5 Muhurat trading bets for this Diwali

5 Muhurat trading bets for this Diwali
by Gautam Upadhyaya 11/06/2018

1) Power Finance Corporation Ltd - Buy

Stock

Power Finance Corporation Ltd

Recommendation

The stock has witnessed a double bottom breakout on the weekly chart and has also seen a flag pattern breakout on the daily chart backed by an uptick in volumes. Derivative data indicating fresh long positions in the stock.

Buy/Sell

Range

Target

Stop Loss

Buy (Cash)

Rs97-98

Rs102

Rs95.2

NSE Code

Market Cap (in Rs cr)

52-week high/low

200-Day EMA

PFC

25753

Rs143/67

Rs90



 

2) Oberoi Realty Ltd – Buy

Stock

Oberoi Realty Ltd

Recommendation

The stock is on the verge of a flag pattern breakout on the daily chart. It has also witnessed a bullish crossover on the weekly MACD-Histogram. We expect the positive momentum to continue and recommend a buy with target of Rs455.

Buy/Sell

Range

Target

Stop Loss

Buy (Cash)

Rs436-440

Rs455

Rs427

NSE Code

Market Cap (in Rs cr)

52-week high/low

200-Day EMA

OBEROIRLTY

15996

Rs609/351

Rs456




3) DCB Bank Ltd
Buy

Stock

DCB Bank Ltd

Recommendation

The stock has witnessed a breakout from a symmetrical triangle on the daily chart backed by an uptick in volumes and has also witnessed a bullish crossover on the weekly MACD-Histogram.

Buy/Sell

Range

Target

Stop Loss

Buy (Cash)

Rs164.5-166.5

Rs172

Rs161.4

NSE Code

Market Cap (in Rs cr)

52-week high/low

200-Day EMA

DCBBANK

5119

Rs206/139

Rs169



 

4) Larsen & Toubro Ltd Buy

Stock

Larsen & Toubro Ltd

Recommendation

The stock has formed a bullish engulfing candlestick pattern on the daily charts and is on the verge of a flag pattern breakout on the 15-minute chart. Derivative data indicates fresh long positions in the stock.

Buy/Sell

Range

Target

Stop Loss

Buy (Cash)

Rs1352-1365

Rs1411

Rs1324

NSE Code

Market Cap (in Rs cr)

52-week high/low

200-Day EMA

LT

190428

Rs1469/1176

Rs1285



 

5) Tata Global Beverages Ltd – Sell

Stock

Tata Global Beverages Ltd

Recommendation

The stock has witnessed a breakdown below its support levels and has formed a large bearish candlestick on the daily chart. Derivative data indicates fresh short formation.

Buy/Sell

Range

Target

Stop Loss

Sell (Nov Futures)

Rs214-216

Rs206

Rs221

NSE Code

Market Cap (in Rs cr)

52-week high/low

200-Day EMA

TATAGLOBAL

13528

Rs328/205

Rs241


Research Disclaimer

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5 Stocks for This Year's Muhurat Trading

5 Stocks for This Year's Muhurat Trading
11/06/2018

Many investors are confused if they should play the market on the long side or on the short side during this Diwali’s Muhurat trading. We believe that playing on the long side is a better choice due to two reasons.

Firstly, Diwali is a festival of lights and optimism and the last thing you would want to do on the day is to initiate a short trade. Secondly, on 10 out of the last 12 occasions, the markets have ended in the positive territory during Muhurat trading hours on Diwali. Hence, it obviously makes more sense to play the market long, both sentimentally and empirically.

That brings us to the next question. Should we focus on large-cap stocks? Should we try to pick up beaten down mid-cap and small-cap stocks? Or should we take a multi-cap approach to trade this Diwali?

To be honest, there is a danger of getting straitjacketed to any single approach. Our logic is that you should just stick to stocks that give a semblance of value. In the next one year, the gap between the men and the boys in each sector will only get wider from here on. So play that game, more than anything else!

Here are five stocks that we have selected for this year’s Muhurat trading.

Greaves Cotton (CMP: Rs120)

Greaves has been a major player in the capital goods space in India and has a long and cherished track record of growth and delivering performance. With the Indian automobiles shifting to the BS-VI standards earlier than required, it opens up a big basket of opportunity for Greaves Cotton.

