By Kamlesh Rao, CEO of Kotak Securities:

From the CEO’s Desk: Indian Markets cheer the Fed’s dovish stance

The Sensex has surged over 300 points today as the US Fed left the interest rates unchanged. It did not give any major hints about the future trajectory of interest rates and more importantly, on the timing of the first rate hike. These slightly dovish comments came in along the expected lines. The Fed said, the economy is expanding moderately. It also hinted, it will wait for further improvement in the labor market and for higher confidence that inflation would rise, before making any decision on hiking the rates.

The Fed also downplayed the importance given to the first rate hike and advised looking at the longer term trajectory of hikes in the future. It seemed to indicate, the first rate hike does not mean consistent rate hikes in future quarters. There is a possibility of a pause in rate hikes. For India, this is positive, primarily from the perspective of fund flows. A gradual rate hike is already discounted by the markets, except for a temporary impact at the time of the first hike. At the same time, a very strong pickup in the first pulse of monsoon augurs well for the economic growth as well for the disinflationary trend in the economy.

Key triggers for the Indian markets

The Greece issue and progress of monsoons will be the trigger in the immediate term. A strong pickup in the first pulse of monsoon augurs well for the economic growth as well for the disinflationary trend in the economy. We also expect Greece and its creditors to find a solution to the current impasse. Over the medium term, markets will look out for Government’s efforts on kick-starting stalled infrastructure projects and new project awards. Passage of the Constitutional Amendment Bill for GST as well as further progress on Land Acquisition Bill would also be key triggers for the markets over this period. Markets will also take cues from management comments regarding ground level impact of all initiatives taken by the Government over the past few quarters.

Indian rupee to be on the guard

Indian Rupee is expected to continue to trade a narrow range, thanks to active intervention of the central bank on both sides of the market. The RBI is eager to accumulate more foreign exchanges, as an insurance against large foreign currency investments and obligation and also at the same time, not allow Rupee to become too strong that it hurts export competitiveness. Hence, we may continue to see the central bank intervene to keep the US Dollar supported between 63.00/63.30 levels on spot. At the same time, depreciation beyond 64.50/70 is appears unlikely, as the central bank has emphasized on the need for stability. However, if the Greek scenario blows out of control, then Rupee can decline much beyond 65.00, possibly towards 66.00 levels, but we then also expect RBI to intervene to bring prices within its preferred band.

What’s in store for the investors?

Even as the markets is weathering the monsoon, Greece crisis and the fine print of the US Fed policy now, the medium to long term growth story is still intact. Because of government’s continued focus on reforms, we continue to maintain a positive stance on the markets from a medium term perspective.

By Kotak Securities:

Beginning of goldilocks era

Today’s prices in the stock market are a reflection of tomorrow’s profits. Indian markets have witnessed a buoyant trend that indicates better profit growth prospects for 2015. This seems to be the start of a golden era, not just for the markets, but also the Indian economy.

Many factors have fallen into place for Indian markets and the economy. India is the only major country that is projected to see a pickup in growth momentum. The growth cycle moved from slowdown to a recovery mode – last seen in 2009. And the industrial sector is expected to lead this recovery. This may start out gradually, but growth will pick up speed in the coming years.

A lot depends on the government’s reform-based approach. There has been a steady flow of reforms focused on areas like governance, ease of doing business and fiscal prudence. In the first six months, the new government has announced labour reforms, diesel price de-control, the ‘Make in India’ movement along with progress in GST talks. Not just that, the government has also extended diplomatic ties to attract foreign funding. We can now expect nearly $55 billion worth investments pouring over the next five years from Japan and China alone. Such concrete initiatives could herald an era of sustainable growth for India.

A significant development that could have an impact on India is the dramatic fall in global crude oil prices. India imports nearly 70% of the oil requirement. An over 40% fall in oil prices is good news for inflation. Retail inflation has moderated to 5-6% from double digits last year. Of course, it may rise in the first quarter of 2015 as the base effect wanes. However, most measures suggest that there is an underlying trend of disinflation. This could lead to a cut in interest rates. The RBI has also indicated the same. This will help improve consumer demand. As demand picks up, capacity utilization will improve. Currently, only 70% of the existing capacity is utilized to produce goods and services. Any rise in this, increases the prospects of new projects and capital expenditure in the second phase. Already, there is a rise in capital expenditure. This can be seen in the fact that the value of tenders for new projects grew 2% from the previous year as of November 2014.

