Trading tips from a Taxi driver

Trading tips from a Taxi driver
10/12/2017

Being an avid traveler, I try to go to as many places I can and meet interesting people; some of these people end up inspiring me in numerous ways. Last month, I was traveling to Mumbai to visit my sister.

I boarded a taxi from Mumbai Central to go to my hotel. I had no clue that this hour-long taxi ride was going to upturn my financial life and change my way of reaching my financial goals.

Ten minutes into the ride, I noticed a photograph glued to the dashboard. It was a photo of the taxi driver, his wife, and his two daughters. Out of curiosity, I asked him what his daughters were doing in life, to which he gave me a surprising answer: "This one is Radha, and she is pursuing her Bachelor's degree from IIT Bombay, and this is Sandhya who is doing Ph.D. from Yale University in Connecticut." Out of all the possible answers, this was one that I was not expecting from a taxi driver.

I congratulated him on his daughters' hard work and achievement. Curiously, I asked him: "All this must be costing you a fortune; do you earn enough from the taxi to fund your daughters' education and cover your daily expenses?"

To my surprise, he replied: "No, not from the taxi; I mostly earn my money by trading in the share market. Driving a taxi is something I started with because I don't like to sit all day in the house doing nothing. So, I decided to do the one thing that I'm good at; apart from investing, of course." This reply was followed by a big laugh as I sat there, even more astonished than before.

Since I have always been fascinated by the share market and the infinite opportunities that it provides to build wealth, I decided to ask him how he manages his investment and the strategies that he uses to trade in the share market. Given below is a small summary of what I learned:

Share Market Trading Tips

Thorough research

On knowing that he hasn't had a loss in investing in 2 years, I asked him, how he picks the perfect stock. To this, he replied: "I research the investment inside and out before deciding to invest. I check the background of the company by looking at their previous earnings, their balance sheet, their income statement, and their potential to pay a regular dividend. If all of this seems right and I see that the company has a potential to grow in the future, I go ahead with my decision to invest in the company." I asked him where he got the time for all this.

"What are nights and early mornings for?" he replied with a smile.

Diversification

When he stated that he hadn't had a loss in over two years, I doubtfully commented: "But this seems like an impossible thing in the share market, even big-time investors incur regular losses." To this, I got an intelligent reply: "It's not that I have not suffered a loss in my investments, I just cut them by earning more profits through my other investments. You see, I am all in for diversification of my portfolio. I try to invest in different company's stocks rather than putting all of my money in just one place. It spreads my overall risk across multiple investments, and even if my one investment turns bad, profits from my other investments make my overall portfolio profitable."

"Well, that's just pure genius," I replied.

Discipline

On asking him what trait a person should have to be successful in the share market, he smiled and replied: "Discipline and patience are crucial. I have seen people selling their stocks as soon the prices go a little higher, losing out on earning so much more money as the price usually increases in the future. You have to be disciplined and patient when trading in the share market. If you sell early, you lose on making more money, and if you retain your stocks for too long even when the market is down, you incur massive losses. By regularly monitoring your investment, you will know the right time to buy or sell your stocks."

When I reached my hotel, I still had so many questions that I wanted to ask him. I realized that I didn't even know his name.

"In midst of all this, I forgot to ask your name.

"No worries, I am Dinkar Rajoria and here is my card. Feel free to call anytime you want a taxi."
"What about for investment advice?

"Call me anytime for that."

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The ‘right’ way to exit a losing trade

Exit a losing trade

Every trader has his share of bad trades in his portfolio and you do not need all your stocks to be multi-baggers to be successful in the share market. While gains from a stock have no upper limit, the loss from a stock is limited to the value invested in it. Exiting a losing stock is not only a financial loss for a trader, but also an emotional or psychological loss. It is human tendency not to accept losses readily. We have a few recommendations that will help you exit a declining trade.

Let’s take a look

Use stops to restrict your financial losses

Stops are calculated, pre-determined price levels at which the investor chooses to go short or sell his stocks to limit losses. When the stock price hits the stop loss price, a sell order is executed and the stock is automatically sold at that price. Stop loss orders work well as they define the losses beforehand and the loss amount is in the control of the investor. Have a personalized stop loss strategy and use it effectively to limit your losses while investing in stocks.

