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1619
The fundamentals of a company are its PE multiple, Earning per share of the company, its cash reserve,BV , the promoter shareholding and the strategic share holding. By comparing a company among its peers you can determine whether the share is cheap or not.

For example take the Refinery space........
u have Chennai Petroleum, MRPL, Bongaigon refinery........ among them you will find that except Chen-Pet(it has a PE of 7/ all others have a PE around 20. So among the refinery stocks Chennpetro will be a great pick.........


Great! Since the discussion on fundamental analysis has started, can someone take 2 peer companies and analyse their fundamentals and do a one-to-one comparison? I am unaware about the fundamental and technical analyses but keen to learn, else I would have initiated the same.
1620

Can some1 throw light on Open Interest ...

1621
gauravbrills Says
Can some1 throw light on Open Interest ...


i would love to........
I hope that you have some basic idea of futures(very basic).
Now suppose we take the case of CAIRN( i am having long position in this so......)As of today(15 dec ) if you visit National Stock Exchange of India Ltd. and see the F&O; statistics you will find that

1) Open interest(OI) is 25957500
2) Change in OI is 692500
3) settlement price is 227.1
4) Market wise position limit is is XXXXXXXXXXX
5) client wise position limit is XXXXXXXX
6) lot size is 2500
7) underlying value is 226.75

Now i will try to explain them one by one.......starting from 7

7) Underlying value is the price at which the share closed on friday 14th dec.
Now this is different from the price at which the share traded at 3:30 pm beacuse... CAIRN spurted in the last half hour and the closing price is determined by the weighted average price of the stock traded for last half hour.
6) lot size of any share in future is the lot of units of the particular share you have in futures. So if I have 1 lot of CAIRN bought at 220.5 then I have expose myself to 551250/- value of the lot. Since i have long position I will be hoping that the lot price move up, similarly one who was expecting CAIRN to fall would have short the lot.
when i bought the lot i have opened 2500 units in the OI so I have increased OI by 2500
5) client wise position limit is the limit of the position that a particular client can take in the share........ For CAIRN it is 5515556 it is equivalent to (2206 lots , each lot has 2500 units) so any one client cannot keep buy or sell position of more than 2206 lots.
4) Similarly market wide limit is the total units that can be kept open). Suppose I had bought 1 lot expecting CAIRN to rise while you had sold one so both of us have added 2500 units in OI and the total OI added is 5000. Similarly whn I sell the lot and square off my position then I shed my OI and the OI of the stock decreases
3) See the F&O; positions are daily settled......... meaning the profit and loss are settled daily based on the settlement price.....
Suppose you had one lot of CAIRN which you bought at 200 on Monday and squared off the trade on Friday end, and the closing price for the 5 days starting from monday is 202, 198,205,207,210.
So on monday after closing u will be credited 2500*(202-200)=5000
So on tuesday after closing u will be debited 2500*(198-202)=(-)10000
So on wednesday after closing u will be credited 2500*(205-19=17500
So on thursday after closing u will be credited 2500*(207-205)=5000
So on friday you will be credited wilth( as you have squared off ) 2500*(210-207)=7500
2) Change in OI indicates the increase/decrease number of units that have been opened for in the futures side with respect to the previous day. If you bought one lot then you add 2500 units to the OI similarly if i sell one lot i add 2500 units to OI
1) OI indicates the positions that are still open in the market.

See F&O; are an enigma but there is no denying the fact that if one can master it then one can become an effective trader !!
Hope my post satisfies your query
1622

@ reachmonil
I am quoting what wikipedia decsribes as Fundamental Analysis::
"Fundamental analysis maintains that markets may misprice a security in the short run but that the "correct" price will eventually be reached. Profits can be made by trading the mispriced security and then waiting for the market to recognize its "mistake" and reprice the security."

This requires understanding of the balance sheets along with peer comparision......... It would be great if you get one /two reports from the broking houses and analyse them.............. but believe me understanding balance sheets is a tough job( if you are not from financial background)!!!

