Indian equity benchmarks ended a volatile session in the red on Monday, as lower than expected IIP numbers for February and SEBI’s ban on private institutions from selling ULIP products weighed on investor sentiments. Traders ignored positive cues from the European markets.
India's industrial production grew slower than expected in February, and there are fears that it may ease further on expectations that the government may withdraw the economic stimulus and an interest rate hike. Industrial output rose 15.1 percent in February from a year earlier, data showed on Monday. The January industrial output remained unchanged at 16.7 percent.
Last week on Friday, SEBI barred 14 insurers from selling ULIPs without its approval. ULIPs are products similar to mutual funds with an added life cover. However, insurance regulatar IRDA has locked horns with SEBI and asked domestic institutions to continue business as usual.
Market is likely to turn volatile in coming days as India Inc begins to report fourth quarter earnings. All eyes are set on Infosys Technologies as it will present the Q4 results Tuesday and give guidance for the next financial year.
Infosys, in the previous quarter gave a very conservative guidance. Compared to the 1.5% QoQ revenue growth guidance given by Infosys we expect it to show a healthy QoQ revenue growth of 4% in dollar terms. However, in rupee terms we expect Infosys to post almost a flat QoQ growth of about 0.3% due to lower realization owing to rupee appreciation.
Operating margins are expected to decline by 45bps on a QoQ basis. We therefore, expect Infosys to post an EPS of Rs.27.8 for 4QFY10 and the end the year with an EPS of Rs.108.7 as against Rs.107 guided by the company.
The key points to watch out for would be out-performance of the Q4 guidance, lower margins, increase in hedges and full year guidance for FY11,” said Arihant Capital Market preview of Infosys results.
National Stock Exchange’s Nifty closed at 5339.70, lower by 0.41 per cent or 22.05 points from the previous close. The index moved in a range of 5382.15 and 5324.90 intra-day.
Bombay Stock Exchange’s Sensex finished at 17,853.00, down 80.14 points or 0.45 per cent. The index oscillated in a range of 17,995.25 and 17,816.19.
“Indices are likely to face resistance at the 18150-18350-18450/5400-5450-5500 levels (Sensex and Nifty respectively). Any surge in the indices may see profit taking around the indicated resistances. Downside supports are placed at the 17800-17750-17650/5350-5330-5300 levels.
Depending on the global cues we expect to see a upward movement from the mentioned supports and the trades could be influenced by strong moves sectorally. Any move until the above mentioned resistances shall be utilized to exit from long positions and look out for a sustainable move. However, looking at the broader scenario we advise investors to play the broad range movement with caution and strict stop losses,” said Karvy Stock Broking note’s weekly technical report.
The broader market performed better than the bluechips. BSE Midcap Index edged down 0.1 per cent and BSE Smallcap Index was up 0.31 per cent.
Sectorwise, the BSE Capital Goods Index lost 1.25 per cent, BSE Auto Index shed 0.85 per cent, BSE Bankex fell 0.84 per cent. Meanwhile, BSE FMCG Index moved up 0.7 per cent and BSE Realty Index gained 0.57 per cent.
Declines on Nifty were led by Tata Motors (-3.56%), GAIL (-3.21%), Kotak Bank (-2.28%), Larsen & Toubro (-2.11%) and Mahindra & Mahindra (-2.08%).
Nifty gainers comprised Unitech (2.96%), Sun Pharmaceuticals (1.67%), Hero Honda (1.51%), Hindustan Unilever (1.33%) and Tata Steel (1.19%).
Market breadth on BSE remained positive with 1581 advances against 1301 declines.
European markets were in the green and the US markets were also likely to open higher. At 4:20 pm IST, Dow Jones futures was up 0.10 per cent, S&P 500 moved 0.06 per cent higher and Nasdaq 100 gained 0.06 per cent.
Monday, April 12, 2010
Mutual Fund Comparison Table!!
Please click on the table to see the bigger image of the table.
Thanks,
Nimesh.
Infrastructure bonds: To invest or not to invest?
