Somehow the Stimulus Package sounds vaguely x-rated but since I couldn’t answer if it would make it through. I decided to find out more importantly if it would actually work. So here goes.
So a stimulus package passed the house and senate but will it help the economy? I had to ask. Here’s the horary chart.
I think the answer to that question is complex. It looks like because a lot of time was wasted and the initial bail out was such a failure, we will have a period of serious hardship in which this new stimulus package won’t be able to do much to bail us out of our problems. There will be a further tightening of the economy, more job loss and more erratic stock market reaction, both overly optimistic and inflated and then days where there will be serious losses. However as this chart progresses the ultimate answer is yes. This package will eventually change the economy for the better, and probably set in motion other smaller bills that will amend and help this behemoth. Again the next couple of years will be tough. It will take some time for this package to actually have a real impact on every day people. And chances are it won’t be enough all by itself, but it’s a good start, one that should have happened weeks ago. If it had we would have seen a much more dramatic and immediate recovery but as it is there have been many compromises (again) that will drag it down and slow its ability to fully help the economy.
The Indian market opened weak note on weak global cues but Market try to cover in mid session but not able to sustain at higher and saw selling pressure and close in red zone . For coming session if nifty close below 2870 levels it can test 2710-2680 zones .On the other side 2970 will act as resistances zone .BUY Punj Lloyd Stop Loss 92 Target 125
SHORT SELL IFCI Stop Loss 23 Target 17
SHORT SELL DLF Stop Loss 162 Target 125
SHORT SELL GVK Power & Infrastructure Stop Loss 24 Target 18
SHORT SELL IFCI Stop Loss 23 Target 17
SHORT SELL DLF Stop Loss 162 Target 125
SHORT SELL GVK Power & Infrastructure Stop Loss 24 Target 18
Simply trade the channel tops & bottoms...Two days of up moves followed by Six days of corrections & again after two days of up moves and so far 3 days of corrections on..
2820 is the critical 20DMA & the channel bottom.
2918 is the 3 dma & the likely resistance during this corrections.
2855 is the 10DMA which might offer minor supports.
Use the cues from the world mkts and trade those small points till 2820 is broken decisively(for tomorrow) or 2980-3050 targets are achieved. I would buy near 2855 & 2820 as per intra TA and then sell near 2900& 2920 till the next big move happens.
US markets are closed on Monday for "President's day".....Indecisive till then..?
kindly read the graf and instructions written there............
kindly read the graf carefully.....do this call as positional............exit at stoploss is must.........book the profit in 25% slabs on respective tgt spot levels given in graf..
Market may open down. Market would be volatile . Market may up between 11.09 and 11.32 Market may steady or up side between 12.01 and 12.27. Market may close at down or near to previous closing.
SHARE YOUR THOUGHTS! LEAVE A COMMENTS
Prediction Came True :
We had predicted Stock Market will under bearish trend after 15th February 2009 in Website.
;)
![[recover.gif]](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-jJrJ_KqxvvKUGaLvlkVmZJ7ZN4XgB5WbxgNYmA5A5hLlCCj86lGs_xPEuLbegoIlqkguTkyCW9h2uNtNlEBtwrjH7nAeKhMpgekRRZ7NQ8ZLP-ddtV-efPl1BhzlyvBe5H2Xh76N7Amx/s1600/recover.gif)
Opening Bell Call
Buy
SUNPHARMA - Sun Pharmaceuticals Industries Ltd
HINDUNILVR - Hindustan Unilever Limited
POLARIS - Polaris Software Lab Limited
ROLTA - Rolta India Ltd.
TANLA - Tanla Solutions Limited
On 11th February 2009 - The BSE Sensex closed at 9618 (down 28 points) while the NSE Nifty closed at 2925 (down 8 points).
Opening Bell Call
Sell
TATASTEEL - Tata Steel Limited
ABIRLANUVO - Aditya Birla Nuvo Limited
TECHM - Tech Mahindra Limited
RCOM - Reliance Communications Limited
RPL - Reliance Petroleum Limited
Technical Analysis for 12th February 2009
BSE-SENSEX - Major Support - 9538, 9502, 9444, 9386, 9291, 9197, 9102, 9008
BSE-SENSEX - Major Resistance - 9575, 9633, 9691, 9727, 9764, 9858, 9953, 10047
NSE-NIFTY - Major Support - 2901, 2889, 2871, 2853, 2823, 2793, 2763, 2733
NSE-NIFTY - Major Resistance - 2913, 2931, 2949, 4961, 2973, 3003, 3033, 3063
2820 is the critical 20DMA & the channel bottom.
2918 is the 3 dma & the likely resistance during this corrections.
2855 is the 10DMA which might offer minor supports.
Use the cues from the world mkts and trade those small points till 2820 is broken decisively(for tomorrow) or 2980-3050 targets are achieved. I would buy near 2855 & 2820 as per intra TA and then sell near 2900& 2920 till the next big move happens.
US markets are closed on Monday for "President's day".....Indecisive till then..?
Nifty :: As per our yesterday post Nifty constantly face resistance at higher level.. Nifty and Sensex both exactly correct near 61% level ..Bulls try to hold strong support zone but unable to give thrust for up swing breakout.. Now most important support for 13th Feb at 2877 once break this support watch next strong support 2832/2825.. Close below 2825 next strong support only at 2774/2715.. In one level above 2897 momentum seems up below 2897 momentum down.. Still overall structure is bullish and that’s why avoid selling near strong support..Our strategy for 13th Feb above 2877 buy on deep (S.L 2877) sell at high (S.L 2961)..below 2877 sell at high (S.L 2897) buy on deep (S.L 2825).. Resistance for up move at 2897/2907/2931/2938/2961.. Supports at 2877/2844/2832 /2825/2810/2774/2715..
kindly read the graf and instructions written there............
kindly read the graf carefully.....do this call as positional............exit at stoploss is must.........book the profit in 25% slabs on respective tgt spot levels given in graf..
Market may open down. Market would be volatile . Market may up between 11.09 and 11.32 Market may steady or up side between 12.01 and 12.27. Market may close at down or near to previous closing.
SHARE YOUR THOUGHTS! LEAVE A COMMENTS
Prediction Came True :
We had predicted Stock Market will under bearish trend after 15th February 2009 in Website.
Opening Bell Call
Buy
SUNPHARMA - Sun Pharmaceuticals Industries Ltd
HINDUNILVR - Hindustan Unilever Limited
POLARIS - Polaris Software Lab Limited
ROLTA - Rolta India Ltd.
TANLA - Tanla Solutions Limited
On 11th February 2009 - The BSE Sensex closed at 9618 (down 28 points) while the NSE Nifty closed at 2925 (down 8 points).
