Friday, 15 February 2019

A Complete Analysis On TATA Motors - Buy / Sell / Avoid


A Complete Analysis On TATA Motors - Buy / Sell / Avoid

This week was extremely volatile with some big news related to giant companies. In upper side 11000 is still acting like a big hurdle for nifty to cross and in lower side 10650 is acting like a crucial support. In today’s post we will discuss about TATA Motors. 

This stock has tanked almost 20-25% on 8th February 2019. That fall was mostly because of weak JLR numbers and the concerns which were arising for Britain. But this week TATA Motors has strongly recovered from 150 to 160. Now the big question is shall we buy this stock or shall we avoid? Let’s start this topic.

About the company

It is an Indian multinational automotive manufacturing company which primary products are passenger cars, trucks, vans, coaches, buses, sports cars, construction equipment and military vehicles. In FY 2017-18 company reported a net profit of 6813 crores compared to 6063 crores in FY 2016-17 in consolidated basis. This company is also ranked 226th on the Fortune Global 500 list of world’s biggest corporations as of 2016.

Shall we buy?

Well, this question is always a subjective type question. Whether you should buy or not that is completely your choice because it is your money. I can only suggest with my analysis which may help you to understand the things more clearly. The end decision will be yours.

As per my suggestion if you want to buy then you should buy this between 145-150 range. One more thing I will add that if this stock comes down then this can come to 130. This is because it has a strong support near 130. Let’s see this in chart.




Analysis

This is the monthly chart of TATA Motors. We can clearly see that 130-150 is the price range where it is expected to consolidate. But this will only happen if it comes down to this level. If it never comes to this level, then you might not get a chance to see these price levels again. 




Why I think that this stock can come down as the volumes are not supporting the price action in this stock. There was a sharp buying from the price level of 130. Normally this kind of candle is called hammer pattern which indicates a buying opportunity. But as this is not supported by volumes which is clearly seen from previous month’s volume bar, I can say this can be a trap.

Conclusion

So if you want to buy this stock then wait for 150 and buy only 25% of your total amount you want to invest. Then if it comes to 130 then buy more 25%. This is the best strategy as per my analysis.

From the fundamental prospective TATA Motors is a good share with the brand name of TATA’s. But each stock has its good phase and bad phase. It’s only you who will decide whether to invest in this stock or not. I always advise that if you have 1% doubt then don’t invest. One should invest only when he is sure for 100% that he wants to invest.

That’s all for now. Stay connected.

Stay happy, Stay healthy, Happy investing.

(Disclosure- I have this share in my portfolio)



Friday, 8 February 2019

Trading Opportunity - Indian Oil Corporation (IOC), Detail Analysis With Charts


Trading Opportunity - Indian Oil Corporation (IOC),  Detail Analysis With Charts

It's been a very volatile week for all the market participants this week and I'm sure each one of them have either gained or lost something in this choppy market. Well, that's the nature of stock market. Today we will discuss about an opportunity which you should pay attention. I always to try to find opportunities in the market and present before you so that even if we don't take our chances, we can't say we didn't know about those opportunities. So we will discuss about an oil marketing company Indian Oil Corporation i.e. IOC.

Company Background

Before going to the detail let's check few basic things. It is the largest commercial oil company in the country. It has earned a net profit of INR 21346 crore in FY 2017-18. It is ranked first in Fortune India 500 list for the year 2016 and 168th in Fortune’s "Global 500" list of world largest companies in the year 2017.

Fundamental Check

This company is currently trading with a P/E of 8.11 while the industry P/E is 15.02 which making the share attractive from the investors point of view. One of the important factor to look at is its debt. It will put hurdle in company's growth. There is more than INR 55000 crore debt on company's balance sheet. This company is well known for its dividend policies as it is one of the most loved stock for dividend seeking investors.

Opportunity

One of the famous chart pattern which we all know is symmetrical triangle pattern. Normally this chart pattern is a sign of bearishness and it makes the stock weak on technical analysis. There are thousands of companies and we all can't pick all companies at the same time to check their charts and find opportunities. But this which I've found, I want to share with you. Let's have a check on its daily chart.



From the daily charts the triangle is clearly seen. The price action of this stock is hovering between  125- 150. This stock has stayed in this range for approximately 5 months and slowly making a symmetrical triangle pattern. Let’s check its weekly chart.



