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 http://www.stockezy.com/ :-

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/-

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.

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.

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 http://www.stockezy.com/ . 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).

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 http://www.stockezy.com/ :-

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.