Stock Check- Reliance Energy, SBI

Just check how far Reliance Energy has come from the day I first discussed it. from 675 levels to 1200+ levels is actually amazing. Thats almost 80%+ gains in less than 3 months! And this is not a penny stock we are talking about. I won’t be surprised to see higher levels on the stock.

Also check SBI. The stock was at 1350 levels when I first talked about it. Today it is 1950-an all time high for the stock. Again a gain of 45% in three months.

I don’t understand why many investors shun large caps and put their money in “penny stocks” where the risks are far far higher.You can make 50% in a week but you can also lose 80-90% in next week!

In markets “safety” comes first and then comes the “returns”.

Stock Watch -Adani Enterprises

One of our picks Adani Enterprises has again flared up 13%. The stock is now up something like 85-90% in 3 months since I first wrote about it! Now this is called real performance. Some of my clients have made a real killing in the stock!

The trend continues- Crude up, dollar down, stocks up

The world markets are witnessing strong trends. Dollar is a downward trend against major currencies and the fall has been accelerated as the expectation of another Fed cut is being expected in January. The crude is touching $83+ and is trending up nicely.

4900 on the NIFTY came and gone. 5000 has been reached easily. Now we are gearing ourselves for the “final push” in the next week. As I had said before, this market might continue to trend up without significant corrections. All we got in the name of correction was a small intraday dip on Wednesday.

Now is the time to turn a little cautious in the short term. The correction can come anytime now. It is difficult to say if the correction shall be sharp or not. Also, traders might dump the stocks just before the result season begins. I am playing for 5200+ on NIFTY . If markets give us more profits, I shall gladly take them and if it chooses to reverse, I shall be out.

Capital good stocks and Reliance stocks might lead the next leg of this rally.Commodity stocks(oil, steel,cement etc.) are also looking very strong. Even IT sector is showing some revival. I am suggesting people to get out of Infosys in the 2000-2050 range. Re enter after this level is crossed.

Sector Analysis

Banking sector seems to very bullish with stocks like SBI, Axis Bank, Kotak Mahindra Bank, HDFC bank,HDFC etc. reaching their lifetime highs. Now this might be in anticipation of an RBI rate cut but we really don’t have to care. I have been riding Kotak Bank from 590 levels since June and see the kind of returns it has generated (55%+). I have been overweight on the banking sector for a while and continue to do so.

Watch ICICI in the banking space. The stock has finally broken out and looks promising.

Steel sector is also coming back into action and stocks like Tata steel, JSW Steel, SAIL, Bhushan steel etc are all making new highs every day. Keep a watch on the sector.

Auto Sector is also waking out of its slumber and stocks like Maruti, Tata Motors and Ashok Leyland have begun their upward journey.

IT is also trying to make a comeback but I would still avoid the sector as it is still in a downtrend. Same holds true for Pharma sector. Except for an odd Glenmark Pharma or Divi’s Labs, nothing looks really bullish.

Capital goods is also back in action and continue to be steady performers.

Oil and gas sector has been a leader in the markets for quite sometime and it may pass the leadership baton to other sectors now.

In search of next IFCI

Bulls are very much in control on the dalal street. Though some selling was seen around 4980 levels, it doesn’t worry me that much.

The action is very much focussed on low priced scrips. After I missed the RNRL move, I have been looking more closely at such scrips which can be the future IFCIs in the medium term.

Two of them hold the most promise. One of them is JP Hydro which I had recommended to my clients last week when it was trading around 52-55 levels. The scrip is now trading close to 80 levels and looks a decent bet for people who like to go for big returns! IFCI gave us 100% in less than 3 months and we are still riding the bull in IFCI. Who knows if it can touch 200 in next coming months?

The next one is Nagarjuna Fertilizers. I have been riding this scrip ever since it crossed 20+ levels. That was like a 9 year high for the stock! The movements look similar and if things go well, this too can zoom quickly in the coming weeks.

At the same time, please be cautious with such scrips as they tend to be very volatile.

As far as markets are concerned, continue to ride them as NIFTY prepares itself to make fresh upmoves. It might not harm to be a little more greedy with our profits till the markets reverse.

Lets hope for the best and be prepared for the worst

Good luck!

Markets cruise ahead-no targets in sight!

When this move started in the beginning of the month, my sense was that 4800-4900 might be reached. The markets have gone past these levels with relative ease(surprise! surprise!). To be honest with you, I have been pleasantly surprised by upmoves in the likes of RPL and RIL. When REL crossed 800, I said 900 is possible in couple of weeks. Today I see the stock around 1100.Two weeks back RPL was at 120 when I talked about it and today it is 170. This is the power of trends for you!

Now that 4900 has been reached in such a short time, I see a lot of sceptical faces on the street. Almost everyone is “waiting for a correction”and is therefore predicting a correction. This also implies that lots of market participants are feeling uncomfortable seeing this sharp move.Somehow they are not able to explain the moves!

All the focus should now shift to profit preservation and adding on to the profits. This move can easily take us to unthinkable levels. The game is more about keeping a clear head and executing your strategy.

There is no need to waste your time thinking about the next target on NIFTY/SENSEX. 5000 might offer some resistance on NIFTY.My feeling is that markets might continue to move up without significant corrections. I shall continue to ride NIFTY while it goes for the moon!

So just ride your winners and manage your risk. Let the rest of world find the “reasons”. By the time they have enough reasons on their hand, the markets might choose to reverse!

(For those who want to short this market should consider this- when GOOGLE was listed at $100+ in 2004, people thought it was expensive. Today it is trading at $550 and continues to trade higher.Would you like to go short on such a stock?)

