Good Morning Folks, Global markets traded and closed in deep green with high expectation of second stimulus package.
Nasdaq closed at 9874 with a 1.2% gain. Dow Jones closed at 25595 with 2.32% gains.
Important Event
Prime Minister will address nation at 4pm today.
Nifty 50 Technical Analysis
Yesterday, the market traded in a very small range of 120 points. Nifty50 took support at 10210-10220 levels and closed at the opening price. The overall market looks weak as declines were greater than the advances.
Nifty50 Support 10220, 10150 Nifty50 Resistance 10330, 10400, 10540
FIIs Data
FIIs have reduced their long position to all month low, and it is a very bearish sign for Indian markets. They have been net sellers for the last 3 sessions with the sold value of around 3740 crores.
Traders should avoid overnight long position and stay hedged until the situation becomes clear.
The global market fell heavily in yesterday’s session as fear of the second wave of selling kicked in. Dow closed around 3% down whereas Nasdaq was down 2.1%
Nifty50 Technical Setup
Nifty shredded 250 points from the day high after 4 days of the continuous nonstop rally. We saw a heavy profit booking at 10500 levels. On daily charts, we failed to close above 10330 levels and Nifty formed bearish engulfing which is a clear indication this rally is going to pause for a while. 10220-10250 levels needed to watch for tomorrow, if it is broken we might see another 150-200 move on the downside. If we see a heavy gap down opening then close watch on global markets should be maintained as they could decide the next course of markets.
Today all these companies will be publishing their respective results. Apollo Hospitals Enterprises, Ashok Leyland, Bank of India, Container Corporation of India, Endurance Technologies, Engineers India, Future Supply Chain Solutions, Galaxy Surfactants, Gravita India, Hindustan Aeronautics, Indiabulls Ventures, ICRA, IDFC, Indian Terrain Fashions, Insecticides India, Indian Overseas Bank, JB Chemicals, Lincoln Pharmaceuticals, Prince Pipes and Fittings, Sintex Industries, Somany Ceramics, Star Cement, TTK Prestige, V2 Retail, Varroc Engineering, Zuari Global, etc
FIIs Data
FIIs have decreased index futures long positions but bought heavily in the cash market. There is a possibility that they are trying to hedge their long position with a short one. For time being Nifty50 upside looks capped and the downside is open till 10000 levels. Traders should avoid heavy long positions till we don’t close above 10350 levels.
US markets performed well in yesterday’s session. Nasdaq closed at all-time high levels. There have been significant developments in the US as Trump administration has removed H1B, H-4 visas. Due to this news DowJones and Nasdaq futures fell 1-2% in the morning session. Therefore it is advisable to watch for global cues before taking an intraday position.
Trading Setup for Nifty50
Yesterday Nifty50 opened with a gap up and broke its important resistance of 10330. Bank Nifty overperformed Nifty50 and on an intraday basis jumped till 22,000. The rally was not able to sustain as it gave all gains by the closing of the session. 10275 will be a key support for Intraday and must be watched out.
Yesterday FIIs have increased their long position in Index marginally. Diis have sold heavily in cash market. We can assume 10,000 to 10,500 will be range for Jun series.
Global Markets closed on the mixed bias on Friday. Nasdaq almost closed flat and Dow Jones traded with negative bias.
In India, there have been significant improvements in recovery rates of COVID Patients.
Trading Setup for Nifty50
Nifty50 1Hr
Nifty50 crossed its important resistance levels i.e. 10150 and closed at day high. We can expect the momentum to continue. The important level to watch is 10330, once crossed we can easily climb to 10550.
Reliance, Bajaj Finance, Maruti, HDFCBank were top gainers and witnessed a huge rise in volumes on Friday. In fact, all these stocks contributed significantly to the Nifty50 movement.
Maruti & Bajaj Finance, Bajaj Finserv closed well above their crucial resistance.
Support Levels: 10150, 10020, 9950 Resistance Levels: 10330, 10550
Trading Setup for Bank Nifty
Bank Nifty 2H
Bank Nifty has outperformed Nifty last week and the same momentum should continue for this week as well. ICICI Bank, HDFCBank, and SBI were top-performing banks last week. All 3 closed above their resistance levels and reflected huge buying in the cash market. There are high chances BankNifty will touch 22000, 22500 this week itself.
FIIs have created a fresh long position in Index and also increased long positions in stock futures as well. FIIs were net buyers in the cash market after heavy selling of almost 8 trading days. Therefore we can expect a new high in Nifty & BankNifty.
Stocks to Watch
PSU banking space and PSU stocks performed well last week. We can see momentum to continue in stocks like BEL, SBI, Coal India & PNB. PNB posted results after market hours. Asset quality improved and its losses narrowed.
ICICIBank, Bajaj Finance, Bajaj Finserv and Maruti should be under your watchlist for coming week.
