Master And Student - All About Stock Markets

Reliance Petroleum RPL, which went public a few years back, is to be merged with Reliance Industries. The RIL board meeting to be held on March 2 to decide further move. The swap ratio is to be in favour of RIL shareholders.The ratio is likely to be 1 share of RIL for 18 shares of RPL. The Merged entity will become India’s biggest company in terms of net profit surpassing Oil and Natural Gas Corporation (ONGC). In terms of networth, and sales, it will continue to remain second after Indian Oil Corporation.

Where RIL stands to benefit clearly is in savings on income tax and dividend distribution tax. The current tax holiday for RIL’s Jamnagar unit is set to expire by March 31, 2009, while RPL’s refinery, which has SEZ status, has a tax holiday for another seven years. RPL can also escape paying dividend distribution tax in a merger. Otherwise, it would have to pay tax every year when it is returning money to shareholders.

Keep watching this space for more details.

Jesse Livermore.

The most valuable knowledge one can gain regarding trading and markets comes from studying market history, and studying the methods of successful traders of the past. In the early part of the 20th century, Jesse Livermore was the most successful (and most feared) stock trader on Wall Street.

He predicted the stock market crash of 1907 and once made $3 million in a single day. In 1929, Livermore went short several stocks and made $100 million. He was blamed for the stock market crash that year, and solidified his nickname, “The Boy Plunger.” He was also a successful commodities trader.Here are some valuable nuggets from Livermore:

“All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical (technical) formations and patterns recur on a constant basis.”

“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.”

Don’t take action with a trade until the market, itself, confirms your opinion. Being a little late in a trade is insurance that your opinion is correct. In other words, don’t be an impatient trader.

Livermore’s money made in speculation came from “commitments in a stock or commodity
showing a profit right from the start.”

Don’t hang on to a losing position for very long.“It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Let this thought be written indelibly upon your mind.”

“When a margin call reaches you, close your account. Never meet a margin call. You are on the wrong side of a market. Why send good money after bad? Keep that good money for another day.”

“Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend.”

A prudent speculator never argues with the tape. Markets are never wrong—opinions often are.
Few people succeed in the market because they have no patience. They have a strong desire to get rich quickly.

“I absolutely believe that price movement patterns are being repeated. They are recurring patterns that appear over and over, with slight variations. This is because markets are driven by humans—and human nature never changes.”

When you make a trade, “you should have a clear target where to sell if the market moves against you. And you must obey your rules!

“I am fully aware that of the millions of people who speculate in the markets, few people spend full time involved in the art of speculation. Yet, as far as I’m concerned it is a full-time job,perhaps even more than a job. Perhaps it is a vocation, where many are called but few are singled out for success.”

“The big money is made by the sittin’ and the waitin’—not the thinking. Wait until all the factors are in your favor before making the trade.”

An important point to note is that Jesse Livermore’s trading success did not come from any “inside” information or from some huge store of knowledge he had about each and every stock or commodities market he traded.

Livermore’s trading success was derived from his understanding of human behavior. He realized early on that markets and stocks can and do change—but people and their behaviors do not. Therein was his formula for trading success—which has lived on and has not changed since Livermore’s heyday in the stock and commodities markets almost a century ago.

The much publicized movie, "Slumdog Millionaire" has swept the 81st Annual Academy Awards, most popularly known as the Oscars, by winning eight awards. Slumdog Millionaire had been nominated in 10 categories at the Oscars.The film has been chosen as the Best picture and Danny Boyle has bagged the award for Best Direction.

The first award for the film was for Simon Beaufoy for Best Adapted Screenplay.
Anthony Dod Mantle won the award the Best Cinematography category.
Ian Tapp, Richard Pryke and Resul Pookutty for Best Sound mixing.
Chris Dickens for Best Film editing.
A.R. Rahman for Best Music Score.
A.R. Rahman; Lyric by Gulzar for Best Song.


Rahman had also been named best composer at the Golden Globes last month.
Known for his musical versatility -- from romantic compositions to foot-tapping numbers, Rahman has innovated with different instruments and sounds to create some of India's best-known musical hits since the last decade.

Gold futures hit the key $1,000 mark for the first time in nearly a year, as global financial worries boosted the safe-haven appeal of the precious metal. In recent action, gold for April delivery traded at $996.80 an ounce, up $20.30, or 2%, on the day. It earlier touched a high of $1,000.30. Gold for February delivery, the near-month contract which registered little volume, was last up $20.10, or 2%, at $996.60 an ounce on Globex.

