Friday, July 30, 2010

Stock Futures Trading Made Ezy - HCL Tech

Stock Futures trading has been thoroughly rewarding for my subscribers. In the last 7 trading sessions my subscribers have made profit in the range of Rs 25,000/- to Rs 30,000/- with maximum investment of Rs 75,000/-. This gets translated into 33% to 40% return on investment in just 7 trading sessions.

This has been possible mainly due to high leverage available with trading stock futures. Also I have now modified my trading strategy where at any one time I give only one stock futures recommendation. This means that firstly subscribers do not have to put in any effort to choose from multiple recommendations, and secondly I can direct all my energies to guide them through the entire single trade. In this fashion their investment at any one time can never be more than Rs 50,000/- to Rs 80,000/-. Profit generated is through rotation of principal and leverage. In this manner we are also able to keep greed under check.

Now let us take the example of trade in HCL Tech Aug Futures. Since I am stock futures trading Guru at , day before yesterday at 1.13PM my subscribers had bought this scrip between 378/380 as per my recommendation. By 2.25 PM all my subscribers sold the lot at 382 on my call, since I felt we will get to again buy the scrip at lower level. In this trade they made profit ranging from Rs 2700/- to Rs 3700/-.

Again day before yesterday at 3.14 PM I gave a call to buy HCL Tech at 375, which the subscribers did. We kept the position open overnight. Yesterday by 9.05 AM all subscribers had sold the lot between 390/395. Since the lot size is 1000, they could make a windfall gain ranging from Rs 15,000/- to Rs 20,000/-. This has been achieved only by holding the position overnight (BTST if you may call it!).

I had recommended buy of HCL Tech day before yesterday because it was a strong buy both fundamentally and technically. Company results were expected to be good. And technically the scrip was just ripe for swing trading. All I had to do was to pin point the buy level at the support of the swing. Rest is now history. That's how simple stock futures trading really is.

Have you ever realized what a wonderful platform Stockezy has provided to retail investors to make money in Indian stock market? There is simply no reason for retail investors not to seize this fabulous opportunity of making money in stock futures at a very affordable subscription price. You are most likely to make triple the subscription amount in your very first trade. Don't believe me, ask my subscribers. I think every retail investor should avail of this money making opportunity provided by Stockezy.

Given below is the link to actual trading. Here I owe an explanation to my readers for putting them through some inconvenience in reading the comments for trade in HCL Tech. Actually the Opinion page was opened for trading Patni Computers. But then suddenly HCL Tech came down to our buy level and there was no time to open a new Opinion page for HCL Tech. So in order that my subscribers do not miss this opportunity I gave the buy call of HCL Tech in this already opened Patni page. Later this page was also used for trading Patni Computers August Futures after squaring off positon in HCL Tech. Anyway, here's the link :- .

Stock Futures Trading Made Ezy - ABB

Stock Futures trading requires very little effort to make reasonably good money, in case one shows patience and waits for price to come to calculated buy levels before entering trade. This gives leeway to exit trade in technical bounce even when the general market is weak. And technical bounces are enough to give you Rs 4000/- to Rs 5000/- in one trade.

We will take the instance of trading ABB August Futures. I have been giving stock futures recommendations at . At 9.45AM one lot was bought at 775/780 by subscribers on 26th July as per my recommendation. On the same day at 3.15 PM the position was squared off at 795. This gave an intra-day profit of Rs 5000/- with return of 13.15% on investment of Rs 38,000/-. As simple as that!

ABB was bought on technical reasons, though fundamental reasons were looking weak since it was rumoured that ABB was going to be taken off from FII's radar. But 50% retracement of most recent rise of ABB gave us the buy price of 775. And the scrip did not disappoint either. From 775 it exhibited a technical bounce and reached its first resistance of 200 day moving average. That was enough for us to exit the trade intra-day with a profit of Rs 5000/-. That's all there is to making sure shot money in trading stock futures.

Link to actual trade is given below:-

Stock Futures Trading Made Ezy - Ultra Tech Cement

Stock futures trading is rather a simple way of making money by retail investors. For continued success while tradng stock futures there are few things to be kept in mind;-
  1. Do not enter into more than one position at a time, whatever be the lure.
  2. Look for established clear momentum or strong swing.
  3. Do not think of trading intra-day. If your target is achieved intra-day it is bonus, but do not have that as a compulsion.
  4. Do not trade any news, good or bad.
  5. Have an amount of Rs 1 lakh in your trading account to successfully trade stock futures.
I have been giving stock futures recommendations in as a Guru. On 19th July one of my subscribers first bought Ultra Tech July Futures at 825.25 as per my recommendation. On 21 July he exited at 846 with a profit of Rs 5250/-.

Again on 27th July my subscribers entered this scrip at 826 as per my recommendations and booked intra-day profit ranging from Rs 2500/- to Rs 6000/-.