1623

I am not saying anything to prove that fundamental analysis is like this but:

Consider this

Shares like RPL,RNRL has seen 200% appreciation in 50 days.Now how can one justify this move fundamentally?Do the balance sheet change in meagre 50 days?How much profit one need to change all this?

Even more,Share like Reliance Inds(RIL) moved from 1900 odd to 2800 in 50 days.India's largest company in terms of market cap moves like this.What happened so good with them?
Neither a huge gas finding/no reduction in crude oil/no such news as such
I agree retail business has started and they investing a lot but then they have faced a huge resistance from local shopkeepers and traders and forced to close down in states like Orissa,UP,Kerala.So shouldn't the share go down??

Hence,fundamental analysis/technical analysis and all looks cool but they don't work once market forces/sentiments drive/reduce prices.

But if one has to invest for long term, fundamental analysis rocks

1624

Hence,fundamental analysis/technical analysis and all looks cool but they don't work once market forces/sentiments drive/reduce prices.

But if one has to invest for long term, fundamental analysis rocks


No denying the fact. I had got tips of Pentamedia, Visu Intl, Facor Steel, etc. and on an average all are giving me nearly 100% return in a month. Since I know nothing about fundamental and technical analysis, was just keen to learn and understand something new. 😃
1625

Lets talk about one of my fav shares - Pantaloon Retail

Have loved this stock since quite sometime now.

Retail story or say the retail bus this company this company has been riding.A great entrepreneur (I sometime feel to be a marwadi).

  1. Great visionary
  2. First mover advantage
  3. Great manpower (Rupa Pursottam, of Goldman Sachs BRIC report, and others )
  4. Ability of do things in style
Facts about Pantaloon
  1. Pantaloon has 9.6 million sq feet space now and will increase it to 10m soon.
  2. Nearest competitor is 4 times smaller in market cap
  3. Mutiple formats of business - hypermarket(big bazaar),discount stores(brand factory),malls(central),conveniences stores(food bazaar),homestore and more businesses coming soon
  4. Nation wide presence. Presence in Tier III cities like Bhubaneswar also with 2 Big Bazaar stores
Then he has started Future Money where he will provide loans to customers to purchase stuff from Pantaloon stores. Think again, you provide money to someone who will again use the same and purchase stuff from your own store. You earn both sides.

Also they starting life insurance,general insurance,MF,etc businesses in the name of Future Generalia.Future group has 200 million customers. So think of the cross selling they can do to their walk in customers.They can sell each and every thing to the customer at their store having small counters or any which way.

And in some years Future Group will hive off all its business into separate business centres and list them separately enabling huge benefit to all share holders in term of unlocking business value.(this hiving off business is real the flavour of the season now)

Pantaloon has a huge SKU of PRIVATE LABELS(own brands) in the name of "TASTY TREAT". They selling almost all food items in their own brand name and making huge profits in the same.Jams,sauces,papad,kurkure alikes,chips,etc etc. All these are stocked alongside national brands and slowly customers will start purchasing Pantaloon brand.Also, retailers do this tactics with SKUs.They stock their own brand in such a way that it will generate sales any which way.They have started keeping separate sales people to promote those.

Pantaloon has started the cash n carry model too in the name of KB Wholesale (KB is Kishore Biyani).

They have identified 30 million sq feet space for further development of retail space. They have a real esate fund also in the name of Kshitij which keeps on buying land here and there.

Also, they have tied up with Inox. Wherever, Future group is starting a new venture,Inox will be given preference for starting its multiplexes.

Future group has a venture fund also which recently 5% stake in Dish TV. Indivision is the name I guess,of the fund.

Recently, I read somewhere that out of the recent price of Rs 685 of Pantaloon,
  1. Retail mail business - Rs 490
  2. Future Money - Rs 100
  3. Home Store - 95
Going forward, I guess the stock has huge upside potential in it.
Keep Investing!!!
1626

@ Amit, A very Comprehensive analysis. Just thought to add something.

Future Groups Private Equity Businesses. Other than Ksthij they have an International Fund known as Horizon worth $350mn and a hospitality fund of $300mn.

Also the stock has seen a run up in the recent past on account of Future Capitals' 10% Equity Dilution wehre some analysts have valued it it rs 80 and another venture Future Media @ rs 66 per share.