Keep a check on the stock even after exiting to find a re-entry point

Once you exit a position, keep an eye on it to identify any bullish indication of reversal, which can be a potential re-entry point. Using stops, you might sometimes exit your position because of price volatility. In no time, you may find the prices rising again. However, using proper stops is proven to be effective as it limits your losses in most cases. Analyze the charts, study the candlestick patterns, and re-enter, only, if it coincides with your research and not in hope or revenge. If there is no valid reason to re-enter the trade after the initial exit, walk away and search for new opportunities.

Do not emotionally connect with your stock picks

You should accept your wrong picks and move on rather than lingering onto the stock in the hope of a rebound. You need to monitor and notice the developments around your shares continuously, and if stocks are taking the wrong direction, you will sometimes need to book losses and accept your wrong stock picks. Don’t fall in love with your shares, sell them if the fundamentals do not appear correct and restrict your losses. Booking losses or hedging them at an early stage can help minimize losses.

Accept responsibility and analyze your mistakes and find out where your investment plan can be improved

This will help reduce the chances of the same happening again. Handling trading losses well is a leading characteristic of successful investors. Treat a failure as an opportunity to learn and improve it in your next move. Many opportunities are waiting out there in the market for you to find and grab hold of.

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5 Stock Tips This Dussehra

5 Stock Tips This Dussehra
by Nikita Bhoota 02/06/2018

Dussehra is considered to be an auspicious festival in India. On this day, Lord Rama has killed Ravana. This festival signifies the victory of good over the evil. Similarly, an investor can overcome their loss-making investments by adding the right stocks in their portfolio. Based on research, fundamentals and valuations, we recommend the following stocks for investment this Dussehra.

Infosys

Infosys is the second largest IT Company in India. The company’s service lines are more focused on discretionary spends like ADM and ERP constituting 67% of the revenues. On the vertical front, BFSI accounts for 33% of the revenue. Geographically, North America contributes ~61.9% of the revenue followed by Europe (~22.5%) in FY17. We expect 11% revenue CAGR over FY17-19E due to pickup in BFSI and retail segment supported by higher customer spends in the US. Similarly, large deal wins will keep the growth momentum. We expect 8% EBITDA CAGR over FY17-FY19E due to increasing focus on cost optimization. We expect 5% PAT CAGR of over FY17-FY19E. The appointment of Mr Nandan Nilekani as the non-executive chairman would restore a sense of security among investors, employees, and clients. We expect an upside of 15% from CMP of Rs 898 over a period of 1 year.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) BVPS (Rs) P/BV (x)
FY17 68,485 27.2 14,353 62.5 14.4 296.2 3.0
FY18E 70,746 26.6 14,326 62.4 14.4 358.6 2.5
FY19E 76,058 27.1 14,993 65.3 13.8 423.9 2.1

Source: 5paisa research

Aurobindo Pharma

Aurobindo Pharma Limited (Aurobindo) manufactures generic pharmaceuticals and active pharmaceutical ingredients in India. The company's product portfolio is spread across six major therapeutic categories of antibiotics, anti-retrovirals (ARV), CVS, CNS, gastroenterological, pain management, and anti-allergic.  It derived 79% of revenue from generic pharmaceuticals and remaining from active pharmaceutical ingredients in FY17. Geographically, US business contributes 44% to Aurobindo’s total revenue.  We expect 20% revenue CAGR over FY17-FY19E due to strong pipeline of 134 products which majorly includes niche and high value products. Clearance to unit 7 in Hyderabad is also beneficial for the company. Further, recent approval for serum and tablet formulations of gRenvela will also boost the revenues. We expect margins to improve by 110 bps as strategic backward integration of marketing with API manufacturing is expected to reduce the intensity of ongoing pricing pressure. We expect 28% PAT CAGR over FY17-FY19E. We expect an upside of 15% from CMP of Rs 698 over a period of 1 year.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) BVPS (Rs) P/BV (x)
FY17 15,089 23.1 2,301 39.3 17.5 161.0 4.3
FY18E 16,301 23.2 2,386 40.7 16.9 201.7 3.4
FY19E 18,173 25.5 2,947 50.3 13.7 252.0 2.7

Source: 5paisa research

Manappuram Finance

Manappuram Finance is an NBFC, offering gold loans, microfinance, housing loans and commercial vehicle loans. Its AUM comprised of gold loan (81.4%), microfinance (13.14%), housing finance (2.2%) and others (1%) in FY17. We expect income to grow at 28% CAGR over FY17-FY19E on account of pickup in gold segment. The company is strongly focusing on short-term gold loans owing to current volatility in gold prices. Manappuram is also focusing on housing finance and microfinance and targets to derive 50% of revenue from these segments in next three years. We expect AUM to grow at 20% CAGR over FY17-FY19E. We expect GNPA to remain flat at 0.8% in FY18E. We expect an upside of 18% from CMP of Rs 95 over a period of 1 year.