On both the occasions we had entered trade in Ultra Tech purely on technical reasons. Ultra Tech was falling at rapid pace and even the general market was weak. But the termination point of second down wave as per Elliot Wave principle was calculated with help of Fibonacci retracement. This gave us our buy price from where technical bounce was sure to take place. And so it did!

We could have opted for higher target but fundamentally cement sector is weak in monsoons and general market also had a negative bias. So we took precautions and exited at a guaranteed  level, thereby eliminating all risk factors attached with holding for higher target. Yesterday the scrip reached high of 878, thereby achieving its resistance level of 30 day moving average. But by exiting early we still could manage to extract average of about Rs 8000/- from two trades in one scrip. That works out to 19.5% return on investment of Rs 41,000/-.

Links to actual trades are given below :-

Sunday, July 25, 2010

Tensions In Kashmir - Problems And Solutions

Kashmir is a land blessed by nature. It is not just the landscape, even the populace is genetically blessed by the Almighty. The all-pervading natural beauty that one encounters in the entire valley is breath-taking. From Pehalgam to Gulmarg, Sonamarg to Baramullah, you can explore any nook and corner and you will be spellbound by the sheer opulence of nature. Anything and everything is in bountiful as far as natural beauty of the countryside is concerned. In the same vein one finds a population endowed with the best of physique and sharp, strikingly beautiful features. It compels one to ruminate that nature has been rather partial to Kashmir and Kashmiris in terms of beauty as compared to rest of India.

When we mingle with the common people, there is a sense of pure and pristine simplicity which is hallmark of hill people. And if you look back thirty years, Kashmir was the place where there was absolute peace. It was like how Leh and Ladakh is today. Then what exactly went wrong that in three decades a place symbolizing heaven on earth is pushed to a spot where even the devil shudders to trod? How is it that such peace loving populace has turned so violent that Kashmir never seem to leave the newspaper headlines. We will try and evaluate plausible reasons, away from the politics of power brokers and terror merchants.

  1. Till the time Kashmir was peaceful, there was no wedge between the minority Hindus and majority Muslims. But the Hindus controlled the actual wealth as they were landlords and affluent businessmen in the Valley.
  2. Most influential Hindus were the Brahmins who were called Kashmiri Pundits. With dominance in wealth and position in society, there existed a fiduciary relationship of master and servant between many Hindus and Muslims.
  3. Such relationship however generates excesses in behaviour, leading to certain conditions of exploitation in day-to-day life. Over a long period of time these conditions give rise to  feelings of simmering anger amongst the exploited.
  4. These are the same conditions which existed in Tamil Nadu between the Brahmins and the lower castes, which led to the movement of ethnic cleansing of Tamil Brahmins and culminated in formation of DMK(Dravida Munnetra Kazhagam).
  5. So the ground was ripe to sow seeds of discontentment and this was done by foul politics and politicians in 1987 state elections.
  6. Seizing an opportunity, as Kashmir went through political turmoils after the 1987 elections, terror mongers swung into action and spread the message of hatred. Land of peace and  tranquility suddenly erupted into one perennial volcano of guns, conflicts and violence.
Situation being as it is now, there is an urgent need to find remedial measures to bring life to normalcy in Kashmir Valley. Some of the measures suggested are listed below :-
  1. Deal with militancy with a swift and heavy hand. Weed out the militants without any political colours and compulsions. After all, there are not more than 5000 militants in the entire valley.
  2. Give a better deal to the population by going full steam for real development on ground. For that the first step is to shore up infrastructure development of the Valley which should match any International standards.
  3. With infrastructure development there should be a case to turn places in Kashmir into Special Economic Zones where industries should be allowed to proliferate. This will bring economic prosperity to Kashmir by way of exponential increase in employment opportunities.
  4. Give extra push to spreading professional education amongst Kashmiri youths so that they become endowed and empowered.
  5. After making Kashmir safe by flushing out militants, make sure that it becomes a tourist destination of the world by providing the right kind of world class infrastructure and tourist comforts.
The only way out of this logjam of militancy and terrorism is to spread prosperity in the Valley with fundamentally strong policies and plans. These policies and plans should get translated into equally swift and sound execution on ground. For that politics and rhetoric have to be kept at bay. The price that Indian Government has to pay for all this will be much smaller compared to the price it pays every year in terms of losses in man and material.

Saturday, July 24, 2010

Stress Test For European Banks : Not So Stressful Though

On 23rd July 2010 results of  Stress Test for 91 banks of the European Union were declared. Of these 91 banks only seven banks failed the stress test. And Spanish banks topped the list with maximum number of failures. Five banks from Spain, one bank from Germany and one from Greece comprised the list of seven failed banks.

One year back similar Stress Test was conducted in US for 19 of its banks. Out of 19 US banks, ten banks failed the stress test conducted in May 2009. It was estimated that these banks would require an infusion of $75 billion to be credit worthy in case of another depression. That was stressful. But here when there is concerns of Sovereign Debt Default in European continent there are only seven banks out of 91 tested which failed. Estimated requirement of capital is just $ 4.5 billion to cater for any rude surprises by way of economic downturn. Isn't it wee bit surprising? It only points to a fact that the tests were not conducted rigourously. The rules applied to test the banks have been lenient. That's the only explanation one can offer.