Going forward, growth in the automotive segment is expected to be driven by replacement demand emanating from the new BS-VI norms and the launch of BS-VI compliant ‘leap engine’.

Greaves Cotton has been growing its share both organically and inorganically. At a trailing P/E ratio of 14.44x, the stock is trading well below the peer group valuation and that should work in the stock’s favor.

HUDCO (CMP – Rs44.80)

After a strong debut post its IPO, the company came under pressure in-line with most of its peer NBF and housing finance companies. HUDCO has a natural advantage of being a predominant player in the low-cost housing segment, which happens to be a thrust area of the government. The government also sees this as a trillion-dollar-opportunity.

HUDCO is backed by the government and enjoys the highest credit rating, which helps it access low-cost funds. The company’s profits are expected to grow at 15%  CAGR (FY18-20E). Apart from its rich pedigree, HUDCO is also available at a P/E valuation of just 9.75x, nearly 1/4th the valuation of its peer group.

Muthoot Finance (CMP – Rs443.85)

Muthoot Finance has, for long, dominated the gold loan business in India. The stock was hit after the Kerala floods this year but its gold lending business continues to be robust. Assets under management (AUM) at Muthoot are expected to grow at 15% CAGR in the next three years on the back of strong gold prices.

Since the loan to value (LTV) is linked to the price of gold, rising gold prices would translate into more loans for each gram of gold and thus, an enhanced value of the collateral. Currently, Muthoot has gold holdings close to 172 ton and that is likely to grow in volume and value terms in the near future. At 9.38x, the stock is grossly underpriced compared to its peers in the industry.

Reliance Industries (CMP – Rs1,108)

While gross refining margins (GRMs) are down over the last few quarters, the petchem margins have helped RIL to hold on. Also, the Jio business continues to boom and is on track to have the largest number of subscribers in India over the next two years.

Although Jio’s ARPUs have fallen, it is still far better than the competition, giving RIL a unique edge when it comes to playing for market share. At 19.4x earnings, the P/E does leave a margin of safety considering that the company is on track to maintain growth.

Puravankara Ltd. (CMP – Rs72.50)

The stock has given up about 2/3rd of its value in the last few months after the NBFC crisis raised some uncomfortable questions for realty companies. However, at this price point, the margin of safety could be quite high for Puravankara. After all, it has an established presence in the residential segment comprising luxury and premium affordable housing projects.

The company also has a total saleable area of 73.41mn square feet, which includes ongoing projects of 18.17mn square feet, and land assets of 55.24mn square feet. Even in valuation terms, the stock looks reasonably priced.

Go bet on these stocks during this Diwali’s Muhurat trading and you could end up wiser and richer.

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Yeh Diwali, 10 Rupee Wali

Yeh Diwali, 10 Rupee Wali
11/06/2018

Throughout history, Diwali has been considered as an auspicious event to start-off on any new journey, spiritual, financial, or otherwise. Be it a new asset purchase, a new business venture, the diversification of an existing business, or even making new investments, Diwali is considered to be the right time to take any such steps.

Regardless, many investors, quite often, tend to hold back their investment plans for various reasons. These plans are held back either because you don’t have the funds or you want to wait for a bigger inflow. This is not a healthy way to achieve financial freedom. Let this Diwali be different. Take a pledge that no matter how small your contribution at first, you will start your investment journey this Diwali without fail.

Here are a few basic things to remember before you start on this life-changing journey.

Starting small is OK because starting is more important

You must have heard of the famous poem, “Little drops of water, little grains of sand, make the mighty ocean, and this pleasant land”. That is exactly the principle that refutes critics of starting small. Remember, even if you start investing in a small way, you will still do better than not starting at all. In mutual fund parlance, this form of investment is called a systematic investment plan or SIP. You invest a small amount (as little as Rs500) at designated intervals (biweekly, quarterly, monthly), which, given enough time, grows into a formidable corpus. Consider the table below:

Particulars

SIP of Rs1,000 (Monthly)

SIP of Rs2,000 (Monthly)

SIP of Rs3,000
(Monthly)

SIP of Rs5,000
(Monthly)

SIP tenure

25 years

25 years

25 years

25 years

CAGR Returns

15%

15%

15%

15%

Total investment

Rs3.00 lakh

Rs6.00 lakh

Rs9 lakh

Rs15 lakh

Investment Corpus

Rs32.84 lakh

Rs65.68 lakh

Rs98.52 lakh

Rs164 lakh

Wealth Ratio

10.9x

10.9x

10.9x

10.9x

If you thought that Rs1,000 per month is a small amount to invest, then you can see right here that it could grow to Rs32.84 lakh in a span of 25 years, nearly 11 times the investment. The wealth ratio does not change irrespective of the amount.

