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European markets closed in positive territory by less than a percent on Tuesday. This was followed by US indices which restarted it losing spree after a breather of small rally on Friday but managed to close flat. Asian markets have all opened in green by about a percent.SGX Nifty is also trading in a positive range with a gain of 35 points signaling a positive opening for Indian markets.

Indian markets traded with a negative bias for most of the day but rebounded from 5350 to close above 5400.The Sensex closed at 17971.12 & S&P CNX NIFTY at 5402.40.

Our market are in a confirmed long term and medium term uptrend.

Global markets are trading in a range thus indicating a range bound or directionless market.Our market have taken a support from 5350 to move back beyond 5400 indicating support for market at 5350-5380 levels.

VIX showed weakness at the final sessions on Tuesday indicating return of strength and decrease in volatility in our market.

Stocks view:

Shorting opportunity:

SBI( long term), Aban offshore

Buying Opportunity:

BPCL (long term),Tata Motors, ICICI Bank, Tata Steel

( This article is also published on www.equitytrendsindia.com )

European markets stayed flat on wednesday and clsed lower to its earlier levels by less then a percent. This was followed by a similar show on the US indices. Asian markets have opened mixed with a negative bias and are now trading in a narrow range.SGX Nifty is also trading in a narrow range with a directionless trade signaling a flat opening for Indian markets.

Indian markets traded in a narrow range for most of the day but closed with a big spike at the end and closed in green territory. The Sensex closed at 18257.12 & S&P CNX NIFTY at 5479.15.

Our market are in a confirmed long term and medium term uptrend.

Global markets have now again rebounded vigourously towards upward direction thus indicating a rangebound market, this may lead to similar show all over including our markets. The current top for market will now be 5480 beyond which market was having difficulty to move.

VIX is in a range but it is now almost at the lowest levels for past 1 year which indicate the importance of its current level.

Stocks view:

Shorting opportunity:

Tata Steel, LIC Housing Fin

Buying Opportunity:

BPCL (long term),Tata Motors( all on declines)

( This Article is also published on www.equitytrendsindia.com )

European markets closed in negative territory on Tuesday which was followed by a similar show on the US indices. Asian markets have opened mixed and are now trading in a narrow range to their previous levels with some exceptions.SGX Nifty is also trading in a narrow territory with a negative bias thus signaling a dull opening for Indian markets.

Indian market remained rangebound for most of the day and closed in the negative territory,with the Sensex at 18219.99 & S&P CNX NIFTY at 5460.70.

Our market are in a confirmed long term and medium term uptrend.

Global markets are low on momentum after a positive move thus creating a rangebound trading activity, this directionless trend once gets cleared may lead to fresh outbreak on either direction for our markets but as sustaining above 5450 is getting difficult for nifty so probablity of downward cut may appear to be high.

VIX is still in a range thus signaling rangebound market with lower volatility.

Stocks view:

Shorting opportunity:

Tata Steel(Short term)

Buying Opportunity:

BPCL (long term)

( This article is also published on www.equitytrendsindia.com )

European markets closed in negative territory on Friday which was followed by a similar show on the US indices. Asian markets have opened mixed and are now trading in a narrow range to their previous levels with some exceptions.SGX Nifty is also trading in a narrow territory with a negative bias thus signaling a dull opening for Indian markets.

Indian market remained rangebound for most of the day but made a cut at the end of the day and closed negatively with the Sensex at 18143.99 & S&P CNX NIFTY at 5439.25.

Our market are in a confirmed long term and medium term uptrend.

Global markets have now started a positive move and if this sustain then it may lead to a short term uptrend for our markets but sustaining above 5450 is getting difficult for nifty.

VIX is still in a range thus signaling rangebound market with lower volatility.

Stocks view:

Shorting opportunity:

Reliance, Punj Lloyd, Everest Kanto Cylinder

Buying Opportunity:

Lic Housing fin, Reliance Infra( on declines)

(Article is also published on www.equitytrendsindia.com )

