panch-tattva talk…the cardinal rules about trading

Firends,

Trading in stock markets is a tricky business and the veterans generally follow these rules while trading besides having their own individual tradign strategies. I have listed out below the cardinal rules of trading which will be appreciated by those who trade , in various real life situations:

1. The trading capital should be devided in ten equal risk segments.

2. Don’t over trade what ever be the temptation.

3. In todays times the traders should make an entry with a two way order ie the stoploss orders should always be put in place .

4. When your trade shows profit and you allow it to grow , you should be careful to watch it from turning in to a loss.

5.There are times when you trade as a contrarion player but the trading with trend is preferable.

6. At times what goes on in market is not understandable , or you have not been able to make any sense out of it. In such situations it is better to not do any thing.

7. Unsolicited tips have never been found to be of value.

8. You should not close out your trades whimsically and rather close them after due analysis.

9. The profits have to be withdrawn partly and stashed away.

10. The losses invite you to average but this should be avoided.

11. You must be cutting losses as much as is possible but while the profit is grwing in respect of a trade , you may wait for a while let it get bigger.

12. You should avoid making quick entry and exit as this involves cost and is a reason for disorientation.

13. One should not mind going short if the occasion demands , however, going short is riskier.

14. A low priced share is no better than an high priced one.

15. You may be tempted to increase exposure in a stock where you are winning but it is better to be restrained.

16. After a long winning streak you should be trading a lower scale for some time.

17. Your openion should not be subject to influence during the market hours, be patient and study the matter with a free mind and let your mind grasp new reality before you change your openion.

18. The crowd need not be followed for the fact is that the crowds mostly prove wrong.

19. You should concentrate on a single market rather trade on many at the same time.

20. It has been seen that the expectation about some thing coming influencs the market more than the fact after it has come to light. So while you may act upon the first murmer about any thing in offing rather than acting after its out in the open.

21. At times your trade gives wind fall profits and this profit should be grabbed immediately.

22. You should be studying charts on an ongoing basis to have an idea.

23. The capital should be cared for as it is the tool with which to work your way in to the market.

24. The happenning in the markets are never new, most of the situations have had their parallels in past.

25. The markets can not be exploited every day, you should be looking for opportunities.

26. When you see that  the market is behaving as per your anticipation you should not shy from backing your openion with available cash.

27. Markets have their reason for the behavior they demonstrate while you may be wrong in judging the market. So never say before hand that market is behaving awkwardly.

28. Many a times you would be pleased for entering in to a trade and such trades are mostly profitable from the beginning itself.

29. When the market is behaving rightly in your favour you should wait for a while before booking profit.

30. The trades entered with an idea to speculate should not be converted in to investments ie seperate the two actions.

31. The profits should not be predetermined, rather look for singnals  before squaring positions.

32. A stock is not worth picking just because it has declined a lot and vice versa.

33. A scrip with potential gets past previous high after a normal reaction and should be picked up more often.

34.Fear and greed should remain in check, humans fall prey to these easily.

35. Just thinking wishfully would not be of any use.

36. The trends etc take a long time to establish and do not quickly change course and big moves happen after a quiter time.

37. You should not be too curious to know as to why some thing is happenning in the market and you should take cue from the market behaviour itself for the time being.

38. You should be mostly trade the leading scrips as here you may spot the opportunity more easily.

39. If you are targetting extraordinery profits you will be disappointed too.

40. It is not necessary that the leader of today will be leaders tommorrow, you should be able to spot the leader in the making.

41. Bear as well bull markets have been known to break supports and resistence with impunity hence be careful from that angle.

42. A thorough trader takes time to decide but acts fast after the decision is made.

43. The second part of trade requires more of experties ie getting out makes for a difficult decision.

44. It is pointles to discuss about what you are doing in the market.

45. A times comes when the markets reverse and they do so without clearcut warnings.

46. The most important is to have a firm control on your volumes while the markets mood is not under your control and you have to manage the losses carefully as a result of it.

The times are such now that long term investemnts also have to be carefully nursed. The integration of the world is almost complete and continuous watch over trends , events and affairs is necessary.

