Buy AXIS Bank for Long Term

AT FIRST glance, the deal between Axis bank and Enam Securities appears very expensive,
considering that the bank is paying nearly 16 times Enam's annualized FY11 profit before
tax (PBT). However, given Enam's major strengths in the investment banking and
institutional broking business and higher profitability compared to its peers, the deal should
pay off for Axis bank in the long term.
The acquisition would enable Axis Bank to enter the league of one-stop-shop financial
institutions, currently dominated by ICICI Bank and HDFC Bank. For Axis Bank's
shareholders, earnings upside following the deal will be limited in the short run, given the
bank's much bigger balance sheet size. But the deal fills in the strategic gap in the bank's
service offerings.
While the deal appears to be on the expensive side, it needs to be noted that it is purely
stock based, which means no cash will change hands. This also means Enam's promoters
would hold on to the equity of Axis Bank for at least one year. Given this restriction and the
recent volatility in stock markets, it is perhaps appropriate that Enam has managed to
attract a premium valuation.
For instance, Enam's closest peer Edelweiss Capital trades at over 12 times its annualized
FY11 PBT. Compared to this, Enam's valuation seems way high. But in the event of a further
decline in emerging stock markets, Axis Bank's stock price may also slide, going forward.
Assuming that it declines by over 10%, Enam's valuations would come in line with those of
its peers.
Another compelling factor is Enam's operations are yielding far superior margins at over
40% compared to 25-30% margins of its peers. Axis Bank would also get access to Enam's
experienced team, which includes over 400 professionals. This is crucial since the
investment banking business is purely relationship driven.
One concern for Axis Bank is the duplication of services. A few analysts point out that the
bank already has an investment banking licence and a broking subsidiary. Given this, it will
be critical to see how well the bank identifies synergies with Enam's acquired operations.
As part of the deal, the bank would issue fresh equity to Enam's promoters, which would
form over 3.3% of the enlarged equity base, post deal. The resulting dilution in the bank's
earnings per share in the short term would be less than 0.5%, which need not stoke
concerns. The bank has most of its fundamentals in place with a healthy growth in the loan
book and a robust asset quality. Its current stock price is 3.4 times its book value, lower
compared to HDFC Bank's 4.7. The bank's stock might see a small dip in the near term,
given the market's perception of steeper valuation of Enam. However, the valuations would
be justified once the acquired businesses start contributing to the bottom-line.

trading calls on wealthsec blog

Top Picks - Fundamental

PTC India Ltd (PTCIND)
CMP - 120
Target - 180

Bajaj Holdings & Investments Ltd (BAJHOL)
CMP - 858
Target - 1182

Shiv-Vani Oil & Gas (SHIOIL)
CMP - 404
Target - 525


Top Picks - Technical

Karnataka Bank Ltd (KARBAN)
CMP – 164.9
Time Horizon - 1 Month
Target - 181.3

Aban Offshore Ltd (ABAOFF)
CMP – 695.5
Time Horizon - 1 Month
Target - 750

Neyveli Lignite Corporation Ltd (NEYLIG)
CMP – 130
Time Horizon - 1 Month
Target - 145

Bajaj Finance Q2 PAT up 143% at 52.8 crore

Buoyed by a strong volume growth in consumer and SME business lines, Bajaj Finance Ltd reported a 143 per cent jump in its PAT for the second quarter ending September 30, 2010, at Rs. 52.8 crore as against Rs. 21.69 crore in the year-ago period.

Total income surged 49 per cent at Rs. 326.4 crore from Rs. 219.7 crore in the year-ago period, according to a company statemnet.

Deployments to the consumer durables witnessed a 58 per cent increase during the quarter at Rs. 401 crore as against Rs. 211 crore in the year-ago period while small and medium enterprise business lines saw a 71 per cent jump in deployments at Rs. 251 crore as against Rs. 157 crore in the year-ago period.

In two-wheelers, the company's deployment stood at Rs. 472 crore in during the second quarter as against Rs. 312 crore in the year-ago period, up 74 per cent.

The company's customer-base increased from 1,93,075 to 3,17,398 while total deployment rose 112 per cent to Rs. 2,128 crore from Rs. 1,003 crore in the year-ago period.

Loan loss and provisions were Rs. 61.5 crore (including Rs. 19.4 crore of one-time accelerated provision in Q2FY11 as against Rs. 58.5 crore in the correponding period of the previous fiscal. Adjusted for this accelerated provision, loan loss and provisions would have been Rs. 42.1 crore.

The company's capital adequacy ratio, including tier-II capital and excluding current year's profits stood at 21 per cent.

The company's NPA provision coverage ratio as at September 2010 stood at 75 per cent.

Upcoming results...

October 13, 2010
ARROW TEX	Goldcrest Fin	Jindal Poly	Riddhi Siddhi	Tata Metaliks
Elpro Intl	Honeywell Auto	Marsons	Stone India
October 14, 2010
Axis Bank	Geojit Bnp	Kernex Micro	Midas Pharma	UTV Software
Dynacons Sys	Gruh Finance	LIC Housing Fin	Rallis India	VST Inds
EUROFINMART	Infotech Enter	Mastek	Shirpur Gold
October 15, 2010
Alpha Hitech	Dhanprayog	Jay Bharat Marut	Manappuram Gen	Sarthak Inds
Betala Global	Eskay Knit	Karnataka Bank	Nu Tek India	SURYAMBA SP
DB Intl Stock	Heidelbergcement	Krishna Life	Orbit Exports	Vardhman Poly
Dev Credit Bank	Infosys	Maharashtra Scoot	Polyspin Expo	Venus Remedies
October 16, 2010
Asahi Fibres	Jaybharat Tex	KSL Inds	Sudarshan Chem
Associated Ston	Key Corp	Reliance Indl Infra	Suryalakshmi
Godrej Prop	Kilpest India	Sanghi Corp	Unichem Lab

See Nifty hitting 6300-6400 soon- KR Choksey

Barring few wrinkles, the bourses have been steadily moving up and Deven Choksey of KR Choksey Securities feels that it is definitely planning for a new high and that is where he sees larger amount of actions coming into the some of the frontline stocks. “We will soon touch 6,300-6,400 very soon. The market has the appetite for buying some of the heavyweight stocks. You should be seeing more actions there.”