Stress Test is like an X-ray. It tells us where all the banks and banking system have to be repaired in order to be strong enough to withstand an economic tsunami. In times of trouble if the banks fail, then what is left to bank upon for common citizens of a nation? But the European Union passed off this opportunity to find precautionary measures to safeguard itself against another economic downturn. If the doctor doesn't diagnose the patient correctly then how on earth can you prescribe the right medicine? Critics are  already saying that the stress tests on European banks were so easy that even Lindsay Lohan would have passed it.

So what could be the reason that European Union opted for losing credibility for its banks in the eyes of global investors? The tests were intended to reassure investors and help ease pressure in bank funding. This was urgently required since Sovereign debt crisis in many European nations undermined confidence in the banking system. Has the European Union achieved that goal with a Stress Test bereft of stress? I wonder not!! US investors have already lost faith in the European Banks as is evident from investment data available from various Mutual Funds. For the last two years exposure in European Banks has been drastically reducing in portfolios of US Fund Managers. Some have reduced it by as low as 60 to 80%. On top of that, this Stress Test has evoked some very caustic remarks from US Fund Managers.

Charles de Vaulx, a portfolio manager at International Value Advisers LLC said the stress tests would not change the firm's outlook on European Banks. "We find the European banks still under capitalized," de Vaulx said. "The lack of a test for sovereign risk means the test was too soft and not credible." After announcement of stress test results US markets shrugged off the results as a non event, and marched northwards on  expectations of better corporate earnings.

Friday, July 16, 2010

Gravitating Towards Trade War Scenario : Fallout of Depression

US President Barack Obama has fired the first shot to initiating Trade War. Last week he goes on record saying "Simply put, export growth leads to job growth and economic growth," This President Barack Obama opined while setting up an industry panel to achieve his ambitious target of doubling American exports in next five years. "This isn't just about where American jobs are today. This is where American jobs will be tomorrow", thundered the US President.

After having failed to create new jobs for US citizens through the usual route of driving domestic growth via fundamental economic activities, President Obama has now set his sights on achieving US economic revival by focusing on enhanced exports. To achieve the same he has already started advising competing exporting nations to go slow on their exports. Sample this reaction from a German official to President Barack Obama's advice "With his arguments that we should become a bit less reliant on exports and allow the others to catch up, he's just trying to weaken us. Well, we're not going to take his advice."

But if we know the style and functioning of  US President, he is not going to go back in his new agenda of doubling exports to rekindle US economic recovery, just because Germans do not like it. On the other hand European nations are not going to accept whatever US President has set as his national goal. It is no longer the period just after World War II that European Union will kowtow to US diktat. US will find it very tough to arm twist European Union on reducing its exports, whatever be the Union's present state of economic crisis. And that may set off some kind of trade war, which can be the next level of global concern.

The spectre of the European Central Bank raising interest rates to damp inflationary pressures in Germany is receding away. European Central Bank will find it very difficult at this time to raise rates when many European nations are still struggling with their respective debt-ridden economies. Credit crisis in Europe has at least ensured that the stimulus package will not be withdrawn for several months, which means that present low interest rates are here to stay for quite sometime. This is excellent news for Germany's export-orientated industry since continuation of low interest rates means high inflation, which in turn means that exports will fetch more money to German exporters.

In a scenario where exports are so lucrative, do you feel Germans are going to pay any heed to the wishes of President Obama? And therein lies the danger of a global trade war, in case US decides to pull out all the stops to attain its national agenda of doubling exports at the cost of its exporting competitors.

Thursday, July 15, 2010

Trading Stock Futures : Performance Update Mid July 2010

Last performance update of trading stock futures was published on 6th July 2010 in a post titled "Stock Futures: Performance Update For June 2010". In that post it was seen that we had achieved 100% result in June 2010 trading Stock Futures. That means all the four Buy trades which were closed in June gave profit. In June we had traded lightly because market conditions were not conducive for aggressive trading on any side, long or short. However we still managed to generate a profit of Rs 23317/- from these four successful trades.

July though is different. There were enough indications for markets to move northwards and so I had given  full throttle to initiating buy recommendations. Now mid way through July 2010, its time to generate a performance report to assess where we stand against all stock futures recommendations which have been executed so far. By the way, let me preempt the findings by disclosing that so far in July we have maintained the track record of June by delivering 100% success. Take a look at the details of trades executed in July 2010 in Stock Futures  recommended by me at :-

Aban July Futures(Long) :
Bought at 670 and covered at 890. Lot size = 250. Investment = Rs 33500/-.
Profit = 220x250= Rs 55000/-. Return on Investment = 164%

KS Oils July Futures(Short) :
Sold at 58 and covered at 57.25. Lot size = 4000. Investment = Rs 46000/-.
Profit = 0.75x4000= Rs 3000/-. Return on Investment = 6.5%

