The mistake often made by retail investors of trading too often so that transaction costs erode the gains they make in the market. Brokers who are paid on a transactional basis are often accused of churning client accounts in order to drive up commission payments at the expense of the client
Pick Details:
Note that this pick has ‘closed’ - that is, it is not reccomended that you follow it because quite some time has passed since it was made.
MoneyVidya.com member ‘RubberDucky’ made a pair trade, which is a bet on relative performance of two stocks over a period of time. The pair trade was a BUY on Pantaloons Retail and a SELL on Shoppers Stop for a 8 month time horizon. This means that RubberDucky believes that Pantaloons retail will outperform Shoppers Stop in the specified period. He has not defined any stop losses or target prices. Currently RubberDucky is up 2.55% on Pantaloons Retail and up 0.93% on Shoppers Stop.
Analysis (Verbatim):
Do not follow this in isolation. It is part of a pair trade - I am only forecasting relative performance (read below)!
This ‘sell’ pick on Shoppers is part of a pair trade with (a ‘buy’ for) Pantaloons, for a time frame of 8 months.
A pair trade is a bet on the relative performance of two stocks. Buy making a buy pick on one stock and a sell pick on another for the same value (as far as i understand this site tracks percentage changes so technically we can think of two picks as ‘the same value’) for the same time frame you are essentially betting that as long as the stock that you put a ‘buy’ on does better than the stock that you put a ‘sell’ on you will make money from this trade.
I believe that Pantaloons, because of Big Bazaar will do better than Shoppers Stop in the next two quarters. We haven’t seen a massive cut in consumer spending yet – with wider consumer sentiment still reasonably intact. I do believe however, that with poor results in the next couple of quarters expected from corporate India, the hiring freezes will be converted to job cuts. With job cuts, falling real estate prices and falling equity prices, there will not only be a real negative income effect on consumers but also a major wealth effect – that is that because the value of consumers’ assets (financial and real estate) has fallen – they will feel poorer and therefore spend less. The first thing that they’ll cut down on are going to be (more…)
My dear politicians,
I blame you as much as I blame the terrorists.
I blame you for your lack of political will. I blame you your inability to decide, and your inability to act. I blame you for creating an Indian national persona which is weak and malleable to the will of the terrorist. I blame you for your jingoistic PR tactics to gain attention, spread hatred, and violence, and lining your pockets in the mean while. Indeed I blame you for hijacking situations such as these to spread greater divisiveness when what we need is greater national unity.
I also blame you for recent specifics: I blame you for shouting foolish slogans but cowering when it hits the fan. I blame you for showing up several hours too late to our city and then delivering insipid, emotionless messages that did nothing to assuage our fears in an hour when we needed your reassurance the most. I blame you for not having a national police force. I blame you for the fact that the NSG had to fly in from Delhi to protect the financial capital of our country. I blame you for your lack of intelligence (pun not intended, but appropriate), which allowed up to 40 terrorists to land in Mumbai, right under our noses, and murder one innocent life after the other. I blame you for the wider emotional and economic fallout of this attack.
I am resilient, but I am not going to keep quiet, any more. I clearly have enough to fear, without needing to fear speaking out against you. As far as I am concerned, you are as much murderers due to your inaction, as the terrorists are because of their actions.
Gautam Kshatriya
Citizen of India, Citizen of Mumbai.
These are my personal views and I alone am responsible for them.
If you’ve visited MoneyVidya.com you’d have noticed that the coming soon page has been replaced with our homepage. We haven’t officially ‘lauched’, we’ve just opened up to a handful of testers. So if you’ve registered your interest but not heard back, please be patient. We’re taking things slow and steady… 
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While the market has rallied considerably since Diwali, with the Fed cutting rates to 1% and the RBI slashing repo, CRR, and SLR, the Nifty is trading at a PE of 13.76. This is by no means cheap, but considerably below historical PE levels of 17.83.
Monday last week saw the Nifty touching its lowest PE level since Jan 99 at 10.68, with the market closing at 2524. My guess is that ‘around now’ is a great time to invest, but not exactly now. I have a feeling that the 600+ point rally that we’ve seen is just a relief rally, and once participants start profit booking, the over-reaction to the positive measure subside, and as earnings continue to disappoint, we’ll soon be back in the 9000 region. When that happens, make sure you’re ready with your money, and clear on where you want to put it!
Historical PE Chart - NSE Nifty
Source: NSEIndia.com
Being that the vast majority of my family and friends happen to be in the diamond/jewelery industry, a newly launched electronic diamond exchange platform certainly caught my eye. Currently, many dealers use Rapaport to price diamonds along with its Rapnet Diamond Trading Network. However, what is different about DODAQ, which calls itself the first online certified diamond exchange, is that it enables professional traders to buy, sell and hold certified polished diamonds like stocks! Furthermore, it offers a two-way auction for traders and facilitates transactions with real-time “spot” pricing.