I hope in the coming year these rules will help your trading . I wish all my readers a very happy and rewarding new year.

HariOm,
krsnakhandelwal

panch-tattva / post reuslt…bfutilitie

Friends,

Please the panch-tattva / post result points for the following:

BFUTILITIE @2281 (31/12/07) gets 754 pts and may be sold off, you may consider buying back on declines after th result for qtr ended 31.12.07.
HariOm,
krsnaKhandelwal

panch-tattva talk…when BJP got 2/3rd majority in gujrat

Friends,

It was in 2002 election in Gujrat when BJP got its 2/3rd majority.I was not blogging then but my diary shows some write up on 13/12/2002 after the results for the 2002 elections. I am in fact quite upbeat about reproducing it for you verbatim and hope you would be as much thrilled to read it as I was this morning and it is given below:

‘ The elections in Gujrat were held on 10th Dec 2002 and the results were out by afternoon yesterday.Some seemed surprised and some not so surprised. The BJP leadership is quite upbeat about it and the Congress is at a loss of words to explain to people as to what may have gone wrong. Since after the TV media taking very active role at least for the election related reporting and analysis the Congress leaders would have liked to be retiring in to remorseful silence and not give a reason to somebody for trying to find meaning in their not so thoughtful answers and versions. Now BJP win comes after the kind of electioneering that has gone by and the event that preceded the announcement of the elctions mid-term by Modi and the postponement of the election by the Election Commission on the pretext of finding the atmosphere not congenial to holding elections in Gujrat and even visiting the riot hit sites and camps for refugees for finding the facts for substantiating the already decided course.

People from BJP and people from Congress have been trying to influence the electorates with logic of their own what seemed is that public has had its own logic to vote BJP and not Congress. The public has seen the BJP as a party which speaks what it endorses and have found Congress not speaking what it endorses. The Congress line of logic that the BJPs’ earstwhile Govt. was responible for the rioting that had burned Gujrat and even trying to convey that it was the govt. in some way instrumental in triggering rioting, has found no takers. The harping on development and progess like tunes is also of no effect by either party. The wheels of progres are so mired in mud of corruption and incoherence that they understand that no political party may , unless headed by a charishmatic leader, move those wheels.

Further more in Indian culture people have not so much craving for the material upliftment beyond a point where the family has enough shelter, clothing and food. The cultural roots give them enough for the spiritual development and entertinment. The cultural activities are organised by people themselves , govts’ intervention is not preferred. This is the case in Gujrat with all the more strong colour.

This being a developed state ,even otherwise, poses less of economic problems for the people. However, with filled stomuch comes haunting the ghost of fear at personal level , community level and national level. the ghost of fear may influence more than the real fear. The fear psychology has been at work during recent pst. the repeated terrorist like attacks within and outside Gujrat by unidentified enemy has made people jittery. The threat perception has put minority population at suspicion. The minority by the way has the same religion as the enemy state across the border. The invaders in past have also been of the same religion. There is lesser participation by this minority community in secular activities and their ativities are mostly confined to themselves.

The Congress has done just the reverse of what was required ever since independence. They have never tried to bring them out and prticipate freely and dispel any doubt about their nationalist credential, on the contrary these minorities were instilled a fear of being swamped if they joined the main stream. This worked well for their vote bank based politics. The Hindus on the other hand never needed to or felt the pressure to see muslim influence on voting as a threat to themselves, but since after the terrorist type attacks here and there the majority Hindu population has started feeling that they have to influence the voting pattern on religiou grounds for their own safety.

It may now be assumed that in case terrorist strikes are continuing and enemy identity is not known the polarisation of votes will contiue. This polarisation will be all the more strong
if minority tries to back a single party. The Congress is in real dilemma,it may neither pose as a party who is interested in issue based politics and also may not stop asking for muslim votes enblock for itself. There are very many parties who are out in open to ask for votes of certain caste plus muslims. There are parties who are asking for votes rom their ideological supporters plus muslims. There are also parties which are asking for votes from their regional supporters plus mulims. BJP this time has asked only for Hindu votes and not the muslim vote. They have also been wise to camouflage the Hindu appeal in Hindu cultural appeal. I see no harm in doing it. This may at least give a chance to muslims also to join without prejudice. The wider meaning imparted to word ‘Hindu’ only has to be generally acceptable which may eventually be the case as then only the complexity of Indian caste , religion , region and language based politics be simplified.

