How to play with FMCG this year?

Since the news of Stake rise by Anglo-Dutch company Unileaver  PLC is ready to pump some +19K crores which is roughly around 67%. The FMCG market had a hard time; slowdown, high cost, profit margin, rupee depreciation, had affected almost all FMCG stocks. We have seen a consolidation of HUL stock from last June-July even FMCG stock have seen consolidation from September 2013.

FMCG CNX Analysis

 Currently CNX FMCG is just below 200DMA and trend-line is standing as a support. There is a possibility we may see a reversal. Stake rise is not only a problem with HUL, many foreign companies are rising stake in major FMCG companies like Pepsico, GSK and few  in other subsidiaries. It was basically a result of 

SEBI’s and RBI’s change of rules in minimum public shareholdings.

FMCG CNX had formed a Symmetrical triangle now; It had not given any directional breakout.

Analysis on HUL

The Stake rise news had created a fluctuation thus forming a Descending Triangle pattern, which had also given a negative breakout.  Along with it we are also seeing a divergence now, and forming a reversal pattern.

The stock is not an attractive stocks for analyst and many find ITC to be a good bet, as the P/E & Earning for FY15(Expected) to be good comparatively good. Both RSI as well as MACD has shown some divergence.

I am not a pharmabull. But, I want to play it technically. Buy if HUL give a positive breakout. I see this stock to be bullish and the stock is expected to move up to 680/725, if it fails to give any breakout the stock find its support at 484/434. 

Best financial documentaries to watch in your MBA

The documentaries/films below are by personal collection and are available on \\Swagat (Intra-college network available only for Bapuji B-schools students ). They are basically the documentaries seen by me on recommendation by fellow friends, well-wishers and few browsing over internet .

The documentaries are as follows

·         Inside Jobs: A wonderful documentary on financial crisis 2007-9. The documentary is divided into 5 parts and a very informative documentary concentrating on every aspect of 2007-9 crises. The documentary throw light on

·         The Ascent of Money: This an Ultimate finance film by a Harvard professor Niall Ferguson's. The film not only speaks on bubble but on all aspects of money, starting from the ancient money to e-money. The film was shown on History Channel in 6 frequent episodes.

·         Too Big to Fail: This was the film that I found digging Dr.Garag’s treasure on swagat(Intra-college network available only for Bapuji B-schools students ). An wonderful film on Leman Brothers collapse. It discuss on minute by minute details of Leman’s fall.

·        






 Rogue Trader: A film on Baring Banks collapse. It show how  Nick Leeson made  unapproved financial transactions. The film is a dramatic form of a documentary 25 Million Pounds.

·         25 Million Pounds: The best film to watch; not only for Finance students but for Human Resource. It speak very fine details of  Nick Leeson dobby accounts and fake transcripts.

·         The Midas Formula:  The documentary is by BBC and an details film on  Black–Scholes formula. Black Scholes is an option pricing model, The Ascent of money have a specific episode on Black Scholes and its failure. Black Scholes model is yet to be discussed in next year of Risk Management (VTU).

·         Million Dollar Traders: the film is on Rookie Traders in financial crises of 2007-9 Lex van Dam.  Lex van Dam is a turtle and is been trained by Richard Dennis. A wonderful film if you want to in invest/ trade in stock market. The film is basically based to showcase every aspect what it takes to be a trader.

·         FIAT EMPIRE - Why the Federal Reserve Violates the U.S. Constitution: finding time to watch. for more details click here

Dewan Housing Taps Debt- ECB Market

Dewan Housing Finance Corporation Limited has come up with an exciting issue of Perpetual NCDs in the Private Placement.

DHFL is amongst the few housing finance companies dedicated to provide housing finance to Lower and Middle Income (LMI) segment of the society. Presently it is the Second Largest Housing Finance Company in the private sector with an integrated network of 140 branches, catering to Semi-Urban and Rural belts of India.

Most of the branches of DHFL  are in the areas where neither the private sector banks nor large HFCs are present, thereby effectively eliminating the Rate Led Competition.

This advantageous position of DHFL enables it to exploit the huge growth opportunity arising from low cost housing segment viz-a-viz other industry players.

