New Delhi: Indian financial minister Mr. P. Chidambaram on 28 February 2013 presented a budget that aims to save India from the existing and upcoming crucial financial crisis of the world. India has been facing financial crisis when ever it affects the world. Now, its time for India to be independent of such global crisis with innovative ideas for a strong financial back up for the country. And to solve this issue, India has to implement the very basic idea of reducing expenses of the government. Therefore, the government decides to implement the policy of reducing government subsidies. Minister Chidambaram declared that development in the country and of the country should be given more important since India is the second best developing country in the world now.

Automotive: Automotives above 800 cc are to pay an extra excise duty of 15% this year.

Mobile Phones: Mobile phones costing more than Rs. 2000 will be more expensive in the financial year 2013-14 due to hike in excise duty.

LIC Offices in all Cities: All the cities with more than a population of 10000 will have LIC offices.

Income Tax: Those who have an income between Rs. 2 lakh and Rs. 5 lakh can enjoy a discount of Rs. 2,000/-

Women’s Bank: Chidambaram announced a sum of Rs. 1000 crores for a public sector bank for women.

Post Offices: Core banking will be implemented in Post Offices of the country.

Skill Development for Students: Skill development programmes are allocated with Rs 1000 crores for ensuring better employbility of the unemployed.

Education: Rs.65000 crores is allocated for the education department of the country. Six new All India Institute of Medical Science  will be coming up soon.

Chidambaram also mentioned that the previous year most importance was given to education since that is the best way of developing and will be continued to be the priority this year as well. Scholarships will be still there in the year 2013-14 as well.

Food security: Rs. 10,000 crores is allocated to ensure food security for the upcoming financial year said Chidambaram.

Health: Rs.33000 crores is allocated for the health department of the country.

Agriculture: The sum of agricultural help is Rs.27 crores this year.

Employment Security: There an allocation of Rs. 33,000 for the job security of the individuals of the country in this financial year.

SC/ST: There is a scheme of Rs.28,500 crores for the development of SC/ST individuals of the country.

Rs.3511 crores project is presented for the development of minorities in the country.

Customs Duty: Electrical equipment need not to be paid customs duty this year.

Housing Loans: For the housing loan of Rs. 25 lakhs, there will be a discount of no interest rate for Rs. 1 lakh. This aims to help and promote individuals to have a house of their own as well as to promote the steel industries and construction industries. This is for those who build a house for the first time only.

Chidambaram also mentioned that the parliament will pass the bills at the earliest possible. He also expressed his concern for women and girls in the country and mentioned that the whole country should work as a team for women’s empowerment.

A new government scheme to encourage flow of saving in financial instruments and improve the depths of domestic capital marketcalled Rajiv Gandhi Equity Savings Scheme, was proposed in the Union Budget 2012-13. The scheme has been introduce for the first time in stock market. The specifications of this scheme are:

• Stocks up to Rs 50,000 into direct equity market can be bought by the new investors who are having an income below Rs 10 Lakh.
• This is a three year lock-in period scheme.
• You can save a deduction of 50% of income tax for every Rs. 50000.
• You can save a tax over above 80c if you hold this investment for three years.

When we consider Rs.50000 in the Indian stock market the amount might sound very small to us. On the other hand, when the same is calculated on a larger scale, the Indian stock market is one of the huge flows of capital in to the market as a whole. It is facts that about 3 crore tax payer citizens of are having an income below 10 lakh threshold.  If every investor decides to invest Rs.50000 each, almost Rs1.5 lakh crores will flow in to the stock market instantly. And the 3 year lock in period will automatically result in saving tax around Rs 5000 for the income category within 10 lacs.

Thus many investors are attracted to this Rajiv Gandhi Equity Savings scheme. As a result, the remote villages’ retail investors over existing schemes available will find a prospective investment avenue on the streets. On the other hand, the very success of the scheme will be totally dependent upon the fact how the brokers will be able to pick up stock for the investors. In such cases, we need to best prefer the large cap investment segment as compared to others. It is because the mid cap and small cap are the runner ups. Therefore, it would be wise to design our portfolio with a mixed bag of large, mid and small cap investments. It is also important to take the midcaps and small caps into account since today’s midcaps become tomorrow’s large caps and today’s small caps become tomorrow’s midcaps.

