News Bulletin & Market Update: 12/10/2021

News Bulletin

▫️ Govt. hopeful to complete LIC IPO by March’22.

▫️ India’s unemployment rate unexpectedly surged to 8.86% for the week ended October 10, compared to 7.56% a week earlier.

▫️ Bharti backed One Web, partners with ISRO for launch of satellite.

▫️ Coal India scales up the coal supply to 1.5 million tonnes during last 4 days to power companies.

▫️ India’s business activity picked up pace during the week ended October 10.

▫️Invesco alleged that Sony Zee deal, unfairly favours Zee founders.

▫️ Finance minister to travel US to attend annual meet of World Bank, IMF, G20 finance ministers and central bank governors.

▫️ Govt. will transfer ₹16,000 crores of unpaid fuel bills and other dues of Air India to SPV, before handing the airline to TATA.

▫️Govt. mandated power distribution companies to reduce electricity losses.

▫️Due to chip shortage Maruti, produced only 81,278 units in Sep’21 against 1,66,086 units in Sep’20.

▫️Tata Motors reported 24% rise in group global sales.

▫️ Prestige estates reported 88% rise in sales in July-Sep quarter.

▫️Internal restructuring of TVS Group gets CCI approval.

▫️ Bitcoin price zoomed past $57,000 mark on Monday.

▫️ Non Food credit grew 6.75 % in fortnight ended on ended on September 24 (highest in 18 months).

▫️ Indian companies to raise $10 billion in IPOs in the next 6 months.

▫️ China proposed ban on private capital in media.

▫️ SEBI to revoke license of credit ratings agency Brickwork Ratings, on failure to apply independent judgement for the IL&FS ratings (a very big and bold action by the government). SEBI to also bar 2 former senior officials of CARE ratings for the same incident.

▫️ Aluminum prices jumped to highest level since 2008 due to global energy crisis.

Market Update

▫️Indian markets reached new heights yesterday, as traders took support from healthy export data and fresh investments from FPIs. However, during the session market lost nearly all of its gain and managed to end slightly positive.

▫️ Sensex closed up by 0.13% at 60,135, while Nifty ended higher by 0.28% at 17,945, yesterday.

▫️ Market Breadth was in favour of bulls with advance decline ratio of 991:850.

▫️ Auto, power, metal, realty and banking shares help the index to climb, while IT was the only sector to end in red, due to disappointing result and commentary of TCS.

▫️Indian markets in near term can be negatively affected by rising crude oil prices, increasing bond yields, global energy crisis, soaring commodity prices and falling ruppee.

▫️Ruppee fell by 37 paise against dollar to end at 15 month low of 75.36, as crude oil jumped towards 7 year high.

▫️Gold prices remained above ₹47,000 mark, backed by weak ruppee and surging yields.

▫️Oil prices continue to hold up $80 mark (WTI Crude), as power crunch worries from Asia to Europe will further propel demand of oil.

▫️US markets closed down by 250 points (Dow Jones), due to increasing concerns of inflation as a result of higher oil prices, which may further trigger tighter monetary policy.

▫️Today morning, US futures is trading flat, whereas Asia is in sea of red. SGX Nifty is suggesting slightly gap down opening for Indian markets.

▫️F&O Ban List: BANKBARODA, BHEL, SUNTV, IBULHSGFIN, NATIONALUM, SAIL, PNB, IRCTC and CANBK.

This is for educational purposes only.

An easy way to select stocks for Investment: F-Score

We are often told to analyse financial statements/fundamentals before investing in a stock. But hardly anyone tells, how to analyse and what to analyse. In this blog we will explain a simple and well proven method to analyse a company’s financials, thanks to Professor Joseph Piotroski, for his Piotroski’s F score.

The F score segregates companies in 3 categories: Weak stocks (score b/w range of (0-2), Grey stocks (3-7) and Strong stocks (8 or 9). The score is based on the outcome of 3 parameters: a) profitability b) leverage, liquidity and source of funds and c) operating efficiency. The F-score is widely used as a screener by fund managers who invest in value stocks.

