People are no longer talking about the markets heading lower, everyone is now talking about the recovery and how market might cross 3500 & possibly 4000. Well with due respect to all most people had started to talk about 2500 and then 2000 for the nifty when the markets were heading lower. The fact is that it is practically impossible to predict the markets when they are not in a trend shift phase. The trend shifting phase happened when the markets crossed 2800-2900 it was an easier call to take then that the markets would be seeing some good upmoves.

So where do we go from here? Currently we are in an uptrend, however the force of the uptrend has been diminished. We will remain in this uptrend until we go down below 3100. . .

A couple of pointers from my side why one should have some cash in hand.

1) There are down days when the markets have almost given up on most of the stocks, and stocks are available at crazy down valuations. These are the days when one employs the cash the return can be almost 100% within a very small period of time.

2) Indian election results, are a big factor that markets are awaiting. No one knows how the markets will behave after that. We all know that markets dont like instability.

3) Some stocks in the course of recovery have far outshot the correct price that they should command specially considering that the results are not expected to be great. Hence fair value is important.

4) Markets usually do not end the bear market in a V shape recovery. This is exactly what is happening, whereas actual results on the ground are getting worse!

So I think having some cash is the order of the day. If one is invested in the market then its nice to enjoy the upmove, with some stop losses in place. Its nice to take some profit off the table once in a while. Wait for the off days and if the markets change course again then wait for the real off days to enter the markets to gain some multi baggers. . .

Nifty Trading range moving higher !!!

2009-04-26T02:25:00.001-07:00

With the new upmoves on the Nifty the trading range has moved higher to 3000-3350. . .The red line indicates the trading range. . .Would be interesting to note if Nifty is able to maintain this range or there is a breakout or breakdown. . .

Nice Quotes

2009-04-19T00:43:00.001-07:00

A couple of nice quotes I came across:

In financial markets they say jokingly, when you can keep your head when all around you are losing theirs then probably you havent paid enough attention :)

In markets timing is as important as in comedy or jugglery

Choose Mutual Funds with care

2009-04-18T08:04:00.000-07:00

I had taken 3 MF before the start of this current rally . . .and the returns that I have got from the 3 are very different. I had just taken the MF's for the heck of it as my portfolio allocation demanded that I needed to have some proportion of the assets parked in MF's. . .

I took 1 Debt Fund & 2 Equity Funds. The 3 have given very different returns.

Debt -1.39%

Equity MF A: 10.45%

Equity MF B: 6.47%

and my returns from actual investment in equity are in excess of 50% during the same period. . .

Well so whats the point in here? The main thing to notice here is the difference in returns between A & B, since both are equity MF's. If within one month the difference in returns are as high as 4%, then it makes sense to pick MF with caution and perhaps as much research as picking up stocks. . .Also this scores home a point that investing in direct equities carries a much higher beta than investing in MF's. Hence if the market goes up then your portfolio will definitely outperform the market and vice versa. . .also another point is that Debt MF do not necessarily always give positive returns in the short term, hence if for a very short term the monies need to be parked then debt MF might give some surprises. . .

Enjoy the Upmove!!! It was high time

2009-04-04T05:45:00.000-07:00

Break out: MACD curve moving above 0, indicating positive trend has begun for the market!

In my previous post I had written that I was expecting some upmoves. . . But the strength of the rally was not something that many had anticipated. However I was happy as I had made some investments prior to that. But only in Cash market. I had taken Welspun, Indiabulls & GE shipping and the returns from them are 61%, 11% & 29% respectively in a matter of a couple of weeks!!!And also this is where investing in direct equities is much more of profitable game rather than investing in MF, provided one has a good understanding of the markets! For e.g. I had bought equity MF also during the same time and they have been able to just about break even in this time!!! I have set out to get decent returns from the market, and am trying to build a model portfolio that includes Equity, Gold, Debt, FD, Cash and MF. . . but I have kept the highest returns from Equity. . .so far so good. . .but I also know that when the reverses happen one has to be very very quick to get out of equities and that is the most difficult decision to make!!!

Well as I had written in my previous post that some of the stocks were available at dirt cheap valuation, and they would become long term assets, is probably coming true, as I donot expect (and hope) that some of the stocks would ever see the kind of levels they saw in the previous month. . .

