Nifty small cap index fell from highs of 9000 in 2017 to a low of 3600 in March 2020. Since then it went up sharply, and hit a fresh all time high of 11290 in Dec 21. And since then it has been in a corrective mode with swing low of around 8450 in June 2022 and currently at 9740.
I think once a strong trend gets established in the Nifty 50, the dog will get settled and the tail will start wagging. Till that time it could be sideways or more stock specific.
Sir, I was going through Garware Hi Tech Films. When I was reading risks involved due to Governance Issues, I remembered Monish Pabrais talk of Risk and Uncertainty. The probability of improving governance is there as third generation is taking over. I think market if taking this uncertainty as risk and discounted in current price. Business is available below Book Value and current PE of 9 (11%+1.5%(dividend yield)=12.6%) looks promising. Ashish Kacholia is invested and increasing stake.
You can’t advise weather to buy or not but sir what has been your experience of such kind of uncertainties? Business fundamentals are strong and improving.
Hello sir , how the long term investor view his approach , sometimes very good biz are almost falling knife after Quarterly results,it’s possible before results we can judge by on charts , some examples like rajratan global ,apcotex ,rhi magnesita , thanks in advance
Hi Hitesh ji! First off, thanks for your invaluable service to this community.
I have a question on the whole techno funda approach. Often times i reduce my holdings in a particular scrip based on charts only to find out later that the fundamentals are actually improving. Recent example being Vimta labs (I am aware that you reduced your holdings in it too) After the latest results and encouraging concall i feel like i have made a mistake. Essentially i sold low(based on technicals) and now i wanna buy at higher prices which is making me wonder if techno-funda investing is really worth it. Or maybe i am not doing it right. I was happy when i kept technicals and fundamentals separate. It’s only over the last 2 years that i have blended the two and often find myself in situations like these. Wondering how you deal with such situations.
If you can provide your technical chart, your technical reasons for selling them, so that Hitesh sir can point out more than what you have observed in the chart, in case he wants to explain your question without providing his chart, which in any case is complex.
Asking as I do this sometimes, only to find the price going up, and buying again more than the price I had paid before. Learning not to sell, learning to understand the fall.
I will delete this post later.
Garware Hitech Films is into manufacturing polyster films. This is essentially a commodity business, though the name of the company includes Hitech. The polyfilm cycle has started turning for the worse and in these kind of sectors usually markets smell a rat much before the bad results come through. Probably that is the reason most of these polyfilm companies like Polyplex, Cosmo, besides Garware hitech appear weak. When the cycle turns is anybody’s guess, so its better to stay cautious till the picture becomes clear.
Ashish Kacholia might have his own reasons for increasing his stake here. But as retail investors we need to look after our own interests rather than rely on following marquee investors.
I think you should do some more research into the prospects of the business going forward, both in near term and medium term and then take a call. Try to learn to differentiate between commodity and (consistent) growth companies.
In cyclicals, when the cycle is in an upswing, no price is too high and when it deteriorates, no price is too low. So don’t be guided by past numbers and try to extrapolate. I used to hold Polyplex earlier, when I knew the cycle was in an upswing and exited when price indicated exit. ( I also take guidance from some friends who are experts in these polyfilm cycles. )
I think in stocks where there has been very sharp run up in response to good results for a quarter or two, or in anticipation of good results, we have to be very careful while buying at very high levels. Because at elevated prices, expectations are also elevated and most of the times whatever the company delivers falls short of market expectations.
Coming to specific example of Rajratan, it had a dream run from levels of around 540 in June 2022 to 1400 in Sep 2022 and at levels of 1400 valuations (considering TTM EPS of around 25) was very expensive. The rally itself was almost vertical and smacked of a parabolic move. These kind of moves are difficult to sustain after a point and sharp cuts are usually inevitable. Currently stock price is trying to find support at its 200 dema and at 61.8% retracement of its previous rally. Need to watch out how things pan out.
Many a times, its difficult to anticipate impending sharp cuts just by following charts. Unexpectedly below par results will result in sharp cuts, and even technical guys are often caught unawares, and stop losses are triggered in the blink of an eye. In such situations, one has to take swift action and exit, or if company is good and future is bright, bear temporary pain and stay invested.
I used to follow Apcotex, and the market reaction post results has been a surprise for me too. It has gone well below its crucial support of 525 and its 200 dema at 515. Its a good company with very good promoters, but business is slightly prone to vagaries of raw material price fluctuations and hence one cannot think too much long term in such kinds of businesses.
I don’t follow RHIM.
Investing based on techno funda approach requires a special mindset. In this type of investing, there is often very high churn rates and many a times entry signals come at levels much higher than previous exit signals. Practitioners of this discipline have no qualms about buying a stock at 30-40% (or whatever level is indicated by charts) higher than earlier selling levels.
Specifically in case of Vimta, I made my exit from it because I found much more compelling options and hence found it easy to switch.
If you find it difficult to practice techno funda approach then its not for you. You might try and find a style suitable to your temperament and try to follow it.
