Sensex, Nifty charts (Nov 22, 2019): consolidating but showing some signs of bearishness

FIIs were net sellers of equity on Mon. and Tue. (Nov 18 and 19), but were net buyers during Wed. through Fri. (Nov 20-22). Their total net buying was worth Rs 47.1 Billion. DIIs were net buyers of equity on Mon. through Wed., but were net sellers on the last two days. Their total net buying was worth Rs 3.3 Billion.

India's urban unemployment rate during Jan-Mar '19 dropped to 9.3% from 9.9% during Oct-Dec '18. Unemployment among 15-29 year olds was 22.5% during Jan-Mar '19 against 23.7% during Oct-Dec '18.

According to a report by CEAMA, India's appliances and consumer electronics market size is expected to nearly double to Rs 1.48 Trillion by FY 25 from Rs 764 Billion in FY 19.

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex has been consolidating sideways within a 'rectangle' pattern for the past three weeks. The entire consolidation has taken place above the three rising EMAs in a bull market. So, the expected index breakout from the 'rectangle' is upwards.

However, a 'rectangle' is an unreliable pattern that can sometimes act as a 'reversal' pattern. A downward breakout from the pattern is a possibility that should not be ignored. The zone between 39450 and 39250 can act as a support on the downside.

Daily technical indicators are showing downward momentum. MACD crossed below its rising signal line and has slipped down from its overbought zone. ROC is below its falling 10 day MA and has dropped into bearish zone. RSI and Slow stochastic are falling towards their respective 50% levels. 

Note that all four indicators are showing negative divergences by moving down while the the index is consolidating sideways and three EMAs are moving up. That can trigger some correction or more sideways index consolidation.

Of late, market experts have been talking about overvalued quality stocks and pockets of value among mid-cap and small-cap stocks. Small investors would do well to ignore such talk. During economic slowdowns, smaller companies and their stocks tend to underperform.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty gained about 19 points and closed well above its three rising EMAs in a long-term bull market. However, the index is struggling to close above the psychological 12000 level, and may have formed a small 'double top' reversal pattern.

Weekly technical indicators are looking bullish and overbought. MACD is rising above its signal line in bullish zone. ROC has started to slide down inside its overbought zone. RSI is moving sideways just below the edge of its overbought zone. Slow stochastic is moving sideways inside its overbought zones. More index consolidation or some correction is possible.

Nifty's TTM P/E has moved up to 27.77 - which is well above its long-term average inside overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone, hinting at more near-term index consolidation.  

Bottomline? Sensex and Nifty charts are consolidating sideways above their rising daily and weekly EMAs in long-term bull markets. Both indices are close to their lifetime highs, which is not a good time to buy. 

A Look at Long-term Nifty trends

Nifty 50 Chart

Both long-term trend lines - TL1 and TL2 - are intact. Current level of TL2 is at 10800 - which may get breached. Strong support exists at 10000. If that gets breached, then a drop to 9000 is possible.

Nifty Midcap 100 Chart

Long-term uptrend line TL1 is intact, but TL2 has been breached. The index is at a support level now. If that gets breached, a fall to 14000 is possible.

Nifty Smallcap 100 chart

Long-term uptrend line TL1 is intact, but TL2 has been breached. The index is at a strong support level now. If that gets breached, a fall to 4500 is possible. 

This may be a good time to look for selective opportunities in growth-oriented mid cap and small cap companies with strong balance sheets.

Sensex, Nifty charts (Mar 01, 2019): bulls and bears locked in a stalemate

FIIs were net buyers of equity on all five trading days. Their total net buying was worth a huge Rs 76.4 Billion. DIIs were net buyers of equity on Wed. and Fri. (Feb 27 and Mar 1), but net sellers on the other three trading days. Their total net selling was worth an equally huge Rs 75.2 Billion, as per provisional figures.

On Thu. Feb 28 (F&O expiry day), net selling by DIIs exceeded Rs 52 Billion, which turned them into net sellers (Rs 5.7 Billion) for the month. FII net buying during Feb '19 exceeded Rs 135 Billion, which was their highest net buying in a month since Mar '17. Despite heavy FII buying, Sensex (-1%) and Nifty (-0.3%) closed lower for the month.

Nikkei India's Manufacturing Purchase Manager's Index (PMI) rose to a 14 month high of 54.3 in Feb '19 from 53.9 in Jan '19, due to increase in sales that fuelled growth of output and employment. (A figure above 50 indicates expansion.)