Now where from here??? A good question. . .I think currently we are positive. One should ride this rally if you have invested, if not then its a little tricky situation. . .cause you dont want to invest when the market is at the top just to see your equity getting blown up in a couple of days. . .However if you feel very strongly for some stock then wait for the downmove day and one can invest a bit . . .However a good investment is always done when the markets are in a state of fear and not when markets are on an upswing. . .So look at the basics, see if you can make some sense of the technicals (as in this market there are a lot of cos that would still be negative and are an avoid) and then make a decision. . .

Expecting some upmoves. . .Its high time!

2009-03-21T22:57:00.000-07:00

The recent upmoves were quite welcome, considering that we had broken the closing lows of 8500 on the sensex. The good thing about this upmove was that the midcaps participated generously and went up quite substantially. . .In my last article I had written that it was a good time to buy stocks from a long term perspective. For E.g. It was indeed great to buy aWelspun Gujarat at Rs 45 (its a different matter I had the stock also at Rs 450!!! last January) but its difficult to fathom that we will get these stocks again at these levels!!! So once these stocks come into the kitty at these prices, they surely become long term assets. . .So in a weeks time Welspun has gone up by 40%, this is exactly the power of equities. . .

Trading with a positive bias should be the norm for the week ahead, also with the expiry coming in it would be interesting to note the market movements.

Time to buy some select stocks!

2009-03-11T06:49:00.000-07:00

I havent been able to write much in the previous month, part of the reason for not writing was that things were not changing much (in terms of downturn) from what I had written in my previous post. We were heading for a downturn and broke the earlier lows set by us. . .and well gold was shining all along . . .We still are very much in the grips of a downturn but I think now there are pockets wherein opportunities for long term investing are showing up. . .most of the stock are available at 1/10th the prices of January!!! If we were buying them at that price, nothing should stop us at buying them at a fraction of a value. . .If things improve (and eventually they will) then these would become assets. . .really high paying assets. . .

Some cherry picking can be done based on certain parameters that should be applied in such conditions:

1) Solvency of the company

2) Dividend yields

3) Management track record

and offcourse the price that you are paying for it (PE ratios) amongst others. . .

They say it was the worst of times and it was the best of times. . .guess this axiom applies more than ever!

Markets all set to retest lows

2009-02-17T08:14:00.000-08:00

The upmoves are coming when least expected and downmoves are strong and severe wiping off the gains made in no time. . .and it does not look good. I had in my post yesterday that charts are pointing that some indicators are positive yet I would not advocate F&O position as the downmoves are very swift. . .now the realty has hit us. . . all this while the rally was looking very very unconvincing, and now all that has ended. . . the sharp downmove today is a precursor for worse things to come. . . I wont be surprised if we break the all time lows set in October. Now I would basically look at 2550 on the NIFTY and 8000-8500 on the sensex. . .if that breaks then NIFTY can be headed much much lower. . . I am also stuck with some cash positions but its not too much of a worry as these are cash positions so one can hold on. . . this was the precise reason why I was not venturing into going long on the futures ( though I covered my shorts a bit too early :( )

Well lets hope for the best, but very frankly there is nothing to look forward to . . . hmmmexcept gold obviously :) ( Do read up my article on gold, i wrote on Jan 31.

Markets Rally, treading with Caution

2009-02-14T08:03:00.000-08:00

OUTLOOK: CAUTIOUSLY POSITIVE

The rise in the markets has come as relief to many, and surprise to some (including me...)! The surprise has come as the outlook for the world economy is bleak and any rally at this point makes little sense. However something interesting seems to have happened. . . whereas the world markets continue their journey downwards with Dow breaking the 8000 barrier on the downside, our markets rallied!!! Does this mean we have started to decouple from the world markets? Cant really say but it will happen one day for sure, with enough money coming from domestic market rather than FII's. However I am not too sure whether that is going to happen in the near future. . .

So where do we go from here. The technicals have become positive. . .so its time to be long. . .but I have one fear, the markets when they head down they come down with heavy force, so I am not fully convinced with taking positions in F&O. Hence it might not be a bad idea to play little by little in the cash market for a 20-30% kind of a trade, with some good stocks. Yesterday I bought some TISCO, RELCAP, GE SHIPPING for a 20% kind of a trade. . .lets see. . .but one will have to be nimble footed if and when the markets trace back. . .till then enjoy the ride I guess. . .

