Monday, May 25, 2009

Stocks ka "FUTURE" ???

Hi pals.After a lot of research into this topic,I am now qualified to poke my nose into this complex topic.Before discussing about futures,I would like to write a little about derivatives.According to Mr Warren Buffet derivatives are financial weapons of mass destruction.I will give you a slightly more positive version of derivatives.
Futures come under the category of derivatives.Derivatives are financial instruments which are basically ummmm a contract. Let me give you an example.
Let us take the example of Sanju Johnny and Jissy Sanny(Both are good friends of mine and are stock market fanatics).Sanju is a cock seller(Male counterpart of Hens.Just in case some pervert guys are reading the article).Jissy wanted to buy 150 cocks from Sanju an year later.He entered into a contract with Sanju and both of them made an agreement of Rs 100 per cock.
Now let us contemplate on the circumstances an year later.Suppose the market price of a single cock soars to Rs 120.Sanju will have to give away each cock at Rs 100 to Jissy.In this way Sanju makes a loss of Rs 20 per cock.
Similarly if the rate plunges to Rs 80 per piece,Jissy will have to purchase each cock from Sanju at Rs 100 and will thereby incur a loss of Rs 20 per cock.So basically derivatives are a contract similar to those in the given example.
Now let us come to Futures.I will give you another example now.
In the case of general stocks you purchase any number of stocks and have the right to sell it whenever you wish.You don't have any obligation in this case.
As soon as you purchase futures,every hair on your body is succumbed to obligation.Mr Alu(Alabhya) another of my friend did not know a s**t about stock markets.He out of premonition made a debut by trading in futures.He liked a company ABC whose each share was priced at Rs 1000.Alu purchased a future contract of 100 shares.Futures always come in sets.For example one set can comprise of 100 shares.You can purchase any number of sets.Coming back to Alu he got one set of ABC company .His set costed Rs 1 lac(1000*100).But in a future contract you have to pay only 15-20% of the total cost.You can also exit the contract before the deadline .On the first day,the share price rose by Re 1.Alu makes a profit of Rs 100(100 shares*Re1).Next day the share plunged by Rs 20.Rs 2000 get deducted from Alu's account(Rs 20*100 shares).Alu gets a thrashing from his wife and is forced to quit the risky venture.
What we saw from the above story is that you should never tamper with futures unless you have experience in the market otherwise they will ruin your future(pun intended).Futures can prove to be very profitable if you trade smartly.

Moral:Warren Buffet is always right.

Thursday, May 21, 2009

S^ocks and Politics

After the big rally on Monday,we saw a lot of volatility in the Indian markets on tuesday.Basically on Monday the markets were driven by large caps.Mid caps and Small caps still had a long way to go.Analysts expected a lot from stocks like GMR as the market was driven more by sentiment than by reform.
On Wednesday we saw a surge in Mid cap stock prices as they were unwilling to stay behind in the big rally.Stocks in the infrastructure sector shot up the most.Cement was one sector which had a "gala" time.Tata Motors was one stock which became dearer by about 10%.But on the other hand stocks like RIL and Bharti were quite disappointing.The trend was due to the already high prices of the large cap stocks due to the rally on Monday.
Stocks like GMR jumped higher and higher and are on the same track today.Right now the stock is trading at about 170 odd levels which is more than three times it's price two months back when the bears had ruined the market.Suzlon Energy ,though a large cap is still looking bullish and is trading at about Rs 95.The same stock was trading at Rs 35 a couple of months ago.
Though Satyam was stubborn like a bull(see the irony) on Monday and did not participate in the rally with it's other pals,today it is soaring and is trading almost at about 49 odd levels.
The banking sector has also done quite well in the past couple of days.One of my favorites is Bank Of Maharashtra which was trading at about 33 odd levels yesterday.This stock had announced real high dividend yields of 15%.On Friday,three days before the "MAGICAL Monday" the same stock was trading at 25 odd levels.
I am expecting a lot from Realty sector as I think the worst is over for it.Though Unitech seemed bullish yesterday,its counterpart DLF was down almost 10%.Unitech after it's Gurgaon Hotel sale seems more and more bullish.
Due to the volatility factor high ,retail investors are quite apprehensive about the course which will be taken by the market. .Though the analysts have predicted SENSEX to oscillate between 12000-16000 in the days to come,people are still refraining from entering the markets out of shear trepidation.I myself ,feel that at some point of time my favorite stocks can also see unexpected correction in their prices.What the retail investor must look out for is a stock which he/she can shell out money and is definitely going to yield good results in a few months time.I do not suggest buying much of those stocks which are already overvalued though they might look very promising.
Ispat industries was another of my favorites which still has scope for improvement.
Coming to currencies,the Rupee is getting stronger(dollar weaker of course) which might prove disappointing for the textile industries as most of their income comes from exports.With the crude price also soaring I feel that the world markets may sooner or a bit later come out of the dark tunnel.NYMEX crude price is about 62$ per barrel.
Inflation is at .61%,lower than last week's .7%.Food prices are still high and a lot is expected from UPA government to counter them.As I have started the topic let me tell you that Mr Pranab Mukherjee is a definite choice for Finance Minister after the party did not approve Mr Montek Singh Ahluwallia for the post as we require a hardcore politician more than a technocrat.P Chidambaram will stick to his Home Minister's "kursi".Kapil Sibbal is likely to get promoted to External Affairs Ministry.This time there is not much hope for allies for the simple reason that the Congress government did not require them much.Jai Ram Ramesh and A.K Antony will continue to hold their ministries of Power and Defence respectively.Let us see what reforms our new government introduces after finally getting rid of the Left's support.

