Budget Rally or New Bull Run?

Markets have started rallying again. Analysts have started speculating about the beginning of a new bull run. Pessimism has been pushed aside and optimism has again taken a front seat. Don't get unnecessarily sucked in at higher levels on the back of speculative and liquidity based rally before Budget to be announced on July 06 (Rail Budget on July 03). It is quite possible that the rally may last a bit longer even post-budget if the announcements are even trifle better than market expectations. Another reason that the rally may last a bit longer could be that markets would like to wait for India Inc's quarterly results for more clarity on earnings which would be announced in the month of July.

But, how much more legs can this linear rally have? Remember, the ongoing rally is largely liquidity led which can dry up anytime. When sentiment turns, the same analysts which are forking out psoitivity and optimism will tweak their views depending upon the situation.

I would say sell 10-20% of your portfolio at higher levels. Sell at higher levels on every rallying day in small quantities. Especially, square-up at least 70% of your Trading positions on or before July 06 to be on a safer side.


Kalindee Rail and Educomp Solutions:

Both Kalindee Rail and Educomp were in hibernation mode in today's market after a steep rally in last few sessions. But, they'll again start rallying before their respective 'B' day. Railway Budget is to be announced on July 03. So, Traders should exit and book profits to the extent of 70% in Kalindee until one day before Rail Budget and remaining they can still consider holding until July 06. Investors can still hold Kalindee with long-term perspective or they can as well sell 20-30% holding and stay invested in remaining. The entry call for Kalindee Rail was given at Rs.135/- as both for Trading and Investment perspective.

Sell 70-80% of your holding in Educomp stock from today to until a session before Budget. You can carry on with 20-30% of this Education counter for post-budget rally, if any. Government can no longer leave Education spending and reforms at bay. However, booking gains is must, do not remain stuck with trading calls. This stock may reach dizzying heights even from current levels of Rs.3500/- in a matter of next few sessions, more aggressively as we approach July 06.

In my posting dated June 02, Time to Re-think Strategy, I had recommended readers to exit part positions in expensive large-cap valuations and remain in cash or shift to Defensive counters like Dabur, Cipla, ITC, etc. Cipla has appreciated 20% since then and Dabur is showing around 10% gains from that day. On the other hand, heavy weight RIL is down 10% from the day of recommendation. The recommendation was only for part-liquidation or shifting strategy and not whole holding. L&T and BHEL are almost at same levels since then, but now with a positive bias.


Which Stocks shall lead before Budget:

These are not Trading/Investment calls. The time to take speculative position before budget is a bit behind us. Though, it may prove worthy to hold these stocks for next few days if you already hold them at lower levels. The below mentioned list is just a summary/guide as to which all stocks may find favour in next 10 sessions based on speculation and drama before Budget announcement:

1) IDFC
2) BHEL/L&T
3) REL/IVRCL/HCC
4) PFC/REC/LIC Hsg Fin.
5) Educomp/Everonn/Aptech/NIIT Ltd.
6) Kalindee/Titagarh Wagons
7) Torrnet Power
8) Rallis India
9) IOC/HPCL
10) SBI

Some erstwhile trading favourites based on Budget theme like Alok Industries, Bombay Dyeing, NMDC, MMTC, Coromendal Fertlisers, etc. have lost momentum in very near-term. It remains to be seen whether some of these stock can regain their lost sheen before the 'B' day.

NMDC sought support around its crucial support levels of Rs.360/- as discussed in the 'Comments' section by me, but the stock has still not picked up the momentum from there. The stock needs to cross Rs.395-405 zone to pick any kind of further momentum. Whereas MMTC needs to cross Rs.33500-35500 levels for signs of futher optimism in the counter. Textile favourite Alok Industries needs to cross Rs.24.50-26.50 for any fresh upside rally.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Hurdles In Following Strategic Plans

In the 'Comments' section, an interesting query has been posted by Abhay pertaining to the likely hurdles in following the Strategy for Investment at different levels.

In the query, Abhay has registered some sort of apprehension on the use of strategy and consequently missing any upside momentum as stock prices keep moving upward. Though, he has not expressed this in writing, he is somewhat confused as to what should be done in scenarios when stock prices keep on moving higher on every bout of selling that an investor/trader uses by way of strategy.