Gold a viable asset class. . . To outperform

2009-02-01T08:03:00.000-08:00

Now with the US facing its worst economic problem since 1929 or perhaps worse of all time, it is important to note certain things:

1) US economy is the world economy's engine of growth if it stops then world economy stops to grow. . .

2) Not only US but Europe are in deep trouble. . . and Japan has been in a trouble now for 30 years that makes it worlds top economies in trouble all at the same time. . . this is not good news.

3) The banking and financial industry have collapsed in the west, this has never happened before as earlier there were industries that went bust but never the support for these industries i.e. Finance industry itself. . .

So what lies in store moving ahead. . . Governments all over the world are using the available options to them, namely on the fiscal front by creating newer projects and secondly on the monetary front by printing in more money . . . and printing in more than ever before. . .not exactly knowing what the impact of printing money is going to be in the long term and worse not knowing whether printing money would finish this crisis in the first place. . .However what this printing is leading to is lot of side effects associated with them. . .One for starters that we see is currencies of these countries heading southwards. . .U.K being one prime example wherein a pound has touched an all time low and in my opinion should fall even more. . .

Currently we are insulated from the monster called inflation as commodity prices have crumbled due to recessionary fears and fall in demand, however with so much money going into the system, inflation might come back with full force (not necessarily in India though, as we have been cautious in our money printing). Also major economies do not have too much flexibility with respect to the interest rates are currently the interest rates worldwide already are near zero (India again stands to gain again as we still have lot of space to maneuver on the interest rates). With so much money sloshed into the system, countries would tend to focus on 'real assets' or gold standard. Gold would tend to outperform, with more and more money getting printed in the system. The first signs of this are already visible with gold touching unprecendented heights lsat week. . . Hence when rejigging ones portfolio it is important that due attention is given to gold . . .

Nifty Upmove Sharp and completely unexpected

2009-01-31T01:34:00.000-08:00

The recent upmoves of Nifty, have caught me completely offguard. . . infact our markets have quite outperformed the world markets. . . the upmove has been surprising but now important thing to note is that we have now tested 2550 and it has held up quite nicely. . . infact this time it did not even reach there, it came back from 2650 abouts. . . I also got stuck with shorts in this upmove :(

now that the upmove might start with nifty holding for a couple of days. . . its time to take stock. . . currently I am not fully convinced with the upmove hence I would stay on the sidelines or at best take positions in cash markets . . . its best to sit out when you are not fully convinced . . . lets see how the markets behave next week . . .

As of now no directional calls from my side.

Markets heading down again!

2009-01-24T08:10:00.001-08:00

Now that the downtrend has its claws firmly in place, its time to take stock again. . .My biggest fear still remains the earlier bottom of 2550. . .which i suspect will not hold also. . .Because as I have mentioned earlier if we break 2550 then it means a long phase of finding a new bottom, then retesting the new bottom and then moving up!!! Phew long process!!! Alsotheres now a talk of Nifty touching 2000-2100, well I dont buy into that as no one can predict the levels accurately, its just the direction that one can give, hence currently the trend is down, but where this will lead to is anyones guess . . .

I have been reading articles on various financial portals and most of them are of the opinion that the world economy is just getting into the worst phase ( I hope they are wrong!). . .but if that is indeed true then it means that markets have another 20-30% more to go from here on the downside. . .Anyhow the charts are currently indicating that we are in a negative zone, the negative zone basically started from 9th of January and it looks like this current downtrend will last till the expiry at least. . .we might see some small upmoves but till the time Nifty decisively breaks 2750, even the small uptrend will not hold. . .

Stock movement - When will we regain old highs

2009-01-14T09:10:00.000-08:00

Today I was seeing an interesting interview with Shankar Sharma on CNBC, he made some interesting comments not all them were comforting, but most of them made lots of sense. . . although his views were connoting extreme bearishness and I hope that things wont be soextreme but none the less he has been the only one who has been able to predict the markets accurately this year. . .

Some of the main takeouts:

1) COMMODITY CYCLE OVER: some of the heavy weight commodity cos may show long periods of no significant earnings increase or even losses. Hence companies like TISCO, RELIANCE, SAIL might be risky to hold going further

2) NEW HIGHS NOT TO BE REACHED TILL 2-3 years!!!: This one even spooked me. So according to him we might see some rallies here and there but to take out the earlier tops of 2008 begining, would not happen till 2015. . .scary no?

