CNBC-TV18's research analyst, Haresh Soneji - When The Sage of Omaha speaks, people listen. The annual pilgrimage to Omaha is said to be tough. This time round, some 30,000 weary investors braved rain which delayed and cancelled flights, traveled by road all night and queued up by 5 am to attend the six hour Q&A session Saturday. And what was the outcome of that session – returns from equities will be lower than witnessed in the previous decade. If that were not enough Warren Buffett adds that he would be happy with a 10% return, but wonders whether equities will be able to deliver even that much.
For starters, Mr Buffett is talking long term. So, perhaps a decade from now, we would see yearly returns of 10% or less. That’s for the US markets though. We would love to believe that we are decoupled from the US markets. But, the latest correction since the beginning of the year has proven that to be a distant dream.
In India, the earnings season doesn’t throw much ray of hope. Let’s look at the benchmark index stocks to get an overall trend and valuations. Around 22 Sensex companies have declared their March quarter and full year numbers till date. These eight remaining companies usually contribute roughly 40% of the Sensex profits (PAT). So, these companies have a lot of weightage in terms of estimating Sensex valuations.
As numbers are expected till as late as June, we try to do a bit of expectations of earnings for the remaining companies. Tata Steel, Sail, Tata Motors, ONGC are the biggies that have not declared their numbers thus far. Currently Sensex EPS is around Rs 820 levels. Factoring results form these companies, Sensex EPS is expected to be in the range of Rs 838-845 levels. Earlier our analysis had estimated Sensex EPS to be Rs 852 for FY08. So, the year will end slightly lower, primarily on the back of rupee appreciation and interest costs. The other reason is that steel and auto have really not performed all that well. So, the lower end of the band suggests these sectoral numbers to under perform. The outer range implies surprises thrown by biggies, which have better pricing power and tools to cut costs which small players may not be able to enjoy.
Nonetheless, we peg our Sensex matrix on the back of the higher end of EPS. The matrix below shows Sensex levels by plotting EPS growth and PE levels for FY09.
As seen, the Sensex at fair valuations doesn’t seem to be running away anywhere. With signs of nervousness around and US in an election year following which a full blown recession is expected, we might not be able to pull through smoothly. Already many experts suggest earnings to grow in the 10-15% range for the coming year, as of now. And having burnt their hands on exotic derivatives, India Inc. will now like to stay away from them after squaring off their existing positions. Also, main stream capex is expected to go full throttle by FY10. So, it’s a waiting game that investors have to play. But, individual stocks keep providing value to long term buyers. Identify them and invest for the long term.
Disclosure: The author is not permitted to trade and/or invest into the equity market directly or indirectly, apart from investing (long only) in mutual fund products.
Friday, May 9, 2008
Mkts likely to consolidate & trade ranged: Collins Stewart..
Deepak Chhabria, Director-Equities, Collins Stewart Singapore said the market is in a consolidation phase, and is likely to remain ranged. "The Nifty is seen ranged between 4,700-5,200 for few months. Institutional participation continues to be on the lower side."
He feels the Nifty may not go down to 4,500, but may stop around 4,700-4,800. "We may not see sharp falls given the low leveraged positions. However, we need to watch for crude prices."
According to Chhabria, investors can pick stocks for the long-term.
Foreign Institutional Investors are not expecting huge upside, but are looking at booking profits, he added.
Excerpts from CNBC-TV18’s exclusive interview with Deepak Chhabria:
Q: How have you read this week’s action globally and locally?
A: We are in a consolidating market where we bounced off from the lows of 4,500 and went to as much as 5,200 or thereabout. In the near-term or even for the next 3-4 months, markets will be in a range between 4,700-5,200. We are seeing a bit of a pullback. The move up from 4,500 has seen a few positives. There is not a significant leverage added to the market. But at the same time, we haven’t seen any great volumes or great participation from international players. So, there is some amount of disbelief, which is going to play out into corrections into the markets. So, at higher levels, we are seeing people shorting the market and taking a hedge against current portfolios. My best guess is this market will probably be in a range between 4,700-5,200. In extreme situations, there may be a hard stop at may be 4,500 based on information that we have today.