The stock market analysts well expected that in coming budgets the proposed limit will be hiked so as to draw more savings into stock market. The other side of RGESS that this investment scheme is not an ELSS (Equity Mutual Fund schemes). The target investors for RGESS will be those who do not yet have a depository account at all. The roughly estimated number of Permanent Account Number (PAN) holders with income between Rs. 2 lakh and Rs. 10 lakh is around 15 million who do not have a demat account at present.

It was surprising that the Finance Minister P Chidambaram recently cut the withholding tax on overseas borrowings to 5% from 20% and approved the Rajiv Gandhi Equity Scheme to attract more investment and thereby suppress the demand for gold.

By the introduction of the Rajiv Gandhi Equity Savings Scheme, the Finance Minister expects that it will encourage more first time retail investors to invest in stock market. And this therefore would help easing of tax to encourage overseas borrowing. The realization of the fact of low interest rates abroad will help to bring these funds to India.

Chidambaram on a press conference mentioned about the RGESS that it does not only encourage the flow of savings but also improves the depth of domestic capital markets. It is also aimed to promote an ‘equity culture’ all over India. He added that it is expected to widen the retail investor base in the Indian securities markets too”. The main market analysts of India expect that the RGESS therefore lead the Indian stock markets to new high.

Ahamednagar Forgings

Ahamednagar forgings is the second largest manufacturer of forged automotive components, high tensile fasteners and cold forged parts in India. It is the subsidiary company of Amtek Auto. Company reported a sales turnover of near Rs 298 Cr in the third quarter FY 2012. It sales turn over in the third quarter FY 2011 was near Rs 218 Cr. About 40% increase can be seen in the sales turn over. Company reported a net profit of near Rs 29 Cr in the third quarter FY 2012. Its net profit in the third quarter FY 2011 was near Rs 28 Cr.

Market cap of the company is just Rs 670 Cr. Book value is Rs 169.17. Price/Book ratio is 1.08. P/E stands at 6. It is clearly below the industry P/E of 16. Company reported annual sales of near Rs 900 Cr in the FY 2011. Annual sales are expected to touch Rs 1200 Cr in the FY 2012. The stock price created a 52 week high of Rs 188 on 28 February 2012. The stock price also created a 52 week low of Rs 76 on 21 December 2011. The stock price is now trading in the levels of Rs 183. It is a very good company from the forging industry. Long term investors can consider it as a very good buying opportunity. Long term target is Rs 220/.

Shilpa Medicare

Shilpa Medicare is a reputed pharmaceutical company in India. Company was established in 1987. Company reported a consolidated sales turnover of near Rs 84 Cr in the third quarter FY 2012. Its consolidated sales turn over in the third quarter FY 2011 was near Rs 64 Cr. About 30% increase can be seen in the sales turn over. Company reported a consolidated net profit of near Rs 6 Cr in the third quarter FY 2012. Its consolidated net profit in the third quarter FY 2011 was near Rs 8.5 Cr.

Market cap of the company is near Rs 500 Cr. Book value is Rs 96.08. Price/Book ratio is 2.19. P/E stands at 12. It is slightly above the industry P/E of 11. Company reported a consolidated annual sales turnover of near Rs 290 Cr in the FY 2012. The stock price created a 52 week high of Rs 294 on 15 March 2011. The stock price also created a 52 week low of Rs 135 on 15 December 2011. Stock price is now trading in the levels of Rs 210. Investors bullish on the pharma sector can consider it as a very good buying opportunity.  Long term target is Rs 300/.

Stocks Recommended by San Joseph

Moving average is a common word heard in the financial markets. There are two kinds of moving averages. One is exponential moving average  and another is simple moving average. Exponential moving average is one kind of moving average different from simple moving average. The specialty of exponential moving average is the faster reaction towards recent price changes. It is also known as exponentially weighted moving average.  Both 12 EMA and 26 EMA are considered as most important short term averages which is used to the indicators like Moving Average Convergence Divergence and Percentage Price Oscillator. Simple moving average is commonly used, because it is easy to calculate. 10 day simple moving average is calculated by adding the closing prices of the last 10 days and divided by 10. Moving average is changed in each day.

If the price breaks below 10 DMA in an uptrend, it is indicating that the trend is weakened. If the prices break above the 10 DMA, it also indicates the decling trend or consolidating. In such situation, watch both 20 DMA and 10 DMA. If 10 day line crosses 20 day line, it indicates a short term trend. For longer term period, both 100 DMA and 200 DMA are used. If the 100 day line crosses below 200 day line, it is called death cross and it gives a bearish outlook. If 100 day line crosses above the 200 day line, it is called golden cross and it indicates bullish sign. Anyway it cannot be considered as an indicator of price direction but an indicator of trend. A short term uptrend can get support at 20 DMA. A long term trend can get support or resistance in the 200 DMA. There will be a slight variation between simple and exponential moving averages. Moving averages are used to understand current trends and trend reversals. It also helps to create support and resistance levels.