Monday, May 18, 2009


I had never waited for Monday as eagerly as I waited for this Monday,18 May 09. Usually i hate Mondays as they come too quickly after Fridays. But being a Stock market enthusiast I was so desperate for the clock to strike 9.55 A.M because I was expecting that moment to culminate into something spectacular and which would be regarded as historic.

The Indian Stock markets lost no time in hitting the first circuit(10%) and in few seconds the Second Circuit(15%). As a result the trading had to be halted for 2 hrs as per the stipulations of market regulator SEBI. But were these two hours enough to cool the bulls??? It proved terribly less. When the trading resumed at 11.55 A.M in a few minutes the markets hit the 3 Circuit and hence trading was halted for the whole day. I can't find enough words to describe this meteoric rise which took the markets to levels which were considered distant a few months ago. The SENSEX had breached 14000 mark and NIFTY FIFTY 4000 mark.At the close of the market hours SENSEX was up by 2110 points and NIFTY was up by 651 points.

One of the main reasons for such a rise was Short Covering as those who had bet against Congress were found Naked when the Anti Incumbency tide went away and had to scout for Cover. Indeces were high on wafer thin volumes because of huge demand at higher prices. As usual stocks like Reliance Group stocks,DLF,HDFC,ICICI,SBI,INFY,SUZLON,UNITECH,BHEL,L&T were the frontrunners among large Caps which sent the Indices roaring. Among Midcaps stock like GMR,PRAJ,Tier 2 Banking Stocks led the rally. It seemed that the traders were not getting enough of these stocks. BEARS WERE MAULED RUTHLESSLY by BULLS this time. Who could have imagined that at the time when Sentiments are not that high, an event like General Elections would take markets to such soaring highs.

All this was the aftermath of comprehensive victory of Congress in the General Elections in which it performed beyond wildest of expectations.Congress did exceptionally well in states of UP,West Bengal, Kerala and AP as a result of which now it finds itself in a very comfortable position. All those 2 sided allies are now wooing Congress so that they can get chunk of power at the center like SP,RJD etc. But the biggest reason which made the markets defy Gravity was the way in which LEFT FRONT was crushed. W.B and Kerala which were considered to be Strongholds of Left were taken by Trinamool and Congress respectively. Corporates and Market Analysts feel that with LEFT no longer in equation it would provide Congress much needed room to push for Reforms in Insurance sector, Disinvestment and also look beyond COMMON MINIMUM PROGRAM.

The main responsibility for congress would be reduce the Fiscal Deficit as any further deficit could lead to a ratings downgrade which would make raising DEBT from Global Banks very difficult. Secondly it should keep in mind that it is the COMMON MAN which has voted it again in power and even though LEFT is not there it should make COMMON MAN an inevitable part of its agenda where ever possible.

Saturday, May 16, 2009

Congress ki JEET,BJP ki Defeat,Left....NO NEED.