Q: Are you saying that it’s not completely likely that we go back and retest the lows from where we bounced off?
A: Situations have to go back in terms of leverage and in terms of corporate earnings to wherever we were in terms of sentiment at 4,500. Obviously, newer factors such as oil being on the boil and whether that sustained at these current prices or even at higher prices is another trigger, which could take us down there.
But I don’t think that based on information that we have today, 4,500 is eminent or possible immediately. You will probably float around in a range of 400 points on the Nifty.
Q: How are you reading the global turf right now?
A: Surely, we saw a bounce from the base that was created by the subprime crisis in the US. We have seen markets recover from there. Equity markets have seen some flows and we have heard a lot of noise that the worse in the crisis in the US has already been seen.
So, we have seen a bounce on the back of that. We are seeing more money going into commodities because those markets are still vertically moving; particularly oil. So, a lack of cash and very low interest is going to keep the equity markets rangebound globally.
Q: What is happening with flows? How do you read the liquidity situation right now for May?
A: I don’t think people based on corporate earnings are expecting a huge run up in this or maybe in the next quarter in the Indian markets, taking advantage of the near-term rally, booking profits or even churning portfolios. So, it’s a good strategy to get out of sectors that you are looking at.
I wouldn’t say that people are getting out in a big hurry or there is a real situation to sell India going out with the international investors.
Q: Is the rupee making global investors a bit nervous out there?
A: I don’t think it has reached a stage of acceleration where anybody is nervous. Most people, given the volumes in the Indian market, were anyways sitting on the sidelines. This will make the Indian markets more attractive for investors who are sitting on the sidelines.
So, maybe 42-42.50 is probably where people will see value in coming back. On the longer-term trajectory, once the inflation that we are seeing is corrected, you will see the rupee appreciating against the dollar.
Q: How are you approaching this spike in crude and the oil sector in India?
A: There are two scenarios. One is that this is a momentary speculative news driven spike and it will correct back to levels we saw about a month back or so. In that event, you will see this as volatility in stocks and come back.
If the rise in the oil price is here to stay and get more aggressive from here, then you will obviously need some part of that passed on to the consumer in India. That action will ultimately stabilise prices of these companies.
So, there has to be either through action on correction and passing of inflation or through the actual change in the price of oil. On the short-term, they will go down on the fear that oil price hikes may not be able to be passed to the consumer in India. That is really the fear that is playing in these stocks going down.
Q: Is there nervousness on Bharti because of the MTN deal? Have people come to terms with it after the initial scare?
A: It is a bit of initial volatility. As people get to know more, things will stabilise and see the value over doing this in the longer-term.
Q: In the near-term, do you expect the market to remain in essentially a 1,000 points range for the Sensex?
A: Yes, barring any unforeseen news which could take us back to test 4,500. If sentiment and further news on commodity prices on flows worsens from here and go down from 4,700 to 4,800, take a stop there. But if newsflow gets really bad then we will go down.
We have very low leverage and low participation. The market will not slam down 5% in a day. That is very unlikely, given the leverage we have on the market today. So, that should give some confidence.
On the other side, there is participation coming back into the markets which will also allow the formation of a base that will take a cue from the corporate numbers and take the next upmove. It is tough to say whether that will happen in a quarter or two quarters.
He feels the Nifty may not go down to 4,500, but may stop around 4,700-4,800. "We may not see sharp falls given the low leveraged positions. However, we need to watch for crude prices."
According to Chhabria, investors can pick stocks for the long-term.
Foreign Institutional Investors are not expecting huge upside, but are looking at booking profits, he added.
Excerpts from CNBC-TV18’s exclusive interview with Deepak Chhabria:
Q: How have you read this week’s action globally and locally?
A: We are in a consolidating market where we bounced off from the lows of 4,500 and went to as much as 5,200 or thereabout. In the near-term or even for the next 3-4 months, markets will be in a range between 4,700-5,200. We are seeing a bit of a pullback. The move up from 4,500 has seen a few positives. There is not a significant leverage added to the market. But at the same time, we haven’t seen any great volumes or great participation from international players. So, there is some amount of disbelief, which is going to play out into corrections into the markets. So, at higher levels, we are seeing people shorting the market and taking a hedge against current portfolios. My best guess is this market will probably be in a range between 4,700-5,200. In extreme situations, there may be a hard stop at may be 4,500 based on information that we have today.