The round of elctions else where in India will be real tend setter. If the equation as put forth by Gujrat elections is repeated then it may be safely assumed that one full circle of such electioneering is a must. Bereft of violence , this experiment may prove to be quite useful as the nation at least this time needs to be galvanised in a single colour. This will see a galloping economy, emergence of India as a global power. Pakistan will find it easier to bow to a big power and give up its effort of matching the Indian might. The USA will feel less threatened by China ( Sino-Russian combine). Middle East, Far East and South East Asia will see stability. Marketing bounderies will collapse. Cooperation will be the buzz-word and a very large part of humanity will be at peace and will prosper.’

You may not agree with what is written above but this gives an scope for having an understanding about the impressions then and now.

I have to tell you with a very heavy heart that Ms Bhutto has met her violent death at about the evening time on 27th Dec 07. She was a serious contender for power and was busy electioneering at the time of her death. Pakistan is under tremendous pessure due to power games and may see worse times. Is Nehru’s ‘Panch Sheel’ is of relevence in such times in neighbourhood, should a strong Indian leader venture to intervene, will Indian help be asked for by the Pakistani public to help restore democracy… these questions are very difficult to answer but Pakistan requires to be guided.

HariOm,
krsnaKhandelwal

panch-tattva talk…nifty rebound

Friends,

A slew of factors pushed up nifty and sensex by over 3.5% on 24th Dec 07. The overseas advices, win of Modi in Gujrat suggesting no possibility of mid term poll at national level and cosmatic buying by FIIs were the responcible factors. It is the fund pool , growing in size every day and seeking parking spaces , which has given a sort of 20% extra valueation to equity markets in India. This itself will lead to higher consumption expenditure and boost industry but only temporarily. In the medium term a bolt from the blue will strike in the form of sluggish growth in demand, higher capacities and dearer raw material.

While the turn over was low the at Rs 1415 crs on NSE , the nifty closed at the highest point in the end at 5985 discounting it at PE of 25.77 times.

Trusts in India are to be allowed investment in equities , the govt. will amend Indian Trusts Act of 1982 in the next session of parliament for this purpose. I think the trusts should not be allowed more than 1/3rd of investible funds in to equity. We have seen innumerable scams afflicting the share-bazaar.

RBI has directed banks to lower charges on use of ATMs by customers of other banks and also asked banks not charge for the sevices renedered through ATMs. This is going to be a blow to new age banks but of course is in the nature of helping the bank customers.

Majority IPOs listed at a premium in the year 2007. The premium on listing amounted to Rs 16101 crs on an investment of Rs 31962 crs. This is only due to euphoric times in market as the market as a whole improved by over 50% over the mid year values in a short time making investment in secondery market more attractive for it was not a partial allotment case for the funds invested unlike in case of IPOs. The real taste of pudding will be known only when the IPOs have shown the results over an year after issue. I do think that overall returns for the year on an average for all issues would not be any better than nominal rate of interest of 12% to 15%.

Indian market gave 77% returns in the year 2007 but in dollar terms. This is still a performance below Peru’s which gave as much as 93% in dollar terms. In terms of growth of index value India is nineth and is behind China which scored 50.91% appreciation.

HDFC alloted 3.3 lac shares upon conversion of 106 FCCBs of $ 100000 each. The dilution of capital for such earlier placements will keep some companies from giving high returns to investors but this also makes them stronger in terms of finance.

For the record I may mention that 10 yr Gilt is hovering at 7.86% yeild and rupee-dollar parity stands at 39.45 while it was 44.58 last year around this time. The Gold stands at $809/oz while only in the first week of Nov it had  jumped up beyond $840/oz. The Brent crude price also stays strong at $92.90/bbl.