3) MARKETS MIGHT SEE SOME STRONG RALLIES: There would be some rallies in between that would give the investors a 20% kind of returns from the absolute bottoms. So if you are smart enough to trade there might be some opportunities.

4) BUY ONLY LARGE CAPS IF AT ALL: Stay away from Midcaps completely, trust only the biggest of the names.

5) STAY AWAY FROM EQUITIES: and real estate also. . .

Well this is a gloom scenario, and I earnestly hope that things are not so bad, but if it were then we should be ready for some really tough times. . .

Satyam has spoiled the mood

2009-01-12T06:38:00.001-08:00

Outlook : Negative

With todays downmove starting it seems that this might be a precursor to the things to come. Todays trade was significant in more ways than one, as markets were not giving clear signal of its direction. However the mood was already spoiled with Satyams disclosures. I must comment that our markets were quite resilient to external factors and was taking everything in its stride till Satyam came along. The problem with Satyam is that it shakes the entire foundation of belief in stock markets, it makes it not fair for all game and people do not like that.

My only fear is that in this downmove we should not break the October lows else we might enter into a period that will take a long long time to correct. Also another point to note is that our markets are usually not favourable in the result season. With the results expected to be bad this year in any case, the markets might already have started the downturn.

So how do we trade this market. Keeping strict stoplosses does help. Buy only when you are sure that the valuations are compelling and screaming and yes keep only the quality stocks, wherein the managements are credible.

Accumulation / Distribution an important indicator

2009-01-04T07:03:00.000-08:00

Now that our markets seem to have stabilised, and thankfully my calls went right :) its time to do a revaluation of the current scenario. . .

Most of the stocks are now trading in their positive MACD's which basically means that the short term trend for these stocks is positive, but the important thing to understand is which of these stocks would outperform. . . I think an important criteria to look at this point of time would be the accumulation / distribution criteria. For e.g. A case in point would be the 2 stocks I own. Indiabulls and Zylog systems. . . Whereas Indiabulls has started to show a good accumulation pattern and it has reflected in its price moving from a low of 77 odd to around 140 within a span of 2-3 months. . . whereas Zylog has not been showing any such pattern and the stock price also has not moved beyond the 100 odd, from a low of around 80 odd. . .

Going forward, there are a couple of things that should be kept in mind:

Fundamental Perspective:

1) Earnings estimates: Assured earnings and some growth

2) PE & EPS : Realistic wrt Industry and markets in general

3) Dividend yield: If it comes to levels above the risk free interest then the stock has to be a good buy. I would keep it at around 10%

4) Stability: Low leverage

Technical Perspective:

1) MACD: Should be positive or atleast moving out of negative territory

2) Accumulation / Distribution: Need to be accumulation patterns

3) RSI: Should be within reasonable limits.

Markets to move up....last leg of bear market?

2008-12-19T21:42:00.000-08:00

OUTLOOK: VERY POSITIVE

Now with the Nifty and Sensex up in the green (on the charts), some happy times should be here....Specially considering that this uptrend is coming after a long time. The last uptrend that we saw was on 29 th of July, and it did not last for a very long time, lets hope that this uptrend lasts longer...

MACD : Just getting above the zero into the positive territory

Also as I have written in my many previous posts some of the stocks have already seen there bottom and now have started to consolidate, this can mean that smart money could be finding its way back into these stocks....

As the classical definition of the last leg of a bear market goes: " When the markets would not react to bad news, and latch onto any good news to move up".....this definitely seems to be coming true wherein the bad news of IIP nos was shrugged off by the markets and the good news of inflation coming down was lapped up by the markets....

Its time to be cautiously optimistic at last...keep an eye on MACD, we need to trade above 0 to remain in the positive zone....

More Downside to Come???

2008-12-13T08:54:00.000-08:00

Although most of the analysts are unanimous with the earnings downgrades, there are only a handful who are actually putting their hands up and quoting levels for the markets. Earlier today I was reading an interview with Shankar Sharma, wherein he is predicting a 20-30% downlevels from the current levels for the market!!! Some excerpts of his interview as published in moneycontrol.

"Markets will not discount this substantial slowdown in advance so I reckon somewhere in the middle of the month i.e. this month the market will begin to get a sense of how bad their numbers are going to be. I wouldn’t be surprised if a few major companies across the world came out and issue earnings warnings that they are not going to be able to meet the numbers that they had forecasted for this quarter. Therefore we see the market beginning to sell-off probably in the middle of December and this could continue I reckon to the middle of January or end of January."

