NIFTY WEIGHTAGE CHANGE..1996 TO 2013

Nifty’s changing face

BHAVANA ACHARYA

The might of the services industry has grown over the years, with the entry of sectors such as software and telecom.Remember Nagarjuna Fertiliser & Chemicals? The fertiliser stock was at one time a market-moving bellwether, forming a part of the Nifty index at the time of its inception. Fellow index-mates then were yesteryear favourites such as MRPL, Chambal Fertilisers, Madras Refineries (now CPCL), IPCL, Kochi Refineries, IFCI and GE Shipping.The Nifty index was launched in April 1996, with its base date set to November 5, 1995. Since then, the index has delivered an annual return of 9.6 per cent.Those staying putThe year 1996 was also among the years that saw more active churning in Nifty components, with six stocks being replaced. The then Hero Honda Motors, Apollo Tyres, and the two fertiliser companies were some stocks that bowed out in the Nifty’s first re-jig. Instead ABB, East India Hotels and M&M found their way into the index; 1998, 2002, and 2007 were other years of more index replacements.In all this mixing up of the Nifty through time, 13 stocks have never been replaced at any point. One is, of course, Reliance Industries, despite its sporadic mergers and acquisitions. Its weight in the index now at 7 per cent (free-float market cap) is little changed from the 6.6 per cent (full float) in April 1996.The other stalwart is SBI, which in fact had the heaviest index weight of 8.3 per cent (full float) in 1996. Others are Hindustan Unilever and ITC. The not-so-obvious ones which stayed put are Hindalco Industries, Ranbaxy Labs, ACC and Ambuja Cements. Three Tata stocks — Tata Steel, Tata Power, and Tata Motors — have also always been a part of the Nifty.In 1996, consumer-themed stocks — auto, hotels and FMCG — held a weight of 24 per cent in the index. Now, it’s 22 per cent. But exclude champion ITC and the consumer stocks’ collective weight drops to just 11 per cent. bowing to serviceThe might of the services industry has grown over the years, with the entry of sectors such as software and telecom. Banking, finance, telecom and software together account for 42 per cent of the Nifty weight now. In contrast, services held just about 27 per cent at inception.The rising influence of the service sector has come at the cost of manufacturing. Sectors such as fertilisers, steel, metals, textiles, and tyres have either seen their weights drop, or completely disappear over the years.With both Indian Rayon and Arvind Mills booted out in 1999, Grasim is the textile industry’s only index representative now. Indian Aluminium Co exiting in 1996, Essar Steel and Indo Gulf Corp following it in the next two years drastically reduced the weight of the steel and metals sectors.(This article was published on December 14, 2013)http://www.thehindubusinessline.com/features/investment-world/niftys-changing-face/article5460110.ece

INDIA GROWTH STORY REBOUNDS..!!!

