Buy Chemfab Alkalies: Ashish Chugh

Buy Chemfab Alkalies at current levels, says Ashish Chugh, Investment Analyst & Author of Hidden Gems.

Chugh told CNBC-TV18, "Chemfab Alkalies manufactures caustic soda. Incidentally this was the first company in the country to have introduced the membrane cell technology which they did way back in 1985. Now there was a small incidence of gas leak in this company in the month of January. Though this was a small incidence but it was probably blown out of proportion and the plant remained closed for more than 3 months. Only after they filed litigation in the high court the plant got reopened in the month of May."

He further added, "Now the effect of closure of plant was reflected in both the March quarter and June quarter numbers wherein it reported a loss of about Rs 1.3 crore in the March quarter and about Rs 2 crore in the June quarter. Now looking at a full year number this company in spite of a loss of Rs 1.3 crore in the March quarter, ended the year with a profit after tax of close to Rs 9.7 crore as against Rs 7.2 crore in FY10."

"In Q2 also this company has reported sales of about Rs 24.25 crore which was up by about 4% and the profit before tax was up by 40% but profit after tax was down by 30% on account of an additional tax provision of Rs 2.5 crore pertaining to the previous years. Now if that provision had not been made, the quarter profit would have been more than Rs 4 crore."

"This company had a debt of about Rs 25 crore 5 years back. The company has been purling its debt and today it's a debt free company. Now looking at the valuations of the company currently the stock trades at about Rs 40 and the market cap is about Rs 37 crore. This is a totally debt free company and as on 31st March 2011 this company had cash and cash equivalents of close to Rs 23 crore which means that you have this business which is available at a business valuation of about Rs 14 crore."

"If you see the numbers of FY11 closely, the cash profit alone was about Rs 17 crore. In a normal year this company is able to make a profit after tax of about Rs 12-13 crore and a cash profit of close to Rs 20 crore. Gross block is about Rs 150 crore. So given all these things of course the numbers for first 3 quarters – the 3 quarters have not been very good but these are because of certain reasons which are not recurring in nature."

"Going forward we can see this company report good profit for the coming quarters and I think at a business valuation of Rs 14 crore, debt free, this company paid a dividend of about 50% for the last two years. Before that some years it had also paid about 100% dividend. It is a Rs 5 paid up stock and dividend yield at the current price comes to about 6.5%. So given all these factors I think this stock looks to be a value buy at the current price and I think it has got minimum downside from these levels."

Idea Cellular can test Rs 104: Anu Jain

Idea Cellular can test Rs 104, says Anu Jain, Sr. Vice President - IIFL Private Wealth Management.

Jain told CNBC-TV18, "I like the way Idea has moved up. It could hold on and pull back to Rs 96 which has been close to its 20 day and 50 day moving average. I think if it were a bad day I would keep a stop loss close to Rs 94."

She further added, "On a good day like this I think closer to Rs 95 should be where my stop loss would be placed. I think for a trading perspective it’s moving close to Rs 100. If it can manage to hold on there then we look at higher targets of Rs 104. But for trading perspective, for right now, I think a 4% kind of a move on the target is looking good."

The company touched its 52-week high Rs 103.65 and 52-week low Rs 55.65 on 06 Sep, 2011 and 28 Feb, 2011, respectively. Currently, it is trading -4.68% below its 52-week high and 77.54% above its 52-week low. Market capitalisation stands at Rs 32,666.36 crore.

The company's trailing 12-month (TTM) EPS was at Rs 2.12 per share. (Sep, 2011). The stock's price-to-earnings (P/E) ratio was 46.60. The latest book value of the company is Rs 37.16 per share. At current value, the price-to-book value of the company was 2.66

How technology can bring cost of services down

Why does your medical bill cost more than your monthly groceries? Or why does your child's education cost more than a plasma TV? According to a famous claim in economics, the cost of services tends to increase as compared to the cost of goods. This definitely rings true as one can barely afford the costs of rising healthcare and education anymore. They seem to be rising faster than overall inflation. Will we be doomed to continue paying exorbitant rates for these necessities? Columbia University professor Jeffrey D. Sachs, seems to have an answer. He believes that a sharp decline in these costs may soon be possible due to the tech revolution. The disruptive forces of technology have changed our lives in many ways. And further development of this field can actually help reduce the costs of highly expensive services. Various educational videos are now being put online for free so that anyone in the world can learn subjects like math and physics. Similar breakthroughs can happen in healthcare space as well to help empower individuals. Investment in technology is without doubt the only way forward.

