Key Events - Next Week - Sanil Sonalkar
Keep an eye on two important events in the next week which may have some impact on one's portfolio :
(1) RBI's monetary policy announcement on Tuesday : this should keep rate sensitive sectors like banks buzzing with activity as a 25 bps hike is widely expected by most analysts. This may also be a good time for long-term investors to accumulate blue-chip private banking stocks at lower levels since last week was not a particularly good one (case in point is Axis Bank which lost 12% over 5 trading sessions). This sector might continue to remain under some pressure for some time, but every dip could be construed as a buying opportunity for the long-term.
(2) Akshaya Tritiya on Friday : gold is scaling new highs almost every single week and this may continue as generally there would be increase in demand during this event. Gold is also considered a safe haven by experts and the safest bet against inflation. Also, yearly returns from gold have been better than asset classes such as equity & debt. Gold ETF's are also gaining popularity. Also, this would give a portfolio the much-needed diversification.
Saturday, April 30, 2011
Wednesday, April 27, 2011
Do we buy Gold or Silver now?
There is a very famous measure of finding out how expensive Gold and Silver as compared to each other. The Mean is about 50 whereas during extreme times it oscillates between 20 and 80.
What we mean here is how many ounces of silver, 1 ounce of gold will buy. Right now ratio is 33.
If we take price of silver to stabilize at 45 dollars an ounce, then gold should trade at 2250 dollars an ounce.
Conversely, Silver should drop to 31 dollars an ounce to meet its equality historically.
So, what is the conclusion?
We dont know if Silver will rise or fall. But, it clearly implies Gold is a much safer bet compared to Silver.
Sunday, April 24, 2011
Full Year Results and P/E: What do they tell us?
The Full Year Results are pouring in and nothing exciting about the Results from Infy, TCS and Reliance. Gold is at an all-time high and the P/E ratio is at 22.18. What are all these telling us.
1. Lets start off with the P/E ratio. As per data from the NSE, its at 22.18 suggesting that the index is fully valued.It has gone up to a ratio of 28 only twice in 2000 and 2008 culminating in major falls. Nifty P/E at 28 leads to Nifty at 7422.
2. If Nifty corrects from here, fair value comes at 3700 - 3900 band.
3. The Annual results have ranged from just meeting expe3ctations to poor. The Good results are usually declared early. So the Result Season has come and gone.Private Banks have shone and here is a excerpt from Sanil Sonalkar.
Both the leading private sector banks, HDFC Bank & Axis Bank, registered robust Q4 numbers, with each reporting >30% increase in net profits (on a Y-O-Y basis). Dividend payout has also been good with HDFC bank announcing a dividend of Rs. 16.50/- per share while Axis Bank rewarded its shareholders with a dividend of Rs. 14/- per share.
Resurgence in retail demand, a healthy ratio of low-cost CASA deposits & improved NIM's have resulted in such stellar performances. An investor with a reasonably long investment horizon (say 10-20 years)must definitely stay invested in these stocks as these are likely to continue outperforming the rest of the market.
The only sore point is that unlike IT companies, private sector banks never reward shareholders with corporate benefits such as bonus shares, interim dividend and the like (for obvious reasons).
However, stay invested for the long-term.
4. Gold is at an all-time high and Japan is planing to raise fresh debt to aid rebuilding efforts. This makes one cautious on equity as an asset class.
The Markets are in a range and only a breakout above 5944 would lead to fresh upsides and a break below 5650-5735. Till then we continue to grind down in a range.
1. Lets start off with the P/E ratio. As per data from the NSE, its at 22.18 suggesting that the index is fully valued.It has gone up to a ratio of 28 only twice in 2000 and 2008 culminating in major falls. Nifty P/E at 28 leads to Nifty at 7422.
2. If Nifty corrects from here, fair value comes at 3700 - 3900 band.
3. The Annual results have ranged from just meeting expe3ctations to poor. The Good results are usually declared early. So the Result Season has come and gone.Private Banks have shone and here is a excerpt from Sanil Sonalkar.