The feeling could be roughly described as below:
(A) I sold some quantity of stock at Rs.X, but later the stock price went up to Rs.X+1.
(B) I again sold some quantity at Rs.X+1, yet again after I sold the stock price went up to X+2.
(C) Now, if I continue to sell some more at Rs.X+2, what if the stock rises to X+3?
(D) Hey, You never know... the stock may ultimately top out at an exuberant X+5 levels. If so, why should I sell now?
(E) In the meanwhile, what is Market Crashes down in near future?

Abhay's Query:
I had L&T at Rs.950/- I sold my 30% of L&T at Rs.1400/- after 2 days.
It rose to Rs.1650/- What should have I done, sell again or what? Strategy for investment plan is great... but it does have some limits. Can u please suggest the readers and me a better strategy, if any? I have short-term perspective on L&T.

In this posting, I shall try to address the above query in detail regarding how to use the strategy for Buying or Selling more fruitfully to avoid any 'Missed-out' Feeling. Whether we can use some other strategy? The posting seems to be a bit long, but i shall try to keep it as simple as possible:


The Pyramid Concept:

Lets take an example of a ‘Pyramid’. It is typically tapered at the top and it gradually broadens with more space as we go down towards its base. It consumes the broadest space at the base and most narrow at the top.

In strategy for buying and selling stock, we have to somewhat collate the same strategy as mentioned above for a Pyramid. The profits are small and limited as the stock starts its upward journey from your cost price. But, as the stock finds itself in the midst of momentum rally, the profit scope broadens. This is what will should try to inculcate in our strategy for trades to squeeze the maximum benefit from its follow-up.

Let me come directly to the query of Abhay in specific relation to his trade in L&T which he had bought at Rs.950/- for Trading purpose.

Trading Strategy:

1) Abhay has bought L&T @Rs.950/- (Let us assume he has bought 20 shares with an investment of Rs.19000/-)

2) Since he has bought this Infrastructure and Capital Goods stock just in time before an all-important event of Budget announcement, we will likewise strategize the trade keeping that in mind. So, we can factor in that the stock shall make bigger moves before the budget as the stock is placed at the sweetest spot to benefit from government’s emphasis on Infrastructure spending and development.

3) We will first create a strategy to sell the stock at specific intervals or at specific price points. Like, for example, the selling should be in small quantity at profits in initial stage. However, the selling should gain more aggressiveness as the stock rallies higher and we move closer to the base of ‘Pyramid’. And, at last stage of excessive euphoria, our selling should reach peak levels (at the bottom of the pyramid) when others are buying aggressively.

4) So, going by above planning schedule, we will strategize to book profits in L&T in 3-4 phases at different price points. The selling would be done in such a manner that Abhay should benefit more with every rally even after selling at lower levels but still at profits.

Phase 1:

First we would sell 20% (20% of 20 shares = 4 shares) of the stock at Rs.1200/-. Amount redeemed Rs.4800/- with a profit of Rs.1000 accrued on 4 shares bought at Rs.950/- and sold at Rs.1200/-.

Phase 2:

Second we would sell a large chunk of 30% (30% of 20 shares = 6 shares) of L&T at Rs.1450/- assuming that the stock has already appreciated a whooping 50% from Abhay’s cost of Rs.950/-. Amount redeemed Rs.8700/- with a profit of Rs.3000/- on 6 shares bought at Rs.950/- and sold at Rs.1450/-. We have got rid of 50% of the stock held until this phase- 20% in Phase 1 and 30% in Phase 2.

Phase 3:

Now, to the surprise of everybody the stock appreciated to Rs.1650/- in a matter of few weeks. No problems, we will sell another major 30% (30% of 20 shares = 6 shares) of our L&T scrip at Rs.1650/-. Amount redeemed Rs.9900/- with a profit of Rs.4200/- on 6 shares bought at Rs.950/- and sold at Rs.1650/-. At the end of this phase, we have almost sold-off all our stocks with barely 20% of the stock still left to be sold. But, herein lies the caveat. One should not under-estimate the ability of return generation from these left-out 20% stock, if they're sold at higher prices. The reason being, these remaining 20% would be sold at the 'BASE' of the Pyramid, which would yield attractive returns even from a small quantity.

