LIC-INFOSYS and making Money techniques....

Jul 15, 2013, 10.27 AM IST

Want to be a good trader and investor? Learn from LIC

At the end of December 2012 quarter, LIC held 4.16 cr shares of Infosys representing 7.2% stake. By the end of March quarter, this was down to 3.42 cr shares representing 5.96% stake and in the just released June-ending quarter, its gone back up to 3.86 cr shares representing 6.72% stake.

Anuj Singhal

Intriguing headline right? LIC, the biggest institutional investor of Indian equities a savvy trader? Well that ladies and gentlemen is the fact and the institution has proved it so right with the biggest of blue chips Infosys and this despite remaining essentially a large long-term shareholder. So what am I saying?Let’s take a look at LIC’s investments in Infosys over the last 3 quarters and try to see what it is up to.   At the end of December 2012 quarter, LIC held 4.16 cr shares of Infosys representing 7.2% stake. By the end of March quarter, this was down to 3.42 cr shares representing 5.96% stake and in the just released June-ending quarter, its gone back up to 3.86 cr shares representing 6.72% stake. What’s the big deal you would ask? The big deal is that by cutting its stake LIC part protected itself from that ill fated 22% fall Infosys had after Q4 results and by buying after that fall, it managed to participate in the rally that followed, especially the 10% thumbs up stock got after Q1 results. Let’s try to put some numbers here.

LIC sold 74 lakh shares between December to March. Stock moved between Rs 2700-2900 during that period so let’s assume an average price of Rs 2,800 for that period. After Q4 numbers, stock collapsed to Rs 2,300. And with an average price of Rs 2,200-2,400 for the quarter, let’s take the average price of Rs 2,300 for the quarter in which LIC bought 44 lakh shares. And now of course, the stock is back to Rs 2,800

So just for those 44 lakh shares, LIC managed to sell at highs and buy at lows with a difference of Rs 500/share that translates into Rs 220 cr of trading profit. Keep in mind LIC is a long term shareholder and would have paid no tax on the shares it sold and the shares it acquired last quarter for sure will again be held for long time.

Of course, LIC had its own compulsions last quarter as I had written here it had to raise money for the plethora of PSU paper that hit the market, but let’s give credit where it’s due. It managed to play a counter consensus trade successfully for 2 straight quarters. And that’s the whole premise even if you hold a share with a very long term horizon, sometimes a minor churn or tweaking in portfolios isn’t a bad idea

Disclaimer: The author of this article does not invest/trade in stock markets including derivatives. His only exposure to stock markets is via the stock options given to him by his employers as part of his compensation. All views expressed in this blog are my personal views and my channel does not subscribe to the same.

You can track his views on www.themarketinternals.blogspot.com

http://www.moneycontrol.com/news/cnbc-tv18-analyst-markets/want-to-begood-traderinvestor-learnlic_917478.html#toptag

RATE CUT or NO RATE CUT....

