Monday 10 March 2014

My First Love(trade) MTNL

With the markets getting back into the frenzied groove, its reminds me of the time - seven years back in 2007 - when we witnessed a sharp rally in the stock markets with real estate and banking shares making most of the rally. Sadly, what followed next was the sharpest and most vicious fall in the Indian markets, with values net worth (or the Sensex) falling as much as by 64 per in a matter of 10 months. Although let me admit, that the frenzied or euphoric behaviour is not yet witnessed in the markets, and what we see nowadays are sharp weekly rallies for 3-5 weeks followed by some corrections.
 
One of the prime reasons for such behaviour is significant drop in number of participants in the markets. The retail investors in particular, who, have burned their fingers time and again now shy away from the mere thought of investments in stock markets. There are other investment options like precious metals - Gold, Silver, real estate - new properties, second homes, Mutual Funds - in-direct route of staying invested in the markets - which are now preferred by some of the old timers.
 
However, yet there are some people like me - who despite - been once bitten, twice shy - continue to play the markets for the sheer thrill of it. This may sound bit sarcastic to few readers, but yes traders (market participants) like me do end up trading for just the thrill of it. My friend once commented, saying the stock markets - especially during volatile times are more exciting and eventful than say a high pitch India-Pakistan cricket match.
 
There is a famous pharse which goes like this - One should never judge the book by the cover. Hence, let me share my personal experience on share markets. As a novice market participant I entered the stock markets in the year 2000 after having started my career in one of the online financial website mere nine months or so earlier. My first trade of me seems like my first love - I suppose the same may be the case with many of my fellow traders. Unfortunately - the trade was a disastrous one - yet my heart refused to accept failure - and I continue to hope again hope for a miracle. It was March 2000, and the government shares were hogging the limelight on buzz of disinvestment. I bought 100 shares of MTNL at a price of Rs 350 each in BADLA trading, as I did not have enough money to buy delivery.
 
Old timers - must be knowing for BADLA trading was all about, for the newer generation, let me explain in short - BADLA trading was very much like the futures & options segment, with one small difference, that the broker had to pay the margin money instead the present situation where for trading in the futures segment the client itself has to pay the margin money. In BADLA, the broker or financier in behalf of the client pays the margin money and also the mark-to-market difference (difference between the closing prices) on day-to-day basis. The trade was carried forward for a maximum of 70 days, post which one would have to surrender the trade and create a fresh position.

Back to my story, after I bought MTNL for Rs 350 or so each share, I got trapped into the markets, and after rolling over the position for couple of months, and paying the mark-to-market difference along with the interest on capital funded, I finally surrendered my position around Rs 175-odd levels. The 50 per cent fall in my net worth was huge for in that time considering I had average salary and was at the start of my career. My parents and family members advised me against any fresh adventure into markets - I did follow their advice for few months or probably a year and utilized that period for learning more about the markets. Fortunately or unfortunately the so called human behaviour of taking revenge (also called BADLA in Hindi) was very instinctive in me. And I had decided, that I shall take revenge from the markets, and earn my lost capital soon enough. Days, weeks, months and years later today with experience I have been a much better trader or prefer to call myself a smarter market participant, who can time the entry and exit into the markets in a more calculated manner.
 
However, the so-called first love or trade continues to live in my heart and will probably always do. For the records, there has been no divestment in MTNL, and the share price of MTNL from record highs of Rs 374 or so in March 2000, had slumped to a life-time low of Rs 9.75 in August 2008. Buying 100 or even 1000 shares at current levels will not harm me today. I may still end my making money even if there will be no divestment in the next decade or so.

Wednesday 26 February 2014

How to lose Rs 1.3 Lac in two days of trading

Most of the times, I write on serious business, investments and trading strategies. However, this time around I could not stop myself from letting go what happened in the last two trading sessions of the commodities markets. This is with reference to the expiry of the February series contract of Natural Gas. Although, my sympathies with those who lost big money by trading in that contract, I would like to highlight the high risk and manipulation game played by operators in the markets.
 
 
 
For starters, the MCX Natural Gas February futures zoomed as much as 30 per cent in the month of February at its highest point of Rs 402.70 - registered on 24 February, 2014. The corresponding February futures in the United States (US) soared by nearly 31 per cent, and topped at $ 6.378 on 20 February, 2014 (investing on natural gas). The fundamental reason for such an unprecedented rise in Natural Gas futures was the severe cold weather in US, which resulted into sub-zero temperatures on numerous occasions leading to higher usage of gas for heating purpose. In US, heaters are used to warm houses in order to beat the cold outside.
 
Now coming to the trading aspect, on an average the MCX Natural Gas open interest stands around 10,000-12,000 contracts, which was again the case around 14 February 2014, when the open interest for the February series stood at 12,297 contracts. The real action began post that. In the following three trading sessions, the prices jumped by 3.9 per cent (17 Feb), 1 per cent (18 Feb) and 11.3 per cent (19 Feb) – a staggering 17 per cent gain in just three days and the open interest from 12,297 contracts surged to 19,023 contracts – indicating aggressive long positions by punters (read operators). During the same period, the MCX Natural Gas March futures gained 1.4 per cent (17 Feb), 0.3 per cent (18 Feb) and 4.5 per cent (19 Feb) – a total gain of mere 6.4 per cent when compared to the near 17 per cent surge for the February contract.  The open interest for the March series also moved higher 2,628 contracts to 7,499 contracts. The reason for dis-parity in prices was that the short-term demand for Gas was higher in US, and the same may recede once the cold wave eases.
 