Midcap stocks too may lead participation. “Probably between 6,300-6,400 you would have majority of the upside completed in some of the index heavy constitutes and thereafter you should probably seeing those funds which are sitting on sidelines starting to pick up in some of the midcap stocks”

Join the rally...

One of the TV Channel spoke to Radhika Gupta, Director, Forefront Capital Management for her fundamental view and Hemen Kapadia of chartpundit.com for his technical view on various stocks and sectors.

Here are the expert views on various stocks/sector:


On Sesa Goa
Gupta is positive on the stock. “We are bullish on Sesa Goa and I think it’s a sector and a stock to be invested in for the long term if the investor has that kind of horizon. We are very bullish on the commodity space and on the metal space within that so we read that as a positive development and within that space Sesa Goa has consistently been in a favorable position so bullish on the stock overall.”

Kapadia is in sync with Gupta on this one. He says, “The stock looks good. We had a protracted decline. We are out of that, it’s stabilized and now it’s looking good. I would have a buy on the stock. It looks good from a medium to longer-term point of view.”


On Bharti Airtel
Gupta says if you have a longer-term horizon on telecom and Bharti then it’s not such a bad space to be in. She says, “We were fairly bearish on telecom but now we have become a little more neutral on the sector and Bharti is the best bet within the telecom sector. It has the highest growing market share, a good outlook ahead with the Zain deal that they have strong operations, but you need to have a longer term outlook in Bharti, maybe a year or two years to really reap the benefits. In the shorter-term we would be little bearish or neutral.” She also adds that she doesn’t see a major recovery coming back into the sector or into Bharti in the three-six months horizon. She says if the investor is looking at a shorter-term, he should probably exit and deploy that investment into more attractive sectors so like power, auto’s or pharma, something where he will see a shorter term gain.

Kapadia agrees with Radhika’s viewpoint. He says, “It’s going to take a long time. We have moved from Rs 260 to Rs 380 almost. I have a hold on the stock because it’s a technical weakness but it is getting heavy. The upside is getting tightly capped so six months I am not sure. Stock doesn’t look bad but the cream has been lost. We could be just walking into a correction, not yet but we are probably on the anvil of walking into a correction and that could take a few months or so.” He says to hold the stock and needs to extend his time horizon from six months to about two years or more.


On auto space:
Gupta says, “I think that perspective on Maruti is that while auto is growing sector, Maruti has seen fair amount of strong volume growth. If the investor has to be in the auto sector there are other individual names within autos where he is likely to see better growth in the prices because Maruti while the topline has been good because of the royalty payments, the bottomline has been hit and is likely to continue being hit. So, something like a Tata Motors or even a Mahindra and Mahindra in the similar space are probably more attractive investments.

On Maruti Suzuki:
Kapadia says, “I think the auto sector looks good, but I think most of the stocks have had run ups, no exceptions there. But I think Maruti will be a hold. I am not sure of the investor’s idea of selling now and buying back later can be practically implemented. Sounds good, but sometimes you could miss out on stocks in markets like these. So, yes, Maruti have moved up for seven weeks in a row. Its ripe for a correction, its overdue, it’s likely overbought. But since the investor has got a longer term investment outlook, I think it we will have a hold on Maruti. Maruti is in a longer term uptrend and we have just finished a 14 month-12 month correction so to speak and we will be back on track again. So, longer term point of view I would have a hold. Shorter to medium-term yes Maruti is probably susceptible to a correction.”


On Tata Steel
Gupta is bullish on the metal space. She adds, “We like the metals and within that the steel space as a whole. Tata Steel is actually one of the strongest plays within that space. Given the companies focus on cleaning up its balance sheet, managing debt, the news that we have seen coming out of Corus, management’s ability to execute over the last couple of years, in general Tata Steel is on very strong footing within this space.”

Kapadia finds Tata Steel a good bet in the long-term. He says, “We are back with a longer-term uptrend but currently the stock has moved from Rs 490 to Rs 680 in eight weeks or so and it’s also overbought. Maybe there is still some more upside till Rs 700 but if I were to buy for the slightly longer-term I will wait till it comes down to Rs 640 or below. I would avoid buying it at current levels because it’s had a run-up, so we could be walking into a correction which is probably overdue for the market as well as for Tata Steel.”

On Kalyani Steel
Kapadia finds Kalyani Steel an interesting stock. The company underwent some restructuring, so the charts have been slightly twisted but currently they are in the last stages of what is possibly an eight-nine week intermediate correction. He says, “Very strong support comes in at around Rs 130, I think downside appears limited, it seems to be setting the stage for an up move. Once this correction gets over, this could end in the next week or two, if not the next couple of weeks. That would set the stage for resumption of its intermediate uptrend and frankly speaking I would stick my neck out and say we are setting a stage for a 20-25% move in the next three months or so.”