Moving average and signals

When a 50 DMA is cross over 200 DMA, a buy signal is occurred and when the 50 DMA crosses below 200DMA a sell signal is occurred.

Relative Strength Index

Relative Strength Index was developed J Welles Wilder. It is used to ascertain whether the market is in overbought or oversold? If the RSI is above 70, it is considered as an overbought situation. If the RSI is below 30, it is considered as oversold situation. It is better to use RSI with moving average cross over. When RSI is in the oversold situation and 10 DMA crosses above 25 DMA it will be a clear buy signal. When RSI is in overbought situation and 10 DMA is crossing below the 25 DMA, it can be considered as a strong sell signal. RSI indicates the weakness and power of a stock. RSI is commonly used in a 14 day timeframe. When the market is in uptrend, RSI will be in between 40 and 70 and if it is in down trend, RSI will be in between 20 and 60.

A reverse trend in a bull market is known as correction. It is process of declining the stock price from a high point. Small corrections will bring the overvalued stock prices to fair prices. Foreign Institutional Investors have major role in the Indian market. If they decide to book profit in a high point, it may lead to correction. Market sentiments have major role in the fixing of share prices. The news like decreasing interest rates and good rainfall will make positive impacts in stock markets. The news like bomb blasts and earthquakes will have negative role in the stock market. A decent stock market correction is 10% or less than 10% from the recent top.

Corrections in the stock market are inevitable. Correction and stock market crash is entirely different.  Crashes will give excellent opportunity to buy Puts. What is a price of a security mean? It just means that a point in which the buyer wants to buy and a seller wants to sell the particular security. Technical analysis have major role in the prediction of stock market crash. Technical analysis is a process in which historic price movements of the security is analyzed. Technical analysis is widely used by technical analysts and traders.

If there is a panic situation, it will be definitely reflected in those indicators. When the stock prices started to go downward, the technical analysts will give sell signals. They are mentioning a rough way ahead. Investors sitting in profit can book profit at those levels and traders can make profit by short selling.

Different Technical Indicators

Bollinger Bands

Bollinger band was developed by John Bollinger. It is a versatile tool widely used in technical analysis. There are three components to the Bollinger band indicator.

Moving Average

20 period simple moving averages is used.

Upper Band

Upper band means two standard deviations above the moving average.

Lower Band

Lower band is the two deviations below the moving average.

Fibonacci Retracement Levels

Fibonacci retracement levels are the key tool used in the technical analysis. Fibionacci series are formed by the key numbers developed by Leonardo Fibonacci in the 13^th century. Fibonaci numbers are calculated by the two extreme points in a chart divided by the Fibonacci ratios like 23.4%. 38.6%, 50%, 61.2% and 100%. These ratios play important roles in the market. The method is used to find the critical points in which the existing trend is reversed.

Indian airline companies are struggling the to keep the head above water.  Kingfisher is a prominent private airline company is in news due to the flight cancellations and pilot exiting. Management is even struggling to pay the salaries to the employees so that 50 pilots were exited in the last week alone. About 300 pilots were left in the last six months. The listed players like Jet airways and Spice Jet are also flying with broken wings. These companies are posting losses in the last few quarters. The situation of kingfisher is really pathetic. High operating cost is the first threat of the company. Heavy debt burden is in the other side. Out of the operating expenses, high fuel cost is in the first position. Jet fuel in India is the most expensive in the world. Sales tax imposed by the various state governments in India is between 4% and 32%. It makes fuel, the most expensive item for any airliner player in India. It accounts for the 50% of their operating costs.

Air India is a bleeding candidate in the airline sector. It is selling tickets below its cost for capturing more market share. Since they are offering tickets in the low price, the competitors had to follow the same strategy to sustain. The aviation ministry is not favor any bailout packages for these struggling airline companies.

The recent steps by the central government are marvelous. The government of India has decided to allow direct import of crude oil by airline companies. It will be definitely beneficial for these players because, there are countries available with low jet fuel costs. Kingfisher Airlines is sinking like Titanic. Darwin’s law of Survival of the Fittest is here. Vijay Mallya is begging before the government. Anyway Bail out is not a bad thing. Even Goldman Sachs asked once.