Auto sales figures in Feb '19 were a mixed bag. Maruti (2%), Tata Motors (-2%), Toyota (-1%), Ashok Leyland (1%) sales were almost flat. Honda, M&M, Bajaj Auto, Suzuki Motorcycles showed double digit sales growth.

BSE Sensex index chart pattern

An eventful week started with an air attack on a JeM camp in Pakistan early on Tue. Feb 26, followed by the shooting down of an Indian MiG21 and arrest of its pilot the next day, and ended with the tension and drama of his return after two days. The daily bar chart pattern of Sensex appeared to take it all in its stride.

Heavy buying by FIIs and equally heavy selling by DIIs ensured that the trading week ended in a draw. The index gained just 0.5% on a weekly closing basis, as it oscillated about its merged 20 day and 50 day EMAs and faced resistance from the Fibonacci resistance zone. 

Sensex closed above its three EMAs in bull territory, but needs to move convincingly above the Fibonacci resistance zone if bulls are to regain control of the chart. Bears are doing their level best to ensure that doesn't happen any time soon.

Eight straight days of correction has been followed by eight days of an unconvincing rally. Sensex is back where it was three months ago. The gently rising 200 day EMA is an indication that bulls have a slight advantage. 

Note that the index touched a lower bottom of 35287 in Feb '19. If Sensex falls below 35287, it will form a bearish pattern of 'lower tops lower bottoms' that can lead to a deeper correction. Likely lower weightage for India in the MSCI Emerging Markets index can trigger the correction.

Daily technical indicators are looking neutral to bullish. MACD is entangled with its signal line, and is moving sideways in neutral zone. ROC has crossed above its 10 day MA to enter bullish zone. RSI is moving up towards its 50% level. Slow stochastic has moved up to its 50% level.

Mid-cap and small-cap stocks showed some signs of life last week. Some of them have corrected a lot despite decent fundamentals. However, BSE Midcap and BSE Smallcap indices are trading well below their falling 200 day EMAs in bear markets, and it may be too early to call a bottom in either index.

Bank FD rates have not fallen much after RBI's interest rate cut last month. Another rate cut is likely in Apr '19 as the inflation rate remains low. This may be a good time to lock some money in FDs instead of bargain hunting in stocks. If the index falls from here, cheap stocks can get cheaper.

NSE Nifty index chart pattern

Note the following comment from last week's post on the weekly bar chart pattern of Nifty: "FII buying can cause some more upside, but is unlikely to propel the index above the Fibonacci resistance zone (between 10880 and 11090)."

The index closed above its 20 week and 50 week EMAs in bull territory and gained about 0.7% on a weekly closing basis, but faced strong resistance from the Fibonacci resistance zone and closed below it. The gradually rising 50 week EMA shows that bulls have a slight advantage.

Weekly technical indicators are looking neutral to bullish. MACD is moving sideways in neutral zone. ROC is in neutral zone, and is trying to move up to its 10 week MA. RSI has bounced up from its 50% level. Slow stochastic is falling towards its 50% level. 

Nifty's TTM P/E has moved up to 26.49, which is well above its long-term average in overbought zone. The breadth indicator NSE TRIN (not shown) has fallen well inside its overbought zone, and can trigger a corrective move.

Bottomline? For the past 4 months, Sensex and Nifty charts have been stuck in a sideways range after sharp corrections during Sep-Oct '18. Both indices managed to close above their long-term moving averages in bull territories, but failed to cross above Fibonacci resistance zones. The consolidations are likely to continue till the general elections.

ANNOUNCING re-opening of paid subscriptions to my Monthly Investment Newsletter

I am pleased to announce the re-opening of paid subscriptions to my monthly investment newsletter for a 3 weeks period from Jan 1-21, 2019. A limited number of subscriptions are being offered to blog visitors, blog followers, blog subscribers and twitter followers – on a first-come first-served basis, to enable me to provide personalised attention and guidance to each subscriber.

If you are interested in subscribing, please send an email to: mobugobu@yahoo.com at the earliest for details.

The newsletter has completed 108 issues, with its share of hits and misses. The stock market touched a lifetime high in Aug '18 but has been undergoing a correction since then. Sensex gained 5.9% and Nifty gained 3.15% during 2018.