But @ rs673 it is grossly overvalued. One may argue that stocks across the board like we have seen in power and capital goods have discounted growth.


I do'nt believe that the argument holds any water. Pantaloon is no educomp that has almost a 100% CAGR for 06-08e. Also with new entrants and also strong players in terms of management and their respective abilities to deliver in new ventures, pantaloon may find it touigh going forward not just on the margin front but also in terms of their ability to competively source.

The stock has potenial but question is whether current valuations justify a buy. Also reports in August and the one post December have shown that sales estimates/expectations have dropped and have not been upto the mark. Maybe one can attribute this to interest rates. I guess thats fair.


But assuming its does an EPS of rs 8 for 208 it trades at a PE of almost 80!!. Assume it grows 50% for FY09 i.e. at rs 12 tha stock then trades at a PE of 50 times.

Even if one takes a DCF value of the retail business at rs450 odd and rs 200 for other businesses like Insurance, Future Money and the IPO valuation rs 650 SOTP Value seems fair value for this stock

1627

removed ....

1628
I am not saying anything to prove that fundamental analysis is like this but:

Consider this

Shares like RPL,RNRL has seen 200% appreciation in 50 days.Now how can one justify this move fundamentally?Do the balance sheet change in meagre 50 days?How much profit one need to change all this?

Even more,Share like Reliance Inds(RIL) moved from 1900 odd to 2800 in 50 days.India's largest company in terms of market cap moves like this.What happened so good with them?
Neither a huge gas finding/no reduction in crude oil/no such news as such
I agree retail business has started and they investing a lot but then they have faced a huge resistance from local shopkeepers and traders and forced to close down in states like Orissa,UP,Kerala.So shouldn't the share go down??

Hence,fundamental analysis/technical analysis and all looks cool but they don't work once market forces/sentiments drive/reduce prices.

But if one has to invest for long term, fundamental analysis rocks



Akhil,
The stocks you are discussing had become pure speculative counters during there run up....
I was closely watching RPL futures during its run up......... and the OI build up ............In a week or so it ran up from 175 to 295 or so........... during its run up it had reached its open interest limit..........meaning that of 18 crores shreas in OI , close to 17 crores OI had been reached by mid november ( i.e. in a week almost 8-9 crore position were added).......... Many people lost their shirt last month when the share came crashing down from 270 levels.................
The interesting fact is that at around 270 some traders created huge short positions(in tune of crores) .........i.e. they knew something which the market didnt and the news later squared off their position when the price came down ( the news was that Mukesh ambani was selling RPL shares in open market transactions)...........

For your information , RPL is the only index stock which had its OI position reached in the entire indian stock market history.

So for shares which are traded in derivative markets , dont always bet on the fundamental story
1629
piku008 Says
open interest


could u please tell us how to trade in futures and options ( like the strike price etc...)

and which is better futures or options and there pros and cons

thanx in advance .
1630
could u please tell us how to trade in futures and options ( like the strike price etc...)

and which is better futures or options and there pros and cons

thanx in advance .



Trading in futures and Options is just like trading in shares. i.e. in terms of trading per se.

Only difference is leverage and qty.

Ex. Take RIL's futures

Lot size is 150 (LOT size is nothing but a minimum and mutliples of shares/contracts one hase to purchase. In the cash market one can buy 2 or 3 shares of RIL but here one has to buiy a min of 150 or multiples thereof)

Assume RIL is trading at rs 3000. So the value of the contract is rs 3000*150= 4,50,000

But while purchasing I pay only ony 15% of the total value of the contract. Why 15% ?? That is decided by the exchange based on the volatility and liquidity of the stock.

So I paid rs 67,500 and took the benefit of a Rs 450,000 position.

Now if RIL moves to RS3300 i.e. is a 10% appreciation , the value of the contract would be rs 3300*150=495000

Profit is rs 45,000 but that profit is on an investment of rs 67500. Thats a return of 66%. Even though RIL just moved 10% So basically assuming most shares of have a margin of 30% every one percent move in futures price is almost a 3-4 percent return on your money.

