Why MBA?

I am writing this post after preparing for MBA entrance exams for one year (i.e. during my final year in engineering college- 2010-11) and finally clearing two exams- IIFT and SNAP and getting through IMT Ghaziabad. Although none of them is equivalent to an IIM, but still, the colleges are prestigious names.

So, finally not joining any MBA college that year, i decided to give exam this year also, thinking that i could do some justice to myself. But again result was the same as that in the last year in CAT (88 percentile). Now again, this is a petty score which would not get me into any good institute. Pondering over my result one fine day i asked myself whether I even need to do an MBA? Pondering further, i decided -no. I contemplated that doing an MBA would be a sheer waste of my time and money. Although i don't know what they teach there, what is fed into the brains of the scholars at those world-class institutes. But i felt, I could learn it by myself. May be at points i will have limitations of resources. But there are numerous ways to learn a particular thing. Ultimately what matters in life is now how you learned something, but what you learned. Isn't it. The one/two years course at an MBA college is meant to teach the students certain subjects, develop certain skills, provide exposure and all that bull shit. But all these skills and subjects can be learnt by self. But again, the blue-chip companies will always prefer an IIM alumni over a simple graduate who is equally smart. The people will always look up at an IIM or XLRI or Harward alumni and also your qualification will be treated as important by others. So, for those people who aim for such companies and who feel their qualification is a gem to be proud of should go for an MBA. But for others who want to open up a business or may be join some start-up, the preferable path should be to develop those skills by themselves, by personal experience, by reading exhaustively rather than wasting two years at some college, where ultimately you might as well end up in a BIG Consultancy firm which will pay you just enough so that you don't leave them.
Learning by self has some advantages. You can learn what you want, the way you want. No constraints, no explanations to others. The only thing is, you should know what you need to learn. Once that is clear, start working. May be you won't be as rich and famous as the MBA degree holders, but you would have satisfaction.

   

Market Prediction for March-April '12 - A different view

Expectations

This article is solely based on the image above.

The image is the movement of BSE Sensex benchmark index of the last one year - from March '11 to Feb '12. I have tried to derive some infrences from the image. However, whatever I have infered is solely based on the retrospective view on the basis of which I am trying to predict the movement of market.

Looking at the image, there are in all six significant hill like structures which i will name as short term peaks. 

Let me name the as A, B, C, D, E and F.

Now from the image we can clearly identify 6 short term (or local) peaks.

Now again, from image 3, corresponding to the 6 peaks, there are respective dips or bottoms or pits.  Lets call them A-, B-, C-, D- and E-.

Giving a thorough look at the image shows us that each peak may be large or small, but always a particular bottom is lower than the previous one, i.e. E- is lower than D-, D- is lower than C- and hence and forth. So A- is the highest pit and E- is the lowest. Now again, looking at F, we find that its subsequent bottom is not reached, and this is what i am waiting for. F-, the local bottom or pit, which is lower than E- and hence will be at a level of 14K-15K. Hence, practically speaking, in the next 2 months, i expect to witness a pit lower than E- i.e. lower than 15,175 points. Hence what i infer here is that the market will fall to al level below 15K over the next two months.  

Taking a look at the present conditions in India, nothing much has changed over the past one year. Inflation has eased a bit and the EU are in a worse condition than before. The currency has stablized somewhat but again, exports and trade balance are not favourable. We have nothing to look forward to in the short term as the government has paralysed and no new reforms are expected before the budget to say the least. However, these points can add to the justification of my theory, but the proof I have provided is sufficient enough. 

This article has minimal factual significance as the assumptions here are many, like all the external factors remain the same. But on statistical interpretation level, it might be useful for inferring.

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!!

Equity investments and trading

Introduction

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 hdfcsec.com 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.

Conclusion

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 !!!

Should India Inc. be apprehensive about a Double - dip yet?

Not much seems to be going right at the moment for India Inc. as such. Be it the value of rupee against dollar or the industrial production growth rate. The stock-market seems to be taking a dive, although the slope doesn't seems to be as steep as the last one. Among this tumult we find the government passing The Food Security Bill amidst the tight fiscal situation. We have news about EU nations on the verge of default which further aggravates the condition. The interest rates are doing no good to the economy than the inflation. Everyone seems to have tightened their fists at the moment, be it the governments or corporates.

I believe this is what should not be happening in the economy. Cutting the costs and spending will exacerbate the situation and will lead to the development of a vicious cycle which might further lead to a double-dip indeed. The market already seems to have stagnated due to the above mentioned reasons and now if we cut the costs/spending then cash will be further sucked out from circulation. The market needs to be eased  by adding surpluses to increase liquidity which can be achieved by lowering the interest rates. Although this might hamper the inflation a bit but in the long run it would be advantageous, I believe. Radical measures should be taken by the government and industries as well to regain the lost faith of investors (both local and foreign). There is light at the end of the tunnel, but length of the tunnel cannot be estimated as yet.