Investment Recommendations - A Story

Here are the recommendations given by a financial fortnightly in the issue Jan 15, 2013, the recommended price and the current prices (in brackets) are as follows.

 L& T – 1618 (980)

India Glycols – 164 (91)

 M&M financial services – 1125 (1000, adjusted to the split price)

Va Tech Wabag – 540 (540)

Axis Bank – 1355 (1010)

LIC Housing finance – 293 (95)

ICICI Bank – 1142 (1080)

Financial Tech – 1114 (273)

Nifty was at 5500 levels in Jan 2013 and in Jan 2014 it is at around 6000 (though it went up to 6400 levels in Jan 2014). None of the above recommendations fetched any returns to investors, rather one would have lost much of the capital had they invested as per the recommendations.

Valentines day is behind us, Reality is Ahead

Those who have made new commitments on Valentines Day will be cursing their luck today. Yesterday people were chasing stocks as if there is no tomorrow and sensex jumped by 800 odd points. As I wrote in my yesterday’s blog, this is nothing but gambling. US markets tanked yesterday and Indian markets will follow the big brother today.

Our markets will be volatile today and it is better to say ‘Goodbye’ to the new commitments made yesterday.

For seasoned traders Educomp provides new shorting opportunity for today. In the current market conditions, any trades should be squared up on the same day for a good overnight sleep.

It is interesting to watch Biocon’s chart and it is forming a good base at 400 levels. Fundamentally company looks good and it is planning to list one of its subsidiaries this year, thus unlocking the value. This will be a good investment pick. Investor’s can wait for an opportunity to buy at 300-350 levels on a bad day.

As far as IT stocks are concerned the future is still uncertain. TCS and Infosys are accepting the fact that there is slowdown in US. The IPO from L&T Infotech is postponed. Negative signals everywhere suggests that there is still more pain left in IT sector. The only hope for IT sector is the budget. I expect the Government to extend the tax holiday for IT companies. This will be a major trigger for all Indian export oriented IT companies. Contrarian investors can seriously start watching companies like TCS, Infosys, Satyam, Wipro, Tech Mahindra, KPIT Cummins, Sasken communications and some mid cap IT companies and can start building a good IT portfolio from 2 years perspective. DSP Merill Lynch technology.com is a good fund to invest at the current price of Rs 28(Growth option).

Indian markets are still below 13 day EMA

US markets rallies yesterday. Yesterday’s rally was strong and Indian markets are expected to open gap up.





Our markets are still below 13 day EMA and hence not good from a trading perspective. While there is no doubt that Indian markets will move up sharply today, taking a trading call is just gambling. We can’t predict US markets and a crash today will bring down our markets tomorrow. I have not seen any gambler's making money and so would not advice anybody to go long either in NIFTY or any other stocks. From my own experience I can say that disciplined investing and trading will succeed most of the time and gambling invariably fails almost every time. A quick buck through gambling gives a momentary kick but unfortunately it is short lived.

There will be huge rush to place the order at market opening and some of the stocks may rally today by 5 to 8%. It is not advisable to enter these stocks at high price. If the market is flat or down in the opening, (I don’t’t think that that would be the case) , then one can go long on NIFTY futures. Educomp is the stock to watch. One can see Educcomp at a critical point, just trying to cross 13 day EMA. The 13 day EMA slope is still not given the buy signal while it is givining some stability indications. If it is available at 3700 levels that would be a good buy from trading perspective. It has good support at 3500. If it drops to 3600 levels in today's market message is clear. It is heading below 13 day EMA and one should exit.


Note: It is extremely dangerous to trade in Educomp in derivatives as the price swing is huge. Taking positions beyond one's limits is not advised. Please do not venture unless you are a seasoned trader.

US rally is not convincing, Slowdown In India growth confirmed

Yesterday US markets rallied. But I am not too positive with the rally. Dow Jones was up over 200 points at one point of time and later corrected about 100 points to end the session 133 points up. Opening high and ending low is a typical bear market signal.

This rally is not enough to power Indian markets and I expect Indian markets to be volatile even today. Wait and watch is the best strategy for the time being.

Suddenly SEBI and finance ministry woke up and realizing that IPO's are not prized properly. Greedy capitalists are sucking investor's blood in the name of "value creation". The value creation bubble is burst, thanks to Reliance Power IPO. Independent valuing agency only should fix the price of the IPO and this rule should be framed as early as possible.

Educomp may be good from derivatives trading perspective and booking profit as soon as one is in profit should be the mantra for the day. Reliance communication is beater up badly because of Reliance Power issue. Reliance Infratel's valuation is under threat because of recent crash of stock market and Reliance group company stocks.

Investor's should not be misguided by statements from 'Indian attire, Harward mindset' people who utter rather slowly everyday that India growth story is intact. As all of us know Industrial production nosedived from 13% to 7% in the latest quarter. Still if one listens to the preaching even god wouldn't save them!