Mid-cap and small-cap stocks faced the wrath of bears. The 4 months long market correction/consolidation since Sep '18 brought down most selected stocks from their peaks – affecting year-end performance. It is gratifying that subscribers have still kept faith in my stock picking abilities.

Those who have been regularly following my blog posts over the past few years may know what kind of stocks to select, and what type of stocks to avoid. The guiding principle is to choose well-managed, financially prudent companies that generate cash from operations, have low debt, give steady (rather than spectacular) returns and have growth prospects. 

Non-subscribers may be interested to know how the recommended 12 mid-cap and small-cap stocks have fared during the past 12 months. Without revealing the names of the stocks (it won’t be fair to my subscribers to do so), here is a brief summary of performance as on Dec 31, ‘18:

• 4 stocks gained more than 20% from recommended levels, of which 1 gained 31% and 1 gained 78%
• Of the balance 8 stocks, 2 gained between 15-20%, 2 gained between 10-15% and 4 gained between 1.5-6%
• At close of Dec 31 '18, 4 stocks were in the green; 8 stocks were in the red - of which 6 are down less than 9% and should make up the deficit soon, and 2 are down between 23-26%
• All 12 stocks touched higher levels after monthly recommendations

That may not appear all that great, but remember that the market has been correcting/consolidating for the past 4 months. To put it in perspective:  BSE Midcap index was down 13.4% and BSE Smallcap index was down 23.5% during 2018. That means 10 of the 12 recommended stocks have outperformed BSE Midcap and BSE Smallcap indices.

What is important to understand is that none of the recommended stocks were ‘cheap’ – fundamentally strong stocks rarely are - and some had already run up a lot when they were recommended.

The selected stocks are meant to be held for 2-3 years. Over the next 24 months, the laggards are expected to catch up with the leaders. Also, stop-loss levels are suggested every month so that small losses don't turn into big ones. 

If you wish to add fundamentally strong mid-cap and small-cap stocks with growth potential to your portfolio, why wait? Just subscribe to my Monthly Investment newsletter. Send me an email (at mobugobu@yahoo.com) soon – subscriptions will close on Jan 21, 2019.

Sensex, Nifty charts (Oct 26, 2018): Fibonacci support zones in danger of getting breached

FIIs intensified their net selling of equity shares during the week. Their total net selling was worth Rs 57.5 Billion. DIIs were net buyers of equity on all five trading days. Their total net buying was worth Rs 45.1 Billion, as per provisional figures.

India's fiscal deficit touched 95.3% of full year budget estimate during Apr-Sep '18, compared with 91% during Apr-Sep '17. Spending touched 53.4% against 53.5% last year, but receipts were 39% against 40.6% of full year budget estimate last year.

Liquidity position of India's financial markets have worsened with cash deficit widening to Rs 1.4 Trillion this week against a small surplus in the first week of Oct '18. RBI's efforts to improve the situation through bond purchases haven't helped much.

BSE Sensex index chart pattern

The following comment was made in last week's post on the daily bar chart pattern of Sensex: "A drop inside the Fibonacci support zone (between 33934 and 32372) is on the cards."

The index dropped and closed inside the support zone on Tue., Thu. and Fri. (Oct 23, 25 and 26). The 20 day EMA has crossed below the 200 day EMA for the first time since Nov '16. The imminent 'death cross' of the 50 day EMA below the 200 day EMA will technically confirm a bear market.

From its Aug 29 top of 38990, Sensex has corrected 14.6% by touching a low of 33349 on Fri. 26th. A 20% correction is technically treated as the start of a bear market. The index is not in a bear market yet, but it sure feels like one - since the index has spent 16 straight trading sessions below its 200 day EMA.

Incidentally, BSE Midcap index and BSE Smallcap index (not shown) have corrected 26% and 33% from their respective Jan '18 tops. 'Death cross' on both indices have technically confirmed bear markets. Sensex is likely to enter a bear market as well.

Daily technical indicators corrected oversold conditions but remain bearish. MACD is facing resistance from its falling signal line inside its oversold zone. ROC and RSI have emerged from their respective oversold zones, but are still inside bearish zones. Slow stochastic has re-entered its oversold zone. 

All four indicators are showing positive divergences by touching higher bottoms while Sensex has dropped lower. Another technical bounce is likely. The previous bounce had faced resistance from the falling 20 day EMA.

Sensex may correct/consolidate some more. Large-caps are bearing the brunt of FII selling. It may be worthwhile to start looking at adding fundamentally strong mid-cap and small-cap stocks - particularly if they are already in your portfolios.

