Stock Investing Strategies PART-3 (Technicals Vs Fundamentals)

Part 0, Part 1, Part 2

Welcome Readers,

As I said in previous parts that we will see how to read different sensex charts to determine the probability of making correct assumptions.  Before we apply any strategy to pick a particular stock it is common to do either technical analysis or fundamental analysis or for sound investment – both. 

So in this post I just make an attempt to bring one idea of what is technical analysis and fundamental analysis.

Going in detail, I can say these two are quite opposite, how? Technical analysis looks at price moments of stock in chart and estimates the future stock price movements. Whereas fundamental analysis is based on the economic factors of balance sheet, income statements, price ratios etc., ultimately in fundamental analysis tries to identify whether the company is potential for sound investing or not !!  Technical analysis is completely different to fundamental analysis, it assumes that all fundamentals included in the stock and then go for analyzing the price moments of stock in chart. 

Hope I make you clear on two different aspects, at the same time I think I made you confused. isn’t it!!

Yes, now in most of us should have raised a question that which one to go for – in picking a particular stock?    

Fundamental Analysis? , Technical Analysis?

Fundamentals are very important, without fundamentals market would not move. It gives a bird view of a company for understanding the balance sheets, income statements, Changes in management, environmental factors, Competitors strategies etc., by considering all these factors it gives a predicted value of future cash flow. 

Technical analysis starts with assuming all the fundamental factors included in stock and then go for identifying the trends in price moments and volumes to make a sound decision on predicting the future stock price.

Few tips got from experts: 

If you are planning to invest for a longer period then it is better to go for strong fundamental analysis. 

Suppose if you are expecting returns in short period of time (say 1 year) then go for fundamental analysis initially and at the time you feel to trade go for technical analysis for better returns. 

If you want immediate returns right after your investment then go only for technical analysis, i.e. trends in price moments and volumes. 

*As the period increases the fundamentals should be strong *  

That’s all for today

Have a blessed day

 

SIS Part - 2 (Selection Criteria of top 30 Scrips in BSE)

Continuation to SIS Part-1

Generally sensex calculated by top 30 listings under BSE, this post will bring some awareness in selection criteria of top 30 scrips in BSE

 

(1) A company equities listed on BSE ltd. (by excluding mutual funds, and the scrips that are traded by permitted category and SME category)  shall be considered eligible

(2) A company should have a listing history in last 3 months at BSE

(3) A company stock should be traded each and every trading day in last three months

(4) A company should meet revenue criteria in last four quarters are eligible.

(5) from the sorted list of top 4 points, the top 75 companies are selected as per the free float market capitalization by taking average of last 3 months, as well as any other companies listed under top 75 as per the full market capitalization. 

(6) From the sorted list came by the 5th point (which can be greater than top 75 companies) is then ranked under absolute turnover (The return that an asset achieves over a certain period of time) avg of 3 months

(7) From the sorted list of 6th point that has cumulative turnover  (The sum of a company's income with respect to a specified financial period or date) of >98 % are excluded and the remaining list may be just more than 30 companies

(8) The sorted list of 7th point is further reduced by free float market capitalization i.e any company having a weight < 0.50 % will be excluded.

(9)All remaining companies will be sorted on sector and sub-sorted in the descending order of rank on free-float market capitalization.

 Well these are the standard selection criteria procedure accepted by the authority boards 

In part three we will see how to read sensex charts :-)

Have a blessed day.. !

Contact: lalikrishna@outlook.com


 

Stock Investing Strategies Part -1 (Begineers)

Welcome,
As in my previous post mentioned that I am going to start a new section of STOCK INVESTING STRATEGIES (refer Part-0) with reference to that, 

Stock Investing Strategies Part -1:-

Before going in to actual study of STOCK INVESTING STRATEGIES, it is necessary to understand some of the basics of SENSEX (or) Standards of Share market…. like 

what is sensex ?

How to calculate sensex?

What is market capitalization?

What is free float?

What is free float market capitalization?

 Sensex? – It is an index, what is Index? Index is an indicator which shows generally most of the stocks has gone up or down. Here we have two Indicators; Sensex is an Indicator of all major companies under BSE(Bombay Stock Exchange) and Nifty is an Indicator of all major companies under NSE (National stock exchange)

Sensex is calculated by considering top 30 listings under BSE, It is calculated by the method of free float market capitalization which is accepted by worldwide. Before we study free float market capitalization, it is necessary to understand what market capitalization is!!

Market capitalization: It is the worth of a company in shares, Example: If you are buying all the shares of a company then the price of total shares will become market capitalization. 

Free float: Generally, any company doesn’t allow all the shares in to the open market, some of the shares with board directors and some of the shares with investors and also with government etc, by excluding all these bodies the remaining shares will treated as open market shares. So we can do trading only in this open market shares.  

Total no of open market shares * Price of the share = Free float Market capitalization

For your reference: 

According to the BSE, any shares that DO NOT fall under the following criteria can be considered to be open market shares:

• Holdings by founders/directors/ acquirers which has control element
• Holdings by persons/ bodies with "controlling interest"
• Government holding as promoter/acquirer
• Holdings through the FDI Route
• Strategic stakes by private corporate bodies/ individuals
• Equity held by associate/group companies (cross-holdings)
• Equity held by employee welfare trusts
• Locked-in shares and shares which would not be sold in the open market in normal course.

Now the free float market capitalization simply means that the sum of all free float market cap of top 30 listings under BSE gives the free float market cap of particular intraday trading. The company with higher free float will have the higher weight in index. That means most of shares will be in open market gives the higher free float. Here the percentage of free float in total capital is not the free float market capitalization, according to the authority board there are different slabs to decide free float adjacent factor, which multiplies with free float open market shares and gives total free float market capitalization. Please go through the following table for better clarity. 

In reliance case, No of shares = 3274230107 with Full Mkt. Cap. 288001.28

No of open market shares =    ?               With Free Float Mkt. Cap 158400.7

By calculation the no of open market shares = 1800826558

So the % of free float will be 55% and the free float factor according to the slabs is 0.55 (see below)

So now we know what is sensex and free float market capitalization, so what are you waiting for? lets calculate today’s sensex. 

To calculate sensex the formula is : (Free float market cap/ base market capital)*100   
           
Free float market cap: sum of all the free float market cap of top 30 listings under BSE;

 Base market capital: To find out this I am recording free float market cap for last two days in BSE, on feb 18^th the free float market cap is 1657414.24 with sensex 19501.08, by this 1657414.24/19501.08 = 84.99089

Today’s free float market cap i.e on 19 th feb 2013 is 1668865.61, then the sensex value will be 1668865.61/84.99089 = 19635.817 (apx) check with 19 th feb sensex value in BSE India.

Well… I am tired….

In next blog posts we will see some more basics like, how companies will choose under top 30 listings in BSE and how to read Sensex or Index charts etc, after that we will go for the fundamental analysis and technical analysis nothing but stock investing strategies.

Contact:- lalikrishna@outlook.com