Big Investors Lose 400 cr. as FT Crashes 65%. Who Lost What?

Financial Technologies (FT) lost over 1,600 cr. in market cap today.

The impact will be felt by many, including many of us who indirectly own stakes through mutual funds which own this stock. Let’s see who’s impacted.The share ended the day at Rs. 191, down 65%, one of the largest falls in a single day for a stock on the exchange.

Shareholders of Financial Technologies


Major shareholders own around 25% of FT. (Only from the last quarterly shareholding pattern as of June 30, 2013)

Shareholders (FT)	Shares (Lakh)	Impact (Cr)	% of Company
Ravi and Bharat Sheth	37.97	-132.21	8.24%
Pivotal Securities (Prof. Mankekar?)	5.65	-19.67	1.23%
FIIs (FT)
Blackstone	32.36	-112.68	7.02%
Citi Venture Cap	19.76	-68.80	4.29%
Acacia	14.25	-49.62	3.09%
Fidelity	5.02	-17.48	1.09%

The Sheth brothers (who own Great Eastern Shipping) have lost a packet today with a hit of over R. 130 crores.Pivotal Securities is rumoured to be owned by Professor Shivanand Mankekar, a value investor of some repute, and who’s lost about 20 cr. today. However, Prof. Mankekar will have other things on his mind, as his other shares like Strides Arcolab and Wockhardt (continuous lower circuits) are doing really badly.FIIs have seen a mark to market hit of over 250 cr. today.

Shareholders of MCX Limited

MCX – the Commodities exchange and a part owner of MCX-SX – is owned by a large number of players. The stock stayed at the lower circuit at 20% down all day. It’s now half of the IPO price at 510

Shareholders (MCX)	Shares (Lakh)	Impact (Cr)	% of Company
Times Group	11.44	-14.64	2.25%
NSE	12.5	-16.00	2.45%
IFCI	24.42	-31.26	4.79%
NABARD	15.63	-20.01	3.06%
Corporation Bank	15.05	-19.26	2.95%
HDFC Bank	5.25	-6.72	1.03%
Bank of India	5.25	-6.72	1.03%
Union Bank of India	5.25	-6.72	1.03%

The impact to banks is tiny, but an entity such as the Times group (Bennett Coleman) is only surprising because it’s also a shareholder in the continuously falling Gitanjali Gems.Foreign investors own 31% of MCX and have lost around 200 cr. today
.

FIIs	Shares (Lakh)	Impact (Cr)	% of Company
Blackstone	10.2	-13.06	2.00%
Citi Venture Cap	19.76	-25.29	4.29%
Passport Capital	25	-32.00	4.90%
Fidelity	25.5	-32.64	5.00%
Singapore Govt	5.5	-7.04	1.08%
Intel Capital	8.27	-10.59	1.62%
Merrill Lynch	14.25	-18.24	2.79%
Aginyx Cyprus	24.42	-31.26	4.79%
EuroNext	24.13	-30.89	4.73%

Coming soon: Mutual Funds that owned FT and MCX.

THE BIG UNDERPERFORMANCE

Over the last few days I was thinking of what to write on. The most interesting thing that I found when I was writing the last piece were the very interesting formations that I saw in the charts of the troubled European countries which was similar to the chart formations in the year 2004 before the time when a two year up move in global equity markets fructified. Over the last 3-4 weeks those formations have become even more prominent and it seems that we should see those moves actually take place strongly. The often talked about big rotation from bonds to equities which has been more talk than action till date might actually fructify during this time frame too. I think that the main reason why that shift was not happening till date had to do with two main reasons

- Lack of clarity in the recovery cycle of major developed economies

- The fact that due to unconventional monetary policy tools bond yields were being held down to unsustainable levels. However since bond yields kept on falling even as equities recovered there was no real incentive for investors to shift from bonds into equities. However as bond yields have spiked over last couple of months we have seen the first signs of the so called “Great Rotation” actually take place. Moreover the US economy seems to be moving on a self sustaining recovery cycle despite the Fiscal drag. As the housing and equity markets improve in that country we will again see the wealth affect come up and support the recovery cycle. The risks will obviously remain related to the eventual cut in government expenditure in order to reduce the fiscal deficit and the direction that the move takes.