PSU Banking SpaceNifty CPSE
Results This Week
Info Edge, Asian Paints, Berger Paints, Indian Bank, Page Industries, Union Bank of India, GAIL, General Insurance of India, India Cement, IOC, PFC, Prestige Estates, Apollo Hospital, Ashok Leyland, Bank of India, HAL, ICRA, Coal India, Emami, HUDCO, Glenmark Pharma, IFCI, IRCTC, ITC, Oil India and NHPC.
Most of the people believe that technical analysis is only helpful for short term trading like 2-6 months etc. But long term trends take months to develop therefore we should analyze stock over a longer horizon. Charts and patterns evolve over the long term like 1 to 4 years, and if we relate them with developments in the company, we can get the big picture of the company.
How to Identify Long Term Trends?
Analyze stocks on a different time frame like Daily, Weekly, Monthly.
Give more weightage to higher time frames.
Look for a breakout on weekly and monthly charts.
Watch the financials of the company carefully (sales and operating profits) after taking a position in the stock. Most of the time the stock reacts first and the news follows later.
Analyze peer companies if available.
Lets take some examples of some of the stocks.
Reliance Industries
Reliance Industries went through a long term range bound movement for 8 years. In beginning of 2017 it broke that consolidation with good volumes and rest is history.
If we check the financial of the company there was nothing great as petrochemical business was already matured but the company had made huge investments in RJIO. When stock gave a breakout, it was more of a speculative move but later financial also supported and the stock became multibagger thereafter.
Reliance Industries revenue started picking up in 2017 and till date rising with phenomenal growth.
Havells India
Havells India went through a long gestation period of 30 months before becoming investors’ favorite stock.
Lets looks at financials of Havells India.
In beginning of 2017 we can see a good improvement in sales and operating profit. This shows improve in business of the company.
Titan
Titan (Rakesh Jhunjhunwala top pick) too went through a long 3-year consolidation before on-setting a new journey of becoming multibagger.
Titan financial too reflect the price movement of the stock. From 2013 to 2016, there was stagnancy in the business. After 2017, we have seen phenomenal growth in the revenues of the business as operating profit almost doubled in 3 year.
AstraZeneca
AstraZeneca consolidated for 6 years before starting a journey towards multibagger.
AstraZeneca’s finances also shows a great improvement in business. The company completely turned the table around as changed to profit-making to loss-making company.
Vaibhav Global
Vaibhav Global is another company that has shown good improvement in its business lately. The stock has given a strong breakout near Jun 2019 after consolidating for 9 months.
Vaibhav Global financial also shows same picture of the stock. The company’s operating profit increased 30% ( compared to previous Dec 18) during Dec 19 quarter.
Conclusion
Keep a watch on stocks which are trading near 52 weeks high.
Keep a constant eye on developments by the company. It could be either in the form of large CAPEX or new technology introduced in the business.
Charts should be analyzed on larger time frames like weeks and months.
In this post, we will understand the different charges applicable in Intraday trading in Equity Segment. Most of discount brokers do not charge anything for delivery based trading. Therefore we would be restricting this post for Intraday Trading in cash/equity segment.
Brokerage
This is the revenue generation of most of the discount brokers. Most of the discount brokers charge usually between 0.01% of turnover to a max of 20Rs per order. As a trader, if you are the one who does trades in small quantity then it is better to switch to a low-cost broker which charges the least charge like 0.01% of turnover.
GST
This charge varies from broker to brokerand directly depends on theamount of brokeragepaid. Usually, it is 18% of the brokerage charged for trades. Therefore, If you trade in a small quantity, it is better to switch to the lowest possible brokerage plan provided by a discount broker.
STT
Also, know as Securities transaction taxes. This charge is the same across all brokerage platforms. The money collected via STT directly goes to the government.
Transaction Charges
This charge is also the same across all brokerage platforms. This charge is collected by an exchange like NSE, BSE, etc. They are usually low in amount like NSE charge 0.00325% of turnover.
Sebi Charges
These charges are uniform across all the brokers. It is Rs 5/Crore.
State Stamp Duty
This charge is also uniform across all the brokers. It varies from state to state and the amount is directly paid to state government.
Example
Now, let us find out charges applicable to various discount brokers like Zerodha, Upstox, and AliceBlue.
Here, we have taken an example of buying and selling stocks at 1200 with 50 quantity.
Upstox Charges
Zerodha Charges
Alice Blue Charges
Conclusion
As a trader you need to check your position sizing, i.e. the amount of order you place usually for each trade. If your per amount trade size is less than 2 lakh then you can consider switching to a low-cost discount broker like AliceBlue.
And, if you are trading above 2Lakh per order then you can choose any discount broker as all have the same charges.
FIIs have increased long positions but again sold in the cash market. Therefore we can expect the market to stay range-bound unless any new development from India-China or global news comes.
Global Markets closed in deep green with Nasdaq and DowJones up 1-2%.
Trading Setup for Nifty50
Nifty 50 remained very volatile during yesterday’s sessions. Though Nifty opened with a huge gap up of around 2.5%, we saw a good profit booking at 10000 odd levels. Volatility further increased due to tensions between China and India. Nifty50 shredded 250 points intraday in less than 1 hour. The index also quickly rebounded 200 points from lows as it took support at 9720 levels.