When a company goes public, it means it has crossed a certain criteria which the stock exchange requires for a company to list on its exchange. This criterion would be based on numbers such as total turnover, revenue, assets vs. liabilities on the company’s financial statements etc. In essence it means when the company has achieved a certain amount of growth and size, it qualifies for a public listing. This is a way for the company to raise money by issuing stock of itself to the general investing public. Another way that a company raises money is through the issue of bonds.
Bonds are simply paper certificates that state the agreement between two parties, much like a loan. Bonds are issued by the government as well as corporations. This is another way for them to raise money from the investing public. As a rule of thumb, bonds are risk free instruments which fall into the debt category. The company or the government (known as the borrower from here on) agrees to pay the lender some ‘face value’ amount at the end of a stipulated period of time sometime in the future. A bond has a ‘term’ or ‘maturity’ which is the number of years that the bond will be alive for. As the bond ages, the borrower makes periodic payments (much like dividends that a company would pay its shareholders), except in the case of bonds these are called ‘coupon payments’. The ‘remaining term’ is the time remaining for the bond to reach its termination date. Most bonds make these coupon payments semi- annually or annually.
Bonds are first issued by the borrower in what is called the ‘primary market’ where they are purchased by investors. This purchase is often then further traded in the ‘secondary market’ by the initial purchaser. Later on in the life of a bond, companies sometimes enter the secondary markets themselves and buy some of their own bonds, and retire them. This is known as a ‘buyback’
Bonds are assigned default ratings that give the investor an idea of the likelihood that the investor will see a fall in his promised payments. The bonds ‘yield to maturity’ reflects its implied return which basically means that this is the expected return that is to be in the particular assets future timeline. As a general rule in finance, when an investor takes more risk, he expects more return. So for a bond holder taking more risk, the implied return should be higher. A bond usually has a certain risk free rate of return, above which three other risk factors can be considered. These fall into default risk, liquidity and maturity risk. The first one is fairly self explanatory, and the other two are basically uncertainty related to the bonds ‘future selling price’
So this begs the question, how risky are bonds? Well, compared to an individual stock pick as an investment, less risky. But then again, the stock pick has the potential of making you more money in less time than the bond. A bond holder usually has a low risk appetite and is willing to sit pretty on his investment for longer periods of time. So, are bonds good for you? Well, it completely depends on your risk appetite and how long you wish to get a return on investment in.

The world of the financial market and stocks can be daunting to many due to its perceived complexity. While it would be a lie to say that this is not a complicated world, once you know some basics it becomes easier to make sense of it all. So lets look at some basics.
To begin, I’m going to make it as basic as possible. What is a stock? Well, a stock is simply a paper document or a certificate that shows you own a small part or percentage of a particular company. These stocks are bought and sold through stock exchanges such as the Bombay Stock Exchange or the National Stock Exchange. There are also some smaller regional stock exchanges, but that’s not all that important so I’m not going to focus on it. The BSE and the NSE are the two main stock exchanges in India and most of the trading activity in the country happens through these two exchanges. For a company to be able to issue stocks, they must be a publicly listed company on one of these stock exchanges.
Stocks are divided into various categories on these exchanges based on their market capitalization. Market capitalization is simply a measurement of the size of a company which is calculated by multiplying the number of shares outstanding (shares that have been issued and purchased by the investors) by the price of each share. Based on the market capitalization of a company, the stock is categorized into either a “small cap” a “medium cap” or a “large cap” stock. Various countries will have different cut offs for their definition of these categories and these will of course evolve over time with factors such as inflation etc.
Now that we’ve established what a stock is and how it works as far as trading it goes, lets dig a little deeper into some terms that you should understand to better understand this world. Whenever there is a stock pick being recommended there are certain terms you will be faced with so its important to know what is meant by the person recommending the stock. So when looking at a particular stock, there are a few things that describe it. Firstly, there is the “current market price” or CMP as it is often referred to as. This is fairly self explanatory; it simply means the price that this stock is currently being traded at on the exchange. IF you wanted to buy or sell this stock, this is the price it will be bought or sold at. Next you will see an “open” price which means the price at which the stock opened at today when trading began on this day. Any times the last traded price is not the same as the opening price on the next day due to external factors. The “volume” of a particular stock is the number of those stocks that are being traded on the exchange at that particular time. This is sometimes an indication of the strength of the company, very often really small companies do not have much trading volume and this is indicative of the investment being extremely risky.
Another set of terms which categorize stocks are “penny stocks”, “growth stocks” and “blue chip stocks”. Penny stocks are usually very small companies and don’t have much of a chance of ever making it big. Growth stocks as the name suggests are companies that are on the growth trajectory and have a chance of striking it big. Usually these kinds of stocks are good investments and can make you returns quicker. Blue chip stocks are the mammoths of the corporate world, the old companies such as a Tata or Reliance. These are relatively more reliable investments and will probably give you returns consistently.