One of the fresh tax reliefs that have come as an outcome of the budget 2010 is the deduction allowed for investing up to Rs 20,000 in infrastructure bonds. While the FM is stressing on the advantage of the same, the benefits are not neutral for all individuals. Here is a take on the pros and cons of investing in infrastructure bonds for tax saving purposes.
Tax groups post budget 2010.
Tax group 1: Taxable income Rs. 1.6-5 lakhs
Tax group 2: Taxable income Rs. 5-8 Lakhs
Tax group 3: Taxable income above Rs. 8 lakhs.
To understand the pros and cons of tax saving investments we need to look at 4 major parameters:
Tax groups post budget 2010.
Tax group 1: Taxable income Rs. 1.6-5 lakhs
Tax group 2: Taxable income Rs. 5-8 Lakhs
Tax group 3: Taxable income above Rs. 8 lakhs.
To understand the pros and cons of tax saving investments we need to look at 4 major parameters:
Parameter 1 : Actual tax saving (let’s take the highest saving possible)
Parameter 2 : Returns from the investment (during the lock in period)
Parameter 3: Opportunity cost (what if you had invested the same money elsewhere?)
Parameter 4: Effect of inflation on the returns on investment (what would the worth of your investment when you redeem/encash it?)
Assumptions
For the sake of parameter two we will have to take an assumption on the lock-in period (as nothing has so far been announced by the Finance Minister). As is generally the case with most tax saving instruments we can assume two scenarios—3 year and 5 year lock-in
Let’s assume the rate of return on infrastructure bonds is 5.5 per cent per annum and overall rate of inflation is 8 per cent.
Let’s assume the rate of return on infrastructure bonds is 5.5 per cent per annum and overall rate of inflation is 8 per cent.
For people in the 1.6- 5 lakh taxable income group:
As per the new norms the income will be taxed at a rate of 10 per cent for this group.
Parameter 1:
Actual tax saving: 10 per cent of Rs 20,000 = Rs 2000
(If you invest Rs 20,000 in the instrument you get to reduce your taxable income by 20,000 thus giving a 10 per cent benefit)
Parameter 2:
Parameter 2:
What will be the returns at the end of the lock in period? For a lock in period of 3 years an investment of 20,000 would fetch an income of Rs. 3484. When added to the tax saved you'll get an effective return of Rs 25485 (Rs 20000+3484+2000) on your investment
Parameter 3:
If this same amount were to be invested in a market instrument that fetched a return of 15 per cent, you would get an effective return of Rs 27, 376 (Rs 20000-2000=Rs 18000 invested @15 per cent per annum for 3 years)
Parameter 4:
Parameter 4:
What would be the minimum amount required to counter inflation at 8 per cent? The amount would be Rs 25, 194.
Thus for a person in the slab of 1.6-5 lakh the benefits of investing in an infrastructure bond as a tax saving instrument will be only Rs 291 (Rs 25485-25194) whereas the benefit out of paying the tax and investing the balance in any decent instrument would be Rs 2182.
Thus for a person in the slab of 1.6-5 lakh the benefits of investing in an infrastructure bond as a tax saving instrument will be only Rs 291 (Rs 25485-25194) whereas the benefit out of paying the tax and investing the balance in any decent instrument would be Rs 2182.
Similarly we can calculate the benefits for each segment as well as for a scenario where the lock in period is 5 years as given in the table below.
Rate of tax | Investments made | in infrastructure bonds | Tax paid in lieu of investing in infrastructure bonds |
Slab | Tax savings | Effective Returns | Investment returns from market after tax |
3 yrs | 5 yrs | 3 yrs | 5 yrs | ||
30% | 6,000 | 29,485| 32,139 | 21,292 |28,159 |
20% | 4,000 | 27,485| 30,139 | 24,334 |32,182 |
10% | 2,000 | 25,485 | 28,139 | 27,376|36,204 |
Required returns to counter inflation effect | 25,194 | 29,387 |
Bottom-line
If you fall under the Rs 8 lakh taxable income slab, it makes sense to opt for the infrastructure bonds as a tax saving instrument.
