Category Archives: My View

IT Sector in trouble?

Long term investors who have been investing since 2 Decades would be having atleast one IT stocks in their portfolio but the charm of IT stocks seems to be fading out. Since last year we have been witnessing under performance from this sector and now finally it seems to losing complete long term strength.

13th_nov

Above chart is of a NSE IT index and the time frame in picture is weekly. There are two things to be noted technically in this chart, First: Index has been trading in lower channel since the start of 2015 and we are about to break this channel on downside next week which could trigger sell on all Blue chip IT stocks from Long term portfolio. So a trade below 9400 on the index is going to be a first confirmation. Second: Index has traded and closed below 200 Week Average for the first time since 2011 last week…..But looking at indicators may be a pull back could be witnessed. Though not sure of such a pull back so would recommend to start off loading IT stocks on each rise from next week. On the upside resistance could be 11400 while downside the valley is deep!

Some IT stocks charts supporting the fall

Infosys: Stock has closed below 200 Week average with volumes

infy

TCS: Stock has just started dipping out after a consolidation of 2 weeks so its better deal to short TCS then Infy at Current levels

tcs

WIPRO:  Stock has already been hit due to many fundamental reasons so looking at chart, its a completely avoid trade at this level for any side

wipro

HCLTECH:  Stock has been outperforming other blue chip IT companies and its only IT Stock still trading above 200 day average ..

hcl-tech

Strategy:

So now next week we need to first wait for NSEIT Index to give confirmation of trading below 9400. 

Looking at the volatile markets and uncertainty ahead we could go with a spread among IT companies….

Sell HCL Tech and Buy WIPRO…....

Will post again if we get some confirmation!!

Market cap way below 2008 high and so are majority of stocks!

In recent times we have achieved almost a new high on Nifty and now bears, pessimists are talking about “Overvaluation of stocks” but that ain’t what statistics are saying. Nifty surely has given a strong upmove but many of the stocks have yet not performed at all. Nifty is just 4.9% below life high of 9119 but look at the stock performances of all Nifty stocks in attached file: Nifty_Stocks ! If you compare performances respect to Nifty, only 15 stocks out of currently 51 stocks are performing better than nifty compared to respective life-highs. So understanding with a plain vanilla logic , there is way more to go on stock specific trading.

 Now lets talk about market-cap of Nifty which is currently trading $1.63mln which is way lower than 2008 high which was at approx $1.83mln  which means index has crossed 2008 high in terms of absolute value but not yet in terms of market-cap valuation.  Check out the graph below:

marketcap_nifty

In above graph i have compared Nifty (Yellow Line), USD/INR (Pink line) and Market-cap  (Blue line).  Red marked boxes are the event when nifty has topped. During such period of time we often have stronger rupee vs USD and market-cap is way above Nifty on relative terms. Green market boxes are times when rupee is the weakest and Nifty hammers a low and initiate a new rally. So keeping other factors constant, currently we have hammered low for time being and new rally has been triggered. Strengthening rupee is the best sign of strengthening equity markets.

So to conclude, we are going to get the best time of our trading period in coming months but the strategy should be stock specific as we noticed that we have many under-performing stocks. And yes we dont need to search for stocks out of Index because these stocks would also give you best returns. So stay with the best. Though always hedge your positions in option markets.

Nifty undervalued in terms of Dollar

Nifty’s move to 9119 in March 2015 from the previous high of 2008 around 6330 was applauded by our traders alot but not investors. This rally i would term as “Traders rally” because fundamentally we were not globally competitive as suggested by our rupee vs dollar (Green line) which has been weakening regularly. Because of our weak rupee, Nifty in terms of Dollar (White) has not even achieved 2008 high as you could notice in the charts. This huge divergence between the Nifty (Yellow line) and Nifty in Dollar terms need to narrow down soon and we could see fast rally in equity markets. But this rally would be accompanied by strengthening rupee.

Why would rupee strengthen? because finance budget and RBI has won back trust of Investors. By achieving 3.9% of Fiscal deficit target and setting off new target of 3.5% in budget, has surely given a confidence to global investors. Secondly, PSU bank’s cleaning up of NPA’s and Basel norms restructuring has given financial sector a boost. Thirdly, investor friendly initiative by many states in form of global business summit has boosted FII flows in various sectors. Fourthly, bounce back in Commodity prices will boost companies revenues which were hard hit in last few years.

So to conclude, Nifty has yet not at par with 2008 and as  India is considered brightest spot in world map as only emerging market growing we can expect Equity market investment to be a multi-beggar even from current levels in next 5 years. Start investing if you havent yet.