Locally Gold prices set yet another record of Rs 16,000 per 10 gram in line with the surging global bullion markets on speculation that the global recession will deepen further.

Market analysts said the demand of the yellow metal picked up after the global equity dropped in the recent past.They said, investors find no other option but to park their funds in the precious metals, while physical buying for the current marriage season declined substantially.

Gold in the year 2008 outperformed most asset classes and has provided a 32-per cent return on investment.The compounded annualized returns on investment in gold in the last five years ending 2008 have been 19 per cent. In 2009 till date, gold price has appreciated by more than 12 per cent and still going stronger.

The BSE Sensex fell 3.53 percent on Monday, after the interim budget failed to deliver on investor expectations on a stimulus plan for sectors such as infra, construction and autos.The 30-share benchmark index provisionally fell 340.53 points to 9,294.21, with 29 components declining.The 50-share NSE index provisionally closed 3.5 percent lower at 2,845.15.

WHAT DID IT HAVE FOR THE MARKET?
Nothing! The sensex fell more and was down 277 points as soon as the Budget was over.
No tax changes, no sops for any of the industries.
Interest subvention for some export loans extended.
In October 2008, the government had withdrawn a 4 percent interest rate subvention granted to gem and jewellery exporters. Subsequently, in a stimulus package last December, it extended a 2 percent interest rate subsidy till March 31.
THE NUMBER CRUNCH:
Allocation of Rs.40,900 crore for Bharat Nirman.
FY10 budget revenue deficit seen at 4% and fiscal deficit at 5.5%
FY09 fiscal deficit seen at 6% of GDP v/s estimate of 2.5%
FY09 Revenue deficit of 4.4% of GDP v/s estimate of 1%

Indian Stock Markets gained 4% last week and Nifty closed at 2948. Nifty recorded a high of 2969 and then moved sideways in a narrow band. Auto stocks have bounced back nicely, M&M gaining 16%, Maruti and Hero Honda gaining 9% each. Other non index gainers include Hexaware and Educomp up 50% for the week, for no big reasons.

Going ahead, the interim budget to be presented on Monday, which could provide some triggers for the market. Global markets could not make any progress last week. Disappointment came from unclear bail out package and grim economic numbers from Europe kept the lid on equity prices. More importantly , the DOW Jones index is crucially poised at 7800, after bouncing off from lows of 7700.

What to expect next week?

The Nifty has key resistances for the week at 3000/3050 and then at 3100. The current up-trend could extend a little further, depending on the interim budget and global markets.Breakout above 3050 will take Nifty to 3100. Conversely, inability to move past 3000 will signal impending weakness and a decline to 2860 and 2790.

Stock Levels for index heavy weights:

Reliance (1390): Reliance Industries moved to an intra-week peak at Rs 1,414 but was unable to penetrate this level.The area around Rs 1,400 is a strong resistance for the short-term.However, daily momentum indicators are weak, so it can decline to supports to 1340/1300.The stock is trading it is the upper band of its range between Rs 1,100 and Rs 1,400/1450.

Infosys (1254): Infosys reversed lower from an high of Rs 1,325.The stock has supports at Rs 1,220 and Rs 1,180. Reversal from either of these levels can be expected for short term.Break-out above Rs 1300 will take the stock to 1360.

SBI (1194): SBI closed the week with a 7% gain, while most of the other banking stocks looked weak and rangebound.Immediate resistances for the stock are at Rs 1,225 and then Rs 1,250.Supports in the week ahead would be at Rs 1,140 and then Rs 1,100.

Trader's favorites:

Reliance capital(433):Reliance Capital breached many of its long term supports and is currently halting around Rs 400. Resistance for the week exists at 460.Supports for the week are at 410/390.Below 360,the next long-term support band is between Rs 300 and Rs 320.

Aban offshore(455):From a life-time high of 5400, the stock has been trending downward incessantly. Like Relcapital and many other stocks, Aban too has broken major supports during the major sell-off.However, most recently Aban offshore has halted at Rs 415 that was also the 52-week low.Since then, the stock has been on a short-term up-move.The stock has resistance at 490/515.