Profitability is measured via 4 sub parameters:

  1. Return on asset (ROA): If positive, score of 1 else 0
  2. Cash from operations (CFO): If positive, score of 1 else 0
  3. CFO/Net Profit: If >= 1, score of 1 else 0
  4. Current year ROA – Previous year ROA: If > 0, score of 1 else 0

Leverage, liquidity and source of funds is assed using 3 sub parameters:

  1. Present year current ratio/last year current ratio: If > 1, score of 1 else 0
  2. Present year long term debt/last year long term debt: If < 1, score of 1 else 0
  3. Equity issuance: If null in current year, score of 1, else 0

Operating efficiency is tested with the help of 2 sub parameters:

  1. Present year gross profit margin – last year gross profit margin: If > 0, score of 1 else 0
  2. Present year asset turnover – last year asset turnover: If > 0, score of 1 else 0

Overall F-score is the sum of 9 sub-parameters, with 9 being strongest and 0 being weakest. Historically, the companies screened via this method have given high returns to the shareholders’ in the long term.

If you look at latest earnings report of companies in the BSE500 then you may identify many companies with a score of 9. Some of them are: Aurobindo Pharma, Colgate, Emami, UPL, CESC, etc. A score of 9 solely doesn’t assure high investment return, as returns also depend on several other factors. But, you can certainly use the F-score as a guide for equity investment, wherein you should clearly avoid companies with a score of less than 2.

Hence, before buying any scrip, run the F-score to get an idea about its fundamentals. Further to ease your worries, we have developed an interactive excel sheet to calculate the F-score. Reply/Comment with your mail id, to have a copy of the same.

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How to invest in international stocks?

Recently, Apple Inc. was in the news for reaching market capitalisation of $2.0 trillion, which is more than 50% of India’s GDP. Bewildered by the hefty returns of Apple Inc., many Indian investors expressed their willingness to invest in the Company. However, shares of Apple Inc. are not listed on Indian bourses.

Before we move ahead with the ways to invest in international stocks, let us learn about the merits and demerits of investing in international stocks. If you look around yourself, you are surrounded with products of international companies. When you binge watch your favourite show on Netflix/Amazon Prime, on your Apple/Samsung smartphone, while sipping Coca Cola/Pepsi and having your Lays potato chips, you are unknowingly boosting the share prices of these companies. Have you ever considered that you could invest in these companies too, and earn handsome returns? If not, consider it now!

Portfolio diversification is one of the important feature of successful investing. In the Asian Financial Crisis of 1997, markets all across Asia suffered, in contrast to western markets. Hence, by investing in international stocks one can gain geographic diversification of the portfolio. However, sky is not always blue, i.e. there are some inherent risks while investing in international equities. The biggest amongst them is: currency risk. Apple Inc. is listed in the US stock market. So, to invest in Apple Inc. you need to first buy US Dollar and then use your US Dollar to buy shares of Apple Inc. You may incur significant loss, in case of exchange rate volatility and it may turn out to be a nightmare. However, since you are reading this post, you are willing to take that extra currency risk.

There are various ways by which you can invest in international stocks, and it doesn’t require a minimum ticket size; you can invest in international equity with $1 also!!! Nevertheless, there is a maximum limit of $250,000 (₹1.8 crores) as stated by RBI under Liberalised Remittance Scheme (LRS). Coming to the most important question now, HOW?

  • Indian Brokers: Popular Indian Brokers like HDFC Securities, Axis Securities, ICICI Direct, Kotak Securities, etc. have tie up with foreign brokers and offer Indian clients access to international stock markets. They may charge some extra fees or premium or brokerage for international equities, and hence one must go through the terms and conditions very carefully before proceeding. We don’t advise retail investors to use this method, as the costs involved under it may outnumber the returns. It is suitable for people who want to invest large corpus in international equity and have the requisite expertise.
  • Foreign Brokers: There are few international brokers, which have branches in India and give their client an option to invest in foreign market. Some of them are Interactive Brokers, TD Ameritrade, Charles Schwab, etc. These brokers are generally expensive and require a minimum amount in the investment account of the client. This option is suitable for fund managers and full time active traders.
  • Startup Apps: Exploiting the opportunity and interest of Indian investors, many new age startups have come with apps to provide access to international stock markets. Vested Finance and Webull App provides easy access to foreign equities. Although they are regulated and registered, their recency creates a risk factor. Hence, it is advisable to not put a large sum of money through these apps. They can be used for small investments, to just get a taste of international markets.
  • Mutual Funds: There are many Indian Mutual Fund Houses that offer dedicated mutual funds for international stocks. You can easily invest in them and get exposure to international equity. Some of these funds are: Aditya Birla Sun Life International Equity, DSP Global Allocation Fund, ICICI Pru Global Stable Equity Fund, etc. This is the best option for retail investors to get international exposure. Low cost of investing (no currency conversion and transfer charges) along with minimum risk (presence of a dedicated fund manager), makes this a popular option amongst retail investors.