Opening Bell Call
Sell
TATASTEEL - Tata Steel Limited
ABIRLANUVO - Aditya Birla Nuvo Limited
TECHM - Tech Mahindra Limited
RCOM - Reliance Communications Limited
RPL - Reliance Petroleum Limited
Technical Analysis for 12th February 2009
BSE-SENSEX - Major Support - 9538, 9502, 9444, 9386, 9291, 9197, 9102, 9008
BSE-SENSEX - Major Resistance - 9575, 9633, 9691, 9727, 9764, 9858, 9953, 10047
NSE-NIFTY - Major Support - 2901, 2889, 2871, 2853, 2823, 2793, 2763, 2733
NSE-NIFTY - Major Resistance - 2913, 2931, 2949, 4961, 2973, 3003, 3033, 3063
Guest author: Faisal Humayun, Kolkata.
Why I want to talk about commodities?
The current demand – supply balance for commodities worldwide is way out of whack. So while the current slowdown has led to sharp corrections in their prices the long term scenario might be very bullish.
Why the demand – supply scenario is way out of whack?
From 1980 to 2000, the commodities had a bear market. Commodity producing companies had little incentive to go for massive capital expansions as the selling prices would be low coupled with high mining and exploration costs. The terms of trade were in favor of commodity buyers and not suppliers. This led to shortages in all commodities which spurred up their prices post 2000.
What happened post 2000?
After the NASDAQ bubble went bust, interest rates in US were lowered to 1% leading to the housing boom. This in turn led to more consumption in US and China became the major exporter, which in turn boosted their economy further. As China started to grow at scorching pace, the demand for commodities spurred. Growth in India and other Asian economies also boosted prices of all industrial commodities.
In late 2008, major commodities corrected by over 50% after reaching peak levels in June, 2008. Is it the end of the Bull Run for Commodities?
After 20 years of bear market this is certainly not the end of the Bull Run for commodities. They would come back stronger when the economies recover. So the near future would give investors a chance to invest in commodities at a cheap rate and get big long term returns.
How to buy commodities?
Of course it is not feasible for anyone to buy and keep crude oil or copper at home. So the second best option (in absence of a commodity ETF in India) is to buy commodity related stocks.
Two commodities that may outperform in the long run:
1. Crude Oil:
Before discussing the fundamentals for this commodity, presented below is a chart showing how crude oil has performed post 2000 on a yearly basis.
Clearly 2002-2007 was a period of sustained positive move so the sharp correction was very much expected. But have the fundamentals or demand – supply scenario changed drastically?
I would say no. Just consider the statistics below:
In 1964, the world added 48 billon barrels of oil in proven reserves every year but consumption was only around 12 billion barrels. Now we find 5-6 billion barrels of new proven reserves yearly but consume 30 billion barrels of oil annually. Simple mathematics will tell you that underground oil reserves are declining every year. What should it to the oil prices?
In US at the peak of economic activity the per capita consumption of oil was 27 barrels. In Japan and Korea similarly the per capita consumption of oil was 17 barrel at peak of economic activity. In China per capita consumption presently is 1.8 barrel and in India it is 0.8 barrel. If India and China reach even half that consumption per capita then again it would take no great mathematics to predict where oil prices would move.
So for a long term investor it would make sense to have some position in crude. I believe that ONGC would be the best stock in the absence of an ETF to consider exposure to crude. ONGC has also tied up with UCIL for Uranium mining, which happens to be another hot commodity.
2. Copper:
Before discussing the fundamentals for this commodity presented below is a chart showing how copper has performed post 2000 on a yearly basis.
Copper had four years of very strong Bull Run. The year 2008 saw it correct by over 56%.
I would like to bring forward to readers the major application of copper as this would speak volumes about its expected future demand and hence where copper prices should move. Copper is used in industries like architecture, automotive, electrical, building wire, energy efficiency, power quality, tube, pipe and fittings, fuel gas, machine products, telecommunication, copper compounds etc. Also consider the following:
There's more than 50 pounds of copper in a typical U.S.-built automobile. There is about 40 pounds of copper usage for electrical and about 10 pounds for nonelectrical components. Today's luxury cars, on average, contain some 1,500 copper wires totaling about one mile in length. An average single-family home uses 440 pounds of Copper.
Thus if one is bullish on infrastructure, power, telecommunication, automotive industries and is also bullish on urbanization speeding up in Asia then you might as well be bullish on copper first. We generally tend to buy stocks of end products but forget the raw materials which went into their production.
On 10th February 2009 Economic Times came out with a report on Copper prices which surged to two month high on speculation that the US and China stimulus package would boost growth. At the same time it reported that “China has started buying copper from domestic bonded warehouses and overseas markets as the country moves to triple its state reserve to 1 million tons.”
So why would China store copper?
Because it knows that at low prices it’s the best chance to accumulate it for meeting future demand. I believe we should be also smart enough to accumulate some copper stocks for the long run.
Again for long term investors who feel that copper would outperform stocks like Hindustan Copper and Sterlite Industries (India) might we worth considering. Hindustan Copper has 99.5% government holding and my belief is that equity dilution in the future would lead to more value unlocking.
Considering exposure to commodities like Uranium and Coal (black gold) would also prove to be high return generating in the long run. However, no listed company is into Uranium mining. Only ONGC would be doing it in JV with UCIL. As for Coal, Gujarat NRE Coke does look good. But it’s also among companies having pledged high percentage of their holdings. So some wait and watch for this stock would help.
Baltic Dry Freight Index (BDI) - Positive Economic Signals
The BDI tracks the cost of shipping materials like steel, copper and iron ore by monitoring the freight rates paid for vessels transporting these materials. A rising BDI means freight rates are going up, and this generally means that global demand for raw materials is also rising.
Source: usfunds.com/Bloomberg
In May 2008 the index went up to an all time high of 11,793 but again went down 93% from its peak at the end of 2008. However, now there is some recover in the index indicating there is still some demand in some regions for raw materials. The chart above shows the same.
However just like when the stock markets are oversold they rally for few days same way when the global economy slumps (like in October to December period) there is bound to be some bounce back. So this should not be taken as the beginning of economic recovery.
Important Observation for the US Economy:
The Japanese stock markets peaked out in 1990 at 39,000 on the Nikkei. Twenty years later it is still down over 70% from that peak.
The US stock markets bubble went bust in 2000-01 at 11,600 levels on the Dow Jones. Nine years later it is still down over 30% from that peak.
I can give many such examples from economic history. The objective here is to point out that once a bubble goes bust it does not come back so fast. Now post October 2007 three bubbles (primarily) went bust in US namely real estate, bubble in financial sector and stocks and the debt bubble. So only if history does not repeat itself these sectors would recover soon.
Why this is important for US economy is because the economy is 73% consumption based and the consumption driver was debt. So if the debt market will not recover soon (which it should not) the US is in for a long deep recession.
Concluding Note:
Recessions are good – Just like everyone needs some sleep after a day of hard work the economy also needs to pause before resuming the uptrend again. It cleans the system of its excesses. US however, have been trying to evade recession for long by inflating one bubble after another. Remains to be seen what they can do this time. We can just hope the world economy gets better and stronger after this turbulence.
