Sensex journey from 21k to 21k

Sensex, the so called barometer of Indian economy, touched 21000 again on 24th Oct 2013 after almost 3 years gap but why the street doesn't seems to be cheering at all? The reason is that Sensex is not the true barometer of Indian economy as it comprises only 30 large Indian companies. 

SMEs are a major part of our economy and they are in terrible state today due to high inflation, low demand and policy uncertainties  Indian economy is in far terrible state than it was during Nov 2010 when sensex was last seen at 21000. INR is at 61.50 today while it was 44.50 three years ago. Fiscal deficit and current account deficit was in far better shape than it is today. 

Indian IT companies Result and Valuation comparison

Stocks of software service companies in India has been on tear away rally since the beginning of this year and top 5 biggies (TCS, Infosys, Wipro, HCL Tech, Tech Mahindra) are up anywhere between 50% to 75% YTD. 

The run up in IT stocks in India happened on the back of two primary reasons - better demand outlook in US & Europe and massive depreciation of Indian currency vis-a-vis USD-GBP-EUR. CNX IT index is up more than 50% since January 2013.

CNX IT Index 3 year Chart

Sell Tata Steel 370 Call Option at a premium of Rs 0.90

With Tata Steel stock up more than 21% in October alone and up around 73% (Price as on 21st Oct Rs 337) from the August low of 195, the rally has been more than justified and the stock is no longer attractive on valuations front. High debt and soft commodity prices will continue to put pressure on company's earnings in coming quarters. Technically 100 week average for Tata Steel is around 370 and 20 month average is around 360.

Hence option traders can sell 370 call option of Tata steel of October expiry at current market premium of 0.90 thereby generating a return of more than 1.6% in 8 days.

Idea Cellular at life time high

Since we recommended "Buy on Idea Cellular" around 2 years ago, the stock has gone up more than 160% and has overtaken Bharti Airtel as the most favorite telecom stock in India. Fundamentally also the company has one of the healthiest balance sheet with debt-to-equity ratio of 0.9, lower than RCom’s 1.2 and Bharti Airtel’s 1.44.

Idea is now the only telecom operator to have delivered positive returns to its shareholders in the past six years, including the 2008 market crash. At present, Idea’s stock price is 32 per cent higher than that at the beginning of 2008, when the stock market was at its peak. 

Guess the Chart - Oct 2013

"Guess the Chart" is an educational yet fun filled game initiated by InvestorZclub. There will be one anonymous chart, based on Indian Stock Markets, that will be put up on blog every month. You have to guess the company name and write your answer in the comments. The correct answer will be revealed at the end of each month. Some clues will be provided along with the chart to help you find the company name.

Let's see your tuning to the market! Good Luck.

Guess the Chart - October 2013

Which Company's stock chart is given above? 

Clue 1: The Stock Closing price was below Rs 20 at NSE on 7th Oct 2013.

Clue 2: The Stock is part of BSE Group B but used to be a part of Group A sometimes back.

Clue 3: Once market's favorite, the company reported loss in Q1 of current financial Year FY-14

India GDP growth forecast 2013 - 2014

With Indian macro in doldrums since the twin deficits went into uncomfortable zone and industrial growth came to an almost grinding halt, a slew of GDP downgrades have happened since July 2013. The numbers pegged by global rating agencies and financial institutions range from 4 to 5.7 percent for FY-14. The most recent downgrade came in from the stable of Asian Development Bank (ADB) which has lowered India’s growth projection for 2013-14 to 4.7 per cent from 6 per cent earlier, stating that the recent rupee depreciation and capital outflows could adversely impact the economy.

Growth Forecast for 2013-2014 (%)
RBI	5.5
HSBC	4.0
Goldman Sachs	4.0
PMEAC	5.3
Fitch	4.8
ADB	4.7
World Bank	5.7
IMF	5.6
InvestorZclub	5.0

The Reserve Bank of India has also lowered the growth projection for 2013-14 to 5.5 per cent from its earlier estimate of 5.7 per cent. World Bank has the most optimistic target of 5.7% while HSBC and Goldman Sachs forecasting the growth to be at 4%.