If you are under the 5-8 lakh bracket it is advisable to invest in infrastructure bonds only if the period of investment is 3 years, not five years.
If you come under the 1.6-5 lakh bracket it is an absolute no-no to invest in infrastructure bonds for tax saving purpose.
Thanks,
Dewang K. Mehta
DENIP Consultants - www.denip.in
Thanks,
Dewang K. Mehta
DENIP Consultants - www.denip.in
Saturday, April 10, 2010
Market Analysis & Trading Call Updates - 9/4/2010
Nifty spot closed at 5361 as against the future price closing at 5367.
Implications: Nifty trading at premium, increase in open interest, more put acitivity with call shedding and FIIs building fresh long positions combined together implies upside seen in the market till 5,400
Option Analysis
· Call Writing: Unwinding of open interest at 5,300 and 5,400 implies short positions winding up at higher levels, major shedding was observed at 5,300 of 15 lac shares. We continue to believe 5,400 to act as a major resistance for April series on back of concentration and weak PCR.
· Put Writing: Market may continue its upward trend till 5,400 on account of decent activity at higher strike prices Major put writing activity was witnessed in 5,300 to the extent of 17.5 lac shares. We continue to maintain our view on markets that 5,200 to act as strong resistance April series and 5,300 for intermediate time.
Implications: Positive basis on back of strong put writing with call shedding at 5,300 and 5,400 strike prices. We believe on Monday market may open gap up but it may invite some selling pressure at higher levels and April Series to settle between 5,200 and 5,400.
FIIs and DIIs activity in capital market segment
· FIIs were net buyers of Rs 233 crore with Gross buyers of Rs 2,629 crore and Gross Sellers of Rs 2,396 crore.
· DIIs were net sellers of Rs 66 crore with Gross buyers of Rs 1,285 crore and Gross sellers of Rs 1,351 crore.
India VIX
· Volatility for 9TH April, 2010 close at 18.5 which is 7% lower than previous close, after touching an intraday high of 18.8 and low of 18.
Implications: Volatility after spiking to 19 odd levels yesterday has cooled off for today’s session.But we still maintain our view of volatility moving up to 30 levels.
Derivative Update on FIIs
· On Friday trading session, they were net buyers of Rs 1,209 crore. Out of Rs 1,209 crore, they were sellers of Rs 362.7 crore in Index Futures, Rs 950.4 crore In Index Options and Rs 7 crore in Stock options. However, they were net sellers Rs 110 in Stock Futures.
· On Friday trading session, they were net buyers of Rs 363 crore in index future vis-Ã -vis open interest increased by 1.6% to 2.5 crore shares, which implies that “ Fresh Build of Long positions”.
Trading Calls - Update
· IFCI – Long @ 53.2 for a target of 54
1. Target hit with a day high of 54
· Infosys – Long @ 2657 for a target of 2680
1. Target hit with a day high of 2697
· M&M – Long @ 525 for a target of 535
1. Target just missed with a day high of 532.5
www.denip.in
Daily interest on savings may make add-on services costlier.
Banks may raise charges on a host of services linked to your savings account, as they look to offset higher cost of deposits due to daily calculation of interest.
You may have to shell out more for services such as duplicate statements and pay heftier fines for not maintaining minimum balance in your account. The new RBI guidelines in effect from April 1 stipulate adoption of the daily average method for calculation interest on saving accounts.
The issue may be discussed at the next meeting of the Indian Banks Association (IBA). Banks may not take unilateral action for fear of losing customers to competition.
“If there is an increase in cost of funds, there will be no option but to pass it on to the consumers either through interest rate increases or higher service charges,” said a senior SBI official.
The increase in the cost of deposit for State Bank of India, the country’s largest lender, is around Rs 1,200 crore per annnum as it has started paying interest on daily balance in accounts from April 1.
