Tuesday, May 29, 2012

Limited upside

The bulls made it five out of six today. Not bad! But looking at the S&P chart, this upside looks very limited. The number to watchout for, at least in my opinion, is 1340. It is a strong resistance and might prove to be a tough nut to crack. Add to that the steadily approaching MA(20) toward this level and MA(50) means the upside seems to be limited. As far as support is concerned, a break of today's low will mean that the bears are back in control. 

One can play it as a range bound market until any of the above mentioned levels are crossed. No point in trying to be a hero in a news dominated market. Meanwhile, from the watchlist posted this weekend, VHC was up almost 11% and CRUS over 7%. I hope some of you readers played these!

Take care and good luck!

Monday, May 28, 2012

Thoughts from one of India's best fund managers

The Indian stock market is still at that stage of its evolution where most of the stock market blogs and writings promise to make the reader rich beyond his wildest dreams for a small subscription fee. Double your money in three months etc. You know the drill. Genuine success stories are nowhere as famous as say, a Warren Buffet or a George Soros. Of course, that all will change with time. But until it does, voices of sanity are far and few between. So, when of India's most successful mutual fund managers, Prashant Jain, CIO of HDFC Mutual Fund, came up with the following piece, I thought I should share it with you readers. It makes for good reading at a time when most investors are shunning equities and running towards gold and real estate. Of course, as always, consider the source!(I will let you figure that for yourself!)

Take care and good luck!

Sunday, May 27, 2012

Watchlist for next week

Here are a few stocks that I like for next week. All of them have held up well in the last month or so, which in the market that we have had, is saying something. The important levels are marked on the charts itself. Be sure to find out when a stock is coming out with its earnings before taking a position in it.

Take care and good luck!

Is the Indian stock market "cheap"?

Firstly, I am glad to be back. Secondly, in reply to the numerous mails, yes, I am very much alive. Come to think about it, I should have started with "secondly" rather than "firstly". Now that the formalities are out of the way, let's dive straight into a topic that's close to my heart and even closer to my bank account - the Indian stock market. Before we start, let me state that my strategy for Indian markets is quite different from that for US markets. While for US markets, I am a position or momentum trader, for Indian markets, I am a long term investor believing in the long term Indian growth story.

The mess in the Euro zone, and more importantly in my opinion, our own problems (our = Indian) caused due to policy paralysis and the falling rupee (seems like I chose a wrong time to leave US!) means that Indian markets have been one of the worst performing markets in the last one year. If you have time on your side, that can just mean one thing, opportunity. Following is the chart of historical P/E ratios for the Indian markets. Now, I would never ever recommend investing just on the basis of this one single metric, but it does provide an interesting take on where the markets are currently.

The overbought and oversold zones are marked on the graph (click on it for a better view). In hindsight (you simply gotta love hindsight!), 1998-99 and 2008-09 were great buying opportunities but am sure at that time, they seemed like the end of the world! Where are we currently? Well, nowhere as bad as 1998-99 or for that matter 2008-09, but we are getting close to the oversold zone. The current P/E ratio stands at 16.08 as compared to the average P/E ratio of 17.86. A revisit of the December lows will take us into the oversold zone. 

How to play these markets? Well, that will be the subject matter for another post. This time, it won't take five months, I promise. If you have any thoughts or questions about the Indian stock market, do mail me at positiontrader @ ymail.com (no gaps!). I am tired of everyone advising to invest in real estate or gold.

Take care and good luck!