All of this could spur growth. India’s economy, measured by the Gross Domestic Product (GDP), is expected to grow over 6% in 2015. This is significantly higher than the 5.2% expected in 2014. In fact, market expectations for the economic growth are higher at 6.5-7% over the next 3-5 years.

All this optimism has contributed to the rise in the markets. The Indian markets have outperformed its Asian and global peers. The Sensex is now up over 30%—a whopping 7,000 points this calendar year. Our market remains the hot investment option. And this growth is expected to continue as cyclical, rate-sensitive and investment-oriented stocks find flavour with investors.

This is quite similar to the scenario in 2007-08. Yet, there are key differences. Most importantly, there is a lack of systemic risks like the US sub-prime crisis. Secondly, global central banks are cutting interest rates now, unlike in 2007-08. Although more retail investors use, convenient trading platforms like our Kotak Stock Trader app on mobile, overall retail investor participation is very low. As they increase their exposure to equities, markets may rise further. Lastly, India’s fundamentals is much stronger today. The government is well on its path to reduce fiscal deficit and the current account deficit too has narrowed significantly. Financial savings (at around 7% of GDP) and loan growth (at around 10%) too have bottomed out, and can only head north.

By Anindya Banerjee:

Rupee continues to remain in a no trend phase, with 61:00 and lower acting as a strong resistance on the local unit due to alleged strong defense from RBI and at the same time, a broad global rally in USD also tempers bullishness in the Rupee. However, depreciation beyond 61:80/62:00 is not happening now as exporters, FIIs and carry traders are comfortable selling the Greenback. On a peer to peer comparison Rupee continues to appreciate.

Value of one fiat currency against the other is largely determined by the relative attractiveness. Net demand and net supply is what determines whether one currency appreciates or depreciates against the other. For the Indian Rupee, last 12 months have been a game changer. A mix of internal and external factors, which were acting as headwinds till last year, has now reversed polarity, and is now offering sizable positive momentum. Interest rates in the country, after adjusting for inflation is now positive by a decent margin and is expected to remain so over the short to medium term. A positive real rate is considered deflationary for the economy and hence improves the relative attraction of the Rupee. At the same time, GOI has shown remarkable political will in restraining fiscal expenditure and hence the deficit. Once the economy picks there will be tax buoyancy, in which case, the fiscal deficit can shrink further over the medium to long term. Fiscal prudence is once again deflationary and also thereby adds to the positive pressure on the domestic currency.

A sharp decline in global petroleum prices has become a major boon for an oil importer like India. Lower petroleum prices shrinks current account deficit and also lowers fiscal deficit. At the same time, lower oil prices leads to a down ward shift in the cost curve of all goods and services and hence increases the disposable income of households. India consumes around USD 1.25 billion barrels of crude oil every year, hence a drop in oil prices by 20/25 dollars a barrels leads to a cost saving of around USD 20/25 billion in a year. Higher disposable income boosts aggregate demand in the economy, which can be precursor to pick-up in the investment demand. As a result, the economy enters a virtuous cycle of higher growth and lower inflation.

Indian government has recently relaxed the norms for foreign investment in the construction sector. India needs to be build world class infrastructure at an affordable cost of funds and this can be achieved by allowing greater participation of foreign capital. GOI now needs to focus on the key areas like land acquisition, labour laws, tax regime, power sector, privatisation of PSUs, bankruptcy laws, deepening of financial markets and last but not the least, effective regulation and power to banks to deal with NPAs. There is hope that government remains committed to above mentioned reforms and hence we see considerable support for the currency over the medium to long term.