Aban July Futures(Long) Rolled Over From June Series :
Four lots bought at average of 864 and covered at 890. Lot size = 250. Investment = Rs 1,48,000/-.
Profit = 26x1000= Rs 26000/-. Return on Investment = 17.5%

Bajaj Hind July Futures(Long) Rolled Over From June Series :
Bought at 116 and covered at 118. Lot size = 2000. Investment = Rs 46,000/-.
Profit = 2x2000= Rs 4000/-. Return on Investment = 8.6%

GMR Infra July Futures(Long) :
Bought at 59.2 and covered at 60.2. Lot size = 4000. Investment = Rs 47000/-.
Profit = 1x4000= Rs 4000/-. Return on Investment = 8.5%

Bajaj Hind July Futures(Long) :
Buying at dips, investment of Rs 46000/- in this scrip was rotated by buying and selling four times between 1st July to 14th July.
Each time profit of 5500/-, 3400/-, 2000/- and 4400/- respectively could be realized.
Total Profit = 5500+3400+2000+4400 = Rs 15300/-. Return on Investment = 33.26%

Balrampur Chini July Futures(Long) :
Buying at dips, investment of Rs 67000/- in this scrip was rotated by buying and selling three times between 2nd July to 13th July.
Each time profit of 5400/-, 3000/- and 8000/- respectively could be generated.
Total Profit = 5400+3000+8000 = Rs 16400/-. Return on Investment = 24.4%

Cummins India July Futures(Long) :
Bought at 596 and covered at 602. Lot size = 500. Investment = Rs 59000/-
Profit = 6x500= Rs 3000/-. Return on Investment = 5.08%

McDowell July Futures(Long) :
Bought at 1296 and covered at 1310. Lot size = 250. Investment = Rs 64000/-.
Profit = 14x250= Rs 3500/-. Return on Investment = 5.4%

Patel Engg July Futures(Long) :
Bought at 417 and covered at 425. Lot size = 500. Investment = Rs 41000/-.
Profit = 8x500= Rs 4000/-. Return on Investment = 9.75%

Tech Mahindra July Futures(Long) :
Bought at 736 and covered at 760. Lot size = 250. Investment = Rs 37000/-.
Profit = 24x250= Rs 6000/-. Return on Investment = 16.2%

Bharti Airtel July Futures(Long) :
Bought at 273.5 and covered at 278.5. Lot size = 1000. Investment = Rs 54000/-.
Profit = 5x1000= Rs 5000/-. Return on Investment = 9.2%

JSW Steel July Futures(Long) :
Bought at 1075 and covered at 1084. Lot size = 250. Investment = Rs 53000/-.
Profit = 9x250= Rs 2250/-. Return on Investment = 4.2%

Renuka Sugar July Futures(Long) :
Bought at 70.1 and covered at 71.5. Lot size = 2000. Investment = Rs 28000/-.
Profit = 1.4x2000= Rs 2800/-. Return on Investment = 10%

Total profit from 01 July2010 to 14 July 2010 = Rs 1,50,250/-

Sunday, July 11, 2010

Sugar To Become Sweet For Indian Companies

Indian Agriculture Minister has finally given a hint that Indian Government is considering to decontrol the sugar prices. This is sweet music to sugar sector, and upon hearing this news sugar stocks gave a thumbs up  in the last session of trading on Indian bourses. Now there is hope that the most controlled sector of the Indian Industry will be able to come out of its shackles.

When we talk of shackles we need to realize the gravity and complexity of chains that Indian Government has put on this very important industry of Indian economy. To fathom the depth of the situation let us face some hard and harsh ground realities:-
  1. India is the biggest producer of sugar in the world along with Brazil. It is also the top consumer of sugar in the world.
  2. Indian sugar mills are totally controlled through various Acts and notifications by Central Government. Take a peek at some of the chains that Indian Government has tied  this vital industry with:-

    (a)   Price to be paid for cane controlled through state advisory price (SAP).
    (b)  Procurement of cane by sugar mills allowed within a stipulated radius only.
    (c)  Price controlled for sale of sugar in free market.
    (d)  Quantity and duration of sale in free market controlled.
    (e)  Limit on quantity to be lifted by bulk consumers like soft drink manufacturers.
    (f)  Price and quantity of levy sugar to be distributed through Public Distribution System.
Levy sugar is sugar that mills have to sell to Government at a price fixed by the government. This price is generally less than half the free market price. The quantity is at present 20% of the total production of the sugar mills. Levy sugar is distributed by the government through its Public Distribution System(PDS).

Sugar mills have to pay a fixed price to cane growers through system of state advisory price (SAP). Earlier Supreme Court had ruled that SAP should be taken into consideration while fixing the price of levy sugar with effect from1983-84. The honourable court had further directed that Central Government should refund the legitimate dues to sugar mills accruing out of this order. Now Bajaj Hindustan has filed a petition with Supreme Court that Government has violated the honourable court's order by not taking SAP into consideration while fixing the levy price, leave alone legitimate dues to be paid to sugar mills. Now Supreme Court has issued notice on 8th July 2010 to central government to submit a reply to this petition.