So, the most important thing to do is to start investing and quickly so. Effectively, if you just save Rs35/day, you can reach a target of Rs33 lakh in 25 years. That is surely not asking for too much?

Start the SIP early, the earlier the better

Time makes a huge difference to the eventual corpus that you will accumulate from a mutual fund. In the long run, it is always time that matters more than timing. The earlier you start, the more your investment earns and the more returns it will generate. This is called the power of compounding and it has a multiplier effect in the long run and is the reason why SIP investing appears to work wonders over longer durations.

Let us look at another tabular illustration below:

Particulars

SIP (25 years)

SIP (20 years)

SIP (15 years)

SIP (10 years)

Monthly SIP

Rs1,000

Rs2,000

Rs3,000

Rs5,000

CAGR Returns

15%

15%

15%

15%

Total Investment

Rs3.00 lakh

Rs4.80 lakh

Rs5.40 lakh

Rs6.00 lakh

Investment Corpus

Rs32.84 lakh

Rs30.32 lakh

Rs20.31 lakh

Rs13.93 lakh

Wealth Ratio

10.95x

6.32x

3.76x

2.32x

That sounds a little anomalous, right? You increase your monthly SIP and your total corpus but you accumulate a lower corpus and a much lower wealth ratio. That is because of the time value in a mutual fund SIP.

As you shorten your tenure, your wealth ratio is also sharply lowered. That is because you are not allowing your money to work hard although your investment is higher. So, even if it is as low as Rs35 per day, the idea is to start now.

So, should you start with an SIP in equity funds or direct equity?

This is a standard question you may have in mind. Should you start with an SIP in mutual funds or should you rather start an SIP in direct equities?

When you plan to accumulate a particular stock, doing so in a phased manner is surely a good idea. However, there are two things you need to remember. First, the choice of stock is yours and the risk of your holding is proportionate to the performance of that stock. Hence, you don’t get the benefit of diversification as in the case of an equity fund SIP. Second, a stock SIP requires regular monitoring as you do not have the luxury of a fund manager taking care of the diversification and risk management aspects. Hence, if you are looking to create a long-term corpus, then a mutual fund SIP is a better choice for you.

The bottom line is that you should not spend too much time thinking about starting your regular investments. It does not matter even if your starting corpus is small to begin with. Just start somewhere and the power of compounding, over time, will ensure that it will grow into a meaningful and substantial sum.

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This Diwali, Become a Smart Trader

This Diwali, Become a Smart Trader
11/06/2018

Have you ever wondered why we pray to the 8 forms of Goddess Lakshmi (Ashtha Lakshmi) during Diwali? It has an interesting significance. Hinduism defines wealth in a much broader and deeper sense.

Wealth is not just about money but is also about the resources that create future income, leveraging assets, leveraging knowledge, applying skills, social and psychological capital, etc. The logic is that money cannot be expected and it cannot be the ultimate goal.

Lakshmi comes from the word Lakshya or goal and the Ashtha Lakshmi talks about the 8 different wealth forms you need to have to achieve success in life.

Like any activity, success in trading also comes from a conscious effort and by sheer chance. There is a process and you need to work towards it. Let us look at the Ashtha Vidya or the 8 skills that you need to imbibe to be a skilled and smart trader.

1. Start With a Clear Trading Plan

If you hope to be a smart trader you need to have a plan. What how to go about creating a trading plan?

Shortlist the stocks that you will/want to trade in while avoiding stocks that are too volatile or too languid. Be clear about the losses you are willing to take in a trade, in a day, and overall, i.e. identify your appetite for risk. If you learn to protect your capital, then trading profits will follow as a logical corollary. Smart trading is a lot more about discipline and fine-tuning the process rather than shooting from the hip.

2. Keep Your Cool and Think Rationally

There is a common saying in trading that when you panic, you subsidize the other traders who are not panicking. Losing your cool is bad because you are forced to take decisions in a fit of emotion rather than through proper deliberation. More often than not, you end up taking the wrong decisions. When you panic while trading, you either overtrade or end up losing out on opportunities.