My view on Railway Budget

February’s last two weeks each year, newspaper are flooded with the word “Railway Budget” and its always difficult to understand for a common man what exactly it is. So let me explain you guys in some simple words what is it and what shall we expect. To define Railway Budget, ” It is the estimation of Income and expense of Railway department for next financial year”. For the Railway major revenue comes from Sale of passenger tickets and second most source of income is Goods carriage or say freight. On the expense side they have a long list from maintaining coaches, tracks etc to staff expenses.

On the budget day we all wait for new trains to be announced from our home town while companies related to rail industry waits for new tenders and staff wait for rise in salary. But leaving all this expectations aside, i feel this year we also should lookout for some other announcements from the minister which are though minor but will surely improve our travelling experience with railway.

These are some of the points which i personally feel should be focused:

  • Internet on Travel:  Today when we are talking about Digital India and trying to connect more and more Indians through internet, we should think of seamless connectivity with less disconnection. At present, we are not able to get seamless connectivity on 2g/3g on mobile while travelling on trains but if wi-fi connection is available , though at some minimum cost it should surely make our travel more easy.
  • Entertainment on the Go: Entertainment could be by many ways, but on the simpler note we should have a small screen display on each compartment which may display a list of movie just as we have on international flights or may be a common movie should broadcast  across one bogie. This has a minimal cost but requires a lot post installation maintenance.
  • Quality Food: A major step is required for quality food to be served on the train. We have seen some unhygienic food served so i expect some private contract for the catering. Even the tea quality hasnt been maintained.
  • Verified Staff: It has been noticed many times that passenger finds it hard to verify the staff that whether he is a railway appointed or a random guy in the cloths alike railway staff. So may  be some system that could make it easy for passengers to identify railway staff on the go
  • Cleanliness: Of-course to some extent we the passengers are to be blamed  for the dirty coaches but may be we can have a on demand staff to clean our compartment while the travel with some charges, because sometimes in long journey its difficult to travel with dirt around but we dont mind paying few bugs and get it clean. By this way may be we can improve overall conditions.
  • Instant Quota: Though we have a Tatkal Quota, but we should also have some instant quota wherein a last minute travel can be arranged for which booking opens only 2 hours before with some high charges.

Though this all our points which i feel that should be prioritize for the betterment of our travel rather than expecting new travel options. There may be many other such suggestions, keep it coming the comments below.!! Lets discuss and get some idea what other things should helps our railway to improve. Until we dont consider as OUR we can keep it better. Government takes the initiative but we should follow it with true heart.

 

Disclaimer: All views mentioned are my personal and they are not intended for any one in person.

 

 

Aviation industry is surely risky but a good bet

Airline industry has been one of the worst performing sector in last 5 years on our equity platforms, but now i feel that one should be surely taking a risky bet from current levels for a long term perspective and it could be multi-beggar. KFA grounding and Spice Jet liquidity crunch has almost brought scare for investors for this sector but recent restructuring in Indian aviation industry has been quite promising. If we take about particular companies, then new management of Spice Jet has been successful in bailing out company from liquidity crunch and management has also shown confidence on future of the company. Spice jet seems to have place a good order for new plans which is also positive for the guidance. Talking about Jet Airways, after it Etihad stake and closing of its low cost domestic carrier has provide beneficial as of now on their balance sheet. And Indigo Issue too has been successful on the D-street. So my gut feeling for this sectorial investment is strong.

Now lets talk about some primary numbers:

  • Revenue Passenger Kilometers

The RPK of an airline is the the sum of the products obtained by multiplying the number of revenue passengers carried on each flight by the distance – it is the total number of kilometres travelled by all passengers. So this numbers gives us a vague idea how air traffic has been in recent time. As in the graph, we could notice that last 3 years we have seen a increasing trend of RPK in india, which means more passengers have been travelling more kilometers which indicates sector revenue would have been increasing. This is surely a positive trend for the aviation markets and if we continue to witness such growth, we shall get  improving results.

Revenuekm_22feb

  • Load Factor

Load Factor can be simply defined as the capacity utilization of airline industry. Looking at the beneath graph, we could see that Load factor across indian aviation sector has been improving since 2014. Though in 2015 we saw some slump in mid-year but that is considered to be off-season for airlines. Last two months of the year which is generally season as NRI visit increases has seen load factor at the highest level in recent time.

load factor

This sums up saying that airline company’s next quarter results should be the best as Load factor and the  RPK both have improved. Ofcourse there are many other factors to study before investing but a overview and mood seems to be improving in the industry and one should surely have atleast one of 3 listed airlines in portfolio for the long term!!

Disclaimer: This views are purely my research. Invest on my idea only after studying markets and stocks throughly. Take advise of your financial consultant before investing. And equity markets are subject to market risk.

 

 

 

Patanjali, a potential competition for FMCG Co.’s?

In a short span of less than a decade, Patanjali recorded a turnover of Rs. 2,500 Crores in FY15, higher than what existing FMCG companies had achieved over a decadeAccording to the industry data, it has a market share of 4%-5% (FY15) despite having fairly limited distribution. Patanjali has also gained considerable traction in the toothpaste category.

