October 2013

Sensex Gainers and Losers over the last 1 year

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Here are the Sensex Gainers and Losers over the last 1 year. Prices are as of Oct 04 2013. Clearly the Pharma and IT sector has outperformed the others by leaps and bounds.

The Gainers in the Sensex pack are :

Company Name

Sun Pharma Inds.

Curr Price

600.6

Last 1 yr

349.2

% Change

71.99

TCS

2032.8

1315.05

54.58

Dr Reddys Lab

2368.55

1718

37.87

Tata Motors

349.75

274.2

27.55

Wipro

482.9

383.05

26.07

ITC

340.1

275.1

23.63

Bharti Airtel

328.15

269.55

21.74

Bajaj Auto

2119.1

1765.25

20.05

Cipla

438.1

366.4

19.57

Infosys

3015.45

2575.4

17.09

Hero MotoCorp

2032.85

1831.1

11.02

Hindustan Unilever

608.05

555.6

9.44

Sesa Sterlite

187.25

175

7

Maruti Suzuki

1427.65

1391.2

2.62

HDFC Bank

640.35

630.95

1.49

HDFC

798.65

788.2

1.33

Reliance Industries

853.4

852.75

0.08

Mahindra & Mahindra

859.15

859.05

0.01

The Losers in the Sensex pack are : (more…)

December 2012

Past 6 months Sensex stocks performance

Past 6 months (Jun thru Dec 2012) Sensex stocks performance  is shown below :

Gainers Curr Price 6 months back Change(Rs) Change%
Mahindra & Mahindra 949.9 680.1 269.8 39.67
ICICI Bank 1136.3 819.4 316.9 38.67
Maruti Suzuki 1474.4 1078.9 395.5 36.66
Bajaj Auto 2080.25 1549.4 530.85 34.26
HDFC 852.35 644.6 207.75 32.23
Cipla 404.05 305.6 98.45 32.22
HDFC Bank 688.7 534.4 154.3 28.87
Tata Motors 291.9 227 64.9 28.59
Larsen & Toubro 1638.2 1296.9 341.3 26.32
Sun Pharma Inds. 716.6 582.25 134.35 23.07
ITC 295.75 244.3 51.45 21.06
Dr Reddys Lab 1833.7 1555.05 278.65 17.92
Hindustan Unilever 518.15 440.75 77.4 17.56
Reliance Industries 839.2 715.55 123.65 17.28
Tata Power 104.75 92.15 12.6 13.67
Sterlite Inds. (I) 113.2 101.85 11.35 11.14
SBI 2320.15 2154.25 165.9 7.7
Coal India 353.95 330.95 23 6.95
GAIL India 347 333.25 13.75 4.13
BHEL 224.9 217.25 7.65 3.52
NTPC 152.7 148.4 4.3 2.9
Bharti Airtel 311.95 305.35 6.6 2.16

Clearly financial services/ interest sensitivities/ banking are outperforming in the hopes of reforms and expected rate cuts. Early 2013 more noise will emerge around the budget session and reforms. Overall, equity markets look poised for a steady journey northwards.

Most retail investors are skeptical of the up move in the markets over the past few months.  And are keen to move to debt products or Gold. Are they making a mistake, only time can tell. As of now, though, it is time to enjoy the joy ride upwards…

 

November 2012

Quick Snapshot of Sensex Companies ~ TTM EPS & PE Ratios

 
Market Data
Company
Nov 09 Price(Rs)
FV
EPS (Rs)
PE(x)
 
 
 
BHEL
232.30
2.00
28.63
8.11
Bajaj Auto
1852.05
10.00
104.58
17.71
Bharti Airtel
275.30
5.00
16.46
16.72
Cipla
393.50
2.00
18.21
21.60
Coal India
346.25
10.00
13.01
26.61
Dr Reddys Lab
1768.30
5.00
50.67
34.90
GAIL India
355.50
10.00
29.12
12.21
HDFC
794.00
2.00
28.96
27.42
HDFC Bank
639.30
2.00
24.79
25.79
Hero MotoCorp
1907.60
2.00
113.81
16.76
Hindalco
113.30
1.00
9.79
11.57
Hindustan Unilever
529.80
1.00
16.55
32.01
ICICI Bank
1059.20
10.00
64.19
16.50
ITC
288.50
1.00
8.59
33.59
Infosys
2349.15
5.00
156.50
15.01
Jindal Steel & Power
382.45
1.00
19.68
19.44
Larsen & Toubro
1620.95
2.00
79.03
20.51
Mahindra & Mahindra
910.30
5.00
51.53
17.66
Maruti Suzuki
1464.65
5.00
51.80
28.27
NTPC
166.95
10.00
12.57
13.28
ONGC
257.10
5.00
28.47
9.03
Reliance Industries
788.60
10.00
57.29
13.76
SBI
2156.35
10.00
219.40
9.83
Sterlite Inds. (I)
100.30
1.00
3.33
30.08
Sun Pharma Inds.
694.50
1.00
16.71
41.56
TCS
1325.50
1.00
62.57
21.18
Tata Motors
280.65
2.00
6.69
41.95
Tata Power
101.20
1.00
4.99
20.29
Tata Steel
390.55
10.00
58.58
6.67
Wipro
370.60
2.00
21.50
17.24
 
