The demerger of the stock broking arm, Indiabulls Securities (ISL) from the parent Indiabulls Financial Services (IBFSL) could unlock significant value for the shareholders, similar to what the demerger of Reliance Group did for the Mukesh and Anil Ambani-owned companies, according to analysts tracking the group.
IBFSL has a market cap of around Rs 20,000 crore, with financing and the stock broking business as subsidiaries. With the demerger, ISL will list independently and house the stock broking business, while IBFSL will represent the group’s financing business.
The stock broking business contributed a quarter of IBFSL’s revenues, reporting net profits of around Rs 140 crore, in FY07. ISL, focused on the retail segment with 300 branches, should report profits of Rs 260 crore in FY 08.
IBFSL is likely to disburse more than Rs 12,000 crore by the end of FY08. After the demerger of ISL, IBFSL will have a net worth of Rs 3500 crore.
It will count among the top five private sector BFSI players, in terms of net worth, after ICICI Bank, HDFC, Axis Bank and Reliance Capital. The company is expected to report profits exceeding Rs 500 crore for the year ended March 2008, said sources.
IBFSL had demerged its real estate business in February. It subsequently listed as a separate entity called Indiabulls Real Estate (IBREL) and the combined stock price has since doubled. The price of IBFSL was around Rs 700 when the demerger took place. The combined price of IBREL and IBFSL now exceeds Rs 1600.
The recently listed brokerages have been quoting at hefty premiums. Companies smaller than ISL such as Edelweiss and Motilal Oswal have market caps of around Rs 11,000 crore and Rs 8000 crore respectively. Edelweiss is quoting at a price-to-earnings multiple of over 40 times its FY 09 earnings.
ISL is likely to grow at 40 per cent and report profits of 350 crore in FY09. ‘’At a similar multiple to Edelweiss, ISL should be valued at Rs 14,000 crore on a stand-alone basis,’’ said an analyst who tracks the brokerages.
‘’There’s a potential of 50 per cent upside from here on, due to this value-unlocking exercise,’’ added the analyst, citing the example of Reliance Group companies which have seen their market cap zoom 4 times after the brothers parted ways.
IBFSL will drive the group’s growth in financial services. It is eyeing new businesses such as insurance and commodity trading. It has announced a joint venture with the public sector MMTC to set up a multi-commodity exchange and has applied to the Forward Markets Commission in this regard.
Source - Business Standard
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
No comments:
Post a Comment