 
 
However, back in India, the traders who had short Natural Gas at lower levels of Rs 330-or so, and not placed any stop loss, were left in lurch with the only option - HOPE. Some of them may have ended up cutting losses at highs of Rs 380-390 odd levels, as the open interest dropped from 19,023 lots to 15,175 odd lots in the next two trading sessions for the February series. Just imagine, a trader buys MCX Natural Gas February futures at the highest point (Rs 402.7) on 24 February. The person if exited at the lowest point yesterday on expiry (Rs 297.6) would have lost a whopping Rs 1.31 lakh in just two trading sessions. Hence, trading is always said to be a risk business, and trades should be done with strict stop losses.

Tuesday 18 February 2014

FM Cuts Exicse Duty on Car, Read in Case you Intend to Buy a Car in the Near Future

The Finance minister in his last Budget for the UPA-II government finally offered some good news for the investors and common-man. Good news in terms for people at least who intend to buy a two-wheeler or car in the near future. And also good news for people who want to benefit by trading in the stock markets by betting on the short-term trading opportunities.

Firstly What the Announcements

The Finance minister was quite liberally by proposing lowering of the excise duty on the bikes (two-wheelers) and four wheelers (cars) across the segments. For the records, P Chidambaram proposed to
- reduce excise duty on small cars from 12 per cent to 8 per cent
- reduce excise duty on medium cars from 24 per cent to 20 per cent
- reduce excise duty for sport utility vehicles (SUVs) from 30 per cent to 24 per cent
- reduce excise duty on two-wheelers to 8 per cent
 
Auto Mobile Industry
 

Impact of the News

Following the announcement of the proposal, as per reports in Indian newspapers select auto companies like Tata Motors and Maruti have shown intent of cutting prices. However, will the bigger question remain, that will the new government continue to support the revised excise duty? Also, will the benefits of lower excise duty be good enough to see a spike in demand.

Meanwhile, from the market perspective auto and auto ancillary stocks rallied smartly in trades yesterday (17 February) and also continue to perform well today. Mahindra & Mahindra which is a major player in the SUV segment, and also has plans of major boost in the two-wheeler segment was arguably the biggest beneficiary. As a result of which, the stock yesterday rallied nearly 3 per cent. Maruti and Hero MotoCorp also ended with smart gains. Among other stocks - Force Motors and Igarshi Motors are some of the stocks which are buzzing with activity in the last two trading sessions.
 
The broader market trend has been negative for auto stocks - with two-wheeler majors Hero MotoCorp and Bajaj Auto - both trading below the key short-term (20-day) and medium-term moving averages. Also, India's largest car-maker Maruti is also trading below the key moving averages. Only Mahindra & Mahindra and Tata Motors are trading above the key moving averages.

Common-man point of view

Truly, if you are planning to buy a car, then this is just the ideal time. Check out for the latest price reduction on your choice of car, you may end up saving 4-6 per cent on the cost price. Also, in case, you can wait, then you can consider waiting till 1 April, when the RBI (Reserve Bank of India) will meet to review the monetary policy. Chances, are pretty high that the RBI may keep rates unchanged following the recent economic data - which saw a drop in monthly CPI inflation. The news of fall in inflation was accompanied by contraction in IIP growth, which again is seen a precursor for the RBI to hold rates. On the contrary, the Central Bank may surprise the street with a rate cut. Hence, in case you plan to take a loan for buying your favourite car, then it is advisable to wait till April to you plan to buy your car. Not only will you enjoy the benefit of lower cost due to cut in excise duty, but may also cherish a positive surprise in lower interest rates in case the RBI bites the bullet and cuts the lending rates. You may end up saving on your EMI.

Visit MarketOnMobile for the latest news and developments on the corporate and economic front and also track the stock markets trends on day-to-day basis.

Wednesday 12 February 2014

Planning to Buy Gold, Wait you may get it Cheaper

Planning to buy Gold, then you have a reason to be patient as prices may decline in the near future if import duty is reduced.

In the calendar year 2013 - the government was blazing all its guns to bring down the India’s record ($ 87.8 billion) current account deficit. The aim is bring down the CAD to below $ 50 billion by the end of the fiscal year. One of the most important measures implemented during the fire-fighting effort was hiking the import duty on Gold so as to discourage imports and reduce the forex outflows.

The move seems to have been paid off largely off late. And if January trade deficits numbers are to be go by, then the trade deficit is back in single-digits at $ 9.92 billion - thanks to 77 per cent fall in bullion (Gold + Silver) imports.
Gold bars
It may be recalled that the government had hiked in the import duty on Gold from 4 per cent to 10 per cent in a staggered manner during the period of January to August 2013. Following which, Gold imports have shown remarkable decline as per expectations.

According to the World Gold Council report, Gold demand in the September quarter fell by 32 per cent to 148 tonnes against 219 tonnes during the same period a year ago. Jewellery demand dropped by 23 per cent to 105 tonnes (136 tonnes) due to import restrictions. Data for December quarter is awaited.

The Jewellers body has been requesting for lowering the import duty on Gold and also relaxation of the 80:20 scheme, wherein 20 per cent of the imports has to leave India as exports of processed gold.
With elections round the corner - it won’t be surprising to expect a duty cut on Gold imports soon enough. Also, recently the Congress chief Sonia Gandhi had asked for the Commerce ministry to look into the above mentioned Jewellers demands.

The case seems tilted in favour of a likely cut in import duty for Gold. The quantum could be similar to what the hikes were last year - i.e. a 2 per cent duty cut. This could very much translate into at least Rs 500 decline in current prices of Gold. Any further or higher than 2 per cent reduction in Gold duty will trigger a sharper fall in Gold prices. Hence, buyers should be patient for now; the yellow metal may just get somewhat cheaper. To keep a tab on the latest Gold price in India visit Market On Mobile.