On IT sector
According to Gupta this is probably a good time to exit most of the IT names. “We are pretty bearish on software as a pack. Couple of reasons, 1) rupee fluctuation will hurt them; 2) rising employee cost have been a problem for most of these software names and 3) then most of them are trading at fairly rich valuations. So the kind of earnings they need to show to justify the valuations are something that we think is unlikely to come in the next round of earnings. So they are looking overvalued and seeing margin pressures so weak thing for software and Infosys within that is one of the weaker and more overvalued players,” she feels.

However, Kapdia feels there is some upside left for the IT pack. “If you look at the entire IT lot—I think the Wipro, HCL Technologies—have posted 10 year highs. Infosys is at a all time high—short-term, medium term, long term all time frames and all counts it is in an uptrend.

On Infosys, he suggests a hold. “There I some more upside to go before the move fizzles out and the entire IT pack, even a laggard like Tech Mahindra probably looks good enough for a bounce right now so I have a hold on Infosys, I think there is more upside. Probably a Wipro or a HCL Tech might do slightly better than Infosys but Infosys is still a hold.,” he says.

Commenting on other IT counters, Kapadia says, the prospects of the Patni aren’t that exciting right now. However, he is upbeat on Hexaware. “We have had a 10-12 month correction. The time retracement has been there but price retracement has been rather shallow. Simply put, it is looking good and its coiling up like a though the breakout comes in at Rs 90. Hexaware looks exciting enough to warrant a close look and may be even a buy. So Patni doesn’t look too exciting, Hexaware does. In terms of Foursoft—that’s also moving sideways for once again this 12-14 month point of view. Looks okay but out of the three stocks—Hexaware looks to be the best of the lot. I think one can expect 30% upside from here in the next six to nine months,” he adds.

On Reliance
Kapadia says Reliance has been a bad underperformer but to expect Reliance not to perform would be a folly. He adds, “I have been tracking Reliance since my school days. Yes, it hasn’t moved but I think it has the capacity to surprise very much on the upside. I am not sure that an investor should sell call options of Reliance after 17 months of a sideways momentum and if he does he will have to keep a very strict stop loss. If the investor does sell call options he will have to calculate his cost in a sense call option plus the premium gain and if that and the spot price and the futures price crosses that, he will have to hedge it by going long in futures. It’s highly complicated, and slightly dangerous. In fact if Reliance dips a bit I would suggest selling put options because I am bullish on Reliance and not bearish. But frankly speaking just to make up for the losses selling calls and puts are very dangerous. I think you would loose two years of money that you have made in futures and options when you take such dangerous strategy especially in the market open with a gap sometimes. I would suggest a hold on Reliance. I think by the time the bull market comes to an end Reliance should be Rs 1,300 or more.”

On Reliance Capital
Gupta finds the financial space well placed. She finds that Reliance Capital hasn't done much. “Fundamentally it's not a bad business. It is the largest asset management company (AMC) in India. One of the few that's profitable although the insurance side has suffered a loss. I think there are other players in this space like an IFCI or an LIC Housing Finance that have done a lot more and have a much sharper growth trajectory ahead of them. So I would advice the investor to look at that a little bit.”

Kapadia has a buy call on this stock despite the fact that the entire bull market of the last year or so has given Reliance Capital a complete miss. He adds, “Currently we are in the midst of what is possibly a rounding bottom on the week. Maybe it looks like an inverted head and shoulder. Simply put, there is a bullish formation at play. Maybe it takes some more time and at the risk of sounding silly maybe the bull market gets over by the time Reliance Capital moves. Technically speaking it looks great. We haven't had a deep price retracement so despite its deep underperformance I have a buy on the stock especially if you have a year or two investment horizon.”

On Banks
Kapadia doesn’t track the financial sector but agrees it looks good. “All time highs but no resistance levels so I would have a hold. I think we could be moving towards maybe Rs 450 or so in the next couple of months.”

“Bank of Maharashtra looks relatively better in the sense we have some more history in terms of an upside. There is headroom. There is resistance at Rs 74. If you take that out from a weekly point of view I think we could be moving towards Rs 85 or so. Like most banks it’s in an uptrend, looks good and I think one can expect further upsides. I also find Dhanlaxmi Bank looks good.”

Buy GVK Power & Infrastructure, short term

Buy GVK Power & Infrastructure BSE Code- 532708 @ 47 with the target of 59 (short to medium term)
-
Stock is also in Futures and Options
One can buy in Options Call of Strike Rate 50 for the month of Oct2010

-
For Opening FREE DEMAT and Trading account CALL us Today

Buy TTML @ 22.75 Target 27 - 29 Rs. in few weeks

Buy Tata Teleservices Maharashtra @ around 22.75 for few weeks with the target of 27 Rs. - 29 Rs.

If you need a Portfolio Management Service for Equity, Options, Futures, Nifty, Commodities then feel free to call us

We are Vasai Road based broker who provide excellent service

Sensex scales 20K peak after 32 months; FIIs fuel rally

Upbeat foreign investors Tuesday pushed the stock market benchmark Sensex above the 20,000 points-mark for the first time in 32 months, as they bet on companies that are driving the India growth story.

The barometer closed 95.45 points, or 0.48 percent, up at 20,001.55 - its best closing since January 15, 2008, when the index ended at 20,251.09 points.

Similarly, the 50-share National Stock Exchange benchmark Nifty breached the psychological 6,000 mark and ended at 6,009.05, up 28.6 points, or 0.48 percent.