NSE Nifty index chart pattern

The following comment was made in last week's post on the weekly bar chart pattern of Nifty: "Formation of a weekly 'reversal' bar (higher high, lower close) is hinting at a further correction towards the lower edge (9827) of the Fibonacci support zone." 

As if on cue, the index plunged to a low of 10004.55 - a level not seen during the past 7 months. For the 4th week in a row, the index closed below its 20 week and 50 week EMAs. It hadn't done that since Dec '16.

Weekly technical indicators are looking a bit oversold. MACD is falling below its signal line and has entered bearish zone. ROC is well inside its oversold zone, and is falling further. RSI has dropped to the edge of its oversold zone. Slow stochastic has entered its oversold zone for the first time since Mar '18.

Nifty's TTM P/E has moved down to 24.12, which is still above its long-term average. The breadth indicator NSE TRIN (not shown) is rising towards its oversold zone, suggesting some more near-term downside.

Bottomline? Both Sensex and Nifty charts have closed inside Fibonacci support zones. Macro headwinds like high oil prices, a weak Rupee, widening trade and fiscal deficits, ongoing debt woes of NBFCs have increased bearish sentiment. No signs of a market bottom are visible yet.

Nifty chart: a midweek technical update (Aug 01, 2018)

FIIs were net buyers of equity on Tue. Jul 31, but net sellers on Mon. Jul 30 and today. Their total net buying was worth Rs 2.4 Billion. DIIs were net buyers of equity on Mon. and net sellers during the next two days. Their total net selling was worth Rs 8 Billion, as per provisional figures.

At the end of the three-day Monetary Policy Committee meeting, RBI hiked repo rate and reverse repo rate by 25 bps (0.25%) each today. The move was widely expected. Nifty closed just 10 points lower today after four straight days of rallying higher.

Revenue collection from GST rose to Rs 965 Billion in Jul '18 from Rs 956 Billion in Jun '18, thanks to increased compliance. However, it fell short of the Rs 1 Trillion per month target set by the government.

The daily bar chart pattern of Nifty touched a new high every day for five straight trading days. However, it closed lower today to form a small 'reversal day' bar (higher high, lower close).

All three EMAs are rising, and Nifty is trading above them, and above the (blue) up trend line, in a bull market. The index is in 'blue sky' territory with no known resistances.

Daily technical indicators are inside their respective overbought zones. MACD is rising above its signal line. ROC is above its 10 day MA, but has stopped rising. RSI and Slow stochastic are showing signs of correcting overbought conditions.

Nifty's TTM P/E has moved up to 28.14 - which is much higher than its long-term average and in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating just above its overbought zone. Expect some index consolidation or correction.

The index rally during the past 4 months has not been broad-based. A few large-cap stocks have propelled the index higher. Mid-cap and small-cap stocks have undergone profit booking, but their valuations still remain high.

If the index undergoes a correction - which is quite possible after a sharp rally - the mid-cap and small-cap stocks may correct even more. Any rally in mid-cap or small-cap stocks from here on can be used for partial profit booking.

Nifty chart: a midweek technical update (Jul 25, 2018)

FIIs were net buyers of equity during the first two trading days this week, but net sellers today. Their total net selling was worth Rs 8.3 Billion. DIIs were net buyers of equity on all three days. Their total net buying was worth Rs 7.4 Billion, as per provisional figures.

Nifty had 'lost' 1220 points from its lifetime high of 11172 (touched on Jan 29 '18) to its low of 9952 (touched on Mar 23 '18). By touching a high of 11157 today, 1205 of the 'lost' 1220 points have been regained - but the index has taken more than twice the amount of time to do so.

German agro-chemical major Bayer, International Finance Corporation, Netafim and Swiss Re Corporate Solutions launched the 'Better Life Farming' alliance to provide innovative solutions for smallholder farmers in developing economies to help them raise their incomes. The global alliance has now roped in local partners - Yara Fertilisers, DeHaat and Big Basket in India - to scale up its operations. 

The following remark was made in last week's technical update on the daily bar chart pattern of Nifty: "... expect the index to cross above the 'resistance zone' to a new lifetime high sooner than later."

The index crossed above the 'resistance zone' on Tue. Jul 24, and pulled back to the top of the 'resistance zone' today. It should make an attempt to touch a new high any time.

