Re-enter IFCI

Both Sudarshan Sukhani and PN Vijay are of the opinion that this stock can be reentered at the current price for short term. I had given this recommendation when the price of this stock had fallen to Rs 77.

CMP: 83.60

Shiv-Vani Oil

Sharekhan has maintained a buy rating on Shiv-Vani Oil and Gas Exploration Services. They have given a target of Rs 480. This is an extract out of their report ."Shiv-Vani Oil & Gas Q3CY2007 results were ahead of our expectations. The order inflow was also healthy as the company has received orders of around Rs400 crore over the last three months and the order backlog has grown to over Rs 3,000 crore. The outlook for Q4 is encouraging with the commencement of the much-awaited Rs650-crore coal bed methane (CBM) project awarded by Oil & Natural Gas Corporation (ONGC). At the current market price the stock trades at 11.1x CY2008 and 8.7x CY2009 estimated earnings. We maintain our Buy call on the stock with a price target of Rs 480.”

CMP: Rs 380

Buy Reliance Petroleum

Reliance Petroleum is a good buy at this time. It has corrected a bit today and touched a low of Rs 205 today. You can buy this on declines with short term target of Rs 230-245. Keep a Stop loss of Rs 184.

CMP: 216

Status report: Neyveli Ligite

Neyveli Ligite touched an intra day high of Rs 180 today!! That is almost 35% increase from its recommended price of Rs 133. Congrats to those who bought this one!!!

BTW I am on my vacation and that’s the reason for infrequent posts :-)Will be back soon!!

Tata Teleservices

TTML looks like a good buy right now and can go upto 55-60. It moved smartly today and was up 9.83%.

CMP: 47.50.

What is Short Selling?

What is short-selling?

Short-selling, in the context of the stock market, is the practice where an investor sells shares that he does not own at the time of selling them. He sells them in the hope that the price of those shares will decline, and he will profit by buying back those shares at a lower price. In India, there is no prohibition on short-selling by retail investors. Institutional investors —domestic mutual funds and foreign institutional investors registered with the Securities and Exchange Board of India (Sebi), banks and insurance companies — are prohibited from short-selling and are mandatorily required to settle on the basis of deliveries of securities owned and held by them.

How is short-selling beneficial?

Short-selling is considered an essential feature of the securities market not just for providing liquidity, but also for helping price corrections in over valued stocks. Supporters of short-selling claim its absence distort efficient price discovery, gives promoters the unfettered freedom to manipulate prices and favours manipulators than rational investors. Securities market regulators in most countries, and in particular, all developed securities markets, recognise short-selling as a legitimate investment activity. The International Organisation of Securities Commissions (IOSCO) has also reviewed short-selling and securities lending practices across markets and has recommended transparency of short-selling, rather than prohibit it.

Are there any drawbacks of short-selling?

Critics of short-selling feel selling, directly or indirectly, poses potential risks and can easily destabilise the market. They believe that short-selling can exacerbate declining trend in share prices, increase share price volatility, and force the price of individual stocks down to levels that might not otherwise be reached. They also argue that declining trend in the share prices of a company can even impact its fund raising capability and undermine the commercial confidence of the company. In a bear market in particular, short-selling can contribute to disorderly trading, give rise to heightened short-term price volatility and could be used in manipulative trading strategies.

Will institutional investors in India be allowed to short-sell securities?

Sebi is working on a proposal to introduce a stock borrowing and lending mechanism. This will allow institutional investors to short-sell by borrowing shares. Under this arrangement, an investor A, who feels that a certain stock is overpriced, borrows those shares for a charge from investor B, who is willing to lend those shares. Investor A then sells those shares in the market, hoping that the price declines so that he can buy cheap and return them to investor B.

What is the difference between covered short sales and naked short sales?

Covered short sales are those in which the seller arranges for the delivery of shares he has sold by borrowing them. Naked short sales are those in which the seller does not intend to provide for the delivery of shares he has sold. Most international securities market regulators have prohibited naked short-selling and require the client to have documentary evidence of borrowing/tie-up with lenders before executing the sale transaction. This is because naked short sales in huge quantities can destabilise the market.

How does the stock lending and borrowing mechanism function in other markets?

World over, securities lending and borrowing transactions are, by and large, over-the-counter (OTC) contractual obligations executed between lenders and borrowers. International securities market regulators do not directly regulate the lending and borrowing transactions. In many international markets, entities like custodians and depositories run the lending and borrowing scheme and have their own screens for meeting the demand and supply of securities from their clients.

Source: Economic Times

Bottomfish in this market?

Should you be lapping up good stocks at the current levels? Markets have corrected by almost 8% in the last 4 trading sessions. Most of the good stocks have been down between 10-20%. Should you then buy in the current market? Indiabulls Securities’ CEO Divyesh Shah says, “If you are holding a good stock in your portfolio, keep it. It is not advisable to bottomfish in these markets. From what we see now, volatility is so high, it wouldn’t take even five minutes to wipe out a sizeable portfolio. Maintain status quo would be my advice to clients,” Mr Shah added. I agree with this sentiment completely. Unless the FM gives some clarity on the P-Notes issue the uncertainty might continue with FII selling off majorly. But there is a strong argument against this as well. Since the fundamentals are still the same this is only a short term blip and investors can use this opportunity to pick up stocks from a long term perspective.