Some brokers, however, feel that a short-term correction may be round the corner, but would nonetheless provide good investment opportunities.

Happy with the market milestone, Finance Minister Pranab Mukherjee told reporters in New Delhi: "We all know that the Sensex is always a little bit unpredictable. (But) I am happy that for the first time after January 2008, it has crossed 20,000."

Analysts said the rally in Indian market is propelled by strong inflows from overseas fund houses, which have made a net investment of over Rs 71,000 crore in local stocks so far in this year.

"Sensex gushing past 20,000 mark, stands testimony to the attractiveness of India as a preferred investment destination.

With Indian economy structurally well placed for an 8 to 9 percent GDP growth over a long period, domestic equities are in a structural bull run," Angel Broking CMD Dinesh Thakkar said.

Tuesday's close marked the third straight session of gains.

Significantly, the Sensex has completed its journey from 17,971 points on August 31 to 20,000 in just 15 trading days.

Tuesday's gain was fuelled by a smart gain in blue-chips like L&T, HDFC, HDFC Bank, TCS, Infosys and BHEL.

Infosys rose 0.9 percent, TCS 2.5 per cent and Wipro 2.7 percent. Equity analysts said IT stocks rose after IBM Corp announced a USD 1.7 billion takeover.

L&T zoomed 2 percent, Cipla 1.92 per cent and BHEL 1.73 percent. With a net gain of 2.93 percent, Tata Power was the best performer in the Sensex pack.

In the BSE-30 pack, 16 stocks ended with gain, while rest 14 closed in the red.

Even in the broader market, 2,123 stocks declined against 883 advances.

Reliance Industries Ltd, which holds the maximum weight in the Sensex, acted as a drag, closing 0.60 percent lower at Rs 1,033.5.

ITC plunged 2.58 percent and led the losers' pack. Other major losers include Jaiprakash Associates 1.52 percent, DLF 1.38 per cent and Hindalco 1.22 percent.

Asian stocks rose after US homebuilder Lennar Corp posted better-than-estimated profit, boosting optimism in the economic recovery worldwide.

US stocks advanced on Monday, sending the S&P 500 Index to a four-month high on Lennar Corp's profit forecasts and IBM Corp announcing a USD 1.7 billion takeover.

Delivery Call: Buy Adani Power for the target of 160

Delivery Call: Buy Adani Power for the target of 160- 165 Rs. in very short term

our yesterdays call of Cosmo Films touched Rs. 165 (from 140 in just 1 day)

-

For opening Demat and Trading account in Vasai based Wealth Securities call us on 09321318382

Buy cosmo films for few days with target of 170

Looking at the Charts of Last 2 days trading and all the volumes at 150Rs. Level

We are bullish on Cosmo Films with short term target of 168-17o Rs.

One can also watch and buy any other Films stocks like-Polyplex or a Uflex

Analysts see bullish days ahead for Sensex

With the BSE benchmark Sensex breaching the 19,000-level and still going strong, analysts believe that Indian markets have entered a bull phase and persistent FII inflows may push the index past the 20,000-mark in the coming days.

"Investors are sitting on huge cash piles and as the market is rising, they cannot sit sideways for long. A large chunk of cash is coming in the market and in such a scenario, hitting the 20,000-mark seems easy," CNI Research CMD Kishore Ostwal said.

"By October the Sensex is likely to cross the 20,000-mark and by November, I see it at the 21,000-level," Ostwal added.

The Sensex had touched an all-time high level of 21,206 in January, 2008, a year that saw the benchmark index of the Bombay Stock Exchange record an over 80 per cent jump.

Echoing a similar opinion, Network Stock Brokings Head of Institutional Sales & Strategy Prakash Diwan said hitting the 20,000-level would not be a big deal in the coming days.

"The market is driven by strong liquidity and FII inflows are expected to continue in the local stock market. Hitting the 20,000-level by Sensex would not be a big deal. Soon the Sensex will be able to reach that level," he said.

On Monday, the Sensex zoomed by more than 408 points to cross the 19,000-level for the first time in 32 months.

"Investors have faith in the India growth story and in the coming days, the Sensex will touch new highs," Diwan added.

The index has risen 122.3 percent so far this year, from a low of 8,701.07 in October, 2008, on account of the global economic crisis.

"I do not see any reason why markets should not move up. It is a liquidity-supported rally and unabated FII inflows would further push local markets," SMC Global Securities Equity Head Jagannadham Thunuguntla said.

"India is one of the hot spots for overseas investors and those fund houses, which were still watching the situation, now are interested to pick up local stocks as global equities are rebounding," Thunuguntla added.
The Sensex took just five days to reach the 19,000-level from the 18,221.43 mark. On September 3, the index had settled at 18,221.43.

Three banking stocks -- SBI, ICICI Bank and HDFC -- accounted for about 70 per cent of the Sensex's rise from 18,000 to 19,000.

"Banks are on a rising streak on optimism that lending will pick up in a fast-growing Indian economy and that they are well capitalised," IIFL Vice-President (Research) Amar Ambani said.

"Banking stocks jumped as regulators gave firms more time than expected to meet capital requirements (the Basel norms)," another analyst added.

However, equity analysts did not rule out a correction in the markets, as they felt stocks are overvalued.

"Investors should take cautious approach about the market this time. A fall from this high cannot be ruled out," Unicon Financial CEO Gajendra Nagpal said.

The BSE benchmark Sensex was up by 153.39 points at 19,361.72 Tuesday, with just an hour left before the close of trade.