3. Focus on the Big Moves and Don’t Fall Into the Overtrading Trap

It’s not just about making big moves but about making a series of small, but more effective, moves. As a trader, you are not obliged to trade on a daily basis, unless you are trying to make a living out of intraday trading. That is a bad idea anyway. We all saw a sharp correction in NBFCs and auto companies as well as realty companies in the last one month alone. These are the kind of big moves you should wait for while constantly making your small, calculated steps periodically. However, your returns should be really worth the risk. If you try chasing too many shorter moves, you will end up overtrading.

4. Never Trade Without a Stop Loss and a Profit Target

Stop loss is your insurance in volatile markets and profit targets help you to churn money and improve your return on investment (RoI). As a trader, you are not in the market for a very long-term. You are just looking for opportunities; so, focus on trading with a stop loss and a clear profit target. Once the stop loss is hit, don’t think about averaging, and, on the flipside, don’t look back at a stock after profits have been booked.

5. Continuously Interpret Charts, News Flows, and Announcements

Sounds strange but, as a trader, you need to be able to do your own analysis. You need to be able to read charts and evaluate the implications of news on your own. Smart traders never depend on other sources for interpretation. Take the data from other sources and come to your own conclusion. That skill can be fine-tuned over time but the more closely you track your trades and outcomes, the better your chances of making a success out of it.

6. Listen to the Market, But Don’t Try to Outsmart it

When it comes to trading, market is the king. What would you do if a stock that you thought would go up instead starts going down? Remember, if you try to outsmart the market, you will end up on the losing side. When the market behaves contrary to your view, it is actually trying to send you a message. As a smart trader, you must read the message and modify your trading strategy accordingly. It can be a hedge or a reversal, but listen to the market.

7. Trading is Economics and Treat it as Such

If you are planning to trade in the markets as an afternoon pastime then perish the thought. Trading is serious business so treat it with the same seriousness as you would treat your own business. That kind of commitment is central to being a smart and successful trader in the stock markets.

8. Finally, the Buck Stops With you and you Alone

‘I was doing well but got done in by market volatility’ is not a valid excuse. As a trader, the buck stops with you and you alone. Learn to take responsibility. Markets may be out of your control but you are in control of your own actions. A smart trader learns from his mistakes rather than blaming the markets for the outcomes.

This Diwali, try and apply this Ashtha Vidya to your trading activity and you should be able to catch some shining stocks.

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Earn Pataka Profits With These 5 Trading Tips This Diwali

Earn Pataka Profits With These 5 Trading Tips This Diwali

As we celebrate Diwali with the sound of crackers (slightly muffled though), it is time to reflect on how to also create a cracker of a portfolio. OK, forget about a portfolio and let us make out start with buying equities.

Here is a wonderful analogy on Diwali. Back in 1980, the average amount a family would spend on Diwali crackers was about Rs100, a princely sum in those days. If, instead of spending that Rs100 on the crackers, you had bought 1 share of Wipro, do you know what it would be worth today? You would have been holding about 1.92 lakhs of shares of Wipro (with bonuses and splits) today, worth about Rs6.11cr (yes, you heard that right). On top of that, you would have been earning Rs2 lakh in dividends each year.

Wipro is not the only pataka (colloquial for a cracker of a stock). Stocks like Havells, Hero Moto, Infosys, Eicher, TVS Motors, among many more, have been examples of pataka stocks at some point in the last 25 years.

This Diwali, we have come up with five such trading themes that will help you find these pataka stocks. Here we go!

Does the Company Show Consistent Profits and Growth?

Typically, pataka stocks are companies that sustain high-growth levels for a long time. However, growing profitably is just as important as growth. Take companies like Infosys and Eicher for example. These companies, in the past, sustained top-line and bottom-line growth for more than 20-25 quarters in succession. Today, they are positioned at a price point which makes them market leaders in their respective segments.

This is a basic requirement of a pataka stock and you cannot have one without ‘profitable’ ‘growth’. In most of these cases, consistent profit was recorded after a tipping point, but once it came, the companies worked on maintaining it.

Does the Company Have a Unique Positioning in its Industry?

