CONSOLIDATION for..........

The US Debt DEAL didn't enthuse the markets; on the other hand they are now put to DILEMMA till FEB-14. The Indian markets took the cue a bit early and made carnage on the street on IT pack.The other NIFTY stocks could inch up like Bharati and Bajaj Auto on news....

The Supreme Court remarks on RADIA tapes and further investigation may spoil the TELECOM party. The The AXIS bank results are good as the retail business improved and the profitability was maintained. AXIS has resistance at 1120 level but has potential to touch 1270 and the scrip is moving up the support at 1050 shall not be broken on any bad day. The ICICI is also trading above 930 support level may cross 1080 soon. The only catch is that the markets are waiting for some news to breakout the resistance levels. The COAL SCAM is again on headlines. So the Nifty needed some triggers from the Govt/RBI. The month end policy may bring cheers to Banking sector as the built up is creeping. The OI in Bank of India is building may see some news.

The Nifty OI is increasing but the SWITCH made the NIFTY to hang around 6080-6120 level. The Tata steel OI is hugely built at 279-282 level was maintained and the shorts made in TCS at 2230 level were covered. The long positions built in TECH Mahindra were intact. But the real built up was made in WIPRO. The scrip will easily cross 625-650 level in next two months.

The LT results are expected to be mute due to "Liquidy crunch" and the foreign operations may save due to fall in the rupee value. The big opportunity is about to open in DEFENCE sector is a readymade cake for LT.

The BULL unwinding in HCL Tech, TCS and Rel Infra brought to their lows. The TCS may see bounce from 2030 level and very good pick from 1760 level. The CAIRN is about to make some noise. The scrip may shoot up if it trades above 329 levels. The HDFC may cross 860 if it trades above 818-20 level. The KOTAK will get support at 650-30 level.

NIFTY MAY GAIN from USA debt seal.......!!!!!!!!!!!

The overnight encouraging news from US and the recovery of the Europe markets from their lows may spill some positive effect on the opening BELL and may continue for the day as the markets lost 30 points in the previous session and BANKNIFTY lost more than 450 points from the days HIGH. So recovery may adjust.The markets may stay firm as the results announced are not as bad as the markets take that as SURPRISE. So the BULLs may have the courage to hold for some more time. The NIFTY OI is also adding. The markets may see some adjustments in KM Birla companies as the COAL GATE opened new doors for controversies and endless "Can of Worms"........

The AXIS Bank and HCL Tech Results will be announced today and L&T tomorrow. The RIL has good support at 830-835 for  this series. The stock has potential to lead the NIFTY rally in future and very good BLUE chip for a 1260 range for next 18 months.  The BHARATI though may offer tepid results in this quarter  but has very good potential to touch 420 level.

The Nifty is likely to see some serious SWINGS as the results of the banking stocks are not encouraging but the “Change in the provisions” and “Held to Maturity” saved this quarter to HDFC Bank, INDUS has given good results but lost 8% in value and other Banks may also provide similar results. The street may not give THUMPSUP response and may down grade as the future “Un-Certainties are Un-folding”. The immediate Nifty down side is very much protected at 5850-85 level and it is good to BUY at declines for a “SWING up MOVE”.

The NIFTY will have strong support at 5300 level and the LONG-TERM positions for decent profits can be built from 5300 to 4900 level. The BLUE chips like TCS can be available at sub 1400 level and the HDFC bank may see a comforble level at 450-485 range and the technical are showing weak uptrend and  strong down trend for  other banks like AXIS may see some serous correction down the line to 500 range and ICICI Bank may see 625-580 range. But the immediate future upside is potentially strong for IT and metal space. 

BULLs ARE IN COMMAND......NIFTY FOR 6750...!!!!!

Nifty spread is increasing considerably is a good sign that the BULLS are giving higher premium for their CHASE. The Nifty touched 6200 in the third week of May-2013 saw a serious onslaught of BEAR hammering brought to 5100 level in August-2013. Many analysts said that the markets are out of FII favour, bear grip on Dalal street and ….etc but I clearly mentioned to many that the sharp rally is expected and “It Happened”…Whether people like me predict or not markets will take its course as and when required….it is only “WE”…stay with “WHOM”….is always matters….for making MONEY…..

Now the situation is at cross roads and most are expecting a serious rally from here. The Nifty has reasonable resistance placed at 6330-60 level...means we can expect a HIGH cut at 6239 to 6350..a meager 100 points….The good for doesn’t end here the markets are well positioned for a rally up to 6750. The bottom support at 5770-20 is well positioned but the broad range is 6750-4865.

The results of RIL are not very encouraging despite of the Rupee fall as the rise in crude prices could boost the revenues but the real strength is in boosting the KG basin gas output and the profitability at higher rates prescribed by the Ministry.