Phase 4:

Now, we are skeptical whether the stock will move to Rs.1850/- or not since the stock has almost doubled from Abhay’s cost price in a compressed time horizon. Still we are left with a crucial 20% (20% of 20 shares = 4 shares) of the lot which Abhay had originally bought at Rs.950/-. Lets suppose that L&T moves to Rs.1850/- we will sell all the remaining 4 shares at this price. If this price does not come true, Abhay will have to maintain a Trailing Stop Loss of Rs.1650/- on the breach of which he has to sell all the remaining 4 shares. In fact, he can as well observe a Deep Trailing Stop Loss of Rs.1450/- if he is a high risk trader (in case he can bear some risk of holding the stock to once again test his luck for Rs.1850 sort of levels). We will presume that Rs.1850/- levels did not turned up and Abhay sold the remaining stock at Rs.1650/- as per our Trailing Stop Loss Strategy.

5) The Rising Pie: If you notice in above 4 phases, the profits have gone up in increasing order of value. Abhay managed to sell 50% of the stock in Phase 1 and 2 with substantial profits of Rs.4200/-. However, the same amount of profit of Rs.4200/- also got accrued from Phase 3 itself, indicating that a larger share of profits is garnered as we move up the value chain of the Phase wise strategy following.

6) If you go back and visit the phase wise selling as described above, one would notice that we sold the first chunk of 50% shares at a healthy average of Rs.1350/- and the remaining 50% sold at Rs.1650/-. The average of all shares sold comes to Rs.1500/- which is still 50% higher from Abhay’s buying cost. Once can argue, that the returns would have been 100% if Abhay would have sold all his stocks at Rs.1850/-, but is it possible to time your exit at the highs as per one's wish. It is almost impossible to time exit at the peaks even for the best of the best Analysts or Fund Managers.

7) Stock Reversal: One another scenario would be, suppose what if the stock stops its upward journey at Rs.1450/- and does not test higher levels from there? During such time, Abhay would have already sold 50% of the stock based on guidelines in Phase 1 and 2 as mentioned above. But, for the remaining 50% of the stock held, Abhay will have to maintain a Trailing Stop Loss based on Technical levels which could be around Rs.1200/- or Rs.1300/- as the case may be depending upon stock to stock.

8) Now, suppose the stock reverses after testing the Trailing stop loss levels of Abhay, than again, based on Technical levels Abhay (as a trader) shall re-enter the same counter by buying the stock on an upward break-out above the previous highs of L&T at Rs.1450/- with a strict stop loss and a probable target of Rs.1650/-. Traders should always trade with the trend.

9) Where is the Opportunity? Suppose the stock tests Rs.1450/- and starts its decline for a long time to come. In such case scenario, if Abhay would not have booked even the 50% gains as mentioned in Phase 1 and 2, we would have felt terribly uncomfortable in selling at lower levels. At some point, even his cost of Rs.950/- would be tested in some vicious down cycle dragging all his profits to nil. At such times, use of Strategy (including stop loss strategy) would come in handy in aiding a trader from taking any emotional decision for his trades.

10) In the long run, use of strategy will help you in entering and exiting your desirable stocks in a swift and a gradual manner without hurting your preset targets and disallow your decisions to be dictated by emotion-led calls. Use of strategy would also mean that a trader does not get stuck into his trade at any specific levels and gets to benefit from all the up cycles and down cycles of the industry.

Using Strategy in Investment:

Taking the same case scenario of Abhay from a long-term Investor’s perspective. Abhay bought 20 shares of L&T at Rs.950/-. Now, in a short span of time Abhay stands to earn a smart profit of Rs.500 per share at Rs.1450/- on L&T. What should he do?

11) Although Abhay has invested with a time span of 5-10 years, if he wishes to makes use of his portfolio investment held in L&T as a ‘Passive Trade’- he can sell 30% of the his stocks invested in L&T at around Rs.1450 to Rs.1650/-. By this, he will ensure that he is able to book profits in 30% of the stock held. But even still, he has a major 70% of the stock still invested to gain from any future upside momentum in the counter.

12) Buying Back Lower: In longer-term, Abhay will definitely get an opportunity to buy this 30% chunk back at lower levels of say around Rs.1200 or say Rs.1100/- or say even Rs.900/-. At that time, he can buy back those 30% chunk on dips, which sums up to nothing but lower averaging of his over-all cost for owning the stock. More aggressive but Passive investors could as well sell 40-50% of the stock around Rs.1650/- where valuations are more expensive for the counter. They can as well buy back some qty around Rs.1400 followed by Rs.1200 and even Rs.1100, as the case may be.

