March 15, 2012

Budget Tomorrow

Finally the D-day is here. All preparations have been done and the great General Budget Circus will play out tomorrow. Hope it does not create a storm the way Rail Budget did which you would know if you are not in the jungles of Amazon... As I said, Mr. Trivedi has definitely appealed to a rational mind. His new statement that he does not want Indian Railways to go Air India way speaks a lot about how practical and pragmatic this fellow is. There are not many people who would understand, care to admit and defy someone like Mamata for this. He is definitely a 'like' on FB from me.

Coming back to General Budget, then today's Economic Survey had all the predictable information and hardly anything new was mentioned. It is hopeful that Growth will pick up and rates will drop. Zee News gave good summary of Economic Survey highlights and it can be seen here.
Disclaimer: I am not related to Zee News and I gave the link just because I liked it.

On the sidelines, RBI's monetary policy meeting too ended without any action (a.k.a. rate cut) however the statement made by them raises the hope that there can be a rate cut when they meet again in April. That will be a good move for economy as well as for home loan holders (I included). Present high bond yields are a deterrent in the form of high borrowing cost for everyone and it needs to come down.

As for the budget tomorrow... Fiscal Deficit Target of 4.6% seems like stuff of dreams as of now and it will be violated by a wide margin. Situation is not expected to improve with Brent Crude near $125 and Rupee at 50 vs Dollar. Various commodities (of which we import a lot) are also getting dearer. 2G Spectrum sales may bring some respite and additional much needed mullah for Government in next fiscal. Still the target deficit in next fiscal may not be less than 5%.

Economic Survey showered lot of praise on Services Sector and there are chances that it may see some positives. Increase in Import Duty for some goods is also on cards particularly for our imports from China. That may be good news for domestic Telecom and Power companies. However, the largest beneficiary of this budget may actually be the common man for a change. With the drubbing that Congress got in latest elections, it may try to woo back it's middle class vote bank through budget. Specifically because of this reason, there may be some stupid populist move in budget which may put off the market. Abolishing STT (highly unlikely) is the kind of move which can really propel markets to upside.

Lets see if NIFTY Chart gives any clue...


NIFTY is at 21EMA and I feel that we may see a bounce back tomorrow. As for trading, I will prefer if you revisit the Straddle and Strangle Posts before deciding anything.

NIFTY 5400 Call is at 118 and 5200 Put is at 42. This Strangle will have upper break-even at 5560 and lower break-even at 5040 level of NIFTY if you carry them till expiry. Now I don't expect we will see these levels immediately but booking half of the gain of one of the position tomorrow itself during the day can be a good strategy. I mean to say that if you enter in to this (or similar) Strangle tomorrow morning and then during budget book profits partially on one of the position to cover most of your costs could be one way of trading budget (I am kicking myself for not making this post yesterday so that we could have entered today itself). E.g. if NIFTYgoes up by a modest 50 points and Call Option Premium is now at a level which also covers your Put Option Premium, you can square off half of your position to recover your monies and let the remaining position wait for a suitable time before expiry. I am asking you to book some profit because Budget moves can be real ephemeral and gains can be made or lost quickly and as usual I like to play safe.

Will post tomorrow during trading hours if something worth mentioning comes up. Wish you good luck for tomorrow and have a happy budget. Happy Trading goes without saying.

March 14, 2012

Rail Budget

Rail Budget, well, it turned out a damp squib as usual to say the least. Still I am not disappointed totally. Also we were not off the mark by long way... None of the stock showed any positive movement. Shorting was an option but none of this stock trades in Derivatives segment and direct shorting of stocks without owning them is something I don't advise. While NIFTY did not show any positive movement (induced by budget), stocks were bad. Just to mention;
  • Titagarh Wagons Down 4.5%
  • Kalindee Rail Down 7.5%
  • Kernex Microsystem Down 5.5%
  • Texmaco Rail Down 7.0%

Rail Budget, with hike in passenger fares, has already created a storm. However Rail Minister at least got his priorities perfectly in order... Country First, Family Second and Party (TMC) Third. It will be a pity if TMC removes him from Rail Ministry.

Tomorrow is the day of Economic Survey. The survey is the summary and analysis of the state of the Economy and its performance in previous fiscal. The survey contains various key economic figures and indicators and it is usually a precursor in determining what lies ahead in General Budget. It is Governments reading of the state of the Economy and how it fared in last year. Depending on survey, Government prepares budget for coming year. All about Economic Surveys can be found here.

I will be back with more on Budget... either tonight or tomorrow.

March 13, 2012

Rail Budget Tomorrow

As I had promised, I am back with budget special posts. Tomorrow Mr. Dinesh Trivedi will present his first Rail Budget. Apart from some new Trains, I guess Fares will be hiked first time since 2003. There is also a possibility that some kind of Safety Cess may be born tomorrow to improve security situation of our trains.

I am listing some of the stocks that are watched around rail budget.

  • Titagarh Wagons
  • Kalindee Rail
  • Kernex Microsystem
  • Stone India
  • Texmaco Rail

Now, I do not follow any of these stocks fundamentally but we can definitely look at the charts.




Kernex is already anticipating positives from budget and has been going up for last 3-4 days. Kalindee and Titagarh have not shown any particular budget related moves.

I would not like to trade any of these stocks with the budget. I would rather play on NIFTY which looks good after bouncing from the support mentioned in earlier posts.


I would not be surprised if NIFTY as a whole moves in positive direction as compared to individual stocks. I may open a small position on the Long Side depending on the general tone of the budget speech if it sounds rational and does not utter too many populist things to start with.