Right now, there aren’t any fixed prices for polished goods, although Rapaport gives a ballpark number, it can often be far off mark. Generally, it’s used much like the debt market where LIBOR is used as a base and instruments are sold X points plus LIBOR. The lists are weekly thus there is no dynamic transaction data. DODAQ creates a centralized virtual location alongside a physical vault location for secure storage of the graded and guaranteed diamonds with their documentation. Thus DODAQ is basically a custodian for which it charges a commission fee on the transaction. (more…)
The events over the past few days suggests good and bad news for investors. I’ll start with the good: the shit has settled for now. The bad news: nobody knows how long it may take for before the bear phase ends.
Let us examine each of these claims. First, I believe that the two catalysts of the feverish decline in stocks, interest rates and inflation, are finally showing improvement. After nearly two years, RBI has stopped selling dollars and buying rupees from the market, besides infusing nearly 80,000 crores into the banking system. Secondly, inflation, which has been the bane of the bond markets, will ease, as the commodities super cycle has come to an end. While there may still be some pain left for the real economy, brought on my cancellations in private investments and general decline in asset values, we can be sure that the first hint of smart money, has already started to flow in.
As an examination of the Nifty long term chart will reveal, we are currently at 2006 levels. Notwithstanding any further bad news from the West, the trading range for the next year should lie between 2650-3650. I believe that equity markets are oversold in the short-term: a look at the MSCI Emerging Markets Index further suggests support at this level. In fact, it is possible that November and December may be a net positive months for the markets.
The long-term is anybody’s guess. According to me a period of downward consolidation, with intermediate spurts and rallies may last for the next 3-5 years, at a minimum. That is how long I believe it will take for volatility to return to ‘natural’ levels and the investment and earnings cycle will begin to recuperate. If history is any guide, we can take instruction from the financial crisis in 1998. Although, it was relatively mild in comparison, it still took over 5 years for emerging market bond yields to return to their bull market levels.
I read an article in the Mint this morning about the fact that an (unnamed) a major Indian commercial bank has borrowed a massive Rs. 1000 Cr. from another domestistic bank at 20% interest, a rate which reportedly the highest charged by any Indian bank in over a decade. The article goes on to say:
In this particular case, the borrower of the money was desperately looking for funds to tide over short-term asset-liability mismatches in its overseas operations.
There have been a bunch of rumours going about ICICI being badly hit, indeed threatening to collapse under the weight of losses from the subprime crisis. These rumours are of course very unlikely to be true - there’s no chance that ICICI bank could ever go under. At the same time, I wouldn’t blame people for thinking ‘ICICI’ the moment they read this article in the Mint. Bearing in mind this very issue, the author didn’t waste time in including a caveat:
Most of the large Indian banks, both state-run as well as private ones, have overseas presence. The aggressive ones have been building assets overseas by rolling over their liabilities, raised from the inter-bank market.
I had earlier written a brief article on the unilikely rumours that were floating around about ICICI Bank collapsing. I received a promt reply from ICICI bank to the post and I wrote a counter to it. I do wish, however, that rather than send generic responses they would just come clean and say - ‘Hey, look, guys honestly this is the exact extent of Mark to Market losses we’re expecting from our exposure to credit derivatives’. The only issue here may be, they themselves may not know know the true extent of their losses.
If you are a shareholder of ICICI Bank, and if there is more bad news regarding ICICI’s MTM losses, its obviously going to be bad for the stock. However, if you hold an account with ICICI bank, I think it would be a gross overreaction to start pulling out your money from your checking account.
Disclaimer: This, or anything else on the blog is not investment advice, and should not be treated as such. Do not make trades on the basis of what you read on this blog - I’m not liable for any gains / losses. All views presented here are solely the opinion of the author’s.
Disclosure: I don’t hold any positions in ICICI Bank.
Although I mentioned in my last post that the world was coming to an end, I strongly believe that there is plenty of opportunity in the Indian markets. That being said, the US markets will be and have been a drag for India. However, I don’t believe the effects of the US and UK downturn will be recession inducing. In fact, I think India will actually come out stronger.
Of course, I would still err to the side of caution, especially because the markets have just been acting wild. Thus it makes sense to look at a large, steadily growing, but misvalued company such as Mahanagar Telephone Nigam Limited.
Lets start with the negatives: This is the company that I get my broadband connection from and boy has it made a bad impression on me! The government tie to MTNL certainly does not help its case either. And as you would assume the land-line growth, more than 80% of the business, is decreasing.
On the other hand it has Rs. 53.63 in cash/cash equivalents (incl short term investments) per share, with no long term debt. That is more than half of its current stock price (Rs 83.80) in cash! Backing out the cash makes the PE look amusing! Then taking into account the unprecedented credit crisis, it places MTNL in an powerful position.