All three EMAs are rising, and the index is trading well above them - and the (purple) up trend line - in a bull market. 

Daily technical indicators are in bullish zones, and looking overbought. MACD is rising above its signal line. RSI is facing resistance from the edge of its overbought zone. Slow stochastic is showing negative divergence by failing to rise higher with the index, and may be forming a 'double top' reversal pattern inside its overbought zone. 

Nifty's TTM P/E has moved up to 27.66 - which is much higher than its long-term average and in overbought zone. The breadth indicator NSE TRIN (not shown) has bounced up from the edge of its overbought zone. Expect some index consolidation or correction.

A handful of large-cap stocks have propelled the index higher while mid-caps and small-caps have been battered out of shape. Many small investors who are facing deep cuts in their portfolio value should avoid the tendency to 'average down' - it may increase losses.

Benjamin Graham had suggested that an equity portfolio should have 75% or more in large-cap stalwart stocks and not more than 25% in mid-cap/small-cap stocks. At times like these, one appreciates the wisdom behind such an asset allocation plan. 

Sensex, Nifty charts (Jul 20, 2018): bull rallies pause after upward breakouts

FIIs were net sellers of equity on three out of five trading days last week. Their total net selling was worth Rs 12.1 Billion. DIIs were net buyers of equity on three out of five trading days. Their total net buying was worth Rs 13 Billion, as per provisional figures.

The GST Council has given a monsoon bonanza to consumers by reducing tax rates on items like washing machines, refrigerators, vacuum cleaners, water coolers, water heaters, small TVs, electric irons, paints, varnish, handicraft items.

Trade issues and higher US interest rate could create outward capital flow pressure for India, but risks this year are more moderate compared with 2013, according to S&P Global Ratings. 

BSE Sensex index chart pattern

The daily bar chart pattern of Sensex touched a new intra-day high of 36748 on Wed. Jul 18, but closed much lower - forming a 'reversal day' bar (higher high, lower close). The index traded within a 490 points range during the week, and lost 46 points on a weekly closing basis.

Daily technical indicators are in bullish zones, but looking overbought and not showing much upward momentum. Next week is F&O expiry week, so trading activity may remain muted.

All three EMAs are rising, and the index is trading above them in a bull market. However, a pullback towards the recently-breached down trend line remains a possibility.

The following comment was made in last week's post: "The broader market - particularly mid-cap and small-cap stocks - have not participated in the rally so far."

Actually, they have done much worse. (Thanks to reader Abhishek for pointing this out.) Take a look at almost identical BSE Midcap and BSE Smallcap chart patterns below:

BSE Midcap index & BSE Smallcap index chart patterns 

Both Midcap and Smallcap indices have touched lower tops and lower bottoms since their Jan '18 peaks, and have dropped into bear markets. All three EMAs are falling, and the indices are trading below them. 

The 'death cross'es (marked by light blue ovals of 50 day EMAs crossing below 200 day EMAs on both charts) have technically confirmed bear markets.

Daily technical indicators are in bearish zones, and not showing much upward momentum - but showing positive divergences by not falling lower with the indices. Some consolidation or technical bounces are possibilities.

NSE Nifty index chart pattern

The weekly bar chart pattern of Nifty failed to make much progress after breaching the down trend line a week ago. The weekly bar formed a 'doji' candlestick that indicates indecision among bulls and bears. The index lost 9 points on a weekly closing basis.

Both weekly EMAs are rising, and the index is trading above them in a bull market. However, higher volumes on recent down-weeks are hinting at a pullback towards the down trend line.

Weekly technical indicators are in bullish zones but not showing much upward momentum. RSI and Slow stochastic are looking overbought. ROC has started correcting.

Nifty's TTM P/E is 27.36 - which is well above its long-term average in overbought territory. The breadth indicator NSE TRIN (not shown) has dropped towards its overbought zone, and can limit near-term index upside.

Bottomline? Bulls are taking a breather after triggering breakouts above down trend lines on Sensex and Nifty charts. Some more consolidation or correction will enable both indices to move higher. Bear markets in Midcap and Smallcap indices are worrying signs.

Nifty chart: a midweek technical update (Jul 18, 2018)

FIIs were net sellers of equity during the first two trading days this week, but net buyers today. Their total net selling was worth Rs 12 Billion. DIIs were net sellers on Mon. Jul 16 but net buyers on the next two days. Their total net buying was worth Rs 7.7 Billion, as per provisional figures.

