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Sunday, March 23, 2008

Maruti to invest Rs 9,000 cr more

Plans world class R&D, design facility, regional distribution centres and logistics support.

Maruti Suzuki India Limited (MSIL), the leading car maker in the country, will invest Rs 9,000 crore more in India, most of it in research and development (R&D), warehousing, marketing, logistics and design.

The company has already set aside a corpus of Rs 9,000 crore, which will be used primarily to augment production. Almost every second car sold in India is a Maruti vehicle.

The fresh investment will be made over a longer period, about eight years, as compared with three years for some earlier investments.

Shinzo Nakanishi, managing director and CEO, MSIL, said, “We will invest Rs 9,000 crore in India which will be over and above the earlier investment programme announced by the chairman (Osamu Suzuki) last year.”

“The investment will cover our other round of expenses for setting up a world class R&D and design facility, improving warehousing facilities and marketing channels, upgrading our logistics support and similar ventures, which will improve the company’s overall business presence in India,” he said.

Delivery time
The company is planning to set up giant regional warehouses, which will cater to sectoral markets in each of the distribution zones.

This means that a Maruti dealer in Mumbai would not have to place the order for a particular model to the company’s office at Gurgaon or Manesar, but he would be able to source the car model directly from the regional centre based somewhere in the western region. This will slash delivery time by 70-75 per cent.

Maruti is planning four or five regional centres (warehouses) in the next couple of years, in the eastern, western, southern and central areas of the country.

For example, it takes about a month or two for Swift, the company’s top selling vehicle, to be handed over to the customer today. With regional warehouses in place, the delivery could achieved in less than 10 days.

Capacity constraints
The centralised and timely despatch of vehicles from its facilities in the north will mean faster shipment to overseas markets through the Mundra and Mumbai ports in western India.

“Company dealers cannot be expected to pour large sums of capital into enhancing showroom space to house more vehicles. Hence, we have decided to go ahead with the regional warehousing plan,” a company executive explained.

Apart from launching new models by the end of this financial year, Maruti Suzuki expects to hit a production of 300,000 units from its Manesar plant alone in October, which would take its combined capacity up to 900,000 units. It will add another small car to its line-up, perhaps in 2008-09.

Faced with a production constraint, the company is unable to satisfy the current demand. Even though the Gurgaon plant is stretched beyond its original installed capacity of 500,000 units (it now produces 600,000 units), the Manesar plant produces just 130,000 units.

Posted by Srivatsan at 3:28 PM

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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.