Posts Tagged ‘FII


My recent buys..

Indian markets are the second best performing market in 2014. BJP led NDA absolute majority in 2014 General elections has changed outlook for Indian markets. FII’s have pumped close to 10 bn USD in Indian equity markets since the beginning of 2014. It’s a shame that retail investors are not investing in equity markets the way they should have been. I have no doubt in my mind that we are going to see reasonably good run for Indian markets in the next 4-5 years. I have been consistently buying in the cash segment and stepped up my purchase after 16th May verdict. Some of my recent buys are:

1. Ashok Leyland – CV cycle recovery candidate.

2. Bharat Electronics – Composite FII+FDI limit hike to 49 percent in defence. BEL is the best proxy for it.

3. Crompton Greaves – On recovery path

4. Edelweiss financial services – Expecting strong earnings growth for next 2-3 years

5. Grasim – Cement sector exposure

6. Icici bank – Comfortable with valuations of icici bank among private sector banks

7. Jain Irrigation – Balance sheet repair, Agri exposure

8. L&T Finance holding – Trading buy

9. MCX – Sold some portion but still holding

10. Suzlon – Balance sheet repair and growth recovery

I have leveraged trades in Tata Motors Cairn India and Infosys. I have squared off Infy trade but still carrying Tata Motors trade. Cairn India is 2-3 months covered call trade. Given current brent crude levels I don’t expect Cairn India to rise sharply in short term.

Disclaimer: These are my personal views and you should do your own due diligence before acting on anything written in this blog. Please take reasonable care while trading in options, especially while selling. I am not advising anyone to sell or buy options. My purpose of writing this blog is to highlight my trading strategies


INR Outlook..

INR depreciated sharply in the last few weeks and INR spot even touched 49.88 intra-day. Lot of market players were caught off guard with this sharp down move. More than fundamental factors, sharp move had to do more with technical factors. Across the board there was EM currencies long unwinding. Importers and FII’s had unhedged positions in INR and this up-move led to panic among participants. Exporters had already sold off large part of their USD earnings at 45-46 levels, so there was no USD selling at higher levels. It took dollar selling by RBI at 49.8 levels to arrest the sharp slide. Although intervention by RBI was not large (closer to USD 500 m), but it had sentimental impact and Rupee recovered to 48.9 levels.

In the short-term, everything depends on Euro-zone resolution. INR is taking cues from Euro movement. I am not very optimistic on Euro zone resolution. It’s a case of economies having slow or zero growth with high debt levels. But once panic settles down, INR should provide good returns. I will slowly start building positions in Indian currency. If there is capitulation over Euro crises, Rupee can go below March 2009 lows of 52-53. It will be dream levels to go long into Indian currency. If there is capitulation, then commodities along with all asset classes will go down substantially. This will help bring down inflation concerns and pause by RBI, may be cut in interest rates later next year. This will build good case for Indian equities and INR in turn.


SBI follow up..

In my earlier post I had mentioned about selling SBI 2600 call for July series ( Yesterday I covered my sold SBI 2600 call at a slight loss. SBI crossed 2440 levels and even on a down day it was up 1.5%. I felt uncomfortable and cut my position. At this point of time I am not sure about SBI movement, but in case SBI goes up further from here than I might re-look at selling SBI calls.

In last 10 days India has seen lot of FII flows, close to USD 2 billion ( Significant amount of this money has obviously gone into large caps. Some stocks like SBI, Tata Motors had lot of shorts which got covered. I have to be careful while writing calls of some large caps. From next week, Q1 FY11 results will start pouring. Its better to wait for cues from result season and then proceed.


Slowing China – Biggest Risk in writing Calls in Indian market

India is an evolving market and will continue to do so over the next 20 years. Foreign Institutional Investors (FII‘s) continue to dominate Indian market and their inflow continues to decide its direction. Last year, when FII’s pumped billions of dollars, market went up but this year when inflows are not so strong market is struggling to go up. Not many people invest in Equity markets and Mutual fund. The biggest problem I think, is the lack of stable long-term pension money. But over long-term with or without FII money Indian market will continue to go up and you don’t need any kind of BRICS marketing gimmick to confirm that. Structurally, we are in a bull market for next several years, but within that we will continue to overshoot and undershoot our long-term mean valuation of 15 PE. As option writer, I keep waiting for these overshoot and undershoot opportunities.

Last sunday there was an article in Business standard on slowing Chinese economy which might lead to sharp correction in commodities. As OTM Call writer, I would watch the situation in China very carefully since, rising commodity prices especially crude oil prices has been a major overhang on Indian markets this year. This quarter results confirm pressure on operating margins, rising input costs, rising interest rates and with slowing Indian economy, situation doesn’t look very good. But lot of this could change if there is some kind of slowdown in world’s biggest consumer of commodities leading to sharp pullback in commodities.

For June series I sold M&M 740 call, Tata Motors 1200, 1250 & 1300 Call. M&M quarter result clearly reflect pressure on margins, which were lowest in last eight quarters and might fall further. M&M Stock saw sharp reaction on result day. Tata Motors is struggling in domestic Commercial Vehicles (CV) segment, although Jaguar Land Rover (JLR) contributes close to 50% of overall sales. Given poor economic data coming from US and Euro zone,  if there is slight slowdown in JLR sales coupled with slowing growth of Indian CV market then Tata motors is struggling big time. But lot of things might change for companies like M&M which have strong domestic business (tractor segment), if there is sharp pullback in commodities. Inflation may also come down quite sharply and ease pressure on RBI to raise interest rates, hence need to be careful while writing calls of companies like M&M.

May 2018
« Aug    

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 233 other followers


Top Posts & Pages