Over the near term, we need to keep an eye on the developments surrounding the 'black money" proceedings. India is yet to ratify two major global treaties on sharing of information on illicit money. India needs to ratify the FACTA accord, Foreign Account Tax Compliance Act by the end of 2014. Under the law, Indian firms dealing with US nationals or having business in US, will have to disclose information to US tax authorities. Similarly, US alongwith other signatories of the FACTA will share information with India on its citizens financial activity in those countries. However, under FACTA, Indian government would have to maintain secrecy of whatever information it receives from the member countries. Incase India fails to ratify the accord then its businesses and financial institutions can face penal tax of 30% on inflows from the members countries. The apex court in India is expected to pronounce its verdict around the first week of December. We have to keep a eye on the proceedings as incase the Supreme court prohibits GOI from ratifying FACTA on grounds of embedded confidentiality clause, then it can have significant adverse effect on the Rupee.

We have seen a U-turn in the global financial markets, where, a mix of financial intervention and verbal intervention, from the BOJ, US Fed and ECB, has triggered a massive risk on play. Indian equities and debt have benefited from the same. BOJ announced fresh measures to ease monetary policy. Bank of Japan will now expand its monetary base at the rate of 80 trillion yen annually, from 70 trillion yen previously. At the same time, the domestic pension fund, GPIF is expected to announce doubling its allocation of funds to domestic equities and foreign equities, at 25% each now. All in all, global liquidity gets another shot in the arm. We expect the Yen carry flows to rise in the coming weeks and months on account of the above policy shifts. India will remain a major beneficiary of the same and hence Yen and EM equities will become further tightly negatively correlated.

Globally central banks are in no mood to allow any kind of structural damage to the manufactured bull market in risk assets that they have successfully engineered since 2009. However, trying to micro manage financial markets is akin to playing with fire, as years of forced stability can breed greater and significant instability down the road. Therefore, it is much better to heed the caution from saner voices of the likes of Dr. Rajan, who has openly criticised on the overindulgence on QE.

Global economic data over this week was mixed with Germany reporting poor business sentiment data for the month of October (IFO). Euro zone credit contracted further in September but at a slower pace. US durable goods orders had contracted in September. US GDP rose at 3.5% in Q3 after rising 4.6% over the previous quarter. A sharp rise in government spending drove the economic growth upwards. Inflation data from Euro zone members continued to point towards low inflation to deflationary scenario in the currency union. In Japan, household spending declined by more than forecast in September. Inflation in Japan came in lower than forecast in October. ECB's just concluded stress test of the Euro zone financial institutions failed to inspire confidence, as the central bank failed to account for deflation in the worst case scenario. Modelling a euro wide deflation would have led to a sizable increase in bad loans under the worst case scenarios.

Over the next week, traders will keep a close eye on the flash PMIs from major European economies as well ISM PMIs from US. US economy is also scheduled to release its monthly non-farm employment numbers. At the same time, Chinese and UK PMI will offer a glimpse into the state of their respective economies. Both, central bank from UK and Euro zone are scheduled to announce its monetary policy. Indian economy is going to report the PMI data for the month of October. Indian Rupee is expected to trade within a band of 60:70/61:00 and 61:80/62:20 over the next couple of weeks. Large options OI at 61 strike put option and 62 strike call options on NSE confirms the above the range. Rupee can continue to appreciate against Yen and the Euro. Against the GBP, it can remain ranged.

By Mr. Dipen Shah the Head of Private Client Group Research:

HCLT's results were below estimates. Revenues disappointed with a Constant Currency growth of 3.2%. EBIDTA margins also came in slightly below expectations.

The Constant Currency growth has moderated in past few quarters and overall revenue growth has come in largely on the back of IMS. The company needs to improve growth rates in non-IMS businesses.

By Dipen Shah the Head of Private Client Group Research:

Infosys results were higher than our estimates, both on the revenues and margins front. The guidance has been maintained, which is along expected lines. The company has improved efficiencies while adding a relatively higher number of employees, which is encouraging.

The new CEO has outlined his strategic vision for the company, which, we believe, should allow Infosys to achieve higher growth rates and sustain margins over the longer term.

We remain optimistic on the future prospects of Infosys.

By Kotak Securities:

Markets are buzzing with the Budget! Watch Mr. Uday Kotak's views on the Union Budget 2014.