Footnote:

The follow-up of this strategy does have some specific hurdles. But, these hurdles are not strong enough that investors/traders can willfully shun the use of this strategy. The benefits from the use of the strategy clearly out-weighs the hurdles from the follow-up of the same.

Its somewhat similar to SIP (Systematic Investment Plan) facility that one avails of while investing in Mutual funds- investing in small lots at regular time intervals irrespective of market levels in order to benefit and brace from market volatility. Strong and Constant Perseverance in using the strategy for longer times to come will prove that the strategy has more pronounced benefits than hurdles.

The strategy concentrates on the aspect that when you book profits you dont book only part-profits and ride the up side momentum with the remaining shares held. On the other side, in the down trend, it ensures that you buy only in small but handful quantity on every larger dips. It sees to it that you an benefit in averaging on any further down side as the down leg deepens. Most of all, it ensure that your RISK is cut on both sides in any market condition.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Mid-cap Review: Alok, PFC, Kalindee & Videocon

Mohit has posted a query in the 'Comments' section regarding Fundamentals, Trading and Investment perspective on some good fundamental Mid-cap stocks like PFC, Kalindee, Videocon and Alok Industries.

Bulls,
Can you write something or suggest some stocks which are good at current valuations or say if you can give some buying range for long term stocks. What are your views on Alok, PFC and Kalindee Rail on CMP from trading and long term view. Thanks.

Closing Prices as of June 17, 2009:
Videocon CMP: Rs.175/-
Kalindee Rail CMP: Rs.176/-
Alok Industries CMP: Rs.23/-
PFC CMP: Rs.196/-

Speaking about long-term Value proposition of Alok, Kalindee, PFC and Videocon - all of these 4 stocks (mid-caps) seem to be a good bet even at current valuations when contemplated from long-term perspective.


Determining Value in Optimistic & Pessimistic Phases:

For these 4 mid-cap counters, what we have seen till now is their stock price performance from Sensex 8000 to 15000 journey, the period of journey which can be co-related with the times of crisis and global slowdown. We're yet to see these stocks run on steriods like other mid-cap counters, which could be witnessed in the next leg of big rally.

But, gradually, as the economy comes out of the crisis and credit problems, the stock prices of these 4 mid-caps counters shall reflect more exuberance in the next leg of the bull rally from here. In times of optimism, the basis of determining valuations is different from that of pessimistic times. During pessimism. investors factor in the company's debt ratio, forex management, cash flows, promoter pledging of shares among many other factors.

During optimistic times, investors tend to be more occupied with fundamentals and earnings of the company and most of all Prospects of the company going forward rather than micro-factors which come under surveillance during bearish phases. So, the next leg of the rally, could be more return accruing in these four lagging but healthy mid-cap stocks.

Going Slow:

However, I am of the view that markets are a bit over-heated in medium-term perspective. So, it will correct substantially- if not now than at some point post-budget period. So, one can buy these stocks in a staggered approach rather than going in for bulk quantity, if the perspective is for long-term investment.

I may be wrong on my view towards markets and it can keep on moving higher even after Budget, but i need to hold some specific view for markets rather than going view less- and hence i take a stand that markets are a bit over-heated in the short-term and Budget would be the decisive event for the markets next big movement direction.

Trading Perspective:

From Trading perspective also, all the 4 can be bought (especially Kalindee & PFC) around current levels with strict Stop Losses for your trades. Stop Loss for Videocon could be around 145 levels, Kalindee could be around Rs.135 levels, PFC could be around Rs.160 levels and for Alok it could be around Rs.18 level. These Stop Losses are only for Traders and not Investors.

Staggered Approach:

Coming to the point of Ranges for Accumulation of these stocks, i would like to Again repeat that.... You should not have in mind the 'ranges' to buy for these stocks. Because that would ideally mean you're looking to TIME the entry into these stocks. And, there is no certainty that you will get these stocks at your desired prices. May be, it would be a better idea to re-view or hold such ranges for stocks which are extremely over-heated and you could wait for these stocks to correct substantially to start accumulating. Selective large-caps shows the tendency of being over-heated.