Year NII (Rs Cr) Net Profit (Rs Cr) EPS (Rs) ROE (%) P/BV
FY17 1,943 726 1.7 24.8 2.8
FY18E 2,185 836 2.0 24.9 2.5
FY19E 2,489 959 2.3 24.9 2.1

Source: 5paisa research

Titan

Titan Company is India’s leading player in branded jewellery, watches and precision eyewear. Its revenue consists of Jewellery (78%), Watches (15%), Eyewear (3%) and others (4%) in FY17. We expect 42% revenue CAGR over FY17-FY19E on account of sub-brand Rivaah in wedding jewellery segment. With this, Titan targets to reach 40% market share in FY21E vs 22% in FY17E. Additionally, the entry in high value studded jewellery will also support the revenue growth. Recently, government has fixed GST rate of 3% (expected 5%) on gold which bodes well for the company. We expect EBITDA margins to improve by 90bps over FY17-FY19E on account of cost saving initiatives by the company. Titan is a debt free company which lends financial stability. We expect 60% PAT CAGR over FY17-FY19E. We expect an upside of 15% from CMP of Rs 587 over a period of 1 year.

Year Net Sales (Rs Cr) OPM (%) Net Profit (Rs Cr) EPS (Rs) PE (x) BVPS (Rs) P/BV (x)
FY17 12,614 9.5 761 8.6 68.5 48.6 12.1
FY18E 15,075 9.9 1,019 11.5 51.1 60.0 9.8
FY19E 17,968 10.4 1,285 14.5 40.6 74.5 7.9

Source: 5paisa research

Asian Paints Ltd (ASL)

Asian Paints is the largest paint manufacturer in India with market share of 53% in decorative paints and has a strong dealer network of ~45000 dealers. We expect revenue CAGR of 14% over FY17-FY19E on account of strong demand for decorative paints due to shorter repainting cycle (repainting forms 65% of the decorative paint demand). ASL is working on 2 Greenfield projects (Mysuru-6,00,000 KL and Vishakhapatnam- 5,00,000KL) to expand its decorative paint capacity.  The first phase of both the capacities- 3,00,000 KL will be completed by FY19E. GST will reduce the tax arbitrage for the unorganized segment (30% of industry) and will provide additional benefit to the organized players in the long run. We expect EBITDA CAGR of 14% over FY17-FY19E due to shift from distemper to external emulsion (high margin) in decorative paint business. We expect PAT CAGR of 11% over FY17-FY19E. We expect an upside of 15% from CMP of Rs 1161 over a period of 1 year.

Year Net Sales (Rs Cr) OPM (%) Net Profit(Rs Cr) EPS (Rs) PE (x) BVPS (Rs) P/BV (x)
FY17 15,290 19.8 2026 21.1 55 79.3 15.1
FY18E 17,244 19.6 2173 22.7 51 93.8 12.8
FY19E 19,908 19.9 2533 26.4 44 110.7 10.8

Source: 5paisa research

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Do’s and Don’ts of Stock Market Investing for Beginners

Do's and Don'ts for beginners

With a trading account and demat account you are ready to trade. But if you are a beginner in the stock markets, then that is not all. You also need to keep a tab on some major do’s and don’ts before you venture into investing in the stock markets. Let us look at 10 such key dos and don’ts for investors.

10 important do’s and don’ts for investment beginners

Do’s are about doing the right things in the market when you are starting off on your investing journey while the don’ts are the ones to avoid. Here are ten such important dos and don’ts for investing beginners.

  1. Do your research before investing? Remember, research of a stock is not a rocket science and it is all about getting your research process right. Get comfortable reading the balance sheets and income statements of a company. Also read the Management Discussion and Analysis (MDA) of the stock you are planning to invest in.

  2. Start with your goals in mind. You must be clear about how much risk you are willing to take and how much risk you can afford to take. Your equity portfolio should be within the limits defined by your allocation. Always start with a plan.

  3. Don’t put all your eggs in one basket. That is age old wisdom and applies to investing as well. In technical parlance it is called diversification where you effectively spread your equity investments across sectors and themes so that your investment performance is not dependent on any one stock or sector.

