QUANT SYSTEM INVESTMENT VIEW & TRADE RECOMMENDATION - 10.04.23

From the desk of Capt.D.Ganesh Raja

Dear Friends,

Today I am going to discuss different things and it might look I am going all over the place, but the attempt is to trying to understand the different events to form a view as to our own investment and trading decisions.

The topic of discussion in informed circles is US job growth. ”Employment growth has not collapsed though there are signs of continued modernization”, said Kathy Bostjancic, Chief Economist and SVP at Nationwide. Job growth has slowed, interest rates are high and inflation is stubborn in the US. It has been a while and since the top investors in the world like Ray Dalio and celebrated author cum entrepreneur Robert Kiyosaki, have been predicting the worst for the US Economy and US dollar. Ray Dalio has been has been quite articulate in expressing his theory. A person to track this in a meaningful time frame, is quite tough, If not impossible.

Now we need to protect our investment and we cannot follow anybody,

I decided to have a close look but US inflation chart since 1929 and what struck me was inflation was at highest band of variance and ccomparing that with period of the chart from 1950 to 1976, which resulted in inflation remaining elevated right till 1982. There is a strong correlation to that now. The instances where US inflation has been has been in the higher variance band compared to the long-term chart has been has been for a brief period. This brief period even if a couple of years could bring a lot of pain.

Tech giants are laying off people in US, but a report claims that strong hiring is happening for startups. The report also claims laid off worker gets hired within 3 months.

Nasdaq tech heavy indices are indicating an upswing to continue for some more time or at least I would say that there is no sign of sudden reversal. From the peak, these indices have corrected by about 26% and possibly value hunting might be taking place.

As for the Dow and broader US economy is concerned, I do not have a firm view as of now because there is no clear direction as per the system.

Now let us turn our attention back home to India.

The S&P Global India Manufacturing PMI rose to a 3-month high of 56.4 in March 2023 from 55.3 in the previous month, topping market forecasts of 55.0. Output rose at the quickest pace since last December and one that outpaced its long term average. New order growth was at 3-month peaks. Source: Trading Economics. I had a careful look at long term data and there seems to be a new trend emerging here with a very strong upward bias.

Inflation expectations is well within variance limit and in fact right in the middle of the long-term chart since year 2000, with downward tendency. Disposable income has moved out of its long term trendline and now seems to be forming a new range to the upward. If inflation expectations are down and disposable incomes are high, it could be a powerful combination for our economy. Employment rate has increased from 44.7% in Q4 2022 from 44.5% compared to previous quarter. Latest figures are not available yet.

Another fact which I closely looked at is, “Indian Central Government total expenditure to GDP ratio”. It has been maximum in late 80s to early 90s from where it has been steadily falling and bottoming in 2015-19. Looking at the pattern from there. we can see first leg of up move followed by a corrective wave, which is in progress currently.

10 year Government Security index has been extremely strong and this might have been fueled by rate hike pause by RBI.

Looking at all the above factors, if at all a global crisis emanates from somewhere else, we will not be immune to it in short term but will be cushioned to some extent and emerge much stronger. Probably it would be a great opportunity for people waiting in sidelines and first-time investors to enter in equity markets, if not directly, at least through Mutual funds.

After checking lot of data and charts , my observation is that, industries focused on domestic market seems to be getting a boost.

Expect earnings news driven volatility this month as results start trickling in. Individual stock recommendations could swing wildly due to this.

NIFTY : Last close – 17599.15. Continue to hold long position in Nifty till indicated levels of 17600 to 17700. I will inform as and when a system exit shows up. This trade recommendation is at a absolute profit of 3.88%.

NASDAQ COMPOSITE: :Last close – 12097.96. Continue holding long positions as further gains seem likely. This trade recommendation is at a absolute profit of 3.53%.

USD-INR: : Last close – 82.13. This trade recommendation is at a absolute loss of 3.88%.

MCX GOLD: Last close -60569.00. The rally is powering ahead and expectation of a consolidation has to wait for some time now. International gold prices have closed above 2000 and more gains seem likely.