IFGL Refractories: Stock that gained 16% in buoyant trade

IFGL Refractories gained 15.83% or Rs 8.15 to close at Rs 59.65. It touched an intraday high of Rs 61.80 and an intraday low of Rs 54.10. There were pending sell orders of 496 shares, with no buyers available.

Why the run up?
The company has acquired two US based companies EI Ceramics LLC and CUSC International Ltd for a total of USD 13 million. The acquisitions will be partly funded by equity and partly debt with the major portion being debt. The deal is expected to help the refractories manufacturer expand its capacity.
EIC designs, manufactures and supplies isostatically pressed continuous casting refractory to several major steel-makers in North America, which would provide the Indian refractory firm with a lot of synergies.
In an interview, KamalSarda, COO, IFGL Refractories said,"At the current level, at half year, the two companies had about USD 6.5 million. We expect to add about USD 13 million to USD 14 million this year. We hope it would substantially increase after we have absorbed everything." The company sees a 15-20% growth on current operations in the current fiscal.
The company is engaged in the manufacture of specialised refractories and requisite operating systems for the steel industry. The IFGL Group of companies is focused on the global markets and sells in European Community, Americas, South East Asia, Oceania, Middle-East, South Africa, Egypt, Algeria, Nigeria, Russia, Kazakisthan, Singapore, Japan, Taiwan and Phillipines.

Long Term Investment: MARG & TEXMACO

Following are the Stocks that You can not miss, Invest into these stocks with medium to long term perspective...

Marg Ltd @ 220-230 Levels (Long Term) [buy on every low]

Texmaco Ltd @ 160-165 Levels (Medium/Long Term) [buy on every low]

-

Note: Do not invest into the above stocks with the intention of Trading

For Investments into Equities, Derivatives, Commodities, Insurance, Fixed Deposits call our Vasai Road- West branch on 09321318382

Article on: How to analyze the company

Following are the points to be considered for value investing and getting decent returns, please note that if you are investing refering this article, then you should consider all the following points mentioned in this article

• What is Fundamental Analysis
• Invest in Good Company
• Earnings
• Current Valuations of the Shares
• Future Earnings Growth
• Debit status of the Company
• Company’s Announcements

What is Fundamental analysis?
Fundamental analysis is basically done for long term and mid term investment which is also called as delivery based investment or trading.
The main important aim behind is to study and understand the company in which you are planning to invest your hard earned money and get excellent returns.

How to analyze the fundamentals of the company? Basically one should be able to judge at least how the company has done in past years, its debit status, its current valuation, its future growth prospects, its earning capacity etc
So that based on these terms he can at least decide whether to invest in this company or not.

What you should look for in a company to invest?
1. About Company -
What the company is doing and what are its businesses?
How is the current demand for their products and how the demand will be in future like in next 3 to 5 years and so? (It is difficult to analyze the future demand yourself so you can visit financial websites or contact us)

2. Earnings -
This is very important parameter. Broadly look into its last 5 or 10 years earnings whether the company has posted profits or losses.
It’s all about earnings. The bottom line is investors want to know how much money the company is making and how much it is going to make in the future.
To find the earning status ratios used are EPS - Earning per share

3. Current valuation -
This is another very important factor which most of the investor forgets while doing their investments.
Generally most of the investors invest at higher valuations of shares and when share prices start coming down then they keep worrying, so this should not happen.
Before investing one should check the current valuation of the share price and invest only when the share price is at right price and not at over priced share.
This is what happened in January 2008. Most of the people invested at very high valuations and later on the share prices started to correct (falling down).
To find the current valuation of the stock the ratios used are
PE ratio - Price to earning ratio
Book value
PB ratio - Price to book value ratio

4. Future earnings growth -
It is very important to analyze how the company is going to do in future. How will be its returns or its profits etc?
Basically most of the investors invest in shares taking into consideration Company’s future growth prospects.
To find the future growth of the stock the ratios used are
PEG ratio - Price to earning growth ratio
Current EPS and Forward EPS
Price to sales ratio

5. Debit status -
For any company to perform well in the future it is very important to be debt free or less debit because if company is having large debits like borrowings, loans then it becomes difficult for it to plan for any acquisitions, expansion plans take over plans, dividend payout and very important its most of the net profit goes in paying the interest and loans and other debits.
So in other words if the company is having fewer debits or no debit then they are having lots of cash in hand and they are free to take any decision in coming future.
To find the debit status of the company the ratios used are
Debit ratio

So to accomplish above parameters fundamental analyst follow certain ratios which are mentioned below.



Earnings
Earning Per Share - EPS
EPS plays major role in investment decision.
EPS is calculated by taking the net earnings of the company and dividing it by the outstanding shares.

EPS = Net Earnings / Outstanding Shares
(Nowadays you will get this ready made, no need for you to do calculation.)

For example -
If Company A had earnings of RS 1000 crores and 100 shares outstanding, then its EPS becomes 10 (RS 1000 / 100 = 10).
Second example -
If Company B had earnings of RS 1000 crores and 500 shares outstanding, then its EPS becomes 2 (RS 1000 / 500 = 50).

So what is that you have to look in EPS of the company?
Answer - You should look for high EPS stocks and the higher the better is the stock.

Note - You should compare the EPS from one company to another, which are in the same industry/sector and not from one company from Auto sector and another company from IT sector.