Both the leading private sector banks, HDFC Bank & Axis Bank, registered robust Q4 numbers, with each reporting >30% increase in net profits (on a Y-O-Y basis). Dividend payout has also been good with HDFC bank announcing a dividend of Rs. 16.50/- per share while Axis Bank rewarded its shareholders with a dividend of Rs. 14/- per share.
Resurgence in retail demand, a healthy ratio of low-cost CASA deposits & improved NIM's have resulted in such stellar performances. An investor with a reasonably long investment horizon (say 10-20 years)must definitely stay invested in these stocks as these are likely to continue outperforming the rest of the market.
The only sore point is that unlike IT companies, private sector banks never reward shareholders with corporate benefits such as bonus shares, interim dividend and the like (for obvious reasons).
However, stay invested for the long-term.
4. Gold is at an all-time high and Japan is planing to raise fresh debt to aid rebuilding efforts. This makes one cautious on equity as an asset class.
The Markets are in a range and only a breakout above 5944 would lead to fresh upsides and a break below 5650-5735. Till then we continue to grind down in a range.
Wednesday, April 20, 2011
Sunday, April 17, 2011
Gold : Whats driving it? - Fundamental and Technical Factors
Gold has jumped up to new all time high of 1486 dollars. Why is Gold rising and what could be the factors driving it?Lets take a look at it Technically and Fundamentally.
1. Gold is an hedge against inflation.Inflation is rising globally and especially in the United States. Rise in crude oil prices is driving inflation. Inflation has lead to a rise in commodity prices and Gold is no different.
2. Gold was supposed to be the currency against which national currencies were linked.Countries went off the Gold Standard and printed their currencies without anything solid to back it. As the currencies become worthless pieces, people look towards safety and hence Gold is in demand.
3. All the National Banks have begun buying quantities of physical gold. Gold is a finite quantity available and this is driving up prices.
4. Eurozone default is becoming more and more likely. First Greece, then Ireland and now Portugal. The countries going under are getting bigger and Gold is an instrument of safety. Spain will be the next one to watch for.
5. 1 ounce of gold = 15 barrels of oil. By that logic, Gold should touch 1800 dollars.
6. Quantitative Easing - 2 comes to an end in June 2011. QE- 3 means more liquidity or collapse. Either way, it bodes well for Gold.
As long as there is uncertainty in the world, gold prices will continue to rise.In 2 years Silver went from Rs 15000 to Rs 63000 per kg and I do not see any reason why Gold prices cannot go upto Rs 60000 for 10 grams in the next 2 years.
Every portfolio must have 20 pc of Gold in it. These are uncertain times.
That was the Fundamental side of Gold.
Lakshmi has done a Technical Analysis at below link. She is one of the finest Technical Analysts, I know and her targets are usually met.
http://vipreetinvestments.blogspot.com/2011/04/gold-rush-is-it-time-to-rush-out.html
Also, have a look at my post, in June 2010 when Gold was at 1250 dollars an ounce. We are on the right track.
http://money-manthan.blogspot.com/2010/06/gold-as-investment.html
1. Gold is an hedge against inflation.Inflation is rising globally and especially in the United States. Rise in crude oil prices is driving inflation. Inflation has lead to a rise in commodity prices and Gold is no different.
2. Gold was supposed to be the currency against which national currencies were linked.Countries went off the Gold Standard and printed their currencies without anything solid to back it. As the currencies become worthless pieces, people look towards safety and hence Gold is in demand.
3. All the National Banks have begun buying quantities of physical gold. Gold is a finite quantity available and this is driving up prices.
4. Eurozone default is becoming more and more likely. First Greece, then Ireland and now Portugal. The countries going under are getting bigger and Gold is an instrument of safety. Spain will be the next one to watch for.
5. 1 ounce of gold = 15 barrels of oil. By that logic, Gold should touch 1800 dollars.
6. Quantitative Easing - 2 comes to an end in June 2011. QE- 3 means more liquidity or collapse. Either way, it bodes well for Gold.
As long as there is uncertainty in the world, gold prices will continue to rise.In 2 years Silver went from Rs 15000 to Rs 63000 per kg and I do not see any reason why Gold prices cannot go upto Rs 60000 for 10 grams in the next 2 years.