To learn more about the Budget, head to: http://bit.ly/WatchMrUdayKotakB

By Dipen Shah, Head – Private Client Group Research, Kotak Securities:

With the recent trend of volatility and fluctuations, the Indian markets continue their edge-of-the-seat performance. However, markets impressed investors by ending the previous week on a high, gaining up to 4% on benchmark Indexes.

The change of guard at the RBI (with Raghuram Rajan taking over from the erstwhile D Subbrao) and the reduced tensions on the Syrian conflict have been the important reasons, which have helped bolster the Indian markets.

The slew of initiatives announced by the incoming Governor have helped change sentiments, both in the currency and equity investment markets. The Rupee seems to be showing signs of appreciating. The initiatives are expected to bring in significant USD inflows and thereby, lend strength to the INR.

With the rupee on an upward trend, banking stocks gained significantly. Other rate sensitive sectors also rose handsomely. On the other hand, stocks in IT, Pharma and FMCG were relatively subdued.

The escalation of the Syrian issue had led to a spike in crude price and depreciation of rupee. With a possible de-escalation of the issue, the trends have reversed and that has also provided optimism to the markets.

It is important to note that, the RBI initiatives have just been announced and have not taken effect, as yet. We will need to wait and watch for these initiatives to yield results before taking a concrete call. The investment climate in the country needs to be made more lucrative and attractive and more initiatives and reforms will be needed to strengthen the rupee, which may take time to materialize.

Our advice –
Markets have gone up in recent past and may retrace some of the gains. Accumulate (buy at each decline) stocks with a long term perspective. Remain with the blue chip stocks and sector leaders. Diversify your portfolio by buying stocks in defensive sectors like IT/Pharma/FMCG and also some of the beaten down sectors like Capital Goods/Banking, etc. The important triggers in the near term are the policy meetings of the US Federal Reserve as well as RBI.

By B Gopkumar, EVP, Kotak Securities:

It gives me immense pleasure to let you know that Kotak Securities has completed 13 years of online presence through www.kotaksecurities.com.

Over the years, we have been pioneers in offering cutting edge technology and have always enhanced your online investing experience. Today, technology has transformed the entire face of the industry and trading has become more convenient and available on the go. We understand the changing dynamics of the industry and are constantly adapting to the same.

Keeping in tune with this evolution, we dedicate this decade to mobile phones and tablets. Kotak Securities has launched many applications under the Smart-Tech platform. These applications empower you and allow you to trade from anywhere, anytime and from any device. It could be a mobile phone or a tablet device like an iPad. This makes us the only broker to offer access to the stock markets on the go, across such a wide range of devices.

Month gone by

From a market perspective, the month of July witnessed weak macro-economic data influencing share prices. A faltering Chinese economy and a lack of stability in the US economic data weighed on crude oil prices. Yet, India did not witness any fall in oil prices. This is primarily because the Indian rupee fell to an all-time low. The Reserve Bank of India took tough measures to curb volatility in the foreign exchange market. The bright spot for Indian equities was a surprisingly positive financial performance of key companies. As a result, Indian equity markets saw both benchmark indices rallying past key levels.

Month Ahead

The monsoon session of the Indian Parliament begins in August. The stock market expects the government to take initiatives to improve the investment climate in India. Engineering and construction giant Larsen & Toubro cited 'challenging times' as the reason for a fall in profits for the quarter ended June 2013. The Indian government needs to put its fiscal situation in order. The stock market would look for cues from the government on resource mobilisation to meet its expenditure requirement. Any sharp surge in the government borrowing programme would further dampen the sentiment across financial markets.

At this point, I'd like to take a reference from a very interesting speech delivered by Mr. Harish Manwani Chairman of Hindustan Unilever Ltd. at the company AGM. He spoke about "Leadership in a VUCA world". VUCA a term coined by US Army War College stands for Volatility, Uncertainty, Complexity and Ambiguity. There is probably no better term to describe our experience as either investors or market participants in the equity markets over the last few years.