  4. Take a long term view and cultivate that habit in the very beginning. It is futile to time the market. Not only that it is hard to consistently get the tops and bottoms of the market right but it hardly makes any difference to your eventual returns.

  5. Try to invest consistently and regularly instead of putting a large corpus in a stock of your choice. The advantage of being regular is that it instils discipline in your investment and also gives the added benefit of rupee cost averaging. That means; over time your average cost of investing comes down.

  6. Even through equity is about the long term, try to get bargains. Even if you are convinced about the long term prospects of Infosys, it makes a lot of business sense to buy at Rs.650 than at Rs.750. Quite often, a market correction creates salivating bargains. Use such corrections to add quality stocks at low prices.

  7. Divide your equity portfolio between core holdings and satellite holdings. Your core holdings are your long term investment portfolio and you don’t sell these stocks at every correction. On the other hand, the satellite portfolios are more of a trading portfolio where you look out for short to medium term opportunities in the market. Have a separate approach to both these types of stocks.

  8. Don’t ignore trading costs. Even if you are a long term investor, take at a close look at your costs. Your cost is not just about brokerage costs but there are a number of other costs too. There are statutory costs, exchange charges, demat AMC, DIS charges, demat and remat charges etc. All these need to be added to calculate your effective cost. Nowadays, it makes a lot of sense to opt for low-cost discount brokers who can give the same execution at a much lower cost.

  9. As a beginner, remember that quality always wins in the end. When we talk about quality we are talking about quality at a number of levels. Look at quality of earnings; more of the earnings must be coming from the core business. Look at profitability; the company must be earning more margins than the peer group. Take stock of asset turnover; it tells you how efficiently the business is using assets. At a qualitative level, prefer companies that have high standard of disclosure and transparency. Large caps or mid caps, this quality approach always works in your favour.

  10. Make effective use of technology and if you are a beginner then you better get used to it early. Ideally use the online trading platform; it gives you a lot more control over your trades. Also, if possible you can download the app on your smart phone which allows you to trade on the run. Get used to reading electronic contract notes and ledgers; they are a lot more convenient and environment friendly than printed stuff.

In an effort to chase stocks, investors tend to forget that investment success is a lot more about discipline than about skills or flair. It is in your hands to make your investments work in a systematic manner.

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Everything you need to know about Burger King IPO

Everything you need to know about Burger King IPO
by Mrinmai Shinde 12/01/2020
Quick service restaurant chain, Burger King India is launching its three-days long IPO from 2nd December to 4th December. The company has set the price band at ?59-?60 per share for its IPO.

Through the IPO the company aims at raising ?810 crore. Of the total amount the promoter entity QSR Asia Pte Ltd will sell up to 60 million shares, which would amount to ?360 crore while a fresh issue of shares will aggregate to ?450 crore. The company has also raised a pre-IPO funding of ?92 crore from public markets investor Amansa Investments Ltd at ?58.5 per share.

Burger King IPO details at a glance

IPO Date

Dec 2, 2020 - Dec 4, 2020

Finalisation of Basis of Allotment

Dec 9, 2020

Initiation of refunds

Dec 10, 2020

Transfer of shares to demat accounts

Dec 11, 2020

Listing Date

Dec 14, 2020

Issue Size

?810.00 Cr

Fresh Issue

?450.00 Cr

Offer for Sale

?360.00 Cr

Face Value

?10 per equity share

IPO Price

?59 to ?60 per equity share

Min Order Quantity (each lot)

250 Equity Shares

Min Amount Cut off

?15,000

Maximum Lots allowed

3250 Shares (13 lots)


Want to know our suggestion? Read here - Burger King IPO Note.

Things you need to know:

Burger King India Limited is one of the fastest growing international QSR chains in India during the first five years of operations based on the number of restaurants. Talking about the global presence, when measured by the number of restaurants, with a network of 18,675 restaurants in over 100 countries, Burger King is the second-largest fast food burger brand globally. In India, the company owns 261 restaurants which include eight Sub-Franchised Burger King Restaurants, across 17 states and union territories and 57 cities across India.

Burger King India has exclusive franchise rights in India and a strong customer value preposition. Apart from the customer loyalty and brand value, strong management and a vertically scalable supply chain are the company’s key strengths. The company will use the funds raised through the IPO to finance the roll-out of new company-owned Burger King Restaurants, repayment or prepayment of outstanding borrowings and to meet the general corporate purposes.