What do we understand by unique positioning? Well, it encapsulates various factors like a unique brand (Hindustan Unilever), ability to cater to unique markets (Eicher, Britannia), or even entry barriers (M&M). It is this kind of a unique positioning that enables a company to sustain above-normal profits for a long time. Normally, pure price positioning is not very sustainable as we have seen in the case of some FMCG, airline, and telecom stocks. Price wars can, at best, be a temporary advantage.

Is the Company Working on a Disruptive Idea?

This need not always be a disruptive product but can also be a disruptive way of looking at a problem or addressing a demand. Infosys and TCS did not offer a disruptive product but the way they packaged their existing products was unique and hard to replicate.

Not every product offering has to be an Apple in order to be called unique. The moral of the story is that if you want to think of pataka profits in the next few years, then you need to actually look out for companies with such disruptive ideas.

Here are some pointers. Is a particular company looking to use artificial intelligence and machine learning in a big way? Is it focusing on providing robotic solutions to other companies with a first-mover advantage? Is it looking to help consumer companies to rethink their logistics networks in such a way so as to become more value-accretive? These are all examples of disruptive idea that you can look at. Your next multi-bagger [sic] pataka would most likely come from these disruptive ideas.

Does the Company Have Low Capital Utilization?

Most conditions of looking and finding a multi-bagger stock stop at this point; how much capital does the company consume? If you look at the history of multi-bagger stocks, they are typically companies that are low on debt and also low on equity.

Debt adds financial risk to your stock and equity dilutes the earnings. Some of the big pataka stocks in India over the last 20 years have been companies that were extremely frugal in employing capital. A company with a small base of capital employed is a lot more likely to become a pataka stock even if the other advantages are not already there.

‘Not Too Rich Please’

Finally, the stock you select cannot be too richly valued. If the P/E or the P/BV is too high, then there is not much left on the table for you.

This Diwali, when you look for your next big pataka stock, don’t get obsessed by those WhatsApp forwards floating around. They really mean nothing. Apply the above 5-point test and you could be much closer to your pataka stock than ever before.

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Advanced Investments To Get Rich Quick

Advanced Investments To Get Rich Quick
13/06/2018

All of us want to become financially secure. We look for ways that aren’t very risky but promise high returns. These four options could help you increase your potential of earning profits.

Currency derivatives

These are F&O contracts where the buyers and sellers exchange one currency for another at a particular price in the future. It is an excellent hedging opportunity for importers and exporters alike. Even a slight change in the currency rates can lead to enormous profits. Another advantage of currency derivatives is that it gives lucrative arbitrage opportunities. Arbitrage opportunities allow the trader to simultaneously buy and sell the currency inter-market to gain profits from small price differences.

Mutual funds

Investing in mutual funds is one of the best modes of securing your finances and range from debt-based funds to equity-based funds as well as mixed products. They have easy as well as complex structures, suited for all investors. They also provide you an opportunity to invest into the funds of your own choice at different price points. Mutual fund managers make tailor-made portfolios for clients, which helps the latter make more profits in less time, eventually, making them rich.

Intraday trading

Intraday trading is another way to increase one’s wealth in a short period of time. As the name suggests, it is the process of buying and selling stocks on the same day, or within a day’s time (i.e. without getting delivery of shares) during the trading hours (9:30 AM to 3:30 PM in India). Intraday trading provides enormous profits if the right stocks are chosen. It is successful only if proper research is done. Also, it is essential to follow the market trend to decide which stocks to buy. One must trade in liquid markets rather than volatile markets. Let’s assume that after proper research, you buy 100 shares at the start of the day at Rs1,000/share. At the end of the day, its price increases to Rs1,100. It will benefit the trader with Rs10,000. A combination of the above strategy will incur profits and make the trader richer.

Futures and Options

Futures trading is the contract to buy or sell an underlying asset on a specific date in the future at a predetermined price. The buyer and seller of the contracts are obligated to relinquish them at the decided future date. In the future, there will, most likely, be a change in the price of the asset. If the market price of the asset increases, the buyer earns a profit. On the other hand, if it decreases, the seller benefits.

Contrary to this, options trading does not force the buyer or seller to sell the asset at the predetermined date. However, it gives them a right to trade. Options trading requires the buyer to pay a premium. If the contract gets canceled, the buyer will only lose the premium. Whereas, a thriving trade will either make the buyer or the seller rich.