Tuesday, May 14, 2013

Selling in May Has Started - Nifty On Course To Target

Selling in May has started as I had predicted on 10 May 2013. We are about to witness a bizarre game of Distribution. Those who are uninitiated to the term "Distribution", it is a technique of selling by big players wherein they try to mask their intention to sell large quantities by selling in small tranches. This ensures that the prices do not get depressed suddenly and they are able to get good average sell price of their overall quantity. In this process they also intermittently try to artificially spike up the prices by buying back portion of their sold quantity.

This is a normal process of selling that happens in the market as a precursor to Bear Run. Then why am I calling it bizarre? The other day I was telling a friend of mine about what I perceive would happen in the market looking ahead. I am of the firm opinion that in days ahead we are in for some serious selling in the market. In normal times, the distribution phase is meant to suck up the retail investors by tricking  them into buying when actually they should be selling. Conditions in market are so created which convince the retail investors to buy. But at the present moment there is hardly any retail participation and even the domestic institutions are well nigh non participants in the market. That leaves the very big fishes comprising of all shades of FIIs. It is these big players who will try to hoodwink each other to get the best selling prices. So in short you will witness some very complex market movements and illogically high volatility. One day it will seem as if the Bears have taken total control and the very next day you will inexplicably find Bulls racing ahead in full steam.

But don't worry. As long as you are with me through this blog, you will be guided to weather any storm in the market. You will recall that on 10 May 2013 I had advised to sell Nifty May Futures in a post titled Sell In May & Go Away - Should We This Time?   And in the very next trading session on 13 May 2013, Nifty May Futures dropped from intraday high of 6119 to intraday low of 5986. In today's session Nifty May Futures has made a Doji and closed at 6006.

However, in my recommendation I had given the first target of 5870 for Nifty. It seems we are on course to achieve this target. Those who have sold Nifty as per my recommendation, can hold on to their position till the given first target. But they should keep stop loss at 6090, owing to expected high volatility. And once the first target is achieved then they should hold their position for the second target, but with apt trailing stop loss so as to protect their profit till then.

So far so good in trading Nifty since we are sitting in profit. Lets see whether the coming sessions vindicate my stance. Happy trading!

Friday, May 10, 2013

Sell In May & Go Away - Should We This Time?

In Western markets there goes a saying "Sell in May and Go Away". And this adage has generally been holding its worth even in Indian markets most of the time. But this time around Dow Jones has been surprising everyone by making all time highs everyday in May. Does that mean that things will be different this May and the adage will be proven wrong? Will it be foolhardy to sell in this month of May 2013?

I do not think it is unwise to sell now in May 2013. Of course you will have to time your 'Sell' differently for different stock futures. As for record breaking streak of Dow Jones, it seems the bullish exuberance has already been overdone for the time being. I am not for once saying that Dow Jones has peaked. I am only saying that Dow has overstayed in the untrodden territory of All Time High for a bit too long. So for the present moment Dow will have to cool down somewhat in rest of May.

I have been reminding you in previous posts that we will be selling May series. And the time has come for some action tomorrow. The first 'Sell' candidate is Nifty itself.  Lets have a look at Nifty May Futures daily chart.:

 We can see that Nifty has the following weakness in daily charts:-
  • V-shape recovery which needs to correct so as to provide stability for further move up.
  • There is formation of Bearish Engulfing candlestick pattern, if we see the candles of the last two trading sessions.
  • Support for this V-shape up-move will be at 61.8% or 50% retracement. This means that  5800 and 5725 are the support areas for Nifty.
So we can sell Nifty between 6060 and 6090. Even if Nifty has to move up from here without correcting, it will still have to touch down to 5970 before going up, Hence selling Nifty now is low risk and high return proposition. Sell Nifty May Futures between 6060 / 6090 for first target of 5870 and second target of 5725.

There are other 'Sell' candidates also, but we can keep our exposure at low risk by selling only Nifty for the time being. But in case anyone needs to reconfirm a view on selling any other stock futures, he or she can do so by simply asking my opinion in the 'Comments' section. Remember its May and we can make merry by selling stock futures in May. So go right ahead and take action. All the very best!