The manner in which Euro crisis is affecting Indian realty

What has the debt crisis in Europe and the US got to do with office space prices in India? Quite a lot, it seems. According to Jones Lang Lasalle, a real estate consultancy, nearly 50% of the demand for investment grade office space in India is contributed by the information technology (IT) and the IT services sector. And companies from this space derive a significant chunk of their revenues from the US and Europe. Thus, with both these regions struggling with high debt and recession, the reverberations have been felt in India as well. As a result, the demand for office space in India has slackened. 

Besides IT companies, even firms headquartered overseas have been major drivers of the demand for office space. And with the high level of uncertainty in the global markets, these firms are now cautious on buying more office space. All of which means that demand for office space is expected to remain subdued in 2012. So, while 2009 saw around 19.6 m sq. feet of office space leased out across the top 7 cities in India, this figure soared to 31 m sq. ft in 2010. This calendar year is likely to see a modest growth to around 35-36 m sq ft. But in 2012, this number is likely to drop to around 31 m sq. ft of office space. As far as the IT sector is concerned, a deadly cocktail of recession in the developed world and heavy volatility in the rupee has made it wary of investing in office space. All in all not a very bright scenario for the real estate sector in India. 


The world markets had a disappointing performance over the week. The equity markets across the globe saw their worst week in two months. Main culprit for this is that there seems to be no end and no solution for the Eurozone crisis which has dragged for so many months now. Further, Germany's inability to sell its 10 year bonds, France's deteriorating rating and Italy's rising cost of borrowing worsened the situation. 

Indian stock markets witnessed a fall of nearly 4% this week. The markets were very volatile on concerns of weakening rupee, euro zone crisis and poor fundamentals. Amongst the other world markets, Germany led the losses (down by 5.3%). The German debt agency failed to find buyers for its 10-year bonds. All other markets were on the losing end too with China losing the least (down by 0.8%).  

Has infrastructure sector turned attractive?

Once touted as the sunrise sector of India, the infrastructure sector has been getting everything wrong for quite some time. The second quarter ended September, 2011 (2QFY12) saw the infrastructure players posting dismal numbers. Most companies reported significant year-on-year decline in profit after tax (PAT). The poor show was attributable to a steep incline in interest costs, which escalated in the range of 200 to 500 basis points (2-5%). One reason for this was the slew of hikes in key lending rates by the Reserve Bank of India (RBI) to battle the high inflation. The other reason was the high debt burden coupled with a significant increase in working capital requirement. But this is just one part of the story. The other concerns plaguing the sector include regulatory hurdles, land acquisition problems, delays in project execution and such other structural bottlenecks.

So there is no denying that there are ample reasons for the negativity surrounding the infrastructure sector. But we believe that in times of panic, investors have a tendency to be shortsighted. The reactions at such times are often extreme and disproportionate to what the events call for. You could say that such is the current situation of the infrastructure companies, as many of them trading quite below their book value. Value investors may want to scoop up some fundamentally stronger ones amongst them for the long term.

There was no other way to deal with the crisis!

How many times has it happened that we have tried to do an in depth analysis of an issue only to find out later that the solution was not only simple but also right before our eyes all along? Many a times, isn't it? The current situation in Europe can serve as a very good example of this phenomenon at work. Reams and reams of paper have been spent in trying to find out what went wrong and what corrective measures can be taken. But to say that all of these steps have come unstuck would be to state the obvious. The situation is getting worse by the day with still no foolproof action plan being mooted by the member nations. 

Amidst all this chaos, an article in the businessinsider.com points out how almost all the policymakers and economic experts seem to be showing hardly any realism at all. It talks about how it would be next to impossible for Germany, the saviour of last resort to come to the rescue of troubled nations as well as financial institutions as the sum involved would be too large. And what about funding from China? Well, with the Chinese banking system showing signs of trouble, even that option looks like a remote possibility. 