Similarly there have been positive undertones coming from the UK, Japan and the Euro zone too, although the news has been mixed but improving to a great extent. The bigger concerns have come up in the developing markets where the talk of Fed Tapering has led to a huge speculative trade taking place against the currencies of countries that have high CAD’s or borrowed heavily in the international bond markets over the last few years. Whereas it is true that the CAD problems are real, it is also true that they have been known for a long time and it is not that there is going to be a huge reduction in global liquidity over the next 2-3 years at least. Given the economic data coming out of the US it is very clear that Tapering is going to start. However it is also true that at the rate of $ 85 billion per month i.e. $ one trillion per year cannot really continue. Interest rates are going to remain low in most developed markets for the foreseeable future and liquidity is likely to be ample. As such the current CAD scare is likely to be temporary, however over the long term unless CAD comes under control we will keep on seeing such a crisis after every few quarters. In the Indian context we have seen a huge underperformance on both global markets and also relative to mostly correlated EM’s over the last few weeks. The reasons are two fold

-Contradictory signals from the RBI are making people concerned that they have lost the plot. After failing to bring inflation under control despite ultra tight policies now they seem helpless as far as the currency goes. Their current moves on tightening liquidity again are a retrograde one.

-The government is in the election mode and seems to be only bothered about dole out politics as well as taking steps which can help them politically in the next elections. As such crucial decisions related to reviving the investment cycle just remain on paper. Most people have started believing that there will be hardly any move from the government except vote gathering moves from here on. The big positive has been the way the monsoons have panned out and thus indicate a record Kharif crop as well as prospects of a bumper Rabi crop. This should be positive for food inflation unless and until the government continues to hoard foodgrains which are ultimately eaten by rats or contaminated. The other big support for the economy this year should be strong government spending followed by election related spending. As such economic growth should be relatively sustained at the 5.5% level overall.

The other factor that should help us near term is that most correlated currencies like the Brazilian Real, SA Rand, and Turkish Lira etc are showing signs of reversal and as such the pressure on the INR should ease off in the near term. Results and the MarketsOverall the results season has been decent with good results from the Technology and Pharmaceutical sectors. Private sector banks have held on, however PSU banks have seen significant balance sheet stress. With no Capital Expenditure in the economy the Infra sector has been under stress both due to subdued turnover and high interest costs. Telecom has come back strongly and the performance is also reflected in their stock price moves over the last six months. The sector should see continuous improvements going forward.

Overall the current scenario reminds me of the year 2002 when valuations were very cheap. FMCG and Pharmaceutical stocks were trading at very high valuations and there seemed to be no imminent economic recovery. However that was a good time to invest. Stocks in most sectors are now trading much below intrinsic levels and the last few days especially have seen a panic sell off in the broader markets. Moreover like I mentioned earlier the global markets are also looking well placed to move up further. Under the circumstances India could continue to be an underperformer but still move up. We have also seen some FII brokerages turning underweight on India which is a contrarian signal for low downside potential.
As such there does not seem to be a case for a huge up move, however valuations ex of FMCG, Pharma, IT are extremely cheap. Ultimately it is buying cheap and selling high that makes money and there is no reason why the same will not happen over the next one year. MID CAP discount over large caps is also at a record high creating good opportunities in that part of the market too.

INFOSYS 800 POINT RANGE BREAK OUT ON CARDS – Next Nifty mover ?

n the last many months we have seen Nifty continues to maintain higher levels and everything else listed going into dumps. We have almost reached a stage where Nifty is becoming irrelevant for a trader or investor.

There was a time when people would hedge the portfolio with Nifty Shorts/ or Puts. Now it seems the only hedge is to increase cash because Nifty is in a different trend.

The divergence in Bank Nifty and Nifty has never been so huge in last 5-8 years

Another index stock which was silent for past many years – Bharti Airtel seems to be now getting into a major reversal

So we are coming down to a point where one cannot take a trade on basis of Nifty trend. We bounced from 5600 to 6100 but quite a lot of stocks kept going down. And now a dip from 6100 to 5700 and we see some stocks rallying strongly.

From now on the focus should be specific stocks and assume the broader market trend to be down and selective moves to continue.

Now we come to the part of Index management. Every few months we see a different heavy weight being notched up or down. Be it ITC, HUL, TCS, Reliance, Banks, Pharma etc.

The next most important chart which comes on the technical radar which can change the move in Nifty is Infosys.

Technical View:

-> The stock has underperformed all the peers like TCS , Wipro , HCLTech and even the smaller ones like TECH MAHINDRA

-> There have been huge swings on result days but the next result is 2-3 months away.
-> Major resistance at 3030-3050.
-> The range is of 800 points and will it be going back to the lower end of the range or blow out above 3020-3050.
-> The previous tops at 3400 could be an immediate target in momentum.

A confirmation of trend can come only above 3020-3050 but given the index management and underperformance of the stock , we would be keeping a close watch on this index heavyweight.
Given a 8-9% weightage and other IT stocks also tagging along we need to keep a close watch. On breakout quite a few option strategies can be worked out.

For now a stock on radar with 3020-3030 as a price point.

DON'T BE BRAVE – Panic has no Logic. Sit and Research, Focus on Quality

This is just a quick note to investors and traders.

Let not a stock being down 10-20-50% be a reason to buy a stock. Pause and Research. Take your own time. Some times missing a big trade will be better than sitting in a totally damaged stock.