Caution:
I have talked about few stocks in this article. Since I am an analyst does not mean I would pick the best stocks. So do your own research if anyone is interested in considering exposure to any of these stocks. Remember a bunch of analyst and economist managed to create the worst financial and economic crisis in the world.
Disclosure: I would also like to mention that I personally would not take any positions for long term in the markets now. No one can predict the best time to buy but going by how things are shaping up I feel markets have more downside to come. So would wait for even more tempting valuations.
Stock Market quote: "In the beginning, the promoters have the vision and investors the money. In the end the promoters have the money and investors the vision".
Blog author: Faisal, Kolkata.
Krishna on market uncertainty:
1. Some readers are asking me for stock recommendations. I am once again saying that this is not the time to buy stocks irrespective of fundamentals. There is complete uncertainty surrounding economic future. Stock markets are surprisingly resisting crash despite worsening fundamentals.
2. Even during Great Depression days, there were strong rallies in between huge crashes. But markets are not showing either bear market rallies or huge crashes. That is another uncertainty.
3. Barack Obama announced huge stimulus package. But markets were surprisingly subdued as they were during historic inauguration day. Stock Markets are not reacting to either positive or negative news. That is another uncertainty.
4. If you go by recent economic data, many companies and countries announced historic losses or huge dent in growth forecasts. Companies like Toyota announced first ever operating loss in 50 years. Many big banks are announcing billions of losses. How long can stock markets and economy bear these unimaginable losses?
5. Just see the mess in Tata Companies. Tatas pledged almost everything for acquisitions and are now struggling to get loans. There will be big mess in pledging shares if other big stake holders reveal data.
6. IT employees are responsible for 70% of India consumption. IT sector has started announcing lay offs and will announce mass layoffs in the coming days which will have huge impact on Bank NPAs and consumption.
7. I am expecting pro-poor interim budget before elections.
8. India and China are now moving towards deflation due to drastic fall in consumption.
9. As long as people are losing jobs, there will be no economic recovery. If companies have faith about even medium term recovery, big companies will not announce such mass layoffs.
10. RBI will definitely announce further rate cuts. What happened after past rate cuts?
Is it necessary to invest in Stocks when economy is in so uncertain zone?
Opportunistic investment:
Investors should opt for opportunistic investments. Just sit on cash and always look for short term opportunities and make 10-20% profits and exit. Opportunities will continue to come in the way of stake sales and acquisitions etc (Piramal Healthcare and Hexaware etc).
Whole world is now sitting on massive debt which is impossible to clean in short term. This debt is now spread acrooss all investments and countries with interlinking consequences. Cleanup of this mess will take more time than you are now expecting. Stimulus packages are increasing fiscal deficits in stead of improving confidence and consumption.
Is it necessary to invest in such an uncertain environment?
Economic quote:
US President Truman: "When your neighbour loses his job, it is a Recession. When you lose yours, it is a Depression".
Economic Statistics:
1. India: Inflation is now at 4.39% Vs 5.07%.
2. India's IIP numbers: 2% negative growth in December, 2008 Vs 1.7% positive growth in November, 2008 Vs 16% positive growth in December, 2007. This is the sharpest fall after 1992.
3. Gold is now at 14,900 per 10 gram.
Why I want to talk about commodities?
The current demand – supply balance for commodities worldwide is way out of whack. So while the current slowdown has led to sharp corrections in their prices the long term scenario might be very bullish.
Why the demand – supply scenario is way out of whack?
From 1980 to 2000, the commodities had a bear market. Commodity producing companies had little incentive to go for massive capital expansions as the selling prices would be low coupled with high mining and exploration costs. The terms of trade were in favor of commodity buyers and not suppliers. This led to shortages in all commodities which spurred up their prices post 2000.
What happened post 2000?
After the NASDAQ bubble went bust, interest rates in US were lowered to 1% leading to the housing boom. This in turn led to more consumption in US and China became the major exporter, which in turn boosted their economy further. As China started to grow at scorching pace, the demand for commodities spurred. Growth in India and other Asian economies also boosted prices of all industrial commodities.
In late 2008, major commodities corrected by over 50% after reaching peak levels in June, 2008. Is it the end of the Bull Run for Commodities?
After 20 years of bear market this is certainly not the end of the Bull Run for commodities. They would come back stronger when the economies recover. So the near future would give investors a chance to invest in commodities at a cheap rate and get big long term returns.
How to buy commodities?
Of course it is not feasible for anyone to buy and keep crude oil or copper at home. So the second best option (in absence of a commodity ETF in India) is to buy commodity related stocks.
Two commodities that may outperform in the long run:
1. Crude Oil:
Before discussing the fundamentals for this commodity, presented below is a chart showing how crude oil has performed post 2000 on a yearly basis.
Clearly 2002-2007 was a period of sustained positive move so the sharp correction was very much expected. But have the fundamentals or demand – supply scenario changed drastically?
I would say no. Just consider the statistics below:
In 1964, the world added 48 billon barrels of oil in proven reserves every year but consumption was only around 12 billion barrels. Now we find 5-6 billion barrels of new proven reserves yearly but consume 30 billion barrels of oil annually. Simple mathematics will tell you that underground oil reserves are declining every year. What should it to the oil prices?
In US at the peak of economic activity the per capita consumption of oil was 27 barrels. In Japan and Korea similarly the per capita consumption of oil was 17 barrel at peak of economic activity. In China per capita consumption presently is 1.8 barrel and in India it is 0.8 barrel. If India and China reach even half that consumption per capita then again it would take no great mathematics to predict where oil prices would move.
So for a long term investor it would make sense to have some position in crude. I believe that ONGC would be the best stock in the absence of an ETF to consider exposure to crude. ONGC has also tied up with UCIL for Uranium mining, which happens to be another hot commodity.
2. Copper:
Before discussing the fundamentals for this commodity presented below is a chart showing how copper has performed post 2000 on a yearly basis.
Copper had four years of very strong Bull Run. The year 2008 saw it correct by over 56%.
I would like to bring forward to readers the major application of copper as this would speak volumes about its expected future demand and hence where copper prices should move. Copper is used in industries like architecture, automotive, electrical, building wire, energy efficiency, power quality, tube, pipe and fittings, fuel gas, machine products, telecommunication, copper compounds etc. Also consider the following:
There's more than 50 pounds of copper in a typical U.S.-built automobile. There is about 40 pounds of copper usage for electrical and about 10 pounds for nonelectrical components. Today's luxury cars, on average, contain some 1,500 copper wires totaling about one mile in length. An average single-family home uses 440 pounds of Copper.
Thus if one is bullish on infrastructure, power, telecommunication, automotive industries and is also bullish on urbanization speeding up in Asia then you might as well be bullish on copper first. We generally tend to buy stocks of end products but forget the raw materials which went into their production.