Q: Are you saying that it’s not completely likely that we go back and retest the lows from where we bounced off?
A: Situations have to go back in terms of leverage and in terms of corporate earnings to wherever we were in terms of sentiment at 4,500. Obviously, newer factors such as oil being on the boil and whether that sustained at these current prices or even at higher prices is another trigger, which could take us down there.
But I don’t think that based on information that we have today, 4,500 is eminent or possible immediately. You will probably float around in a range of 400 points on the Nifty.
Q: How are you reading the global turf right now?
A: Surely, we saw a bounce from the base that was created by the subprime crisis in the US. We have seen markets recover from there. Equity markets have seen some flows and we have heard a lot of noise that the worse in the crisis in the US has already been seen.
So, we have seen a bounce on the back of that. We are seeing more money going into commodities because those markets are still vertically moving; particularly oil. So, a lack of cash and very low interest is going to keep the equity markets rangebound globally.
Q: What is happening with flows? How do you read the liquidity situation right now for May?
A: I don’t think people based on corporate earnings are expecting a huge run up in this or maybe in the next quarter in the Indian markets, taking advantage of the near-term rally, booking profits or even churning portfolios. So, it’s a good strategy to get out of sectors that you are looking at.
I wouldn’t say that people are getting out in a big hurry or there is a real situation to sell India going out with the international investors.
Q: Is the rupee making global investors a bit nervous out there?
A: I don’t think it has reached a stage of acceleration where anybody is nervous. Most people, given the volumes in the Indian market, were anyways sitting on the sidelines. This will make the Indian markets more attractive for investors who are sitting on the sidelines.
So, maybe 42-42.50 is probably where people will see value in coming back. On the longer-term trajectory, once the inflation that we are seeing is corrected, you will see the rupee appreciating against the dollar.
Q: How are you approaching this spike in crude and the oil sector in India?
A: There are two scenarios. One is that this is a momentary speculative news driven spike and it will correct back to levels we saw about a month back or so. In that event, you will see this as volatility in stocks and come back.
If the rise in the oil price is here to stay and get more aggressive from here, then you will obviously need some part of that passed on to the consumer in India. That action will ultimately stabilise prices of these companies.
So, there has to be either through action on correction and passing of inflation or through the actual change in the price of oil. On the short-term, they will go down on the fear that oil price hikes may not be able to be passed to the consumer in India. That is really the fear that is playing in these stocks going down.
Q: Is there nervousness on Bharti because of the MTN deal? Have people come to terms with it after the initial scare?
A: It is a bit of initial volatility. As people get to know more, things will stabilise and see the value over doing this in the longer-term.
Q: In the near-term, do you expect the market to remain in essentially a 1,000 points range for the Sensex?
A: Yes, barring any unforeseen news which could take us back to test 4,500. If sentiment and further news on commodity prices on flows worsens from here and go down from 4,700 to 4,800, take a stop there. But if newsflow gets really bad then we will go down.
We have very low leverage and low participation. The market will not slam down 5% in a day. That is very unlikely, given the leverage we have on the market today. So, that should give some confidence.
On the other side, there is participation coming back into the markets which will also allow the formation of a base that will take a cue from the corporate numbers and take the next upmove. It is tough to say whether that will happen in a quarter or two quarters.
Why should I learn Forex currency trading?
I think you are already aware that Forex trading is a good way to make money at home. More over, I bet you knew someone, or would have heard of someone, who's already making tons of good money in FX trading.
But what you wouldn't know is that 7 out of 10 traders keep losing money in Forex market! That's right, 70% of individual FX traders keep losing their hard-earned money in the market; while the rest of the 30% work freely at home and earn millions annually.
Wonder what differs between the losing 70% and the winning 30%? Forex trading skills and the trading system! If you want to work less than 20 hours a day at home, if you want to make millions by trading freely at home, if you want to have financial freedom by trading Forex; you better LEARN Forex trading before you start trading Forex.
