July 19, 2018

Market outlook

Daily charts:
- trend is up on daily charts
- today NF closed 0.2% in negative at 10957
- AD was 1:2
- option writing support 10800

July 18, 2018

Market outlook

Daily charts:
- trend is up on daily charts
- today NF closed 0.25% in negative at 10980
- AD was 1:2
- option writing support 10800

What ails small- and mid-cap stocks

The promoter of one of Mumbai’s oldest broking houses told BusinessLine that SEBI’s move asking mutual funds (MFs) to restructure schemes for small- and mid-cap stocks is a chief cause for the sell-off in this segment. SEBI directed MFs to cut down the number of schemes and broadly have only large-, small- and mid- schemes in the category and further sub-category.

“SEBI’s criteria for re-categorising stocks baffled the street. The definition was strange and confusing as parameters were vague,” said the broker.

“Over 44 per cent of total MF schemes had to be re-adjusted in three months, which started a wave of sell-off in small- and mid-cap stocks and showed no sign of ebbing till June.”

SEBI defined large-caps as the first 100 stocks by market-cap, mid-cap from 101 to 250, and small-cap (stocks below 251), which it said will be updated half yearly.

Suddenly, the pool became smaller and MFs put curbs on inflows into small- and mid-cap schemes.

Read more at https://www.thehindubusinessline.com/markets/what-ails-small-and-mid-cap-stocks/article24445398.ece

1 cr in 17 days

20L in a day.

And people still find fault with his trades.

July 17, 2018

I expect half my trades to fail

Mumbai monsoon pothole song... BMC please wake up

Mix of Marathi and Hindi with English subtitles...based on Sairat Zingaat song.

Open interest distribution

Market outlook

Daily charts:
- trend is up on daily charts
- today NF closed 0.6% positive at 11008
- AD was 10:7

- option writers still bullish
- highest OI addition was in 11000 put strike
- overall highest OI is still at 10600 put level

So many possibilities... so easy to go wrong

Junk dividend plan options in mutual funds

Image result for dividend planMutual funds are not corporations to have any earnings of their own; they are basically portfolios of corporations which generate “returns”, not “earnings”. Further, corporations rarely find themselves in a position to return capital or meet cashflow requirements of investors, whereas mutual funds can provide liquidity to their investors almost at call by way of resale of units.

So why such take up of dividends by mutual fund investors despite unreliability and no fundamental reason? It’s not like all investors go for dividend options; in fact around 50% of all investors and probably a larger value of assets under management (AUM) is probably in growth plans as dividends have become less tax-efficient over time. Interactions with investors tell us that there is a good base of investors who want cashflows but are unable to differentiate between terms like return on capital, return of capital, dividends and plain cashflow requirement. Dividends connote “return on capital” without a direct proportionate impact on the original capital and this is what draws investors to dividend; whereas applied to mutual funds, the concept almost entirely results in “return of capital”. One can argue that mutual funds too earn dividends from underlying companies but a simple calculation of dividend yield on some of these portfolios will tell you the argument is bogus. Corporations usually declare dividends after audited profits for a review period are announced and the management, after factoring capital related decisions, recommends a payout to the board. Dividend declarations from mutual funds are indeed “return of capital” as gains generated by mutual funds are only from the sale of securities and there is no correlation between the act of declaring dividends and trading operations of funds.

A portion of investors has capital that they can invest, but it is from this capital that they need to sustain themselves, which requires predictable cashflow. Yet another set of investors does not want cashflow for sustenance but sees regular cashflow as frequent “profit-booking” from a variable return asset or they see cashflow from

Read more at https://www.livemint.com/Opinion/zHn00TKQ7dyXw3yEfA264O/Anyone-in-the-mood-for-dividends.html

Definedge: 11000 straddles hints at rangebound market

Although Nifty is showing some weakness since morning, the 11000 straddle is still going down.

If this weakness is going to continue further, this straddle should turn up.

As long as this straddle is going down, Nifty can remain sideways between 10900-10930 on the lower side and 11050-11100 on the higher side.


Source: http://www.definedge.com/11000-straddle-update/

My notes based on very limited understanding: anyone who bought 11000 straddle at Friday close is still in loss even though markets went down Monday and VIX increased by 4-5%. The option writer is in profit.

Only if the straddle value increases can one expect a big move in the market. As of now that is not happening.

July 16, 2018

Market outlook

Daily charts:
- trend is up on daily charts
- today NF closed 0.7% in negative at10937
- AD was 1:5
- 17 stocks were at 52 week high and 300 at 52 week low
- midcap/ small cap indices down almost 3%

- I think nifty will fill the gaps and take support around 10800 levels

3 ways to make money today using 5 min charts

First hour range breakout method
- break of first hour low was sell signal
- bought 2 lots of 11000 PE around 85 as my SL was high
- cover at close (110)

- this method is the easiest and every one should get same results.