Mayavati , UP CM, has spoken diplomatically in favour of permitting the organised retailer like Reliance Fresh of Mukesh Ambani to be allowed to enter retailing in state provided it is properly planned. She says there is enough space for every body in retail arena. This will open opportunity for Reliance Grp to invest Rs6000 crs in the state owrds retail business. She is diplaying her capacity to do right things while managing local political imperatives.

Railways should invest heavily in putting up moving stair cases and plateforms on big stations. This is going to be an essential requirement at these stations otherwise the travellers will have to shun railway travel in favour of road transport. It may entrust maintenance to outside parties and not carry headache that way.

Asia Motor Works Ltd. has decided to augment capacity to 50000 trucks against 10000 at present at its only plant in Bhuj, Gujrat. It has 75 % market share in 49 tonnage vehicle segment.

Sintex Ind. is to raise Rs 2376 crs through issue of securities here and abroad. Ther is a growing trend of raising big monies by small companies and would satiate the demand of equities by local and foreign investors. Such issues would also be rightly priced than the current prices of listed equities have in terms of intrinsic strength.

HariOm,

krsnaKhandelwal

panch-tattva talk

Friends,

 Gujrat under Modi achived tele density of 13.2% which is double of national average.

Bihar’s aricultural growth was 4.4% in 04-05, the maximum in the country.

Sub-prime crisis of USA may dent demand for steel around the world. The high input costs of steel producers were being passed on but now the steel consumers find it difficult to further pass on the burden of high steel prices. Clearly there is limited scope of further steel price rise.

 The appreciating rupee has made IT companies , as also others, cost concious.

China raises bar for the tax free incomes to 2000 yuans from 1600 yuans. this will free 70% wafe earners as against 50% earlier from paying income tax. It seems Chinese govt. waking up to the need to make lives for workers easier now. Chinese farmers too will get 13% susidy on purchase of electronic daily use items like TV and mobiles. China would allocate substantial extra funds to cooperative Medical Insurance System covering more than 700 million rural households. China has at last deemed it necessary to help the bypassed sections of society in its match to development.

 A family of four has to have an income of half a million pounds per year to feel rich in London.

HariOm,

krsnaKhandelwal

panch-tattva talk…further on gujrat elections

Friends,

Modi team got 117 seats while Congress just 59 out of 182 in Gujrat’s assembly elections just concluded.The vote shre for BJP remained almost static at 49.12% . Gujrat has shown that the leader who delivers is to be backed to the hild and elected ( Gujrats’ statistics as per the RBI and GOI records during the Modi tenure as CM have been the best in the country and the same are not given for the sake brevity here) and the blame game has proved of no use with Gujrati electorate. Congress has been getting in to power since independence on basis of instilling fear in the minds of minorities and never cared to really improve their lot. This falsehood did not work in Gujrat because it has educated masses and the middle classes form 76% of the population. The mind set here is also business like. Caste based politics also does not work here. The rebel Patel leader from Saurashtra region did not cut much ice.

I think the rest of the states , particularly the progressive ones will also take cue from Gujrat. Bihar and U.P. have their own style, they have enough food and water and don’t care for luxuries and have capacity to take life as it comes rather than chnage it. They laugh and rejoice with little in hand and are not remorseful even if half clad. The ambistious people go out of the state in serch for jobs and income but the satisfied ones stay back. There is therefore only a slight chance of these states getting over caste based politics for caste gives them the feeling of belonging and offers protection. Only a leader of stature like Nehru’s , who can demonstrate through scrifices can change attitude of public. There is none who would shed luxurious life style , be with masses and also remain honest. The people in these states repose some confidence only in the leaders representing castes. It is not voter apathy but the lacking charishma of present day leadership that is responsible for the present day political currents in these lesser states.

In light of above Modi may matter for the nation at large in times to come. He has charishma, has devoted him self to the cause of development and has shown that the honesty can be maintained inspite of compulsions . If he lacks some thing , it is this that he does not have a lineage to speak of. We Indians praise RAM and love and respect him for being the member of ‘Raghukula’ and for being one of the great kings in ‘Suryavansh’. I think Modi can over come this short coming by being stead fast in his resolve to serve people with grit and imagination.

