Does promoters buying shares in the open market a positive sign?

Posted on March 14, 2008. Filed under: Stocks |

Conventional stock market wisdom says that whenever the promoters are buying shares from the open market, it is a positive sign. If you believe in this statement, there are couple of stocks which are consistently bought by the promoters making complete use of the weak stock markets.

1. Over the last couple of months, the promoters of K. S. Oils Ltd has been buying shares in the open market. The promoter, Ramesh Chandra Garg’s name appears in the
Insider Trading Information every day, almost.

2. The second stock is Gujarat NRE Coke. This is again bought regularly from the market by a group company, Gujarat NRE Minerals.

Since the promoters are buying in a big way, I guess they know more than what all market watchers know. Only time can tell!!

There is another side of promoters selling stocks in a big way. Deepak Shenoy has written about First Source Solutions, where the insiders have sold their stocks. You can read about the sale of shares by insiders in First Source Solutions here.

We should not blindly buy shares of the companies where promoters are increasing their stake. If the performance of the company is good and you are satisfied about the fundamentals and then you know that promoters are also buying, it gives you the added comfort.

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Reliance Power IPO – What I have learnt?

Posted on January 16, 2008. Filed under: Stocks |

Reliance Power IPO is the hot topic doing the rounds in the capital markets for variety of reasons. I have read many articles on the Reliance Power IPO both for and against it.
Reliance Power would be setting up Ultra Mega Power Plants and the first revenue flow would start from Mar 2010 only. Till then the company would be in the investment mode with no tangible revenues accruing to it.

Already the IPO has been over-subscribed by more than 10 times. That is, Reliance Power has garnered bids to the extent of more than 100,000 crores. Really staggering!! Probably, that is one of the reasons why we are seeing a sell-off in the Indian markets particularly, by the retail investors to apply to the Reliance IPO. NDTV Profit carried out an analysis of how much money the company would earn by parking the application money collected during the IPO. At 3.5% savings bank rate of interest, the Reliance Power is expected to earn anywhere between Rs1000 crores to Rs1500 crores as interest on the application money!! The grey market premium for Reliance Power is already around Rs400/- per share, which means that the listing can be expected around Rs850-900/-.

What is creating euphoria about the Reliance Power IPO?

  • Ambani’s project execution capability is one of the corner-stones on which the entire IPO has been built. They have executed projects in record time and this time as well they may be able to do it. Real test for Anil Ambani as all the previous projects were driven by Reliance group and not by Anil Ambani alone.
  • I guess there is going to be a slew of announcements to follow post the Reliance Power listing or very close to the listing date. He may come up with stake sale announcements, acquisition of captive mines for Reliance Power fuel requirement, set up of equipment manufacturing company for power sector, merger of RNRL with Reliance Power and so on. Anil Ambani would like to keep the momentum going in the share markets for his company, as he may have plans of off-loading substantial stakes to bigger power manufacturers across the world. Already Anil Ambani has talked about setting up a power equipment manufacturing company.

Ambani’s have been very popular with the shareholders because of their investor friendly activities. They have the capability of selling ideas in a big way and this time as well he has done it successfully.

Thanks to Reliance Power IPO, more and more analysis is being done on power sector and one stock which has come up for comparison is NTPC. If you take the comparison between the production capacities in 2010, Reliance Power would have 600 MW compared to 34,000 MW for NTPC. By the time, Reliance Power goes full stream in 2016, NTPC would have a generation capacity of close to 50,000 MW more than 100% of what Reliance Power would have.

By any standards, NTPC is a superior stock at current prices and valuations even after discounting for Reliance Power’s management capability and vision. NTPC is one stock which I am going to buy at all possible opportunities.

Disclosure: I am not going to apply for Reliance Power IPO.

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Stocks in my portfolio which has not moved for a long time!!

Posted on December 17, 2007. Filed under: Stocks |

I have a list of stocks which I hold for the last few years without seeing any profit:

1. KG Denim Ltd:
There was a great euphoria about the removal of quotas for textile companies couple of years ago. The expectations were that on removal of quota for textile companies would result in increased business opportunities. But on the contrary, the removal of the quotas didnt help the Indian companies.
As a retail investor started buying the shares of KG Denim Ltd., some two years ago. Today the stock is quoting around Rs21.40 whereas my average cost of holding is around Rs45. The company has expanded its capacity during the last year using the TUF scheme. For your information, the company owns the jeans brand “Trigger”.