By Shrikant Chouhan, Head- Technical Research, Kotak Securities:

During my childhood I was always fascinated by gold only because of its innate characteristic sheen, as I grew up I realised the monetary value it possessed.. When the global crisis hit the world in 2008, I realised why it is referred as a precious metal and the reason it commands a huge premium as compared to other metals.

On basis of the above facts and some real life experiences, I stepped into the world of investing in real gold.  Soon I realized that investing in real gold had its own short comings, for instance where to store, how to keep it safe etc. When I started taking interest in the Gold markets, with a view that it's a great hedge against inflation and global crisis I found that my impact cost was very high whenever I entered any deals with my jeweler.

When I discussed these issues with a friend of mine, he shared that these are common problems that every investor in gold faces, but there is also a solution called Gold ETFs.

Here I got an answer to all my worries - investment in Gold ETF. What is Gold ETF; it is an instrument where the underlying precious metal is Gold.

How does investing in Gold ETF help - Gold ETF benefits in terms of
Fair value in price discovery as it does not include making charges and other charges.
Ease of Investment - buying and selling can be done from anywhere without physical presence  and these days use of smart phones has been on rampant and companies too have developed software to buy/sell from the phone while one is on the go.
Saving in small denomination even a small denomination like ½ gram can also be bought with whatever surplus a person has. 
Liquidity - investments can be liquidated at a press of button; entry and exit is smooth.
Hedge - Gold has been considered a good tool to hedge against inflation.
Safety - no need to disturb the night sleep as ETFs are in dematerialized format.
Accountability - government knows who holds the ETF and there is transparency in the same.

I am glad that I was introduced to Gold ETFs by my friend. All my doubts have been clarified and I am sure that awareness about Gold ETFs will help many people like me especially in a country like India, which is densely populated and where the savings rate is very high.  The only missing link here is awareness, which I am sure with sound and efficient private banks stepping in can help a lot of people realize their dreams.

By Dipen Shah, Sr. Vice President - Private Client Group Research, Kotak Securities

While the RBI did respond to the Government’s recent fiscal initiatives and reduced interest rates by 25bps at its recent policy meeting, it differed from the market on the continuing fall in inflation and reversal of growth rates in the future.

Markets have been discounting a continuing fall in inflation due to the fall in crude prices as well as the slowing industrial growth (reflected in core inflation coming down sharply to about 3.5%). On the other hand, the recent Government initiatives have raised hopes of a faster recovery in the growth rates.

However, the RBI has sounded caution on these issues. It has indicated that, while growth rate seems to have bottomed out, faster growth will come about only if the monetary measures are supplemented by efforts towards easing the supply bottlenecks, improving governance, stepping up public investment and continuing commitment to fiscal consolidation. As of now, the industrial and services growth remain impaired because of various bottlenecks and uncertain global environment.

RBI expects a moderate recovery in growth to 5.7% in 2013/14 from 5.0% in FY13. According to the RBI, the outlook for industrial activity remains "subdued". The pipeline of new investment projects is "drying up" and existing projects have been "stalled" due to bottlenecks and slow implementation. Also, global growth is "unlikely" to improve significantly in 2013/14, according to the RBI.

To that extent, the RBI wants the Government to remove the bottlenecks and promote investments in infrastructure.

On inflation also, the RBI has sounded out risk factors like sectoral demand supply imbalances, ongoing correction in administered prices and pressures stemming from MSP increases. Supply side constraints may feed inflationary pressures if sharp interest rate reversals stoke demand.

It expects inflation to be range-bound around 5.5% in 2013/14. The RBI will endeavor to bring down that rate to 5% March 2014 and to 3.0% over the medium term.

RBI is also concerned about the Current Account Deficit. While in FY13, CAD was financed by the excess liquidity in the global economy, the liquidity situation could quickly alter for developing markets including India. The RBI feels this can be due to changes in outlook for developed economies and also process shocks, which could result in capital outflows.

'Little space' for future cuts and possibility of rate reversals
RBI has also indicated that, based on the current growth rates, inflation and CAD situation, there is little space for further monetary easing. Also, the RBI has indicated that, the risks to CAD, which stem from sharp reversals of inflows, may call for reversal (increases) in interest rates. We opine these statements will result in anchoring inflationary expectations.