There are some reports emenating from the US that the recession fears are getting stronger than ever before, and this recession would be the worst that the world has seen after WWII. As published in an article in the bloomberg:

The U.S. economy may be headed for its deepest and longest recession since World War II as mounting job losses take their toll on consumer confidence and spending.

"Employers cut payrolls last month at the fastest pace in 34 years as the unemployment rate rose to 6.7 percent, the highest level since 1993. The 533,000 drop brought cumulative job losses this year to 1.91 million, the Labor Department said yesterday in Washington. At 12 months, the recession is already the longest since the 16-month slump that ended in November 1982. The recession is the 11th since a downturn that occurred in 1945, the year that World War II ended."

Another factor that needs to be kept in mind the rising US dollar. This is not particularly good news for the developing economies, whose currencies are falling in sync Vs the US dollar on a rapid pace. Hence till such time that we see a cooling off the US dollar or atleast stability there seems to be slim chances of EM's recovering swifty, add experts.

Sensex Analysis

2008-12-06T07:17:00.001-08:00

OUTLOOK : POSITIVE

From the looks of it, we might be out of the woods, if we can have a couple of days of decentupmoves. The upmoves of the past few days has ensured that we are close on the charts ofpositive territory. Now with the news flow of the rate cuts coming in, the markets should gain some traction. Until there is a sharp downmove, we can safely assume that we would be out of the short term bearish trend if we close in the greens for a couple of more days!!!

What needs to be seen now would be whether the FII selling subsides (which in any case it does due the Christmas break abroad), and if it does then there is enough domestic money waiting on the sidelines to take the markets up in a hurry. Only a cap of caution being the quarterly results which are not expected to be good...If we can have some decency on that count also then we can safely say that we might have seen the worst behind us.

As written in my previous posts, last series has held up well, and the retesting and holding of the lower levels of around 8500 have augured well for the markets. Now with the tripletesting of the bottoms, we might have formed a base from which we can aim for higher levels. . . provided that the levels of 8500 hold up. Also a couple of other factors seem to be in the favour are, that we have started to trade above the Moving Averages line and if we can trade in this region for some more days, not giving up the gains then we would have firmly gone out of the bear phase, at least for the short term.

MACD: slowly trying to get into positive territory, now left with just some more ground to cover

image courtesy:indiabulls

Sensex outlook

2008-11-30T02:03:00.001-08:00

Outlook : Neutral

MACD: Moving up from the lows set in October. Still not in the positive territory. Till the time it does so it cannot be said that the movement has turned positive

Stochastics: Till such time the red line is above the black line it indicates short term strength.

With the market not doing anything for some days perhaps its not such a bad thing after all. We all get to hear about periods of consolidation and markets not falling, well for some days we have experienced something like that. Interesting thing to note what exactly is happening in the Accumulation / Distribution patterns. What this means is that if the accumulation chart patterns are showing accumulation, then it means that smart money is accumulating stocks at these low levels. However this not true for all the stocks as some stocks still are showing distribution.

It comes as a relief, that the markets did not collapse on Friday and the series went off peacefully. I had taken a punt in my post on 8th Nov, that the series might be able to hold its own for this series and thankfully it did. It did not sell off, the way it has been doing...so does it guarantee that we are out of the woods? Well not really...we still are in the negative territory,MACD is still showing negative diversion, we are still trading at below the Moving averages curve so it is still it is not happy days for the markets...

Now with the new series starting, it would be interesting to see whether the individual stockshave started to show accumulation patters, that would indicate that smart money has started to accumulate stocks...If not then we might have somewhat lower to go...But for that to happen first the lower bottoms have to be broken and that is a glimmer of hope for all of us...On the positive side if the accumulation has started to happen, then we might see another positive series, that would mean that shares would start to see positive gains and some traction would return to the markets. It is difficult to predict the movement currently for a long period, as we are in a no mans land right now...

SENSEX BOTTOM?

2008-11-23T07:06:00.000-08:00

In my previous post I had written markets might retest bottoms, and that is exactly what happened. The markets touched 8400 odd whilst last time on a closing basis they had touched 8500. The good part is that the bounce back happened from these levels, which in essence means that if we can hold this bounce back then it might spell an intermediate bottom for the markets. However if these levels are broken then its an all together different matter of markets collapsing further down. Lets hope that we can hold these levels, and bounce back from here. The closing of the markets was a positive signal with the markets closing at the highest point of the day, also the American markets provided some good news with an impressive close on the Dow Jones....

Also another interesting fact is that when we moved up from 7500 levels to 10,500 odd levels a gain of 40%, this was achieved in 6 trading days, however the fall from 10,500 to 8300 has been achieved in 10 days and the 11th day saw a bounce back. This might be an indication that the rush to the bottom is slowing down a bit!!! Although the momentum charts are trading below the positive territory still it is trading at a level of around 85, whereas in the earlier weeks it had touched levels of 75, indicating a strong negative trend. (anything below 100 shows a negative trend, with the trend gaining momentum on either side the index trends away from 100. E.g. a 60 is a very strong negative trend, whereas a 110 is a medium positive trend. 100 is flat trend).

In the meantime, the news continues to be mixed, whereas now fears of Citibank getting into trouble has started to surface, along with GM and Ford, at the same time there have been voices of a stimulus package coming from Indian Govt coming are becoming stronger...so its a mixed bag, but lets hope that this contagion does not come into Indian companies...

So where do we go from here, if the markets fall below the 8500 levels convincingly on a closing basis, would mean that we would have made a new bottom. That would mean that we would go down further, then possibly bounce back, then again would retest the new bottom, and then if that new bottom holds then the markets would start to stabilise....whew!!! nowthat's a long process...however if this bottom holds then it would mean that we would seen the bottom for the time being and the markets can start the rebuilding part...

Sensex to retest lows?

2008-11-14T21:57:00.000-08:00

Now with Europe officially getting into a recession, Hongkong also there and USA showing the lowest ever retail sales data, the picture is not exactly perfect..With the markets rebounding from the lows of 7600, and going upto 11,000 the journey back of the markets has now started to look little scary. Although there is nothing on the charts that suggests that we are capitulating, its the individual stock prices that are nearing their 7600 lows that is begining to worry me...Also now as the stock prices are again nearing their bottoms suddenly they don'tlook so attractive anymore, guess its a function of their earnings also. However as stated in my previous posts, that for any bottom to happen the markets have to retest the previous lows and only once that happens do we see a recovery...markets still have to retest the bottom and stop there!

On the technicals side today's day was not particularly good as today was the day when we broke the recovery uptrend on the MACD that we had nicely established. Again from the charts its virtually impossible to predict tomorrows setup as we are not on the extremes, but the news flow is negative and that is not concerting....

Its difficult to invest in such times, specially when one knows that if one is playing in the derivatives markets its much easier to make money there by going short or by selling covered calls rather than making long investments in stocks...Lets hope for the best, that this series is able to hold its own, else we are entering troubled waters!!!

To go Long or Short? Tricky Call...

2008-11-08T04:55:00.000-08:00

Markets are still showing a negative MACD curve, but the good news is that the negative MACD is rising fast to come into the positive territory...Once the MACD moves into positive territory then what I have observed is that usually the stock momentum goes up and stocks start to see some meaningful gains! As I have written in my previous posts that some of the stocks seem to have seen the worst for them. .. Also another interesting thing to note is that the recovery in NIFTY was very meaningful...For e.g. I had bought TISCO at 152 odd and saw some 50% gains over the next one week, though its a different story that it has retraced back a bit, but still it is still at 20-25% gain!!! similar is the story with other stocks that have gained smartly in this pullback.

Now the point to note is that how does this series go...from the indications it doesn't look like that the series is breaking away on the downside immediately. The signs are looking alright, and my punt is that the series might hold its own. However that does not take us out of the bear market that we are witnessing...so waiting and watching is the best policy with perhaps a tilt towards being cautiously optimistic for some days...

I am currently not trading in F&O for some time now, but I am sure there would be interesting opportunities like buying or selling straddles or collars to play with now, rather than taking unidirectional positions...

Futures and Options and Sensex

2008-11-01T22:05:00.001-07:00

Its nice to be right ! When you predict that the markets are going to go a particular way and markets oblige ! If you see my previous posts on 27th October and 11th October, both predicting an upmove, we indeed went into an upmove from the very next day... Actually in technical analysis it is much easier to predict the short term bottoms than to predict the tops...so it was not too much rocket science predicting the bottoms...but yes it indeed feels nice, to be a good student of the markets...