On 10th February 2009 Economic Times came out with a report on Copper prices which surged to two month high on speculation that the US and China stimulus package would boost growth. At the same time it reported that “China has started buying copper from domestic bonded warehouses and overseas markets as the country moves to triple its state reserve to 1 million tons.”
So why would China store copper?
Because it knows that at low prices it’s the best chance to accumulate it for meeting future demand. I believe we should be also smart enough to accumulate some copper stocks for the long run.
Again for long term investors who feel that copper would outperform stocks like Hindustan Copper and Sterlite Industries (India) might we worth considering. Hindustan Copper has 99.5% government holding and my belief is that equity dilution in the future would lead to more value unlocking.
Considering exposure to commodities like Uranium and Coal (black gold) would also prove to be high return generating in the long run. However, no listed company is into Uranium mining. Only ONGC would be doing it in JV with UCIL. As for Coal, Gujarat NRE Coke does look good. But it’s also among companies having pledged high percentage of their holdings. So some wait and watch for this stock would help.
Baltic Dry Freight Index (BDI) - Positive Economic Signals
The BDI tracks the cost of shipping materials like steel, copper and iron ore by monitoring the freight rates paid for vessels transporting these materials. A rising BDI means freight rates are going up, and this generally means that global demand for raw materials is also rising.
In May 2008 the index went up to an all time high of 11,793 but again went down 93% from its peak at the end of 2008. However, now there is some recover in the index indicating there is still some demand in some regions for raw materials. The chart above shows the same.
However just like when the stock markets are oversold they rally for few days same way when the global economy slumps (like in October to December period) there is bound to be some bounce back. So this should not be taken as the beginning of economic recovery.
Important Observation for the US Economy:
The Japanese stock markets peaked out in 1990 at 39,000 on the Nikkei. Twenty years later it is still down over 70% from that peak.
The US stock markets bubble went bust in 2000-01 at 11,600 levels on the Dow Jones. Nine years later it is still down over 30% from that peak.
I can give many such examples from economic history. The objective here is to point out that once a bubble goes bust it does not come back so fast. Now post October 2007 three bubbles (primarily) went bust in US namely real estate, bubble in financial sector and stocks and the debt bubble. So only if history does not repeat itself these sectors would recover soon.
Why this is important for US economy is because the economy is 73% consumption based and the consumption driver was debt. So if the debt market will not recover soon (which it should not) the US is in for a long deep recession.
Concluding Note:
Recessions are good – Just like everyone needs some sleep after a day of hard work the economy also needs to pause before resuming the uptrend again. It cleans the system of its excesses. US however, have been trying to evade recession for long by inflating one bubble after another. Remains to be seen what they can do this time. We can just hope the world economy gets better and stronger after this turbulence.
Caution:
I have talked about few stocks in this article. Since I am an analyst does not mean I would pick the best stocks. So do your own research if anyone is interested in considering exposure to any of these stocks. Remember a bunch of analyst and economist managed to create the worst financial and economic crisis in the world.
Disclosure: I would also like to mention that I personally would not take any positions for long term in the markets now. No one can predict the best time to buy but going by how things are shaping up I feel markets have more downside to come. So would wait for even more tempting valuations.
Stock Market quote: "In the beginning, the promoters have the vision and investors the money. In the end the promoters have the money and investors the vision".
Blog author: Faisal, Kolkata.
Krishna on market uncertainty:
1. Some readers are asking me for stock recommendations. I am once again saying that this is not the time to buy stocks irrespective of fundamentals. There is complete uncertainty surrounding economic future. Stock markets are surprisingly resisting crash despite worsening fundamentals.
2. Even during Great Depression days, there were strong rallies in between huge crashes. But markets are not showing either bear market rallies or huge crashes. That is another uncertainty.
3. Barack Obama announced huge stimulus package. But markets were surprisingly subdued as they were during historic inauguration day. Stock Markets are not reacting to either positive or negative news. That is another uncertainty.
4. If you go by recent economic data, many companies and countries announced historic losses or huge dent in growth forecasts. Companies like Toyota announced first ever operating loss in 50 years. Many big banks are announcing billions of losses. How long can stock markets and economy bear these unimaginable losses?
5. Just see the mess in Tata Companies. Tatas pledged almost everything for acquisitions and are now struggling to get loans. There will be big mess in pledging shares if other big stake holders reveal data.
6. IT employees are responsible for 70% of India consumption. IT sector has started announcing lay offs and will announce mass layoffs in the coming days which will have huge impact on Bank NPAs and consumption.
7. I am expecting pro-poor interim budget before elections.
8. India and China are now moving towards deflation due to drastic fall in consumption.
9. As long as people are losing jobs, there will be no economic recovery. If companies have faith about even medium term recovery, big companies will not announce such mass layoffs.
10. RBI will definitely announce further rate cuts. What happened after past rate cuts?
Is it necessary to invest in Stocks when economy is in so uncertain zone?
Opportunistic investment:
Investors should opt for opportunistic investments. Just sit on cash and always look for short term opportunities and make 10-20% profits and exit. Opportunities will continue to come in the way of stake sales and acquisitions etc (Piramal Healthcare and Hexaware etc).
Whole world is now sitting on massive debt which is impossible to clean in short term. This debt is now spread acrooss all investments and countries with interlinking consequences. Cleanup of this mess will take more time than you are now expecting. Stimulus packages are increasing fiscal deficits in stead of improving confidence and consumption.
Is it necessary to invest in such an uncertain environment?
Economic quote:
US President Truman: "When your neighbour loses his job, it is a Recession. When you lose yours, it is a Depression".
Economic Statistics:
1. India: Inflation is now at 4.39% Vs 5.07%.
2. India's IIP numbers: 2% negative growth in December, 2008 Vs 1.7% positive growth in November, 2008 Vs 16% positive growth in December, 2007. This is the sharpest fall after 1992.
3. Gold is now at 14,900 per 10 gram.
Guest Blogger: Kumaran Seenivasan (MS in Applied Economics), USA.
What is Financial statement:
Financial statements comprise 3 things namely Balance Sheet, Income Statement or Profit/Loss Statement and Cash Flow Statement. Experienced and successful investors say that they rely heavily on financial statements when deciding where to invest. Out of all the three statements, Cash Flow Statement is the very important but widely neglected one by beginners / retail investors. In this article, we will see the difference between these statements while explaining in detail about Cash Flow Statement.
Components and Differences
It is a myth that these statements contain some crazy financial stuff that only Auditors can understand, but in principle, these statements are copycat to what we do in our family to manage the family budget (the difference is we do not prepare and do not complicate). Then you might ask what the Auditors do? They are of course essential as the companies get involved in too many transactions and also the company has to follow the laws to comply regulations. Now let’s see what they contain and the differences among the three.
All the three statements are inter-related but they are prepared separately to give clear picture to understand the financial health of the company in three different angles.