So, best approach would be to divide every Rs.10 that you wish to invest in to 3-4 parts and invest them on larger dips as the correction kicks-in. From VALUE perspective all the 4 mid-caps are still lucrative in terms of their stock prices. All are good fundamentals stocks and will provide very handsome returns during the next big rally. You must have patience to wait out until another such rally happens.

(Note: My forward looking statements in this posting for these 4 mid-caps does not mean to convey that they're roaring Buys at current prices. Just that their stocks prices could still be value yielding from current prices in the long-term horizon. One should remember, that if markets correct substantially in future, these stocks wont be able to show any contrary trend to the markets and even they will correct. May be, their correction would be limited to some extent based on the value in these stocks.)

Investors can also add Gitanjali Gems, Indiabulls Real Estate and Time Technoplast to the list of 4 mid-caps mentioned above for the long-term Value Investment perspective.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Structural Shift in Momentum

Change of Baton

1) From what was clearly a tapered rally from expensive Large-caps to under-valued Mid-caps, is now turning its head from Mid-caps back to the Large-caps. There was no possibility of the benchmark indices moving higher without the support & participation of the leading heavy weight counters.

2) The expensive heavy weight stocks are back in the vogue what with an all-important event in the form of Union Budget not so far away. However, mid-caps are not the absolutely forgotten lot. There is still a bullish tend prevailing amongst the mid-caps but in ones which are left behind in the race of mid-cap momentum or the ones that stand to benefit majorly from the Budget announcements.


Passing the Parcel

This shows to a great extent that mid-caps, which had under-performed big time during the last 3 months to their larger counterparts, are no more in 'Comfort Zone'. Speaking comparatively, even large-caps are no less cheap than their smaller counterparts. But, perhaps, they can support the ongoing phase of euphoria more strongly on the base of their superior fundamentals.

It is difficult to predict the top of this 'Mini' bull phase of last 3 months. But, we can keep tracking the signs the markets are providing. Like, for example, we saw Large-caps bloom in the initial part of the rally from Sensex 8000 to 10000 levels. Later, from Sensex 10000 to 12000 levels, we got to witness large-caps being valued in the 'Fair Valuations' Zone. At the same time, mid-caps which had under-performed from Sensex 8000 to 10000 levels , started catching in the later part of the Sensex journey from 10000 to 12000 levels.

In the later part of the excess euphoria from Sensex 12000 to 15000 levels, based on combined effects of excess global liquidity & re-rated fundamentals of India on the back of Political stability and likely Reform movements, we witnessed large-caps attaining euphoric valuations which needed support on the base of 'Forward Earnings' estimates. Mid-caps & Small-caps rised vertically as if there is no tomorrow.

Now, we're witnessing that the baton is being passed on from mid-caps to Large-cap as benchmark indices are up to test newer highs. These are times of euphoria where 'Greed' factor takes the front seat and if investors do not exercise caution, they may be in for some sort of pain when markets witness even a mild correction in the rally. Investors should adhere to patience and not make fresh purchases until there is a meltdown of the over-exuberance in the short to medium term horizon. Though, they can ride the momentum on the back of their already invested portfolio.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Indian Markets: Upgraded but still Synchronized

Indian stock markets rallied from lows of Sensex 8000 levels to 12000 levels followed by a thin volume jump of 2000 points on the back of positive verdict of Indian public on the Political front. And now that markets is gradually sustaining above Sensex 14000 levels, it can be termed as up gradation of position of India on the global map more so on the back of positive and stable outlook on the Political front.

But, that does not mean that Indian stock markets may have 'decoupled' from global markets. India still remains in sync with global momentum and trend. The benchmark indices of Indian markets still moves in sync with positive global momentum. Likewise, when the ongoing positive global momentum receives a jolt, it would be difficult for India to shrug-off the trend beyond a point.

However, we can say that there is, indeed, an up gradation on Indian fundamentals amongst the Emerging market clutch. And this we will see when global markets correct, that Indian indices will enjoy an up gradation to the extent of Sensex 2000-3000 points (even when there is correction) on the back of reform-oriented and disinvestment-led stable government on the Centre for next 5 years led by UPA.

