Model Portfolio: One Year Performance Review

The model portfolio which was created with an initial capital of Rs.1,00,000 /- on 21st March 2013 completed one year of existence on 21st March 2014. I feel very happy to say that in-spite of very challenging  macro and micro economic situation in India, our model portfolio has outperformed benchmark Nifty by huge margin.

Model Portfolio snapshot as on 21st March 2014:

As can be seen from the Nifty chart below, during the period from 21st March 2013 to 21st March 2014, Nifty has delivered an absolute return of 14.74% while our model portfolio has generated 29.1% return based on the closing price of stocks held in the portfolio as on 21st March 2014.

Sell DLF 220 Call Option

DLF has moved up sharply from the 140 odd levels since the beginning of March 2014 to 180 as on 12th March 2104 mainly due to short covering. Due the sharp up-move in the stock on 11th March on very low delivery volumes and short covering, the IV's in the strike prices of the counters has gone up substantially. One can utilize such high IVs to sell far out of the money call which are adequately safe.

Valuation wise DLF is trading at around 16 times EV to EBIDTA of current financial year which is quite expensive in the context of slowdown in realty sector in India. Also the majority of debt reduction exercise is over which means all the good news in terms of debt reduction is discounted in the price. Technically the stock seems to be highly overbought at current levels and is also up more than 25% since the Feb 2014 closing. Hence there seems to be limited upside (if at all) from current levels. Hence one can sell 220 strike call @ 0.95 or higher which is highly safe as movement towards 220 will imply almost 50% move from the Feb close.

Total Return from the trade: