Index Investing in Nifty 50

[jamit_05]

Placed an order to buy Idea at Rs.100 today. Went unfilled. Tomorrow perhaps.

Given the fact that Reliance has stepped into this industry, slashed rates and all, Idea may well correct to 2012 low of Rs.65, in which case we shall buy in with more 50% of allocated capital for each scrip. (If it were a top notch like Cipla, HDFC etc, then we'd buy 100%.)

 

[jamit_05]

A portfolio, or any set of actions for that matter, meet specific requirements. With Index Investing in NIFTY 50 we:

1) Invest in a premium asset class, which ranks high in reliability. Draw-down on the entire amount of investment will not be more than 15%

2) Invest Diversely, like no where else.
This is the best part. We get to invest in a vast variety of sectors. We are not dependent on any one set of circumstances that may affect say, Gold or Property. We are not in hope and pray mode.

3) Get a slice of the cake.
India is a growth oriented economy. Pharma, IT, FMCG, Cellular, Infra etc are breaking grounds (and ceilings) not only on home turf, but world over. Via Nifty50 we get a slice of this cake. (LIC, PPF, FDs, Post office, Gold and property do not offer that).

4) Best in class tax benefits on any amount of investment. In fact, while selling we will ensure that we get these tax benefits. Losers will be sold within the year, and winners after a year.

 

[jamit_05]

Extremely poor Q1FY17 results for Idea. Sharp fall in margins and profitability; margins hugely affected by Interest Costs, which are likely to increase further.

A snippet:

"CLSA estimates Idea will still have to spend $2 billion for 3G/4G coverage, which will further add to interest costs and debt, and increase net debt to EBITDA ratio to 3.4x in fiscal year 2017."

There is a lot negative happening for IDEA Cellular. Precisely why the stock is getting cheap. The converse is true as well, when the going gets good we will see fresh highs.

In fact, this is the reason why this portfolio will beat the performance of Nifty: We buy stocks, when they are in the dumps, more bad news the better, and hold them till the going gets good.

 

[jamit_05]

Bought Idea 97.60 - Qty As per amount allocated for each scrip.


This is the first trade, in the making of a Nifty50 portfolio.

 

[jamit_05]

<Next on Radar: ONGC 188)


BhartiAirtel and RCOM, too are collapsing. Meaning, the industry is looking down, is in its down cycle. Nothing particularly wrong with Idea Cellular. This is a good time to get in.

Bhartiairtel is an investor favourite in the sector. Our buy trigger for it is 281.90, a 2014 low.

Talking of Buy Triggers, if the Index decides to sharply correct to 7000 levels, like in March 2016, we will get plenty Buy Triggers in Pharma and IT sector, both are lucrative sectors to long term investors.

To list a few potential buy triggers:
Pharma
1) Cipla 369 (I doubt, but hv my fingers crossed)
2) Drreddy 2750
3) Lupin 1280
4) Auropharma 464
5) Sunpharma 550

IT
1) HCLtech 630
2) techm 410
3) wipro 475
4) infy 932, 720
5) tcs 2115



PSU
1) CoalIndia 240
2) ONGC 188
3) Bhel 90

Bank
1) SBIN 151
2) Bank of Baroda 102
3) Axis 366
4) Yes 595 ???
5) hdfc 928 ???

 

[Subhadip]

Great thread.

Thanks for the long term view.

But one question: you have bought Idea. And RCOM and Bharti in radar. As the telecom sector in down trend, will you add up more if uptrend starts when trend changes or keep as it is.

 

[jain.er]

My 2 cents
1. Better to reverse ie buy 52Week highs
2. JPA was once an index stock and so was DLF and Unitech and countless others
3. Have you backtested the strategy, if yes please share the details coz. I am not confident about its success as 52week low can be(it is generally) a value trap.
4. Stock making 52week low in a bull market are not good
5. If you believe in turnaround then they are very far and few
6. And most of the turnaround stories are not part of Index

 

[jamit_05]

My 2 cents
1. Better to reverse ie buy 52Week highs
2. JPA was once an index stock and so was DLF and Unitech and countless others
3. Have you backtested the strategy, if yes please share the details coz. I am not confident about its success as 52week low can be(it is generally) a value trap.
4. Stock making 52week low in a bull market are not good
5. If you believe in turnaround then they are very far and few
6. And most of the turnaround stories are not part of Index

Rogues such as JPA and DLF are a concern as they do not value the retail investor. A reason why Adaniports was left out of discussion.

I do have a filter, wherein, I look for an established past of the company as a result of which the company has leadership in its industry.

The company should be in Nifty50 as a result of its performance over the years, and not its political connections.

Have you backtested the strategy, if yes please share the details coz. I am not confident about its success as 52week low can be(it is generally) a value trap.

Nifty50 is an index which attracts institutional buying. Our strategy revolves around the ebb and flow of the institutional buying interest.

We aim to have around 40 scrips. Few rotten apples would not be damaging to the overall performance.

In Nifty50, 52Week Lows are mostly corrections after strong run ups, ebbing of institutional interest. Smaller companies need heroes and make turnaround stories.

If an individual stock is collapsing, then its worrisome. But, if the industry as a whole is correcting then it is mostly an opportunity. Like pharma, cellular, and IT are now. Like Banks were earlier this year.

A good amount of "common sense" is required.

 

[jamit_05]

jain.er

Have a look at these scrips and BUY triggers. One decent downleg in Nifty and most these will trigger buys.

Pharma
1) Cipla 369 (I doubt, but hv my fingers crossed)
2) Drreddy 2750
3) Lupin 1280
4) Auropharma 464
5) Sunpharma 550

IT
1) HCLtech 630
2) techm 410
3) wipro 475
4) infy 932, 720
5) tcs 2115



PSU
1) CoalIndia 240
2) ONGC 188
3) Bhel 90

Bank
1) SBIN 151
2) Bank of Baroda 102
3) Axis 366
4) Yes 595 ???
5) hdfc 928 ???

Do you still doubt that such a portfolio will perform less than twice as well as FDs?

 

[jain.er]

jain.er

Have a look at these scrips and BUY triggers. One decent downleg in Nifty and most these will trigger buys.

Pharma
1) Cipla 369 (I doubt, but hv my fingers crossed)
2) Drreddy 2750
3) Lupin 1280
4) Auropharma 464
5) Sunpharma 550

IT
1) HCLtech 630
2) techm 410
3) wipro 475
4) infy 932, 720
5) tcs 2115



PSU
1) CoalIndia 240
2) ONGC 188
3) Bhel 90

Bank
1) SBIN 151
2) Bank of Baroda 102
3) Axis 366
4) Yes 595 ???
5) hdfc 928 ???

Do you still doubt that such a portfolio will perform less than twice as well as FDs?

Your benchmark of out performance should be prashant jain, s naren of the MF world and not fixed deposit. The kind of stocks chosen are good but with those you may may not outperform fds but I am sure you will not outperform MF. Instead try large cap MFs for such index stocks because they have similar stocks and others and are well diversified.

For direct bets I recommend hpcl, Bajaj fin of the world a bit more aggressive and certain to outperform. In your universe I like pharma and private banks(though my fav. Indusind is missing) only. My personal choice and I may be proved wrong and I have no ego.

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