August 27, 2009

Investment- with one more dimension

Analyze market with one different dimension-Have you ever thought you can catch market momentum and reversal by mix of few indicators. Nifty PUt-call ratio, PE of Index, Momentum reversal indiicators and few other parameters. The biggest challenge is to take and make money in the falling wedge. For instance one cannot deny the fact that market can be irrationally exhuberant compared to what one can look at.
Learnings for finance students in this case would bee how to make sure that market is postioned for a fall/ rise.
Take a sectoral example:Consider a case of banking Industry. Historically all PSU's have traded in terms of P/B in the range of 0.6 to 1.42. If one catches and holds at 0.7 he has made money like anything because of the underlying volatility. Think about one strategy where you lock investment in a banking stock for dividend yield> post tax return on savings account. this is the right time to invest in a bank. If you want to analyze, look at the PSU's with three year average dividend payout in 2006 scenario and 2009 beginning and if they were giving you a div yield of 7% odd. You build one of the sure short money making strategy. Buy underlying/ Sell higher call options if freely tradeable/ sell simultaneous puts or take a short on Banking Index with Vanilla long on your stock and capacity to absorb short term supplies. there are numerous ways one can make money if it identifies a right time to enter into a sector. This is part one of the Investment Series that we are going to post every alternate day. Now its upon you to think how one can make money and learn the art of making money by using all the ideas that we suggested. For queries write to us@ splconquest@gmail.com.
Friends this is what we expect in the scholarship competition for JP this year. Last year we had banking dilemma but this year the hot flavor is Portfolio investments in India. We will definitely have something on it in the competition. Keep following us to learn the real investment strategies and overview of the economy.
Some key words in banking sector you need to understand are NPA, GPA,NII,NIM,PCR,P/B,Asset utilization, Risky weights etc. along with basic information

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