Patanjali Ayurved Limited was established in 2006 by Baba Ramdev along with an Ayurveda practitioner, Acharya Balkrishna. Although Ramdev baba does not own any stake in the company, he has played an important role in gaining brand’s visibility.

The company manufactures around 800 products and has expanded to a full range of consumer categories, from edible oils, biscuits, and noodles to toothpaste, hair and skin care products. It sells its products through clinics, wellness centers and outlets. The company partnered with Future group to sell its products through Future Group’s stores and has plans for joint manufacturing in future.

The exponential growth of Patanjali is attributable to increasing appeal of ayurvedic and ‘natural’ products, price discounts (10% – 30%), better quality, and a growing desire to consume Indian brands. It also has an advantage of being associated with Yoga guru, Baba Ramdev. The company stepped up its advertising and promotional spends and roped in Hema Malini as its Brand Ambassador. According to BARC, Patanjali’s advertisements were one of the top three brands advertised on television (Nov’15).

Hence, Patanjali is definitely an exciting development in the FMCG Industry. Patanjali has been a disruptor in the FMCG market. It poses challenge to FMCG companies like Dabur and Marico that focuses on natural products. Going forward, Patanjali might eat market share of the FMCG majors present in oral care, hair care and OTC (over the counter) products. The future may see price wars or new product launches to cope with the stiff competition. Bring it on! As we know the major FMCG players are not going to be quiet!

Why Invest in India?

Global economy scenario is a bit vague at current situation but this should be considered as an opportunity to invest for the long term, those who have liquidity. Am sure many of you are confused that where should we Invest? Answer is INDIA. It is not just because i am an Indian citizen but currently if we compare developed and developing countries, India has the most favorable factors to outperform in next 5 years. Now, you guys would say that if world economy is fragile, India would not grow too. But i am going contrary to this statement as i believe we have so many domestic factors that are going to lead our economy. I am trying to list down few points which i feel are positive points or may say booster to our economy.
    • Government with Vision: NDA in center this time is most differential with all past government strongly on one point which is, it has vision for changing India. I am not politically against or for any government, but what i feel different about this government is that it  has initiated many ways to change India at same time. Ofcourse previous governments too took steps to change india, but this time they are going with Digital world which is helping to reach out large pool of people at one time and also making work quit easy for departments to manage data. So biggest game changing for this government could be Digital India campaign, more than even any other change because it is connecting people and also its making  information available to citizens easily. With Make In India campaign, government is trying to support all sectors of India and its also boosting on Exports. I may go down to write endless pages, if i mention all the points of visionary government but in short to say,if we see even 35% change than current situation, its going to change India in alot better way. So i have faith in this government!!
    • Youth Population: As per the UNFPA’s 2014 report, India’s 25-30% of total population is Youth between 10-24 of age which i believe are going to spend the most in coming decades as they are going to be next work force who will earn. In terms of total population, India is the second highest and so a simple math would suggest that atleast we are going to stay in top 5 country to have youth population in next decade. Even as per CIA report 2015, India birth rate is far more than China, Australia, USA or say any other developed country. Considering this angle of economy, other factors remaining constant across countries, Multi national companies would surely choose India as its destination for manufacturing. To add to this, Indian Government, Led by Modi, has initiated a programme, SKILL INDIA to create a ecosystem to train labors across India through training partners. So am sure main blood for economy to prosper is always human and stats says India is going to be most preferred.
    • Change in Workforce: It could be considered a continuation of above point but there were two things which i wanted to mention here which was China, who has largest workforce, is losing in numbers where as India has added 366 million in last decade as suggested by articles in leading magazines. This could be the biggest example that youth population of our country is joining skilled labor more than agriculture. So this is surely changing our demographic. Secondly, women workforce is increasing in India which could increase demand of various products in next decade as they would have purchasing power. Until recent or even still many families have tradition of housewives but now as more and more girls are completing their graduation, they prefer to stay working even after marriage. Though still many families doesnt allow to work but thought is changing at rapid pace. This will surely push more women in labor market. Now how this is positive for India? Its simple logic…As now women would earn themselves, they dont have to be dependent on Husbands to fulfill their demands for luxury products. This  will raise demand for clothing, jewellery, cosmetic etc and the money will keep circulating in economy. So i Feel even this could play part in changing India.
    • Untapped Rural markets: As per the census report of 2011, India’s approx 68.84% population stays in rural while just 31.16% are living in urban. That number has improved from previous 72.19% in 2001 so we can assume that this number could max be revised to 60% in coming census . Which means still more than half of India is going to stay in rural in next decade. That also concludes that halve of our population is dependent on Agriculture. But interestingly, if you guys notice around you, we are witnessing major change in vision of rural people. Until before 2 decades, it was by default assumed by a farmer’s son that his future is going to be farming, but now the scenario is different. Now 50% of farmers want their children to be a doctor or engineer or even a chartered account. What has brought this change? Awareness!  Today Digitization has made it possible for information to be available at each and every corner of the world where there is Internet. As we are having largest pool of mobile users, even internet is reaching  each part of India, which is bringing awareness in Rural India. People there are getting informed of Education, Products, Jobs etc. This is creating demand of each and every type of products and services in Rural. As Food inflation is rising so is income of rural india. This states that when urban people are into somewhat liquidity crisis, rural people have purchasing power as money has been transferred to rural india by the way of food inflation and real estate inflation. On opposite, they havent spent at the same pace as they earned because they were unaware of spending option until now. But now Internet have educated them. In next decade they would demand say Electric appliances, Education services, etc more than urban in term of sales growth. So untapped rural markets is biggest advantage of India currently.
This were 4 basic points which are  creating biggest opportunity to invest in India for next 5-10 years. Ofcourse there are many other financial factors and commodity factors such as lower crude oil price which are also going to play crucial role for growth but that is common for many developing countries. While 4 points which i mentioned are unique advantages of India over developed countries and developing countries so i feel we should STAY INVESTED IN INDIA OR START INVESTING! Where and how should you invest within India, is upon you to decide. You may take advise of your financial consultant and work the best investment opportunity as per your goal. So my formula for next decade is I.I.I (Invest In India)
 