Before we move on, you should note that there are three types of EPS numbers:

Trailing EPS - Trailing EPS means last year’s EPS which is considered as actual and for ongoing current year.
Current EPS - Current EPS means which is still under projections and going to come on financial year end.
Forward EPS - Forward EPS which is again under projections and going to come on next financial year end

But the EPS alone doesn’t tell you the whole story of the company so for this information, we need to look at some more ratios as following.
It’s not advisable to make your investment decisions based on only single ratio analysis.
EPS is the base for calculating PE ratio.

Importance of Earnings -
Earnings are profits. Quarterly or yearly company’s increasing earnings generally makes its stock price move up and in some cases some companies pay out a regular dividend. This is Bullish sign and indicates that the company’s is in growth.

When the company declares low earnings then the market may see bearishness in the stock price and hence its share price starts deceasing and corrects further if the company doesn’t provide any sufficient justification for low earnings.

Every quarter, companies report its earnings. There are 4 quarters.

Quarter 1 - (April to June and earnings will be declared in July)
Quarter 2 - (July to Sept and earnings will be declared in Oct)
Quarter 3 - (Oct to Dec and earnings will be declared in Jan)
Quarter 4/final - Also called as financial year end - (Jan to Mar and earnings will be declared in April)

Now by this time you would have understood how earnings are important for a stock price to move up or down. But depending only on earnings one should not make investment or trading decision. To make decision more risk free you should look into more tools as mentioned below so that your investment decision becomes more solid and you should get excellent returns in future.

Conclusion - Keep a close watch on quarterly earnings and trade or invest accordingly or manipulate your investing.

Following are the most popular and important tools/ratios to find excellent growth stocks which focuses on earning, growth, and value of the company’s.

Current Valuations of the shares
Price to Earnings Ratio - PE ratio
PE ratio is again one of the most important ratio on which most of the traders and investors keep watch.
Important - The PE ratio tells you whether the stock’s price is high or low compared to its forward earnings.
The high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. This generally happen in bull market and share price keeps on increasing. Basically in bull market share prices keep increasing without giving more importance to its current valuation and once market realizes that it is over priced then they start selling.
In bear market the low PE stocks having high growth prospects are selected as best investment options.

But, the P/E ratio doesn't tell us the whole story of the company.
Generally the P/E ratios are compared of one company to other companies in the same sector/industry and not in other industry before selecting any particular share.

The PE ratio is calculated by taking the share price and dividing it by the companies EPS.
That is
PE = Stock Price / EPS

For example
A company with a share price of RS 40 and an EPS of 8 would have a PE ratio of 5
(RS 40 / 8 = 5).

Importance - The PE ratio gives you an idea of what the market is willing to pay for the companies earning.
The higher the P/E the more the market is willing to pay for the companies earning.
Some investors say that a high P/E ratio means the stock is over priced on the other side it also indicates the market has high hopes for such company’s future growth and due to which market is ready to pay high price.
On the other side, a low P/E of high growth stocks may indicate that the market has ignored these stocks which are also known as value stocks. Many investors try finding low P/E ratios stocks of high value growth companies and make investments in such stocks which may prove real diamonds in future.

Which P/E ratio to choose?
If you believe that the companies has good long term prospects and good growth then one should not hesitate to invest in high P/E ratio stocks and if you are looking for value stocks which prove real diamonds in future then you can go with low PE stocks provided that companies has good growth and expansions plans.
At all if you would like to do PE ratio comparison then it has to be done in same sectors/industry stocks and not like one stock from banking sector and other stock from pharmacy sector.
So now you would have come to know how to choose stocks based on PE ratio.

What is book value?
Book value is the total value of the company's assets that shareholders would theoretically receive if a company were liquidated (closed).
By being compared to the company's market value, the book value can indicate whether a stock is under priced or overpriced.
So in other words if the share price is trading below its book value then it is considered as under priced and good for value investing.

Price to Book Ratio - PB ratio
Basically PB ratio is mostly utilized by smart investors to find real wealth in shares, so investing in stocks having low PB ratio is to identify potential shares for future growth.

A lower P/B ratio could mean that the stock is undervalued.

Like the PE, the lower the PB, the better the value of the stock for future growth.

Some of the investors become quite wealthy by holding stocks for the long term of such companies whose growth is based on their businesses instead of market and one day when every one notices this stock the value investor’s pockets are full of profit.

PB ratio is calculated as
PB ratio = Share Price / Book Value per Share.

Generally, if the ratio comes below 1 then it is considered as value investing. But this doesn’t mean that the ratio coming to 1.2 or 1.5 is not value investing. It also depends on its future growth prospects.

Future earnings growth

Projected Earning Growth ratio - PEG ratio
Because the market is usually more concerned about the future than the present, it is always looking for companies projected plans, financial ratios, and other future announcements.

The use of PEG ratio will help you look at future earnings growth of the company.

PEG is a widely used indicator of a stock's potential value.
Similar to the P/E ratio, a lower PEG means that the stock is more undervalued.

To calculate the PEG the P/E is divided by the projected growth in earnings.

That is PEG = P/E / (projected growth in earnings)

For example -
A stock with a P/E of 30 and projected earning growth for next year is 15% then that stock would have a PEG of 2 (30 / 15 = 2).
In above example what does the “2” mean?

Lower the PEG ratio the less you pay for each unit in future earning growth. So the conclusion is you can invest in high P/E stocks but the projected earning growth should be high so that companies can provide good returns.

Looking at the opposite situation; a low P/E stock with low or no projected earnings growth is not going to give you good returns in future because its PE is low means investors are not ready to pay high and its PEG is also low because companies do not have any good future growth or expansion plans so investment in such stocks could prove less or no returns.

