S&P CNX Nifty 2752.25 +98.25(3.7%)
S&P CNX Nifty broke an important resistance level 2708 which was Mondays (24th Nov 2008) close. Tomorrow’s close would be critical to assessing the next course of the market. If S&P CNX Nifty closes above 2799 decisively, then it could signal a fresh uptrend for the next few days. I don’t expect this to happen and upside looks limited as 3100 has emerged as a strong resistance level. Global indicators as of now are not supportive for the markets to break the critical resistance levels.Nifty would confirm the downtrend once it breaks 2524. Let’s wait and watch!
Wednesday, November 26, 2008
Monday, November 24, 2008
Strategy:What should you do? - II
I hope you have read my previous post by now.
Do you sell everything you hold in a bear market? That’s a tough one to answer.
I wouldn’t advice a complete sell-off, but hold those which you think can grow well over a period of time. The following factors would be critical to your decision:
- Fundamentals of your stock
- Holding period
- Returns expectation
- Price at which you entered the stock
First, the fundamental of your stock is very important. For example, Bharti Airtel was probably one of the best picks in telecom some time back. Though nothing has changed much since then, it’s not a value buy at current levels. For one, it has entered a new business (DTH) which would squeeze its margins for the next 5 years at least. Second, I believe its ARPUs have peaked. From here, it could go into a consolidation phase with slower growth in ARPUs if not deteriorating growth rates. Looking at these factors, its probably headed lower considering the market fundamentals. I would probably re-visit the stock for long term below 400 levels.
If my holding period for the stock is around 10 years, I would probably part-hold Bharti Airtel and add more at lower levels (thereby cost-averaging). I would hold because revenues aren’t declining as yet for the stock. The new business would dent margins in the short term, however would contribute to greater profits towards the end of my holding period. However, for someone with a 2-3 year view or maybe lesser, it’s not the best stock.
The current bull-run has already seen spiraling growth in the stock. From here, it may not give you something like what you have seen in the past. Remember, the stock rose from Rs 30 levels in 2002! I would probably pick the stock as a safer pick for the long term with medium risk. It can still give you 30% YOY if you are inclined to hold for a decade or maybe when the next Bull Run emerges!
All said and done! If you entered the stock(in this case Bharti Airtel) at the peak (or its current 52-week high), you would be better off selling the stock at current levels (600+) and enter at sub-400 levels. For one, you would hardly see any returns on the stock for the next 3 years. Its not known to be a good dividend payer, so you need to think twice before retaining something which doesn’t pay you for long! It’s like working for an employer for free in expectation of strong growth ahead!
Do you sell everything you hold in a bear market? That’s a tough one to answer.
I wouldn’t advice a complete sell-off, but hold those which you think can grow well over a period of time. The following factors would be critical to your decision:
- Fundamentals of your stock
- Holding period
- Returns expectation
- Price at which you entered the stock
First, the fundamental of your stock is very important. For example, Bharti Airtel was probably one of the best picks in telecom some time back. Though nothing has changed much since then, it’s not a value buy at current levels. For one, it has entered a new business (DTH) which would squeeze its margins for the next 5 years at least. Second, I believe its ARPUs have peaked. From here, it could go into a consolidation phase with slower growth in ARPUs if not deteriorating growth rates. Looking at these factors, its probably headed lower considering the market fundamentals. I would probably re-visit the stock for long term below 400 levels.
If my holding period for the stock is around 10 years, I would probably part-hold Bharti Airtel and add more at lower levels (thereby cost-averaging). I would hold because revenues aren’t declining as yet for the stock. The new business would dent margins in the short term, however would contribute to greater profits towards the end of my holding period. However, for someone with a 2-3 year view or maybe lesser, it’s not the best stock.
The current bull-run has already seen spiraling growth in the stock. From here, it may not give you something like what you have seen in the past. Remember, the stock rose from Rs 30 levels in 2002! I would probably pick the stock as a safer pick for the long term with medium risk. It can still give you 30% YOY if you are inclined to hold for a decade or maybe when the next Bull Run emerges!
All said and done! If you entered the stock(in this case Bharti Airtel) at the peak (or its current 52-week high), you would be better off selling the stock at current levels (600+) and enter at sub-400 levels. For one, you would hardly see any returns on the stock for the next 3 years. Its not known to be a good dividend payer, so you need to think twice before retaining something which doesn’t pay you for long! It’s like working for an employer for free in expectation of strong growth ahead!
