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Governments influence in Stock Market


Recently someone asked me “Can ruling governments influence and manage stock market indices? If so, how can they do it? Why would they do it?”

Q1:YES or NO? 

Ans: YES

Q2: Why?

Ans:

a) Every government would like to portray their image as a good government to the rest of the world. A rising index is a good sign of prosperity and growth which will invite more investors into the country.

b) Governments can do IPO listing of the government holding companies and cash out of that business by divesting to the public.

c) An overall positive sentiment in the people focused on the next election.

Q3: How?

a) Monetary Policies: They create tax incentives or taxes based on how they like to control it.
For example, India govt did not charge taxes for stocks that gained over more than 1 year. Recently in 2018, they introduced Long Term Captial gains (LTCG) tax on stocks at 10% from FY 2018-19.  This impacted a lot of FII’s who were investing in India and caused markets to crash in mid and small cap stocks.

b)Fiscal Policy: They use the policies of Federal institutions to control the interest rates.
For example, RBI controlling Repo and Reverse Repo rates

c) Regulations: They create new rules to control the market through market regulators.
For example, Recategorization of Mutual Fund schemes in 2018 and result of the work. The result was many small and mid-cap stocks went for a downward spin since many bluechip/index category of mutual funds were holding it for higher gains.

c) Rigging: They use public money in public institutions to rig it.
For example :
i) Asking/Ordering Life Insurance Corporation of India (LIC) to buy some index stocks.
ii) Opening up  Provident and Retirement Funds to invest in equity markets.

d) Bailouts, Subsidies, and tariffs: They give away news or manipulate news for markets to react in a timely manner. it could be government spending or subsidies to industries.
For example, giving subsidies to Sugar sector (News) or farmers or capital infusion to governmental banks or importing taxes on certain imports.

I hope this quick blog was helpful in understanding how governments rig a countries economy as well as build perception to the rest of the world.

 

Other References:

  1. https://www.investopedia.com/ask/answers/03/101703.asp
  2. https://www.investopedia.com/articles/economics/11/how-governments-influence-markets.asp
  3. https://www.forbes.com/2009/03/25/government-influence-solutions-opinions-contributors-problems.html
  4. https://www.quora.com/How-does-government-policies-affect-stock-market
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FY 18-19 Stock Picking Competition


We are starting a new competition for FY 18-19 period and here is the list along with their names. This will be tracked over the next 1 year.

Bulls

There are 23 stocks here on this list. This time we will also do an assessment of the stock performance as a portfolio for the next one year. I will allocate Rs 1 lac to each of the stock and total of 23 lacs in a virtual portfolio. So it looks like as below:

Bulls2

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Jan 2018 Stock Picks for next 1-3 years


Here is the list of Large Cap stocks for next 1-3 years

 

Capture2

 

Here is the list of Mid and Small Cap stocks for next 1-3 years

Capture

 

After the FY 18-19 budget announcement, there is a serious meltdown in the market due to the introduction of Long Term Capital Gains Tax (LTCG). Here there would be some heavy offloading in the market since many stocks would have hit stop loss due to the eventful day. I would recommend dropping your stop loss boundary to another 15-20% considering the high Volatility due to the LTCG changes. Please note that nothing else has changed in the business due to LTCG and long-term investors are still staying on them.

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Pre-budget 2018 Rally picks for 26%


Here is the list of pre-budget rally competition for 26% gain from 4th Jan 2018

 

Capture

 

And in less than 2 days Nitesh Estates wins the competition with 30+%.. Here is the result as on 08-Jan-2018 at 10AM…

Capture

 

Lets see who is the fastest follower now to take second place.

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Stock calls FY 2017-18


Bit delayed in publishing by PERMA Bulls from April 1st 2017 to March 31 2018

 

 

Capture.JPG
Here is the result of last financial year competition.

