Adani Enterprises- Is it being operated?

Adani Enterprises-one of my early stock ideas on the blog is reaching for higher and higher levels. It is having a dream run from 250 levels to 1050 levels from July 2007.

Many of my clients who have seen it go 4 times in last six months are wondering if the stock is being driven by operators. Everytime it goes up, it makes them more nervous!

I explained the same issue to one of my uncles who is a qualified chartered accountant for last twenty years. He was very candid in admitting that many CAs in this country specialize in “window dressing” of balance sheets of public companies! Thats why he himself never relies on balance sheets to take his investment decisions. He actually wondered how we manage to make money despite knowing the fact that the stock might be “operated”.

Thats one of the advantages of being a trend trader. Have a look at the chart and see how you could have benefited.

Long live the uptrend in 2008!

In many ways this market is reminding of 1999 days when the end of December was extremely good! That was the first time when I had observed that what the “media writes or says” is not always correct. “The FIIs are sleeping”, “Markets shall be rangebound”- I used to hear exactly the same noises in Dec 1999.

In some ways the euphoria is also similar!

I hear a lot of news in Financial services being the hottest sector and stock markets being the easiest way to make some quick money . Also people are feeling that there is “no way” you can lose in this market!

Not bad for my business but some bad signs for the individual investor . So easy to get trapped. So should one get cautious and just sit in cash?

If you went into an Adani Enterprises at 300 bucks and are riding it all the way to 1050 in less than six months, your job is easy as of now. But historically this market goes bad in the March to May timeframe. It might be because of pre-budget hype built in the market.

I’d just suggest you to be extra cautious this time.Your job is to preserve your gains and not get over leveraged if this market goes to ridiculous levels. 7000+ on NIFTY is not something which will surprise me. I had written about 6300 levels by December end and we seem to be very near that.

All I wish is that this uptrend lives for another couple of years. At the same time, you should not forget that one can easily get corrections as deep as 50%!

I am also happy to see the emergence of the “local investor” and this is just the beginning of a trend. In next 3-5 years we might dominance of “local money” in the Indian equity markets.

Next big trend might be the emergence of “individual investor/trader” in the Indian stock markets. I feel that sooner or later the returns from MFs shall become “average” or “below average” and this will see more and more individual investors jumping into the markets!

My best wishes for the “individual investor” in all of you. May all of us grow wiser to take care of our money and be wealthy!

Is there a bubble building up in the Indian markets?

As a trend trader, you might be wondering as to why am I even asking this question. As someone who is profiting from this sustained uptrend in stock prices, I might even sound a complete hypocrite in asking this question.

The answer lies in ” excessive risk”.My intention is that we keep our gains rather than squander them away because of our greed.

It looks like the frenzy in mid cap and small cap sector is also trending up and trending up quite fast!Now as I say, it is not our job to question the trends or how far will they go, at the same time we have to act responsible in managing our risks.

The December of 2007 is reminding me, in some ways,of Dec 1999. At that time the buzzword was “technology”,this time is “hidden value”, “power”, “infrastructure” etc.. And it is the retail investor’s fancy with sub 100 an sub 200 price stocks, which is a little concerning. I am seeing a lot of buy calls on mid and small caps with people giving all sorts of “reasons” to justify an upmove. Interestingly, the markets have been responding with follow up moves on such stocks.

I had experienced a similar thing back in 1999-2000 when stocks(like HFCL, Global Tele) were driven to the moon before the bubble burst! So this time, I’d advice you to be more cautious. I know people might tell you -”this bull market is different” but you have to trust your eyes,ears and knowledge.

Of course I am not calling 20,000 as the market top or suggesting that this market shall not go to 25000 in coming weeks or months. This frenzy can continue for another couple of weeks to months. All I am suggesting is to “stay rational” and not be driven by “greed”. This shall ensure your “safety” in turbulent times.

There is a difference in entering Omaxe at 400 and entering at 600. Even if Omaxe corrects to 500, an entry at 400 would still make you profits but an entry at 600 might burn you badly.

A stock like XL Telecom at 200 was a good bet but entering at 550 might carry “huge risks”. So do not chase such stocks if you don’t when to “get out”.

Entering a JP hydro at 52 and entering a JP hydro at 130+ (all in a space of 3 months) is a different ball game.

What I have been observing is that trades which used to give u 10-20% in 2-3 weeks are yielding 50-70% in the same time.

All such parabolic moves often result in sharp reversals, usually ranging between 20-40% in a matter of days!And as you know timing such reversals is next to impossible.So if you are not careful you might be on a sticky wicket.

This is a good time to preserve your profits rather than running after those extra returns. And if you still want to enter, keep your risks in mind.