2. Rama Newsprint:
I dont exactly recollect the reason why I bought this share some 3 years ago now. The company restructured the capital and for every 100 shares you owned, I have 25 shares. Today it has closed at Rs35.80 against my purchase price of Rs68.00.

Lesson learnt is that be clear with the reasons why you buy the shares.

I am still holding on to these shares. What else to do?!

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Observations during an Retail Investors Meet at Chennai

Posted on November 26, 2007. Filed under: Stocks |

I attended on last Saturday a Retail Investors Meet organised by Tamilnadu Investors Association. The chief guest for the day was Mr Deven Choksey from KR Choksey Shares and Securities, Mumbai. He advised investors to stay invested for a period of atleast two years to get multi-fold returns rather than engage themselves in day-trading, which I think is very valid. There were questions on sub-prime issue and its impact on the Indian markets, P-Notes. Mr Choksey feels that these issues would not impact the FII inflow in 2008. Lets hope so.

It was a fairly well attended meet with around 250 participants. My observations were:

1. The most striking feature is the absence of youngsters. The majority of the crowd was above 45 years and hardly 10 people less than 30 years or so.
2. As with all retail investors meet, the idea of the people attending the meet is to get some tips or stock ideas to make some money. Deven Choksey didn’t let them down and he quoted atleast 5 or 6 scrips which were duly noted by the participants.
3. People leave even before the “vote of thanks”. I still cant understand why they cant spend that additional 5 minutes.

The stocks mentioned by Deven Choksey are as follows:

2. Reliance Industries
3. Micro Tech

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Demerger of companies – potential for value unlocking – some companies in the race!!

Posted on October 29, 2007. Filed under: Stocks |

The demerger of companies resulting in value unlocking for the shareholders is a theme which has become a big hit after the Reliance group demerger. I think the following list of companies have plans to demerge their companies to create value for the shareholders are as below:

1. JSW Steel – is planning to demerge their Infrastructure, Energy and steel business into separate companies. I dont think the company has made the announcement in this regard but the market rumours has set the stock soaring towards Rs1000/.

2. Alok Industries – is seeking to demerge the textile and real estate business. The company has notified the stock exchanges that the Board of directors of the company would discuss about the demerger and assign this activity to a professional consulting company. The stock ran up a bit to Rs80/- but came down to trade in the range of Rs65-68.

3. Teledata Informatics – is planning to demerge the company into three different companies with focus on a specific area of operations. The company has made the announcement as well as carrying out huge advertisements in Business newspapers about the demerger and the record date details. The record date for Teledata is 23 November. The share swap ratio is 1 share each in Teledata Marine Solutions and Teledata Technology Solutions for every two shares held in Teledata Informatics. All the three companies would be listed. The stock has closed today at Rs64.

4. Gujarat Heavy Chemicals Ltd (GHCL) – It has interests in Caustic Soda and home textiles. It has been in a buying spree in the last couple of years in the home textiles front and has so far acquired 4 companies in the last 2 years. 3 in US and 1 in UK. The owners want to demerge their textile business from the Chemicals business in the near future.

So watch out for these 4 companies as the market currently fancies these demergers.

Disclaimer: The usual one. It is not an invitation to buy or sell stocks. Please take your own decisions.

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Multiple Demat and trading accounts – another problem to resolve!!

Posted on October 20, 2007. Filed under: Stocks |

Just like multiple email accounts, I have opened multiple demat accounts in the last 3 years. As per the last count, I have in my name demat accounts with the following brokerage houses:

1. ICICI Direct – Online account – It is hardly used. (I dont rate very high of the online share trading platform of ICICI Direct because it is very slow and I find it not very user friendly)

2. Sharekhan – Online account – Occasionally used. The functionalities are good including a portfolio tracker. But the problem here is it sometimes fails to connect to the server. You dont get quotes at all.

3. India Infoline – Online account – Hardly used in the last 1 year. This is a software based application cant be used in a networked environment because of restrictions.

4. Geojit Securities – Offline account – Actively used.

Of the four mentioned above, I have initiated steps to close the India Infoline account. It should be completed within the next 15 days. Then I would be left with 3 Demat accounts. Even that I feel is too much.

Of the online trading accounts I have seen, Kotak Securities provides you with an option to use their software based application (KEAT) as well as a browser based trading window. Particularly where there are severe network restrictions, you can atleast use the browser based window for accessing your online trading account either from office or from a internet browsing centre.

When I tried to inquire about the browser based trading window, India Infoline, Angel Broking, ILFS Investsmart etc came back saying that they dont provide that facility. I cant really figure out if they dont have this facility or the salesperson doesnt know about the availability. The quality of guys who you meet while you open trading accounts leaves a lot to be desired. They lack basic knowledge of the share markets, the desired functionality of the users like online Portfolio tracker, fund position etc., They keep talking about the brokerage rates which hardly matters if you are not a day trader working on small margins. It is also difficult to get a complete demo of all functionalities from a brokerage house on their online accounts.

Anybody who has a satisfactory online brokerage account with all features like browser based and software based trading windows, one-click access to funds status, portfolio tracker, past transactions history, tie-ups with big banks for funds transfer and most importantly a easy to understand ledger can suggest the name of the online broking house and share their experience here so that others can also benefit.

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Biggest fall in the Indian Stock Markets

Posted on October 18, 2007. Filed under: Stocks |

Got it one of the forwards on the email:

Here are the 10 biggest falls in the Indian stock market history:

Oct 17 2006, Sensex falls 1744 points, recovers by 391 points

May 18, 2006: The Sensex registered a fall of 826 points (6.76 per cent) to close at 11,391, it’s biggest ever, following heavy selling by FIIs, retail investors and a weakness in global markets.

April 28, 1992: The Sensex registered a fall of 570 points (12.77 per cent) to close at 3,870, it’s second-largest, following the coming to light of the Harshad Mehta securities scam.

May 17, 2004: Another Monday. Sensex dropped by 565 points, its third biggest fall ever, to close at 4,505. With the NDA out of power and the Left parties, part of the UPA coalition government, flexing their muscle, the Sensex witnessed its second-biggest intra-day fall of 842 points, twice attracting suspension of trading. At close, however, it regained some of its lost ground.

May 15, 2006: The market fell by 463 points to 11,822 points.

May 22, 2006: Sensex slumped by 457 points to 10,482.

May 19, 2006: Sensex slumped by 453 points to 10,939.

April 4, 2000: Sensex slumped by 361 points to 4,691.

May 12, 1992: Indian stock markets plunged 334 points to fall to 3,086.

May 14, 2004: Sensex lost 330 points to fall to 5,070.

May 6, 1992: Losing 327 points, the Sensex fell to 3,561

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Indian Stock market crashes at opening!!

Posted on October 17, 2007. Filed under: Stocks |

What an opening this morning? The stock indices, both Sensex and Nifty crashed by around 10% because of the new regulations proposed by SEBI on P Notes on Overseas Derivatives Instruments. The early morning itself gave some idea about what is going to happen in the Indian market with Nifty futures traded on the Singapore Exchange falling by more than 6.6%.
But to be honest, I didnt expect a fall of more than 500 points on the NIFTY and 1700 points on the SENSEX within 5 minutes of trading.

Now, the market is closed for one hour because of the market trading regulations. The rules of closure are as follows:

If the market crashes by 10% – closed for 1 hour.
If the market goes down further by 5%, – closed by further 2 hours.
If the market goes down by 20% in a day – then it is closed for the day.

What we can expect for the rest of the day?
The trading has been stopped today with very low volumes. It may go down by another 5% when it re-opens as there would be more sellers provided there is no clarificatory remarks from either SEBI or Finance Minister. There is also a possibility of the margins being invoked by banks due to this very big crash. It can accentuate the selling pressure. Probably, we may see for the first time the market completely closed for the day due to 20% fall.

Stocks which have gone up like crazy in the past month bore the burnt of the fall. Stocks like Reliance Energy, Reliance Industries, Reliance Capital, Tata Power, ONGC have fallen more than 12%. But the volumes are very low and hardly in few thousands of shares.

The intelligent stock pickers wait for a day like this and pick up good shares.

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Reading Annual Reports – Indraprastha Medical!

Posted on September 1, 2007. Filed under: Stocks |

After a long gap, today I have started reading the Annual Reports of companies. I am currently reading Indraprastha Medical Corporation Limited’s (Healthcare industry/medical tourism) annual report for 2006-07. It is turning out to be an interesting read so far with lot of corporate announcements/updates included in the annual report.

I will try to summarise them in the next one for those who would be interested to know.

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