Fundamental Analysis
berger paint fundamentals and panic criss cross crude is down is fundamental positive
market panic is near term negative
POSITIONAL STOCKS FOR 2-3 MONTHWe have shortlisted some stocks as per the fundamental analysis for the positional trading but we do not enter into any trade with only fundamental.
We use our trading strategy to enter into the trade and the strategy based on price action technical analysis. We always wait for our setup to enter into the trade.
We take the trade only if the particular stock meets all our entry criteria, Most of the time we take entries in a lower timeframe like 15 minute or 1-hour timeframe.
There are lots of research behind the stock selection and the trading strategy, So please do not invest without proper knowledge, Do your own research before investing or trading.
And this list will be updated according to the market movement.
These are the stock list for the month
1 - SPENCERS RETAILS
2 - CESC
3 - GRUH FINANCE
4 - CHALET HOTELS
5 - PAGE INDUSTRIES
6 - BERGER PAINTS
NIFTY OVERVALUED: Fundamental Approach.Is NIFTY' OVERVALUED? Fundamental View Based on P/E, P/B, Div'. Yld.
(A) Nifty' 50’s Price to Earnings (P/E)
Price-to-Earnings ratio (P/E) of the NIFTY' is
a simple market-valuation ratio.
A general guideline to help understand the valuation is:
P/E > 24 = Dangerously overvalued
P/E > 20 < 24 = Overvalued
P/E > 16 < 20 = Fairly valued
P/E > 12 < 16 = Undervalued
P/E < 12 = Highly undervalued
(mouthwatering valuations)
Current: 28.11 (MAX was 28.26 on 06 & 07th aug '18)
(B) Nifty' 50’s P/B (Price to Book value)
Price-to-Book value ratio (P/B) tells us how many times
an investor is ready to pay for a rupee of net assets.
Since book value is stable and less volatile than earnings,
some consider it better than the P/E as a measure of valuation.
If P/B > Median P/B = Overvalued
P/B < Median P/B = Undervalued
Current: NIFTY' 50's P/B: 3.74 > Median P/B: 3.4 (OVERVALUED)
(C) Nifty' 50’s Dividend Yield (Div'. Yld.)
Dividend Yield (Div'. Yld.) is nothing but the return
an investor gets in the form of dividend on his investment.
It is measured as dividend per share divided by price per share.
General Interpretation:
When stocks are cheap, dividend yields are high.
#1. Div'. Yld > Median dividend yield => Undervalued
#2. Div'. Yld < Median dividend yield => Overvalued
Current Scenario: 1.17, Median Div' Yld: 1.31
Fulfill Criteria #2. Hence Verdict: "OVERVALUED"
Historical Ref.: MAX - 2.24%, Min - 0.90%
Technical View:
Nifty'50 seems to have exhausted its momentum in the near term.
Time cycle suggests a sharp correction is overdue.
The upward channel is acting as a strong resistance and it seems that the market will respect the same.
The oscillators have turned distinctly negative (mentioned "MACD" in Chart), suggesting loss of momentum on the upside.
For Intra / Weekly levels refer "NIFTY: Week Ahead, Spot & FUT Levels Weekly(20/08/18) Basis"
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INDIA Vix and Options - Theoretical ApproachINDIA VIX and Options - Theoretical Approach.
What is relation between the volatility index (VIX) and the options pricing.
In Black Scholes model of options pricing, the call and put options pricing is dependent on following 5 factors:
1) Price of the underlying
2) Strike price
3) Risk free rate of interest
4) Time to expiry
5) Volatility
Out of these five factors, first four are factual in nature.
We all know the price of the underlying, strike price, risk free rate of interest, time to expiry at the time of writing an option.
What you don’t know is the Volatility in the near future and thus it is somewhat subjective in nature and derives from the anxiety or fear of the option writer.
This volatility is called implied volatility and it reflects the sentiment of a option writer.
If the option writer thinks that in the near future the volatility is going to be high, he would demand
higher premium for writing an option and thus the prices of the options will be higher.
On the other hand if he thinks the volatility is going to be lower, he will demand lesser premium for the
options and thus lower option prices.
Now if we consider all the option writers present in the market. There would be millions of such people and if we try to calculate
the average volatility from the options they have written, we can get a value which can describe the overall sentiments of the market about volatility.
This is what Volatility Index really tells us. It uses the prices of the options to guess the future volatility, ofcourse, after doing several other operations
as well but in a nutshell, it is the reverse process of option pricing taken all the options being traded into account and thus calculating the sentiment of the entire market.
We can read the exact method of calculating India VIX here.
Now what does a particular value of the India VIX indicates?
Value of India VIX at the time of writing this article (24/08/17) is 12.5725 which means people are thinking that over the next 30 days markets can move up or down by 3.6293%
and demanding premium as per this value. Low value of VIX indicates stability in the market while higher value indicated stress, fear and anxiety.
Since, the investors are more fearful of the downside, VIX is negatively correlated to the stock market index like Nifty or Sensex which means
as the market index drops the VIX value increases & vice-versa.
Try to post another article, discussing the correlation between India VIX and Nifty and how VIX can be used as a hedging tool once India VIX futures and options are introduced.