In this issue of levy sugar, one fails to understand as to why only sugar industry has to bear the burden of subsidy. On top of that you are not ready to pay legitimate prices to sugar mills for levy sugar!! No wonder this industry is making losses day in day out. The following vicious cycle is happening in this vital industry of Indian economy:-
  1. Sugar mills are forced to reduce production below their capacity in order to cut their losses.
  2. Lower production means lower procurement of cane.
  3. Lower cane procurement induces the farmers to grow less cane and switch to other cash crops.
  4. This generates scarcity of sugar, sending sugar prices to skyrocket. This compels the central government to import sugar to meet domestic demand, and in the bargain lose precious foreign exchange.
  5. In this scenario it is a lose-lose situation for all. Cane growers lose, sugar mills lose, the exchequer loses and ultimately the Indian economy loses along with the public in general.
May be now the Indian Government will wake up to the realities of economics in sugar industry. By decontrolling the sugar prices it will allow this industry to flourish and make India the Sugar King of the world, which is its rightful place given the god-gifted fertile land that it possesses.

Reliance Industries is the biggest industrial empire of India and this group has still not stepped into sugar sector. With freeing of sugar industry of its shackles, Indian Government may create the right conditions for Reliance Industries to join the bandwagon of sugar sector in times to come!!! Keep a strict lookout for sugar sector for long term investment even if the sector is partially decontrolled by the government.

Friday, July 9, 2010

IMF Forecast For 2010: India GDP Upgraded

International Monetary Fund (IMF) has now corroborated what I have been maintaining for quite some time. IMF has upgraded India's GDP forecast of year 2010 from 8.8% to 9.4%. And on the other hand, IMF has indicated that US poses the greatest threat to global recovery. In fact as per IMF it is India and China and some other Asian economies which are supposed to lift the growth prospects in the world and therefore it has raised the world GDP prospects for 2010 from 4.2% to 4.5%. However it has lowered its growth estimates for Euro zone, Canada, US, Japan, and emerging economies.

If we consider expected growth rate of different economies of the world, India ranks second behind China. According to IMF, while India's GDP is expected to grow at the rate of 9.4%, China's GDP is fore estimated to grow at 10.5% for year 2010. This is wonderful news for Indian economy, and should lift the global investors' confidence and investment sentiments towards India.

I had already fore casted in my post dated 17 Jan 2010 titled " Stimulus Induced Growth - Is It global Recovery On Steroids" that US will witness a double dip depression while Indian markets will correct but rebound aggressively to surpass their all time highs in a year's time. Now IMF forecast mirrors my sentiments. With India you can also see other emerging economies to do well, provided they are not heavily dependent on exports to US.

Moving away from growth rates, do keep a look out for textile counters for long trades in Indian markets today ie 9th July 2010. This is because the textile sector will benefit from the announcement from China that yuan will be allowed to appreciate more aggressively.

Thursday, July 8, 2010

Stock Futures - Gap Up Ticks Difficult To Trade

Before Indian stock markets opened today on 8th July 2010, there were strong bullish market sentiments from across the Atlantic Ocean. US markets had closed strongly in positive territory. Bounce in US markets was generated by investor expectations of good corporate earnings. After a long time Dow Jones closed above the 10000 mark with a gain of 274.66 points.
Overnight good tidings in US markets had a salubrious effect on the Asian markets, which were trading in green when Indian markets opened today. As was expected, Indian markets opened strongly in the green and kept surging northwards. It is such situations there is dilemma while entering trade in stocks futures. "Will the stock correct to cover intra-day gap or not?" is a question predominant in mind. Today was one such day.

Be that as it may, I am furnishing details of three stock futures trades which were squared off today as per my recommendations at . Of these three trades, two were long trades and one was a short trade. The point to note here is that even in a strong bullish market you can  earn profit by shorting specific stock futures :-
  1. Balrampur Chini July Futures : Bought at 84.75 and covered at 85.5. Lot size = 4000. Long trade.
    Investment = Rs 67000/-.
    Profit = 0.75x4000= Rs 3000/-.
  2. Bajaj Hind July Futures : Bought at 117 and covered at 118. Lot size = 2000. Long trade.
    Investment = Rs 47000/-.
    Profit = 1x2000= Rs 2000/-.
  3. KS Oils July Futures : Sold at 58 and covered at 57.25. Lot size = 4000. Short trade.
    Investment = Rs 46000/-.
    Profit = 0.75x4000= Rs 3000/-.
Total profit on 08 July 2010 = Rs 8000/- (3000+2000+3000).

Wednesday, July 7, 2010

Trading Stock Futures - Profitable Even On A Down Day

I have been harping on this power of leverage that Stock Futures enjoy. This power has been evident in Indian markets even today. From the time the Indian markets opened today on 7th July 2010, there has been immense selling pressure. In the first half, Indian markets took cue from weak Asian markets and then got fully hugged by Bears after European markets opened weak in the second half. There was just no escaping the relentless selling by Bears. Nifty gave up all its gains it made yesterday.