Chaitanya Kumar, a member of the Indian stock picking community www.moneyvidya.com

IF you are a beginner in the world of investing and stock picking, it won’t be long before you come across the terms Technical Analysis and Fundamental Analysis. So what do these terms really mean and what is the difference between the two? It is an important lesson to learn as you foray into the world of stock picking and investments.
The terms technical and fundamental analysis are used to describe two entirely opposite methods of analyzing stocks and making an investing decision. Technical analysis is a method of evaluating stocks based on their historical performance. A technical analyst will consider things like historical prices and the trading volume when analyzing the value of a stock. It is dependent on studying charts and trends to predict the future trajectory of a stock. Technical analysts are also sometimes called “chartists” illustrating their reliance on charts for predicting the future of a particular security. In this philosophy or method of investing, there is no consideration given to the actual “intrinsic” value of a company, it is simply the price movements that are considered. The technical analyst will use charts etc to predict patterns to judge the future value of a particular stock to aid in his stock picking strategy.
On the other hand, Fundamental analysis is quite a different approach to stock picking. Fundamental analysis is a approach to evaluate the value of a stock using the actual “intrinsic” value of a company. “Intrinsic” value simply means the true value of the company based on all aspects of the business, be it tangible or intangible. Some examples of this could be the strength of the financial statements, the quality of its management, the business model itself etc. A fundamental analyst would also take into consideration the overall macroeconomic condition that the particular company may have to face in its particular industry. This method of valuing a stock takes into account both qualitative and qualitative aspects of a company/stock. There is major focus on the analysis of the company’s financial statements such as their balance sheets and the income statements. A fundamental analyst would look at things such as the number of assets and liabilities the company currently has and what are their expense as opposed to their revenues. It can get a little complicated but it’s enough to understand that this style of analyzing the value of a stock relies on looking into the company itself and all aspects that go into creating a “true” value of the company. This number that the fundamental analyst will try to achieve may or may not be the same as the “market” value of the particular stock. Based on whether the fundamental analyst has conclude it to be above or below the “market” value he will make a “buy” or a “Sell” call on that particular stock.
Now you may be asking yourself which is a better method to follow? Well, unfortunately there is no correct answer here. The stock picking community has followed both these philosophies of investing and both have gotten success as well as failures for the investor. So at the end of the day, read all you can about both these topics as there are volumes of material written about both, and finally trust your judgment and take the plunge.

SENSEX is the sensitive Index of Bombay Stock Exchange (BSE), India, a Market Capitalization Weighted average of 30 large and financially stable companies’ BSE stock prices. These 30 companies account for a half of the total market capitalization of BSE. Started since 1986, SENSEX is monitored by most of the global markets as well .

NIFTY is Standard & Poor’s CRISIL NSE Index 50, is the index for large and financially sound companies who’s stocks are being traded on National of National Stock Exchange (NSE) of India. Started since November 1995, nifty is most widely used for benchmarking index funds, index based derivatives and to evaluate the overall performance of the nation’s stock market over time.

On plotting the daily closing values of Sensex and Nifty over last three months(25th February to 25th May, 2010 i.e. more than 50 samples), with the hypothesis that SENSEX is independent variable and Nifty is dependent on SENSEX, by performing ANOVA or Analysis of variables test in MS-Excel, the coefficient of correlation or R-square comes out to be 85% and the hypothesis proves to be correct with 95% confidence. The inference from above mathematical analysis is that even though both indices belong to separate markets, their performance/daily movement is almost identical, which can be spotted visually as well, because both the curves fit very well and mostly give identical information.

The war between the two has intensified due to the ever rising competition between NSE and BSE. Both of them have their own USPs. The market Capitalization of NSE is almost twice of BSE, but, the BSE is the oldest stock exchange in Asia and has its own history. The fact that both are having many independent powers & separate entities worsens the situation. So, the only common link between them now is SEBI, which has a totally different role, as it’s a regulatory authority to watch and control the legal and ethical aspects of the market and protect the interests of shareholders. Hence, no one, not even the SEBI is an intermediary between the two, thereby, intensifying the competition between them to become the preferred exchange for top companies. Even though the competition is healthy for any company to emerge stronger, provide more value added services and work smarter, it becomes totally unhealthy and destructive when there are price wars and a red ocean causing them to put their riches in advertising and other undue marketing/brand building expenses.