Over the past few sessions have been mentioning on a lot of midcaps/smallcaps under manipulation and warnings FINANCIAL TECHNOLOGIES
was given as a sell at 700
For now there is no point catching falling knives. Let stocks fall down as much and stabilize. In such sentiments stocks may not go up 50% quickly. So you may get an entry maybe at a higher level but in comfort and after research. 

Continue to research and read up on companies as not everyone will go bankrupt and there will be some superb bargains. Do not hurry and sit tight. If you have researched a stock do mail it to us onTRENDZOFMARKET@GMAIL.COM

Although i had posted a positive view on Nifty and large caps a few months back and Nifty did bounce to 6100 and we have still not broken on Nifty supports but Bank Nifty, Midcap and Smallcap Indices have broken down and some have reached 4500 levels of Nifty and in some cases even 2008 levels. So we may even see Nifty holding with index management and stocks collapsing. we have been warning continously on avoiding dud stocks over last few days.

In such scenarios the best thing to do is DO NOTHING in markets and let things stabilize. If you have researched a good company then can sit tight or even accumulate, But do not venture into stocks because of a fall.

Panic has No Logic. Nifty continues to hold the 5600 band keeping the benchmark under control. Mind you even shorting can be risky in such conditions and sharp bear rallies can kill.

Focus only on quality stocks !! Stocks we are looking at to buy NBCC at sub 100 slowly , Rallis India at 120-130, Biocon a short term pick , Ab Nuvo at 1100-1000. Sun Pharma advanced at 100-80 in panics. We will soon be coming out with detailed notes on many stocks where we believe risk-reward and long term opportunity.

WAT TO DO WITH Financial Technologies. NOW?

Todays big news seems to be the 60% fall in Financial Technologies.

The first hint of something being wrong came in technically. I had posted this
http://trendzofmarket.blogspot.in/2013/07/financial-technologies-major-breakdown.html with 600 target.

Unfortunately sticking to the conservative strategy we booked at 600 in 4-5 sessions . 

This is how the chart looks now. 

 

A few days back there was an article showing how Financial technologies was sitting at a huge risk- http://t.co/iM2QwEDALl in economic times 

For last couple of years had been reading about many advisors talking about 14-17% returns through the NSEL products. This did seem unsustainable.

Today when suddenly NSEL contract suspension news came in people are realizing the risk with Financial technologies.
Currently the stock trend remains down and if market rumors of a major payout crisis is to be believed the liability risk can be huge for Financial Technologies. Maybe it will come out with no issues but its not worth the risk.

So if you hold the stock pray that company manages to get out of this mess. If you do no hold it be relaxed and give it a miss unless you are ready for another 20-50% crack risk on the stock.  No need to catch this falling knife.

From the above post its very clear as to why Technical Analysis is a tool which every trader/investor should know of to be able to get out of such risks. Technical Analysis would not have suggested the stock would fall to 200 rupees but it definitely gave an exit signal. Also one of the simplest rules a technical analyst follows is a stoploss which helps to get out in such cases.

 

Lots of Intra-day Drama on Status Quo Fed Policy

 
It was an interesting trading day for S&P500… too much of drama and Up, Down and Nowhere action for a status quo policy.

Here’s S&P500 Emini Futures Intra-day Chart

As you can see in the chart above: the day started with strength and Optimism. S&P500 Futures rallied from 1685 all the way to 1692.5 before Fed’s policy announcement and then drifted down to 1685 just before Fed made the policy announcement. It was a quiet period. Then came the status quo policy
Federal Reserve Announces No New Change To Policy, But Flags Low Inflation As A Risk
The reaction was of the relief and S&P500 did a sharp bounce only to sell off on some tapering talk/risk. Emini futures slipped below 1685 inviting shorts…only to be eaten up.
As it always happens in Bull market – the shorts get squeezed and that’s precisely what happened. S&P500 futures managed a stunning recover from below 1685 all the way to 1694. It was a totally one way move. There was a real panic among shorts. Lots of traders would have covered shorts and gone Long – Hoping for fresh breakout.
Did it happen? – No [Policy days are too volatile to trade. You have to be really lucky]
Just when everyone thought that on spot S&P500: market is about to make new HIGH above 1698: well market sold off

S&P500 sold off from 1698 in a pretty dramatic and linear fashion. The futures slipped dramatically to 1681 before making a minor comeback. On a daily chart: S&P500 has printed a large exhaustion tail on the upside.
How does Chart look now?
S&P500 is trading near all time high. The resistance is now clearly developing at 1698. Despite being in bull market, there are signs of exhaustion at the top and one should not rule out some pullback to make the market healthy for upmove. The next data point market will be keeping an eye on: US Jobs data on Friday. There is nothing wrong Globally and Indian market has more to worry locally than Globally.