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.

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.