In such a scenario, if you were a retail investor there was no room to hide, trading in cash segment. Like it or not, retail investors are perenial Bulls and cannot imagine going short. And in cash segment, today was just not the day for going long. But its a different story if you are trading in Stock Futures. Power of leverage will help you to make reasonable money on the long side by exploiting the intraday volatility. Let me illustrate the point by highlighting the following trades which were squared off today as per my recommendations at :-
  1. Bharti Airtel July Futures :
    Bought at 273.5 and covered at 278.5. Lot size = 1000.
    Investment = Rs 54000/-.
    Profit = 5x1000= Rs 5000/-.
    Remarks : This lot was bought today morning and squared off intraday with reasonable profit of Rs 5000/- for investment of Rs 54000/-. If one had bought the scrip in cash, it would  have been difficult to exit with profit of just Rs 5/- per share. For making Rs 5000/- profit in cash segment, one would have had to invest Rs 2,73,500/- in this scrip.
  2. Cummins India July Futures :
    Bought at 596 and covered at 602. Lot size = 500.
    Investment = Rs 59000/-.
    Profit = 6x500= Rs 3000/-.
    Remarks : Here it would have been even more difficult to exit with a profit of just Rs 6/- per share, if one had traded the scrip in cash segemnt. To achieve a profit of Rs 3000/- you would have had to invest Rs 5,96,000/- in cash segment.
Today's closed trades in Stocks Futures yielded total profit of Rs 8000/- (5000+3000) against a total investment of Rs 1,13,000/- (54000+59000). That means a return of 7.1% on investment in long trades, on a day totally in the grips of Bears. Hope I have made my point amply clear about power of leverage in stock futures trading.

Tuesday, July 6, 2010

Stock Futures : Performance Statistics For June 2010

In the month of June 2010, six trades of Stock Futures were executed as per recommendations given by me at All the six trades were 'Buy' ie long trades. Of these six trades, two trades have been rolled over from June series to July series and are still open. These are Aban Offshore and Suzlon Futures. For the rest of the four trades, I am furnishing the details below:-
  1. Tata Comm June Futures :
    Bought at 247.5 and covered at 264. Lot size = 525.
    Investment = Rs 26000/-.
    Profit = 16.5x525= Rs 8862/-.
    Return on Investment = 34%
  2. HDIL June Futures :
    Bought at 228 and covered at 235.5. Lot size = 774.
    Investment = Rs 36000/-.
    Profit = 7.5x774= Rs 5805/-.
    Return on Investment = 16.1%
  3. Punj Lloyd June Futures :
    Bought at 118.4 and covered at 121.5. Lot size = 1500.
    Investment = Rs 36000/-.
    Profit = 3.1x1500= Rs 4650/-.
    Return on Investment = 12.9%
  4. Bajaj Hind June Futures :
    Bought at 116 and covered at 118. Lot size = 2000.
    Investment = Rs 46000/-.
    Profit = 2x2000= Rs 4000/-.Return on Investment = 8.7%
Thus total profit in June 2010 from trading stock futures = 8862+5805+4650+4000 = Rs 23317/-
against total investment of Rs 1,44,000/-.

Monthly Return on Investment = 16.2%

Monday, July 5, 2010

Power of Stock Futures On Lean Trading Days

5th of July 2010. It was one of the most tiring days in trade. There was hardly any movement in global indices, and Indian markets were no exception. Primary reason for weak trading volumes today was the fact that traders stayed on the sidelines ahead of  US Independence Day holiday. All markets were looking for direction to trade, be it Asian markets or European markets.

As for Indian markets, there was an added baggage of nation-wide Bundh call by opposition parties. With means of transport getting badly effected, there was hardly any trading volume on the bourses as traders stayed away. For the entire day Nifty traded in a super tight range of 27 points with day high of 5253 and low of 5226. For day traders, how much more boring than this can things get?

However if you were trading Stock Futures, even such a boring day can be rewarding. The reason is simple- the power of leverage, as explained in my last post on 04July2010 titled "Power of Trading Stock Futures : Bajaj Hindustan". To clarify the point , allow me to highlight the following trades which I had recommended to members at   :-
  1. Tech Mahindra July Futures : One lot was bought at 736 on last trading session, ie 02July2010. Today the scrip reached the recommended target of 760, thereby giving profit of Rs 24/- per share. Since the lot size is 250, total profit = 24x250= Rs 6000/- against an investment of Rs 37000/-. Thus return on investment in two trading sessions = 16.2%.
  2. Balrampur Chini July Futures: In last trading session, one lot of Balrampur Chini July Futures was also bought at 84.1 with a target of 84.45. Today in first half hour of trading the scrip achieved its target price, thereby giving a profit of Rs 1.35 per share. The lot size being 4000, this position attained total profit = 1.35x4000= Rs 5400/- against an investment of Rs 67000/-. Thus return on investment in two trading sessions = 8%.
Hence from two positions with total investment of  Rs 104000/- (67000+37000), total profit obtained was Rs 11400/-(6000+5400). This translates to a return of 11%  in two trading sessions. Remember today was a lean trading day, but the power of leverage in Stock Futures can make any trading day rewarding.