Disclaimer: All the views are personal and the actual figures may differ. I am not biased to any political view. Please refer to you financial consultant before investing on my idea. This is purely what i think.

IS INTEREST RATE POSSIBLE GOING FORWARD

The Reserve Bank of India (RBI) in its monetary policy meet on 02ndJune, 2015 has cut the repo rate by 25 basis points to 7.25% from 7.50%. Consequently, the reverse repo rate under the LAF stands adjusted to 6.25% and the marginal standing facility (MSF) rate was cut by 25 basis points to 8.25% as against 8.50%, while Cash Reserve Ration and Statuary Liquidity Ratio kept status quo at 4% and 21.5% respectively. The interest rate cut to spur growth and revive investment but the central bank has remained cautioned that Inflation is expected to rise to 6 per cent by January 2016 and they also cut their GDP target to 7.6% from earlier 7.8% for FY 16. A possible push back of U S interest rate hike by FED, still makes indicators of recovery and low investment and credit growth has led RBI to cut interest rates by 0.25bps. But going ahead we are expecting monsoon to remain normal, clearing of GST bill in Rajya Sabha during the monsoon session, possible clearing of Land Acquisition bill, further with the process of clearing of stuck infrastructure projects is going on and likely pick up in corporate earnings going ahead. We expect a further 25 bps rate cut or a CRR cut during the year.

INDIA'S MARKET CAP-TO-GDP RATIO

Nifty had a non-stop rally from 6000 to 9000 over the last year on the promises of getting rid of policy paralysis, passing of key reforms and bringing back the India’s growth on the track given by the pro-growth government at the centre due to the strong mandate given by the people of India. After the non-stop rally over the last 12 months, the question arise in the mind of investor whether the Indian market cheap or not.
 One of the key indicators considered by Warren Buffett is Mcap to GDP ratio. A ratio used to determine whether an overall market is undervalued or overvalued. The result of this calculation is the percentage of GDP that represents stock market value is as follows a ratio < 50 represent that market is significantly undervalued; Ratio between 50%-75% mostly Undervalued, Ratio between 75%-90% fairly valued and Ratio above 90% is overvalued.

India’s current Market cap to GDP stands at 87% which is at the highest level in last five years. India’s current Market cap to GDP ratio at 87% shows that the market is Fairly Valued. We believe that short term investors should remain cautious and for the long term investors it is good time for SIP.  

IS INDIA GOING THROUGH STAGFLATION?

Stagflation refers to environment of both high unemployment and increasing inflation or a condition of slow economic growth with a rise in prices and low demand. Now the question arise that “IS INDIA IS GOING THROUGH STAGFALTION”.
If we can see the data India’s GDP growth which has come down from its peak of 11.4 in 2010 to 4.6 in 2014 and the inflation rate of India  in  2012-2014 was in between 11.4% to 8.4% which is on the higher side compared previous years. So going by the above data we believe that India is going through stagflation.
The key reasons for stagflation is Lower GDP, High Inflation, High fiscal deficit, High CAD, High Unemployment, Low capex etc.  We believe that if there is stagflation one should increase investment related to commodities in anticipation of higher commodity prices.

But we are more confident that India would come out of Stagflation on the back of positive election results and also positive macroeconomic data like Increase in IIP numbers and higher HSBC Manufacturing PMI at 53 almost 17 month high. So we believe that one should buy nifty on every dip.