CORRECTION ANALYSIS: WHEN’S THE CRASH?

(Source: www.shutterstock.com/cartoonresource) Every time there is a correction, all of us are scared. Are stock market corrections irrational? Not always. How can a layman investor ‘trade a correction’?   Historical Correction Analysis In the current year, the ‘peak to trough’ correction was roughly sixteen percent. (I am making a dangerous assumption, which is that the current correction is done with!). How does that compare with past corrections? To find out, I collated the historical ‘corrections timeline’ for the calendar years […]

HOW TO ‘READ’ THE 200-DAY SMA OF THE NIFTY?

(Source: www.shutterstock.com/cartoonresource) The 200-day Simple Moving Average (SMA) of the Nifty is 8382. Currently, the Nifty is trading below its 200-day SMA.   What is the 200-day SMA The 200-day Simple Moving Average (SMA) of the Nifty is the average of the closing prices of the Nifty for the previous 200 days. Very simply, the formula is [(day1)+(day2)+….(day200)] / 200. With each passing day, the oldest days data gets deleted and the latest days data gets added. Hence, it’s called ‘moving’ […]

VALUE INVESTING – IS THIS THE RIGHT TIME?

(Source: www.shutterstock.com/cartoonresource) Value investing is a strategy wherein the concept of growth is automatically ingrained into the calculation of value. The worldwide ‘search for economic growth’ seems futile. It does seem that value investing is on the verge of making a ‘comeback’.   What is Value Investing? From an investment standpoint value investing would mean buying stocks of a company that meets the following criteria: The products of the company are such that they will continue to be in demand […]

AREN’T YOU FED UP OF THE FED?

    (Cartoonist: Mike Baldwin; Cartoonstock.com) We all know that rates in the U.S. are going up. When – Sep or Dec doesn’t matter. Markets seem to be ‘fed up’ with the lack of clarity from the Federal Reserve. What the markets want, is for the debate to end.   Which rate is the Fed expected to hike? The U.S. Federal Reserve at its meeting on September 16-17, 2015 will take a decision on increasing interest rates. A rate hike […]

HOW TO TRADE THE EMERGING MARKETS SELL-OFF?

(Source: www.shutterstock.com/cartoonresource) Pursuant to Chinese devaluation, Emerging Markets as an asset class experienced a sell-off. Is the selling done with or is there more to come?   Chinese Devaluation and Emerging Markets Emerging markets account for roughly half of the world economy. Of late, due to the commodity meltdown, Emerging Markets have been suffering from slow growth and weakening currencies. Hence, it seems, they can no longer be considered as the growth engines of the world. Within the Emerging Market space, […]

GREED, FEAR & GOLD

(Sketch Credit: Carl Richards – Reproduced under a Creative Commons License) Gold is making headline news. Unfortunately for the wrong reasons. The recent fall in the price of Gold presented an opportunity to highlight a couple of behavioural biases which are inherent in all of us. In markets, they say that the four most dangerous words are ‘this time it’s different’. In reality, it’s different every time. However, human behaviour remains the same at all times.   Greed, Fear & Gold […]

HIGH PE RATIOS – MYTH OR REALITY?

(Cartoonist: Doug Pike; Cartoonstock.com) For the layman investor, the most commonly used method of stock valuation is the Price to Earnings multiple or the PE ratio. The current market price divided by the latest earnings per share of the company in question gives us the PE multiple for the stock. From a historical perspective, the benchmark is currently trading at a high PE multiple.   PE ratios and Value Investing The strategy of buying stocks based on low PE multiples […]

DIVIDEND GROWTH INVESTING IN A SIDEWAYS MARKET

(Cartoonist: Jim Naylor; Cartoonstock.com) The fact that dividends create value in the hands of the receiver is one of the least appreciated features in the investment business. The only time dividends make headlines is when it is skipped. In sideways markets, like the one we seem to be in, dividends can be put to good use.   Sideways Markets – Big Moves Little Change The benchmark is locked in a tight trading range. The image below says it better than […]

PSU BANKING – IS IT THE RIGHT TIME TO INVEST?

(Cartoonist: Lindsay Foyle;Cartoonstock.com) The PSU Banking Index is the worst performing Sectoral Index in the current calendar year. There has always been a valuation gap between the public sector and private sector banks. This is despite the fact that, for both the sectors, the end customer remains the same. Since the beginning of 2015 the gap has widened.  In my opinion, this widening of the valuation gap is an opportunity for buying PSU banks.   Why Banking is the key to economic […]

HOW LOW CAN THE RUPEE GO?

The Rupee dollar parity is the single most determining factor for the prices of stocks in India. It is ahead of the economy, earnings, global cues, etc. It seems that as per the REER (Real Effective Exchange Rate) calculation the Rupee is overvalued. The Big Mac Index suggests that it is one of the most undervalued currencies in the world. Surely, one of them is wrong. I have tried to make sense out of this apparent dichotomy.   Real Effective […]