Balance sheet is the statement that shows the overall financial position of the company at any particular point of time from inception. It has two components namely Assets and Liabilities (Just like what are all the assets our family has and what are the loans and other things that we need to repay).
Profit/Loss statement includes Earnings and Expenses so that we can be clear about the Net Income.
Cash Flow statements give you the detailed picture of both Cash inflow and Cash outflow of a company under three sections namely operations, investing and financing. All the three statements are equally important but Cash Flow Statement is even more important during the crisis times like what we have now.
The simple diagram below shows the relationship among three and components of these statements. You see a brown color stock investor box which shows that proceeds from the stock sales will be shown under financing section of cash flow but the total money raised through stocks will be shown under equity section of balance sheet. Similarly the bond investor’s box explains that proceeds from bond sales go to financing section of cash flow statement and interest paid to the bond holders go to the income statement while the bond debt goes to the liabilities section of the balance sheet. You can think of similar relationships from the diagram between these three statements.
The three green arrows indicate the three sections of Cash Flow Statement which are operations, investing and financing. The yellow part is the components in the income statement.
Why Cash Flow Statement is more important?
Assume a hypothetical situation where you have two neighbors Akash and Nilesh and you are a man with common sense. Akash works in L&T as an Assistant and earns Rs. 300 per day and he is able to meet daily family expenses and other costs but he does not have any major assets and debt. Nilesh earns Rs. 500 per day and he has a house but has taken a loan from HDFC and he is struggling to meet even family expenses. They both come and ask you Rs. 5000 and promise you that they would return it in a month. Who would you believe and give loan? Common sense investors would give it to Akash. In this particular situation, you would not be reading any financial statements to make a decision as you know these individuals and their financial situation. Nilesh might have stronger balance sheet than Akash but Akash has better cash flow and gets your confidence.
It’s the same case in corporate as well where experienced investors give more importance to the cash segment as it is very important for the day to day operations of the company. So, people think it is better to invest in a company which can survive in short term rather than a famous corporate giant who is all set to fail. In my view, you do not need to study complicated books to understand the basic principles which remain the same both at household level and firm level. That’s why legendary investors like Peter Lynch and Warren Buffet say that a guy with common sense will show better returns than many of the Analysts.
Cash Flow Statement
As I have pointed out earlier, Cash Flow Statement includes operational activities, financing activities and investing activities.
The above table is a cash flow statement from Satyam for the year 1999 and is shown as an example. The basic idea remains very simple. We deduct all cash outflows from cash inflows and show the net cash available for the company operations in a Cash Flow Statement. But I will explain one by one with respect to this example. Figures in parenthesis indicate cash outflows and figures without parenthesis show cash inflows.
1. Operating Activities:
Section A in the table contains operating income and it starts with net income before interest, tax and after extraordinary items. The operating income usually comes from selling products and services. Since, the net income has been calculated already by excluding extraordinary items like depreciation, and loss on sale of fixed assets; they have added it back to remove the effect. Extraordinary items may include Amortization and many other things (All non-cash items), but in this example they have included only two. Then they have added whatever cash inflow they had and deducted all the cash outflows they had to finally arrive at Net Cash Flow from operating activities which was Rs. 9,782 Lakhs in 1999(Hope it was not a fictitious statement) . In short, operating activity is a Money raising activity.
2. Investing Activities:
Investing activities (Section B) include activities that are carried out by the company for future growth either upgrading facilities or buying equipments or fixed assets. I am not going to explain what is in the table again. But the idea under this section is again to calculate the amount invested for the company and income if any and then arrive at net investment amount which stood at Rs. 16,574 Lakhs.
3. Financing Activities.
All the items related to the core finance come under this category in Section C including loans companies get from banks, raising money through stocks sale, IPO, dividends etc. Here too the idea is to calculate the net amount raised by deducting outflows from inflows. In the example Satyam had raised Rs. 9,302 Lakhs in 1999 through financing activities. This is again a Money Raising activity.
Finally to arrive at Net Cash / Cash Equivalents, you add Section A and Section C. In this example it was Rs. 19,084 Lakhs (Rs. 9782 + Rs. 9302). Then deduct the amount invested for that year from Rs. 19,084 Lakhs which is Rs. 19,084 – Rs. 16,574 = Rs. 2,510 Lakhs. This is the amount you are seeing in the example as well. Since they had Rs. 1,317 Lakhs from the previous year, you are seeing that amount added to this Rs. 2,510 Lakhs to get the final Cash / Cash equivalent of Rs. 3,827 Lakhs.
Cash Flow Statement and it’s relevance to the Stock Investment:
We have discussed sufficiently about the basics of cash flow statements. But how it is relevant to our stock investment stand point? In fact I would say Cash Flow is the first important thing in the business without which no one could have started the business. Earnings are important and people value companies based on that. But not many think how a company managed to earn that money?
A company with better cash flow in general would generate good earnings and that’s why experienced people go to the root of the problem. In some cases it might not be true (Initial Days, Capital Intensive Business like Bharti Airtel in 2002 and Moser Baer in 2009). Company with a better cash position can outsmart peers and can take advantage of special situations.
Ex 1. Reliance Capital was late in to the Brokerage business, but they are threatening to rule the brokerage world just by virtue of having more cash flow. I do not think any other brokerage firms would have attained the same growth.
Ex 2: Satyam (Illegal outflow and Cash inflow shrunk). A company can be worth Rs. 50,000 crores but if it does not have Rs. 500 crores for day to day operations, then it will become bankrupt and is of no worth.
Ex 3. Subhiksha is a success story and within 10 years, the company fetched Rs. 1,500 crore value, but what happened now is a story well known to everyone. Company is now in bankruptcy situation.
So, cash flow is an important thing that you have to look in to while valuing a company or stock. Of course you have to study the balance sheet as well. Cash flow statement combined with balance sheet might give you a better idea about value when you compare a company and its peers. There are few ratios which you can look at if you do not study the entire statement.
Important Ratios:
1. Price to Cash Flow Ratio:
This ratio is similar to our PE Ratio but many think that PC Ratio is more reliable than PE Ratio. PE Ratio can be easily manipulated as it includes non cash items, depreciation etc. while same cannot be said about PC ratio. I do not know which side Raju has manipulated, but in general it is very hard to manipulate the PC Ratio.
Price to Cash Flow Ratio = Stock Price per Share divided by Operating Cash Flow per Share.
Where, Operating Cash Flow = Net operating Cash Flow / Number of Shares.
Ex. Assume Yes Bank has Rs. 900 crore cash flow and it has 300 crore shares. Then operating cash flow per share would be Rs. 3 and it’s Price to Cash Flow Ratio would be 20 (60/3) based on the current stock price. Like PE Ratio, the interpretation remains the same. Lower the PC Ratio, better the stock value and it is a nice tool to have when you compare companies in the same sector or peers. In spite of the importance, PE Ratio rules the world.
2. Price to Free Cash Flow:
It is a similar ratio with stringent guidelines.