Infact, for the past two weeks I am focussing more on quality names and liquid large caps. We have made enough money in midcaps and are happy with it.

So be cautious and remain on a constant vigil. This is not meant to scare you but just an attempt to shift your “focus” back to risk!
You guys can also read Infosys- a fundamentalist view to get a historical perspective. This might be helpful in designing a strategy.

Stock Watch- XL Telecom

See how one of our Stock Ideas XL Telecom is moving up higher and higher. From 200 to 540+ in less than three months. This is called power of trends! Don’t fight them, don’t argue with them, just follow them.

Geojit,Indiabulls and JP Associates trend higher

Couple of our stock ideas like Geojit, Indiabulls and JP associates are trending up nicely and going to the moon!

All these are multibaggers and continue to be real money spinners.

NIFTY and SENSEX at all time high

Yesterday,the NIFTY and SENSEX both closed at all time highs which was encouraging for the bulls. Today the global cues are bad which might bring a knee jerk reaction in the morning. I would still be taking a bullish stance till we see complete break down.We need to closely observe if the buying emerges at lower levels or it is a case of “bull trap” where we need to be prepared for sharp reversals.

Edelweiss IPO is listing today and it is sure going to be a big bang listing.IPO investing is surely giving good returns these days and that too without much anxiety

Stock Watch- Omaxe

Omaxe is one stock which we had picked about two weeks around 400 and the stock continues to trend up nicely. Keep an eye on this stock. This has the potential to be a “rocket”.

This is another example of how price trends begin to take shape before the news is out. Don’t you think there are smart people in the market who get a whiff of what is going to come and start accumulating the stock? We don’t claim to be be that smart but we try to follow such “smart people”! This allows us to buy “before the news” and gives us the edge we need in the markets. Also, this keeps us away from the frenzy of “news based” decision making. This is the edge I intend to bring with my products also.

Coming to markets, the mid cap and small cap rally continues while large caps are languishing. It remains to be seen as to how long will this trend continue.

Stock Watch- IDFC

Check how IDFC is slowly trending up and breaking new highs(currently at 225). This remains our favourite stocks for long term trend following. We have also built some short term trading positions in the stocks right form 200 levels and the stock can reach 250 levels in the coming weeks.

Ride this beauty till it continues to trend up.

Does more information make you a better investor?

With the explosion in financial media, we are surrounded by loads of information. You get it on TV everyday, you read it in magazines and you get it on blogs like mine!

But does more information necessarily make you a better investor?

I was reading a research paper on the above topic which had the following findings:

• Investment in financial information increases with wealth and risk tolerance.
• Portfolio Sharpe Ratio (return per unit of risk) decreases as investment in information increases, mostly because of a positive relationship between information-gathering and portfolio volatility. For example, those collecting financial information 2-4 hours per week have a Sharpe ratio 27% lower than those not collecting at all.
• Trading frequency increases, and portfolio decision delegation and diversification decrease, with investment in information.

Have you observed such things with your own portfolio or investments? In my personal experience I have found all of them to be true. I’d specifically like to emphasize on

“Trading frequency increases, and portfolio decision delegation and diversification decrease, with investment in information“

This behaviour is exhibited the most by individual investors. All this happens because more information leads to investors being “overconfident” in their own abilities. This overconfidence leads to increases in trading activity and higher account volatilities. You get news and information on a minute by minute basis and you are tempted to try out every single idea which is presented to you!

Sometimes, this overconfidence is reflected in having less diversification in the portfolios. This is because we get so confident of “our research on a particular stock” or of the “news” that we tend to invest all our money into it! A recent case in point might be RPL or RNRL. Many times I have seen just 2-3 stocks in an investor’s portfolios. All this results in “high risk” for the investor(reflected in higher Sharpe ratios).

To me a  lot of information means a lot more confusion and chaos. I personally feel that it doesn’t necessarily make you a prudent and wise investor. Sometimes “less is more”.

UTV-Another stock which went from “high to higher”

UTV is another stock in which you might have benefited from buy high and sell higher strategy. Check the chart below and see How the stock moved from 600 in September to 1050 in 3 months. Would you even dare to put a target on such stocks?

Stock Watch-Prime Securities

With brokerage sector hotting up again, check out how one of our earlier stock ideas-prime securities is making new highs. From 75 levels in June to current levels of 215, this stock has been a “threebagger” in six months!

Stock Watch- Geojit Financial

Geojit Financial-one of our stock ideas is really breaking out today. Keep a watch on this. It has finally got some momentum on its side. This one has really tested our patience and has been an underperformer. Lets see if it is able to play a catch up game!