Friday 9 March 2018

Top 20 FII heavy stocks which rose up to 200% in 2017 saw up to 60% cut in 2018

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Foreign institutional investors (FIIs) net investments in the month of February stood at Rs negative 12,000 crore largely on account of weak global cues and US bond yields rose to record highs which prompted global fund managers to shift some funds to bonds from equities.

   

Indian market which was hitting record highs just in the first month of the year 2018 came under selling pressure soon after the Budget was announced and weak global cues too played a spoilsport.
Foreign institutional investors (FIIs) which remained net buyers of Indian equities to the tune of $8 billion in the year 2017 but have now turned net sellers in the month of February.
They poured in over Rs14000 crore in the month of January 2018 but turned net sellers in February as they pulled out over Rs12000 crore, SEBI data showed.
Plenty of stocks in which FIIs hold double-digit stake corrected up to 60 percent in the first two months of the year 2018.
It is not clear if FIIs were selling their stake but anecdotal evidence suggest that as many 46 stocks which more than doubled investors’ wealth in 2017 saw the correction of up to 60 percent in the year 2018.
Stocks like Vakrangee which rose 208 percent in the year 2017 saw a deep cut of 57 percent so far in the year 2018, followed by Jaiprakash Associates which rallied 222 percent, plunged 43 percent in a matter of just 2 months, and Forbes & Company rose 151 percent, saw a cut of 33 percent.
Other stocks which saw a double-digit cut include names like Unitech, followed by PC Jeweller, Future Consumer, Motilal Oswal, Jindal Stainless, Time Technoplast, Elpro International, Aegis Logistics, Adani Transmission, TVS Motor Company, DLF, Tata Global Beverages etc. among others, according to data from AceEquity.
  
Foreign institutional investors (FIIs) net investments in the month of February stood at Rs negative 12,000 crore largely on account of weak global cues and US bond yields rose to record highs which prompted global fund managers to shift some funds to bonds from equities.
The selling is likely to continue in the future as well, suggest experts. But, on a yearly basis, FIIs investment towards Indian equity markets should turn positive.
I think the selling will continue in the foreseeable future; we might see a rebalancing in FII portfolios allocating additional funds to developed markets as the emerging markets have gotten quite expensive.
With rising interest rates, fixed income is bound to yield a higher return adding further impetus for FIIs to invest in developed markets, the implementation of long-term capital gain tax will not help garner investments either.
Cues from global market suggest that flows from foreign investors will be less than what we saw in the year 2017 largely on account of what US Federal Reserve will do with respect to interest rates and rising bond yields.
US Fed has indicated an increase in rates for 2018, the direction of which will be set in meeting on 21st March. Increase in rates is definitely a negative event for foreign liquidity.
At the same time, it is also determined by country fundamentals, which are improving. Therefore, FII flow might not be completely negative for 2018.
MORE WILL UPDATE SOON!!



Use pullback rallies to exit longs; 4 stocks which could give up to 9% return

  13:04      No comments   Edit

We expect a near-term bounce in the index; however, such bounce will not lead to a significant trend reversal and any up move towards 10400-10480 levels can be used to exit from trading long positions.

   


