Sunday, November 29, 2015

RBI Policy to dictate direction next week

The markets gained 1.1 pc last week to end higher. We are headed to a data heavy week with the RBI Meeting on December 1. In the immediate next week, I expect the markets to move higher from current levels.

1. The RBI Governor is unlikely to cut rates especially with US Fed meeting on Dec 16th. Rajanl ikes to surprise and may still cut rates.

2. The FIIs continued to be net sellers for the month of November. Hug FII outflows mean that the markets have declined that month.

3. The Gold scheme of the Government has been a success. Instead of ETFs the Investors will now buy bonds from the Government. India has Sovereign Gold Reserves which can be now be held against the Bonds.

4. The FIIs will go on vacation soon, and the Coal India FPO I believe will hit the markets at any moment. Fundamentals suggest a buy.

5. So we are now entering a quiet phase within the markets but at the same time some turbulence due to Central Bank meetings.

Long term view still remains the same, buy on dips.

Sunday, November 22, 2015

The Dust Settles

The last few week have been tumultuous and now the dust is beginning to settle. Let us remove chaff from the wheat and filter the noises out. The markets gained 1.2 pc in the last 1 week. The target of 7200 is now 500 points away from the current low.

1. The Power Reform announcements if and when implemented will lead to the Discoms recovering the lost ground. This was the most groundbreaking announcement of the past few weeks.

2. Coal India FPO which will hit any moment, full subscription is advised for the Retail Investors. Coal India gives god dividends and at least Rs 20 can be expected this time around. The dividend yield itself will be around 6 pc.

3. Coal India has got the approval for exploring Coal Methane Blocks, this will need to significant new cash flows for Coal India.

4. The FDI announcements in various sectors will lead to more foreign money flowing and Defence is the key sector I see benefiting. Defence Sector from the Private parties is under developed in India and I see the Private Sector in Defence in India as a sunrise sector.

5. The time to talk is over and the Government will get down to business now. The Phase 2 of Modi first 5 year term has been kick started.

6. Power, Defence, Pharma and Banking are the key sectors I will watch at with special focus on Infrastructure lending.

Things have started moving on the ground. The next few weeks should provide us with more buying opportunities.

Wednesday, November 11, 2015

Mahurat Pick - Tata Motors

My pick for this Mahurat is Tata Motors. I do not hold this stock in my portfolio for the last 10 years and will add the first lot today. I will not look at it for 5 years and will evaluate it in 2020.

The Reasons for buying Tata Motors stock is:

1. Legacy of Tata Motors is more than 70 years old and the legacy of the Tata Group goes back even further. The Tata Group with their motto of Leadership with Trust is here to stay for the next 100 years at least.

2. The Jaguar Land Rover acquisition has been a master stroke. With this they have access to the latest technology and have moved the Research centre to UK.

3. HorizonNext program is launching cars at the right price point starting with the Bolt, Zest and Kite on its way. In the next 10 years I see Tata Motors having a car in every segment from the Nano to the Jaguar. Once they have loyal customers in place, the same customer will upgrade to the next car in the category.

4. They have right people at the top with Mayank Pareek who set up the Sales Process with the Maruti Team and Karl Slymm before him. The Best Practices from Maruti are being implemented in the Tata Motors Group.

5. India as an automotive market is growing. Society is becoming aspirational and disposable incomes are rising. Savings Rate may be going down but the spends are going up. There is a market for the cars.

6. Look at the trend of sales for Zest in last few months. Chugging along with now nearing 2500 units per month. The stability in numbers is heartening.

7. Capacity is available at Sanand for fresh cars. The Nano is an example of the innovation and frugal engineering.

8. People do not leave the Tata Group for life. They have the Tata Administrative Services or TAS which is second only to the IAS cadre in terms of trained personnel.

9. Vision is clear with the group logo "Leadership with Trust" and the HorizonNext program. This clarity of vision at the group level of Tatas and and at Tata Motors company level is heartening.

10. Price is attractive right now. No one is looking at Tata Motors. In 2001 when it was down in the dumps, I made 10 times the profit and got out.

People, Processes and Technology - the combination of these three lead  to success. Right leadership with streamlined processes in place and having the state of the art Technology in place.

On a personal note, I have owned 5 Tata Cars in the last 14 years. The Indica, Indigo CS, Manza, Nano and now awaiting my Zest.

2 CEOs have intervened to resolve my issues at 2 different points of time. If there is such strong Focus on Customer Experience and Customer Loyalty, the company is a blind buy.

Sunday, November 8, 2015

What next? Bihar Results are out

The Elections have come and gone. The Results are unveiled and the real winner of he elections is Lalu and the biggest loser is Nitesh. The markets will present an excellent buying opportunity on Monday.

1. Lalu from nowhere has come and grabbed center stage in Bihar. He has more seats than Nitesh so will grab prime portfolios. Take the credit and give the blame to Nitesh. Nitesh will become Chief Minister but what a price to pay. BJP as an ally was much better and safer than Lalu.

2. If Nitesh had stayed with the BJP, he would have had got few seats in the Union Cabinet plus Bihar he would have continued to rule peacefully.

3. Last week I had said markets should correct to 7200. We are at 7954 just about another 9-10 pc intra day. 7200 is coming and will be a buying opportunity.

4. FIIs continue to sell and that will add to short term pressure.

5. The Gold bonds being floated by the Government represent a very good buying chance to lock into Gold at low prices. I will study more and update.

Happy Diwali and stay tuned for my Diwali Pick before Mahurat Trading. This is 1 stock I am yet to enter but will buy with a 5 year horizon.

Sunday, November 1, 2015

Next Sunday will be Trend Decider

The markets lost about 2.8 pc for the week., it has already corrected about 300 points from the top on the Nifty without anyone even realizing it. The Bihar election results are due on next Sunday and that will be the tipping point.

1. Bihar elections will throw up only 2 possibilities, either the NDA or the Nitesh led front wins. If Nitesh and company win the markets will anyway tank and if Modi wins there might be a surge but eventually the markets should correct.

2. I see Yes Bank at levels where it was when the markets were at 7800 and now we are still at 8000 plus levels but Yes Bank as corrected. Banks are usually Lead Indicators of an impending correction in the Nifty.

3. The markets typically peak around Diwali and the euphoric atmosphere is generally used to reel in the last few suckers left. In October 2009, there was a sharp 2 week correction from 5181 to 4538, a correction of 12.5 %. If we extrapolate this now, 12.5 % correction from 8338 will bring us to 7295.

4. The markets are a cesspool of multiple factors. Every buyer and seller thinks he is buying at the correct price. The FII flows continue to remain iffy and I see no great traction in the money flowing.

5. The Cafe Coffee Day and the Indigo IPOs have sucked out a great deal of cash from the markets. IPOs typically occur at the peak of Bull Markets. Remember Reliance Power in 2008. The markets tanked even before the stock listed.

6. IPOs, election results, Diwali peaks all these make a very interesting time for the markets.

I would not put in any fresh money in the markets just churn the existing cash around. I still stand by we visiting 7200 and 10500 within the next one year. What will come first? My model says 7200. Models can fail so we may well see 10500 first though I would put the probability at 20 pc.