India's WPI inflation touched 5.8% in Jun '18, compared with 4.4% in May '18 and an upwardly revised 3.6% in Apr '18. It was the highest level touched by WPI since Dec '13 (5.9%). Higher crude oil, cotton, vegetable prices and electricity tariffs were the main culprits.

In a classic case of 'sell on news', HUL stock dropped by more than 100 points after announcing good Q1 (Jun '18) results. Good numbers were also declared by Federal Bank, Bandhan Bank, ICICI Lombard, Zee Entertainment. Jindal Stainless, Cyient, Hindustan Media Ventures, GM Breweries came out with disappointing numbers.

In last week's technical update on the daily bar chart pattern of Nifty, a few technical reasons were cited to warn bulls. The index subsequently crossed above 11050 on intra-day basis three occasions, but failed to close above 11025.

The 'resistance zone' between 10950 and 11120 is being used by bears to make a last stand. The index is trading well above its three rising EMAs and the (purple) up trend line in a bull market. So, expect the index to cross above the 'resistance zone' to a new lifetime high sooner than later.

Daily technical indicators are in bullish zones, but not showing much upward momentum. MACD is moving sideways above its signal line. RSI is moving sideways above its 50% level. Slow stochastic is about to fall from its overbought zone. 

Nifty's TTM P/E has moved up to 27.28 - which is much higher than its long-term average and in overbought zone. The breadth indicator NSE TRIN (not shown) is oscillating in neutral zone, hinting at some index consolidation or correction.

Oil's price has moderated a bit. But rising inflation may force RBI to raise interest rates during its Aug '18 monetary policy meeting. Manufacturing activity is not showing any significant uptick. The macroeconomic environment is not conducive to growth.

Investors should be cautiously optimistic and remain stock and sector specific in their buying, because the rally from the Mar '18 low has not been broad-based. 

(Note: Thinking of buying quality mid-cap and small-cap stocks but not sure which ones to pick? Subscribe to my Monthly Investment Newsletter. Paid subscriptions are being offered to blog visitors, followers and subscribers for three more days only - till Jul 21, 2018. Contact me at mobugobu@yahoo.com for details.)

5 Stocks contributed Half of Nifty's 1000 point Rally from its Mar '18 low

"Nifty 50 has gained more than 1,000 points from its previous low in March, with the benchmark index taking 76 sessions to chart the journey.

The 50-stock gauge beat small- and mid-cap indices on returns but lagged the Nifty Bank Index during the period. It’s now trading close to its all-time high that the index scaled in January before it started retreating.

The market rallied on the back of short-covering and buying in selective stocks while mid caps underperformed during the period..."

Read more at:

https://www.bloombergquint.com/charts/2018/07/12/what-contributed-to-niftys-1000-point-jump-from-march-low

Announcing re-opening of paid subscriptions to my Monthly Investment Newsletter

I am pleased to announce the re-opening of paid subscriptions to my monthly investment newsletter for a 3 weeks period from Jul 1-21, 2018. A limited number of subscriptions are being offered to blog visitors, blog followers, blog subscribers and twitter followers – on a first-come first-served basis – to enable me to provide personalised attention and guidance to each subscriber.

If you are interested in subscribing, please send an email to: mobugobu@yahoo.com today for details.

The newsletter has completed 100 issues, with its share of hits and misses. Sensex and Nifty touched lifetime highs in Jan, 2018 and have since been in corrective phases during which small-cap and mid-cap stocks have faced sell-offs. That has affected overall performance. It is gratifying that subscribers have still kept faith in my stock picking abilities.

Those who have been regularly following my blog posts know what kind of stocks to select, and what type of stocks to avoid. The guiding principle is to choose well-managed, financially prudent companies that generate cash from operations, have manageable debt, give steady (rather than spectacular) returns and have growth prospects.

Non-subscribers may be interested to know how the recommended (mostly mid-cap and small-cap) stocks have fared during the past 18 months. Without revealing the names of the stocks (it won’t be fair to my subscribers to do so), here is a brief summary of performance as on Jun 29, ‘18:

• 11 stocks gained more than 25%, of which 6 gained between 25-49%; 1 gained between 50-99%; 4 gained more than 100% (of which 1 gained more than 250%)
• Of the balance 7 stocks, 4 gained between 10-24%, 3 gained between 1-9%

The stock market has been in a consolidation-cum-correction phase from which it is yet to recover fully - thanks to FII selling. Several stocks have lost their gains and some have slipped into the red - despite good fundamentals. 