Bad times aren’t forever

As more good news trickles in, investments in India will regain vigour.
The last few quarters have been challenging for India — with GDP growth declining sequentially, worsening foreign trade triggering a sharp depreciation in the currency, and inflation, interest rates and budget deficits well above comfort levels. However, there is ample reason to believe that India’s woes are coming to an end. This conviction stems from the exemplary resilience shown by the economy in the face of past adversities, a closer analysis of its economic cycles, and visible signs of a reversal in recent trends.
Basic resilience
There is some amount of anticipation, even anxiety, in the investor community over the outcome of the upcoming general election in India and the impact of global events, such as the tapering of quantitative easing by the Fed.
However, while the effects of adverse events — political or otherwise — impact on India’s prospects in the short term, both the Indian economy and its capital markets tend to tide over these in the medium term.
On the political front, India experienced its most volatile political period in recent history from 1996 to 2000 when it saw five governments at the Centre under three different prime ministers and a war with Pakistan. Yet, GDP growth over the period (March 1996 to March 2000) averaged 6.7 per cent and the Sensex gained by nearly 50 per cent.
Two key events in late 2008 precipitated the slowdown in India: the Lehman collapse followed by the terrorist attack on Mumbai within three months. India’s GDP growth fell to 5-6 per cent in the next few quarters and the Sensex crashed to below 10,000. But the nation emerged stronger from the crisis, marked by a return to the high-growth trajectory of 8 per cent plus and a doubling of the Sensex by late 2009.
Economic Resurgence
The last three economic cycles before the current one lasted for 5-6 years (between lows): 1993 to 1998, 1998 to 2003 and 2003 to 2009.
The lows are characterised by a bottoming-out of almost all macroeconomic indicators — economic growth hits a trough and foreign trade, government finances and interest rates are stretched.
The resurgence of the economy post the cyclical lows is usually fast and steep, with an even quicker appreciation in the capital markets and valuations. In mid-2003, GDP growth had fallen to a multi-year low of around 4 per cent, while fiscal deficit and inflation had ballooned to 6 per cent each. The stock markets had pared gains from the IT boom and foreign investment had slowed, reflected in a weakening currency.
Subsequent quarters started showing signs of rapid recovery and growth picked up to over 8 per cent in less than a year, foreign investments surged and the rupee recovered almost 10 per cent — all these while inflation held steady. The stock markets almost doubled by the end of 2003, and the Sensex galloped to treble by early 2006.
The story was no different in 2009 when the past year had seen the global financial crisis unfolding. Growth had moderated to levels of 5-6 per cent, interest rates and inflation were in high single digits and budget deficit was expanding. Consequently, capital markets had crashed to half their boomtime highs. Just like the previous cycle, the economy recovered rapidly. Beginning 2010, India clocked consistent GDP growth of 8-9 per cent for five to six quarters, buoyed by a moderation in inflation, interest rates and budget deficit.
Towards the end of 2010, stock markets had doubled from the 2009 lows, adding a trillion dollars in market capitalisation. The rupee had also strengthened by 10 per cent.
It has been four years since the last cyclical low hit India in 2009, and as on previous occasions, most economic parameters are at multi-year lows. The worst seems to be behind us, and the cycle is poised for a turnaround.
Welcome signs
Some signs of an uptick are already evident. In the July-September 2013 quarter, exports grew over 10 per cent compared with the corresponding period last year even as imports registered a decline on the back of moderating gold and oil imports. Consequently, current account deficit for July-September plunged sharply to a little over $5, a fourth of the level seen in the same period last year.
The Government expects to contain CAD at 3 per cent of GDP in the fiscal ending March 2014, which is almost 40 per cent lower than in March 2013. Together with continuing robust capital inflows, this should lend crucial support to the rupee in the medium term.
Therefore, political and other events have failed to make a lasting dent in the Indian economy in the past, and capital markets surge much faster than the improvement in headline macroeconomic indicators.
As more good news trickles in over the quarters, investments in India, including private equity, will regain vigour. Greater predictability, particularly towards the second half of 2014, will induce fence-sitters to pay premium valuations to close deals. The right time to invest is now when valuations have still not run up much, and not later in 2014 when indications of an economic turnaround emerge.
A spurt in the markets and valuations over the course of next year will also set in motion a flurry of PE exits, including PE-backed IPOs. Again, PEs would do well to start preparing portfolio companies for an exit now, so as to make the most of the opportunity when the tide turns.
(The authors are co-founders, Sage Capital.)
(This article was published on December 21, 2013)

http://www.thehindubusinessline.com/features/investment-world/macro-view/bad-times-arent-forever/article5487127.ece

Time Value of Money & FUTURE ...!!!

De-jargoned: Time value of money
The real value of money essentially has to consider the impact of inflation on the purchasing power
Lisa Pallavi Barbora

If somebody gave you a choice to receive Rs.50,000 now or after three years, what would you choose? This one is simple, you will choose to receive the money now. Intuitively, you know you can do a lot more with the money today and you can even invest it so that three years later, it is worth more. Now if somebody gives you a choice, would you prefer Rs.50,000 today orRs.60,000 after three years? This is a harder choice to make and you need to calculate the time value of money to decide. There are two important thing you need to consider for that—the interest you can earn on your money and the rate of inflation or the change in purchasing power of your money.
Future Value of moneyThe future value of money can be calculated to tell you how much your money will be worth after a defined period of time. Let’s say you leave the Rs.50,000 you have received today in your savings bank account. Then after three years, it will be worth Rs.56,341 assuming that the interest offered on the savings account is 4% and the interest due is compounded quarterly.

The formula for calculation is: amount*(1+(interest rate))^number of periods. So, in this case it can be calculated as 50,000*(1+(.04/4))^12.

