Tuesday, January 23, 2018

Market Pulse
Buying continued unabated as key benchmark indices extended intraday gains and hit fresh intraday high in early afternoon trade. At 12:23 IST, the barometer index, the S&P BSE Sensex, was up 295.06 points or 0.82% at 36,093.07. The Nifty 50 index was up 103.20 points or 0.94% at 11,069.40.

Shares opened higher as positive leads from Asian markets and overnight gains on the Wall Street boosted investors sentiment. Both, the Sensex and the Nifty hit record high level in early afternoon trade. The Sensex crossed the 36,000 mark and the Nifty crossed the 11,000 mark.

The Sensex rose 309.06 points, or 0.86% at the day's high of 36,107.07 in early afternoon trade, its record high level. The index rose 65.97 points, or 0.18% at the day's low of 35,863.98. The Nifty rose 107 points, or 0.98% at the day's high of 11,073.20 in early afternoon trade, its record high level. The index rose 28.35 points, or 0.26% at the day's low of 10,994.55.

Among secondary barometers, the BSE Mid-Cap index was up 1.24%, outperforming the Sensex. The BSE Small-Cap index was up 0.63%, underperforming the Sensex. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,556 shares rose and 1,177 shares fell. A total of 119 shares were unchanged. Breadth was quite strong in early trade.

Cement shares declined. Ambuja Cements (down 1.79%), ACC (down 1.25%) and UltraTech Cement (down 0.19%), edged lower.

Grasim Industries was down 0.82%. Grasim has exposure to cement sector through its holding in UltraTech Cement.

Telecom shares rose. Reliance Communications (up 5.57%), MTNL (up 2.11%), Idea Cellular (up 1.76%), Bharti Airtel (up 1.07%) and Tata Teleservices (Maharashtra) (up 0.14%), edged higher.

Telecom tower infrastructure provider Bharti Infratel was down 0.66%.

Rallis India fell 5.22% after consolidated net profit fell 1.6% to Rs 24.94 crore on 18.6% growth in net sales to Rs 390.16 crore in Q3 December 2017 over Q3 December 2016. The result was announced after market hours yesterday, 22 January 2018.

V Shankar, Managing Director and CEO, Rallis India said that the company's broad based portfolio of solutions and robust farmer relationship have been instrumental in driving its revenue growth during the quarter. The company's performance in the international business continues to be better than last year due to improving situation in key markets such as Brazil and strong demand for herbicides.

Overseas, Asian shares were trading higher following the stronger lead from Wall Street after US lawmakers reached a deal to end a government shutdown.

Japan's central bank kept monetary settings unchanged on Tuesday and offered a more upbeat view on inflation expectations than three months ago. The Bank of Japan (BOJ) maintained a pledge to guide short-term interest rates at minus 0.1% and 10-year bond yields around zero percent at its two-day rate review that ended on Tuesday. It also kept intact a loose pledge to buy government bonds so its holdings increase roughly at an annual pace of 80 trillion yen ($722 billion). The nine-member board also kept its price forecasts that project inflation to hit 2% around the fiscal year ending in March 2020.

US stocks ended higher after the Senate reached a short-term compromise to end a government shutdown that began last week. The stopgap bill approved by the Senate on Monday will keep the US government open through 8 February 2018. The House of Representatives subsequently voted and passed the bill to reopen the government, sending it to President Donald Trump for a signature. The Dow Jones Industrial Average gained 0.6%. The S&P 500 rose 0.8%. The Nasdaq Composite Index rose 1%.

Today's Calls  (given to my various clients): 
#Positional Buy ABB Ltd in the range of Rs.1570-1590, for  a target of Rs.1730-1770, with a SL below Rs.1515. Book Partial PROFIT at around Rs.1641.

#Intraday Sell Tata Motor DVR around Rs.238.5, SL 241, TGT; Rs. 235-232.

#Sell DHFL at around Rs.623, T: Rs.604, SL: Rs.627. 

#Sell Aluminium at around Rs.142.50, SL above Rs.144, T: Rs.140 on  T+3 basis. Book Partial PROFIT and keep a trailing SL to cost price.

#Short Term buy Chambal Fertilizer at around Rs.157-158, SL below Rs.151; T:Rs.168- 172.