Forex market is definitely not a game for newbie and you need to brush up your skills before getting your hands wet.
But what you wouldn't know is that 7 out of 10 traders keep losing money in Forex market! That's right, 70% of individual FX traders keep losing their hard-earned money in the market; while the rest of the 30% work freely at home and earn millions annually.
Wonder what differs between the losing 70% and the winning 30%? Forex trading skills and the trading system! If you want to work less than 20 hours a day at home, if you want to make millions by trading freely at home, if you want to have financial freedom by trading Forex; you better LEARN Forex trading before you start trading Forex.
Forex market is definitely not a game for newbie and you need to brush up your skills before getting your hands wet.
Friday, June 8, 2007
USEFULL FOREX TIPS TO REMEMBER
TIP 1 Read both the books by Mark Douglas which cover trading psychology BEFORE you read or do anything else. If you don’t, I’ll say I told you so when you hit a failure barrier and don’t know why.
TIP 2 Stop loss policy - you MUST have one and practice, more practice and even more practice at sticking to it. It will not be easy but it is an essential discipline to profitable trading.
TIP 3 Trading plan / system. Again, you MUST have one! Then you must practice sticking to it. Do not try and second guess or trade against your indicators - wait until they give you a concise signal before acting on it.
TIP 4 TRADE WITH THE TREND. DO NOT trade against the hourly trend of the market unless you are VERY certain the market has turned. Check this by watching a long term moving average (say 80 SMA on 15 minute chart)
TIP 5 Learn to sit on your hands and not trade! It’s better to wait for good quality trades than take a mediocre one and loose money. A day of no trades is better than a day with one loosing one. If you don’t like the market, just walk away. It will always be there later.
TIP 6 Don’t set yourself false targets and expectations. Trading is not an EXACT science and if you do you will only become frustrated by your failure to meet them. Take what the market gives and be satisfied. Greed will kill you as a trader, both mentally and monetarily. .
TIP 7 The market is rarely your friend in a trade that goes against you. Cut your losses quickly and accept them as an inherent part of trading. You will not be able to trade without some loosing positions. Manage them well!
TIP 8 Try hard not to get out of profitable trades too early. Try operating a trailing stoploss of say 15 to 20 pips behind the trade (on 5 minute timeframe) and maximise your good trades by letting them run. Be patient!
TIP 9 Ensure you fully understand how to generate and use pivot points and camarilla points on your trading platform. These are crucial decision points for daily trading and you will struggle without them.
TIP 10 DO NOT overtrade your account. Read up on money management in trading to make sure you fully understand why this is important and develop a strategy which fits with your personal trading capital. NEVER risk wiping out your account because believe me, it can happen. I’ve done it twice myself!
TIP 11 Learn about FIBONACCI levels and how to apply them to your charts.
TIP 12 Keep your trading system simple. Do not have too much information on your trading screen. It is unnecessary and will only cause you to be confused and delay you making your trading decisions.
TIP 13 Always think in terms of probabilities. Trading is all about thinking in probabilities NOT certainties. You can make all the “right” decisions and the trade still goes against you. This does not make it a “wrong” trade, just one of the many trades you will take which, through probability, are on the “loosing” side of your trading plan. Don’t expect not to have negative trades - they are a necessary part of the plan and cannot be avoided.
TIP 14 Ensure that the candle is fully formed on the timeframe you are trading BEFORE you enter your trade. Trade what you see, not what you would like to see.
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Monday, May 14, 2007
FOREX TIPS
The Forex market is among the most advantageous and profitable in the world, and is worth more than a trillion and a half dollars a day! With all that money going around, it makes sense to get in on the action. There are a few things that you should remember, however, before you invest large sums of money in the enterprise. Here are a few tips to help you on your way.
There are not many Forex tips that are more important than that of training and knowledge. While there are many professionals who will be willing to help you on your way, it is important that the final say on the matters will be yours. Hence, when you do invest, know the ins and outs of the market, and take the power into your own hands. Another of tips of Forex is that you invest wisely and take advantage of the technology available to you in the market, since most trades are made online. All you have to do in order to make a trade is go online, and there you will find all the resources that you will need. While you are investing, it may be a good idea to will you children some money, as well.
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