Price to Free Cash Flow Ratio = Company Market Capitalization divided by Free Cash Flow,
Where, Free Cash Flow (FCF) = Net Income + (Depreciation and Amortization) – (Changes in working Capital + Capital Expenditure
Note: Higher the P/FCF value, more expensive the company is.
These are the two important ratios which broking firms calculate but you can calculate your own ratios based on what importance you attach to different things.
For example you can calculate Cash Flow to Debt ratio or Cash Flow to Long Term Debt Ratio along the similar lines. But the basic idea remains the same across all the ratios which is better the cash position, better the value.
Conclusion: Cash Flow Statement is as important as balance sheet and PL Statement and serious investors should give at least a glance while making larger investment decisions. This does not mean, companies with better PE and PC ratio will always give you great returns but it is one among various measures you can use to evaluate a company so that you can eliminate the risk to a certain extent. I will try to explain balance sheet ratios and PL statement in another article. Thanks.
Guest author: Kumaran Seenivasan (seenivasankumaran@gmail.com)
Job: Statistical Consultant, USA.
Native place: Jangalpatti near Coimbatore (Central Tamilnadu).
Statement of the day:
1. Charles Dumas: “This Asian recession could be worse than the Asian crisis of 1997-98.”
What is Financial statement:
Financial statements comprise 3 things namely Balance Sheet, Income Statement or Profit/Loss Statement and Cash Flow Statement. Experienced and successful investors say that they rely heavily on financial statements when deciding where to invest. Out of all the three statements, Cash Flow Statement is the very important but widely neglected one by beginners / retail investors. In this article, we will see the difference between these statements while explaining in detail about Cash Flow Statement.
Components and Differences
It is a myth that these statements contain some crazy financial stuff that only Auditors can understand, but in principle, these statements are copycat to what we do in our family to manage the family budget (the difference is we do not prepare and do not complicate). Then you might ask what the Auditors do? They are of course essential as the companies get involved in too many transactions and also the company has to follow the laws to comply regulations. Now let’s see what they contain and the differences among the three.
All the three statements are inter-related but they are prepared separately to give clear picture to understand the financial health of the company in three different angles.
Balance sheet is the statement that shows the overall financial position of the company at any particular point of time from inception. It has two components namely Assets and Liabilities (Just like what are all the assets our family has and what are the loans and other things that we need to repay).
Profit/Loss statement includes Earnings and Expenses so that we can be clear about the Net Income.
Cash Flow statements give you the detailed picture of both Cash inflow and Cash outflow of a company under three sections namely operations, investing and financing. All the three statements are equally important but Cash Flow Statement is even more important during the crisis times like what we have now.
The simple diagram below shows the relationship among three and components of these statements. You see a brown color stock investor box which shows that proceeds from the stock sales will be shown under financing section of cash flow but the total money raised through stocks will be shown under equity section of balance sheet. Similarly the bond investor’s box explains that proceeds from bond sales go to financing section of cash flow statement and interest paid to the bond holders go to the income statement while the bond debt goes to the liabilities section of the balance sheet. You can think of similar relationships from the diagram between these three statements.
The three green arrows indicate the three sections of Cash Flow Statement which are operations, investing and financing. The yellow part is the components in the income statement.
Why Cash Flow Statement is more important?
Assume a hypothetical situation where you have two neighbors Akash and Nilesh and you are a man with common sense. Akash works in L&T as an Assistant and earns Rs. 300 per day and he is able to meet daily family expenses and other costs but he does not have any major assets and debt. Nilesh earns Rs. 500 per day and he has a house but has taken a loan from HDFC and he is struggling to meet even family expenses. They both come and ask you Rs. 5000 and promise you that they would return it in a month. Who would you believe and give loan? Common sense investors would give it to Akash. In this particular situation, you would not be reading any financial statements to make a decision as you know these individuals and their financial situation. Nilesh might have stronger balance sheet than Akash but Akash has better cash flow and gets your confidence.
It’s the same case in corporate as well where experienced investors give more importance to the cash segment as it is very important for the day to day operations of the company. So, people think it is better to invest in a company which can survive in short term rather than a famous corporate giant who is all set to fail. In my view, you do not need to study complicated books to understand the basic principles which remain the same both at household level and firm level. That’s why legendary investors like Peter Lynch and Warren Buffet say that a guy with common sense will show better returns than many of the Analysts.
Cash Flow Statement
As I have pointed out earlier, Cash Flow Statement includes operational activities, financing activities and investing activities.
Satyam cash flow statement
The above table is a cash flow statement from Satyam for the year 1999 and is shown as an example. The basic idea remains very simple. We deduct all cash outflows from cash inflows and show the net cash available for the company operations in a Cash Flow Statement. But I will explain one by one with respect to this example. Figures in parenthesis indicate cash outflows and figures without parenthesis show cash inflows.
1. Operating Activities:
Section A in the table contains operating income and it starts with net income before interest, tax and after extraordinary items. The operating income usually comes from selling products and services. Since, the net income has been calculated already by excluding extraordinary items like depreciation, and loss on sale of fixed assets; they have added it back to remove the effect. Extraordinary items may include Amortization and many other things (All non-cash items), but in this example they have included only two. Then they have added whatever cash inflow they had and deducted all the cash outflows they had to finally arrive at Net Cash Flow from operating activities which was Rs. 9,782 Lakhs in 1999(Hope it was not a fictitious statement) . In short, operating activity is a Money raising activity.
2. Investing Activities:
Investing activities (Section B) include activities that are carried out by the company for future growth either upgrading facilities or buying equipments or fixed assets. I am not going to explain what is in the table again. But the idea under this section is again to calculate the amount invested for the company and income if any and then arrive at net investment amount which stood at Rs. 16,574 Lakhs.
3. Financing Activities.
All the items related to the core finance come under this category in Section C including loans companies get from banks, raising money through stocks sale, IPO, dividends etc. Here too the idea is to calculate the net amount raised by deducting outflows from inflows. In the example Satyam had raised Rs. 9,302 Lakhs in 1999 through financing activities. This is again a Money Raising activity.
Finally to arrive at Net Cash / Cash Equivalents, you add Section A and Section C. In this example it was Rs. 19,084 Lakhs (Rs. 9782 + Rs. 9302). Then deduct the amount invested for that year from Rs. 19,084 Lakhs which is Rs. 19,084 – Rs. 16,574 = Rs. 2,510 Lakhs. This is the amount you are seeing in the example as well. Since they had Rs. 1,317 Lakhs from the previous year, you are seeing that amount added to this Rs. 2,510 Lakhs to get the final Cash / Cash equivalent of Rs. 3,827 Lakhs.
Cash Flow Statement and it’s relevance to the Stock Investment:
We have discussed sufficiently about the basics of cash flow statements. But how it is relevant to our stock investment stand point? In fact I would say Cash Flow is the first important thing in the business without which no one could have started the business. Earnings are important and people value companies based on that. But not many think how a company managed to earn that money?