Even in weekly chart the same pattern is showing which is showing bearishness in the chart. This means if the stock breaks the boundary of the triangle in downside then it will go further downwards and make new lows. Though as per my analysis fundamentals of the stock is not bad but still we have to check technical along with the fundamentals.

Brokerage houses have already downgraded this stock for its poor performance in Q3 of 2018. Big brokerage house CLSA has cut the target price of this stock to  120 which may be in our favor and favoring this chart pattern. So there can be a short selling opportunities in future market and if you have this stock in your portfolio then you should remain cautious and try to hedge your position.

So this is for today and I’ll love to hear from your suggestions, questions or any specific points you want to mention. Till then stay happy, stay healthy.

Friday, 1 February 2019

What Is Hedging and Arbitrage In Stock Market?



In this post we are going to discuss about hedging and arbitrage. So let's start.

What is hedging?

In a simpler term, hedging means insurance. Now if we understand what is insurance and why we take insurance, then we will clearly understand the meaning of hedging and its purpose.
So what is insurance? It is an arrangement by which a company undertakes to provide a guarantee of compensation for specified loss in return for payment of a specified premium. A trader has hedged his portfolio means he has protected his portfolio by taking position in stock market. Let’s understand it by an example.

Also Read
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I have a biased interest in TATA group of companies and from all the companies of that group I preferred TATA Motors. I bought the shares of TATA Motors because I think this share is an underdog. It can perform well in future. But at the same time, as market doesn’t go as per my conviction, I have a fear that TATA Motor’s share may go down. That’s why I sold the shares of Ashok Leyland, a competitor of TATA motors, in future market. Now there will be two cases.

Case-1: I was proved right.

TATA Motor’s share goes up and I earned profit. But at the same time I face loss in Ashok Leyland because I have short position in that share.  If I considered the net position then I will find a net profit from my trades.

Case- 2 I was proved wrong.

If something contrary happens against my analysis then TATA Motors will go down and I will bear a loss. But thanks to Ashok Leyland! I will earn profit from there to minimize my loss. Hence I will bear a loss which is small in compared to the gross loss I was having in TATA Motor’s share. 

What we learned from this example? No matter I was right or wrong, in both the cases I gained something. In first case I gained profit whereas in second case I minimized my loss. 

Not having loss is also a kind of gain.

In stock market big players play with big money and they have responsibilities. So they can’t just play randomly. They always take hedge positions to reduce their risk. The traders who take long position make their hedge by taking short position in other shares. Traders, who initially take short positions, make their hedge by taking long position in other shares. The fund managers always prepared for the downside risk of markets by taking a calculated hedge positions.

So it is a very important tool in capital market.
 
What is arbitrage?

Arbitrage is basically having profit by buying a security in one market and simultaneously selling it in other market at a higher price. This is the process of identifying and trading the temporary differences in price of the securities in different markets. 

For example I observed a seller is selling shoes in a shop. He is quoting 400 per pair. I moved to a shop which is in other area of the city. Interestingly I saw that the same shoes are quoting at ₹420. I asked the seller his buying price. He said it costs ₹410 to them because they buy those shoes from other cities. Now I get a chance to earn profit here. I ran to the first shop and buy shoes ₹400 and immediately sold those shoes to the second seller ₹410. My travelling cost was ₹20. I have sold 20 pairs of shoes. Now can you tell me the profit I earned?

Sales = 20*410= ₹8200
Purchase = 20*400 = ₹8000
Travelling cost = ₹20
Net profit = ₹8200-₹8000-₹20 = ₹180
This is kind of arbitrage practice. In India there are two major stock exchanges. 

1.NSE (National Stock Exchange)
2.BSE  ( Bombay Stock Exchange)
1

    Now I noticed that Berger Paint’s share is trading at ₹225 in BSE while trading at ₹223 in NSE. I will immediately Sell shares in BSE and buy the same shares in NSE. I will gain ₹2 per share without any analysis. 

But the important point to notice is there are less likely situation where we will get chance to make arbitrage profit. There are many FIIs who only do arbitrage because they have advanced software, automated machines who take trade automatically. You have to be very fast in this game. You have to be absolutely attentive. 

I hope this post helps you to understand what is hedging and what arbitrage is. If you have any questions then you can ask in comment box. Constructive suggestions are always welcome.

Thank You.

Stay Healthy, Happy Investing.

Sources of information