Thus, life seems to have come full circle as far as the Euro zone is concerned. Restructuring and bankruptcy, the very phenomena which the region wanted to avoid all along looks like the only feasible option worth undertaking. In fact, the path which was being followed by policymakers had a dead end from the very beginning, the only difference being that right now, it is smack in front of their faces. Thus, be it a nation or a company, a period of high leverage beyond a certain threshold will have to be followed by a period of deleveraging. Anything else just doesn't work. It is one of those unwritten rule of nature perhaps. This is also the reason why we insist onbuying companies with bare minimum debt and some strong competitive advantages.

Roubini's warning on the US economy in 2012

The recent failure of the US super committee to approve programs to help reduce deficit has not gone down well with the economists. Noted economist Nouriel Roubini is no exception to this. Roubini says that the political impasse will lead US into another major recession in 2012. He opines that if the measures to reduce US' debt burden of US$ 1.2 trillion are not extended, then it would lead to a 'fiscal drag'. This could amount to nearly US$ 350 bn on account of higher payroll taxes as well as higher burden on account of unemployment benefits. This amounts to nearly 2.3% of total US GDP (Gross Domestic Product). As a result, by doing simple math, if the US economy grows by 2% and the fiscal drag brings it down by 2.3%, then the growth is actually negative. And this drag would continue to spiral, thus making sure that the recession gets worse with each passing year. Therefore, it is high time that the US politicians get their act together and come up with logical and im plementable solutions to the problems. Otherwise, the world's largest economy will sink deep into recession.

India Inc once again exposed to the risk of FCCBs

The perils of foreign currency convertible bonds (FCCBs) have come to haunt India Inc once again. Readers would do well to recall that these bonds had become a fad in 2006 when buoyancy in the stock markets and the lure of zero coupon rates had led to many corporates rushing to cash in on these bonds. Since then, the risks that these bonds pose have come to the fore time and again. And they are once again set to hurt the fortunes of some Indian companies. FCCBs get converted into equity shares at a predetermined price when the bonds are issued. If the prevalent share price is lower than the predetermined price then the chances of conversion get reduced and the pressure of redemption on the company mounts. This is what is happening now. Indian stock markets have been hammered in recent times as a result of which the stock prices of around 28 companies with FCCBs are lower than the agreed price. These FCCBs amount to Rs 245 bn. 25 of these 28 are most likely to face rede mption in the next financial year, which will result in an outflow of as much as Rs 330 bn. This means that they will have to ensure that there are sufficient funds at their disposal to redeem these bonds. If not, borrowing more to fund these redemptions will only increase interest costs and dampen profits. What has further made matters worse is the sharp depreciation of the rupee to a level of 52/US$ which has exacerbated the forex losses on their books and hurt profitability. No wonder then that these are trying times for India Inc. indeed!

Microfinance industry loses its most visible face

Many will recall a much-hyped IPO (initial public offering) that hit the Indian markets in August last year. It had a quite a few renowned names on its list of investors- George Soros' Quantum (M) Ltd, venture capitalist Vinod Khosla and Infosys founder N R Narayana Murthy. Then things turned sour, the stock tanked and the rest is now history. Any guesses which stock we are talking about? In case you have forgotten, the company was SKS Microfinance, a Mumbai-based micro financing institution and the only listed company in the sector. From a high of Rs 1,151 after the listing, the stock has lost about 90% of its market capitalisation since then. The company faced severe headwinds after the state of Andhra Pradesh laid restrictions on collections and also capped lending rates. As a result, the company reported a loss of Rs 3.85 bn in 2QFY12, against a net profit of Rs 805.5 m in the corresponding quarter of the previous fiscal. And now, the founder and chairman of SKS Microfinance, Mr Vkiram Akula has announced his resignation. This again raises the old question: Should the microfinance industry be run for profit or should it be a social service run by non-governmental organisations (NGOs)? Akula's resignation is sure to add more fuel to the fire of this all important argument.