Power of Trading Stock Futures : Bajaj Hindustan

While trading Stock Futures, one has to constantly keep in mind the power it generates in terms of leverage. Its return on investment is five times that of trading in cash segment. And with this power you can rotate your money faster for further leveraging effect. When the markets are moving sideways trading in stock futures can be very rewarding. Case in point is that of Bajaj Hindustan. The recommendation to buy Bajaj Hindustan Futures was posted by me at

Bajaj Hindustan June Futures was bought on 16 June 2010 at 116 for a target of 121, as per my recommendation posted. The scrip was chosen for Futures trade because all Technical parameters were giving strong buy signal. However Fundamental reasons for entering into sugar sector in general and Bajaj  Hindustan in particular were as follows:-
  1.  On 14 June 2010 Indian Government had approved rise in levy sugar prices paid to mills by Rs 4/-. This would help market sentiments to improve as it signals that the prices could be higher than what they were.
  2. Global sugar prices were rising.
  3. Bajaj Hindustan was to merge it subsidiary - Bajaj Hindustan Sugar. This move would strengthen Bajaj Hindustan's position in Indian Sugar Sector through rationalization of operations, resulting in enhanced production, better profitability and stronger competitive edge.
The position was rolled over to July series as the target was not met. On the first day of July series Bajaj Hindustan surged past 121. I had then recommended to hold the stock for enhanced target of  127 which was later revised to 130. In this position I had recommended a trailing stop loss of 118. However the stock reached a high of 121.7 but met with trailing stop loss of 118 on 29June 2010. In this manner we could protect our profit in a very volatile market. Profit made was Rs2/- per share and since the lot size is 2000, the total profit was Rs 4000/- against an investment of Rs 46000/-.

Again on 30June2010, one lot of Bajaj Hindustan July Futures was bought at 116.75. Next day this position was squared off at 119. This provided a profit of Rs 2.75/- per share  and total profit from one lot of 2000 shares worked out to be Rs 5500/-.

Further on 01 July2010 one lot of Bajaj Hindustan was again bought at 116.8 and covered on 02July2010 at 118.5. This gave a profit of Rs 1.7/- per share and total profit of Rs 3400/- from one lot.

Thus by rotating our capital we could make a total profit of Rs 4000+5500+3400 = Rs 12900/- against capital investment of Rs 46000/-. That is equivalent to a return of 28% in two weeks.

Comparison With Cash Segment
Now for some comparison of Futures trading with Cash market trading. If we had bought Bajaj Hindustan in cash segment with capital investment of Rs 46000/- and at buy price of 116, we would have bought 396 shares. With a profit of Rs 2/- per share we would have made a profit of Rs 2x396= Rs 792/-. Instead ,by trading in Futures, we made a profit of Rs 4000/- with the same capital and at same buy and sell prices. This is the power of leverage acting on Futures trading which gave us a profit multiplication of five times over cash trading.

Now if you make a profit of Rs 792/- in delivery based trading , you will not like to exit your position because most of this profit will evaporate in giving brokerage. But with brokerage being one tenth in Futures trading in comparison to cash trading, you will not mind exiting your position with a profit of Rs 4000/-. And that is why we could rotate our capital of Rs 46000/- to make a total profit of Rs 12900/- with a return of  28% in two weeks. This quick money rotation would not have been possible in cash segment trading.

Thus we have seen the power of Futures trading in terms of leverage and capital rotation.

Sunday, July 4, 2010

Sovereign Debt Default : Price To Pay For Sub Prime Crisis

Sub Prime crisis seems to be a thing of the past. People are now grappling with Sovereign Debt Default crisis in Europe. Investors are accusing European countries for bringing about gloom and doom in the financial world. But what has caused such deplorable financial condition of European nations, a sphere where everything was hunky dory just a couple of years back? As was the general perception then, conditions in European Union was one of growth and prosperity. As per IMF estimates of 2008 GDP and purchasing power parity among various currencies, the Eurozone was the second largest economy of the world. It was a place which was touted to be making a bipolar world with aspirations of giving a countervailing effect to the financial clout of USA. In fact the Euro was deemed to be the next dollar in the coming years, slowly and steadily replacing the dollar in international trade. Central Banks of many countries were increasing their exposure to Euro as their reserve currency. So much so that in 2007 former US Federal Reserve Chairman Alan Greenspan opined  " it is absolutely conceivable that the euro will replace the dollar as reserve currency, or will be traded as an equally important reserve currency". Strong opinion that! But then what happened suddenly within a span of two years that Euro has lost all its sheen? Today Eurozone bonds are hurtling towards acquiring junk bond ratings as many European nations are staring at the spectre of being declared insolvent.