Every portfolio must have 20 pc of Gold in it. These are uncertain times.
That was the Fundamental side of Gold.
Lakshmi has done a Technical Analysis at below link. She is one of the finest Technical Analysts, I know and her targets are usually met.
http://vipreetinvestments.blogspot.com/2011/04/gold-rush-is-it-time-to-rush-out.html
Also, have a look at my post, in June 2010 when Gold was at 1250 dollars an ounce. We are on the right track.
http://money-manthan.blogspot.com/2010/06/gold-as-investment.html
Markets Next Week: A Fundamental look at Things
Its the Results season and already Infosys has hit a road block. The Markets tanked on Friday and lets have a look at what could be the road ahead for the markets.
1. Infosys had a double whammy. Poor results and Mohandas Pai leaving the company. Infosys is a company built on processes and too much is being made of a departure of a certain Individual. The knee-jerk reaction also is significant in highlighting the dangers of a personality cult.
2. More worrying is the drop in Margins to 29 pc. Infy is well known for high Margins of 33 pc for all these many years. Infosys has grown to a particular size. Where will the next phase of growth come from is the main question. There are several worrying questions like, how does the non linear growth come from. By non-linear, I mean that revenue and profits should not be linked to manpower growth. Putting it simply, it means getting high value businesses like Consulting where the billing rates are more.
3. On a revenue growth comparison, TCS and Cognizant are pulling ahead of Wipro and Infosys. I believe this is a cyclical phenomenon and one cannot write of Infy yet. Infy will now become a value stock like HUL and not a growth stock. A solid rock in one's portfolio but not the dazzling star.
4. Crude continues to boil over, gold and silver prices continue to zoom. The European cockroaches are coming out again. A Spanish default and Gold could cross 1800 dollars.
5. Oil imports continue to bleed our economy and the government waits for elections to get over. Inflation continues to rise and expect a 50 basis points hike soon in the interest rates.
6. Real Estate stocks are in a shamble, autos and banks would be the next to go down.
7. What could take the markets up? Further cheap money in the form of QE -3 could flood emerging markets and take us up. Till this is announced, expect a range bound to a negative bias to the markets.
8. The results are factored in. Only some bad news like Infy or extra ordinary good results can cause big swings.
Markets typically hit some kind of bottom around May. 1 of the myths floating around is Sell in May and go away. If I look at past data, I would prefer to buy in end of May. Reason? Markets usually bottom in March-May for the year.
Portfolio highlights could be Gold, ONGC or Cairn and Debt funds. This is keeping in mind a conservative 16 pc return over the next 1 year. Gold has given a return of 26 pc if bought in Dec 2009 when I commenced my SIP in gold. This meets my target of 16 pc annual returns without taking undue risks.
1. Infosys had a double whammy. Poor results and Mohandas Pai leaving the company. Infosys is a company built on processes and too much is being made of a departure of a certain Individual. The knee-jerk reaction also is significant in highlighting the dangers of a personality cult.
2. More worrying is the drop in Margins to 29 pc. Infy is well known for high Margins of 33 pc for all these many years. Infosys has grown to a particular size. Where will the next phase of growth come from is the main question. There are several worrying questions like, how does the non linear growth come from. By non-linear, I mean that revenue and profits should not be linked to manpower growth. Putting it simply, it means getting high value businesses like Consulting where the billing rates are more.
3. On a revenue growth comparison, TCS and Cognizant are pulling ahead of Wipro and Infosys. I believe this is a cyclical phenomenon and one cannot write of Infy yet. Infy will now become a value stock like HUL and not a growth stock. A solid rock in one's portfolio but not the dazzling star.
4. Crude continues to boil over, gold and silver prices continue to zoom. The European cockroaches are coming out again. A Spanish default and Gold could cross 1800 dollars.
5. Oil imports continue to bleed our economy and the government waits for elections to get over. Inflation continues to rise and expect a 50 basis points hike soon in the interest rates.
6. Real Estate stocks are in a shamble, autos and banks would be the next to go down.
7. What could take the markets up? Further cheap money in the form of QE -3 could flood emerging markets and take us up. Till this is announced, expect a range bound to a negative bias to the markets.