A company with better cash flow in general would generate good earnings and that’s why experienced people go to the root of the problem. In some cases it might not be true (Initial Days, Capital Intensive Business like Bharti Airtel in 2002 and Moser Baer in 2009). Company with a better cash position can outsmart peers and can take advantage of special situations.
Ex 1. Reliance Capital was late in to the Brokerage business, but they are threatening to rule the brokerage world just by virtue of having more cash flow. I do not think any other brokerage firms would have attained the same growth.
Ex 2: Satyam (Illegal outflow and Cash inflow shrunk). A company can be worth Rs. 50,000 crores but if it does not have Rs. 500 crores for day to day operations, then it will become bankrupt and is of no worth.
Ex 3. Subhiksha is a success story and within 10 years, the company fetched Rs. 1,500 crore value, but what happened now is a story well known to everyone. Company is now in bankruptcy situation.
So, cash flow is an important thing that you have to look in to while valuing a company or stock. Of course you have to study the balance sheet as well. Cash flow statement combined with balance sheet might give you a better idea about value when you compare a company and its peers. There are few ratios which you can look at if you do not study the entire statement.
Important Ratios:
1. Price to Cash Flow Ratio:
This ratio is similar to our PE Ratio but many think that PC Ratio is more reliable than PE Ratio. PE Ratio can be easily manipulated as it includes non cash items, depreciation etc. while same cannot be said about PC ratio. I do not know which side Raju has manipulated, but in general it is very hard to manipulate the PC Ratio.
Price to Cash Flow Ratio = Stock Price per Share divided by Operating Cash Flow per Share.
Where, Operating Cash Flow = Net operating Cash Flow / Number of Shares.
Ex. Assume Yes Bank has Rs. 900 crore cash flow and it has 300 crore shares. Then operating cash flow per share would be Rs. 3 and it’s Price to Cash Flow Ratio would be 20 (60/3) based on the current stock price. Like PE Ratio, the interpretation remains the same. Lower the PC Ratio, better the stock value and it is a nice tool to have when you compare companies in the same sector or peers. In spite of the importance, PE Ratio rules the world.
2. Price to Free Cash Flow:
It is a similar ratio with stringent guidelines.
Price to Free Cash Flow Ratio = Company Market Capitalization divided by Free Cash Flow,
Where, Free Cash Flow (FCF) = Net Income + (Depreciation and Amortization) – (Changes in working Capital + Capital Expenditure
Note: Higher the P/FCF value, more expensive the company is.
These are the two important ratios which broking firms calculate but you can calculate your own ratios based on what importance you attach to different things.
For example you can calculate Cash Flow to Debt ratio or Cash Flow to Long Term Debt Ratio along the similar lines. But the basic idea remains the same across all the ratios which is better the cash position, better the value.
Conclusion: Cash Flow Statement is as important as balance sheet and PL Statement and serious investors should give at least a glance while making larger investment decisions. This does not mean, companies with better PE and PC ratio will always give you great returns but it is one among various measures you can use to evaluate a company so that you can eliminate the risk to a certain extent. I will try to explain balance sheet ratios and PL statement in another article. Thanks.
Guest author: Kumaran Seenivasan (seenivasankumaran@gmail.com)
Job: Statistical Consultant, USA.
Native place: Jangalpatti near Coimbatore (Central Tamilnadu).
Statement of the day:
1. Charles Dumas: “This Asian recession could be worse than the Asian crisis of 1997-98.”
The Asian markets are in no good mood to move up can spread their shadow on our markets. The Nifty is good above 2915 level and has resistance above 2950 level.
The RIL may face resistance at 1405-08 level and will become weak below 1383 level to touch a low at 1341-43 level. The ONGC one of the leading counters of Nifty has suddenly got support with the 1200 cr IT case facing resistance at 720 level will become weak below 693 level will touch 671-73 level. The immediate support levels will hold as the markets are enjoying the Bulls support.
The two days consequent bear hammering on Relinfra right from the 593-96 level brought it down to 527 level could recover to 542 level. The scrip shall not trade below 511-14. The markets may re-rate RIL and the fertilizer companies with the gas supply.
Yesterday star performers like ICICI and Relcap may continue to get Bulls support. The ICICI is good above 421 levels but it has resistance at 447-46 level. The Relcap has resistance at 432-35 region but is good above 411.
The beaten down stocks made good recovery, be it ZEE, EDUCOM or MC-DOWELL. Yesterday ZEE lost nearly all the gain made in the previous session.
The RIL may face resistance at 1405-08 level and will become weak below 1383 level to touch a low at 1341-43 level. The ONGC one of the leading counters of Nifty has suddenly got support with the 1200 cr IT case facing resistance at 720 level will become weak below 693 level will touch 671-73 level. The immediate support levels will hold as the markets are enjoying the Bulls support.
The two days consequent bear hammering on Relinfra right from the 593-96 level brought it down to 527 level could recover to 542 level. The scrip shall not trade below 511-14. The markets may re-rate RIL and the fertilizer companies with the gas supply.
Yesterday star performers like ICICI and Relcap may continue to get Bulls support. The ICICI is good above 421 levels but it has resistance at 447-46 level. The Relcap has resistance at 432-35 region but is good above 411.
The beaten down stocks made good recovery, be it ZEE, EDUCOM or MC-DOWELL. Yesterday ZEE lost nearly all the gain made in the previous session.
