Invest Without Emotions
It was a rough week for our portfolio algorithms.
While the NIFTY went down -1.05% we are down -2.38% for the week. We had so many trailing-stop-losses trigger today that our portfolio is almost 40% cash.
We remain focused on the process:
Talk to us about our Quantitative Portfolio Strategy Execution.
The NIFTY ended on a negative tone, drifting down -1.05% for the week.
Biggest losers were AMBUJACEM (-9.56%), JPASSOCIAT (-7.82%) and ULTRACEMCO (-7.77%).
And the biggest winners were INFY (+15.43%), TATAMOTORS (+4.76%) and WIPRO (+4.04%).
Decliners eclipsed advancers 37 vs 13
Gold: +0.10%, Banks: -4.59%. Infrastructure: +0.55%,
Net FII flows for the week: $729.13 mm (Equity) and –$238.17 mm (Debt)
Today’s pick is SUZLON [stockquote]SUZLON[/stockquote]. The stock started the year with a steep uptrend to blow past Rs. 30. It hovered around that point for a month, and finally gave up the momentum and slid all the way down to Rs. 15. However, it looks like it is at the beginning of an uptrend, having broken the pennant it was stuck in since December. In the last three months, the stock has moved +28% vs. +5% of the Nifty’s.
Oscillators RSI and CMO are in no man’s land and are not signaling any directional move. Short-term technical just saw a 4×9 and 4X18 bullish cross-over.
The MACD line is moving close to the signal line but the increasing histogram levels are suggesting a bullish outlook. The long-term GMMA lines are starting to flag out suggesting an upcoming long term bullish move for the scrip.
SUZLON’s average correlation with the Nifty is 0.57, which is positive. The scrip will be replicating the movement of Nifty. [stockquote]NIFTYBEES[/stockquote]
SUZLON has a historical volatility in the range of 0.4 to 1.0. The scrip’s volatility currently is in the middle of the range.
Given these technicals, we suggest a short-term and a long-term Buy for the script. Also, looking at the volatile history of the stock, we suggest traders to use trailing stop-losses in order to book profits if a trend-reversal were to take place.
Today’s pick is EICHERMOT [stockquote]EICHERMOT[/stockquote]. The stock has been on an uptrend throughout the year with a 2 month correction period during the middle. The stock experienced its 52-week high of Rs. 3,000 a week ago and is undergoing consolidation currently. In the last three months, the stock has moved +25% vs. +5% of the Nifty’s.
Oscillators RSI and CMO are in no man’s land and are not signaling any directional move. Short-term technical just saw a 9×4 bearish cross-over combined with a bearish Gravestone doji.
The MACD line is moving close to the signal line and the dropping histogram levels are suggesting a bearish outlook. The long-term GMMA lines are well dispersed and are suggesting a long term bullish move for the scrip. Also, the stock just saw a close below the center line of Bollinger band, which is short-term bullish.
EICHERMOT’s average correlation with the Nifty is 0.42, which is positive. The scrip will be replicating the movement of Nifty. [stockquote]NIFTYBEES[/stockquote]
EICHERMOT has a historical volatility in the range of 0.3 to 0.8. The scrip’s volatility currently is in the middle of the range.
Given these technicals, we suggest a short-term Hold and a long-term Buy for the script. We suggest traders to use trailing stop-losses in order to book profits if a trend-reversal were to take place.
The national employability report 2011 compiled by Aspiring Minds revealed a shocking trend- the percentage of ready-to-deploy engineers for IT jobs is dismally low at 2.68%. Even though India produces more than five lakh engineers every year, only 17.45 % are ready to be employed in the IT sector. Revenues for Indian information technology (IT) and business process outsourcing (BPO) services companies is expected to cross $100 billion mark this financial year.
However, there are doubts over sustaining this multi-fold growth due to supply-side constraints like talent availability. The report notes that around 92% of graduating engineers do not have the required programming and algorithm skills required for IT product companies whereas 56% showed lack of soft skills and cognitive skills. To retain its competitive edge, the IT industry requires an industry-ready workforce. Sector-specific skill shortages have emerged with middle-management personnel possessing little domain experience.
The IT/BPO sector also faces threat in the form of competition from other offshore destinations who are ready to dislodge India. A number of alternative offshoring locations like Philippines, Eastern Europe, Latin America, and China are emerging as viable options for BPO delivery centers.
Philippines has superior English language and soft skills for customer service operations especially for US buyers, Eastern Europe offers language and time-zone advantages for European buyers.
These competing destinations also offer lower cost, provide quality talent pool and are offering fiscal and regulatory incentives to lure buyers away from India.
Mid-tier IT companies are facing problems of their own. Apart from over-dependence on few clients and increasing attrition, they are also plagued by non-availability of talent. Since the sector biggies get preference in campuses during recruitment, mid-cap firms lose out on top-quality talent. This has impacted their ability to execute projects effectively.
Also, the emergence of cloud computing has allowed companies to cut fixed costs in terms of buying software or high capital expenditure on IT infrastructure.
Even as cloud computing is yet to address key issues like data security, it has made crucial inroads into traditional outsourcing and the days of companies hiring thousands seems to be over as 
they no longer have to maintain assets such as servers and software.
Even as we dissect the industry on key parameters like order pipeline, demand outlook, decision-making cycle, client IT budgets, pricing power and so on, it is crucial to address the structural issues that plague the IT industry if it is to continue as the blue-eyed sector of the Indian economy.
Instead of resting on its laurels as one of the world’s top providers of IT and BPO services, companies must build new skills in its workforce to maintain its competitive edge and innovate.