Sensex TTM PE stands at ~20.  ~ Data Source Ace Equity
 
 

September 2010

Reliance – 2nd among world’s largest value creators

There is a report in Business Standard which mentions many Indian Companies amongst the world’s largest value creators in this decade. The report is here :

Mukesh Ambani-led Reliance Industries has been ranked second in the list of world’s 10 biggest ‘sustainable value creators’, companies that have been successful in creating the most shareholder value over the last decade, prepared by Boston Consulting Group.

Reliance Industries again comes second in the ‘Large Cap firms’ for 2005-2009 of 112 global companies with a market valuation of more than 35 billion dollars.

In the chemicals industry, Reliance Industries has been named the second biggest value creator of 53 global firms during the period behind South Korea’s OCI.

However, the stock has virtually not given any returns over the past 2 years….. Many investors are losing patience now and
letting go of the stock in favor of Banks, Pharma and FMCG Companies…. which have outperformed…
If you compare the returns of Reliance with the BSE Index, the result is quite glaring….Sensex is up almost 40 % in last one
year……Whereas Reliance has not given any return at all ……
So , What is next …….. Well a relief rally should be on cards till 1200 at least if the stock holds above 960 levels. …. And this will definitely bring smiles to the investors… and the markets as well.

August 2010

What and How of Nifty Index!!!

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One of my friend recently just wanted to get an idea about Nifty and How it is calculated. I am presenting some basic facts about Nifty here….

Background of Nifty

S&P CNX Nifty is a well diversified 50 stock index accounting for 21 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds.

S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India’s first specialised company focused upon the index as a core product. IISL has a Marketing and licensing agreement with Standard & Poor’s (S&P), who are world leaders in index services.

  • The traded value for the last six months of all Nifty stocks is approximately 44.89% of the traded value of all stocks on the NSE
  • Nifty stocks represent about 58.64% of the total market capitalization as on March 31, 2008.
  • Impact cost of the S&P CNX Nifty for a portfolio size of Rs.2 crore is 0.15%
  • S&P CNX Nifty is professionally maintained and is ideal for derivatives trading

What and How of Nifty Index, How is stock selected in Index, Sensex, India Index Services and Products Ltd. (IISL)NSE, CRISIL, Liquidity,  Impact Cost, Floating Stock, index calculation

How Stocks are selected :

The constituents and the criteria for the selection judge the effectiveness of the index. Selection of the index set is based on the following criteria:

Liquidity (Impact Cost)

For inclusion in the index, the security should have traded at an average impact cost of 0.50% or less during the last six months for 90% of the observations for a basket size of Rs. 2 Crores.

Impact cost is cost of executing a transaction in a security in proportion to the weightage of its market capitalisation as against the index market capitalisation at any point of time. This is the percentage mark up suffered while buying / selling the desired quantity of a security compared to its ideal price (best buy + best sell) / 2

Floating Stock

Companies eligible for inclusion in S&P CNX Nifty should have atleast 10% floating stock. For this purpose, floating stock shall mean stocks which are not held by the promoters and associated entities (where identifiable) of such companies.

Others

a) A company which comes out with a IPO will be eligible for inclusion in the index, if it fulfills the normal eligiblity criteria for the index like impact cost, market capitalisation and floating stock, for a 3 month period instead of a 6 month period.

b) Replacement of Stock from the Index:

A stock may be replaced from an index for the following reasons:

i. Compulsory changes like corporate actions, delisting etc. In such a scenario, the stock having largest market capitalization and satisfying other requirements related to liquidity, turnover and free float will be considered for inclusion.

ii. When a better candidate is available in the replacement pool, which can replace the index stock i.e. the stock with the highest market capitalization in the replacement pool has at least twice the market capitalization of the index stock with the lowest market capitalization.