Alternatively, if you had instead invested in a three-year fixed deposit, with annual compounding your return would amount to Rs.64,751 assuming a 9% per annum rate.
Now that you know the future value of your money, you can say with confidence that you would prefer to have Rs.50,000 today. But remember that this is the nominal value of money.
Nominal vs real value of moneyThe real value of money essentially has to consider the impact of inflation on the purchasing power. Inflation measures the rise in cost of goods and services. In other words, every year things you buy become more expensive by a certain margin and this margin is measured by inflation. At present the Consumer Price Index (CPI), or what’s referred to as the retail inflation, is around 11%. This means the total value of your basket of goods has increased 11% in the last year and your money is worth that much less. If you consider that in the last year or so the CPI has been around 9-10% and extrapolate 9% (per annum) as the average for the next three years, the value of your nominal Rs.64,751 sum is still only Rs.50,000. This happens because at an average inflation rate of 9%, each year your money is worth that much less. You have to discount the value of your money by the inflation figure to ascertain the real value.

The calculation is simple: amount/(1+discount rate)^number of periods. In this case the discount rate is the inflation.

Understanding the difference between real and nominal value will help you make a better choice for investing money today and enhancing the effectiveness of the future value of your money. Lastly, you have to consider things such as taxation on earnings to know the final money in hand.
http://www.livemint.com/Money/Xol3HKN4bGm0DixwI8CJRL/Dejargoned-Time-value-of-money.html

Nifty target at 6,481--Barclays..!!!

Barclays sets Nifty target at 6,481 for end-2014

PTINEW DELHI, DEC 24:Indian equities may have a roller coaster ride next year given the fluctuating sentiment and modest fundamentals, Barclays said, setting a target of 6,481 for the Nifty for end-2014.Despite the possibility of the economy bottoming out, the investment cycle could remain weak for another couple of years and earnings downgrade should continue.“We maintain our defensive stance in this environment, expecting only modest equity returns from the current levels,” Barclays said in a research note.According to the global brokerage major, the sharp performance of Indian equities since the beginning of September 2013 clearly indicates that the market has shrugged off the taper fears and now appears much more optimistic on a stable and strong political outcome from 2014 elections.The National Stock Exchange’s 50-stock index Nifty has surged over 733 points since September this year. On September 2, 2013 Nifty was at 5,550.75 points and it increased to 6,284.50 as on December 23, 2013.Corporate fundamentalsHowever, corporate fundamentals continue to remain weak with earnings growth of the BSE-100 being propped up significantly by the rupee’s depreciation.“We remain defensive and set a Nifty target of 6,481 for end-2014,” the research note added.The negative trigger for the market include — a weak mandate post the 2014 elections; NPA risk for banks and INR depreciation.On the positive side, the key factors are — expectations of a strong turnaround in GDP growth, a win by BJP in the parliamentary elections and an improvement in capital spending.According to Barclays, the key overweight sectors are IT services, healthcare, energy and consumer discretionary and the key underweight sectors are financials, industrials and materials.(This article was published on December 24, 2013)

http://www.thehindubusinessline.com/markets/barclays-sets-nifty-target-at-6481-for-end2014/article5497448.ece

BULLs in CONTROL..BUT...!!!

The latest news on GAS PRICE hike has triggered a new wave of Stock rerating of RIL, ONGC and Cairn. The markets strength will come from these sectors. The current up move is a decent show by the BULLS to keep the BEARs at bay. The Rajan effect has given booster dose to FII investments. The FII invested close to 1.1 Lakh crore in 2013, they have recorded highest ever investment in 2010 as per reports. The real challenge lies in keeping their faith in Indian growth story & markets. As of now experts are favouring the BULLs and markets may touch new highs. Nifty shall not trade below 6130 level. The momentum needs to be sustained at least till the DEC13 expiry, for further consolidation. So long as Nifty stays above 6220 the markets are likely to make new high of 6435 then to 6550 level. 

The banking sector is differently working and looking for South ward. Bank Nifty has to trade above 11550 level for it to perform in future. The ICICI has to trade above 1130, Axis above 1309, SBI above 1781 and HDFC bank above 689 levels. 

The court order infavour of the lenders and against Vijay Mallya, the knee jerk reaction may impact United Spirits, so negative impact on the stock tomorrow likely to force the stock to seek lower level supports at 2530 level or 2380 is not ruled out. This can give good opportunity for Diagio to go for creeping acquisition. Similar, but not that much serious is on the INFY. The high profile Bala exit may have negative impact. The EXIT door is wide open to as many as 9 seniors, opted for greener pastures out-side. 

