Author: shyam

Monthly Recap: An Exchange Goes Down

monthly nifty heat map

The Nifty went down -4.71% (INR) / -12.52% (USD) in August. IT and Metals were the few bright spots.

Index Performance

The worst performer of the month award goes to Indian banks thanks to the deadly triumvirate of the falling rupee, rising rates and an asinine government.

index performance

Top Winners and Losers

TATASTEEL +27.03%
RANBAXY +42.36%
SESAGOA +47.63%
FEDERALBNK -26.74%
IDFC -26.48%
CANBK -25.96%
How long will the metals rise? It seems completely counter-intuitive given the worsening credit and growth outlook.

ETFs

GOLDBEES +8.89%
INFRABEES +5.26%
NIFTYBEES -5.24%
JUNIORBEES -7.26%
PSUBNKBEES -10.58%
BANKBEES -13.93%
Gold was the only place to hide from the sinking rupee. But then, the government doesn’t want you to buy gold. Good luck with that…

Advancers and Decliners

advance decline

Yield Curve

Long-term rates continue to rise but the curve remains inverted.
yield curve

MIBOR

Overnight MIBOR (inter-bank) rates seem to have stabilized at higher levels after gyrating wildly in July.

MIBOR overnight

MIBOR 3 months

Sector Performance

sector performance

The National Spot Exchange: Rs. 8000 crore scam?

NSEL’s role was to bring farmers and buyers together by eliminating middlemen but it forged/manipulated documents regarding stocks and liquidity and allowed some of the companies to pledge the same stock with more than one financial institutions.

Source: Live Mint Coverage
[stockquote]NEULANDLAB[/stockquote]

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Scaled Total Accruals

Usually, analysts fixate on the “net income” part of the income statement. However, operating cash flow is the lifeblood of a company and is a better metric of a company’s financial health for two main reasons. First, cash flow is harder to manipulate and second, a company that does not generate cash over the long term is on its deathbed.

One of the measures of balance sheet bloat is scaled total accruals (STA). STA = (net income minus cashflow from operations) divided by total assets. By ranking STA smallest first, and filtering only for situations where both net income and cashflow are positive, you end up with a list of profitable companies ordered by balance-sheet efficiency.

We aggregated income statements from the past 5 years and ranked companies based on STA. The 10 best:

BHARTIARTL [stockquote]BHARTIARTL[/stockquote]
EROSMEDIA [stockquote]EROSMEDIA[/stockquote]
USHAMART [stockquote]USHAMART[/stockquote]
ABAN [stockquote]ABAN[/stockquote]
INFRATEL [stockquote]INFRATEL[/stockquote]
WHEELS [stockquote]WHEELS[/stockquote]
ALKYLAMINE [stockquote]ALKYLAMINE[/stockquote]
SUVEN [stockquote]SUVEN[/stockquote]
SUBROS [stockquote]SUBROS[/stockquote]

and the 10 worst:

VINATIORGA [stockquote]VINATIORGA[/stockquote]
ICRA [stockquote]ICRA[/stockquote]
NAVNETPUBL [stockquote]NAVNETPUBL[/stockquote]
AIAENG [stockquote]AIAENG[/stockquote]
ECLERX [stockquote]ECLERX[/stockquote]
HERCULES [stockquote]HERCULES[/stockquote]
IMPAL [stockquote]IMPAL[/stockquote]
MOIL [stockquote]MOIL[/stockquote]
WABCOINDIA [stockquote]WABCOINDIA[/stockquote]
BLISSGVS [stockquote]BLISSGVS[/stockquote]

Note: we ignored stocks that don’t had 5 years worth of statements.

The problem with a stand-alone STA measure that it doesn’t track changes in balance-sheet health. More on that later…

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Globe’s Buy-and-Hold Theme

Globe Capital Markets has an equity research team that recommendations buy-and-hold stocks with a 12 month time-frame through their “Monthly Monitor” reports. We created a theme that tries to track their recommendations on a real portfolio. The challenge is that they have many on-going calls that were made over the span of many months. So we started with their buy calls on IPCA lab [stockquote]IPCALAB[/stockquote] and Indusind Bank [stockquote]INDUSINDBK[/stockquote] made in August 2013 and we’ll keep the Theme updated as they make adjustments to their recommendations.

You can have a look at the theme “Globe Monthly Monitor” and track its portfolio, performance etc…

In the spirit of full disclosure, we are sub-brokers of Globe Capital Markets and we provide trading and investment services through them.

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Credit Suisse’s Top 10 Midcap Idea Theme

Credit Suisse came out with a research report yesterday that picked 10 mid-cap stocks that looked good. Can these stocks out-perform the Nifty? How would an equally weighted portfolio of these stocks perform over a period of time? Is the hit ratio any better than 50/50? Well, we created a Theme that tracks this portfolio. So dood-ka-dood, pani-ka-pani.

Check out the Theme here: “CS Midcap 28-Aug-2013”

[stockquote]PRECOT[/stockquote]

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Quality to Price = GPA + BM

We had filtered stocks based to Gross Profitability to Total Assets (GPA) and Book Value to Market Cap (BtM). If you combine the two, you get the Quality to Price ranking. The goal is to end up with stocks that are profitable and under-priced.

We went one step further and setup a Theme that invests in NSE stocks that fit this criteria. Check out the “Quality to Price” theme – a portfolio of 10, equally weighted stocks for the value investor in you.
[stockquote]PRECOT[/stockquote]

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