Thursday, November 20, 2008
Strategy:What should you do? - I
For the past few weeks, I have been focusing on selling some of my holdings. I exited all of Asian Hotels (@300), Bharti Airtel (@700), and Allcargo global (@ 745). Of course, I mentioned my strategy on ICSA here.
There have been many who have been very skeptical of selling stocks at loss. Some analysts somehow on hearing blur-chip names, by default, recommend a hold for long term! Well, I keep saying, “It’s ultimately your money doing the rounds”. Here’s a case for understanding.
Let’s say, you bought Infosys Technologies during the highs of 2000 at a price of Rs 1500(after adjusting bonus and split). One can see from its historical charts that it touched a low of 269 in the year 2001 and a high of 2439 during the year 2006.
Now, let’s say, in the year 2000, you decided to hold for long term as many knowledgeable analysts recommended. Let’s take the best case scenario of selling the stock at 2439 during the year 2006.
You have made a gain of 939 Rs/share in 6 years time which translates to a 10.4% annual return. Considering the dividend/share, you would have made around 11 percent annually. This would be your best case scenario. Many would probably be satisfied with this kind of return way back in 2003 when interest rates were low. Considering the levels of 2001 and the interest rate scenario then, you would have been better off investing in fixed instruments as they would have earned you the same return with surety and security!
Stock markets are all about timing. While it’s difficult to time, one needs to take a calculated judgmental call. Fundamentally, I thought Infy was fairly valued at around 700(during the year 2001). However, technically way back, it was showing no signs of bottoming out. Economic indicators too weren’t supportive to the stock. Given this, I would have probably entered the stock at approximately the same level (700) during the year 2004 as it showed strength at every lower level. Note that this price is nearly 150% higher the lows it made in 2001. At my entry price, I would have made big money (>50% returns) even if I sold at a median price of 2006!
The gist is – Don’t fear to sell just because you’re at loss. You could end up losing a lot more if you don’t sell. I have taken a top performer in this example. But, many companies as you would know wouldn’t reach their highs even after a decade. One needs to analyze fundamentals from time to time. For example, Arvind Mills used to trade around 300 during the early 90’s. Today, it is struggling to stay at double-digits and hasn’t managed to reach anywhere closer to 300 in two successful bull runs (in a 15-year span). And remember, way back in the 90’s, textiles and manufacturing was a good space to enter just as IT is today.
Again, don’t just sell at whatever price you see on the board. Look at technicals and fundamental indicators and then sell closer to the high-points. You would get adequate opportunities to re-enter the stock at lower levels. But, how does one decide on selling a stock? Do you sell everything you hold in a bear market? I would answer this in my next article. Keep watching!
There have been many who have been very skeptical of selling stocks at loss. Some analysts somehow on hearing blur-chip names, by default, recommend a hold for long term! Well, I keep saying, “It’s ultimately your money doing the rounds”. Here’s a case for understanding.
Let’s say, you bought Infosys Technologies during the highs of 2000 at a price of Rs 1500(after adjusting bonus and split). One can see from its historical charts that it touched a low of 269 in the year 2001 and a high of 2439 during the year 2006.
Now, let’s say, in the year 2000, you decided to hold for long term as many knowledgeable analysts recommended. Let’s take the best case scenario of selling the stock at 2439 during the year 2006.
You have made a gain of 939 Rs/share in 6 years time which translates to a 10.4% annual return. Considering the dividend/share, you would have made around 11 percent annually. This would be your best case scenario. Many would probably be satisfied with this kind of return way back in 2003 when interest rates were low. Considering the levels of 2001 and the interest rate scenario then, you would have been better off investing in fixed instruments as they would have earned you the same return with surety and security!
Stock markets are all about timing. While it’s difficult to time, one needs to take a calculated judgmental call. Fundamentally, I thought Infy was fairly valued at around 700(during the year 2001). However, technically way back, it was showing no signs of bottoming out. Economic indicators too weren’t supportive to the stock. Given this, I would have probably entered the stock at approximately the same level (700) during the year 2004 as it showed strength at every lower level. Note that this price is nearly 150% higher the lows it made in 2001. At my entry price, I would have made big money (>50% returns) even if I sold at a median price of 2006!
The gist is – Don’t fear to sell just because you’re at loss. You could end up losing a lot more if you don’t sell. I have taken a top performer in this example. But, many companies as you would know wouldn’t reach their highs even after a decade. One needs to analyze fundamentals from time to time. For example, Arvind Mills used to trade around 300 during the early 90’s. Today, it is struggling to stay at double-digits and hasn’t managed to reach anywhere closer to 300 in two successful bull runs (in a 15-year span). And remember, way back in the 90’s, textiles and manufacturing was a good space to enter just as IT is today.