Call Dated: June 04, 2009
Short-Term Trade: (Strictly for High Risk Traders)

Buy Educomp (CMP Rs.2950)
Buy Around Rs.2800-3000
Target: Rs.3330-3530-3700
Stop Loss (SL): Rs.2740-2585
This trade is recommended strictly for High risk Traders.
The second stop loss of Rs.2585 is for those traders who can bear deeper SL.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Status of Trading Calls

Call Dated June 01, 2009
Buy Bajaj Holdings & Investment
Buy Around: Rs.370-400
Target Rs:422-470-500
Stop Loss: Rs.355-340

Call Status: (CMP Rs.490)
First 2 Targets Achieved with in 2 sessions.
Book At least 60-70% Gains
Profit Return: 20%

Call Dated May 28, 2009
Buy Reliance Capital
Buy Around: 930-950
Target Rs.1060-1125
Stop Loss: Rs.845

Call Status: (CMP Rs.980)
None of the Targets Achieved till now.
Call remains Open.
If satisfied with 3% Returns, Sell 20% of the Stock held.

Call Dated May 25, 2009
Buy PFC
Buy Around: Rs.190-194
Target Rs.225-240
Stop Loss: Rs.169

Call Status: (CMP Rs.203)
None of the Targets Achieved till now.
Call remains Open.
If satisfied with 7% Returns, Sell 30% of the Stock held.

Call Dated May 22, 2009
Buy Kalindee Rail (Investment + Trading Call)
Buy Around: Rs.125-140
Target: Rs.158-180
Stop Loss: Rs.120

Call Status: (CMP Rs.174)
1st Target of Rs.158 Achieved.
2nd Target of Rs.180 almost Achieved.
Call to Book 30% Profits at Rs.158 already given earlier.
Today At CMP Rs.174 Book another 30% Gains.

30% of stock sold at 17% Profits
30% of the stock sold at 30% Profits today.

The above strategy is for Traders.
Investors can sell 30% of the stock at CMP Rs.175 with a 30% Gains.
Remaining 70% to be held by investors for some more time at least.

Call Dated May 20, 2009
Buy BHEL
Buy Around: Rs.1900-2050 (Average Rs.2000)
Target: Rs.2300-2500
Stop Loss: Rs.1800

Call Status: (CMP Rs.2140)
None of the Targets Achieved as yet.
Call remains Open.
If satisfied with 7% Returns, Book 30% profits at CMP 2140.

Call Date May 20, 2009
Buy Videocon Industries (Investment + Trading)
Buy Around Rs.105-120
Target: Rs.150-160
Stop Loss: Rs.90

Call Status: (CMP Rs.193)
Sold 40% Profits at Rs.150
Sell another 30% Profits at Rs.193/- Today.

40% stocks sold at Rs.150 at 25% Returns
30% stocks sold at Rs.193 at 60% Returns.

The above call to sell is for Traders
Investors can hold on to this stock for long-term or
Sell 30% of stock held with 60% profits.

Call Dated May 14, 2009
Buy Gitanjali Gems (Investment Call)
Buy Around: Rs.45-75

Call Status: (CMP Rs.135)
Sell 30% of stock held at 70% Profits
Hold Remaining 70% as Investment.

Call Dated May 14, 2009
Buy Alok Industries (Investment Call)
Buy Around Rs.12-16

Call Status: (CMP Rs.26)
Sell 40% of stock at 90% Profits

Call Dated May 8, 2009
Buy Suzlon
Buy Around: Rs.68-74
Target Rs.92-111
Stop Loss: Rs.66

Call Status: (CMP Rs.157)
Both Targets Achieved
Book Maximum Gains.

Call Dated May 8, 2009
Buy HCC
Buy Above 65
Target: Rs.72-89
Stop Loss: Rs.61

Call Status: (CMP Rs.119)
Both Targets Achieved.
Book Maximum Gains.

Call Dated April 24, 2009
Buy IDFC
Buy Above 82
Targets: Rs.95-109

Call Status: (CMP Rs.125)
All Targets Achieved
Book Maximum Gains.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

Time to Re-think Strategy

Indian equity markets have rallied a whooping 80% in last 3 months. The rise was linear in fashion and a non-stop rally as if resembling a 'Mini' bull run. Indeed, valuations of most of the large-caps, especially selective index heavy weights, are no more in the 'Comfort Zone'. In fact, some stocks are way ahead of their current earnings performance & to support their high valuations the Analyst community have to use Forward Valuations method while recommending such stocks to their audience.


How to Shield oneself from Euphoria?