Maruti's expensive cars to get durable lithium-ion batteries

According to a media report, Maruti Suzuki will be replacing the lead-based batteries on its cars with lithium-ion batteries. These will be offered on the more expensive models including the Swift hatchback from FY2021.

The batteries will be sourced from Suzuki's upcoming battery plant at Gujarat, allowing the factory to achieve economies of scale. It is also expected to be more cost-effective than sourcing lead batteries from vendors.

Source: http://www.team-bhp.com/news/marutis-expensive-cars-get-durable-lithium-ion-batteries

This is interesting as Maruti is India's largest car manufacturer and if they do this for all their cars, the battery manufacturers (Exide, Amaraja etc) will be hit badly as you are losing your biggest customer (both OEM and replacement market).

The Curious Case Of Manpasand Beverages

Building strong consumer brands is hard. Building them at scale is even harder. Especially in the food and beverages market, building a new brand can be exceptionally difficult. A new player must garner market share from incumbents that have (1) a high brand loyalty amongst consumers, (2) a large distribution footprint built over decades, and (3) benefits of scale due to a portfolio of brands (distribution, advertising, overheads etc.). This explains the resilience of brands like Maggi and Coca Cola which survived the lead and pesticide controversy respectively. Over the last 10 years, the number of new brands built in the food and beverages segment are quite low.

There have been a few exceptions though. For instance, Paper Boat by Hector Beverages has been quite successful. However, Paper Boat’s success was driven by its creation of an entirely new product category of ethnic drinks. Paper Boat did not directly compete with any existing player. It has built a loyal customer base by targeting a latent consumer need which was not served by incumbent players. However, Paper Boat is still a niche product and generated less than 100 crs in revenue in FY16. Other success stories (like that of DS Group’s Pulse candy) have primarily been in segments with higher market share churn. 

However, there is one company which is truly an exception – Manpasand Beverages (“Manpasand”). Manpasand is a Baroda based company which sells fruit drinks/juices under the Mango Sip and Fruits Up brands. In a short period, the company has seen rapid growth in revenues and profits. In FY16, Manpasand generated 557 crs in revenues and 51 crs in profits. This growth was achieved despite fierce competition from incumbent players like Coca Cola (Maaza), Pepsi (Slice/Tropicana), Parle Agro (Frooti) and Dabur (Real).

Read more at https://2point2capital.com/blog/index.php/a2016/12/06/the-curious-case-of-manpasand-beverages/

On cancellation of buybacks

Nice analysis: Did Directors of Kesoram Industries Indulge in Insider Trading and Short-change Minority Shareholders?

The directors and promoters of BK Birla group company Kesoram Industries have allegedly indulged in large-scale insider trading in the process short-changing minority shareholders hundreds of crores. The trail of such wrongdoing was recently alleged by a shareholder Janardan Kothari at the annual general meeting (AGM) of Kesoram Industries on 13 July 2018. Moneylife has reviewed the documents shared by Mr Kothari and pieced together the alleged modus operandi of this episode. The company’s stand at the AGM was that, “We will not take the question of related party and that it can be discussed separately”.

As of 31 March 2015, Kesoram held 27.46 lakh shares of Century Textiles. On 22 March 2016, Kesoram sold all these shares to Camden Industries for Rs141 crore in a bulk deal. In FY17-18, Kesoram invested another Rs400 crore in Cygnet Industries, its wholly owned subsidiary. Cygnet Industries used this amount to buyback 27.46 lakh shares of Century Textiles from Camden Industries in three transactions on 5th, 11th and 12 December 2017; for Rs355 crore. Thus, it is alleged that Camden Industries made a clean profit of Rs214 crore.

Read more at https://www.moneylife.in/article/did-directors-of-kesoram-industries-indulge-in-insider-trading-and-short-change-minority-shareholders/54689.html

July 15, 2018

Feel like doing engineering

Time to invest in midcap mutual funds

The midcap index has corrected by 18% this year and is close to multiple supports on weekly charts. With the broader nifty index expected to takeoff, a turnaround in midcaps stocks is likely so the current environment provides a good opportunity for long term investors.

I was earlier not a big fan of mutual funds but recent SEBI ruling on schemes classification has changed my view. Funds can now invest only in a predefined list of stocks (large caps - 100 stocks, mid caps - 150 stocks etc). The small cap list is too long for my comfort.

Another factor is lack of ETFs in this segment. ETFs have always been my first choice.


  • Save brokerage and invest directly with the AMC
  • Select  growth scheme. Avoid dividend plans as you will lose heavily on the benefits of compounding.
  • Lumpsum or SIP can be considered depending on your cash flow.

I/ my family are investing in ICICI and HDFC mutual funds over this coming week.

Sensex closes at all time high

- surprised to miss this
- highest ever weekly closing
- so sensex has given breakout before nifty
- next target 40000?