The TCS results are far excellent than its counter-part INFY. The stock is poised for a HIGH of 2440 level but may even touch 2620-60 level.  The Infy has resistance at 3480 level may touch 3620 but it is safe to avoid Infy as the Investors will offload seriously. I advised people to stay away as the counter is expected to touch 1200 when it fell below 2400 from a high of 2700 with sharp volume increase!!!!. Then there was some un-expected lobbying by FEW could change the fortunes for NOW. I was also surprised on the comeback of MNM again at the helm.

The HDFC Bank results are good on this economic scenario but the price at which it is ruling may not be possible to stay above 660 level. Although it has some upside potential upto 707,717 to stop loss 757. The Bank-Nifty has resistance at 11428 and 11765-11728 level.

Importance of valuation in portfolio management
P Saravanan | Updated: Oct 15 2013, 17:43 ISTEvery asset — be it financial or real — has a value. The key to successful investing lies in understanding not only what the value is, but also its sources. Every asset can be valued, but some assets are easier to value than others, and the details of valuation vary from case to case.For instance, valuing a real estate property will require different information and different mechanics than that of publicly traded shares of a company.Basis for valuationA principle of sound investing is that an investor does not pay more for an asset than its worth. This is quite logical and obvious, but often it is forgotten . Basically, financial assets are acquired for the cash flow expected from them. So, perceptions of value have to be supported by reality, that is, the price paid for any asset should reflect the cash flows it is expected to generate.Eliminate bias before valuationValuation is neither a science nor an objective search for true value. Most models used in valuation may be quantitative, but the inputs leave plenty of scope for subjective judgments.Thus, the final value arrived is coloured by bias; so that the price gets set first and the valuation follows. The way out is to eliminate all bias before starting on a valuation, but this is easier said than done; the reason being that most investors are exposed to external information, analyses and opinion about a company.But there are ways of reducing bias. The first is to avoid taking strong public positions on the value of a company before the valuation is complete. The second is to minimise, prior to the valuation, the stake investors have in whether the company is under- or over-valued.Arrival of new informationThe value obtained from any valuation model is affected by firm-specific as well as market-wide information. So, the value will change as and when new information is revealed.The information may be specific to the firm, affect an entire sector, or alter expectations for all firms in the market. Information about the state of the economy and the level of interest rates affect all valuations in an economy. A weakening in the economy can lead to a reassessment of growth rates across the board, though the effect on earnings is likely to be the largest at cyclical firms. Similarly, an increase in interest rates will affect all investments, of course, to varying degrees.Underlying assumptions in valuationEven at the end of the most careful and detailed valuation, there will be uncertainty about the final figure arrived as there are assumptions that one makes about the future of the company and the economy. It is unrealistic to expect absolute certainty in valuations. The degree of precision in valuation is likely to vary widely across investments. The valuation of a large and mature company with a long financial history will usually be much more precise than that of a young company in a sector in turbulence.Quantitative modelsnot always betterThere is a general belief that a valuation model that is more complex yields better valuations, but it is not necessarily so. When the models become more complex, the number of input variables needed to value the firm increases, thus bringing in the potential for input errors.While engaging in more complex models, investors should keep in mind the following points: First, adhere to the principle of parsimony, which states that one should not use more inputs than absolutely needed to value an asset; and, second, that there is always a trade-off between the additional benefits of building in more detail and the estimation errors.Markets are inefficientThe general assumption under an inefficient market is that it makes mistakes and investors can find these, often using information that other investors have access to. So, it seems reasonable to say that those who believe that markets are inefficient should spend their time and resources on valuation and those who believe that markets are efficient should buy the shares at the market price as the best estimate of value.Those who believe that the market makes mistakes and buy or sell shares on that basis believe that, ultimately, markets will correct theses mistakes, meaning which they become efficient. Recognising that markets make mistakes and finding them requires a combination of skill and a bit of luck too.To conclude, the role valuation plays in portfolio management is determined by the investment philosophy of the investor. Valuation plays a minimal role in portfolio management for a passive investor, whereas it plays a larger role for an active investor.* The writer is an associate professor of accounting and finance in IIM ShillongThe process* Basis for valuation: An investor should not pay more for an asset than its worth. So, the price paid for any asset should reflect the cash flows it is expected to generate* Eliminating bias: The final value arrived is coloured by bias; so that the price gets set first and the valuation follows. The way out is to eliminate all bias before starting on a valuation. Avoid taking strong public positions on the value of a company before the valuation is complete. Minimise, prior to the valuation, the stake investors have in whether the company is under- or over-valued* New information: The value obtained from any valuation model is affected by firm-specific as well as market-wide information. So, the value will change as and when new information is revealed* Assumptions: Even at the end of the most careful and detailed valuation, there will be uncertainty about the final figure arrived as there are assumptions that one makes about the future of the company and the economy. It is unrealistic to expect absolute certainty in valuations. The degree of precision in valuation is likely to vary widely across investments* Markets are inefficient: The general assumption under an inefficient market is that it makes mistakes and investors can find these, often using information that other investors have access to. So, those who believe that markets are inefficient spend their time and resources on valuation and those who believe that markets are efficient buy the shares at the market price as the best estimate of value

http://www.financialexpress.com/news/importance-of-valuation-in-portfolio-management/1182541/0

LOW GROWTH AND HIGH INFLATION....INDIA at STAGFLATION...!!!!