RECAP ON PREVIOUS RECOMMENDATIONS

1. BPCL: Last close – 328.05. Stop loss triggered on 05.04.23, resulting in absolute loss of 5.02% and asset allocation loss of 1.00%. Trade recommendation closed.

2. HCL TECH.: Last close – 1091.85. Continue holding short position. Presently in absolute loss of 3.81% and asset allocation loss of 0.38%. Hold position.

3. TITAN: Last close – 2548.45. Presently in absolute profit of 2.21% and asset allocation profit of 0.33%. Hold position. It is recommended to continue holding long position.

4. TATA COMMUNICATION: Last close – 1259.85. Presently in absolute profit of 1.15% and asset allocation profit of 0.17%. It is recommended to continue holding long position.

NEW TRADE RECOMMENDATION

1. BALARAMPUR CHINI: Last close – 411.60. It is recommended to go long at these levels with stop loss at 350. There has been a prolonged consolidation from May 2021 till date. It seemed it was forming a topping pattern with bearish implications but resolved to upside after a 5 wave correction, from 08.04.22 to 28.10.22. When a bearish signal becomes bullish it pays to put a trade and wait.

Target 1 – 500.0 , Target 2 – 618.0, Leverage – 0.10x.

Minimum profit potential – 21.5% , Asset allocation profit potential – 2.1%.

Minor trend : Up , Intermediate trend : Neutral with upward tendency , Long term trend : Neutral.

2. ARVIND: Last close – 59.85. It is recommended to go long at these levels with stop loss at 75.0. Target 1 – 108.0 , Target 2 – 145.0, Leverage – 0.05x.

Minimum profit potential – 20.2% , Asset allocation profit potential – 1.0%.

Minor trend : Up , Intermediate trend : Neutral , Long term trend : Neutral with upward tendencies.

3. GRASIM: Last close – 1669.05.What should one do when there is bullish consolidation pattern around life highs ? Go long , of course. It is recommended to go long at these levels with stop loss at 1495.0. Stop loss is deep to avoid shakeouts.

Target 1 – 1827.0 , Target 2 – 2050.0, Leverage – 0.10x.

Minimum profit potential – 9.5% , Asset allocation profit potential – 0.9%.

Minor trend : Up , Intermediate trend : Neutral , Long term trend : Neutral with upward tendencies.

4. ULTRATECH: Last close – 7701.85. It is recommended to go long at these levels with stop loss at 7189.0. Target 1 – 8869.0 , Target 2 – 9500.0, Leverage – 0.10x.

Minimum profit potential – 15.2% , Asset allocation profit potential – 1.5%.

Minor trend : Up , Intermediate trend : Up , Long term trend : Up.

5. L&T: Last close – 2274.25. It is recommended to go long at these levels with stop loss at 2080.0.

Target 1 – 2502.0 , Target 2 – 2646.0, Leverage – 0.20x.

Minimum profit potential – 10.0% , Asset allocation profit potential – 2.0%.

Minor trend : Up , Intermediate trend : Up , Long term trend : Up.

6. INDIAN HOTELS: Last close – 324.40. It is recommended to go long at these levels with stop loss at 275.0.

Target 1 – 370.0 , Target 2 – 410.0, Leverage – 0.05x.

Minimum profit potential –14.1% , Asset allocation profit potential – 0.7%.

Minor trend : Up , Intermediate trend : Neutral with upward tendencies , Long term trend : Neutral.

RETURNS TILL DATE SINCE 04.07.20 : 79.14% (AS OF THURSDAY 05.04.23 CLOSING)

LEVERAGE FOR EXISTING TRADE RECOMMENDATIONS: 2.60

LEVERAGE FOR NEW TRADE RECOMMENDATIONS: 0.60

TOTAL LEVERAGE: 3.20

ASSET ALLOCATION PROFIT POTENTIAL FOR NEW TRADE

RECOMMENDATIONS: 8.3%

TIME PERIOD OF TRADES RECOMMENDED : 15 DAYS TO 3

MONTHS.

TRADE RECOMMENDATION LOG.pdf

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