The other scenario which is favouring BEARs when the NIFTY trades below 6130 level, is that the recent RUNUP is “ENOUGH is ENOUGH”. The US QE Tapering in the coming months may accelerate, more pain stored in for emerging markets like INDIA.The political equations definitely not favouring CONGRESS and the BJP case is no different. So lot of confusion may arise after two months and the BEST case to SELL is NOW. So build now to cover later. The CAVEAT in this scenario is that the GOVT. may do all that is need to prop the markets high, the RBI may slash CRR and Repo rates to boost the economy and a renewed investment EUPHORIA in the markets may trap the BEARS. 

The MidCap rise is stronger than the fall shows that the markets are in BULL grip. Those who has the holding capacity of one year and two time averaging CAPITAL, then shall try to buy at the current levels, other wise go for “Stop-loss Based Momentum Trades”. 

I have suggested to BUY Wipro, Auro Pharma and Escorts which made decent run in the recent times, exit 50% at current prices.

INFY, RELIANCE,SBI, TATA STEEL SUPPORTS & TARGETS....!!

Pivotals: Reliance Industries (Rs 893.6)
YOGANAND D.December 21, 2013: 
The stock was volatile in the previous week, though it rebounded after testing the lower boundary of the sideways range at Rs 840. It surged 4.5 per cent on Friday, turning its earlier loss into a gain of 3.5 per cent. With this rally, the stock has slightly breached the upper boundary at Rs 885 and short-term outlook appears positively biased. There has been an increase in daily volumes in the past three trading sessions. Moreover, indicators in the daily chart have entered the bullish zone implying upward momentum. The daily moving average convergence divergence indicator has signalled a buy. The stock has leapfrogged over its 21- and 50-day moving averages indicating bullish momentum. Short-term traders can consider going long with a stop-loss at Rs 880. Targets are Rs 910 and then Rs 930.
The stock extended its medium-term sideways consolidation in the wide band between Rs 770 and Rs 930. Strong rally above Rs 930 will pave the way for a rally to Rs 955 in the medium-term. Key supports to watch for next week are pegged at Rs 860, Rs 840 and Rs 820.
State Bank of India (Rs 1,751.8)
This stock was also choppy last week and finished on a marginally positive note. However, its short-term trend remains indecisive. It is likely to move sideways in the range between Rs 1,675 and Rs 1,920 in the ensuing weeks. Short-term trend will be decided only if the stock moves out of this phase. Hence, traders should tread with caution as long as the stock is in this zone. Significant immediate resistance is at Rs 1,810. A rally above this level can test the upper boundary at Rs 1,920 in the near-term. Resistance beyond this level is placed at Rs 2,015 and Rs 2,065.
On the other hand, a strong tumble below Rs 1,675 can drag the stock down to Rs 1,600 in the near-term. Next important support is at Rs 1,500.
Infosys (Rs 3,552.3)
Infosys was in the limelight as it moved out of the sideways band and has jumped 5.3 per cent, with good volume, for the week. It is nearing the key resistance at Rs 3,600 mentioned in this column last week. But the indicators in the daily chart are about to reach the overbought levels signalling minor correction is on the cards. Therefore, inability to rally above Rs 3,600 will be the cue for short-term traders to take profits off the table at that juncture. An emphatic rally above Rs 3,600 can take the stock northwards to Rs 3,750 and then to Rs 4,000 in the medium-term. Investors with medium-term perspective can remain invested with a stop-loss at Rs 3,000 levels.
On the other hand, a decisive fall below the immediate support at Rs 3,450 can drag the stock down to Rs 3,350 and then to Rs 3,250. Subsequent important supports below these levels are at Rs 3,150 and Rs 3,000.
Tata Steel (Rs 417.8)
The volatile movement continued in the stock and it marginally advanced in the previous week. As long as the stock trades above Rs 370 its short-term trend stays bullish. Only a strong move above the immediate resistance at Rs 423 will reinforce strength and accelerate the stock higher to Rs 440 and Rs 450 band. In that scenario, short-term traders can initiate long positions with Rs 423 as a stop-loss. Immediate supports are at Rs 410 and Rs 400. But a decisive fall below Rs 400 can pull the stock down to Rs 386.
Medium-term trend for the stock has been up since its August low of Rs 195. Investors can prolong their long holding with a stop-loss at Rs 320.
(This article was published on December 21, 2013)

http://www.thehindubusinessline.com/features/investment-world/market-watch/pivotals-reliance-industries-rs-8936/article5487244.ece