Friday, February 13, 2015

How to trade earning in Indian stock market

Trading in earning  days is one of the easiest ways to make amazing profit in short span of time. Sometimes you can earn 2 % and above within seconds. I would like to share some of the acquired insights when I traded with some of the earnings.

A few days before earning day, the stock may either correct or does not show any movement in any of the direction. On earns day comes the revenue as well as the profit estimates broadcasted by CNBC TV or ET NOW. The stock may open high or low depending upon the estimates. If the estimates are higher than what the street expects, then the stock may go up slightly. When earning is released and shown on TV, you will see a huge price change with a sudden spurt in volume.

You need to pay attention to little things before entering the trade.

First check whether the results beat or miss the estimates and by how far it did.

Now watch the stock movement you need to watch for 2 to 3 bars to get a clear understanding of stock movement and trade with the trend. You can either go with this trade as a positional buy since the stocks which beats estimates usually gets brokerage upgrades in the next day and stock gains further. If volume is too much then you can go for delivery and keep the stock for 3 to 4 days and get the maximum profit possible on the stock.

 If price oscillates and does not give any clear direction stay away from trading.
It is not advised to take the trade before the earning is published because it is quite risky as well as boring to hold the stock till results.

After beating estimates of the street SBI gained 7 % today, Since the stock was near monthly lows the buying was so intense. You can hold it for targets of 320 within a few days.

Monday, February 9, 2015

Understanding the previous bull run of Dec 2014 to Jan 31 2015

Understanding the previous bull run is very important because we need to know how it turned out into a huge correction. The market is correcting much more than expected. 8600 levels was the estimated correction. However, we have overshot it. The reason for the bull run was change of economic scenarios such as lower crude price with low commodity prices, political stability, the same Indian growth story as well as the beginning of rate cut cycle. When foreign money came into Indian markets most of the DII's were net sellers of stocks. DII's sold banks mostly.

MonthFII (Rs. Crore)DII (Rs. Crore)
Net Purchase
Net Purchase
Till 9th February data as follows.

TOTAL                            28,243.77             30,006.07      -1,762.30       10,675.18      10,198.26                476.92 

DII's where the clever guys who used this bull run to cash out and they are buying the stocks again that too at lower prices. DII's sold banking shares in that bull run because they felt it was overvalued. Now these stocks have corrected more than 12% in average. They are just following a simple theory, sell when prices are high and buy when the price is low. Only few disciplined traders and investors can practice this. During a bull market, we always expect to gain more and more, but the realty is that the market will correct some points. This is what we call Elliot wave theory. For every upmove there is a counter downside movement. Always expect this and buy in that dips.

Nifty at 8550 levels does not show any kind of consolidation mode. It seems like room left for further slide. We hope that it can start retreating from 8300 levels. Earnings were not as impressive as expected. Only budget is the hope left for the market.

Buy in to Pharma, IT as well as few FMCG companies as a defensive play since we do not know where we are headed as of now. Few stocks are worth buying at current prices are as follows.

  1. Britannia Industries is a buy at CMP 1885.0 for a target of 2150.
  2. Bharath Forge is a buy at CMP 1068.0 for a target of 1340.
  3. Wockhardt is a buy at CMP 1315.0 for a target of 1700.
  4. Yes Bank is a buy at CMP 800.0  for a target of 900

Many of index weights are corrected to now and you can try entering into Axis Bank, Tata motors as well as Cairn India.

Thursday, January 29, 2015

ECB to pump 60 billion.

US Federal Reserve and the Bank of England announced plans for quantitative easing in 2009. This cleared the way for economic recovery in the US and UK.
QE programs of the U.S. Federal Reserve likely contributed to:
  • Lower interest rates for corporate bonds and mortgage rates
  • Higher stock market valuation, in terms of a higher price-earnings ratio for the S&P 500 index
  • Increased inflation rate and investor's expectations for future inflation;
  • Higher rate of job creation
  • Higher rate of GDP growth.

Similar effects can be expected in the ECB Stimulus. Investors cheered the ECB’s commitment to flood the eurozone with more than €1 trillion ($1.16 trillion) in newly created money, sparking a rally in stock and bond markets and sending the euro plunging.

Capital flight from European countries will be creating bubbles in emerging markets. Investing in Europe is not the best option when considering the better growth opportunities in the emerging markets. India can expect a portion of their ECB stimulus invested in our capital markets.

Tuesday, January 27, 2015

Nifty target for 2015

Nifty continues its bull run without any doubt about its target. After breaking 8500 levels nifty has touched a fresh high of 8900. 400 points gain within a few trading sessions. Nifty can easily touch 9000 in this bull wave. 9300 can be possible if we receive fresh capital inflows to India.

 Global investment bank Citigroup in its latest report raised the December-2015 target to 9,850, at 16x Dec16. UBS raises Nifty target to 9,600 for 2015.We may overshoot the above mentioned targets and shoot up to 10000 mark considering the favorable economic situation.

However, it is not a good time to enter into market as most of the stocks are at 52 highs and above. We need to wait for some correction. Today nifty shown a sign of not ready to correct at current levels. We need to wait for few trading sessions understand the future movements and direction of the market. Be ready to book profits in this week itself.

Thursday, January 15, 2015

RBI cuts repo rate ahead of Feb 3 policy review resulting in 216 points gains in Nifty

All stocks were in green when the market opened in the morning. The rate cut has been just a beginning. We can expect further rate cut and similar rallies in the stock market. Stick to Financials, auto and real estate.

Trade deficit during December fell sharply to USD 9 billion from USD 16.8 billion in November 2014. This is an icing on the cake. FIIs bought shares worth 1,738.24 crores. We can expect further momentum in the market. This will be the pre budget rally.

Yes bank can test new highs as the stock target was revised by Bank of America Merrill-Lynch raises Yes Bank Target Price to Rs. 1,050​. Currently trading around 813.

Wednesday, January 14, 2015

Stocks to focus on 15/01/15

Metal stocks are in downtrend. There exists an opportunity to short sell metal stocks.

Hindustan Zinc (CMP-153) is a sell for a target of 143. S.L is 160.
150 is major support level.However a huge price volume action can cause a break from the support level.

Sesa Sterlite (CMP-186) is a sell for target of 180. S.L is Major support level is already broken. Further slide is expected in this counter.

Saturday, January 10, 2015

ECB plans for bond purchase to boost the economy

European Central Bank is planning for a 500 billion euros ($591 billion) worth bond purchases. They have not decided on the specific class of asset , only AAA-rated debt or bonds rated at least BBB minus, the euro-area central bank official said. . A 500 billion-euro purchase program would take the ECB halfway toward its goal of boosting its balance sheet to avoid the deflationary threat. ECB is also buying asset-backed securities and covered bonds.

Euro-area consumer prices fell last month for the first time in more than five years. The euro traded 0.2 percent higher at $1.1811 at 4:16 p.m. Frankfurt time. The yield on Spanish 10-year bonds climbed 5 basis points to 1.72 %. Its Greek equivalent dropped to 10.1%

 Euro-area consumer prices fell on an annual basis last month for the first time in more than five years and ECB fears of a deflationary issues.  ECB intends to expand its balance sheet toward 3 trillion euros. Current balance sheet is about 2.2 trillion euros. Banks must repay more than 200 billion euros in loans early this year.

The far-left Syriza party continues to hold lead in polls ahead of Greece’s election scheduled on January 25th. This lead seems unlikely to be overturned in just two-and-a-half weeks as per the expert opinions. The firebrand Syriza leader, has been toning down his anti-European rhetoric. He now says no “unilateral” decisions will be taken on Greece’s obligations to its creditors, a signal that a Syriza government would not surprise markets with an immediate default. Mr Tsipras’s message to voters is simple: a promise to end four bleak years of austerity with a splurge of social spending.

QE will be a good news for the Europian Union as well as for the world markets. However as predicted in the previous posts Euro will be depreciating further.