With respect to (2) above, a maximum of 10% of the index size (number of stocks in the index) may be changed in a calendar year. Changes carried out for (2) above are irrespective of changes, if any, carried out for (1) above.

And Finally how is the index calculation done

S&P CNX Nifty is computed using market capitalization weighted method, wherein the level of the index reflects the total market value of all the stocks in the index relative to a particular base period. The method also takes into account constituent changes in the index and importantly corporate actions such as stock splits, rights, etc without affecting the index value.

Source : NSE

Selling Options : Sometimes it can be made to good use.

Selling Options , Calls, Puts, Tutorials, Options Strategies, Butterfly, Straddle, Strangle,  What Investors should know.

Options, by definition, are a wasting asset. The time decay, declining volatility etc. eat away into the premiums of the options.

Many option buyers learn this fact the hard way by watching their option contracts expire worthless many times. The majority of options expire worthless (estimates are somewhere > 80%). Given that the majority of option buy positions are worthless at the time of expiration, some investors decide that they will sell options and collect the premium. Prima Facie, this sounds like an easy way to make money.

However, there is no free lunch in the investment field as well. There are stories of how some of the brightest people in the world have blown up their accounts while selling ‘Naked’ options. Selling options, when there are no underlying holdings to support in case of adverse move is known as ‘Naked’ Selling.

Nevertheless, Options selling, when used intelligently, can be used to complement/protect your portfolio holdings to a certain extent and also make income in return.

Investors earn a premium for every put and call option which they sell. This premium is paid by Option Buyers.

Selling Short

When you sell shares of a company which you do not own, then it is called short selling. Selling a stock short is taking a view that the shares will keep going down. One way of doing this is by selling Futures. And another way of doing this is by selling Call Options.

In a short sale you have to buy back the shares at some point. And thus, short selling exposes you to unlimited risk, if the price of the stock starts to increase.

There are numerous strategies in Options. I will present just one example of how the selling of call options can be used by investors :

 

Covered Call Strategy

A covered call strategy is strategy for bullish investors to make some money and benefit from a stock that will move little over the short term.

This is often employed when an investor has a short-term neutral view on a stock or when the Stock has made a decent up move in a relative short period of time, and is expected to be range bound in the near term.

Let us take the example of Larsen and Toubro (LNT) recent price action again.

Assume, Investors bought the stock @ 1400 or Traders bought it at the breakout above 1660 in early June. Next, the stock made a decent up move in a month’s time frame and touched almost 1900. Investors could have written an options contract selling one call option of LNT Jul 2010 strike price 1900 at Rs 40. (However, Remember that one call option gives an investor the right to buy 125 shares).

You would earn income because the buyer of the call option has to pay you a premium for the option. If the stock’s price drops stays below the strike price (In this case , LNT did close well below Rs 1900 by Jul end) , the call buyer will never exercise the contract and the entire premium is yours to keep (Remember one lot of LNT is 125 and that makes the premium monies Rs 125 * 40 = Rs 5000).

If the stock’s price increases above the strike price, the call buyer may choose to exercise the contract. You would then either have to buy shares on the open market or deliver your shares to the buyer.

This is one of the common ways in which large institutional players generate income on the basis of their large holdings which they can always use to hedge in case of any adverse move against their options position.

Again, the intention of this article is to arouse interest and make aware of Options Selling. It does not advocate that you start selling options. Please understand, when selling options, remember that although your profit potential is limited to the amount of the premium that you receive, your losses can be rather large.

Also, My personal view is that selling PUT Options carries higher risk than Selling CALL options. This is because , in general, stocks generally use the stairs when going up (Sellers of Call Options can manage risk here ….) , But Jump out of the window when coming down. (Sellers of Put options can run out of exit options or get trapped …)

LNT has indeed made a good move from 1660 to 1900 and which I have been tracking since Early June …

You might be interested to know about Buying Options here…

July 2010

The Simple rules to Successful Investing – Part 1

The Simple rules to Successful Investing , Understanding Investing, Stocks, Mutual Funds, Tax, Insurance, Estate, Wills.

“No amount of talking or reading can teach you swimming. You will have to get in the water.”

There are these little general rules which are applicable and useful for decision making and taking actions. And these simple rules are applicable in so many aspects of life, they are just some small reminders, some common-sense stuff which are really useful.