Indivjal Dhasmana  |  New Delhi  

October 14, 2013 Last Updated at 20:30 IST

Economy moving towards stagflation: CII survey
Stagflation is a situation where economic growth is too low, inflation too high, leading to steady high unemploymentPolicy makers may not accept it, but the Confederation of Indian Industry today said its survey of chief executive officers indicated that the economy is moving towards a situation of stagflation."Indicating that the economy is moving towards a situation of stagflation, majority of the respondents (42%) expected inflation to increase moderately in the second half of the year," CII said in a statement here.Stagflation refers to a situation where economic growth is too low and inflation is too high, leading to a steady high unemployment.The situation indicates a dilemma of sort for policy makers since actions designed to cut inflation may aggravate unemployment situation.CII, however, did not elaborate to say why is it referring to stagflation when the respondents talked of only moderate rise in inflation.Inflation, both in wholesale and retail counters, rose for the month of September driven by vegetable prices, particularly onions. But, even then inflation stood at 6.46 points in wholesale price index terms, and 9.84% on the retail price index basis.Most chief executive officers in the survey joined the league of independent analysts doubting the government's optimism over the economy clocking more than five% economic growth this financial year.However, 32% of them did share the government's projections. These respondents said the economy would register 5-5.5% growth, while 42% voted for 4.5-5%.However, CII director general Chandrajit Banerjee did not rule out over five% economic growth in 2013-14.“We believe that 5% plus growth is still not out of reach. With a significant improvement expected in the growth of agriculture output in the current year, we hope to see an upswing in the sectors, which have traction from rural demand.”As many as 65% of the respondents said that they did not expect revival in investments it before the second quarter of next fiscal. Political uncertainty was ranked as the highest risk factor affecting the business confidence of India Inc, according to a CII’s CEO snap poll conducted at its National Council Meeting.Commenting on the efficacy of the Cabinet Committee on Investment (CCI) in clearing large projects, 56% of the respondents did not feel it had the intended impact on the investments so far at the ground level.“This clearly implies that there is a need for strengthening policy intervention to revive investment demand, both by the Government as well as RBI. Among other critical measures, the Government should be focussing on stepping up its capital expenditure whereas RBI should be adopting a softer monetary stance”, added Banerjee.With WPI inflation rising to a seven-month high in September, and the retail price inflation breaking a two-month, RBI might not agree to Banerjee's demand. In an indication of easing current account deficit situation, 82% of the respondents felt that the value of rupee against US dollar was favorably affecting their exports. Contrary to the expectation that low rupee will lead to increase in their import bill, 53% of the business leaders felt that their imports will remain unchanged during the second half of the year. Going forward, majority (53%) of the respondents expected the rupee to prevail below Rs 62 a dollar by the end of the current fiscal.Exports grew double digits for the straight third month in September.Most of the respondents (37%) expected that their credit demand will remain unchanged during the second half of the current fiscal. Similarly, 50 of the business leaders did not see any perceptible change in their investment level during the second half of this year.In the survey, 50% of the respondents expected their sales and exports to grow moderately during the second half of this fiscal. However, profit margin was expected to decline by majority of the respondents due to pressure from hardening of input prices.http://www.business-standard.com/article/economy-policy/economy-moving-towards-stagflation-cii-survey-113101400908_1.html

Nobel for decoding asset price behaviour

SUDIPTA SARANGI

This year’s Nobel Prize for Economics has gone to three stalwarts, who have worked in the area of finance and enhanced our understanding of asset prices. Eugene F. Fama and Lars Peter Hansen, both professors at the University of Chicago, and Robert J. Shiller of Yale University have been pioneers in studying the behaviour of asset prices using large amounts of detailed financial data.

While nobody can perfectly predict stock price movements, the three economists, through their own independent research, have been instrumental in providing those crucial nuggets of information that have changed the way both academics and practitioners view financial markets.Their research tells that while we cannot say much about how stock prices will behave in the immediate future, we can actually say something about their behaviour in the long run by understanding the role of risk in this process.

Asset prices are important, as their movements affect aggregate consumption patterns and investment behaviour of firms. Also, based on their current and anticipated prices, we make decisions about how much to save and in what form — cash, gold, bank deposits, stocks or real estate. Episodes of speculative behaviour when assets are mispriced are a cause of worry. This is especially so in today’s interconnected global financial markets, since they eventually lead to crashes that can in turn trigger recessions. Hence, the study of asset prices is a very important and active field in economics.