Thursday, May 9, 2013

Note For Those Who Are New To Stock Futures Trading

Since my recommendations to make money from stock market will be for very short term, it is advisable that you leverage your profit by entering futures trade of the recommended stock. But those who are uninitiated to stock futures trade, will have lot of mental apprehensions. For newbies I would like to touch upon rudimentary issues regarding stock futures trade. Read on to know the details/nuances of stock futures trade:-
  1. Stock futures is traded almost in the same fashion as you trade that particular stock in the cash segment. Only difference is that when you buy a stock you get delivery of the stock in your Demat Account. But when you buy futures of that stock, you do not get physical delivery of that stock. Instead the buyer only enters into a contract with the seller.
  2. While placing 'Buy' order for stock futures, quantities  need to be filled as fixed by the Exchange for each stock, called Lot Size. So if you have to buy Relinfra futures, you have to buy minimum one lot and the size of the lot is 500 shares. That means you have to buy minimum 500 number of Relinfra futures or buy in multiples of 500.
  3. You can buy any of the three contracts of Relinfra-  May contract or June contract or July contract. Each contract expires on the last Thursday of that particular contract month. Thus May contract will expire on 30 May, June contract will expire on 27 Jun, and July contract will expire on 25 July. After you buy a particular month contract, you have the liberty to sell that contract anytime from that moment till expiry of the contract
  4. Let us see how much money you have to invest to buy one lot of Relinfra Futures, consisting of 500 shares. You will have to pay about  20% of the total value of one lot. If current price of Relinfra June Futures is say 400, then the total cost of one lot of 500 shares will be 400x500 = Rs 2,00,000/-. But while buying one lot of Relinfra June Futures, you will only pay 20% of Rs 2,00,000/- which works out to Rs 40,000/-. In other words you can buy one lot of 500 shares of Relinfra June Futures for Rs 40,000/-, and this is the leverage you are getting to trade in stock futures. Suppose after buying one lot of Relinfra June Futures at 400, you find that the price has shot up to 420. and you sell it. Since you have sold one lot of Relinfra June futures at 420, you will make a profit of 20x500= Rs 10,000/-.
That is how simple stock futures trading is. But initially if you are little hesitant in filling the 'Buy' order form, you may seek the help of relationship manager of your broking firm. The advantage of stock futures trading is not only in the leverage that you get in terms of capital requirement, but also in the following areas:-
  • You can quickly get into market and as quickly get out and yet make substantial return on investment. This means that for any position you take in the market, you can plan to have a very short exposure so as to cut down on risk of long exposure in uncertain times.
  • Even when the market is falling because of a downturn or Bear Run, you can make money in stock futures. This is possible because you can take a sell position even before you buy. So this means that you can first sell one lot of Relinfra June Futures and later when the prices drop sufficiently, you can buy back one lot of Relinfra June Futures. Suppose you 'SELL' one lot Relinfra June Futures today at 400, and after couple of trading sessions you find that Relinfra June Futures is trading at 380. You can buy back your sell position at 380 and thereby make a profit of 20x500= Rs 10,000/-. Thus you can actually make profit in Bear market through trading Stock Futures. You do not have to keep waiting for start of a Bull market to make profit.
There is always a catch in all rosy pictures and the catch here is MtoM (Mark to Market). After you take a position (either buy or sell any stock futures), you need to keep your trading account sufficiently funded for MtoM. Supposing you Sold one lot Relinfra June Futures for 400 today and at the end of trading session Relinfra June Futures closes at 410. That means at end of the day you have incurred a notional loss of 10x500= Rs 5000/-. This Rs 5000/- is the MtoM requirement for today for the Sell position you have taken in Relinfra June Futures. And this much amount should be there in your trading account for you to keep holding this Sell position in your account. You may contact your broker to get more details on MtoM.

 We have seen that trading stock futures is simple enough. So get ready to enter into 'Sell' positions in May series to make profit. I will be giving you 'Sell' recommendations very shortly.

