Thursday, January 19, 2012

What might be the right thing to do for India Inc.

With the value of rupee starting to appreciate again (1$=50.30Rs.) as compared to previous low of Rs. 53.40, things seem to be getting back to track. Although this might me a little early to say so, but further signs and stimulus is provided by the increase in FII net inflows.

But among this positive environment two things bother me the most (apart from offcourse the poverty in India) :
1) Our current account deficit
2)Trade imbalances

and i believe the only solution to both of these problems is : To boost our Industrial and Agricultural Production. This is the only practical solutions to most of our problems and this seems quite obvious at first look but I don't understand why the policymakers are oblivious to it.

Industrial production can be boosted if government introduces some revolutionary reforms and acts which had been left in the back-burner. Also the government alone can't do much, help of the big industrial houses is also needed. They should be lured into helping by providing (tax) incentives. Since the EU is under huge debt burden this is particularly the right time to tap the European markets. The crisis doesn't seem to end soon.
Agricultural production can be boosted by revolutionizing the agricultural sector. Its indeed time for the second green renolution. Subsidies must be properly regulated, itroduction of better technology and genetically advanced seeds and crops are few means to boost the production.

Only by doing something that produces result in material form will be helpful and nothing else. We have been making policies for a long time and now its time to implement.  Jai hind!!

Thursday, January 5, 2012

Equity investments and trading

The primary reason people enter into equity trading is because of its potential to offer huge returns and rewards. Even I was drawn into it for the same reason. It looks all shiny and glittery. But all this shine and glitter comes at a cost known as RISK. Most of the time traders (and not investors) enter market with a short term perspective which has enormous risks associated with it. The only way to avoid or at least marginalize the risk is to research exhaustively and play it smart.
My experience
I am a novice to first-hand equity investing, having just six months of experience but I have been following the stock markets and some specific stocks since the last four to five years. I slowly started to develop my knowledge and expertise in this field by reading newspaper (Economic Times and Financial Express) and books (CFA course material) and of course the internet which is undoubtedly the most informative source.
My strategy
I am a kind of trader who believes in inter-day and medium-term investments and very rarely will I involve in intraday trade. Here are some strategies I apply :
1) Look out for undervalued shares (Value Investing):
Sometimes the markets are not efficient in itself and a stock may be undervalued by the market. So I try to find out such undervalued stocks by looking at the past one year graphs and financial ratios. The information is easily available on and others other websites. The comparison of last one year price range and current price of the stock provides valuable information about it. It can be interpreted differently by different people, however while interpreting one must take note of the prevailing market conditions corresponding to the particular value of stock at that time. Eg. When the market (Sensex or Nifty) is at its years highest point and a stock of ABC company is trading at its years lowest levels then there is a possibility that the stock is undervalued.
2) Look out for news and announcements
Reading newspaper and online news reports can provide important information about a company's operations. Lookout for news of mergers and acquisitions, about commissioning of new production facility set-up and other important developments. Now in this respect one must keep in mind that not every merger/acquisition will result in a positive return or increase in price of stock. Here I'd like to share an experience with you. Once, around two years ago, I read in The Economic Times that SAIL is going to set up some new plants in tho locations and the profits are expected to rise etc. etc... The very same day I bought its shares at 220/share. And today the price is howering at 80/share. So this means I had not researched properly about the stock and had invested in vain and had to pay the price.
3)Comparing financial ratios of company with other competitors
Financial ratios of a company like Leverage ratios, solvency ratios etc. are very useful in determining the position of a company and ability to pay debts. Comparing these ratios and other financial statements like balance sheets, profit-loss statements with other peers can help in taking a smart decision for investing in a stock. However, studying and understanding these ratios require some patience but I assure you that once you start understanding them, it will be very useful.
4) Insider information
Insider information is the information provided by some management level employee of a company. It may be about a news about a new deal or merger or takeover of some other company and has not yet been made public. Obtaining such information is very difficult but if obtained from some reliable source, believe me, it can work wonders.
5) Future prospects and expectations from the company
Expectations about sales growth and global scenario. Foresight about how the sales of the company are going to be affected can be helpful.

Trading in equity is considered in of the riskiest business but also it is the business which can bring you from rags to riches in the matter of months (if not days). The strategies followed by any investor cannot be fool proof and should be subjected to continuous evolution. Net theories and practices should be developed, iterated and reiterated. Older theories which have proven wrong should be discarded or modified according to individuals discretion. There is no thumb-rule which can be applied to equity trading for booking profits. Portfolio should be built in such a way such that the risk is minimized and profit maximized. Cheers !!!