Markets on a roll- NIFTY at 4900+, IFCI makes a sudden move

Markets are again on a roll and stocks are moving all over the place. IFCI has made an upmove and a stock is up 14-15%. Now I know any of us can explain the move by saying that so many institutions have bid for the stock! But who knows whether they have bid at 85 or 125 or 150?I remember analysts talking about 52 as fair value for the stock!

Ride the giant moves in the stock.The first time I talked about the stock on the blog(about two months back) it was 50!

We were talking of 4800-4900 on the NIFTY sometime back which has been easily reached. What next? Any guesses?

What is the “reason” behind the market moves?

Today the biggest question on everybody’s mind is “why are all Reliance stocks moving up” but all I feel you should be bothered about is ‘Have you made money riding these stocks?”

I see people cooking up all kinds of “stories” to justify the move. Some say it is a scam while others say that Ambani brothers have joined hands again!(How intelligent?)

This is similar to what fundamental analysts do- find a reason and then issue a buy or sell. People find it easy to follow because it is ‘logical”(so smart!). Markets do the opposite of this- they first move and then comes the “why of it”. And sometimes the “why’ doesn’t even exist
Lets ask ourselves what might happen if the same Reliance stocks stage a strong reversal on Monday.The same guys will say that “the stocks were too expensive, so they had to correct” .The technical analyst shall say that “all of them were in overbought zone” so they had to fall.(Once again-how intelligent ?)

Reasons don’t make you the money.In hindsight I can justify almost “anything” and “everything”. I am surprised by the confidence such people have. Let me give you an example.

A few days back Mr. Nirmal Jain of Indiainfoline was ‘absolutely bearish” on the markets and saw that bearishness lasting for 6-9 months. (How accurate?) Today he again comes on TV and says that markets are going to “stay bullish’ for coming quarters. Earlier the ‘reasons’ for bearishness were “subprime problems” and today the reasons for “bullishness” are “India’s secular growth”!

(When markets were falling in August,I remember writing on the blog that one thing is “positive” in these falling markets- all the experts have become bearish! And incidentally markets bottomed out the same day itself (August 22).Read what I had written.)

Now check any of my previous recommendations. Do I ever ask you to buy because of ’some news” or “inside information”?

Many of you might not have bought Reliance Capital at 1040 thinking that I didn’t give you a “strong reason’ to buy it. And also the stock was already “too high” or ” too expensive”.Now you can’t buy at 1550 because what was high and expensive at 1040 is definitely more expensive and higher at 1550!!

Please read my post-Infosys-a fundamentalist view to get a better understanding of what I am saying.

Similarly many people got annoyed when I gave a short sell call on Cipla when it was at 200. Three months later Cipla is(-15%) and whereas a RPL is (+50%). Now if you were buying CIPLA because it has already “fallen too much” or that it is a “fundamentally good company”, then you can continue to add it at lower levels till you get your “cost price”.

Coming back to markets-I am looking forward to the next week with extreme focus and caution. As many of my clients are sitting on decent profits, all I am asking them is to manage their risk and ride their profits.It is important to note that this is the time when most of the money shall be made or lost in the short term. So fasten your seat belts and enjoy the action. At the same time “remain in control”.

Good luck with your Reliance stocks!

Gold hits 28 year high!

Gold is hitting multi year highs due to dollar weakness. People are buying gold to hedge themselves against inflation.Also India’s demand for the yellow metal is increasing.You might not see the same strength on Indian exchanges because of rupee strength.Read this story.

Do you believe it- RPL up 12%?

Now I asked you to play oil by buying RPL/ RIL and play the rupee dollar by shorting IT. But who’d have thought that RPL shall be up 12% in a day?

Rupee breaches 40 level

A new wave of downtrend has started in dollar vs the rupee. Read this update. I wish RBI had allowed currency trading in India!Next stop for rupee is 39.5 and the next one is 38. please check my earlier posts on rupee dollar in the currency section.

Yesterday was a good time to get out of large cap IT stocks as every cat and dog was rising.

Next stop of Infosys could be 1700-1750. If you want to take a countertrend trade, you can consider that! TCS, 950 looks possible.

Indian Markets- the road ahead

Yesterday was a phenomenal day for global financial markets. Equities hit a new high, Crude hit a new high and Gold also hit a level never seen since 1980s. Infact some of my clients have made more money on Gold and Crude rather than on stocks. The trend is up, up and up…

A NIFTY closing at 4732 was a surprise to many. I remember sending a note to my clients last week saying that I am seeing patterns which indicate a huge 6-7% move on either side (up or down) in US markets. Now they were advised to be cautious because the “direction” of the move was uncertain. I tiled more towards a bullish move after a decent closing on Friday on Dow. But I was still sceptical till Tuesday afternoon when the markets really perked up and closed at highest point of the day. Sometimes “price” is a good precursor of things to come.

What next? We’ve had a strong rally and now everybody is asking if this rally can take us past the 5000 levels. It all depends on the “left out investors”. As and when they “jump in” the rally might get over. Also I am sensing “some overconfidence” in the air which might again prove fatal. Profits make you feel like a “champion”! So lets keep our feet on the ground and not get carried away. Also this might be a good time to stay away from “media noises” and just be vigilant with our stock positions.

I am not going to take a guess and burden myself with “predicting the top”. All I am asking people is ride this upmove and be ready to give back 5-10% of their profits on reversals.I am not asking anyone to get completely in “cash”. On the NIFTY 4800-4900 is my first stop but even it get backs to 4600, I won’t be surprised.

And if you are a “long term investor”, you should not be bothering yourself with watching the markets everyday. The volatility might increase your blood pressure!