So, next time when you tune into your Apple Smartphone with Coca Cola Can in your other hand, you are actually creating money for yourself.

Do share with your friend who wanted to invest in Google! #rare4share

Safe Harbour: This post is for education and awareness purpose only!

Is Gold rally likely to fizzle out soon?

2020 has been a painful year for all of us till now (no need to mention the reason). However, amidst all the difficulties there has been a ray of sunshine especially for the stock markets enthusiasts, be it, investors or fund managers (of course those who could catch up to the opportunity). i.e. the prolific rally in two asset classes: Equities & Gold. Both these asset classes have delivered handsome returns to investors in a timeframe of fewer than 4 months; ~20 per cent for GOLD and ~30 per cent for EQUITY (Nifty50).

In this article, we will focus on the current and future prospects of GOLD as an investment avenue.
Firstly, let us understand why GOLD has had a dream run because many of us might be wondering that there has been a massive demand destruction on the discretionary side owing to the COVID pandemic, and as such who on earth is going to buy jewellery or any other gold item. Keeping this in mind, prices of GOLD should have been on a southward journey? Right?
NO. To your surprise, three days back GOLD touched an all-time high of ₹51,500/10gm in the spot market and is in close proximity to reach all-time high levels internationally.

The following factors were behind the GOLD’s stellar rally:
Linkage to International Prices – Internationally, gold prices are on the rise because of its tag of “safe haven” in difficult times. And since domestic prices have a linkage with international prices, they have risen too
Accumulation by fund houses across countries – At a time when interest rates across countries are abysmally low or negative in some case coupled with a bleak economic outlook that has cast a dark shadow on companies’ prospects, it makes sense for fund houses to park their money elsewhere for generating returns. Fund houses across the US and Europe have followed suit by piling up gold during these tough times resulting in 18% surge in demand for the precious metal. The behaviour has almost been an encore of what they did in 2009 after the global financial crisis.

Now the moot question – How long will the gold rally last?
In the short term, there are a host of events which can keep the prices of gold buoyant and might even take it to a fresh all-time high; rising Coronavirus infections with a possibility of a second wave, geopolitical tensions between US-China, China-India and US Presidential elections in November to name a few.

But does this mean we should stock up the yellow metal for a holding period ranging from 3-5 years?
Let’s take the example of the year 2011 – The year in which gold reached an all-time high of $1920/oz and ₹26,400/10gm, both internationally and domestically, owing to economic issues around the world.
But what happened after that? India’s GDP growth recovered from 5.24 per cent in 2011 to 8.17 per cent in 2016, while gold prices remained almost flat during the period (₹28,623.50/10gm in 2016).

We all are familiar with this quote: “This too shall pass”. So, the COVID-2019 pandemic will pass too. It can’t stay here for years or else we will have to live with it.
Recently, there has been a stupendous advancement in R&D particularly for the development of a vaccine. What if the vaccine comes way before than projected? Will gold still shine?
Secondly, the geopolitical tensions and US presidential elections, can’t keep gold afloat at all-time high levels for too long.
All of us are praying for a quick arrival of vaccine and COVID-2019 to go. If things materialize, then the so-called “safe haven” might lose its sheen similarly like it did after 2011. We believe that although there are enough triggers for some more upside in GOLD in the short term, for the long term it would be prudent for investors to wait for a correction and then ride on the GOLD-RUN. Till then enjoy any short term investment opportunity as far as gold is concerned.

Keep sharing the rare #rare4share, See you next time soon. Till then take care and stay safe!