If you are looking for the short-term gains through the IPO, you need to bear in mind that if there is a spike in the Covid cases and there is another round of lockdown, then the business might take a hit. The termination of the Master Franchise and Development Agreement could also pose a threat to the business. Lack of identification of the locations when expanding in new regions, and deteriorating relations with third party delivery aggregators apart from perceived and real health concerns along with shifting food preferences and habits are a few things to look for. Having said that, the investment would turn out to be promising in long term.

This year has seen a lot of good IPOs, which has encouraged a lot of new investors to enter the markets. Apart from Burger King, the other companies that issued IPOs this year include SBI Card, Rossari Biotech, Mindspace Business Parks REIT, Route Mobile, Happiest Minds Technologies, Angel Broking, Chemcon Speciality Chemicals, Computer Age Management Services, Mazagon Dock Shipbuilders, UTI AMC, Likhitha Infrastructure, Equitas Small Finance Bank and Gland Pharma.

How to apply for Burger King IPO?
  • In 5paisa Trading App, go to IPO Section reflected on the home screen
  • Click on Apply IPO
  • Enter Quantity and Price to bid for
  • Enter UPI id to block funds on
  • Later in the day you will receive funds block confirmation in your UPI app, which needs to be approved

If you are not a 5pasia customer, you can apply for the IPO using any supported UPI apps. Click here to find the list of UPI apps and banks supporting the IPO application.

Watch the video below to know more about the Burger King IPO

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Union Budget 2020 – What’s It All About?

Union Budget 2020
01/02/2020

Budget 2020 was rich on expectations but the exemptions in the budget were much lower than what the market desired. The impact was visible in the performance of the stock market indices which cracked in response. While a detailed analysis is still due, the immediate reaction of the market appears to be that there was no big bang announcement in the Union Budget despite the tough macro conditions. Here are some of the major announcements in the Union Budget 2020.

Response to macro pressures

  • Nominal growth for fiscal year 2020-21 has been pegged at 10%. The real rate of GDP growth could be in the range of 5.5% to 6% depending on the nominal growth actually achieved as even 10% does look quite steep at this point in time.

  • The budget 2020 has fully utilised the 50 bps leeway on fiscal deficit offered by the N K Singh Committee. For 2019-20, the fiscal deficit has been pegged at 3.8% instead of 3.3% while for the fiscal year 2020-21 it is pegged at 3.5% instead of 3%.

  • There is some positive impact on post-harvest infrastructure. To improve post harvest infrastructure, including cold storage, the budget has announced viability funding based on public-private-partnership. Indian Railways will run dedicated trains to support the cold chain plan.

Some cheer for Corporates and MSMEs

  • Despite the lack of any cost advantage, the Budget 2020 has outlined big plans for manufacture of mobile phones and electronic equipment and semiconductor packaging. In addition, the 15% concessional tax will be extended to the power sector too.

  • Finally, MSMEs have something to be really pleased about. Invoice financing via the factoring method will be extended to MSME as will be the issue of subordinated debt to MSMEs and handholding in the early stages.

No cheer for markets and that was evident

  • LTCG on equity stocks and equity funds was not scrapped, despite the STT being introduced in 2004 in lieu of LTCG tax. This is resulting in the cascading effect of STT plus LTCG tax and that is adding to the costs of traders and investors.

  • While DDT has been scrapped on equity and on equity funds, it comes back in another form. At the same time, the dividend distribution tax on debt funds will continue as before. There will be a single point of taxing dividends as other income at the applicable peak rates of tax for individuals.

  • Efforts are being made to reduce tax burden on middle class. People earning in the range of Rs.5 lakh to Rs.15 lakhs will see reduction in taxes.

Direct tax; more complicated than effective

  • Direct tax regime has suddenly become a lot more complicated. There will be two regimes; first regime will focus on status quo with all exemptions and rebates. The new regime with lower rates applicable will be devoid of exemptions and rebates. Loss of exemptions could be a big cost as many exemptions are virtually mandatory or inevitable like life premiums, provident fund, tuition fees, home principal etc.

  • Under the new tax regime, direct taxes will be as under:

Income bracket

Below 5l

5l to 7.5l

7.5l to 10l

10l to 12.5l

12.5l to 15l

Above 15l

Tax Rate (%)

Zero

10

15

20

25

30

Above table represents the new regime. If you opt for the second option, then your IT form will be auto-filled. That simplicity appears to be the only visible advantage.