However, monthly technical updates with suitable stop-losses have enabled investors to preserve their gains and/or kept their losses small.

What is important to understand is that none of these stocks were ‘cheap’ valuation-wise – fundamentally strong stocks rarely are - and some had already run up a lot when they were recommended.

If you wish to learn how to add fundamentally strong mid-cap and small-cap stocks with growth potential to your portfolio, why wait? Just subscribe to my Monthly Investment newsletter. Send me an email (at mobugobu@yahoo.com) today – subscriptions will close on Jul 21, 2018.

ANNOUNCING re-opening of paid subscriptions to my Monthly Investment Newsletter

I am pleased to announce the re-opening of paid subscriptions to my monthly investment newsletter for a 3 weeks period from Jan 1-21, 2018. A limited number of subscriptions are being offered to blog visitors, blog followers, blog subscribers and twitter followers – on a first-come first-served basis, to enable me to provide personalised attention and guidance to each subscriber.

If you are interested in subscribing, please send an email to: mobugobu@yahoo.com at the earliest for details.

The newsletter has completed 96 issues, with its share of hits and misses. The stock market closed the year at a lifetime high. Sensex gained almost 28% and Nifty gained 28.6% during 2017, but both indices have been in consolidation mode during the past two months.

Many mid-cap and small-cap stocks made excellent gains - which made stock selection difficult as finding value became a challenge. The 2 months long market consolidation since Nov '17 brought down most selected stocks from their peaks – affecting year-end performance. It is gratifying that subscribers have still kept faith in my stock picking abilities. 

Those who have been regularly following my blog posts over the past few years may know what kind of stocks to select, and what type of stocks to avoid. The guiding principle is to choose well-managed, financially prudent companies that generate cash from operations, have low debt, give steady (rather than spectacular) returns and have growth prospects.

Non-subscribers may be interested to know how the recommended 12 mid-cap and small-cap stocks have fared during the past 12 months. Without revealing the names of the stocks (it won’t be fair to my subscribers to do so), here is a brief summary of performance as on Dec 29, ‘17:

• 6 stocks have gained more than 25%, of which 2 have gained between 25-50%; 3 have gained between 50-99%; 1 has gained 100%
• Of the balance 6 stocks, 2 have gained between 10-25%, 2 have gained between 0-9% and 2 have lost 3% & 34%
• All 12 stocks had touched higher levels after monthly recommendations

That may not appear all that great, but remember that the market has been consolidating for the past 2 months - thanks to FII selling. So, let me provide a different perspective on the above performance:

By blindly investing (not recommended) Rs 20,000 in each of the 12 stocks and holding on till Dec 29 ‘17, a subscriber would be sitting on gains of nearly Rs 80,000 (33%) – outperforming Sensex (28%) and Nifty (28.6%).

What is important to understand is that none of these stocks were ‘cheap’ – fundamentally strong stocks rarely are - and some had already run up a lot when they were recommended.

The selected stocks are meant to be held for 2-3 years. Over the next 24 months, the laggards are expected to catch up with the leaders. Also, stop-loss levels are suggested every month so that small losses don't turn into big ones. 

If you wish to add fundamentally strong mid-cap and small-cap stocks with growth potential to your portfolio, why wait? Just subscribe to my Monthly Investment newsletter. Send me an email (at mobugobu@yahoo.com) soon – subscriptions will close on Jan 21, 2018.

When is the Right Time to Sell a Stock?

The following comments appeared in a post titled "When should you 'hold' and When should you 'fold' a stock?":

"Buying a stock doesn't make any one any money. Holding it for a reasonable length of time, and then selling it at a profit completes the cycle." 

It may seem like a no-brainer, but in reality many small investors find it difficult to decide when is a good time to sell a stock.

If you are a long-term investor with a 'core' portfolio of good large-cap stocks, then there should be only three reasons (explained in the post referred above) for selling a stock.

However, if you also have a 'satellite' portfolio of mid-cap and small-cap stocks then Warren Buffett's strategy of 'holding forever' may not be a good idea.

Setting a price target and a stop-loss - and selling when the target or stop-loss is reached is often a better idea.

In a recent article in investopedia.com, Steve Economopoulos explains how you can fine-tune your selling strategies and provides a technical analysis example of setting a price target after buying, and selling when the target is reached.

Read the article here.