8. The results are factored in. Only some bad news like Infy or extra ordinary good results can cause big swings.
Markets typically hit some kind of bottom around May. 1 of the myths floating around is Sell in May and go away. If I look at past data, I would prefer to buy in end of May. Reason? Markets usually bottom in March-May for the year.
Portfolio highlights could be Gold, ONGC or Cairn and Debt funds. This is keeping in mind a conservative 16 pc return over the next 1 year. Gold has given a return of 26 pc if bought in Dec 2009 when I commenced my SIP in gold. This meets my target of 16 pc annual returns without taking undue risks.
Friday, April 15, 2011
Implications of High Crude Oil Prices
With oil prices ruling above $100 per barrel, India’s trade deficit is
widening and inflation remains a major concern. Lets looks at the implication of high oil prices for investors, and see how we can benefit from this adversity.
Continue Reading at:
http://investmentsfordummieslikeme.blogspot.com/2011/04/implication-of-high-oil-price-for.html
widening and inflation remains a major concern. Lets looks at the implication of high oil prices for investors, and see how we can benefit from this adversity.
Continue Reading at:
http://investmentsfordummieslikeme.blogspot.com/2011/04/implication-of-high-oil-price-for.html
Sunday, April 10, 2011
Markets Next Week
The markets were flat this week, but there were a number of interesting happenings which could be a precursor of things to come. The coming week should be decisive in telling us whether the Up move is done with or if we can go higher.
1. Gold closed at an all time high of 1474 dollars. The rupee has strengthened to almost 44 to a dollar and hence this is not reflected in rupee terms price of gold. Gold now has given a breakout from its previous top of 1434 dollars and first target can come at around 1550 dollars.Around the 1500-1550 dollar range comes multi - year resistance and once this gets taken gold can zoom up.
2. Crude is at 126 dollars to a barrel (Brent Crude). Petrol under-recovery of 4 rupees and Diesel under-recovery of 17 rupees to a litre. The Fiscal Deficit goes for a toss and the oil refining companies continue to bleed.
3. The Markets have formed a Gravestone Doji on the Weekly charts and which is usually a reversal sign.we need to see for the follow up in the coming week.
4.Several short term technical indicators have given a Sell signal and key supports are 5711, 5640 and 5608.
5. If we take Wave 1 down as from 6339 to 5177, this could have been Wave 2 up from 5177 to 5944. We would need to see if the Third Wave down has begun and it could have targets of 4800 or 4300 on the Nifty.
6. The Bollinger Bands have been touched on the upper end and a reversal is under way. The Stochs have given a sell and MACD also has turned down. We ow have 2 possibilities. A correction to the last up move from 5348 to 5944 or a fresh down move. Reversal from 5600-5700 could mean that the up move has not yet ended.
7. The Trend line joining the previous 2 tops provided good resistance and is now at approx 5900. This could be a good level to decide whether to take fresh longs.
8.. The Full Year results will start trickling in the next week. The Results are usually factored in unless there are some great upgrades.
Strategy Ahead: Its a truncated week with 2 Holidays. Long above 5944 and short below 5830 with taking the 5 day EMA as a stop loss.
1. Gold closed at an all time high of 1474 dollars. The rupee has strengthened to almost 44 to a dollar and hence this is not reflected in rupee terms price of gold. Gold now has given a breakout from its previous top of 1434 dollars and first target can come at around 1550 dollars.Around the 1500-1550 dollar range comes multi - year resistance and once this gets taken gold can zoom up.
2. Crude is at 126 dollars to a barrel (Brent Crude). Petrol under-recovery of 4 rupees and Diesel under-recovery of 17 rupees to a litre. The Fiscal Deficit goes for a toss and the oil refining companies continue to bleed.
3. The Markets have formed a Gravestone Doji on the Weekly charts and which is usually a reversal sign.we need to see for the follow up in the coming week.
4.Several short term technical indicators have given a Sell signal and key supports are 5711, 5640 and 5608.
5. If we take Wave 1 down as from 6339 to 5177, this could have been Wave 2 up from 5177 to 5944. We would need to see if the Third Wave down has begun and it could have targets of 4800 or 4300 on the Nifty.