DHFL enjoys an AUM of over 24000 Crs. With a net NPA being 0% . Unlike other players, DHFL‘s branch staff interacts directly with potential customers thereby assessing their requirements and then design the solution. This unique marketing feature helps them avoid potential defaulters.

Housing loans sanctioned during the nine months ended 31^st December 2012 amounted to Rs. 3922.13 Crs. As against Rs. 3189.53 Crs. During the previous corresponding period showing an increase of 23%. Disbursements during the same period amounted to Rs. 2893.32 Crs. As against Rs. 2279.78 Crs. During the previous corresponding period showing an increaseof 31%.

In December 2010, DHFL acquired M/s Deutsche Post Bank Home Finance Ltd, having a home loan portfolio of approx. 4800 Crs. And was enjoying a AA+ credit rating.

DHFL as a company has a credit rating of AAA

Here are the issue features: Issue closes on 30^th September 2013

Issuer	Dewan Housing Finance Corporation Limited.
Instrument	Rated, Listed, Perpetual NCDs
Issuance Mode	Dematerialized Form
Credit Rating	"BWR AA+" by BRICKWORKS and "CARE AA-" by CARE
Issue Price	10,00,000 /-
Minimum Application Size	30,00,000 /-
Listing	On the WDM segment of N.S.E.
Coupon Rate	Monthly	Quarterly	Annually
	12.05%	12.18%	12.75%
Annualized Yield	Monthly	Quarterly	Annually
	12.74%	12.75%	12.75%
Call Option	To be exercised by the issue At the end of 10th year whether to redeem the NCD or step -up the interest rate
Step - Up in interest	Monthly	Quarterly	Annually
	220 bps	225 bps	250 bps
Issue Closing Date	Issue closes on Monday i.e. 30th September 2013

Mentioned below is the financial snapshot:

STANDALONE ANNUAL PERFORMANCE

PARTICULARS	31-Mar-11	31-Mar-12	31-Mar-13
Share Capital	104.43	116.84	128.22
Net Worth	1548.43	2032.72	3237.09
Total Income	1451.24	2469.68	4140.35
PBDIT	1274.32	2192.14	3738.49
Profit Before Tax	341.48	398.41	610.68
Profit After Tax	265.13	306.41	451.85
PBDIT(%)	87.81	88.76	90.29

STANDALONE PERFORMANCE FOR THE FIRST QUARTER

PARTICULARS	30-Jun-12	30-Jun-13
Total Income	738.82	1126.64
PBDIT	661.33	999.31
Profit before Tax	104.63	159.03
Profit after Tax	77.83	120.3

Strategy for Gold on FOCM meeting

Today all eyes are on FOCM meet to be held. Not only commodity and Gold but Forex and stock market will have implication of the meeting which is to be held today or tomorrow(Source: Business Standards). Anticipating strategies for gold, all eyes are on tapering of bonds by fed. Many experts believe that Fed will come up with taping of bond buying program. If it happens gold will loose value globally.

Technical

An open up candle followed by a bearish engulfing had given a clear indication of a possible bearish trend 28k &26K are the good supports as seen in technical charts. More clarity will be seen after fed's bond buying strategy.  

Gold what's next??

I never expected gold above 32,500. Since June-July I am giving regular updates on my blog on a special request. After formation of a  expanding triangle, gold had reached 34,500 testing a new height. After a breakout of 32,500. The sustainability was not seen , after a negative reversal gold reached its climax; starting a correction.

Know we have a question where do gold find its support. Currently we have 2 major supports and 2 trend-lines. But 30,000(50%; fib) is found to be next level, if it fail. We can see gold 27,800-28,000 as a powerful support.

 Fibonacci levels

Major SAR

Gold can be a good investment if we witness any reversal at 30,000 levels. We may see gold again touching 34,500/ testing new heights.

To read previous article on Gold: Click here

Beta and Correlation

It was my 2nd class of risk management yesterday. During a calculation I saw that  beta's formula  is identical to correlation. Searched out some resourceful stuff form internet.

  Beta Definition
Beta is a measure of the systematic, non-diversifiable risk of an investment

A misconception about beta is that it measures the volatility of a security relative to the volatility of the market. If this were true, then a security with a beta of 1 would have the same volatility of returns as the volatility of market returns.  In fact, this is not the case, because beta also incorporates the correlation of returns between the security and the market.