For me some of my picks fall into the medium to long term category, where barring the ocassional swing trading, I keep holding them as long as the growth remains on track and tailwinds persist. In rest of the part of my portfolio, I follow techno funda or pure technicals and I try to be pretty clear at the time of buying what kind of call I am taking. Whether its pure funda, techno funda, or pure technicals. That makes it easier to deal with decisions at a later stage.
In case of Vimta labs, for the long term investors relying on pure technicals, 340 was a breakout above previous all time high and the stop loss was a conclusive breach of level of 270, which was the swing low prior to the stock breaking out above 340. Target for the pattern breakout was 580 and 620. For short to medium term guys this whole equation would have been different.
Hitesh bhai, do you NHPC break out was false? As it has falling down since past 2-3 days after breaking above 46…
Hello Hitesh sir, what are your updated views on paper stocks? Companies are posting very good results but the stocks are being sold after the results.
Is this the sign of sector being topping out?
NHPC has undergone sharp short term correction after hitting fresh life time highs. That I think is nothing new. I usually am not too alarmed if stocks correct 10-15% from their swing highs (many a times its 20% correction too, but anything more than that often leads to prolonged consolidation before a major upmove.)
Results announcement is due on 10 th Nov. So till than its wait and watch.
Paper stocks as you mentioned are not reacting too enthusiastically to what appear to be superb results. I don’t follow the sector too closely once I had exited some picks from the sector.
I am usually wary of companies and sectors where the main tailwind is price rise due to shortages and such reasons. Those holding positions should listen to concalls in sectoral stocks where its being done and try to figure out how things stand.
Regarding the sector topping out, I think its too early to conclude. Maybe watch for a few more trading sessions and see how stocks react.
@hitesh2710 Sir,
Does this look like a inverse H&S pattern? Please share your view
Sales are growing and looks like margins have bottomed out. You view on the company as well if you track it.
Thankyou
@hitesh2710 - did you have a look at Eureka Forbes- demerged from Forbes company- headed by Mr Pota former head of jubilant food works. Fundamentally significant market share in both water purifier and vacuum cleaner. Though it’s just like any another home appliances businesses they have a steady state AMC business for water purifier as once their customer, Every year the customers have to shell out money to buy filters from them. It’s a must for the customers to change filters every few years- in a way a very good business if you ask me.
But all these years the management lacked focus as Seen by their lacklustre growth. Now after demerger, they are now debt free and renewed focus on the business after entry of Advent international and Mr Pota. Their latest credit report from CARE has upgraded them from BBB- to AA+.
The business is available at 4 times sales and price has been consolidating tightly in the range of 500-515.
If you haven’t looked at it, it warrants your attention and please give you opinion on it.
Biased coz of being customer of them for close to a decade and thought this to be one hell of business as I used to shell out 3000-4000 per year for the filters though upfront cost of new machine is 9000-10000 with one year warranty and hence invested recently
You were following krbl which seems to have almost broken out and then fell back. What is your reading of krbl technicals now?
PSU stocks in most sectors are showing very strong chart formations. (barring a few cycical PSUs like NMDC etc) We are all aware of the strong run up in PSU banks, PSU defence stocks. Even the less popular ones in other sectors are showing good strength… I think going ahead, the easiest sector to look at for techno funda picks (or pure technical picks) could be the PSU basket.
I don’t track exide or amber.
@tjjeykumar I don’t track eureka forbes.
@seshukumar KRBL had a major 3 year breakout above 340 levels. Post that it went up and tried to cross the strong resistance band of 400-410 and has failed till now. Support it seems exists between 370-380. LT Foods results had a negative impact on prices of both LT foods and KRBL, but the crucial event would be results of KRBL due on 11th Nov. Till that time we might continue to see range bound moves. I remain invested in KRBL with my own targets and stop losses.
Indiamart daily chart shows early signs of an attempt at a probable bottom formation. (Note the words like probable and attempt 
meaning its too early to conclude. ) Its an interesting chart all the same, mainly because there are two inverted head and shoulders patterns marked. First is the one in dotted lines where breakout happened and after a brief rally, a retest seems to have happened. Second is an impending breakout which will also co incide with a break above 200 dema marked in green.
It does seem to be suitable to occupy a place in the watchlist for potential change in trend.
Exide chart has shown a good breakout from a cup and handle pattern above 168. It has also shown breakout from a falling medium term channel. Basically it shows early signs of change in trend. Can be interesting going ahead.
While Amber chart looks weak. It fell from 4000 to 2000 within a few weeks and tried to take support from there and gave a weak bounce only to fall again. I would not be too bullish on this one as of now.
Regarding PSU power pack, I think anything PSU looks strong and even PSU power stocks look good. So it could be a sector to watch.
Kindly refer attached chart of Redington.
It has been moving in channel of around 135 (Purple Line) to 158 (Black Line) since few months. It broke both above and below this channel, but came back inside the channel eventually. 135 seems to be very strong support. After good Q2 results, it bounced up strongly from the 135 levels and on Friday, it closed around 158 level. Also, it seems that it has closed just above the trendline (shown in blue) with strong volumes. For me, it looks certain that it will go to the ATH of 179. but what signs one should look for to break out above 179?
Do you track GE shipping. The stock has tough ATH and has come up in cycle with earnings coming back. Given the cyclical nature of the industry it would be key to determine how long this run will go,
