Before you get the goodies, you have to under go pain first.

This is a monthly chart of Nifty from 2005 onwards and the Fibonacci Retracement  levels are presenting very clear picture in front of us.
If Nifty is able to hold onto 4750 levels on the closing basis on monthly chart than the chances of start of another bull market when global environment become conducive,  are very bright.
But in case we break the 4750 than we are looking at 4300 which is also a long term support for the market, below this level pull up your pants and run because Nifty is going to dogs in this case.
On the upside we can safely assume that the worst is over whenever we start trading above 5400.
In between Its a market for both Traders and Investors who want to bet on long term growth story of India, as i feel there are lots of  largecaps with huge amount of cash on the balance-sheet are just waiting for the opportunity to grow inorganically, one prime example is Reliance Industries.
Traders should stick to there systems and use proper Position sizing and Money management rules by following stop-loss on trades and look for smaller profits rather than playing for that big move.
I have been busy myself, but hope i will be more active than in the past.
Thanks for Visiting and sharing.

It was a hot Tuesday afternoon, with markets trading flat when one of the biggest shocks of the recent time for Indian Stock Market came storming in.
State Bank of India, the largest Indian bank came out with utterly disappointing financial numbers for Q4 FY11.
The Profit After Tax (PAT) tumbled a whopping 99% y-o-y to a meager Rs 20.8 crore, and Stock reacted quickly and crashed nearly 8%.

The company and the whole banking sector itself was feeling the heat for a time since RBI has been raising key policy rates to curb soaring Inflation. The Apex body of banking has raised interest rates for the 9th time since mar 2010. In latest policy meet on May 3 they have also raised the interest rate on savings bank accounts by 50 basis points (bps), or half a per cent, from 3.5% to 4%. This key policy change might bring some smile to a large no. of account holders but it will certainly hit Net Interest Margin(NIM) of Banks, and SBI is is not spared either in fact it will suffer the most because of  large base of Savings Account in its overall deposits.

The Net interest income(NII) was up 20% y-on-y to Rs 8058 crore, along with Net interest margin falling 31 bps to 3.3% in Q4, FY11.
The biggest reason for this shocking Financial performance by this PSB major is higher provisioning, It made a provision of Rs 4157 crore versus Rs 2349 crore a year ago. Out of total provision, the bank has earmarked Rs 3264 crore for NPAs as against Rs 2187.  Gratuity provision rose to Rs 1565 crore as against Rs 46 crore in FY10.The company’s provision for NPAs was up 49% at Rs 3,264 crore versus Rs 2,187 crore, YoY. Its gross NPA at 3.28% versus 3.05%, YoY. Its net NPA was at 1.63% versus 1.72%, YoY. The Reserve Bank of India has mandated that banks must reach provisioning coverage ratio of 70% for the NPAs recorded till September, 2010. (Data Taken from Major Financial portals)

The road forward for SBI is also ain’t smooth with similar kind of provisioning expected in quarters to come the Stock may remain under-performer and lose out on the traders interest.
My view still remains the same, for an investor looking for long term opportunities the recent crash in stock price has only sweeten the deal, so go ahead and by in truck-loads.

In other major development, The Govt. has  increased upstream share to 38.5% of total subsidy burden of about Rs 77922 crore for FY11, Now the Upstream companies like ONGC will have to bear burden of Rs 30,000 crore in FY11, when i first saw the news i thought i should not react to it as in my whole life i have never Invested or given any kind of investment recommendation to anybody for ONGC (used to be the biggest PSU, now sharing the spot with Coal India and IInd largest listed firm, now  coal India and TCS catching up).

A company of this scale and size, was never an investment opportunity according to me, This gem of an company has been turned into stones by we Indians only, As quoted by an investor “ONGC is the victim of most absurd petroleum  products pricing, subsidizing and misusing activities of Indians.”  First we will put up alcohol like tax on petrol and diesel only to increase under-recoveries and then subsidized it by taxmen money and put financial pressure over Fortune 500 companies like ONGC and IOC.
why an ordinary taxpayer pay the price of the diesel used in electricity gen. sets and in luxery diesel sedans.

here i am assuming one is familiar to stock markets and had been involved in trading or investing in markets directly or indirectly.

Fundamental analysis is looking at a business at the basic or fundamental financial level, which means you do analysis and comparison between companies operating in same sectors before you pinpoint on a particular company to park your hard earned money.
Now we come back to how it is done and why it is done, the answer for why it is done is quite simple, wont you like to make smart decision so you can invest wisely with proper information and most importantly with knowing what you are doing so that whatever decisions you take is based on some concrete analysis of data and you yourself are convinced to make an entry into companies list of shareholders to attain the satisfaction and peace of mind knowing.
So now we are left to find an answer to how it is done, one of the most important ways is by using the known financial ratios like:
Earnings per Share – EPS
Price to Earnings Ratio – P/E
Dividend Payout Ratio
Dividend Yield
Book Value per share
Projected Earning Growth – PEG
Price to Sales – P/S
Price to Book – P/B
Return on Equity – ROE or Return on capital employed – ROCE

to get an overview on what these ratios stands for you can use Google or jump to http://niftystrategy.com/knowledge-center/ and if you are left with any doubt you can also ask here.