STOCK PREDICTABILITY

Fama’s research shows us that past prices cannot be used to infer anything about asset returns in the short run. What he also found was that the stock markets react to new information extremely fast and incorporate them into the price of assets. As a result, arbitrage opportunities vanish very quickly. Also, stock prices are hard to predict after the initial reaction to any new piece of information.

Although it seems counter-intuitive, there is more predictability in stock prices when we consider a longer term. Safer assets will behave differently from riskier assets and this fact can be utilised to have better predictability in the long run. Shiller demonstrated precisely this in the early 1980s. Typically, we expect stock prices to reflect the present value of all future dividend streams. However, Shiller found that stock prices move much more than dividend streams.

Consequently, if the price of any stock is high relative to dividends this year, it influences investors’ perception of it. The stock price will, then, fall relative to the dividend value in the coming years. In other words, stock returns follow a predictable pattern!

This pattern was found to be true for bonds and other assets as well.

Lars Hansen developed a statistical method called the Generalised Method of Moments (GMM) to test the Consumption Capital Asset Pricing Model (CCAPM). In any exercise requiring us to compute the present value of future cash flows, we use what is called a discount factor — how much a future rupee is worth today. Shiller had originally assumed that the discount rate is constant. But it is not clear why this should be so. Also, if the discount rate can vary, we need to explain why this may happen. The CCAPM is the most basic theoretical model connecting asset prices to savings and risky behaviour, which can systematically incorporate the role of different types of discount factors.

RATIONAL INVESTORS

Applying the GMM technique to historical stock data, Hansen demonstrated that the standard version of the CCAPM model is not valid. He, thus, showed that asset prices fluctuate too much relative to dividends even if we allow for discount factors to vary over time. All these, though, assume a rational investor, which may not be the best way to think about ourselves on any given day.

So another approach to explain long-run asset behaviour is to abandon the model of a fully rational investor and rely on “behavioural finance.”Animal Spirits, a book that Shiller co-authored with another Nobel Prize winner George Akerlof, is a nice introduction to this topic. A direct consequence of the research of the three economists is the emergence of the ‘indexed fund’ — a fund that mimics a benchmark market index like the Sensex or the Dow.

Since stock markets cannot be predicted in the short-run, and it is hard to pick stocks both in the long and short run, the best bet for a small investor probably is to put money in an indexed fund!

(The author is Gulf Coast Coca-Cola Distinguished Professor of Business Administration at Louisiana State University.)

(This article was published on October 14, 2013)

http://www.thehindubusinessline.com/opinion/nobel-for-decoding-asset-price-behaviour/article5234149.ece?homepage=true

CAN NIFTY MARK ALL TIME HIGH...????

Nifty has managed to cross the 5930 level and the bottom support at 5820is well built. The Nifty may test 5930-50 level due to IIP numbers and the cyclone impact but the actual support at 5800 is crucial for now.

The INFY has generated some buying interest in the markets but the ODDs are still weighing high. The TCS and RIL results will be good but the TCS run-up before results may dampen the rise. The Infy also may not help much to Nifty at this juncture. The RIL negative news is not over. Unless the stock trades firmly above 879, there is always a threat built in to touch 809. The corporate results of BANKs will show the real direction to NIFTY as they are still attracting BEAR-BLOW. The INDUSIND Bank, ICICI, AXIS and HDFC duo will lay the road for next course of BANK Nifty journey.  The resistance at 10300 has just crossed to touch 10650 level, from a low of 8600 touched on 4^th SEP-13 but touched a high of 11200 on 19^th Sep-13. Similarly Nifty also made a decent journey from a low of 5320 to 6147 and now ruling at 6100 level.

The CAD issue is not an alarming issue and the FIIs inflow into Equity is rising since the 1^st week of Sep-13. The Rajan effect is still working as the Rupee depreciation is arrested and the recovery is notable. The Banks are allowed to rise dollars generated a fresh hope and simultaneously RBI selling dollars has given right signals to short sellers on RUPEE. The interantional meetings and invitations by the PM and FM may raise some hope of “Best opportunity to Invest in India”, that can translate into some buing interest. The IIP numbers are not encouraing but the Exports did. So there is some GOOD news and some BAD news built in.

The week a head is much dependant on the corporate results from TCS, INDUIND, HDFC Bank, AXIS Bank, HCL Tech, LT and RIL. The results may not kick start a fresh journey unless the US deadlock ease and give boost for some more upside at DOW. The temporary downside may prolong if NIFTY fails to register new HIGH in OCT-13 series. The IT and pharma may do well with their export driven orders. Now the RIL may add better results. So, there is a better chance of crossing the yearly high of 6230 despite of the above said issues.