“The impact is expected to be higher for banks that have a dominant share of salary accounts with highly fluctuating balances,” said a report by the ratings agency Crisil.
Currently, service charges for each bank depend on the category of savings account. For a regular salary account, an additional cheque book currently costs around Rs 50. Giving a standing instruction may cost you Rs 150.
Charges for not maintaining minimum balance vary from Rs 50 a month in public sector banks to Rs 750 a quarter in case of private banks.
Savings accounts have been the cheapest source of funds for banks. They form a considerable part of the bank’s portfolio. In the case of SBI, savings deposits account for about 43% of the total deposits.
An executive with a leading private bank said his bank would consider an increase in service charges if there is some consensus on the issue at the next IBA meeting.
Bank of Baroda has a different strategy to offset higher costs. “The increase in cost can be offset by growing faster to achieve higher volumes of current and savings accounts (CASA),” said MD Mallya, chairman and managing director of the government-run bank.
There will be a notional increase in the cost of deposits but overall margins will be maintained, he said.
A higher CASA ratio means higher portion of the deposits of the bank has come from current and savings account deposits, which are cheaper source of funds.
Some smaller banks such as Indian Bank do not want to increase service charges. “But, if other banks decide to tinker with their service charges, I guess everyone will fall in line,” said TM Bhasin, chairman and managing director of Indian Bank.
Source: Economictimes.
Thanks,
Nimesh.
You may have to shell out more for services such as duplicate statements and pay heftier fines for not maintaining minimum balance in your account. The new RBI guidelines in effect from April 1 stipulate adoption of the daily average method for calculation interest on saving accounts.
The issue may be discussed at the next meeting of the Indian Banks Association (IBA). Banks may not take unilateral action for fear of losing customers to competition.
“If there is an increase in cost of funds, there will be no option but to pass it on to the consumers either through interest rate increases or higher service charges,” said a senior SBI official.
The increase in the cost of deposit for State Bank of India, the country’s largest lender, is around Rs 1,200 crore per annnum as it has started paying interest on daily balance in accounts from April 1.
“The impact is expected to be higher for banks that have a dominant share of salary accounts with highly fluctuating balances,” said a report by the ratings agency Crisil.
Currently, service charges for each bank depend on the category of savings account. For a regular salary account, an additional cheque book currently costs around Rs 50. Giving a standing instruction may cost you Rs 150.
Charges for not maintaining minimum balance vary from Rs 50 a month in public sector banks to Rs 750 a quarter in case of private banks.
Savings accounts have been the cheapest source of funds for banks. They form a considerable part of the bank’s portfolio. In the case of SBI, savings deposits account for about 43% of the total deposits.
An executive with a leading private bank said his bank would consider an increase in service charges if there is some consensus on the issue at the next IBA meeting.
Bank of Baroda has a different strategy to offset higher costs. “The increase in cost can be offset by growing faster to achieve higher volumes of current and savings accounts (CASA),” said MD Mallya, chairman and managing director of the government-run bank.
There will be a notional increase in the cost of deposits but overall margins will be maintained, he said.
A higher CASA ratio means higher portion of the deposits of the bank has come from current and savings account deposits, which are cheaper source of funds.
Some smaller banks such as Indian Bank do not want to increase service charges. “But, if other banks decide to tinker with their service charges, I guess everyone will fall in line,” said TM Bhasin, chairman and managing director of Indian Bank.
Source: Economictimes.
Thanks,
Nimesh.
Thursday, April 8, 2010
Market Analysis & Trading Call Updates - 8/4/2010
Market Overview & Strategy
Trading Call Updates · Aban Offshore
· Market would be trading between 5,200 and 5,400 in April Series. Traders can also initiate Long positions when Nifty is closer to 5,200 and Short sell near 5,400.
Implications: Premium turning into discount, open interest decrease, Volatility increase and weak put activity combined together implies profit booking at higher levels.