For fundamental analysis I have one more thing to share, I feel the fundamental analysis is very subjective thing because of lots of factors, one example I’ll give you to make you understand what i am saying is;
one of the most important part of fundamental analysis is “history or background of promoter” in short “who is the promoter” because we really don’t want to invest in a company run by Mr. Ramalinga raju
so tell me is there any possible ratio or financial statement or for that matter software, which can tell the difference between narayan murthy and deepak parekh or can compare them with scamster like Raju. So there are many ways to do the job of fundamental analysis but i do feel one can get the hang of it only after he/she had been involved in stock market for a while, these things come with experience. As you keep researching about different aspects you will eventually learn and you will get your answers related to fundamental analysis.

Thanks everyone, share and discuss more to learn more.
you can also join Facebook page of niftystrategy.com at http://www.facebook.com/pages/Indian-Stock-Market/121754187894140
hope to meet all my readers there.
Thanks

Another reason for market turning in optimistic mode is that the legendary investor  Warren Buffett has announced that he is looking to park some long term money in Indian businesses and is looking out for good opportunity in various sector. His firm Birkshire Hathway is also interested in investing in Indian Insurance market.

The markets has found support near 5350 level on the Nifty this time is now on the verge of touching its first technical Resistance level of 5690  its 200-DMA level. Once market gives a weekly close above this level we can assume that the downtrend of market is over and we can start a fresh up-move any time.

The bull market will gain momentum once we breakout above the long term resistance line on the Nifty weekly chart as shown above.

I Will update with complete analysis of Fundamental and Technical factor weighing the Stock Markets in next few days. Have my interview for IMT-Ghaziabad lined up so i have some time constraints.

You are welcome to post comment or your queries, i will get back to you.

Thanks

Govt. of Japan also declared emergency at two nuclear plants after their cooling systems failed, Prime Minister Naoto Kan ordered evacuation of over 45,000 residents living within 10-kilometer radius of the nuclear plants. According to latest media reports there is some radiation leak has happened in one of the nuclear power plant.

Business activities are halted as Global auto majors Honda, Nissan and Toyota issued statements that they have temporarily closed some of their plants in Japan.The immediate jitter caused by natural disaster in Japan in Global equity markets are over and things are looking stabilized now.

Indian Markets may continue to head towards lower levels as there are lot of technical factors are telling the same story, with 50-DMA now trading below the 200-DMA on NIFTY it is confirmed that we are in a bear grip.

Markets are not showing any kind of strength and now they are at the mercy of bears, one bad news in Global or domestic markets may send a round of panic selling into Indian markets and if 5200 on the Nifty is broken then we are heading back to 4800 mark.

My advice for Investors will be to look out for opportunities in fundamentally strong large cap stocks and buy if any panic selling occurs, traders are advised to trade on the short side with proper stop-loss and also positional traders and swing traders should purchase some OTM call options to hedge their position in case markets bounce-back.

Options traders can also look for”Put Backspread”  strategy, Sell 1 March 5600 Put and buy 2 march 5400 Put, breakeven will be at 5200 and below 5200 gains will be unlimited. Its a limited risk trade and will only stand to incur good profit if markets sold of heavily and test lower levels below 5200.

Your comments, queries and opinions are welcome.

Now going ahead, Wilders 20-Day moving Avg.  is placed at 5620, and 200-DMA is also placed at 5630 , so this level will be the first resistance Nifty will face, for market to end this down move Nifty must close above this level on weekly basis. But right now on the daily charts there is more possibility for Nifty to test the lower levels of 5450 then closing above 5650.

For Investors, remaining on the Sidelines will be the prudent advice because right now its very difficult to predict when this down move will end, For Traders according to Fibonacci Retracement  we can even touch the level of 4770 on the Nifty before making a long term bottom on the monthly Charts, But before that we have very good support coming at 5450 and then 5250 but once we break below 5250 it is expected that all hell will break loose …. see self explanatory attached Chart below ..

Another view is that by looking into daily Chart, we can see that the current correction is milder in nature because we are going down in a parallel channel, we have already touched at two points in the downward channel and not more then 4 touch points are expected ever, so we may see bottom being formed in the Nifty  in coming 2~3 Weeks.