Saturday, May 4, 2013

Vigneshwara Developers' Acquarius Business Park At Gurgaon

Got hold of this Walk Through Presentation on Aquarius Business Park, Sector 74, Gurgaon which is being developed by Vigneshwara Developers. Watch it critically and do let me know your thoughts.

If you recall, in my 21 Apr 2013 post on Real Estate Investing  I had discussed why we should invest in Property now and had recommended Vigneshwara Developers as my trusted builder. Disclosure is that I am a very happy and satisfied investor in projects of Vigneshwara Developers. Further in a post on 03 May 2013 I had put forward strategies for investment in real estate. Click Here to access post. Vigneshwara Developers offer 12 % Assured Return Plan and pay you  from the day you invest in their property. To get their Sales Presentation and other details you may contact their General Manager Marketing at this number : 09359210404

Friday, May 3, 2013

Reality Check For Investing In Real Estate

Time has come for looking towards Real Estate as an investment destination. But investment in stock markets at the present juncture is fraught with dangers and may give investors sleepless nights. I would like to qualify my statement here. I am only saying that stock markets will be difficult for investors, and not traders. Traders in stock market can still make money, but the same cannot be said for stock market investors.

While stock market investing can be an exercise in futility, investing now in real estate can turn out to be quite rewarding. At this point there is an overhang in stock markets, whereas real estate market is poised to gather steam. The only problem with investment in real estate is that the requirement of initial capital is dauntingly high. So in the succeeding paragraphs I am going to discuss strategies which can help investors to surmount this high barrier of capital requirement in property purchases.

Scenario # 1.
Let us consider options for those who do not have adequate capital for investment in real estate but have a residential property/flat which they have rented out. It is generally seen that a residential property/flat worth Rs 1,00,00,000/- (Rupees one crore) will fetch them a rent of about Rs 30,000/- (Rupees thirty thousand) per month. Now if they were to sell this residential property they would have Rs 1 crore in hand. They should invest this 1 crore in 12% assured return scheme in a commercial property. Then they will get a monthly return of 1% which works out to Rs 1,00,000/- (Rupees one lakh) per month. This means by shifting over from their residential property to commercial property they stand to gain Rs 70,000/- thousand per month as income. And if they judiciously choose their commercial property ( preferably IT Space) as per guidelines I had earlier given in this blog-post  http://archana-archdeb.blogspot.in/2013/04/investors-time-to-consider-shifting-to.html , then they will also get an exponential appreciation of their property over time. Hence we find that through the strategy outlined above, they will substantially increase their monthly income and also enhance chances of improved appreciation of their property.

Scenario # 2. 
Now  I will consider a strategy for those who do not have adequate capital for real estate investment and are staying in their own house without any other property. They can sell their house and invest the proceeds in a similar manner as in Scenario # 1 above. Supposing their house sells for Rs 1 crore. By investing this amount in assured return commercial property, they will have a monthly income of Rs 1 lakh as outlined in Scenario #1 above. They can shift to a rented house of similar status as their original house for which they will need to pay Rs 30,000/- as rent. That means after paying the rent, they will be left with Rs 70,000/- as spare income per month. Now they can go for buying a new residential flat under construction from a reputed builder by taking loan. EMIs for this loan can be easily met with the extra Rs 70,000/-. in hand, with lots of money to spare. I am saying this because till completion of  the flat, they will only be paying only the interest component of money disbursed by bank so far, called Pre-EMIs. And once the new residential property is ready for possession, they can move into their new flat, thereby saving the rent amount of  Rs 30,000/- they paid per month. So when the EMIs actually start, they will have Rs 1 lakh as income coming to them per month which will easily cater for these monthly EMIs. With this strategy they will have two properties(commercial plus residential) to appreciate in time, instead of just one residential property. Of course here they will have to initially pay 20% of the basic sale price (BSP) of the flat before sanction of  loan from a bank.

A reputed builder in Gurgaon who is selling commercial property(IT Space) with 12% assured return and whom I can vouch for is Vigneshwara Developers. For complete details you may contact their General Manager(Marketing) at this number : 09359210404

And yes, be ready for my next set of trading calls of May series which will be on the sell side. You will get my recommendations in this blog one day prior to entering the trades. Take care!!!