Meanwhile on a segment basis, the growth in both the cellular and broadband businesses should partially offset the decline in revenues from fixed-lines. Furthermore, the soon to be launched 3G network should accelerate growth in the cellular business, although margins will decrease with the license fees for the spectrum allocation.
A more detailed analysis to follow…
Disclosure: I don’t hold any positions in MTNL.
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Shalin
I had a nice little pause in blogging last week, primarily because I was living (I write as if it has past) one of the biggest financial disasters of all time, first hand. It started late friday night as I was leaving from work, I read the Fed was holding a meeting with Lehman. Now mind you, many people knew Lehman was in trouble due to the lack of confidence and the rumors out on the street. So although important, I took off, it had no bearing on our investments.
Then Saturday afternoon I read a short story about the world’s banking heads convening at the Fed’s office downtown. This included the CEOs of Goldman, Morgan Stanley, JP Morgan, Lehman, Citigroup, Merrill, Bank of America, Barclays, etc. Simaltaneously, the rumor on Barclays buying Lehman started growing stronger and news on WaMu, AIG and Wachovia grew louder.
By Sunday it was intense. I walked into work and I was glued to the monitor as the movie-like drama unfolded. The posts below go through the history more or less.
Monday was a complete war-zone (more…)
However I would err on the side of caution and wait before calling this a trend of any sort. The new RBI governor Devvuri Subbarao clearly stated that keeping inflation in check was primary in his agenda. Until there was a ‘discernable’ trend he would take all the ‘necessary’ steps to stem inflation. While raising interest rates makes it more difficult for consumers and companies to borrow for consumption and investment (thus slowing down growth, which is at 7.9% for the last four quarters – the slowest growth in the last 4 year), it is absolutely to control inflation in order to preserve the value of currency.
Compared to a week earlier, inflation for the week ending August was (more…)
A move to Mumbai is something I’ve been considering since my parents moved there 4 years ago, more so recently, as a potential career move. Every year, I’m sure there are hundreds of thousands of Indians thinking about moving back to India. However, their are distinct differences in the types of people making this decision.
One large group would be the 160,000 or so Indians studying abroad, who upon graduation decide on (more…)
The past couple of months have seen a strong correlation between oil prices and the Indian and Chinese equity markets. As oil fell, Indian equities rose, while China’s continued to fall. High oil prices are bad for everyone (except for the oil producing companies/countries, of course), even if governments subsidize petrol diesel by not passing on the price increases onto customers – as it happens in India. This is because the government needs to pay for subsidies by borrowing from the public – that is by selling more government bonds, which leads to an increase in interest rates.
A fall in crude means that the government needs to borrow less to subsidize oil, therefore reducing the upward pressure on interest rates. Lower interest rates are of course great for boosting demand for goods and services, as companies are individuals are able to more borrow more cheaply to fund their consumption and (more…)
While bloggers might be tired of reading about social networking applications (”social networking fatigue”) there is no question of the fact that it is a class of applications that are highly relevant. Indeed as far as India is concerned, the fatigue should only be warranted for the ‘generic’ social networking platforms that are emerging as major media corporations try to join the bandwagon by launching unimaginative Facebook / YouTube clones that will never really be able to compete in terms of service and user experience, regardless of what sort of ‘Indianization’ they claim as a competitive advantage.
Given that I believe social networking is here to stay in India, the next question is, how is it going to evolve? In order to understand, its probably useful to look at what’s happened / seems to be happening in countries such as the US / UK. I believe that the evolution social networking can be described (more…)
UBS has recently announced plans to split its wealth management operations away from its investment banking arm. The wealth managers, which had become the company of choice for low-risk, stability loving high net worth clients, saw net outflows of assets under management of $41bn as news of writedowns on poor investments (See a humorous but great explanation of the sub-prime crisis here) dogged them relentlessly. The total amount written down so far is $42 billion. The stock is currently trading at $21 - close to its 52 week low $18. This, despite its better than expected in the second quarter (ended June 2008).
When times are good, being a massive financial conglomerate has great disadvantages - you can save on costs by integrating various head office functions, and you can pump your customers for more revenue by cross selling them services. When times are bad however, as the saying goes, ‘one bad apple spoils the bushel’ - as has clearly been the case (more…)
Interestingly however, according to the Business Standard - 5 banks have not been given approval to trade currencies because they don’t have the right ‘client profile’ or a ’strong enough risk management culture’.
Prashant from pluggD.in - a fantastic startup blog wrote a very interesting article giving great tips on guerilla marketing, including:
To read more tips check out Ashish’s post. I have a few thoughts of my own: I’m sure that at some point in your school or college life you were either a part of a team putting together a student event, or you at least knew somebody that organised such an event. The budget for some of these events were absolutely tiny, but somehow or the other people managed to pull people to attend these events - how?
The articles in this blog are personal opinions of the authors' and should not be construed as investment advice.