Another technical study suggest that, according to Fibonacci Retracement, we can come down to 4770 and still remain in a bull market as, 4770 is 38.2% retracement for the whole up-move which started when the Nifty touched 2250 in Oct 2008 and ended by Nifty Touching 6340 in Nov 2010.(See the Chart Below)

Also In the Month of Jan this year, the Nifty on the monthly Chart has shown “Bearish Engulfing Pattern” which also suggest that the markets may pause their up-move for atleast few months and may trade in the range-bound manner.

Fundamentally corporate earnings are expected to grow by 15~20% range for the next financial year, and we are already trading at 16 times current year and 14 times on forward earning basis , so things are looking good till now as for the FY11, GDP is expected to grow by 8.6% year on year which is higher then 8% for last Financial year, so economy is growing at a very good pace. Only concern remains Inflation and Fiscal Situation which may become worse if crude oil starts to trade above 100$/Barrel  mark.

I will post next time few fundamentally strong investment ideas to invest in,  and keep holding SBI, Reliance, Powergrid and Bharti Airtel  in your long term portfolios, do hedge your position by Selling OTM Call option and buying a Bear Put Spread, this can be achieved by Selling Out of the money call option in the scripts which you hold in your portfolio and buy 1 At The Money Put option along with Selling 1 Out of the Money Put Option.

Well that’s it for now please pour in your comment, reply and queries, and i will get back to you.

But when things are looking the darkest, i am sure we are on the brink of a new morning.

Brokerage houses, research reports every one is talking about raising cash levels in your portfolios, My opinion is very different, the Nifty broke out from its 1 and a 1/2 year range in September when it moved above 5550 levels with great volume and vengeance . we saw a rally up to 6300 and now we are lingering back to 5700.

If we see the Markets technically, their is not much of a rosy picture out their, so traders be cautioned. my views are only for investors, traders should trade what the charts are telling, and right now charts are pointing towards 5400-5600 band, so follow the charts and use strict Stop-losses and most important of them all “Be Nimble”, swiftly getting in and out is what makes or brakes a trader. Well …. ! trading lessons.. some other time.

Technically things are not supporting what i am suggesting, so i will refrain away from posting few charts but for sure I’d like to post few things which will strengthen my view.

Markets after braking out from a very long range are not going to break down that easily, although below 5600 on Nifty, things will start to look scary and long term charts which are at least holding till now will be in question but for that to happen, we will need a catastrophic event to happen and that to should come as a surprise not after we had already fallen 500+ points from the top.

Its the hot money which is flowing out from Indian Equity Markets and its not a cause for concern, our earnings growth will be 20%+ for Nifty stocks in the Dec quarter as the result will start rolling in, in few days.

After we bottom out, there is a very strong chance that we will have a pre-Budget rally and i am quite certain that we will be at least 10% higher from here in next 3 months time frame.

For people who want to increase their portfolio exposure here are my few picks in Large Cap universe.

Reliance Industries – Structure is neutral on weekly charts, downside limited, reported strong earnings this quarter, A fundamental pick for playing The INDIA Story.

Here the stock is stuck  in  a range for last 2 years , once it break above 1150 then it will start a new long term uptrend, Long term support at 920 so it can be accumulated with a good 2 to 3 years time horizon.

My other pick which is SBI, to know more see here

SBI also declared good set of result for the DEC Quarter net profit is up 14% at Rs 2828 cr.

A good bet for uncertain time will be POWERGRID

As a unique play into power transportation, with monopolistic market Share and Funds accumulated from FPO will provide support to Capacity Expansion program.

Investment Price – 2700

Target -  3500

Stoploss -  2450

With being the largest public sector bank and having the widest branch network, SBI stands to gain from growing wealth of Indian middle -class, Its CASA ratio (Current Account and Savings Account) stood at 47.8% which is one of the best in Industry and better then any private bank in the country. On the back of growth in CASA deposits, shedding of bulk deposits and higher yield on advances will result in improvement on NIM (net interest margin). Due to strong CASA with market share gains and high fee income, SBI’s core RoEs (return on equity) have improved over the past few years and is better then other public sector banks.

The worrying factors are mainly increase in Gross and net NPAs ( Non performing assets) with higher bad debt provisions along with provisions for pension liabilities would pressurize earnings in the near term and the hike in deposit rates without a corresponding increase in lending rate would further dampen earnings but these factors are only going to affect earnings growth in short term and looking at the current price, it seems that has been discounted by the market.

SBI’s Rs 20000 crore rights issue will hit the market next year. The government holds a 59.4% stake in SBI at present and to meet the expansion program and the business development and also the forthcoming Basel III requirements which IFRS will have, there is need of capital raising for SBI to continue its growth story. And with rights issue round the corner the price of SBI should go up as institutional demand will increase.

My Technical analysis in SBI suggest that it is a good Buy candidate right now as it looks correction is over and it has reached the price from where it should bounce back. although it is trading below the important moving averages and looking a bit weak in short term but long term charts are suggesting that till it hold above the 2480 mark, it will continue to perform with the market.

Post your opinion and comments.