Option Analysis
· Call Writing: Fresh writing of 17.7 lacs shares and 7.5 lacs shares at 5,300 and 5,400 strike prices respectively. We believe 5,300 to act as intermediate resistance and 5,400 for April series on account of major activity taking place and concentration of 74.4 lacs.
· Put Writing: We have observed weak activity towards Put options after consecutive 2 weeks of strong writing. Major shedding of open interest was seen at 5,400 of 2.3 lacs shares. So, we expect markets to take strong support at 5,200 for intermediate time and April series
Implications: Positive sentiments in the market came to an end after 2 weeks of upward rally. So, We see further downward pressure till 5,200. The range for the April Series to settled between 5,200 and 5,400.
FIIs and DIIs activity in capital market segment
· FIIs were net buyers of Rs 62 crore with Gross buyers of Rs 2,115 crore and Gross Sellers of Rs 2,052 crore.
· DIIs were net sellers of Rs 93 crore with Gross buyers of Rs 1,200 crore and Gross sellers of Rs 1,294 crore.
o Long @ 1246 for a target of 1265; stop loss at 1242
1. Day high of 1269.8 completing our target of 1265
· DLF
o Long @ 331 for a target of 340; stop loss at 328
1. Day high of 345 completing our target of 340
· EKC
o Long @ 129 for a target of 133; stop loss at 125
1. Day high of 131.5 before closing at 126.7; stop loss not hit
Please hedge these longs with a Nifty Put maybe a Nifty 5500PE @ 144 for a target 152 stop loss at 132.
Nifty 5500PE completed our target with a day high of 223.
Wednesday, April 7, 2010
Market Analysis & Trading Call Updates - 7/4/2010
Market Overview
• Limited downward basis with upside momentum continuing till 5,460. If the market close above 5,400 with volume, it may reach to 5,460.
Implications: Premium increased from 1 point to 6 points on Nifty spot to Nifty future, increased in open interest and Put writing across strike prices indicates “Fresh Built-up of Long Positions”
Option Analysis
• Call Writing: Fresh writing at higher levels and shedding at lower levels indicates current momentum to continue. Marginal addition of more than 2 lacs shares at 5500CE. However, we still expect market upside capped at 5460 on account of concentration and weak PCR at 5400 level.
• Put Writing: Fresh writing witnessed across strike prices with majority at 5300PE to the tune of 10.74 lacs shares and 5.4 lacs shares at 5400PE. So, we expect markets to bottom at 5,300 for intermediate time span and 5,200 for April series
Implications:
Current trend of upside momentum may continue till 5,460 with first intermediate resistance at 5,400. However, downside capped at 5,300 for intermediate time and 5,200 for April series. The range for the April Series to settled between 5,200 and 5,400.
FIIs and DIIs activity in capital market segment
• FIIs were net buyers of Rs 338.8 crore with Gross buyers of Rs 3,415.45 crore and Gross Sellers of Rs 3,076.7 crore.
• DIIs were net sellers of Rs 23.4 crore with Gross buyers of Rs 1,412.7 crore and Gross sellers of Rs 1,436.1 crore.
Trading Ideas Update
· Nifty – High Risk trade
o Short at 5366 with a target of 5330 and a stop loss of 5375
1. Day open at 5380, then a low of 5343 before finally closing at 5381 (premium of 6 points over Spot Nifty @ 5375)
· DLF - Accumulate between 327 & 318 for a target of 340
o Stop loss at 315; time frame 3 days
o Makes a day high of 335 before closing at 331
· Indiabulls
o Long at 115 for a target of 117; stop loss at 113
o Day high of 123.6 completing our target of 117
· Kotak Mahindra bank
o Long at 781 for a target of 792; stop loss at 775
o Day high of 796.75 completing our target of 792
New Product Launch - Reliance Fixed Horizon Fund XIV Series 9.
The important instructions for subscriptions in Reliance Fixed Horizon Fund XIV Series 9 are as follows:
Scheme Features:
- NFO opening date is 7th Apr 10 and closes on 15th Apr ‘10.
- Duration of this fund: 25 months from the date of allotment of units.