And yes most of them are applicable in investment planning as well.

a. Perfect Plan – Forget it.There is no such thing as a perfect investment plan and no such thing as a perfect time. The right time is now. Tomorrow is and always will be uncertain. Perfectionism is the enemy of action. Do not let perfect investment plan or a perfect time to invest stop you from starting.

b. Analysis Paralysis – Too much thinking will often result in getting stuck.Some thinking is good — it’s good to have a clear picture of where you’re going or why you’re doing this — but don’t get stuck thinking. Just do.

c. Get the Broad Picture and Start. You need to get the broad picture in your mind. You need to understand your future requirements or what do you want to achieve (goals). You need to know the time you have to meet those requirements. And, then you should have the broad plan to meet the goals. Once you have the broad picture. Get going.
All the planning will take you nowhere unless you take that first step, no matter how small it is.

d. Keep things Simple and take Small Steps. Small steps always work. Little tiny blows can break down that mountain. And then each step counts. Keep the big picture in mind, but start by taking small steps.

Understand the advantage of Investing Early here.

The Little Rules to successful action To be contd … Part 2.

Sensex touches 18000 again , two kinds of investors, two different views ….

chart.

“The investor’s chief problem – and even his worst enemy – is likely to be himself.” ~ Benjamin Graham

Sensex is at 18000 once again.

(A) Many Investors who had invested since 2007  when the markets were around the same levels are not happy. Most of them are waiting to get out of the markets when they are able to get cost to cost. Reasoning — they could have got better returns in Bank FD’s in last 3 years.

(B) Many Investors who invested in Markets in 2009 are super excited as almost all their investments have doubled.  Most of these investors have become developed short term view. They believe that they know everything about markets and they can easily generate good returns time and again. Many want to get out at these levels and reenter at sensex 12000 levels only now. They are experts you see.

Greed and Fear works in both the directions of the markets.

Investors who fall in the above categories do not realize the following fundamental rule of nature which is applicable to markets as well : “THIS TOO SHALL PASS AWAY”.

My view is that investors in either of the above categories will probably never be successful over a investment lifecycle of 3 – 5 – 10 years.  Period. Because the above reasoning of exit from market is based purely on market returns and not based on fulfillment of life objectives. And this kind of reasoning falls in the category of speculation.

Do you fall in any of the categories mentioned above…..

Indian Markets are outperforming ….

Indian Markets are outperforming , Sensex, Nifty, Stocks, Global Indices, Sensex compared to DOW

The Indian Stock Markets are outperforming other markets over the past month and a half.  As seen in the charts above, the out performance of the Indian Markets started in May 2010.  How long this goes on is anybody’s guess.

However, this out performance is sweet for Indian investors; especially because (1 ) There is a heavy impact of the European crisis on Stocks worldwide and (2) – the US markets are demonstrating serious weakness in near term especially with Dow below 10,000 and S&P Index below 1050.

In India, well — The tax collections are up.  Corporate performance in Q1 is expected to be better, at least by 15%.  Monsoon is active again and covered almost all the areas ten days in advance. Earnings season will begin soon.

The above factors are seemingly having a favorable impact on markets.

It will be interesting to see the performance of the markets vis-à-vis the US Markets in the coming weeks and months.

June 2010

Beginner Investors : Investing with Index funds/ ETF’s is a good choice

Guide to Beginner Investors , Investing with Index funds, ETF's is a good choice, Financial Planning, Goal Oriented Planning, Understanding Risk.

What is Index Fund

An index fund is a a mutual fund which tries to replicate an index of a financial market. (For eg: Sensex or Nifty). An Index fund follows a passive investing strategy called indexing. It builds a portfolio with the same stocks in the same proportions as the index. The fund makes no effort to beat the index. The purpose of the Index Fund is to earn the same return as the index over a period of time.

What is ETF

ETF stands for Exchange Traded Funds — these are funds that trade on the stock exchange just like any stock. And they are stored in yuor Demat Account just like any Shares you purchase.

Why are Index Funds/ETF’s not as popular or not  advertised like other Mutual Funds ?

Expert Professionals / AMC’s don’t make enough fees from them, so they often go ignored. Just like Term insurance….. , Term Insurance is not promoted as much. Insurance companies do not benefit from them (You can see the correlation…., What is good for Investors and also available for cheap, is not often promoted enough. Because it does not pocket enough profits for the providers/agents…….)