During such times, when euphoria is strong and momentum seems unstoppable, investors don't like to sell stocks with valuations beyond their comfort zone. The hope that stock will rally forward even from prevailing high valuations, does not allow the investor to book profits. Their calls are led by emotive decision to keep holding their paper profits. They are reluctant to book even part-profits.

During such times, there are few options that investors can exercise to take cautionary steps. I will divide this strategy into 2 different options in detail:


1) Book Profits in Small parts & Accumulate Cash:

Under this option, selling should carried out in those stocks where valuations are beyond the support from current earning performance. As markets rally further, the ability of such counters to appreciate further in terms of their stock prices is limited to the extent of their valuations. In fact, many-a-times, it so happens that until the over-all market momentum is up, such stocks may rise along with markets but not in line with market performance.

It is advisable to book profits in small parts on every rise in such counters. When markets starts it course of correction, these will be the stocks which will be hit hardly in the initial part of the down leg as panic is fraught where valuations are excessive or fundamentals are not up to the mark. Over here, in large-caps, the fundamentals may be sound; but valuations may be on the higher side, thus triggering sharper correction when market downturn begins.

As smaller tranches of these stocks are sold, investors can accumulate cash from sale of such stocks in anticipation of market weakness over a period of time.


2) Shift to Defensive Category Stocks:

If you don't wish to follow the above mentioned strategy of staying in Cash during an up turn, the other optional strategy could be Selling aggressive stocks or stocks with high valuations. And later switch-on to stocks from defensive category and low beta characteristics. The stocks from Defensive space holds limited potential of correcting when markets are in mid of a down turn.

At the same time, investors' wish of not liquidating even a small part of their portfolio could also be fulfilled as they do not have to liquidate their portfolio but re-jig it depending upon the current situation. They can still take advantage of the up turn in the markets to the extent of price appreciation in the defensive category stocks which of course would be limited to a certain extent during the up turn.

Summary:

1) Liquidate a part of portfolio especially where valuations have gone for an over-drive. Accumulate cash to the part of the portfolio that is liquidated & use it once the down turn is more sustained and the over-exuberance is out of the context. However, you can still benefit from any incremental rally from here in the remaining major part of the portfolio they should would be still intact and invested.

2) Liquidate a chunk of the aggressive stocks and shift the accrued money to stocks from Defensive category which tend to correct relatively much less than over-valued stocks when the tide turns on the bourses. This will also ensure that you need not sit on hard cash just as the up turn wears out its last stage of euphoria.

Some stocks from Defensive Category:
Cipla, Dabur India, ITC, Marico, Glaxo Smithkline Pharma.

By using the strategy of latching on to Defensive stocks, your portfolio may underperform for a while unless the up turn continues its remaining steam. But, one another possibility which can not be ruled out is that, if indeed this is the last stage of the ongoing 'Mini' bull phase, usually such euphoric rallies end with a last leg of rally in all left-out stocks and sectors including Defensive stocks.

So, if this scenario turns out to be true, you can still benefit from price appreciation from Defensive category stocks too. One such recent example is a lagging 'Hotel' sector which showed a good move even on a slightest of a good news in the industry.

(Note: The above mentioned strategies can be used not just in the context of over-heated large-cap stocks but also any other stocks be it mid-cap or even small-cap which have appreciated substantially over last 3 months. Take, for example, you can sell some 20% of your portfolio where the stock prices have over-heated in last 10-15 sessions and shift to Defensive stocks from the accrued money.)

Dated: June 01, 2009
High Risk Call -Opportunistic Trading Bet:

Bajaj Holdings & Investments (CMP Rs.390/-)

Buy Around: Rs.370-400
Target: Rs.422-470-500
Stop Loss: Rs.355-340

Rationale: This mid-cap stock has been an under-performer in the ongoing mid-cap momentum. Bajaj Holdings & Invst. is the holding company for Bajaj Auto & Bajaj Finserv. Both the companies have rallied sharply on the bourses in last 2-3 months.

But, this holding company has not much to show in terms of price appreciation. It has fared only as a market performer & not an out-performer like other mid-cap stocks. Traders who wish to play on this aspect of under-performance can bet on this stock with above targets and Stop losses.

Its a high risk call as markets have appreciated sharply to the extent of Sensex 1000 points since last 1 week.

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