#Buy HDIL at around Rs.60.70, for short term targets of Rs.65-72. The budget is likely to bring some goodies for the Real Estate space. In the last budget, the Affordable Segment was a huge beneficiary, with it being granted Infrastructure status, along with other incentives, such as lower interest rate for loans up to Rs.12 lakh, area being increased and an increased time for construction. Land acquisition is one of the single highest cost contributors to a real estate project. Moreover, since margins in affordable housing are thin, it becomes increasingly difficult for affordable housing developers to buy land at prevailing cost of capital. The Government should make land available at a cheaper cost of capital to promote the affordable housing sector -- one of the expectations of the upcoming budget.
Now coming to the GST alone, despite input credit being passed on to the customer, with GST @ 12%, there is a marginal increase in the overall cost impact to the consumer. This needs to be revised downwards, to benefit the consumer, leading to a further push in sales volumes. These are some of the measures which is needed to kick start the growth of the now moribund real estate sector.

#The call of NDTV Ltd was given to various clients at around Rs.45-46, banking on the better prospects of the company in the next couple of years. However, I am looking for a short term target of Rs.51-57, for the stock.

#One thing, I would like to mention here is that: wealth will be created in the long term only, provided you follow some basic protocols of equity market, among them is the disciplined use of Stop Losses. I mean if you buy a share based on certain theory and keep on holding with daily or weekly reviews on the same, you will gain more than these daily tit-bits,which most of the stock market participants are interested. Therefore, I always suggest less of daily or short term trading but more of investment based play in the market. 
However, what I find is that most of my clients (and friends) barring say 20% from the group, are more interested in this short term game of buying and selling, which are very risky and in the process they lose wealth at the end of day instead of gaining. 
Yes, short term trading is also necessary and an earning of Rs.1200-1500 on daily basis on a seed capital of Rs.2 lakhs is not bad, however this should not eclipse your main objective of making good profit from your investments through delivery based medium to long term play only. Therefore:
1. Buy a stock based on a story - turnaround stories gives best returns.
2. Check the sector outlook on a regular basis.
3. Keep eye on the changing fundamentals of the sector and of the company (if any).
4. Review your investment decision on this stock, at the end of each day or week. 
5. Exit at the Stop Loss, if the SECTOR OUTLOOK turn SOUR and the stock does not show much improvement in price actions. 
Eg: 
a) The scrip of MCX Ltd at around Rs.844, is likely to face stiff competition from its peers and has more chance of going down or stay range bound, than some giving some meaningful positive returns on the upside. Hence, it is no use of buying the share of Multi Commodity Exchange of India Ltd  (Rs.844.20) for the long term, unless and until there is marked improved in the future SECTOR outlook.
b) The stock of 3i Infotech Ltd (Rs.7.35) is currently in a sector, whose outlook has turned positive according to some brokerage houses. I mean the sector outlook has changed towards better, which means the shares in this sector would show marked improvement in fundamentals going forward; if we follow the standard protocols of equity investing. 
Moreover, this company which is in the CDR scheme, is also showing positive developments in the fundamentals. Hence, what should you do? You should buy the scrip of 3i Infotech Ltd on everyday declines with a SL at Rs.6.70 and keep holding. I am sure you would thank me after a couple of years.
c) The stock of Federal Bank Ltd (Rs.103), should be accumulated. Why? Because after implementation of the new Insolvency and Bankruptcy Code, 2016 (IBC), the outlook of banking sector has turned positive. 
You can see this from the share price of Punjab National Bank Ltd, which is ruling at Rs.186, having made an intraday high of Rs.187.8. Its share price came up from around Rs.162 to the current market price within a few days --- you can check this from the historical prices. Therefore, any concern with asset quality of banks, is likely to come down in future, due to strict implementation of the IBC by the authorities. Hence, you need to accumulate the scrip  of most banks and hold. 
Moreover, if the stock of ICICI Bank Ltd can jump from ~Rs.305 to Rs.364, within a couple of week, the same can happen in this reasonably well managed private sector bank, known as Federal Bank Ltd, which additionally has come out with good set of Q3FY18 numbers. Similar is the case for Central Bank Ltd (Rs.74.5) and Dena Bank Ltd (Rs.26.40).
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