INDEXGAME-
BUY NF ABOVE 2880 SL 2840 TARGET 2940/2990
SELL NF BELOW 2880 SL 2940 TARGET 2840/2777
STOCKSGAME-
BUY ABAN ABOVE 445 SL 435 TARGET 455/465
BUY AXISBANK ABOVE 430 SL 425 TARGET 435/440
BUY ABIRLANUVO ABOVE 460 SL 440 TARGET 480/500
BUY CROMPTON ABOVE 136 SL 133 TARGET 139/142
BUY DIVISLAB ABOVE 940 SL 920 TARGET 960/980
BUY EDUCOMP ABOVE 1930 SL 1880 TARGET 1980/2030
BUY HDIL ABOVE 85 SL 82 TARGET 88/91
BUY HEROHONDA ABOVE 920 SL 900 TARGET 940/960
BUY KPIT ABOVE 22 SL 21 TARGET 23/24
BUY KTKBANK ABOVE 72 SL 70 TARGET 74/76
BUY RPOWER ABOVE 103 SL 100 TARGET 106/109
BUY SINTEX ABOVE 115 SL 112 TARGET 118/121
BUY SRF ABOVE 68 SL 65 TARGET 71/74
SELL ACC BELOW 550 SL 560 TARGET 540/530
SELL AMBUJACEM BELOW 74 SL 76 TARGET 72/70
SELL APIL BELOW 285 SL 290 TARGET 280/275
SELL CHAMBLFERT BELOW 42 SL 44 TARGET 40/38
SELL CIPLA BELOW 190 SL 193 TARGET 187/184
SELL DISHTV BELOW 23 SL 24 TARGET 22/21
SELL GAIL BELOW 214 SL 220 TARGET 209/203
SELL GESHIP BELOW 200 SL 205 TARGET 195/190
SELL GRASIM BELOW 1345 SL 1360 TARGET 1330/1315
SELL INFOSYS BELOW 1250 SL 1270 TARGET 1230/1210
SELL ITC BELOW 177 SL 180 TARGET 174/171
SELL MARUTI BELOW 610 SL 625 TARGET 595/580
SELL NAGFERTI BELOW 18 SL 19 TARGET 17/16
SELL RELIANCE BELOW 1350 SL 1380 TARGET 1320/1290
SELL SESAGOA BELOW 93 SL 96 TARGET 90/87
BUY NF ABOVE 2880 SL 2840 TARGET 2940/2990
SELL NF BELOW 2880 SL 2940 TARGET 2840/2777
STOCKSGAME-
BUY ABAN ABOVE 445 SL 435 TARGET 455/465
BUY AXISBANK ABOVE 430 SL 425 TARGET 435/440
BUY ABIRLANUVO ABOVE 460 SL 440 TARGET 480/500
BUY CROMPTON ABOVE 136 SL 133 TARGET 139/142
BUY DIVISLAB ABOVE 940 SL 920 TARGET 960/980
BUY EDUCOMP ABOVE 1930 SL 1880 TARGET 1980/2030
BUY HDIL ABOVE 85 SL 82 TARGET 88/91
BUY HEROHONDA ABOVE 920 SL 900 TARGET 940/960
BUY KPIT ABOVE 22 SL 21 TARGET 23/24
BUY KTKBANK ABOVE 72 SL 70 TARGET 74/76
BUY RPOWER ABOVE 103 SL 100 TARGET 106/109
BUY SINTEX ABOVE 115 SL 112 TARGET 118/121
BUY SRF ABOVE 68 SL 65 TARGET 71/74
SELL ACC BELOW 550 SL 560 TARGET 540/530
SELL AMBUJACEM BELOW 74 SL 76 TARGET 72/70
SELL APIL BELOW 285 SL 290 TARGET 280/275
SELL CHAMBLFERT BELOW 42 SL 44 TARGET 40/38
SELL CIPLA BELOW 190 SL 193 TARGET 187/184
SELL DISHTV BELOW 23 SL 24 TARGET 22/21
SELL GAIL BELOW 214 SL 220 TARGET 209/203
SELL GESHIP BELOW 200 SL 205 TARGET 195/190
SELL GRASIM BELOW 1345 SL 1360 TARGET 1330/1315
SELL INFOSYS BELOW 1250 SL 1270 TARGET 1230/1210
SELL ITC BELOW 177 SL 180 TARGET 174/171
SELL MARUTI BELOW 610 SL 625 TARGET 595/580
SELL NAGFERTI BELOW 18 SL 19 TARGET 17/16
SELL RELIANCE BELOW 1350 SL 1380 TARGET 1320/1290
SELL SESAGOA BELOW 93 SL 96 TARGET 90/87
"if we dont cross 2950 and close below 2905, i will carry positional shorts."
this is what i wrote in my previous update, and Dow is trading -200 as i m writing this :-)
trading becomes this easy when we stop thinking about whats happening in this world, and just concentrate on "TECHNICALS".
For today, 2895 will be a major level, and nifty will be weak trading below it.
also breaking 2870 is important, where nifty may tgt 2855-2830-2785 levels..
Sensex Technical View :
This 30 minute chart of Nifty shows the price action in detail and 2880 is likely to be a good support.
Comparing things always helps to understand what's going on. The whole market tanked on October 27 th last year. From the close on that day till date, the Nifty has gained 14.61%, while 48% stocks from the Nifty index and 23% stocks from the NSE basket have out performed the Nifty during the same period. This is quite good and does not support a bearish outlook as such. It's ok to live with this sideways market for some more time and I really don't think we're going to go down seriously from these levels. I call this phase as "the shock absorber" for the January through October crash.
The recent rise from 2750 - 2957 (Spot) has Fib retracements between 2832-80. Anything in between these is ok to live with and continue to target 3100~. The chart below shows Fib retracements for the earlier fall.
Sensex low 9445 yet again close to the point it broke out from. The range bound move continues. As there has been no follow up on the breakout it seems index is indecisive to continue ahead. many index stocks are giving breakouts but no follow up moves is an indication of indecision so better to be cautious till we dont see large price and volume action confirmation.
In the short term we had seen some bottoms around 9020 mark so for the trend to change completely it would be the important level. On upside major resistance on the trendline is 9900-10100.
Dow Jones :
While writing the index has made a low around 7725 closer to 7750. Closing below for a couple of days would endanger the recent lows. Long term support is around 6900-7100 which was the low zone made in 1997 and 2002.
Gold :
After crossing 930 gold has reached the 1st tgt area of 952 and could well be headed to 980 or lil lower also with dips in between.
Crude :
The pattern is being followed in crude since last 2 mths. Crude march at 34-35 whereas April is quoting at 42-43. Such a gap
Stocks to watchout for :
With the ranged moves on the index it has become difficult to find good trades on stocks also as no follow up moves and trend. Sometimes its better to wait for the right setups then to make small losses just for the need of trading.
Investors can continue to wait with cash for the next couple of months and take a fresh view on deep declines as time-wise pain and correction still left. ( 13-14 mths )
Colgate has finally given a breakout move after consolidating around the 415 zone. Can be bought on dips to 420 for 5-10 % upside as defensive sectors do see upmoves in such conditions. ( hero honda on life high )
Infosys
The stock is losing momentum on upside. Sustaining below 1235 could tgt 1190-1140. Short on rise to 1275-1290 stop of 1320.
Bharti Airtel
Support around 635-638 if stays below could test 618-607 in near term. Only a move beyond 690 would be positive.
Larsen and Toubro
The stock has made a range of 630-705 in near term. As per mkt conditions traders can take positions on either side. Short around 697 stop 705 reverse buy if crosses for 735.
This 30 minute chart of Nifty shows the price action in detail and 2880 is likely to be a good support.
Comparing things always helps to understand what's going on. The whole market tanked on October 27 th last year. From the close on that day till date, the Nifty has gained 14.61%, while 48% stocks from the Nifty index and 23% stocks from the NSE basket have out performed the Nifty during the same period. This is quite good and does not support a bearish outlook as such. It's ok to live with this sideways market for some more time and I really don't think we're going to go down seriously from these levels. I call this phase as "the shock absorber" for the January through October crash.
The recent rise from 2750 - 2957 (Spot) has Fib retracements between 2832-80. Anything in between these is ok to live with and continue to target 3100~. The chart below shows Fib retracements for the earlier fall.
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