No light on Dalal Street because of Power Failure

No one had expected such a bad listing for Reliance Power IPO and the impact on fragile Indian equity market is huge. We saw another black Monday, shaking investor confidence.

US markets ended marginally up. There is no much hope from US markets in the near future and so Indian markets are expected to be in bear phase for a longer term. Yesterday’s NIFTY closed below 200 day moving average which is not at all a good sign. There may be a slight recovery today but I would not bet on our markets for the time being.

It is better to watch the developments for few more days before bottom fishing. It is interesting to watch when the power will be back.

Bears pulling the cart, Bulls watching US markets in the sidelines

Technically, market is very weak and is in a dangerous zone. Market is trading below 13 day exponential moving average, and the recent attempt to move above this decisive zone is failed and market is falling from last 3 days. In technical terms the bearish divergence pattern is clearly visible and apart from Reliance power listing and budget expectation, there are no other triggers to pull the market up. Global signals are negative as US markets ended in negative territory on Friday. Indian Inflation data is discouraging as inflation is up at 5 month high of 4.11%. This means there may not be an interest rate cut in India in the near future. This is the reason for a sudden fall in banking stocks on Friday.

As the general election is just one year away (under normal conditions), the primary objective of the Government is to keep the inflation under control. Bank stocks were flying high on the expectation of interest rate cut and the news may result in further correction in banking stocks. Stock market works on expectation and speculation and when there is negative news, the impact is swift and unforgiving. That is how markets work and we should respect this fact.

The cause for concern is that there are not many supports for the market in its downward journey. If the market breaks its short term support of 17000, next support exists only at 15500 levels. And if it breaks 15500 levels, next support is only at 14,000. So, if we have two bad days, market can slide to 14000 levels. Recovery of global markets is very important and if it doesn’t happen we can see 14000 levels very soon.

From a general market perspective we have seen withdrawal of two IPO’s (Emaar and Wockhardt) and postponement of union bank’s follow on offer. In one sense this is a black mark on Indian markets. But it is a good lesson to greedy promoters of the company to offer the shares to public at realistic valuations.

With the general market conditions, I am not too optimistic about Reliance power listing. By any miracle if I get a chance to sell at around 900, I would sell it as I am sure I can buy this at much lower price for sure. I am sure there will be many recommendations to buy this stock at high price, but one should be very careful to enter this stock at a high price.

I have read an article about grey market pricing and it seems the grey market premium has come down to 150 levels from previous 450 Rs. Th expectation is that Reliance power will list at around 600. If Reliance power fails to list at around 700, grey market operators are going to lose money and so they may sell other stocks in secondary market to meet their financial obligations, thus pulling the entire market down. So Monday is a dangerous day and I would look at almighty to save the market! Hope (only hope!)it would not be another black Monday!

Trading in banking stocks is also very dangerous for now. From an investment perspective, I am still bullish about banking stocks. For me only Sun Pharma looks attractive from derivatives trading and investment perspective. If market crashes, Sun Pharma can be bought at around 900 with a stop loss at 850.

Laxmi is waiting...

Suryalakshmi cotton mills is investor’s darling in textile sector. This company was started in 1962 and one of the great wealth creators for the investors. This company manufactures over 300 varieties of denim also manufactures yarn for hosiery or weaving.

Textile sector is one of the worst hit sectors in India. Dollar appreciation and decrease in demand for denim has impacted the margins in the last 2 years. The price from an all time high of about 600 has come down to Rs 30 levels (after 1:1 bonus).

Textile industry is cyclical in nature and a turnaround is expected in a year’s time. This year’s budget will offer some sops to this sector and hence we have a short term trigger for the sector as a whole. Once the sector turns around, there is no looking back to Suryalakshmi as it is a leader in the sector and one of the most investor friendly textile companies. Recently Suryalakshmi has also entered into garments business.

Suryalakshmi is back in black in the third quarter of 2008, by reporting a 177% net profit increase compared to the third quarter 2006. One should also note that , the company had reported a net loss of about 2.72 crores for the September 2007 quarter. The net profit in the last quarter was 1.33 crores . There is 34% increase in sales compared to the previous quarter.

This is, in my opinion, is one of the best contrarian buys and definitely a future multibagger (20 bagger?). Once sector turns up, chasing this stock is very difficult.

This is only for long term investors and those who are expecting continuous upper limits within no time can forget this scrip and try their luck elsewhere. This company will definitely bring ‘Laxmi’ to patient investor’s house and lighten of their portfolio.

Unfortunately there was a fire in on of the denim factories on Jan 28, 2008. Though as per company statement, entire facility is insured, there will be a production disruption and it may impact the margins the the current quarter. Watch the company closely and this will be an excellent buy at around Rs 30.