Winner : Minda Industries with a return of 101%,

Runners-up : Divi’s Lab with a return of 74%

Congratulations to Winnersbulls winner

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10 checklist for selling a stock


Investors often sell their winners too soon and hold onto their losers for too long. The reason is simple: They’re afraid that their winners will give up their gains, and hopeful that their losers will bounce back. It can be tough to figure out when to cut your losses on a stock, but these 10 questions might help you make up your mind.

1. Has the business fundamentally changed?

As industry trends shift, many companies’ strengths become weaknesses. For example, BlackBerry (NASDAQ:BBRY) missed a critical technological shift when iPhones and Android devices popularized touchscreen smartphones. That blunder caused its shares to fall nearly 95% over the past decade. If your company is facing a similar paradigm shift, it might be time to rethink your investment thesis.

A businessman removes a Jenga block.

IMAGE SOURCE: GETTY IMAGES.

2. Does the company dismiss its problems?

The reason BlackBerry crashed was that it repeatedly dismissed iPhones and Android devices as viable threats to its smartphone business. Unfortunately for BlackBerry, iOS and Android devices became more secure and widely accepted by enterprise customers — which caused BlackBerry’s market share to drop to nearly 0%. If your company repeatedly dismisses clear threats while touting brand strength or customer loyalty, it may be time to sell the stock.

3. Are revenue and profits headed in the wrong direction?

If a company is still growing its revenue, margins, profits, and cash flows in the face of tough competition, it can probably withstand future headwinds. But if all the numbers move in the wrong direction for several straight quarters, it might be time to sell the stock.

4. Is the company overvalued compared to industry peers?

Another simple way to see if a stock is “ripe” is to check its P/E (price-to-earnings) ratio. For higher-growth stocks, the P/E ratio should be comparable to its annual earnings growth rate. For mature stocks, the P/E ratio should generally be comparable to its industry average. If the stock’s P/E ratio is significantly higher than those figures, it may be time to sell.

5. Is the company being pilloried by regulators?

Companies can also be struck down by regulators if they become too powerful. One recent example is Qualcomm (NASDAQ:QCOM), the biggest mobile chipmaker in the world. The company was fined over allegedly unfair patent licensing practices in China and South Korea, and could face additional fines in the U.S., Europe, and other markets. Therefore, if a company is being pilloried by regulators, its upside potential could be limited — so it might be time to sell.

6. Did management betray investors’ trust?

If you don’t trust the company’s management, don’t keep the stock. Toshiba(NASDAQOTH:TOSBF) and Volkswagen (NASDAQOTH:VLKAY), for example, both betrayed investors’ trust recently with two high-profile scandals. A probe found accounting errors throughout Toshiba’s massive business, while Volkswagen was implicated in illegally modifying vehicle software to meet emission standards. If a company drops the ball like that, it doesn’t deserve your hard-earned money.

7. Does the company lack a competitive moat?

If a company lacks a clear competitive moat against its rivals, its growth will likely slow down as its market is commoditized. That’s precisely what happened to GoPro (NASDAQ:GPRO) and Fitbit (NYSE:FIT), which both saw their sales growth slow dramatically due to the arrival of new competitors. If the company repeatedly fails to widen its moat with new products or services, it might be time to sell.

Fitbit's Blaze smartwatch.

FITBIT’S BLAZE SMARTWATCH. IMAGE SOURCE: FITBIT.

8. Is it a cyclical stock that’s moving the wrong way?

Investors should see if the stock is a “cyclical” one that rises and falls on multiyear cycles of higher and lower demand. Common examples of cyclical stocks include car manufacturers and commodity companies. These types of stocks might rally when the cycle turns positive again, but they could also drop further before bottoming out. If you believe that’s the case, it might be smarter to sell the stock and buy one with more promising catalysts on the horizon.

9. Did the company unexpectedly cut its dividend?

Dividend cuts indicate that a company’s business is in trouble. An easy way to spot upcoming dividend cuts is to keep an eye on a stock’s payout ratio, the percentage of its earnings that it spends on dividends. If that ratio is higher than 100% and you own the stock for its dividend, it’s definitely time to switch to safer income plays.