Tata Capital Ltd has announced public issue of Secured Non-Convertible Debentures (“NCDs”) aggregating to Rs. 50,000 lakhs with an option to retain over-subscription of Rs. 1,00,000 lakhs for issuance of additional NCDs.
There are four options to choose from
1. NCD of face value Rs.1,00,000 (min 1 NCD) with interest rate of 11.5% paid monthly.
2. NCD of face value Rs.1,000 (min 10 NCDs) with interest rate of 11.25% per annum paid quarterly.
3. NCD of face value Rs.1,000 (min 10 NCDs) with interest rate of 12% per annum paid annually.
3. NCD of face value Rs.1,000 (min 10 NCDs) with interest rate of 12% per annum paid cumulative.
So what is this NCD and what an investor should do?

As indicated above there 2 NCDs of different face value.In the first case you have to invest minimum Rs.1 lakh with face value of Rs.1 lakh and you will get interest rate of 11.5% monthly.
In the second case minimum investment is Rs.10,000 but 10 NCDs of Rs.1,000each.
The interest will be paid at the end of the quarter/year or cumulative after 5 years - depending on the options 2,3 and 4.

What are advantages and disadvantages?

Advantages:
As indicated the NCDs are secured, 11.5% and 12% are slightly better interest rates than Bank Fds.
Every month/quarter/year you will be getting the interest as mentioned above.
No TDS on interest.

Disadvantages:
The NCDs have lock-in period of 5 years.
They are listed in National Stock Exchange (NSE), they may or may not be actively traded. So liquidity might be a problem - that is one cannot sell the debentures as and when required.


Currently bank deposits offer anywhere between 10 to 11% p.a. which are better. But going forward interest rates might drift lower. But Bank FDs offer easy liquidity, that is an advantage.

So, know your requirements and risk profile before investing in this NCD.

U.S. Treasury chief Timothy Geithner unveiled a new rescue plan that would put $2 trillion to work mopping up bad assets and restoring credit, but stock markets plunged on fears it would not work.The S&P 500 Index dropped 4.9 percent, the most since Jan. 20, to 827.16. The Dow Jones industrial average ended at 7888 down 4.6 percent -- its biggest one-day percentage drop since Dec. 17.
The lack of details frustrated many market participants."There’s still a lack of clarity,” Dan McMahon, director of equity trading at Raymond James Financial Inc. in St. Petersburg, Florida, said of Geithner’s proposal. “These are smart people and they’re supposed to have it figured out. We’ve been waiting all week and then he said nothing.”
Asian markets have reacted negatively, but not as bad as US markets. The Indian markets too, are expected to react in the same manner.Nifty has good supports around 2850/2800.

Never confuse a single defeat with a final defeat - Winston Churchill

Indian Markets Last week: Nifty moved in a band between 2750 and 2870. Going ahead, the next week seems to be a positive one at least in the first half. The short-term up trend from 2661 can continue to take the index to 2950 /3000.Short term reversal can be expected from these levels.If the rally continues, Nifty will test the resistance band between 3070 and 3090.Supports for the week are at 2760 and 2660.The short term is positive as long as the index trades above 2760.

Global markets: There was a strong rally in global equities, last week and that made most markets close with hefty gains. Volatility came down after a sharp spike in the early part of the week.The 200 points spurt in Dow Jones on Friday took the index well above the critical 8000 level.And on Monday, the most anticipated bailout package is to be announced, which could decide the further course of the markets.

Stock Levels for index heavy weights:

Reliance (1343): The stock moved in a range before ending with up just Rs 17 of weekly gains. There can be an upside rally upto Rs 1,400. But the area around Rs 1,400 is a strong resistance where reversal can be expected.Supports are pegged at Rs 1,250/1200.The stock has not broken out this range for the past 3 months.

Infosys (1280): The stock did not break above the resistance at Rs 1,300. A downward reversal from here can pull the stock down to Rs 1,220/1160.The medium-term range for the stock is between Rs 1,070 and Rs 1,300.

Sbi (1118): SBI closed lower this week with 3 per cent loss.The 200 day moving average at Rs 1,180 will act as a strong resistance.The near-term view will turn positive only on a close above Rs 1,200. The long-term support is available at Rs.1000.

NDTV supported by Toyota, will be telecasting a rare and first of its kind 24-hour nonstop programming -THE GREENATHON- urging Indian citizens to take a pledge towards a greener tomorrow. The Greenathon starts across all the NDTV channels on the today,7th of February 2009 at 7pm. The iniative "Open Up Tomorrow Today" by Toyota and NDTV, will exhibit a series of activities such as round-the-clock clean up drives in Mumbai city and Yamuna Ghats in Delhi; a 24-hour marathon run by Milind Soman and simultaneous green activities taking place across the country.
The Greenathon event will be inaugurated by Dr. R.K. Pachauri, Nobel-prize winner, Chairman of the Intergovernmental Panel on Climate Change and Director-General of TERI (The Energy and Resources Institute), and Dr. Prannoy Roy, Chairman, NDTV.
The campaign aims to raise funds for TERI's 'Light a Billion Lives' project and will provide light through solar power to villages across India, that would otherwise have been without electricity for a decade or more.
NDTV's responsibility towards nature and society is really commendable.I wish with all my heart that this 24 hour programming becomes a great success. Go Green.

After a long term , there are two IPOs hitting the markets this week - Gemini Eng Fab and Edserve Softsystems. Gemini Engi Fab is entering the capital market on 3rd February 2009 with a public issue of 55 lakh equity shares of Rs.10 each, in the price band of Rs.75 to Rs.80 per share. This IPO who has all the characteristics of an IPO ‘for, of and by the promoters’.

CARE has assigned an IPO Grade 2 to Gemini Engi-Fab IPO. This means as per CARE, company has below average fundamentals. CARE assigns IPO gradings on a scale of 5 to 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals.Initial momentum and speculation on listing will be there , maybe, to give an exit route to IPO subscribers.But finally the stock would settle at lower levels.So why to take risk, when there are enough good stocks available in secondary market.

Edserv Softsystems is entering the capital market on 5th February 09, with an IPO of 39.74 lakh equity shares of Rs.10 each, in the band of Rs.55 to Rs.60 per share.The networth of the company as at 30-09-08, was just Rs.10.50 crores with book value per share at Rs.12.50.CARE has assigned an IPO Grade 1 to Edserv Softsystems IPO.

This issue is pure momentum and initial speculative momentum play can take share price to a level but would get settled at lower prices later.So use the IPO money for the education of your near and dear ones.

Spice Communications has gone up from Rs.27 to Rs. 92 in just two trading sessions. The stock is NOT in derivatives segment, but there was also no daily filter of 20% as with usual stocks. It has more than trebled since last week.

Idea Cellular Limited (Idea) together with its associate namely Green Acres Agro Services Pvt. Ltd., currently holds 49.9% equity in Spice Communications Limited (Spice). The other major shareholder in Spice is TMI India Limited which holds around 49.0% equity. The balance around 1.1% alone is held by public.

The share price is been jacked up due to low availability of the stock.

As prospective bidders for crisis-ridden Satyam Computer Services start lining up, industrialist BK Modi also joined the fray to buy out the IT firm.

Modi, however, made it clear that the group would be interested in buying out Satyam and that it was not looking at a piecemeal acquisition. He added that he saw Rs 2,000 crore as a benchmark for Satyam. Modi also said he had a full team in place for Satyam, in case of a takeover.


L&T is in the also in the fray by increasing its stake in Satyam, so Modi's Satyam venture will not be that easy.

It is better to avoid both Satyam computers and Spice Communications

Nifty closed the month of January 2009 down 3% at 2874, but there was full of action throughout the month.The top gainers for the month were Infosys (15%), M&M (12%), Maruti and Herohonda (10% each) and among the top losers include Siemens,Rcom and PNB (24% each).

Now looking ahead, most of the quarterly results have come out and going forward there is lack of any fresh trigger on the local news front. A close look at the Nifty chart would give an insight of current market behavior.The nifty is trading in a range of few hundred points of 2650/2800 on the lower side to 3000/3150 on the upper side.

The formation in Nifty is similar to an ascending triangle due to the two peaks formed at 3160. The up trend from 2661 can take the index higher to 2900 or 2986. In short, the area between 2900 and 3000 is a strong resistance zone. If this zone is crossed, the index can head towards 3150.

But the medium-term view for Nifty would turn positive only on a weekly close above 3150. Conversely, the area around 2500/2650 will continue to act as a good medium term support.


Break of this range would give a decisive direction to the markets. Till then one can buy around the lower range and sell on rise to the upper range.Any big negatives could come only from global cues, which could impact our markets.

Meanwhile Gold is hitting new highs closing at Rs.1450 per gram. A 5 to 10% exposure can be made on declines.