A few important things to remember about PEG:
It is about year-to-year earnings growth.
It relies on projections, which may not always be accurate.
It’s forward earning estimation which market analyst or company calculates.

Following two ratios are again the projection or estimation done by either market analyst or by company resources.

Current EPS - Current EPS means which is still under projections and going to come on financial year end.
Forward EPS - Forward EPS which is again under projections and going to come on next financial year end.

Price to Sales Ratio
The question is, is it that companies having no current earnings are bad investments?
Answer is Not necessarily, because such companies may be new and trying to grow and expand but you should approach such companies with precaution.

The Price to Sales (P/S) ratio looks at the current stock price relative to the total sales per share.

You can calculate the P/S by dividing the market cap of the company by the total revenues of the company.

You can also calculate the P/S by dividing the current stock price by the sales per share.

That is
P/S = Market Cap / Revenues
or
P/S = Stock Price / Sales Price per Share

Conclusion - To find under valued stocks you can look for low P/S ratios.

The lower the P/S ratio the better is the value of the company.


Debit status of the Company

Debit Ratio
This is one the very important ratio as this tells you how much company relies on debit to finance its assets.
The higher the ratio the more risk for company to manage going forward. So look for company’s having low debit ratio.
Generally it is considered that debit ratio less then 1is good investment option. But even some investor considers higher debit ratio provided the company is having good growth prospects.

If company has fewer debits then company can make more profit instead paying for its debits like interests rates, loans etc.

Dividend Yield
If you are a value investor or looking for dividend income then you should look for Dividend Yield figure of the stock.
This measurement tells you what percentage return a companies pays out to shareholders in the form of dividends. Older, well-established companies tend to payout a higher percentage then do younger companies and their dividend history can be more consistent.

You calculate the Dividend Yield by taking the annual dividend per share and divide by the stock’s price.
That is
Dividend Yield = annual dividend per share / stock's price per share
For example
If a company’s annual dividend is RS 1.50 and the stock trades at RS 25, the Dividend Yield is 6%. (RS 1.50 / RS 25 = 0.06).

Important Note -
Any single tool or ratio should not be used to make your investment or trading decision nor will they provide you any buy or sell recommendation. All tools should be used to find growth and value stocks.
After making use of above all tools you will get excellent stocks which will give you excellent returns in mid term to long term.
You will find all these ratios in any financial website or you can contact us.


Company’s announcements
Always keep a close watch on stocks you are interested to buy or you already bought for any mergers, take over, acquisitions, stake sells, new product launch etc. This would make the major impact on company. This is important point

Profit after Tax
Check out company’s PAT (profit after tax) of every quarterly if you are short term to mid term trader and if you are long term investor then check out its yearly PAT. The company should have posted consistent growth.

VLS Finance Hotel Case should be in VLS Finance favour

VLS Finance: There is talk floating around of a favourable outcome in an ongoing case over Sunair Hotels. According to a report in Business India magazine, in 1995, VLS invested in Sunair Hotel and for Rs70 million, it got a 25% stake in this five-star hotel in Delhi, which runs the Metropolitan Nikko at Connaught Place. The balance Rs220 million was brought in by the promoters, the Gupta family, while a Singapore-based hotel chain, Accor Asia, was to bring in Rs10 million at a premium of Rs90. VLS also mobilised loans of Rs850 million, agreed to manage the public issue, and gave Sunair a security deposit of Rs100 million at an interest rate of 20%. VLS claims that within a year, Accor withdrew, and Sunair was not paying the quarterly interest on the deposits. VLS and the Guptas are mired in a legal battle over the property which, in 2007 itself, was valued at Rs8 billion. VSL says that according to the agreement, it would become the majority stakeholder.

Govt moots relaxation in FDI rules on JVs

The government on Friday proposed a major relaxation in FDI rules to allow foreign firms to bring in new technology and set up new independent business without clearance from their existing local partners.

The move is aimed at attracting foreign direct investment (FDI) into the country, which has recently slowed down.

Under the present dispensation, a foreign player who had set up a joint venture (JV) in India before January 12, 2005 but now wants to open a new business independent of the existing domestic partner faces barriers.

The foreign player not only needs the government approval but also a 'no-objection certificate' from the domestic partner to the effect that the new forays would not "jeopardise" interest of the existing JV.

"The proposal is a welcome move it will attract more and more FDI and will also bring in high quality products for Indian consumers at competitive price," Naresh Makhijani, Executive Director, KPMG said.

The FDI rules proposed to be relaxed were not applicable to the joint ventures entered after January 12, 2005. Thus, the changes would help foreign investors who entered JVs before this date.

Suggesting abolition of this rule, the Department of Industrial Policy and Promotion (DIPP) said in a discussion paper, "There is a need to examine whether such a conditionality continues to be relevant in the present day context."

Alternatively, it has suggested that the stipulation of no-objection from the domestic partner should not be applicable to JVs which are 10-year old.

It has invited comments from the stakeholders till October 15.

The move follows representations from foreign investors pointing out that their domestic partners were using a string of press notes since 1998 "as a means of extracting unreasonable prices/commercial advantage. These press notes had become a stumbling block for further FDI coming into the country."

The DIPP, the nodal agency for FDI related matters, said India has entered into a number of free trade agreements and several others are under negotiations.

"In such a scenario if an industry (FDI) is discouraged from being set up in India, it could be set up in a neighbouring country with whom a trade agreement exists or is being negotiated," it said.

India received USD 25.8 billion FDI in 2009-10.