So, whom to track? Whom to believe and follow? Which of them is a better indicator of the market? Who is better in gauging the Indian stocks? Ironically, it doesn’t matter at all. Both SENSEX and Nifty are well diversified and contains many similar companies’ stocks. So, even though Nifty has got 20 more companies, that’s 67% more variety, both SENSEX and Nifty moves in the same direction and the trend seems like totally correlated. There is a definite difference in scale or magnitude, but, after scaling and equalizing both to similar bases, there will be hardly any difference in both indexes. So, the choice is based only on convenience and not on the performance. The global markets prefer SENSEX because that was the only option with them earlier and they don’t want to switch to other without any clear reason for that sudden change. As far as the Index funds are concerned, they deal on a huge volume, hence, dealing on a low turnover BSE might create huge swings, so, they prefer the NSE. As most of them anyways deal in NSE, it makes a point to use Nifty than SENSEX as SENSEX gives perception of BSE, which might create some confusion in the minds of customers. The same is the reason why Moneyvidya, which is a free stock advisory service for Indian investors also track the performance of the registered analysis by comparing their stock pick’s returns with Nifty. The portal started with accepting stocks listed in NSE, hence, the initial choice was Nifty, but, there were many stocks, which were listed on BSE and not on NSE, hence, they started BSE stock picks service as well. Now, even for stocks which are in BSE and not listed in NSE, are also evaluated vis-a-vis the Nifty for that period as other it will kill the consistency and make it difficult for the designers to rank each individual.

To build a relationship between gambling and trading, let’s define gambling and its special attributes. Gambling is the act of risking money with the hopes of more monitory gains in a very short time. It is governed by both skills and chance. The attractiveness of its supernormal returns makes it addictive in nature. The choice in gambling is based on preference of favorable position, often based on instincts, astrology, numerology or other similar methodologies. If played in an uncontrolled environment, gambling can be destructive and can ruin the lives of the gamblers or their associates.

As far as trading in stock exchange is concerned, one has to put in his money to buy stocks/derivatives or has to make a promise to buy the same at future value via quick sale, an act, by which a person can make additional money or lose a portion/all of his money, hence, trading is also an act of risking money with the hopes of more monitory gains. Also, the trading, by definition is done for a short duration lasting anywhere from a few minutes to a couple of days. Again, there are many cases of people making supernormal returns and people loosing all their wealth. Both of them coming back again in the market with new hopes and having a kind of addiction to the stock market. There is a sudden rush of traders and even analysts making deals based on instincts and astrology. The stock market has also ruined many families and ripped many aristocrats.

With these arguments, any layman can easily accept this hypothesis that trading is another synonym of gambling. Indeed a trading is a form of gambling, a gambling with a difference. The first difference is that in a gambling, the odds of winning are never above 50%. These odds of winning fall further in professional gaming zones or slot machines. Some slot machines have around thousand combinations of outcomes out of which only 25 to 30 combinations of symbols are rewarded. A roulette wheel has 37 positions where betting can be done on each number or a set of even/odd/black/red/first/last half numbers, but, here as well the chance of winning is at max 18/37, slightly less than half. Coming back to trading, the chance of making money keeps rising with more experience and use of sophisticated tools. From technical analysis to fundamentals, speculation, global news, there far too many sources to increase the predictability. Hence, the decision taken in trading is an informed decision, not solely based on luck, but, on hundreds of other parameters. Another key differentiator is the level of losses. Unlike gambling, where most of the games or machines are designed to take away all the betting amount on loss, trading has a choice to limit the losses with stop-loss and similar inputs.

Both of the above key differentiators create a boundary line between trading and gambling. But, these lines are very faint as many people don’t buy the argument that trading is different from gambling, all because of incorrect or partial knowledge. It is because of such people that the bad fame of trading as gambling spills over to investment group as well and people mistakenly believe that the entire stock market is gambling. This belief has caused a destructive effect for the market by keeping many potential investors to stay away from pooling in their resources. The solution to this problem is to either create much more awareness for these prospects or reduce the number of traders as, no one needs these traders anyways. No company management would like its shareholders to be composed of only short term traders, neither do the long term investors like them. The only group appreciating them and lobbying for them are stock brokers, who want more and more trading volumes as their income is not dependent of client’s profits or losses but just merely the volume being traded.