6. The Bollinger Bands have been touched on the upper end and a reversal is under way. The Stochs have given a sell and MACD also has turned down. We ow have 2 possibilities. A correction to the last up move from 5348 to 5944 or a fresh down move. Reversal from 5600-5700 could mean that the up move has not yet ended.
7. The Trend line joining the previous 2 tops provided good resistance and is now at approx 5900. This could be a good level to decide whether to take fresh longs.
8.. The Full Year results will start trickling in the next week. The Results are usually factored in unless there are some great upgrades.
Strategy Ahead: Its a truncated week with 2 Holidays. Long above 5944 and short below 5830 with taking the 5 day EMA as a stop loss.
Monday, April 4, 2011
Sunday, April 3, 2011
Markets: What Next?
Its a new financial year and what has changed for the markets? Lets take a look at a few fundamental and technical factors at play.
1. The March auto sale numbers seem to be mind-blowing. In spite of high fuel prices and the fact that i Feb a lot more cars were bought factoring in expected hike in excise prices in the Union Budget, the March Car Sale numbers were amazing.
2. The FIIs have pumped in a whopping 8395 crores or almost 2 billion USD. That was a major reason for the Markets rising so much. As long as the FII flow is there, the markets will continue to remain stable.
3. The Markets seem to ignore a lot of negative data like high crude oil prices, inflation, poor governance etc. For how long this continues is anybody's guess.
4. The Wave Count seems to be getting clearer. Wave 1 was from 6339- 5177. Wave 2 will correct this entire down move and the targets could be 5620 (done), 5758 (done) and 5895.
5. Wave 1 down took almost 3 months and Wave 2 would take at least 2 months till middle of April. We have seen Wave A till 5608, Wave B till 5348 and Wave C could have targets of 5779, 6041.
6. Once Wave 2 is done we will have a wave 3 which can be a down move of 1200 to 1800 points lasting 4-6 months.
6. The difference of 5 DMA and 20 DMA shows it to be in overbought zone. The top may have been in or in a day or 2 max.
7. The Stochastic are highly overbought indicating that the next week could be a flat to slightly positive week at max.
8. There are 2 critical trend line resistances coming up. First is the line joining the last 2 tops at 6339 and 6177. This has already been resisted twice and the next one at 5922. This is the channel from Nov 2009 from which we had broken out in Sept 2010, broke below briefly in February 2011 and now re-entered.
Bottom line: Trade cautiously and look to safe havens like Gold and Debt options.
1. The March auto sale numbers seem to be mind-blowing. In spite of high fuel prices and the fact that i Feb a lot more cars were bought factoring in expected hike in excise prices in the Union Budget, the March Car Sale numbers were amazing.
2. The FIIs have pumped in a whopping 8395 crores or almost 2 billion USD. That was a major reason for the Markets rising so much. As long as the FII flow is there, the markets will continue to remain stable.
3. The Markets seem to ignore a lot of negative data like high crude oil prices, inflation, poor governance etc. For how long this continues is anybody's guess.
4. The Wave Count seems to be getting clearer. Wave 1 was from 6339- 5177. Wave 2 will correct this entire down move and the targets could be 5620 (done), 5758 (done) and 5895.
5. Wave 1 down took almost 3 months and Wave 2 would take at least 2 months till middle of April. We have seen Wave A till 5608, Wave B till 5348 and Wave C could have targets of 5779, 6041.
6. Once Wave 2 is done we will have a wave 3 which can be a down move of 1200 to 1800 points lasting 4-6 months.
6. The difference of 5 DMA and 20 DMA shows it to be in overbought zone. The top may have been in or in a day or 2 max.
7. The Stochastic are highly overbought indicating that the next week could be a flat to slightly positive week at max.
8. There are 2 critical trend line resistances coming up. First is the line joining the last 2 tops at 6339 and 6177. This has already been resisted twice and the next one at 5922. This is the channel from Nov 2009 from which we had broken out in Sept 2010, broke below briefly in February 2011 and now re-entered.
Bottom line: Trade cautiously and look to safe havens like Gold and Debt options.
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