Problems of Kingfisher

Market cap of the company is near Rs 1400 Cr. Kingfisher has a debt of Rs 7000 Cr. That is very huge. A debt worth Rs 14000 Cr was written off in the last year. Company made an operation loss of Rs 1027 Cr last year. Company has to pay an approximate amount of Rs 890 Cr to its fuel suppliers. Indian Oil Corporation has put a cash and carry agreement with them so that they have to pay each drop of the fuel. Both HPCL and BPCL stopped supply completely.

We have heard the word technical analysis many times. What is technical analysis? Nobody will have a right answer. It is a prediction of the price movement of a security by analyzing its past price movements, primarily price and volume. Many factors will be used to predict the future price of the security. There are fundamental analysis and technical analysis to predict the stock market movements. Fundamental analysis gives a long term picture of the stock where technical analysis gives short term movements of the security. Fundamental analysis is a measurement based on the intrinsic value of the company. Fundamental analysis studies overall economy, track record of the company, financial conditions and credibility of the management.

There are two types of technical traders. One is traders, they are the fans of charts and another is the people who are trading with the help of oscillators and technical indicators. They are just thinking about the price movements in the history and the future movement possibilities. The technical consultants argue that market discounts every fundamental data of the company. If there is a trend occurred, there is 90% chance to follow the trend. That is effectively used by smart technical analysts. Most technical trading will be done by this assumption.

By studying balance sheet, income statement and cash flow statement, fundamental analysts find the intrinsic value of a stock. If the price of a stock is trading below its intrinsic value, it will be a clear buy. If the price of a stock is valued above its intrinsic value, it will be counted overvalued. Investors should not tempt to buy overvalued stocks.

Fundamental analysts are the supporters of long term investment but technical analysts are supporting short term. It may take a long time to reflect the actual value of a company. This process is also called value investing. Warrant Buffet is a world famous value investor. Value investors may wait for a time of years to cash the stocks.

Fundamentals are the actual characteristics of a business. Nobody can rich by one night. One has to wait. We are investing in a business and it has to be grown. Technical analysis is used for trading, especially short term trading while fundamental analysis is used for investing, particularly long term investment. Investors are trying to increase the value of the holdings where traders are trying to transfer the assets to somebody. Many stock analysts are combining both these schools together to make advantage from it.

Bajaj Finance

Bajaj is a reputed brand in the minds of Indian people. Bajaj Finance is a Bajaj Group Company involved in the finance sector. Company is giving loans for Bajaj vehicles. Company is also giving personal loans and loans against property. Company reported a sales turnover of near Rs 490 Cr in the second quarter FY 2012. Its sales turn over in the second quarter FY 2011 was near Rs 320 Cr. A smart 50% growth can be seen in the sales turn over. Company reported a net profit of near Rs 87 Cr in the second quarter FY 2012. Its net profit in the second quarter FY 2011 was near Rs 58 Cr. 50% increase can be seen in the net profit.

Market cap of the company is near Rs 3000 Cr. Book value is Rs 370.77. Price/book ratio is 2.16. P/E stands at 7. It is clearly below the industry P/E of 6. Company reported annual sales of near Rs 1400 Cr in the FY 2011. Stock price created a 52 week high of Rs 813 on February 2012. 52 week low by the stock is Rs 536. The stock price is trading in the levels of Rs 800. The stock price can touch Rs 1000 in near term. Long term target is Rs 1250/

Ind Swift Laboratories

Company is a manufacturer of API. Company has six different manufacturing locations in India. Company has been becoming a reliable partner in the global pharmaceutical industry. Company reported a sales turnover of near Rs 350 Cr in the second quarter FY 2012. Its sales turn over in the second quarter FY 2011 was near Rs 210 Cr. About 70% increase can be seen in the sales turn over. Company reported a net profit of near Rs 22 Cr in the second quarter FY 2012. Its net profit in the second quarter FY 2011 was near Rs 21 Cr.