MF investment are subject to Market Risk, please read the SID carefully before investing.
Thanks,
Nimesh.
Tuesday, April 6, 2010
DENIP's FINALYZER - Coming Soon!!!
We are coming up shortly with a software that will Analyze a persons profile and will suggest a protfolio as per his profile. We have been developing this software since last 6 months and now we are into the Testing phase.
We shall roll out the software's first phase soon in this Month. The first phase will be divided into two modules. Module one will include questions that a person will answer. On the basis of his answeres the profile of the person will be evaluated. Module two will suggest a portfolio to the person which will include the break up of instruments that are suitable to that profile.
We sincerely thank the efforts put in by Mr. Omkar Patil & Ms Kanchan Mashalkar from Symbiosys Institute for helping us with the coding part of software and Ms. Mousmi Dedhia & Ms. Sonali Ramaiya from Shah & Anchor Kutchhi Management College for helping in designing the branding and marketing materials for promoting the software.
So now Wait and Watch..... Finalyzer will hit the Market Soon....!!
Thanks,
Nimesh.
We shall roll out the software's first phase soon in this Month. The first phase will be divided into two modules. Module one will include questions that a person will answer. On the basis of his answeres the profile of the person will be evaluated. Module two will suggest a portfolio to the person which will include the break up of instruments that are suitable to that profile.
We sincerely thank the efforts put in by Mr. Omkar Patil & Ms Kanchan Mashalkar from Symbiosys Institute for helping us with the coding part of software and Ms. Mousmi Dedhia & Ms. Sonali Ramaiya from Shah & Anchor Kutchhi Management College for helping in designing the branding and marketing materials for promoting the software.
So now Wait and Watch..... Finalyzer will hit the Market Soon....!!
Thanks,
Nimesh.
Trading Ideas - 7/04/2010 - Previous disclaimers apply !
· Limited downward basis with upside momentum continuing till 5,460. If the market close above 5,400 with volume, it may reach to 5,460. Conservative traders looking for return on investment of 3% could go for Selling 5,100 PE with Gross investment of Rs 25,000 and ROI of ~3%.
Option Analysis
· Call Writing: Addition of 6.63 and 4.51 lacs shares at 5,300 and 5,400 respectively. Concentration and PCR less than 0.5 at 5,400 strike price indicates upside momentum may continue for another 100 points to 5,460.
· Put Writing: Fresh writing across strike prices with majority at 5,300 of 9.9 lacs shares and 5,400 6.7 lacs shares So, we expect markets to bottom at 5,300 for intermediate time span and 5,200 for April series
Implications: Current trend of upside momentum may continue till 5,460 with first intermediate resistance at 5,400. However, downside capped at 5,300 for intermediate time and 5,200 for April series. The range for the April Series to settled between 5,200 and 5,400.
FIIs and DIIs activity in capital market segment
· FIIs were net buyers of Rs 766 crore with Gross buyers of Rs 2,374.5 crore and Gross Sellers of Rs 1608 crore.
· DIIs were net buyers of Rs 403 crore with Gross buyers of Rs 1,392.5 crore and Gross sellers of Rs 989.1 crore.
India VIX
· Volatility for 6TH April, 2010 close at 17.2 which is 0.15% Marginal Increase than previous close, after touching an intraday high of 17.57 and low of 17.03.
Implications:
Volatility has an inverse relationship with markets and trading below its undesirable level. So we expect volatility in near term to bounce back till 30 levels.
Following are the trading ideas for tomorrow i.e. the 7th of April 2010
· Nifty – High Risk trade
o Short at 5366 with a target of 5330 and a stop loss of 5375
· DLF - Accumulate between 327 & 318 for a target of 340
o Stop loss at 315; time frame 3 days
· Indiabulls
o Long at 115 for a target of 117; stop loss at 113
· Kotak Mahindra bank
o Long at 781 for a target of 792; stop loss at 775
All these are high risk trades so if you are a safe trader avoid tomorrow and wait for some sort of direction in the market.
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