Pros - Leverage
Cons- Margin money. If anyone out here is a Equity Dealer he would know the pressures of margin calls being triggered i.e. of the share price drops the customer/trader has to bring in more money to cover up his Mark to markt positions.

So thats one pain in days like today. If one doesnt bring in the required money your position will be sold off based on the risk measures taken by your broker. And thats what happened in May last year when a lot of long undwinding of psoitions happened and traders consistently shorted the market.

Options:- Without Complicating matters I'll take my own Ex.

I bought 4 lots of Nifty Dec 2007 6200 call option at a price of rs 15 per lot. The lot size is 50 here for the Nifty and rs 15 is the strike price or the premium I pay for the right to bet on the nifty moving towards 6200

The reason why I bought this is I believe tomorow with some sort of short covering and overselling of positions that happened today that market would bounce back.

If the Nifty moves an x no. of points the value of my option increases by Y. In options one can regularly see 50% appreciation in the value of their options.

But here the risk are huge as in my whole capital could be washed away but the return is huge. The premium value rather strike price or the price u pay to buy an option can swing drastically. It is very normal for an option to move from a premium amount of rs 15 to rs20 depending on what traders are willing to buy/sell. So thats almost 33% return in a day.

Also Options are used in Arbitrage opportunities. Would dwell much into it as it would confuse matters.
1631
Trading in futures and Options is just like trading in shares. i.e. in terms of trading per se.

Only difference is leverage and qty.


But while purchasing I pay only ony 15% of the total value of the contract. Why 15% ?? That is decided by the exchange based on the volatility and liquidity of the stock.

So I paid rs 67,500 and took the benefit of a Rs 450,000 position.


Vinit, I would like to add that we dont pay, we keep a margin of 15% of the lot value with the exchange.........

Correct me if I am wrong..............
1632

Here's one great PDF for the one's who wanted some gyaan on Technical Analysis!! Amazing piece of doc. Even I would start reading it... Quite self explanatory i surmise!!

1633

hi , could anyone explain the statement with an example " the XYZ stock is trading at 24Xtimes it FY08 earnings " .

1634
ideacrash Says
hi , could anyone explain the statement with an example " the XYZ stock is trading at 24Xtimes it FY08 earnings " .

You are talking abt the P/E ratio (or multiple) - one of the most used valuation ratios.. it simply is the prevailing price of the stock divided by the Earnings Per Share (EPS).. and this EPS may be trailing (historical), quarterly annualized, half yearly annualized or forward (projected)
1635
buck_was Says
You are talking abt the P/E ratio (or multiple) - one of the most used valuation ratios.. it simply is the prevailing price of the stock divided by the Earnings Per Share (EPS).. and this EPS may be trailing (historical), quarterly annualized, half yearly annualized or forward (projected)


I have a doubt regarding P/E ratio. I read that a high P/E ratio means that it's a good stock. But how is it possible?

High P/E ratio either means high share price and low earnings which is bad. Overall it gives an impression that it's Earnings are not good and that's why P/E is high. Then how come it's a good stock?

Or is it that low P/E signifies it's a good stokc...??:

plz elaborate.
1636
I have a doubt regarding P/E ratio. I read that a high P/E ratio means that it's a good stock. But how is it possible?

High P/E ratio either means high share price and low earnings which is bad. Overall it gives an impression that it's Earnings are not good and that's why P/E is high. Then how come it's a good stock?

Or is it that low P/E signifies it's a good stokc...??:

plz elaborate.

Hey Kondapalli... Ur wrong.. I mean its a low P/E Ratio which is favourable.. A company with high PE Ratio is dangerous. Its the High EPS and the low PE ratio which makes the company very attractive.
1637
IFC........whats ur say ...
very bad ...
many must hve lost thousands ...
1638
IFC........whats ur say ...
very bad ...
many must hve lost thousands ...

Thanks for the info but seems you too among the loosers and venting out your frustration here. Please go easy on the fonts and post here only if you have something to contribute to the ongoing discussion. No tips or buy/hold/sell calls without relevant analysis will be entertained here.