    Beta = Correlation of Asset to Market * (Std Dev of Asset / Std Dev of Market)       

For example, if one stock has low volatility and high correlation, and the other stock has low correlation and high volatility, beta cannot decide which is more risky.
Beta sets a floor on volatility.  For example, if market volatility is 10%, any stock (or fund) with a beta of 1 must have volatility of at least 10%.

Another way of distinguishing between beta and correlation is to think about direction and magnitude. If the market is always up 10% and a stock is always up 20%, the correlation is 1 (correlation measures direction, not magnitude).  However, beta takes into account both direction and magnitude, so in the same example the beta would be 2 (the stock is up twice as much as the market).

Correlation Definition
Correlation – measures the degree to which two variables relate to each other.  It’s a standardized measure (unlike Covariance) of the strength of the linear relationship between two variables.  When you say that two items are correlated, you are saying that the change in one item effects a change in another item.

    Correlation = Covariance of Asset to Market / (Std Dev of Asset * Std Dev of Market)

Beta and Correlation both measure the relationship between 2 variables. If you study the formulas you will see that correlation is just covariance expressed as a normalisation of covariance - that is it is scaled by the standard deviations of the 2 variables. Beta is however the Covariance of the 2 assets divided by the variance of the benchmark asset.

Intuitively what it really means is Beta is distinct from correlation in that correlation is more indicative of direction, while beta is also incorporating magnitude. If we say a market is up 15% always and the stock is always up 30%, then the correlation will be 1. However as beta gives us both the direction and the magnitude we would get a beta of 2.

Source:

http://risklearn.com/questions/?qa=33/what-is-the-difference-between-beta-and-correlation

http://cpacfa.squarespace.com/beta-correlation-and-covarianc/

Gold; Where is it?

Gold has become a huge political issue. In spite of many artificial measures to stop import of gold, government has miserably failed. This eventually led to the domino effect in the entire Indian Financial Markets.

We are currently seeing Gold at upper level the RSI is giving a caution signal and we have 2 major resistances ahead. It’s a high time for gold, the trend-line which was broken by gold during the end of March and the upper level resistance @32,500.

We are seeing signals from gold of a possible correction. Which will start from the first week of next month or prior. 

If gold is able to give a breakout and sustain the breakout gold is again a screaming buy.

For previous article on gold; Click Here

BSE FMCG; Will it enter a bull run?

Jetairways; an Analysis

Most of the aviation stocks are at a downtrend, few hit badly. I am seeing Jet airways to be a potential stock. it is forming a falling wedge along with it we are seeing divergence. The stock has even given a per-mature breakout. The target are showen above in the figure. If the stocks fail to give a breakout the stock is expected to find support at 275 

High Profitability Trading

When it comes to ultimate trading system; everyone are interested to know about. Obviously it is one of the curious topic discussed form centuries. Everything started form plotting “X” and “O” on cigarette packs or placing candles on a sand table.  Technical Analysis grew as an industry without even realizing.

We have witnessed many things in these times Black–Scholes, quant, expert system, cutting edge software’s, back testing and  dozens & dozens of indicators. Let me come again, where are we today. A time we are bombarded too many techniques, models, strategies and methods. Few sold over courses and coaching’s few are shown on YouTube few kept hush-hush.  Ultimately, today we leave in a world where we have too many techniques to follow too many indicators been invented few paid, few unpaid, few reliable and few aren’t.

After spending centuries of time, and spending huge amount of money. What we have found? Is it an ultimate trading system? The answer is no and we won’t find it until we understand the simplest things of stock market. That’s volatility, price and volume; all these are the basic pillars of technical analysis. Any indicators, trends, patterns follow these basic principles of markets.

Stock market is not a Pandora box it’s a simple demand and supply. There is nothing called as high profitability trading technique, every system have its own risk. Risk and reward are the basic inherent variables of any trade using a system. Remember, every system have certain risk even a risk free model such as Black–Scholes model also had a risk with it. Ultimately we are left with models which can be applied the only thing that you have to know is when to apply.