Market cap of the company is near Rs 450 Cr. Book value is 128.36. Price /book ratio is 0.94. P/E stands at 5. It is clearly below the industry P/E of 10. Company reported annual sales of near Rs 1000 Cr in the FY 2011. The stock price is trading below its annual sales. The stock price created a 52 week high of Rs 125.80 on 6 February 2012. The stock price also created a 52 week low of Rs 74 on 22 August 2011. The stock price is trading in the levels of Rs 120. It is a clever buying opportunity for long term investors. Long term target is Rs 170/

Stocks Recommended by San Joseph

Andhra Sugars

It is a prominent sugar company in India.  They have reported a sales turnover of near Rs 300 Cr in the second quarter FY 2012. Its sales turn over in the second quarter FY 2011 was near Rs 300 Cr. About 30% increase can be seen in the sales turn over. Company reported a net profit of near Rs 48 Cr in the second quarter FY 2012. Its net profit in the second quarter FY 2011 was near Rs 29 Cr. About 65% increase can be seen in the net profit.

Market cap of the company is near Rs 350 Cr.  Book value is Rs 146.28. Price/book ratio is 0.89. P/E stands at 4. It is clearly below the industry P/E of 14. Company reported annual sales of near Rs 520 Cr in the FY 2011. Company is trading below its annual sales. The stock price created a 52 week high of Rs 132 on 27 January 2012. 52 week low by the stock is Rs 77.65. Company recently did an agreement with ISRO to supply liquid hydrogen. The stock price is now trading in the levels of Rs 130. It will be a clever buying opportunity for long term investors. Long term target is Rs 210/

Ipca Laboratories

It is a world class player in the pharma industry. Company has respectable presence in multiple areas like Asia, Africa, Europe, Australia etc. Company reported a sales turnover of near Rs 623 Cr in the second quarter FY 2012. Its sale turn over in the second quarter FY 2011 was near Rs 520 Cr. About 210% gain can be seen in the sales turn over. Company reported a net profit of near Rs 78 Cr in the second quarter FY 2012. Its net profit in the second quarter FY 2011 was near Rs 94 Cr.

Market cap of the company near Rs 3728 Cr. Book value is Rs 83.76. Price/Book ratio is 3.54. P/E stands at 14. It is above the industry P/E of 10. Company reported consolidated annual sales of near Rs 1900 Cr in the FY 2011. The stock price created a 52 week high of Rs 351 on 14 June 2011. 52 week low by the company id Rs 232. The stock price is trading in the levels Rs 293. It is a bright long term investment opportunity for conservative investors. Long term target is Rs 450/

Stocks Recommended by  San Joseph

Kotak Mahindra Bank

It is an aggressive new generation bank in India. It is a very reputed group in the country. Bank reported a sales turnover of near Rs 2030 Cr in the second quarter FY 2012. Its sales turn over in the second quarter FY 2011 was near Rs 1450 Cr. About 40% increase can be seen in the sales turn over. Company reported a consolidated net profit of near Rs 430 Cr in the second quarter FY 2012. Its consolidated net profit in the second quarter FY 2011 was near Rs 360 Cr. About 20% gain can be seen in the net profit.

Market cap of the bank is near Rs 36000 Cr. Book value is Rs 92.42. Price/Book ratio is 5.34. P/E stands at 38. It is above the industry P/E of 9. Company reported consolidated annual sales of near Rs 6100 Cr in the FY 2011. The stock price created a 52 week high of Rs 520 on 28 October 2011. The stock price also created a 52 week low of Rs 333 on 9 February 2011. The stock price is now trading in the levels of Rs 500. It will be a tremendous buying opportunity for long term investors. Long term target is Rs 650/

Gokul Refoils

Gokul refoils is one of the FMCG companies in India with respected global presence. Company is engaged in the areas like soya bean oil, cottonseed oil, palm oil, sun flower oil, mustard oil, groundnut oil, vanaspati etc. Company reported a sales turn over of near Rs 1750 Cr in the second quarter FY 2012. Its sales turn over in the second quarter FY 2011 was near Rs 1290 Cr. About 35% gain can be seen in the sales turn over. Company reported a net loss of near Rs 72 Cr in the second quarter FY 2012. Its net profit in the second quarter FY 2011 was near Rs 20 Cr. It was shocking news for the company.

Market cap of the company is near Rs 1080 Cr. Book value is Rs 33.2. Price/Book ratio is 2.46. Company has just turned into loss in the second quarter FY 2012. Company reported annual sales of near Rs 4500 Cr in the FY 2011. Company is trading 1/4^th of its annual sales. 52 week high by the stock is Rs 110. 52 week low by the stock is Rs 73. The stock price is now trading in the levels of Rs 81. It is a smart buying opportunity for long term investors. Long term target is Rs 120/.

Stocks Recommended by San Joseph