HariOm,

krsnaKhandelwal

panch-tattva talk

Friends,

A single square foot of commercial space in Connought Place , New Delhi costs Rs 45000/- , this represents four fold increase over two years. Indian Railways are in process of inviting tenders for development of 1/4th of 212 acres of its land in Delhi for which DLF and Hines (UK) would be in race.

Chinese property boom falters but may not crash. The prices jumped three fold over eight years in Shanghai and Beijing but this is also true for most of Indian cities too.

REL led consortium is the preferred bidder for the IDI Airport and New Delhi station metro link involving Rs 2500 crs layout.

China has raised its one year lending rate to 7.47% (+0.18%) and the one year deposit rate is also raised to 4.14% (+ 0.27%).

SEBI has okayed short selling by all but not naked short sales. The institutional investor however can not day trade and has to inform before hand if the transaction involves short sale while the individual may decide it at the end of day. The borrowing and lending mechanism would allow short eller to arrange deliveries.

State Govts. have ruled out levy of service tax on health and education services. I think the real benefit to common man would be if the payable service tax is restricted to billing over Rs 500/- or so across the board. This will be a real benefit  to small people using tele services and entertainment services.

Sinzo Nakanishi , the new MD of Maruti Suzuki , informs that Rs 9000 crs would be invested to enable sales of one million vehicles in an year by 2010.

FIIs have been net seller in cash market since Nov 07 to the extent of Rs 21690 crs and the Insurance Companies and local institutions have been buyers of the order of Rs 12212 crs over the same period. However, since Jan 07 Rs 2831 crs worth of net sales have been effected by FIIs and the purchases by Ins. Cos and Indian institutions have been about Rs 23130 crs. The Unit Linked Plans sold over last four years ensure that monies pour in mrket giving it stability and counter FII influence.

World steel production for eleven months ended Nov 07 was higher by 7.7% to 1.211 billion tonnes , China accounted for maximum at 39.7 million tonnes of production.

There would one out four mobile subscriber who stays in India in future, the present ratio is one out of twenty.

India Ceemnt would raise about Rs 600 crs through equity or equity linked securities. It plans to invest Rs 1500 crs as capex.

Inflation has eased to 3.65% and rupee appreciation has been resposible for this in some measure.

Out of 7 lac people employed by Indian diamond industry in Gujrat many jobs are slated to be pruned due to rising rupee value. Total jems and jwellery exports from India would be $150 billion during 2007-08.

Steve Jobs said :

‘ Your time is limited so don’t waste it living some one else’s life. Don’t be dragged by dogma – which is living with results of other people’s thinking. Don’t let the noise of others’ openion drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They some how already know what you truly want to become. Every thing else is secondery.’

I follow the advice above.

Last day of weeks’ trading saw Nifty close at 5766 on the 20th Dec 07. This number shows that the closing for the year 2007 will be lower in the second half of Dec. You may refer to previous post about the december behaviour of market.

HariOm,

krsnaKhandelwal

panch-tattva talk

Friends,

China has some new labour laws that would push labour costs of Chinese manufacturing enterprises by about 8% or even more according to some. There has been a lot of exploitatation of labour in China in its march towards becoming the factory of the world. The Chinese leadership now understands that the short cuts to progress are not really going to work in the longer run. After adopting  just interest rates, just taxing practices,just rate of exchange , just labour laws and just environmental concerns China would loose much of its edge over the other manufacturing nations. India , by the way, has better record and relies more on services sector for exports where the practices are on par with the international practices.

Tatas have bid for the Jaguar and Land Rover brands and seem to be ahead in the race to acquire them. If the deal is clinched , some 40 contracts will have to be signed before a formal take over is complete. I personally think that this deal is not in the interest of Tatas . They should be growing organically in auto sector rather than through aqisitions. The new brands may be more easily built here while keeping the old brands alive would be difficult. But , as earlier also mentioned, Tatas seem to be more inclined to get themselves perceived as international group rather than an Indian International Group. They have already close to over 40% revenue from the international operations including exports from India.