Business Standard  |  New Delhi  July 14, 2013 Last Updated at 21:40 IST

RBI's dilemma intensifies

CPI and IIP head in opposite directions

Going by the release of the quarterly balance of payments numbers on June 30, and the numbers for the index of industrial production (IIP) for May and the consumer price index (CPI) for June last Friday, it appears that a new principle is in place. If the news is good, announce it during market hours. If it is bad, wait until the market is closed. The IIP and CPI numbers certainly warranted this caution. Together, they suggest that even as growth is decelerating, inflation is actually accelerating. Looking at the IIP, the index declined by 1.6 per cent relative to May 2012, sharply below consensus estimates, which were anticipating a small positive number. It has to be kept in mind that the positive growth seen during the past two months was almost exclusively attributable to garments, the growth in which slowed to a mere 14.3 per cent during May, still putting the April-May growth rate at a rather striking 50.6 per cent! Most of the other industry groups continued with their sluggish performance of the past several months. Whichever way the numbers are looked at, they show no signs of a recovery under way, belying the confident assertions to this effect by government spokespersons. These numbers provide early indications that growth projections for the current year will have to be scaled down from their already modest levels.
On the other hand, consumer inflation has accelerated somewhat, clocking almost 9.9 per cent over June 2012, about half a percentage point higher than the previous month. As has been the case for so long now, the main reason for this is food. Strikingly, the drivers of food inflation seem to have shifted from non-cereal items to cereals, which saw prices increase by almost 18 per cent. As regards the prices of manufactured goods, there has been something of a disparity between increases recorded by the CPI and the wholesale price index (WPI), for which the numbers for June will be announced on Monday.
These patterns make the Reserve Bank of India's (RBI's) decision on July 30 even more difficult. The recent depreciation of the rupee has already been highlighted by it as a renewed source of inflationary pressure, constraining the room for further interest rate cuts. Today's WPI numbers will provide an indication of how much dynamics have impacted inflation through higher prices of imports. If there is a reversal in the recent downward trend in both headline and core inflation, it will almost certainly stay the RBI's hand on July 30. In fact, unless RBI Governor D Subbarao's successor decides to follow a completely different tack for monetary policy, it is looking increasingly likely that the interest rate reduction cycle that began in April 2012 and reduced the repo rate by a cumulative 125 basis points has ended. In which case, the fundamental question has to be raised: where is the trigger for a recovery going to come from? With the government's attention currently distributed between the food security ordinance and finding ways to finance the current account deficit, that question is clearly not getting the priority it deserves. And, it will not wait until 2014 for an answer.

http://www.business-standard.com/article/opinion/rbi-s-dilemma-intensifies-113071400668_1.html

HDFC,M&M, IndusInd Bank...MULTI FOLD RISE in 5YRs....

FII-favoured stocks like HDFC, M&M, others log up to 7-fold surge in five years

By PTI | 14 Jul, 2013, 02.26PM IST

NEW DELHI: A clutch of 20 stocks, which have been favoured by influential Foreign Institutional Investors (FIIs) over the past five years, have clocked up to seven-fold surge in their valuations in this period, says a new report. 
These stocks, where the FII exposure has been mostly rising, include housing finance giant HDFC, automaker M&M, private sector lender IndusInd BankBSE -1.24 % and drugmaker Lupin, as per the report by investment banking major Morgan Stanley. 
"Of the top 100 stocks in India by market cap, the top 20 purchases by FIIs over the past five years delivered an average return 21 times more than the 20 least-purchased (or most sold) names by FIIs," said the report. 
According to data collated by Morgan Stanley, the highest return among the top 20 stocks bought by FIIs came from IndusInd Bank (784 per cent), followed by GlaxoSmithkline Consumer (774 per cent), Lupin (523 per cent), M&M Financial (429 per cent), Yes Bank (per cent) andMotherson SumiBSE -0.62 % (317 per cent) saw substantial returns on a 5-year trailing basis. 
Counters including Marico, Tata MotorsBSE 2.31 %, Ultratech Cement, Colgate-PalmoliveBSE -0.53 %, REC, Zee Entertainment and HDFCBSE -0.38 % saw gains in 107-280 per cent range. On the other hand, the 20 most-sold stocks by FIIs, including JP Associates, BHELBSE 0.91 %, Tata SteelBSE 0.57 %, RCom, JSW SteelBSE -0.31 %, Bharti AirtelBSE 1.65 %, Ranbaxy and ABB, have seen about 16-49 per cent value decline. 
"Often, when we engage in a debate on India's macro, we are reminded of the reason why foreign investors first came to India: it was largely to own companies that were well managed and whose stocks were reasonably valued - the macro environment was not the reason to buy Indian stocks. 
"The past five years has brought this reason back to the forefront. The macro has been challenging, to say the least, yet several stocks have delivered notable returns," the report said.

http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/fii-favoured-stocks-like-hdfc-mm-others-log-up-to-7-fold-surge-in-five-years/articleshow/21068824.cms