Saturday, 10 November 2012

NIfty P/E

P/E ratio is known as price to earning ratio. How to calculate PE? In simple terms lets say if stock is trading at 100 Rs. and its earning per share is 10, then thats share PE ratio is 10 (100/10). Fundamental analysts find this as a very useful tool. If PE ratio is low compared to others then it is considered undervalued.

Now i present a PE chart of nifty and try to analyze when to enter and exit.





















 Lets analyse the above graph for more insight. All time low of Nifty P/E is 10.68 in 2008 during recession. Belows the Nifty P/E lows or support levels in the last 10 years. These are excellent levels to buy. Nifty P/E below 13 is a big BUY any-day.


Date Nifty P/E
1 27-Oct-08 10.68
2 12-May-03 10.84
3 1-Jan-99 11.62
4 24-Jun-04 11.82
5 13-Jan-09 12.16
6 21-Sep-01 12.3
7 29-Apr-05 13.27
8 25-Oct-02 13.83
9 14-Jun-06 14.92
10 18-Oct-00 17.18
11 5-Mar-07 17.2
12 25-May-10 20.06


All time high of Nifty P/E is 28.47 in 2000. Below is the Nifty P/E peaks or resistance levels in the last 10 years. These are best levels to SELL. Nifty P/E above 24 is a big SELL any-day.
Date Nifty P/E
1 11-Feb-00 28.47
2 8-Jan-08 28.29
3 12-Dec-07 27.69
4 13-Oct-10 25.91
5 23-Dec-99 24.22
6 31-Dec-09 23.17
7 9-Feb-01 22.78
8 8-Mar-04 22.01
9 16-Oct-06 21.65
10 31-Dec-03 20.73
11 26-Feb-02 19.14
12 19-Dec-05 17.2                                                                        
 (the above data is taken from http://bse2nse.com)

So any PE level of 13/14 or below it is a "must buy" level.  These are very rare opportunities to by the index at low levels. Levels above 24/25 are usually a period of roaring bull market.  It is a phase where everybody wants to buy shares at any price because they feel left out as prices are continuously going up. Do you remember year 2007?  The housing loan scam just was a reason for markets to correct. Above all, it was Nifty P/E at all time high which posed huge resistance. The housing loan scam was a misbehavior of few individuals and fundamentally nothing changes with respect to the companies in scrutiny. When everybody wants to buy, you need to know that now the time has come for me to exit, and PE ratios reflect that.

Now you would want to know the current PE ratio.....here it is taken from NSE website.

It is 18.43
Here is a link 
http://www.nseindia.com/products/content/equities/indices/historical_pepb.htm
 
Do you know in the month of June 2012 it traded around 16/17 PE when nifty fell below 5000. In fact this whole year PE has been between 16 and 19.
 
Hope this article will help you some way.


















                    

Friday, 9 November 2012

Will Aban Offshore take a support??






As you would notice, it is right at the channel support.  Now question is would it take support or go down more?  Well, i am not here to predict.  Technical analysis does not believe in predicting.  It believes in probability.

There is a high probability that it would take support here.  It has twice taken a support on this channel line in the past.  So it is likely to repeat the history the third time.  Secondly, look at the volume.  It is falling on less volume compared to when it was going up. Third, RSI is at extremely oversold level.  So all things put together, there is a high likelihood of taking the support.

Now the question is what if it does not???  Answer is we should never bother.  If there is a trade setup, we should take it.  Fine if it goes in favor.  Else SL will hit.

Tuesday, 6 November 2012

Ambuja Cement


The chart speaks itself.  As suggested on earlier post to keep an eye on the support, it exactly took support on the channel and bounced off.  Now it is likely to reclaim new high if all goes well.

This is the power of technical analysis and buying at supports.

SBBJ

State Bank of Bikaner and Jaipur

What a breakout!

As you see it traded quite long around 200 DMA, got supported and now has strongly broken out.  Isn't it wonderful??  Sorry for posting it late, but it is still not late.


Delta Corp Ltd

As you can see on the chart, the stock has taken support on a cluster of moving averages 50,100,200 DMA.  65 seems to be a good base.  A close below it would warrant an exit.  Till then enjoy the ride upto 88.
CMP 69.8.