10. Is the company’s only hope a buyout?

Investors sometimes hope that an 11th-hour buyout will save a dropping stock with abysmal growth prospects. Some of the stocks I previously mentioned — including BlackBerry, GoPro, and Fitbit — have all been moved by buyout buzz before. Yet none of those companies has been taken over by their rumored suitors. Therefore, if a buyout is your best hope for a stock’s recovery, it’s probably time to sell.

The key takeaways

A stock doesn’t have to meet all these conditions to justify a sale. But if you answered “yes” to all 10 questions, it’s time to cut your losses and sell. The loss will initially hurt, but at least you’ll be able to invest the cash into more promising stocks with higher growth potential

Taken from

https://www.fool.com/investing/2017/04/05/10-point-checklist-for-selling-a-stock.aspx

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November 2016 picks


Buys

  • Metals & mining companies
    • Hind Zinc @ 250
    • Hind Copper @60
    • Vedanta @200
    • SAIL @50
    • Coal india @315
    • NALCO @50
    • Avoid Tata steel and Hindalco
  • Oil Marketing Companies
    • HPCL @450
    • BPCL @ 676
    • IOC @ 316
    • Reliance Industries@1000
  • Auto
    • Mahindra and Mahindra @1310
    • Bosch @ 21678
    • JBM Auto @286
    • SKF @ 1416
    • Exide @197
    • WABCO @5579
  • Finance
    • Reliance Capital @507
    • IDBI Bank @ 70

Hold

  • Cement
  • Chemicals

Sells

  • Pharma
    • Sun
    • Lupin
    • Dr.Reddys
  • Sugar sector
  • Tata stocks
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Dilip Buildcon IPO


Dilip Buildcon IPO summary

From Website:

Dilip Buildcon Limited (DBL) is one of the leading private sector road-focused Engineering Procurement Construction(EPC) contractors in the country . DBL is also the fastest growing infrastructure development company of India with about 78.44% continuous year-on-year growth for the last four years. DBL, named after its visionary promoter Mr. Dilip Suryavanshi, is a Bhopal based ISO 9001:2008 company, with accreditation from the IRQAO and ASCB(E) Accrediting Certifying Bodies, UK. DBL is the successor of Dilip Builders that was founded as a proprietorship concern in 1988-89. On April 1, 2007 the business of the proprietorship firm was taken over with all the assets & liabilities by DBL.

From Red herring Prospectus:

  • Our Promoters and Promoter Group currently hold an aggregate of 90.25% of the outstanding Equity SharesWe achieved a CAGR of 38.18% of revenue growth on a consolidated basis for the five year period ended March 31, 2016.
  • BanyanTree Growth Capital, LLC, a private equity firm, invested ` 750.01 million in our Company in February 2012, which significantly added to our financial flexibility.
  • As of March 31, 2016 the amount of our total consolidated borrowings was ` 36,395.20 million.
  • As the owner of the one of the largest fleets of construction equipment in India, we maintained, as of March 31,2016, a modern equipment fleet of 7,345 vehicles and other construction equipment from some of the world‘s leading suppliers, such as Schwing Stettar, Metso, Wirtgen and Vogele.
  • We are one of the largest employers in the construction industry in India and employed 19,746 employees as of March 31, 2016.
  • As of March 31, 2016, we had an order book of ` 107,787.31 million, consisting of 50 third party road EPC projects, six of our own road BOT projects, three irrigation projects, one mining project, one cable-stayed bridge project and three urban development projects.
  • While our strategy is to undertake BOT projects opportunistically, we had a portfolio of 18 BOT projects as of March 31, 2016, with 12 completed projects and six under construction. Our BOT projects fall into four types — annuity plus toll-based, annuity-based, toll-based and hybrid annuity basis.
  • Under the OFS, promoters Dilip Suryavanshi and Devendra Jain would sell up to 1,136,364 shares each, while private equity player BanyanTree Growth Capital will offload 7,954,545 shares.
  • Our Company intends to use the Net Proceeds for the purposes described in the section entitled. The company proposes to use Rs 202 crore of the proceeds to prepay or repay a portion of the term loans.  (As of March 31, 2016, unsecured loans amounted to  4.38 million)
  • The company has received early completion bonuses of an aggregate amount of Rs 1,91.97 crore for 11 of its BOT projects and Rs 28.62 crore for 10 government EPC projects.
  • At present, DBL is pre-qualified to bid for BOT projects with a contract price of up to Rs 2,100 crore and EPC projects with a contract price of up to Rs 1,200 crore.
  • Competitive strengths:
    • We are one of the leading road-focused EPC contractors in India: With largest construction equipments and staff.
    • Efficient business model:Our growth is largely attributable to our efficient business model of careful selection and geographical
      clustering of our projects.
    • Excellent execution track record through strong operating systems and controls
    • Strong financial performance and credit profile -We have never defaulted in the repayment of our borrowings. According to ―Care and India Rating‖ and ―India Ratings & Research‖, our credit rating for long-term borrowings increased from BBB in Financial Year 2012 to BBB+ in Financial Year 2013 and to A- in Financial Year 2014 and remained at A- in Financial Year 2015 and A- (provisional) in the first half of Financial Year 2016.