Wall Street Thrashed in Worst Week in Two Months

FOX Business: The Power to Prosper
Despite a sleepy performance on Friday, Wall Street was pounded by European debt fears in the worst week since September.
Today's Markets
The Dow Jones Industrial Average slid 25.6 points, or 0.23%, to 11,232, the S&P 500 skidded 3.1 points, or 0.27%, to 1,159 and the Nasdaq Composite fell 18.5 points, or 0.75%, to 2,442.
The Dow, S&P and Nasdaq all finished the shortened trading week by more than 4.7% to the downside, and have now been down for two weeks in a row. Indeed, the Dow has plunged close to 1000 points in that time, while the Nasdaq has shed more than 10%. All three have now fallen deep into the red for the year after a short-lived Fall rally.
The markets have been captivated by worries over Europe's sovereign debt crisis. Financial stocks have taken a particularly strong beating over the past week as worries have stirred over the global financial systems' exposure to the debt crisis.  For example, JPMorgan Chase (JPM: 28.48, +0.10, +0.35%) and Bank of America (BAC: 5.17, +0.03, +0.58%) -- America's two biggest banks by assets -- were both pummeled, far under-performing the broader markets.
Many economically-sensitive energy and materials stocks were slammed on the week too.
Adding to the fears on Friday, Belgium's credit rating was sliced one notch to AA from AA+ by Standard & Poor's, while Moody's slashed Hungary's debt rating into junk status late Thursday.
"While not really a market-moving event, the downgrading of Hungarian bonds to junk status still served to highlight that the same old European debt problems remain," David Jones, chief market strategist at IG Index wrote in an e-mail.
Meanwhile Italy -- Europe's third-largest Economy -- was forced to pay an average yield of 6.5% on a roughly $10.7 billion auction of six-year bonds, far higher than the 3.5% it paid at its October auction, signaling a much higher risk premium.
As a result, the yields on its 10-year bond moved even higher above the 7% level.  While the 7% mark does not have any technical significance, it is symbolically important because countries like Greece needed bailouts around that level as borrowing costs spiked, and refinancing on the private market became difficult.
European blue chips jumped 1%, while the euro fell 0.76% to $1.324.
On the corporate front, AT&T (T: 27.41, -0.14, -0.51%) said Thursday it would take a $4 billion charge to its fourth-quarter earnings as a preparation for a potential failure of its $39 billion acquisition of Deutsche Telekom's T-Mobile.
There are no major U.S. economic releases slated for release on Friday.
Energy markets were mixed.
The benchmark crude oil contract traded in New York rose $1.03, or 1.1%, to $97.20 a barrel. Wholesale RBOB gasoline slipped less than a penny, or 0.15%, to $2.51 a gallon.
In metals, gold dropped $2.30, or 0.14%, to $1,697 a troy ounce.  The yield on U.S. government debt ticked higher.  The benchmark 10-year note yields 1.939% from 1.883%.
Foreign Markets
European blue chips jumped 1.4%, the English FTSE 100 climbed 1.4% to 5,198 and the German DAX rose 1.7% to 5,421.
In Asia, the Japanese Nikkei 225 edged lower by 0.06% to 8,160 and the Chinese Hang Seng tumbled 1.4% to 17,689.

Read more: http://www.foxbusiness.com/markets/2011/11/25/stock-futures-fall-amid-persistent-euro-debt-fears/#ixzz1enPmYJR0

Profiting From Panic Selling

Panic selling occurs when a stock price rapidly declines on high volume. This often happens when some event forces investors to re-evaluate the stock's intrinsic value, or when short-term traders are able to force the stock price down far enough to trigger long-term stop-losses. The entire process creates a tremendous opportunity for bottom-fishers to initiate long positions, especially if the event behind the panic selling was non-material or speculative in nature (such as an SEC investigation or an analyst opinion). Here we shed light on the panic-selling process and introduce a model that can help you predict the right time to take a long position after panic selling occurs. 
The Process Panic selling happens in several phases. Figure 1 illustrates a typical panic selling scenario that occurred as a result of an SEC investigation. The company in this example is Doral Financial (NYSE:DRL), a corporation whose primary business is mortgage banking, but this chart can be read as a general illustration of what happens in panic selling situations. 

Figure 1

Source: Tradecision

Let's break down what happens at each numbered step in the chart: 

Step 1 - Something occurs that causes the stock price to rapidly decline on high volume. 

Step 2 - Eventually, a high volume day occurs when buyers and sellers fight for control of the trend. The winner then takes the trend on low follow-up volume. 

Step 3 - If no significant trend change occurs at point 2 (i.e. a continuation), then there is typically another point of high volume in which a substantial reversal (long or short term) may occur. 

Step 4 - This process continues until a long-term trend is established and confirmed with technical or fundamental factors. 