All this is too uncertain but one thing is very likely... Railway Budget may arrive in Parliament tomorrow in a suitcase and not in a bag like last three years.

I will be back with a more definitive post on General Budget soon.

Happy Trading.

March 09, 2012

DLF Limited

Lot of stuff has been said about DLF in the last week. Veritas, in its research report casted strong doubts over DLF’s accounting practices and its dealings with DAL (DLF Assets Limited). Year after year, DLF showed a large chunk of its sales to DAL without getting paid for it. So in effect, DLF on its books showed property sales to DAL on one side and showed receivables of almost full amount from DAL on the other side for balancing. From FY07 to FY11, through this accounting practice DLF inflated its Sales by Rs 11236 Crores and Profits by Rs 7233 Crores. After doing so for many years without any payment from DAL, it merged DAL with itself in 2011.

DAL is a DLF Promoters company and its merger with DLF was done at ridiculous valuations. This is cheating in most open terms but allowed very well by Indian laws. This is why I do not like fundamentals as all these years DLF books showed good topline and bottomline growth. Balance Sheets and P&L Accounts hide much more that they reveal and only after careful scrutiny you can find loop holes which have been exploited by these companies. Many a times, even trained persons fail to spot these irregularities (remember Satyam) then what are the odds for lesser mortals like you and me here.

Well, Price and Volume data does not lie (in most non-penny stock cases) and fortunately for us it is not in the hands of these companies to publish it. So let’s look at the chart now…


Chart is no good and does not help much. All moving averages are beyond reach of the price as of now and they are drooping too. MACD or RSI are not inspiring any confidence at the moment either.

First level which can be called as some support is around 171-175 for DLF. It is created by the lower trendline as well as it is the same level from where stock has rebounded twice/ thrice in last six months. Rs 100 valuation as created by Veritas will also acts as mind magnet for various players. Veritas has couple of success stories backing them up (Kingfisher, Reliance Communication, etc) where they identified the cancer in early stage and that will play at the back of mind of any person dealing with DLF. The inquiry initiated against DLF by Ministry of Corporate Affairs (MCA) if done correctly, will very well decide what lies ahead for this Script (Life Milegi ya Tawe pe fry hoga).

Fundamentally I have some unidentified allergy with real estate sector and I believe that ethical behaviour and real estate sector do not (or cannot) go hand in hand. This applies to ‘one of project builder’ to ‘big blue chip NIFTY component companies’ alike. Now this kind of business practices can get you to top very fast but cannot sustain you there for long. Real Estate sector in India is not plagued by rising input (Cement, Steel) costs or by non-availability of labour. What stops it by realising its true potential is widespread malpractices across the breadth and width of entire sector. Too much political interference, bad brokers, crooked builders, one sided agreements, non-fathomable (to layman) beaurocracy and greedy investors are some of the factors which keeps the general public away from real estate. The scene is so bad that the real pain for a person starts after he books a flat which actually should be a point where he should starts to relax.

Bad and heart breaking stories are too many to ignore in this space and I personally do not like them. Hence I do not get in to real estate stocks for these (foolish as they may sound) reasons.

Technically too, there is nothing positive in the charts so as of now it is ‘stay away’ in my deeds as well as advice too.

Happy Trading.

Disclosure: No Positions at all.

March 07, 2012

Market at 200d EMA

NIFTY is at 5207 as I am writing this. It had gone down to a low of 5183 this morning so far. Considering that US Markets are down by over 1.5 %, I would consider less than half percent drop at NIFTY as a reasonable performance.

Remember 5190 is our 200d EMA and it is a crucial level. A firm close below this level can change lot of equations. So lets see how it goes.

Will try to chip in with a EOD post. Till then happy trading...

March 06, 2012

Market Today

Oh, I did not realize that my post today morning would find its way straight to the ears (or eyes) of Market God. It went for a hike of about 125 points immediately after my post. However by the end of the day, NIFTY was back to where it started. This move prompted me to check the charts once again. As you can see, the trend line this time was going somewhere close to 5200 as against 5240-5250 in last post.


In any case a closer look was warranted and I did take one.


So the real support (of this trend line) is around 5190. This figures corresponds with 200d EMA and it will be a strong support. If you believe (I unofficially do) that NIFTY is primed for a move up, it will be a good level to create some (small) position. Keep a continuous eye on NIFTY if you really do.

I am itching for writing on couple of scripts; DLF for instance after the Veritas Report or KingFisher after so much news. Hope to find some time for that.

You have great fun during Holi. I appeal to all of you not to waste water and play 'Tika Holi' this year. Have a great festive season and Happy Trading...

NIFTY is at a Support

NIFTY right now is at around 5250 level. If you recall my earlier post, it is a crucial support.

Lets hope it holds (off course only if you are long). As for me, I am on sidelines and trying to devise some strategy to play out budget.

Will make a post on that well within time. Happy trading till then...

NIFTY is at a Support

NIFTY right now is at around 5250 level. If you recall my earlier post, it is a crucial support.

Lets hope it holds (off course only if you are long). As for me, I am on sidelines and trying to devise some strategy to play out budget.

Will make a post on that well within time. Happy trading till then...

March 03, 2012

Special Trading Session today

Today NSE and BSE are conducting a special trading session from 11 am to 1 pm. Please note that no settlement will take place today. This session is for BSE to test it's Disaster Recovery site (beats me).

It's after eons that I have an off day at home and market is open. I will have fun and so should you...

Happy Trading...