The verdict is finally out....It promised to be a humdinger of a contest but in the end turned out to be a tame encounter. Congress gave its best since days since 1991, BJP delivered what it did in 1991.But it was LEFT which touched nadir.

Congress cut into Left's share in West Bengal( through Trinamool) and in Bengal which were considered to be the bastions of Communists. Then it also cut BSP and SP's share in UP where it decided to go Solo and delivered beyond even the most optimistic expectations. It only suffered in Bihar but it was due to some really good work by Nitish kumar. Some populist measures in TN led to DMK winning majority of seats despite the Anti Incumbent atmosphere prevalent there( distribution of TV sets, kg rice for Re 1).

Another remarkable fact was the trends which emerged. It clearly shows that the PRO Rural, farmer centric policies of Congress did bear some fruit and LEFT was punished for being too much pushy and still being in old times. Nuclear deal would have hurt them severely. BJP suffered due to its policies and lack and absence of young leaders and its precisely where congress scored by devolution of some responsibilities to leaders like Rahul Gandhi, milind deora, Scindia .BJP also suffered on behalf of Varun Gandhi and due to Jinnah debacle....Surprisingly Varun emerged victorious from his constituency.Rahul Gandhi won by more than 3,00,000 votes.

A low point in these elections was the Turnout percentage...Inspite of never before publicity, campaigns the percentage of people who voted was below expectation. The heartening fact was the indian electorate used a good measure of prudence in casting vote.

Dr. Manmohan Singh is all set to come to power again and it will be only since Nehru himself. But these elections surely brought out the politician in him if see some of comments which he made at opposition which is quite unlike his usual self. This time without left it would be good chance for him and Congress to carry out PRO industry policies.

But congress should be careful and wise enough not to ignore the COMMON MAN since it was the LEFT which used to discipline the congress every now and then. After all it is the COMMON MAN which has brought the congress back to power.
The verdict should receive a good response from the markets when they open on MONDAY considering that markets always desire stability of govt and with LEFT probably out of equation Congress will have more LEGROOM to carry out certain unfinished agendas.

EU Slaps INTEL with more than a Billion Dollar Fine..

After Microsoft it is now turn of INTEL to be sued by EU court of Competence for unlawfully hindering the growth of competition for Chips in which INTEL is the dominant market leader but is facing competition from AMD in some markets....The fine was slapped citing the reasons that INTEL was giving discounts to the PC makers who were using the INTEL chips which included companies like HP, Dell etc....This was done to keep companies like AMD at bay......It was also found that Intel had bribed a retailer for keeping only INTEL chips available......AMD chairman welcomed the move by saying that it would open the market by imposing lawful restrictions on companies which try to go beyond the law to gain market share........

I am sure that AMD would have surely thrown up a big party after this news.........

Friday, May 15, 2009

Some News for Unitech Shareholders.

During the past few days we can see that the market is doing quite well.Realty sector has been one big contributor to it.Ramesh Chandra led Unitech is on cloud nine now as it has sold about 800 flats in the last one month in Gurgaon.Unitech has actually started a project in Chennai where the cost per square foot will be very reasonable.In this way it's volumes will surge up like anything.The Real estate firm had a debt of about Rs 10000 crore from banks .Now it has started clearing it's debt rather quickly.Post QIP(Quallified Institutional Placement)it's debt has reduced to about Rs 8000 crore and in very little time it will be only Rs 5000 crore.Unitech has sold one of it's hotels in Gurgaon and the sale of the other will be finalised soon.It has about 200 acre of land for schools which will be sold in about 2.5 to 3 years time.It's flats in Gurgaon which were earlier sold at about Rs 4500 per sq ft are now being sold at Rs 3000 per sq ft.Seeing this many buyers had rushed to buy the flats resulting in the sale of 800 flats last month.The Chairman of Unitech has finally agreed that it's share was over valued in the good old days of the market.Unitech which is now trading at about 50 odd levels is expected to surge according to analysts.
I feel that more shares of Unitech should be purchased as the Realty sector or to be precise Unitech has seen the worst and is now on the road to recovery.This stock will yield excellent returns after a few years,when the market will come back on track.Unitech's cheapest flat in Gurgaon which costed about Rs 7000000 previously will cost only about Rs 25-30 lacs.So,if you have a bit of cash to spare you can invest in the flats!


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