Now we'll look at how we can predict when a trend change is going to occur. 
The Exhausted Selling Model (ESM) The exhausted selling model (ESM) was developed to determine when a price floor has been reached. This is done by using a combination of the following trend, volume and turnaround indicators: 

• Trendlines 
• Volume 
• Moving Averages 
• Chart Patterns

Figure 2 illustrates how this model works. 

Figure 2: Exhausted selling model

Source: ChartSetups.com

Notice that a variety of indicators are used to confirm that the trend has changed. As a trader, you may choose how many confirmation indicators you wish to use. The fewer confirmation indicators used, the higher the risk and the higher the reward (in the sense that, the longer you wait for confirmation, the less potential gain there will be for you to capture), and vice versa. 
The rules to using the ESM are as follows: 

1. The stock price must first rapidly decline on high volume.
2. A volume spike will occur, creating a new low, and appear to reverse the trend. Look for candlestick patterns showing a struggle between buyers and sellers here (i.e. cross patterns or engulfings).
3. A higher low wave must occur.
4. A break of the predominant downward trendline must occur.
5. The 40 and/or 50-day moving averages must be broken.
6. The 40 and/or 50-day moving average must then be retested and hold.

Note that you may use other moving averages - ideally, ones that connects highs or lows. Typically, a break of a larger moving average is more indicative of a trend break than smaller moving averages. 
As you can see, the ESM combines several techniques to ensure that the trend has changed for the long term. 
Example 
Now let's take a look at Figure 3, which will show the ESM in practice 
Chicago Bridge & Iron (NYSE:CBI) announced that its earnings would be delayed, which sent the stock down 16% in a matter of hours. First, we can see that the low was made on high volume just before 11.26am. Next, the price moves up slightly, but eventually forms a descending triangle, from which we drew a trendline (indicated here by the red line). Next, the price breaks through the trendline and moving averages (indicated by the green dot on the left). It then retraces to the moving averages (shown by the green dot on the right) before moving upwards. 

Figure 3

Source: ChartSetups.com

Finally, we can see that CBI turns around and returns to its previous levels after all of the confirmations are present. Note that if you would have entered after just one or two of the indicators, you would have made more profit, but increased the risk of the trade. 

Conclusion 
Panic selling naturally creates great buying opportunities for well-informed traders and investors. Those who know when the selling is over can benefit from the retracements/turnaround that often occur afterwards. The exhausted selling model explained here provides a safe and effective method to determine where the best entry point is, and the ESM's use of multiple indicators can help you avoid costly mistakes. 

Read more: http://www.investopedia.com/articles/trading/06/ESM.asp?partner=basics112511#ixzz1enOEJ0ao

Black Friday

What Does it Mean?
1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold speculators, including Jay Gould and James Fist, who attempted to corner the gold market. The attempt failed and the gold market collapsed, causing the stock market to plummet.

2. The day after Thanksgiving in the United States. Retailers generally see an upward spike in sales and consider this to be the start of the holiday shopping season. It's common for retailers to offer special promotions and to open early to draw in customers.

Why tax saving mutual funds?Why tax saving mutual funds?

Why tax saving mutual funds?

• Get upto Rs.1,00,000 exempted from tax under section 80c.
• Lowest lock-in period - just 3 years - of all tax saving investments.
• 100% equity market exposure - best return potential of all investment classes
• Easy and free - no demat account required, no entry load, no transaction fees to invest

So, tax saving mutual funds are easy to invest in, offer the best return potential, and has the lowest lock-in period of all tax saving investments!

For example, if you had invested Rs. 20,000 in HDFC Tax Saver fund (one of our current recommended funds) in the year 2008, not only would you have saved upto Rs. 6000 in taxes in the same year, your investments would have grown to Rs. 30,592 now (*as of September 22, 2011) - an annual return of 15.22%! . What's more, the profit of Rs. 10,592 would be tax free as well!

Possibility for 5500 is getting better: IIFL's Anu Jain

The Nifty has multiple resistances from 5,350 levels to 5,500-5,600 levels, said Anu Jain, senior vice president of IIFL Private Wealth Management in an interview. However, she further indicated that the possibility for Nifty to touch 5,500 levels is getting better with the current scenario.
According to Jain, the high beta sectors like real estate and metal have a positive bias. She mentioned that the metals space did well globally too and might do another 5-8% more.
Jain suggested a buy on Kotak Bank and ICICI Bank at current price as they have possibility of sharp moves. "Currently, the private sector banks are leaders against public sector banks," she added.