What is the basic difference between Index Funds/ ETF’s  and Mutual Funds?

Mutual Funds try to beat the index over a period of time. This is active investing. Fund Managers are paid to beat the index over a period of time by generating alpha (The excess return of the fund relative to the return of the benchmark index is a fund’s alpha.).

Index Funds/ ETF’s on the other hand, try to mirror the index returns. This is known as passive investing.

What is the advantage of Index Funds/ ETF’s over Mutual Funds?

– Much Lower Expense Ratios (AMC’s are much lower)

– More Flexible

– Transparent

– Approximately 60%-80% of equity mutual funds underperform the average return of the stock market over a period of time. This is the price of “active management”.

On top of this the AMC charges 2-2.5% of the portfolio value annually.

So , you have to pick the funds carefully. This becomes just like picking Individual Stocks. Of course, if you pick up the right funds (or for that matter right stocks) , then you would be beating the Index handsomely. However this process requires good amount of time, effort and judgement on your part. It sounds simple but is not easy.

– On the other hand , investing in index funds in the beginning , you can start participating in the capital markets and once you have a substantial base, then you can start exploring “active”  investing options.

The writeup on Types of Investors will get you to understand more about different kinds of investors.

March 2010

Costly Investment Mistakes to avoid at all costs – Part III

Costly Investment mistakes Part 3, Investment Planning, Financial Planning, Stocks, Mutual Funds Investing, Life Planning, Goal Oriented Planning.

In the process of investing, one often makes mistakes.

Here are some of the most common investing mistakes which investors generally make and some of which even I had made in the earlier part of my investment years

Of course, learning from the mistakes, continually, the investing experience has truly been rewarding experience.

You can also cultivate good habits of investing by avoiding the following mistakes.

This series is in continuation to the earlier 2 posts which contains the first 5 common mistakes committed by investors. You can read posts here at ( Part I and Part II )

This post ( Part III )  will throw light on the following common mistakes generally committed by investors:

#6. Having Unrealistic Expectations from Investments & Wrong understanding of Risk

Indexes (Sensex and Nifty) have gained more than 85% returns from the lows of March 2009. All the TV channels and newspaper headlines have started to focus on this aspect a lot andfuel greedin common people. Similarly just 2 months earlier to March 2009, or so,  when there seemed no end to the global markets falling down, were down more than -ve 50% , the same TV channels and newspapers were fueling fearsinto the minds of the people.

Expecting similar returns consistently from the stock markets is one of the common mistakes. This happens when expectations from the market are unrealistic (like doubling money in 1 year. etc).

The other side is when there is fear in the markets there perception that markets are extremely risky and all investments should be moved to safe instruments like FD’s etc.

Point is :

Markets test patience and reward conviction.

1. Equity Markets cannot keep rising 100% year on year every year & cannot keep falling 50% year on year every year.

2. There are various phases to the markets, long periods of range bounded ness, sudden spurts either up or down due to sentiments, global factors etc.  All this causes violent moves in the markets in short term. In the long run or long periods of time 5yr, 10yr, 15yr the ups and downs and returns from the marketseven outtoyield mean (or average) realistic returns. Being aware of this point is important.

3.Riskin equity marketsappears very highin short period of time. HoweverRisk in Equity markets is reduced significantly when investments are spread over long periods of time.

4. Risk and Returns are inseparable. Once the objective is clear which is get better returns over a period of time, then you must be willing to invest in instruments which carry more risk, intelligently. And marry the risk with passage of time to yield good returns.

#7. Leaving Investments in Auto Mode – No Periodic Assessment, No periodic Re balancing

You do periodic health checkup with the objective of finding if there is any need to take preventive measures to keep the body in good shape. If you are gaining weight and becoming overweight, you need to start taking steps to cut down on the weight. Similarly, if you are losing weight and have become underweight, you need to start taking steps to regain health.

Similarly, periodic assessment of portfolio (once a quarter, every 6 months at least) is necessary. This has to be done with the similar objective of taking preventive measures (if at all required) to keep the portfolio in good shape. Portfolio rebalancing has to be done as per asset allocation.

However, many investors make mistake of leaving the portfolio in auto mode once the investments have been made. Investments is indeed a long term process, but If some investment goes sour, and it is not acted upon in a timely manner,  it probably becomes too late / or too costly to get the portfolio back on track , if preventive measures are not planned and executed.

Final Part to be contd…… You can read the final installment here at Part IV