The Nifty resumed its downtrend after a broad consolidation and eventually took out the swing low of 10,276.30 in Tuesday’s session. This triggered further pessimism and the index nosedived sharply towards its next crucial support of 200-DMA which is seen around 10,130-10,140 zone.
In Thursday’s session, short covering was seen in banking and selected heavyweight stocks near the crucial support level of 200-DMA that helped Nifty to close above 10,200 levels.
The hourly momentum oscillators are trading well inside the oversold territory and are indicating towards a further pullback on the higher side.
We expect a near-term bounce in the index; however, such bounce will not lead to a significant trend reversal and any up move towards 10,400-10,480 levels can be used to exit from trading long positions.
At this juncture, 10,130 which coincides with the 200-DMA will act as an immediate support level for the index and if it trades below this level will drag index lower towards its weekly swing low of 10,033.35 which is a crucial support.
On the other side, 10,276 which was earlier acting as a strong support has reversed its role and is likely to act as an immediate hurdle above which the strong resistance is placed near 10,360.
Here is a list of top 4 stocks which could give up to 9% return in the next 15-21 sessions:
Reliance Industries Ltd: Sell around 920 – 925| Target 840| Stop Loss 960| Timeframe 15 to 21 sessions| 8%
On the weekly charts, the stock has formed a classical head and shoulder formation and is currently the right shoulder which is in the process of making.
The neckline of this pattern is pegged near 871 and any decisive move below 871 will eventually confirm the breakdown from said pattern. The weekly RSI (14) indicates the possible range shift.
The weekly Bollinger Band has compressed significantly hence volatility is likely to increase in the coming trading session. Therefore, we advocate traders to build a short position in this stock in a range of Rs920 to 925 with a price target of Rs840 and a stop loss placed above Rs960.
Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
Hindalco Industries Ltd: Sell around 225 – 230| Target 205| Stop loss 238| Timeframe 15 to 21 trading sessions| Return 8%
Looking at the weekly chart, the stock confirmed its breakdown from the Double Top pattern as the neckline of the said pattern was placed near 232.
Along with its Double Top breakout, the stock also broke below its 200-DMA which supports the hypothesis. On the daily chart, the stock closed below the upward sloping trend line drawn from the bottom of around 63.
Hence, we expect this stock to see further correction in the near term. We recommend traders to go short in a range of 225 to 230 with a price target of 205 and a stop loss placed below 238.
HUL: Sell around 1293 – 1300| Target 1225| Stop loss 1330| Timeframe 15 to 21 trading session| Return 5%
Looking at the daily chart, the stock broke the upward sloping trend line joining from the bottom of 1057. Also, the stock broke the higher top higher bottom sequence which doesn’t bode well in the near term.
The stock is trading well below the 89-EMA. Thus, we recommend traders to build a short position in a range of 1293 – 1300 levels with a downside price target of 1225 and a stop loss placed below 1330.
Cholamandalam Investment & Finance Company: Buy around 1415 – 1400| Target 1550| Stop loss 1360| Timeframe 15 to 21 trading session| Return 9%
Looking at the daily chart, the stock is trending in a rising channel formation and recently the stock precisely tested the lower band of the channel pattern and rebound sharply.
Also, Thursday’s low of 1392 coincided with the 50% of its previous daily swing low. Hence, we recommend traders to buy this stock in a range of 1415 – 1400 with a price target of 1550 and a stop loss placed below 1360.
MORE WILL UPDATE SOON!!

Thinking where to invest? These 3 sectors could hog limelight in 2018

  13:01      No comments   Edit

Longer term metrics on the economy and earnings growth continue to remain positive.

   

We continue to expect elevated volatility levels in the equity markets and hence advise investors to look at equity allocations from a medium to long-term investment horizon.

Market sentiment is currently negative globally. Equity markets faced stiff headwinds largely from global factors this month. Local factors including the unearthing of the PNB frauds have also added to this negativity.
In our opinion, all of this is short-term in nature. Longer term metrics on the economy and earnings growth continue to remain positive.
Company results for Q3 FY 18 have seen significant improvement across sectors the highlight being a recovery in the consumer businesses and housing sector, both partly helped by the low demonetization base.
Consensus NIFTY earnings also did not see any negative commentaries, highlighting that there is confidence in a likely step-up in growth going forward. Improving GDP growth and back to back strong IIP numbers point to a revival in manufacturing.
We continue to expect elevated volatility levels in the equity markets and hence advise investors to look at equity allocations from a medium to long-term investment horizon. Systematic investments into equity products could also help investors ride out short-term volatility.
 The US hiking rates do raise costs of borrowing across the world since the US Dollar is the world’s reserve currency. Re-pricing of equity risk premia is likely to play its part in keeping markets volatile in the short term.
Fundamentally, India is looking at a trio of positive factors, Strong GDP growth, Revival of corporate profits and stable inflation.
If US 10-Years G-Sec trends and stays above 3 percent which very likely given higher inflationary pressures in next 12 months, the carry trade would likely unwind as the cost of money increases.
This would definitely have some indirect pressure/volatility on the Indian markets as FIIs re-allocate assets.
As a philosophy, we have consciously stayed away from PSU stocks especially PSU banks. Our philosophy consciously targets companies with strong earnings growth and sustainable business models.
These qualities in our opinion are key ingredients for long-term wealth creation. PSU banks currently do not offer these attributes and hence it’s not the core part of the portfolio.
The recent budget announcements relating to rural, agriculture and healthcare are positive for growth in general and for these specific sectors of the economy.
We continue to believe in:
a) Rural consumption story that is expected to play out over the next few quarters. We believe that rural centric policies are likely to be undertaken in the run-up to the 2019 general elections, which will bode well for rural spending for the next 12 to 18 months.
b) private banks are looking attractive
c) NBFCs who have strong ALM practices, Auto/ Auto ancillaries & the consumption basket. Many companies in this sectors also offer opportunities to play the rural themes.
Volatility is a friend of the long-term investor. While equity markets are volatile in the short run, they tend to follow earnings performance in the long run.
The Indian economy as highlighted above is the fastest growing large economy in the world. With the revival in the Indian corporate sector, the long-term potential of equities continues to look attractive.
Systematic investments offer a prudent yet simple mechanism for investors to ride the volatility. SIP’s help ride the downturns without investors facing the risks associated with timing the markets.
Asset allocation is critical to building a sustainable long-term portfolio. However, investors who do not understand financial planning should take professional advice rather than invest in an ad-hoc manner.
Investment advisors take a holistic approach to investing based on the risk profile and the investor`s goals keeping in mind the market environment. Each asset class offers its own set of merits and demerits and should not be ignored while building a financial plan.
Rising interest scenario is generally good for bank NIMs as loans get re-priced immediately with an increase in MCLR while deposit re-pricing happens with a lag.
Banks enjoy pricing power as demand for credit improves and hence are able to pass on any increase in the cost of funds. Also, rising interest rate scenario is backed by an increase in CAPEX - as of now brownfield CAPEX is happening while greenfield CAPEX is yet to pick up.
The minutes of the February MPC meeting reinstated the cautious approach as inflation uncertainty has increased.
Amid this increased uncertainty, possible closure of output gap with improved growth also appears to worry a few members. While the tone RBI policy earlier last month was neutral, the hawkish tones of the MPC minutes suggest a possible increase in interest rates in the H2 FY19.
MORE WILL UPDATE SOON!!