We have seen good buying in selected midcaps and small caps related to the agriculture industry. Stocks like KSCL, GodrejAgro were up more than 7% and have seen a significant increase in volumes.
Support for Nifty50: 9800, 9720, 9630 Resistance fro Nifty50: 9950, 10040, 100150
Technical Setup for BankNifty
We saw mixed sentiments among banks yesterday. Private banks like HDFC Bank, Kotak were supporting Index. Public sector banks SBI, Bank of Baroda remained weak during the day.
Support for BankNifty: 20070, 19930, 19530, 19300 Resistance for BankNifty: 20630, 20500, 20970
FIIs Position
FIIs have again sold heavily in cash markets with amount aggregating to 1478 crores. They have covered their short position but continued to hold shorts on Index.
Today’s session will be very volatile due to further escalation of India-China border issues. We also have Supreme Court hearing on moratorium offered by banks.
Bank Nifty Supports: 19720, 19350 Resistance: 20050, 20300, 20730
FIIs Position
Yesterday, FIIs have increased short positions on Index and again sold heavily (-2960 cr) in the cash market. FIIs are constantly decreasing their stock positions and increasing their short position is negative for Indian markets.
We have a strong resistance at 10330 and good support at 9600, for this Jun series we would likely to trade in this range.
Alok Industries has been in buzzing stock among retail investors. Therefore we have decided to cover this company in this post.
Alok Industries is a bankrupt textile company and Reliance Industries acquired it through National Company Law Tribunal (NCLT). The lead banker SBI in Jun 2017 had initiated the insolvency proceedings against Alok Industries. Alok Industries owed around Rs 30,000 crore to its financial creditors.
Equity Infusion in Alok Industries
Reliance Industries has infused funds into Alok Industries, comprising Rs 250 crore towards equity shares and Rs 250 crore for optionally convertible preference shares.
The National Company Law Tribunal (NCLT) in March 2019 approved the bid of RIL-JM Financial consortium for Alok for Rs 5,050 crore. Of this, RIL is looking to raise about Rs 4,550 crore through bank loans while agreeing to infuse around Rs 500 crore as equity into the bankrupt textile company.
Alok Industries Business
Alok Industries is engaged in textile fabrication for industrial and household.
It produces finished goods such as shopping bags, handkerchief. woven fabric, knitted fabric, garments- woven and knitted and home textile products (bed linen and terry towel).
Few of its industrial product also includes polyester texturized yarn, partially oriented yarn and fully drawn yarn
It ships industrial products such as corrugated pallets, cotton, and blended yarn and also provides embroidery work.
Recently, it has also started producing PPE kits for medical staff at a very low price.
Financial Information
No analysis is complete without looking at the company’s balance sheet and profit and loss statement. Alok Industries is currently sitting on a massive debt of 26,0000 crores and it has raised another 5,000 crores which will be reflecting once the last Q4 2020 results will be out. Though the company has been acquired by Reliance Industries it would be important to note that the company has not been managed well in the past. It has neither generated cash to run the business smoothly nor has deployed money efficiently in CAPEX which will reward in the future.
Company Dividend Information
The company has not declared any dividend in the last 7 years which makes it difficult to check that authenticity of the generation of cash from the business.
Company Sales
The company operating profit is very volatile in the last 6 quarters and it is nearly impossible to project future profits. The sales figure is almost constant an operating margin is negative.
Profit & Loss Note Item 32
In 2019 Q3, the company has reported a profit of 7048 crores due to the reversal of interest expense accrued. Basically, it was a one time gain company has considered and it may not happen in the future.
Company Balance Sheet
The company has negative reserves in cash, which basically means the company owes around 16,000 crores to others.
Company CashFlow Statement
In the last 5 Years company has not generated any profit from its core business and instead, it has raised huge money from lenders like SBI bank. When we have a huge debt on the balance sheet it is very difficult to run the business because debt also comes with interest cost and it adds an additional burden to the business.
Alok Industries Stock
Alok Industries’ stock price has jumped around 600% in the last 10 weeks. With so many negative things roaming around the company, the market is quite optimistic about the company.
So what got changed?
After the acquisition of the company by Reliance Industries, the company has changed its main production line. Alok Industries has started manufacturing medical supplies such as PPE kits and COVID19 protective gear for hospital and medical staff. The cost of manufacturing these kits is one third the cost of those imported from China.
Should you invest?
Now, taking a investment decision in a bankrupt textile company, which has been given a lifeline support by a industry major is not easy.
On one side this company still owe a massive debt of 32,000 crores. Its quarterly interest will be a huge dent in its profit and loss statement. On the other side, we see a new business opportunity for manufacturing medical supplies. But before taking any decision we really need to gauge the demand of the market which the company will be capturing.
The present movement in stock price looks like more of speculation rather the any business growth. Due to low traded volume in the stock, it is in continuous upper circuit which gives a sense of a bubble formation.
At present, I would strictly stay away from any kind of investment decision as we neither have any information regarding the expected sales of the company nor the about of the expected profit the company will be reporting in the coming quarters.