 

Market Opportunity

MyHelp

  • Between Fiscal Years 2016 and 2020, the length of roads and highways upgraded or
    constructed at the state level is expected to grow at an average of 7-8.0%. Total investment in state roads, during this period, is expected to grow at an average of 12-13%.
  • MyHelp
  • Capture

Observed Concerns:

  • As of March 31, 2016, projects in Madhya Pradesh accounted for approximately 39.53% of our order book.
  • As of March 31, 2016, 76.27% of our order book was derived from contracts awarded by various governmental clients. For Financial Years 2015 and 2016, 69.74% and 86.64% of our revenue was derived from transactions with government clients, respectively.
  • One of our Promoters, Mr. Dilip Suryavanshi, has pledged 5,412,400 of his Equity Shares, representing 4.62% of the pre-Issue share capital and will represent []% of the post-Issue share capital that our Promoter holds in our Company, in favor of IFCI Limited for loans of an aggregate value of ` 2,000 million to our Company, the purpose of which was for our Company to purchase new plant, machinery,
    equipment and for general corporate purposes, including improvement of long term working capital.
  • Majority of projects are from MP RDC, Karnataka RDC (only one project from NHAI)
  • There has been negative publicity in the past about our Company and/or Promoters, alleging criminal acts, corruption and illegal activities in relation to our mining operations, land purchases near Bhopal, Madhya Pradesh, construction defects or delays in one of our projects and the income tax proceedings against our Company.
  • There may be delays in the collection of receivables from our clients or entities owned, controlled or funded by our clients or their related parties. As of March 31, 2016, ` 3,666.24 million, or 29.06% of our total trade receivables had been outstanding for a period exceeding six months from their respective due dates.
  • We do not own the premises where our Registered Office and Corporate Office are located
  • 20 subsidiary companies have made losses in FY 2016 (highest are DBL Betul-Sarni Tollways Limited -77m, DBL Mundi Sanawad Tollways Limited -39m, DBL Silwani Sultanganj Tollways Limited -35m etc)
  • Based on the statistics on 12th plan, the funds for Roads and Bridges is very marginally (~10%) higher than 11th plan (5 years back).

Summary:

I feel that Dilip Buildcon is a good company with employee and machinery assets with strong execution capability which has been proven by multiple projects and has a lot of BOT projects in hand. It seems like a good buy considering that pricing is not very high and there is excess cash from the IPO proceeds for management to grow the company in addition to settle debts and pre-IPO investors. So my recommendation would be to add 2-5% of your portfolio with Dileep Buildcon based on your risk appetite and conviction.

Other news articles

http://economictimes.indiatimes.com/markets/stocks/news/dilip-buildcon-ipo-some-brokerages-recommend-subscribe-ratings-on-issue/articleshow/53485176.cms