Should you bet on large-cap or mid-cap stock for better returns in current market?

  12:57      No comments   Edit

Investors should adopt an asset allocation approach towards equities, with exposures across all categories.

  

Given the current market backdrop, investing needs to be done judiciously. Investors participating in equity markets are advised to adopt cautious approach during these challenging environment. Equity trend amid high volatility around mid-cap funds while large-cap, on the other hand, can be considered as less risky. However, the past trends show only slight variance between the returns generated by large-caps over mid-cap. Hence, a million dollar question arises – which equity savings category can be considered as less risk and provide high returns future earnings for investors? However, one cannot select a specific category of funds that offer exposure to equities while minimizing the risk element, but doing proper asset allocation can help them to do so.
Investors in the current market conditions can consider equity investments whether be it a large-cap or a mid-cap that aims to generate income by investing in bluechip companies or emerging companies to get higher returns. However, while looking at capital appreciation through moderate exposure in equity, one can also go for hybrid equity funds option too.
The equity saving funds endeavours to wrap three benefits together – income opportunity, the growth potential of equity and tax efficiency.
2017 was a fantastic year for Indian equities, particularly mid and small cap equities. Sensex delivered 27.5% in 2017, against 46% for BSE Midcap, and 58% for BSE Small Cap. The current trend of outperformance of mid and small caps over large caps has been continuing since 2013. One flip side of this trend is that we are seeing many investors falling into the behavioural trap of believing that this outperformance trend will continue forever, and they are allocating their money exclusively to mid and small caps. Looking at history, we can safely say that there is no indication that mid and small caps will always outperform large caps in the long run. In fact, since 2003 over seven-year investing periods, we see that mid and small caps outperform large caps in less than half of the observed cases.
Why large-cap?
In normalcy, the companies stocks with a market cap of Rs 20000 crore or more comes under the ambit of large-cap stocks.
Large caps and mid and small caps vary slightly in their attributes. In the large caps, since these are larger firms there is a relatively higher degree of revenue and profit certainty.
Large caps are less volatile than mid and small caps. Mid and small cap firms can offer elongated periods of high growth, but to access this high growth, these firms also take an inordinate amount of operational risks. In many cases, these operational risks do not pay off, and earnings suffer. With high earnings fluctuations, we also observe more volatile valuations and stock prices..
Why mid-cap?
In normalcy, the companies stock with a market cap of Rs 5000 to Rs 20000 crore comes under the ambit of mid-cap stocks. and the companies stocks with a market cap of Rs 1000 to Rs 5000 crore comes under the ambit of small-cap stocks.
Himanshu said that one of the benefits of midcaps stocks is that these firms are typically under-researched, and there is some alpha to be discovered from the quality stock selection. With SEBI’s reclassification mandate where fund managers will have to build the majority of their mid-cap exposure from a universe of 150 stocks, this stock selection alpha may get slightly constrained.
Looking at these reasons, we suggest investors adopt an asset allocation approach towards equities, with exposures across all capitalizations. Given the attractive relative valuations between large caps to mid and small caps, we prefer slightly overweight large caps at this stage relative to mid and small caps.
MORE WILL UPDATE SOON!!
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