Mr Speculator

Born
6000 BC Nifty

Died 2522 BC Nifty

Speculators Lie here at Peace.

To be Reborn again at 6000 BC Nifty
I M gearing up for a Rampage
I m an Indian Bull and Gearing for a
Rampage.

I have taken lot of Rest in last one

and half year

I am driven by Indian Entreprenuers

and Economy. I consume Capital

I don’t care who my driver would be

say an UPA or NDA

I would grow at 25% CAGR

STOP ME IF YOU CAN

Fundamental and Technical
Analysis
A Refresher by Hiten Shah
 Fruits and Vegetables are Precious, We don’t purchase them without inspecting

We don’t rely upon Bhaiya, even though he is an expert and deals in them on regular
basis
While Buying Equity we pledge our future, hard earned cash to select group of Analysts and
treat them as demi gods
 Fundamental Analysis
• Content Sheet
– Basics
– Why trends are formed
– Ingredients of good Fundamentals
– Current Indian Economic Scenario
– When to buy and which type of stocks to buy?
 Basics
Inflation

Interest Rates

Rise Prices of Commodities

Global
Economy
Liquidity
Balance of Payment Deficit

Flows
and P/E
In Equity as an Asset Class in
longer period

Fall In Realty as an Asset Class in

Shorter term

Determine Where do In Liquidity in the markets

Markets Stand
In Corporate Margins over a
period of time
 How trends are formed?

• One Bad set of

Higher Data can burst
Leverage
• Volatility grows
Effect of
Derivatives

Over • Law of Averages

Exposure Violated

• Going Beyond
Norms- Margin
Speculative Funding and
Investment
Derivatives
• Greed Overrides Fear
 Ingredients of good economy- Good Govt, Flexible Policies, More FDI, More Investments,
Better Markets

Pagdis n
Lungis

Viru Gauti

Vibrant
Gujjus

Dhoni

Bengali
Bears

Dada
 Economy matters

Smooth sailing, Controlled Inflation- Tiding Economic Crash

a Tsunami
 How can U.S Sink China
Chinese
have
surplus BOP
That is a good with US
story of how
money flowed US accounts for
back to US more than
30% of
Chinese
Exports

If US is
uncertain, China has
Chinese money invested in
made out of US US bonds
and invested in out of its
US would sink BOP Surplus
 What is INDIA- Positives
• Less Dependent
Inherently on Exports
controlled • Money has to be
Economy used for internal
development
SAARE JAHAN SE ACCHA
Focus • Cheapest source
towards
service of intellectual
sector labour

Agrarian • Focus on
Economy Agriculture

More
dependent
on Oil
Imports
Current Indian/ Global Market Scenario
 What is the Expected Outcome

Markets
Rise When Commodity
Prices falling
and EBITDA
Improving
India’s
RBI easing
Internal
Liquidity
Margins Fall Comsumption

Existing
Scenario

MKT
 Buying Decision
• Focus on Low debt stocks
• Avoid stocks backed by consumer behaviour
• Purchase stocks where CWIP + BV is less than the market cap
• Check quarterly Promoters and Institutional holding patterns
• Buy stocks where promoters have increased their holdings and public
float have decreased
• Ensure that in testing times anything available higher than 5-8X
historical is not bought
• Focus on fundamentally sound Small Caps
 Businesses to buy
• PSU like GAIL, BHEL, BEL, ONGC if available at 5-8X historical

• Companies focused on Irrigation and drainage related system/pipes like Jain Irrigation, Astral

• Ancilliary in Infrastructure like Jai Hind Projects, GSPL Jkumar Infra projects, Indraprastha Gas- Available at lowest
multiple with reasonable order book

• Biodiesel companies like IKF, SBTL- Available below book value

• Power Majors like NTPC, REL INFRA (below promoters buying price)

• Chemical players like Tata Chemicals, Manali Petrochem and Kiri Dyes

• Solid order book- L&T , Welspun and Siemens

• Fertilizer players – Nagarjuna and Chambal

• Financials like IFCI, IDFC (IFCI has one of the best Investment Portfolios and the Asset recovery of bad loans is easy
now)

• Surrogate Exchange Investments like FTIL

• Power ancilliary companies like IMP power, Alstom Power

• Companies with running new products like CIPLA (I Pill), Logistics company like GDL

• Reliance Industries at 1410-1520 range (if crude is below $55), Shiv vani Oils, Selan Exploration
 Avoid
• Automobiles- Product driven

• Cement- Only prices have determined profits

• Real Estate- See business model before buying

• Commodities like Steel, Copper, Aluminium –avoid unless US and China stabilize

• Pharma- Avoid as one suit can kill

• Hotels- Avoid as surplus capacity would kill

• IT- Avoid till US and Europe stabilizes

• Financials and Brokerages- Interest rate on downward trend

 Vision 2013
Markets 2010
Lower Inflation
Nifty > 4150
Stable Government

Markets 2011
Nifty > 6200 Crude Stabiizes at $80 and Reliance at Peak

Markets 2012
Time to Exit from Realty and Equity and take
Nifty> 8200
a Vacation for two years
 Technical Analysis
• Fundamentals are the bases, Technicals are pillars
• There is nothing which goes against the law of averages
• History repeats itself
• Fundamentals follow technicals (Inside Story) (see the
contradiction from aforesaid statement)
• Trends continue to be in motion for atleast 4.5-5 years
• There is nothing like a wave
• Law of Averages and Volumes decide technicals and
formations don’t
• Investors can make money if they exit from 60% topside
of the previous top
• The historical market CAGR is 25-28%
 Higher Greed and No Fear
Markets cannot have Vertical Rise, Once it
defies Dow Theory and Goes above
Averages, It has to correct G
Lower commodity prices, A
Inflation in Control, Trend to P
Change

Higher P/E,
High Inflation
Equity a best Asset
Class, 5 yrs, 20%
CAGR and 1000% if
properly leveraged

45/200 MACD
at Bottom

Report on Market Cardiogram

 How to Interprete Charts
Chk Technicals would
correct when
Averages EV/EBITDA or P/E is
beyond comfort

Chk
Mkts have never
Volume ditched 5 year aveage
s

Deviation
from
Normalcy
 Disclaimer

• The Views are Personal Views of Hiten Shah

Use discretion, study and research and do
not rely upon any TIPS
• Investing in Equity is like playing with fire,
don’t do without a stop loss and don’t rely
upon others for own wealth management