If you notice that most the upmoves and downmoves are based around the series of F&O. So once the series are over on the last thursday of every month, the positions are cut and new positions are built, which I am sure have a lot of role to play how the markets behave in the next series. For e.g. once this series got over on Wednesday we have started ourupmove...and this phenomenon is noticed across many series as well...a word of caution though that in many series a trend that starts at the beginning of the series gets reversed after the first 5-6 days!!!

So is the worst over? Well its very difficult to answer it...if you read the newspapers or hear the experts on TV, all of them seem to be indicating that the worst is yet to come. However what I am worried about is some of the statements coming from the worlds leading institutes predicting that the worst might be over for the developed countries but the worst is yet to come for the emerging economies!!!

From an index perspective, we still are in a negative trend!!! and it will take a lot to get out from here...infact we cannot say that we are out of the woods till such time we test the bottoms and the bottom holds....now with the RBI's move of cutting repo rate the markets are expected to take the cue and rally for some time, however till the time we are over 3100 on the Nifty we would not be even in a small uptrend...so these small sharp rallies need to be played but played with a lot of caution...infact I think its a nice time to rejig ones portfolios and start building some nice solid portfolios, that would give long term results. For e.g. in my previous posts I had written about TISCO, which was trading at crazy valuations at 150!!! This would have meant that if one would have picked TISCO at 150, he / she would have got 11-12% risk free dividend income throughout !!! no wonder that it bounced back 40% from those levels within a couple of days (as such valuations do not last for long). So its time to enjoy the uptrend as long as it lasts, and perhaps hope that the levels of 7600 are not breached, if and when the markets come to retest the bottoms!!

Best time to BUY Stocks...All Out!!!

2008-10-25T22:30:00.001-07:00

Its time for an rebound again...strange as it may sound, we are ready for a rebound...Now the word of caution, last time we went into an rebound on 10th of October, it lasted only 2 days...but during those 2 days we rallied by 10%. The reason is the oversold technicals which are warranting a rebound immediately...but the question that is more important is have we made a bottom? Well that is a question that is practically impossible to predict. However what needs to be seen is that when we make this recovery and come back to test the bottoms, will they hold, or would we slip further...Thats a question again I dont think is possible to predict.

From a fundamental perspective, as I had said in my earlier post that some of the individual stocks have bottomed out yet, index stocks might still have some more time to go. For arguments sake, if you take dividend yield as a parameter, then some of the mid caps seem to have bottomed out with a PE of around 4 and a dividend yield of 8-10%. So for e.g. a reliance currently is holding on at 7-8 PE and less than 2% Dividend yield!!! So just imagine if big boys correct to 8-10% dividend yield, then how much more they would have to fall!!!

But good news is that spectacular valuations are emerging, with dividend yields actually going above 10%. A case in point being TISCO, with dividend yield of around 10% and a PE of around 2!!! So if you build your portfolio carefully, cherry picking good stocks now, over a period of 5-10 years these stocks would give you super super returns with great mouthwatering tax free dividend earnings...Lets take an e.g. if today you bought TISCO worth 30,000 then you would get roughly 3000 Rs worth of dividend this year. Now assuming that TISCO's earnings grow by 15% yoy and the same PE holds (which is abysmally low currently) then after 10 years, you would have a stock price of around 600 Rs and you would have got dividend worth Rs 60,000!!! Now adding all of it up, you would have made roughly 1,60,000 (1,00,000 by worth of stock price and 60,000 by dividend) hence you would have made more than 5 times in 10 years!!!

Hence it is critical not to lose sightof where we are and what valuations are staring us in the face...

Its time like never before to invest...but invest wisely and invest in what you know!!!

Bear Market Stocks - should you buy on rallies?

2008-10-19T00:27:00.000-07:00

I had raised a question in my previous post that do, Do bear markets end in a V Shaped recovery. The weight of evidence suggests otherwise, and hence the rally that we saw a couple of days back just fizzled out and we are again at new lows. Another interesting point I came to know, is that bear markets usually see the highest daily gain rallies in absolute and percentage terms. This is a peculiar characteristic of the bear market. And we indeed saw the other daydow gaining the maximum points in a single day. . .

However what is disconcerting is the fact that bear markets take a long time to go away and intermittent periods are marked by rallies that are 'fake'. I use the word 'fake' because these rallies are sharp upmoves and they show promise that the bull market is back, however the only thing that they end up achieving is lower bottoms. These rallies fizzle out after 'luring' the small investor only to end up in an even more severe downmove.