Again, don’t just sell at whatever price you see on the board. Look at technicals and fundamental indicators and then sell closer to the high-points. You would get adequate opportunities to re-enter the stock at lower levels. But, how does one decide on selling a stock? Do you sell everything you hold in a bear market? I would answer this in my next article. Keep watching!
Wednesday, November 19, 2008
Market Update: Nifty would fall 50% more
S&P CNX Nifty 2635 -48.15 (-1.79%)
S&P CNX Nifty broke the 3 year support of 2632, which means it’s only a matter of time for the next lower support to happen. I mentioned earlier that the S&P CNX Nifty has merely broken the 3-year low recently whereas the Dow has breached the 5-year low decisively and is headed closer to its 10-year support.
I now peg the next lower support to emerge closer to the 5-year low of 1470. I don’t expect a sporadic fall to 1470. The fall would be phased giving ample exit opportunities. The next support level to watch would be around 2316 for the immediate term.
This is nearly 50% lower from current levels! Traders – stay away for now and Investors – sit with cash till further trends emerge.
S&P CNX Nifty broke the 3 year support of 2632, which means it’s only a matter of time for the next lower support to happen. I mentioned earlier that the S&P CNX Nifty has merely broken the 3-year low recently whereas the Dow has breached the 5-year low decisively and is headed closer to its 10-year support.
I now peg the next lower support to emerge closer to the 5-year low of 1470. I don’t expect a sporadic fall to 1470. The fall would be phased giving ample exit opportunities. The next support level to watch would be around 2316 for the immediate term.
This is nearly 50% lower from current levels! Traders – stay away for now and Investors – sit with cash till further trends emerge.
Thursday, November 13, 2008
Dow trades weak
Dow 8068.96 -213.70 (-2.58%)
Sensex 9536.33 -303.36 (-3.08%)
I mentioned here sometime back that the 10-year low of 7591 is an important level to watch. Looking at the rate of fall and news flow, this level is most likely to be broken within the next few days or a couple of weeks at most. Its certainly one of the worst times in history!
For the Sensex, I still maintain a bearish trend. The Sensex has still not broken its 5-year low which is an important level to watch. Once the 5-year low is broken, I expect a technical bounce. Till then, it’s a wait and watch.
Sensex 9536.33 -303.36 (-3.08%)
I mentioned here sometime back that the 10-year low of 7591 is an important level to watch. Looking at the rate of fall and news flow, this level is most likely to be broken within the next few days or a couple of weeks at most. Its certainly one of the worst times in history!
For the Sensex, I still maintain a bearish trend. The Sensex has still not broken its 5-year low which is an important level to watch. Once the 5-year low is broken, I expect a technical bounce. Till then, it’s a wait and watch.
Tuesday, November 11, 2008
Portfolio Changes - What am I doing?
Wockhardt NSE 108.05 -0.10(-0.09%)
I sold Wockhardt for a quick profit and would look to re-enter at 100+ levels. I'll continue looking at some attractive stocks for investment with a short and long term view.
I sold Wockhardt for a quick profit and would look to re-enter at 100+ levels. I'll continue looking at some attractive stocks for investment with a short and long term view.
Thursday, November 6, 2008
Portfolio Changes - What am I doing?
Sensex 9734.22 -385.79 (-3.81%)
ICSA NSE 191.85 +6.7 (3.62%)
1. The stock has completed most of the retracement from its low of 143. From here on, there is very little upside left.
2. Stock could touch 100 in the short term at which point, I'll look to add again.
3. The upswing to 200 levels was seen with low volumes whereas the fall was with higher volumes. Hence, the stock continues to be weak on the charts.
4. FII ownership is close to 50% which means the trend will largely be controlled by one segment. The past quarter has seen some short term buying and selling from FIIs. If you look at the current holding structure, its easy to understand that most of them have brought down their cost of ownership. Many FIIs have sold the stock at higher levels and have bought lower. The practice looks malicious, however this is how it will be till SEBI bans short-selling!
Tuesday, November 4, 2008
Portfolio Changes - What am I doing?
Today was a good exit opportunity for some of my holdings. I exited my positions in Bharti Airtel and Asian hotels. I introduced Wockhardt to my portfolio with a short and long term view. I recommend being cautious at current levels. Do not over invest and divest part of your portfolio where you think there is more downside.
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