MoneyVidya.com - A Private Stock Picking Community for Indian Investors and Traders. Follow top rated Investors and Traders on MoneyVidya.com, or become one yourself by sharing Stock Picks
I presented a long term view about expected return for SENSEX. I mentioned that the compounded expected return was 12.1%, while the arithmetic average was 16% per year.
Today, I am discussing the short term perspective using a NIFTY index. Similar calculations can also be done using SENSEX, but I believe NIFTY is a better representation. I calculated daily returns, weekly returns, and monthly returns for NIFTY from August 2002 to May 2009. In all three cases I have used average closing value on a given day, given week, and given month. The table below shows the summary for these results.
Nifty spent the week of April 20, 2009 consolidating and giving a hint of its intentions in Friday’s trading. The attached chart shows it clearly, the fast averages are once again attempting to crossover and signaling the start of another leg up. Despite all this, I continue to be reluctant to dip my toes in the water from the long side as I remain unconvinced that this rally will hold long term steam. On the weekly charts 3640-3650 still remains a formidable target for Nifty and for me it’s a place to attempt a short.
NIFTY April 26, 2009
I am also attaching the chart of S&P 500 showing the progress of the Trend Channel that I had tried to anticipate a couple of weeks back. As we can see from the attached chart - prices have already taken resistance once and could approach the outer line of the channel now. All the best for your trading during the week April 27.
My investing philosophy involves investing in high quality dividend paying companies at a fair value. I am willing to wait for more than 10 years. So many times I have been questioned on this investing approach and believe it or not, I just smile and move on. Not because I cannot respond, but because I am confident that I will have the last laugh. As an example, you may read one of my earlier posts on yield on cost.
Indian companies are not alone in paying dividends to its shareholders. Dividends are paid to common shareholders by corporations across the world, in different economies, different markets, and variety of industry segments. The characteristics of common shareholder dividends are not same. There are differences with respect to yield, frequency, how dividends are perceived, quality, and growth rates. In addition, for an international investor, effect of currency fluctuations is an added risk.
Today I am presenting the dividends yields and growth rates in three different parts of the world. It would very difficult (if not impossible) to either screen or identify every dividend paying companies in these markets. Therefore, I am using individual index and their yield to look at trends in any given market. While there may be varied arguments about quality and validity of such comparison, I still believe it is a good start to understand any given market and its policies vis-à-vis common shareholder dividends.Read the rest of this entry »
Breakout of the Wedge: Nifty was trading inside an ascending wedge formation. There was a breakout in the wedge pattern with the large volumes (due to Satyam fiasco) and hence we can expect market to remain in bearish phase. Wedge pattern tested its support (green circles) and resistance (red circles) more than 2 times each, adding to the strength of the pattern. The base of the wedge is around 800 points, hence price target of pattern = 2920 (price at breakout point) – 800 = 2120. However, the breakout occurred close to the apex, hence, we remain circumspect on the price target.
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!
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 Read the rest of this entry »
There has been a lot of chatter in the market about FIIs staying away from the Indian markets because they feel that the valuations in India are still relatively quite expensive. Index PE ratios, when looked at in comparison to historical levels are a good way to determine how cheaply/fairly/expensively the companies that make up the index are relative to their historical levels.
But first, an explanation of how an ‘Index’ is calculated: There several ways to create an ‘index’ but the method commonly used is the ‘free float market capitalisation methodology’ where very crudely Indices are calculated adding together the market capitalisation of each of the companies chosen for that index based on some sort of criteria, dividing that figure by the sum of the market capitalisation of those companies that met the same criteria in a base year and then Read the rest of this entry »
Loading... 