Hyundai Motor India will hike prices in Jan 08 for all its car models. On the other hand Maruti is set to offer discount ranging from Rs 18000/- to Rs 54000/- on its diffrent models. The Tatas have planned to unveil their Rs one lac car in the Auto Expo in Ja 08 in Delhi.

CSIR’s former chief Mr Mashelkar had a ride on the Tata small car along with Ratan Tata and seemed pleased. The car would run 25KMs in a litre of petrol.

World grain production is slated to go up to a recor 2.316 billion tonnes in 2007.

European Central Bank is ready to offer Euro 350 billion worth of liquidity to banks etc at 4.2% rate of interest , almost in an unlimited way at the rates below market rates.  There is growing discomfort on account of the way the Fed and BoE operate in the money markets. I have time and again given you indication that all is not well in world’s economic and monetary order. There is a need for a world body entrusted with the functions of the central bank with unbiased agenda for formulating monetary policies and fixing exchange rates and be represented equitably.

PM remarked at a meeting of Natinal Development Council on Tuesday that US sub-prime crisis would affect countries exports as well. He was however sure of India’s agricultural growth at the rate of 4% a year . He was pleased that bank credit to agriculture was up by three times in three years . There is no doubt that the increased credit to farmers will see agricultre modernise and productive.

HariOm,

krsnaKhandelwal

panch-tattva talk…nifty expectations

Friends,

Nifty closed down 270 points at 5777 on 17/12/07. This happens to be worst fall in history, previous biggest fall was on 18th may 06 which dragged nifty by 246 points . Oct 07 and Nov 07 had also seen a single day fall of 208 points and 219 points on 18/10/07 and 21/11/07. I think th constant advice to my readers over last three – four months to stay out of equity investment will be appreciated.

The worst is not yet over so please do not enter the market yet. The current quarter result should be first evalueated before any final view about the market is taken.

HariOm,

krsnaKhandelwal

panch-tattva talk…gujrat elections and modi

Friends,

Election in Gujrat are over and may be termed as one of the most peaceful with fair turnout.While too much is made out of Midi’s dictatorial attitude and pro-hindu leanings , I see Gujrat under him offering best of the opportunities to minorities to live peacefully, vote fearlessly, remain gainfully employed and practice religion comfortably than any where else in the country. If Modi has been able to put stop to anti national activities of certain muslim organisations and miscreants , why should it pain any body. Democracy flourishes in Gujrat like no where else in the country. Here people take part in politics with stomach full and think rationally without fear. I live in Ahmedabad , the capital of Gujrat and also tour extensively to north India and south of Ahemedabad . The development in Gujrat is all around and not in pockets only. The rich hail from every where in Gujrat. The govt. is supportive of trade and industry, education is nearly universal, women are liberated and add to GDP of state in a big way, every one is welcome here and is repected without distinction. The untouchability is unheard of. Modi’s tenure has given it a big confidence and progress. There is no unemployment. Necessities are available at reasonable prices and health services are affordable. It invites investment from all over the world rather lures it and rewards it. Tata, Ambanis and Premji hail from here. Modi has shown what can be achieved if the man at the helm is honest and courageous.

 The road network is very good, electricity aplenty and tele density maximum. Agriculturists are advanced. There are hardly any slums in big cities. Cultural advancement is note worthy. Next five years under Modi will make it a model state. Gujrat would be the biggest contributor to centre’s kitty. It is home to most pharma companies. The coast line is going to be anchoring maximum ships and handle most of the shipping cargo inward and out ward. The polititians from outside the state try to devide the consensus but to no avail. The low incidence of crimes is praise worthy. The policing is least here.

The state of Gujrat is home to mega plans and magnanimous implementation. This peice of writing has come out of the pen of a non-Gujrati. Hopefully the verdict will favour the deserving son of Gujrat and future mentor of India.

HariOm,

krsnaKhandelwal