After a pick up in the first two months of the current fiscal, the inflows have slowed down for June and July.

10% blowout rally possible from here: Samir Arora

Indian markets are on a swing and the great moves will continue as long as FII flows continue. Claiming that recent inflows into the markets were the result of reallocation of existing funds, Samir Arora of Helios Capital told that these flows will continue if markets grind higher. He said he has turned bullish on India in the past three months and sees a 10% blowout rally from here. However, "a 15% rally is unlikely," he said.

Speaking on specific stocks and sectors, Arora said Delta Corp remains his top midcap pick, and he continues to hold S Kumars. "I remain short on telecom," he said.

KRBL: Stock that gained 54% in 5 days

The catastrophic floods which have destroyed Pakistan's rice crop seem to have opened doors for India's Basmati rice producers. One of the beneficiaries has been Basmati rice exporter KRBL. Its stock price gained 54% over the last five days. Today, however, it managed just 1.80% or Rs 0.65 to end at Rs 36.80. It touched an intraday high of Rs 38.50 and an intraday low of Rs 36.05 and touched a 52-week high of Rs 38.50.

Why the run-up?

The most devastating floods in Pakistan’s history has destroyed crops and damaged infrastructure severely. A rice exporters’ group in Pakistan has forecast that exports may plunge significantly for the year.

In an interview, Anil Mittal, CMD, KRBL said, "The rice prices have increased by about USD 100 in the last 10-15 days. This is primarily because Pakistan floods have helped India to boost their prices. Since Pakistani prices have also increased by USD 100-150 in the last one month, that is the reason Indian prices have been boosted by USD 150 per tonne.

India, the second largesst producer of rice, had put into practice a trade ban on non-Basmati rice in April 2008 to increase the country's domestic supplies. The drought in 2009 further compounded issues for the government with a double-digit fall in rice production forcing it to continue with its restrictions in 2009.

Mittal however expects relaxations on export parameters for non-Basmati rice any time soon. "Looking at the monsoons and looking at the prospects of non-Basmati crop, I am quite confident that by October, the government will take the position of the crop and will definitely open the exports of non-Basmati rice."

As compared to about 2.8 million tonne of the total Indian export, KRBL's export this year is about 140,000 tonne. "We are expecting a 20% rise overall. The Indian exports of Basmati will jump by 20% this year because of the Pakistani floods," said Mittal.

What experts said during the week:

Rahul Mohindar, viratechindia.com told, "KRBL is pretty good from a long term count. But the stock has obviously run up to a good degree. It had a significant price and volume breakout over the last couple of weeks, which certainly makes this very potential longer run. But again if you are worried about the short term, Rs 36 to Rs 38 is a resistance area. We are still sitting in that zone where we might knock off 8% or 10%. So unless you are really worked out about the very short term I would still recommend holding on to the stock. We see this as a candidate for about Rs 52 and one has to be prepared that the stock can correct to something like Rs 31–32. So keeping that downside cushion, one should continue holding on to KRBL. It has made a case with the kind of volumes and price breakouts that we have seen over the last week where it shows that there is a lot more potential to come."

He added,"I am obviously looking at a timeframe of about 6 months plus. It’s a stock which can give you one of those sudden momentum moves. But again one should keep a timeframe of approximately 6 months in mind."

Mitesh Thacker, Technical Analyst, miteshthacker.com said, "We have seen a strong run-up in all the rice stocks. KRBL though it is difficult to give a price target on it, because it has broken into all time highs, but if we look at the momentum and the technical setup, there is at least a 15% upside, and Rs 40-42 should be easily tested probably even higher."

Bull of the Day: Stock that gained 10% in a muted mkt

The stock of Suven Lifesciences got a shot in the arm after the pharmaceutical firm announced its eighth product patent in Australia and Mexico for its new chemical entities. The stock gained 9.56% or Rs 2.80 to close at Rs 32.10. It touched an intraday high of Rs 32.75 and an intraday low of Rs 29. There were pending buy orders of 1,128 shares, with no sellers available.

Why the run-up?

The company secured two product patents, one each in Australia and Mexico, for a new chemical entity to treat disorders associated with neuro-degenerative diseases. The patents in Australia and Mexico will be valid till 2023 and 2025 respectively.

The company with its pipeline of molecules that it is developing in the central nervous system arena for cognitive disorders is eyeing an estimated USD 30 billion potential global market.

Back in May, the company had received a patent for new neuro molecules, from Canada and Eurasia. The contract reserach and manufacturing services provider received the Canadian and Eurasian patents for new chemical compounds with the potential to treat several neurodegenerative diseases including Alzheimer's.

In April, Suven Life’s investigative 5-HT compounds won patents from New Zealand and India, while in March, it secured another patent from the European Patent Office for a lead molecule with the potential to treat neurodegenerative diseases.

The company is looking to raise USD 20 million by the end of fiscal year 2011 to fund its research activities and could consider diluting stake. Speaking on the company's fund raising plans, Venkat Jasti, CEO of Suven Life Sciences had told on August 27, "We have brought 13 molecules to the table. But when it comes to development and clinical trials, and this is for SUVN-502, we need to spend about USD 20 million, for which we don’t have cash on hand. We will be raising that at the end of the year."

Also read: Will raise $20 million by year-end: Suven Life Sciences

The company had signed an agreement with Eli Lilly back in 2008, according to which the company would receive research funding as well as potential discovery and development milestone payments in the range of USD 19 million to USD 23 million per candidate and potential royalties on net sales of any products that may be successfully commercialized from the collaboration.