There is empirical evidence to show that in the great fall of 1929, markets went up 3-4 times till 1932, in rallies that were as high as 40%, yet every time in those 3-4 times, the markets made newer bottoms, and this continued till 1932, infact there were 6 false bottoms that were made before the final bottom came at 80% off the highs!!! And not only that it took the markets until 1954 to come back to the highs of 1929!!! But then that was the great depression, we are no where near a depression, infact we are not even in a recession....and as the common saying goes,

'when your neighbour loses his job, its recession...when you lose your job, its depression'

So where do we go from here, seeing the technical parameters, we are nearing a rally or a bounceback from these levels, the bounceback might come soon (if we have a sharp fall of lets say 600-1000 points in a couple of days) or it might come after 3-4 days of slow grinding down, or it might come even without any of these happening...but the point is that we will not see for sure a downturn without going up! My worry more is that how long will this rally sustain and more importantly will we fall further like the bear market rallies do!

If we go by the historical bear markets, they tend to last anywhere between 18-36 months, and we are still only 10 months into it ...and thats not comforting news...lets hope that our earnings growths will take us higher...

When will this bear market end?

2008-10-12T01:08:00.000-07:00

As mentioned in the previous post, a technical bounceback of the sensex is on the cards imminently. As all the technical parameters are also showing an oversold scenario. With the US markets ending their losing streak on Friday, Monday onwards we can expect some traction in our markets as well...Not to say that we cant fall further but it would be preceded by some gains on the indexes. It is also interesting to note that stocks (even some mid and large caps) have started to quote at dividend yields of 10% +, that basically means a 10% return with appreciation on capital (assuming cos keep on growing) For me personally, Friday was the day of shopping, wherein good opportunities were available at very very reasonable rates. Also another point to note is that not all stocks would bottom out at the same time. For e.g. SBI had formed a bottom at 1000, when the markets were at 12-13000. Now with the markets at 10,500 SBI is sitting pretty at 1350 odd. So if one sees value it might not be such a bad idea to nibble a little..... carefully though!!!

Bear Stock - How to invest in a bear market

2008-10-06T19:55:00.000-07:00

With the stock markets crashing and falling like 9 pins, some of the stocks have reached levels that are simply mouthwatering. Its a phase in the market that is both exciting and involving. Exciting as there is a good potential to earn super returns and involving as you have to make the right choices. Its no longer a blind game, wherein everyone from your driver to watchman was recommending stocks, and making money!!!

Now with PE's losing their meaning there are 2 fundamentals one should look at:

1) The company should be stable and not look like it will close down.

2) Look at the dividend yields the company is offering, this is essence means an indirect comparision with the PE's of the company.

A small e.g. will make it little clearer. . .Company X is quoting at a price of 100, with EPS of 20, this implies a PE of 5. It gives a dividend of Rs 4 per share. This in essence means that every year you would be getting a return of atleast 4% even if the price falls. In my opinion the further the price of shares fall, more attractive their dividend yields become. And there comes a point wherein the dividend yields actually surpass or become very close to the market rate of interest and that is the time to buy equities heavily.

Currently there are some stocks that are quoting at dividend yields of around 6%-7% also. The trick is to identify such stable companies. My personal favourite is brokerages. Some of the stocks such as India infoline and Indiabulls etc are quoting at good dividend yields however some of the PE's like that of India infoline are still higher, hence it makes sense to analyse both the parameters before entering into a trade.

Best & Worst Performing Sectors of Sensex

2008-10-02T09:41:00.001-07:00

This post shows how various indices have performed over the last 6 and 9 months.

It is interesting to see that Realty sector is the worst performing whereas FMCG has been the best performing with returns of 6%. This clearly shows that why defensives are considered safe when the bear market is there, whereas the biggest falls are in the sectors which had the largest froth. e.g. Realty and small caps.

*TRADING PLACES*
	*Local trading hours (a m to p m)*
	*Cash*	*Futures & Options*
New York	9:30 to 4:00	6.00 to 5.00*
Singapore	9:00 to 5:00	9:00 to 5:00
Tokyo	9:00 to 2:00	9:00 to 7:00
London	8:00 to 4:20	8:00 to 9:00
India (now)	9:55 to 3:30	9:55 to 3:30
India (soon)	9:00 to 5:00	9:00 to 5:00
Source : Bloomberg * 23 hrs