I love Kung-fu Panda, the most loved part in that movie is “nothing”. The soup-noodles isn't made up of a special ingredient nor there is any special description about martial arts on dragon scroll. Similarly we have left out with nothing in stock market. I have literally seen peoples who make money only using candle sticks and moving averages. And they are doing well, I regularly hear about a marwadi in Bangalore who use manual tools for predicting market. And that man is well-known for accuracy. How did he do that? It is nothing but shear dedication towards market.

This Sunday I was able to interact with an interesting man he is very close to Indian army. He told “Any army in the world have an average IQ. It isn’t an IQ that make that difference, it the discipline”. Larry Berman told something similar “I am a technical analyst; I have people to punch my orders”. Guys, any bullshit can make money out of market and we have good examples for that: Turtles, Million Dollar Traders (documentary) and many more. In an official blog of Rakesh Junjunwala described “people laughed at me when I told I want to be in stock market”(When Rakesh took a decision to start trading in his college days).

Coming again, we have nothing called as high profitability trading. If there is so than its you. And only you.

Strategy For Gold: Technical Analysis on Request

My last article on gold told about gold coming up to 28k. I was write and the gold have reached 28k, filling the gap.

If gold start correcting after this gap filling we may see a support at 27,300-27,400. if the support fail we may see it coming to a support at 26,400-276,500. Gold is a hold

Click here for previous article on gold

Technical analysis on Request: Gold

Gold is forming a kind of symmetrical triangle and gave a bullish breakout. Gold will rise around 28k levels and find some resistance. If it manages to go above 29k gold will be on a bull run. 

Sensex: Negative Swing on 21/5/2013

Weekly analysis of Sensex: 29th April to 3rd March 2013

The market  will  looking sluggish this week the resistance of 19712 will be a major resistance for this week the market is expected to have  18624 as a support at lower side. we are seeing a negative divergence in in Sensex, this may drive to 18624.

 Am I bullish on Sensex?

No, I expect a consolidation. We are seeing a risk building out in Sensex, as per me this week is the week for profits booking. Most of the short term players may book profit this week.

How much consolidation is good for Sensex?

18510-18000 need to be the support below which market is not healthy to grab. If market manages to consolidate below 18000 levels we may see a free fall upto 17500/16900.

Sleeping Triangle: An Research and Findings by Sangamesh.K.S Part 1

Sleeping Triangles

The name may be fascinating, interesting, curious sometimes weird. The main myth with this pattern has stimulated my need towards understanding pattern at a higher level.  When we go into, what is it all about? How this pattern emerged?  We come to know there are 2 major parts in Sleeping Triangle.  One is body and other is the sleeping body of the triangle. I call it as real body and sleeping body.

Real Body

 As per my observation the real body will be lengthiest price action before breakout. The real body get into new resistance. It will touch the higher price, the price action of the real body will be very high and sometimes it take a short time duration (it may be formed within couple of days). As the price action with real body is very high. We normally tend to see RSI and other Oscillators going to a overbought zone.

Sleeping Body

The sleeping body is the essential part which differs from a regular triangle. The price action will never tend touch the support (it will touch only once before giving a breakout) instead try to be at a higher level but the sentiments of the market drag the price action lower such that it from a channel.  The volume will be much lower compared to real body.

 The price action of the sleeping body can be seen sticking to the upper level. And show the sentiments to be bullish.

Premature breakouts

Sometimes we may see the price giving premature breakouts which will say the future breakout (intension of bullish/bearish breakout) and price action.

Breakout

 The breakout will be formed when the price hit the support and when the support is good the price rebound which cause a breakout.

*T&C Apply

Strategy: Trading using Sleeping Triangle   

When we see a bullish breakout it is the only level where we can buy. As the price level is low it is the best opportunity to buy at a breakout and sell at a higher high. The triangles need to be traded opposite of a triangle. In the figure above, we can see a triangle which resembles as a descending triangle.  In a descending triangle we normally place a stop loss above the trend line but here in this sleeping we need to place a stop opposite to the descending triangle

Types of Sleeping Triangle

These triangle are of 2 types namely an

·         Ascending  Sleeping Triangle(Bearish)

·         Descending Sleeping Triangle(Bullish)

An example of descending triangle forming in Tata Coffee

Descending Triangle

 For More details

Contact

Sangamesh.K.S

8904440661

http://experimentswithstocks.blogspot.in/