How has this sudden capitulation taken place in such strong and vibrant economies? Why Europe, even US is reeling under the pressure of mounting debt. On 30 June 2010, the Congressional Budget Office(CBO) in US predicted that US debt will reach 62% of GDP by year end, which happens to be the highest percentage since just after World War II. Further, China happens to be the biggest creditor to US and also has huge exposure to Euro in its reserve. So you see, with every crisis of US and Europe in terms of debt servicing, China will be wincing in pain. Many South Asian economies will do the same since their economies in turn are China-centric. In other words Asia will be in pain whenever Europe and US feel the heat of sovereign debt default. As for African nations, most of them are already so badly managed economies that they figure in the Forbes list of top ten worst economies of the world. Since they depend on US and its financial organizations giving aid in some form or the other, Africa also will be under the weather with US economy in spot. That leaves us with South American nations. Well most of those economies are fully dependent on trade with US and hence will be effected too, if US is forced to go through austerity drive to curtail its fiscal challenge. In short, the entire world is under threat of an impending economic crisis.

But our central question still remains unanswered. How has this catastrophic situation come about? What has triggered this avalanche of economic woes upon affluent nations? In quest of an answer let us proceed step by step in the following direction :-
  • The US sub prime crisis had morphed into global credit crisis of epic proportions. As we had seen in my last post on 12th June 2010 titled "Wall Street Shenanigans - Is Iconic Brand US Under Threat?", billions of dollars had been lost by global financial institutions in the wake of sub prime crisis. Every financial institution worth its name was on the verge of being bankrupt.
  • These financial institutions were the backbone of every nation and this backbone was under threat of being broken. That is when Governments had to step in to save these financial institutions. It was a rare display of synchronized actions taken by all nations as they pumped in billions of dollars to save their terminally ill financial institutions. Such heavy injection of steroids(bailout money) is being popularly referred to as "Stimulus Package".
  • This unified stand taken by all nations speak of the severity of  threat of annihilation, since politics of nations has never before allowed the world to be united on any single issue. But this time was an exception, a time to unite for survival. On 28Mar2009 in a post titled " Aftermath of Global Slowdown"   I had emphasized that for the leaders of G20 nations, meeting on 02Apr2009, it was their last chance to steer the world away from global catastrophe. And this time leaders of 20 most powerful nations united to deliver what is now popularly known as "Stimulus Package".
  • Apart from many actions which increased liquidity, Governments across the globe injected money to bail out their financial institutions who had lost billions to the machinations of Wall Street investment banks.
  • This bailout money eroded the coffers of nations making them credit unworthy. Injection of bailout money to save financial institutions at that point was unavoidable, but then measures should have been taken to ensure that this money was used for activities that kickstart economic revival. Instead billions of dollars again ended up in the kitty of people who planned and executed sub prime crisis in the first place. Take the example of AIG taking US tax payers' money as bailout to the tune of $182 billion and immediately paying off counterparties like Goldman Sachs and other Wall Street banks at 100% on the dollar. No negotiations?? Joseph Cassano, former head of AIG's derivatives unit, appearing before Financial Crisis Inquiry Commission, said he could have saved tax payers billions of dollars by negotiating harder with banks. Are the American tax payers paying attention?
  • So instead of reviving the economy with activities which create jobs, these billions of dollars of stimulus money were siphoned off  to people who have again used it for more speculative purposes like dollar carry trade. To read more on dollar carry trade do look up my post on 27Nov2009 titled "Dollar Carry Trade - Easy Money in Difficult Times".
  • With no revenue generation activities and empty coffers of nations, time had to come when debt servicing and debt repayment by nations was to become difficult. And that time has now come upon the world in the form of impending Sovereign Debt Default. To get a grasp on the implications of Sovereign debt default it is recommended that you visit my post of 18Dec2009 titled "Sovereign Debt Default Scare - Is Dubai Too Big To Fail?".
From April 2009 till date we have witnessed stimulus induced growth in all markets across the globe. That is artificial recovery and has no fundamental moorings. Nothing has changed on ground as far as growth parameters of nations are concerned. Take the latest US Jobs Report for instance. Last Friday the US unemployment data showed that the nonfarm payrolls fell by 125000 in June 2010. Economic activity is just not picking up in US and hence new jobs are not being created. If new jobs are not created then consumption will fall. Consumption falls then inventories increase and so production activities have to be curtailed. Decreased production requires even less jobs and inspires further fall in consumption. Hence we go into a vicious cycle in which you can imagine what happens to the economy.

Stimulus Induced Growth that we have seen for the last one and half year is at its end. Having taken not enough measures to induce structural economic growth, US is on the path of double dip recession. And history tells us that the Great Depression of 1929 got prolonged for similar reasons. You can get more details on stimulus packages in my post of 17Jan2010 titled "Stimulus Induced Growth - Is It Global Recovery On Steroids". At this stage it is judicious to remember that earlier World Wars were basically fought not for ideological or emotional reasons but for economic reasons, sparked by trade wars. I hope the world leaders are listening.