FIIs take back 44000 crores from Indian Capital Markets

Foreign Institutional Investors pulled out more than $7.5 billion from Indian debt and equity put together in the month of June 2013. The withdraw has been the highest from Indian capital markets in a single month ever, thanks to our dilapidated current account deficit and currency. Since April 2013 the Indian currency depreciated more than 10% in 2 months thereby erasing all the benefits of interest rate arbitrage that existed between U.S. and India. 

Investors in U.S. borrow in their home country at less than 2% and invest in Indian govt. and corporate debts at over 8% thereby yielding huge return. But since the overseas investors are borrowing in USD and investing in INR the depreciation in the invested currency beyond the arbitrage points makes it unattractive and worthless for them to stay invested. Similar is the situation for overseas equity investors, as they benchmark their return in their home currency, the depreciation in invested currency negated all the equity returns of April and May this year, which led to significant outflow from Indian stock markets as well.

World largest gold company stock falls to 20 year low

Barrick Gold (ABX:US), the world's largest gold producing company having reserves of more than 140 million ounces of gold in it's mines all over the world fell to a two decade low recently due to crash in gold prices and some of it's own internal problems.

The average cost of production of 1 ounce of gold at barrick gold is around $950 USD and was selling it at more than 100% premium when the gold price touched $1900 per ounce in 2011. Consequently the stock touched an all time high of $56 on 21st April 2011 and was having a huge market value of around $56 billion then. The stock is now hovering around $15 with a market value of $15.5 billion.

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New SEBI Guidelines on Buyback, FIIs and SME Listing

SEBI has introduced some key changes in rules for share buyback by Indian Companies, SME listing and Foreign Institutional Investors (FIIs). Following are the highlights of changes introduced:

On buyback

• Mandatory to buy back 50% of offer size; penalty of 2.5% on failing to do so
• Buyback period reduced to six months from one year
• Tender route compulsory if buyback size is over 15% of paid-up capital

BSE A Group stocks that under-performed Sensex

Since 21st may 2013 BSE Sensex had fallen from 20300 odd levels to around 18800,  a fall of around 7.4% in one month time frame. Though the fall in index is quite large but the cracks in individual stocks have been massive and some stocks from BSE A group has fallen as much as 40 to 50%. Following is the list of stocks from BSE A group which have fallen more than 20% in last one month.

The gloom doom and panic - Is everything all that bad?

With all the talk of FII money flowing back to US markets from India and analysts suggesting levels which are unnerving, there is complete panic out there and people might be thinking what to do now. So in this gloomy scenario, is that all bad or people are over reacting? Lets look at the following points:

1. The Quantitative easing by Fed was anyway expected to start rolling back by year end and people were well aware that this massive money printing cannot go on foreever. As a result there has not been any bubble like situation in equity asset classes around the world. Most of the equity market are reasonably valued and Indian markets are also trading below historical average valuation. Hence there will be valuation support on further fall in equity markets in India. 

Model Portfolio Update - June 2013

The market crash has provided a descent opportunity to accumulate some good quality stocks at attractive valuations. Hence my model portfolio which had 109k cash has been updated with stock that I believe has attractive valuation and long term story.

Check out the my updated portfolio here: Amit Agarwal's Model Portfolio

Top 3 Free Futures & Options trading simulators online

There are many free trading simulators for cash based buying and selling of stocks on virtual money and almost all the popular ones are good without having huge differences. 

But when it comes to Futures and Options (derivative) trading simulators there are not much choices and the virtual world in this space is pretty much occupied by following three. 

Sell IndusInd Bank: Recommends Citigroup

Citigroup has recommended a "sell" rating on IndusInd Bank with a target price of 455 rupees, citing stretched valuations.

The investment bank says IndusInd has transformed itself into a "unique" bank that is also a non-banking financial company (NBFC).

However, Citi adds that "future growth will likely be less dynamic, amid a tougher macro, and less unique" as other NBFCs are applying for banking licenses.

The stock has been a huge out-performer in the last 2 years and has more than doubled from 250 odd levels in June 2011 to 500 in May 2013. Going forward the credit growth is expected to slowdown due to slowdown in India GDP and capital expenditures which is expected to put pressure on Banks and financial institutions in general.

Fitch India Rating History

Fitch has maintained the long term rating of India at BBB- in 2013 but revised to outlook in 2013 to Stable from Negative in 2012. India had negative outlook in May 2001 and post that it was stable till 2012 when the outlook was revised again to negative. Stable outlook should provide some relief to fast depreciating rupee and help in getting some flows in debts and equity.

Nifty support @ 5800

After the relentless rise in the month of April and May this year market is finally showing some correction, thanks to our domestic problems such as currency depreciation, reform slowdown and general election next year.

Nifty has corrected 5% in the last 20 days and is witnessing selling pressure at higher levels beyond 6100. Defty (dollar nifty) has corrected 8% in last 20 days due to massive correction in INR vs USD.

Though the upside seems fairly capped at 6100, the downside also seems to be capped at 5800. As on 7th June the Nifty closed at 5880. Below are the indicators which are suggesting limited downside for Nifty below 5800 in the current month. However in case INR blows out completely or some grave news comes out of Europe or US, the 5800 level could get broken and the market could slide down significantly as the major support would have got broken.

Educomp Solutions: The rise and fall of the euphoria

Educomp Solutions is another example of investor's exuberance and irrational behavior which, like others, ended in blood bath. So what went wrong with Educomp and why it went up crazy and then crashed? Lets take a brief look at the timeline:

22nd Dec 2005 - Educomp Solution IPO (issue price = Rs 125) closed got hugely oversubscribed on projected education boom in India. At Rs 125 the company was valued at a reasonable market value of Rs 200 crores. The Face Value of each share was Rs. 10

13th Jan 2006 - The shares of Educomp got listed on NSE and BSE and went to as high as Rs 315 but closed at Rs. 285. The shares 

28th Mar 2006 - The stock price touched 400 level and a PE valuation of more than 45. People started talking about exponential growth in the multimedia educational product of the company and justified high valuation.

30th  Mar 2007 - The stock price touched Rs 1000 mark and a PE valuation of 42 times as the company Net profit more than doubled from 14 crores in FY-06 to 38 crores in FY- 07. Within 15 months from the listing the stock and the market value went up 7 times to Rs 1600 crores.

Buy RIL on dips in the range 770 - 780

• Reliance Industries witnessing strong support in 765 to 770 band and has bounced back many times from those levels in past 10 months.

• Fundamentally the outlook beyond 2014 looks positive as the gas price agreement will be over and there could be good amount of increase in per mmbtu prices

• The stock is attractively valued based on FY-15 EPS

• Has been an underperformer since last 3 - 4 years which has resulted in significant base building for the stock.

• Fundamentally or technically the stock seems to have limited downside below 760 levels.