We also note that, the RBI has also indicated that, it will ease more aggressively if, the CAD moderates more than expected or if inflation cools off faster than anticipated.

We expect a further 50bp cut
We expect RBI to reduce rates further by 50 bps over the course of the year, contingent upon delivery on fiscal front by the government. Also, with the latest rate cut, policy rates are near pre-crisis level - we note that, pre-crisis period (2006-2008) witnessed an average CRR of 6.5%, while reverse repo and repo rates averaged at 6% and 7.5%. In fact, during last decade, 2001-2012, average policy repo rate was 7.3%. This indicates that, we have now entered in neutral interest rates (long-term average) band. From now on, significant diversion in policy rates would warrant significant change in economic scenario.

Dipen Shah, Head of PCG Research, Kotak Securities

For many it’s their day-to-day livelihood while others have made enough money to last for a lifetime and there are plenty of others who have gullibly fallen prey to the vicious ways of the share market and saw a lifetime of savings wiped out in just the blink of an eye.

The stock market has continued to give decent returns year over year and the returns in turn are way better than one could expect from other modes of investment, and yet not all investors are able to make the most of the opportunity at hand. And there are various reasons attributed to failure to succeed in the market including the common perception that stock trading is as good or bad as gambling.

But why do people consider stock trading as gambling? And why do people tend to lose money on the market? And is there really a formula for success?

Contrary to popular perception, investing in the market can actually be beneficial rather than detrimental. The only catch of course is to make your moves with caution. And the formula for success is simpler than you thought, but first let us begin by attempting to answer the aforementioned questions.

Is Stock Market Really Equivalent to Gambling?

This is what most people think and believe and some literally take it to the heart. Share market investment is more akin to gambling and gambling obviously means getting addicted to something that will make you lose a huge amount of money and may be win some.

And gambling is bad considering the way people get hooked to the thought of someday making good their losses which most never will.

With respect to gambling, however, the cold hard fact is the very people who think stock trading is like gambling are exactly the guys who tend to lose money on the market. They don’t have a set investment goal or strategy to follow and all they are interested in is to make a quick buck and get rich overnight.

This leads us to the next logical question. If this is not gambling, then why or what makes people addicted to the market and lose money in the process?

Why Do People Lose Money in the Market?

The reason is simple – most newbies investing in the Indian share market do not have a definite investment strategy. It’s the “get-rich-quick” mentality that becomes their nemesis and eventually leads to losses – in some cases “suicidal loses.”

Here are five key reasons why people, especially the inexperienced folks, lose money on the market.

Most individual investors fall prey to either one or all of the self-explanatory reasons mentioned above. So how can people ensure that they don’t end up on the losing side?

Patience - The Secret of Success

If at all you want to believe there is a secret sauce for stock market success, there’s just one word that most successful stock market investors swear by and that is “patience.” And you need to have loads of if you ever want to hit pay dirt.

Some of the other prerequisites of stock market investment include defining a proper investment strategy that suits your style of investment, keeping yourself up to date with market trends, knowing when to exit and when to hold, and basically keep yourself firmly rooted to the ground. You don’t want to be swayed away by emotions, speculations, rumours and misinformation that most investors are exposed to day in and day out.

The Rewards and Benefits are Immense

It’s a known fact that stock market investments are one of the best known avenues to generate long term income and even beat inflation that is primarily responsible for capital erosion. It’s an arena where even beginners can make good of their investment provided they clearly understand the tricks of the trade.
They need to use a scientific and systematic approach to stock trading rather than an ad hoc approach where people seldom understand what their investment goals and objectives are and indulge in speculative trading.

One good tactic of investing in stock markets is to carryout index based investment rather than individual stocks. According to Sensex, while the returns from investing in individual stocks can vary, index investing has turned to out to be a much more reliable option from year 2000 to 2012 with average returns in the range of approximately 20% .

While the market has performed well in terms of returns on investment in the long run, it remains to be seen as to how investors actually make good of the opportunity by playing their cards wisely.

Dipen Shah, Head of PCG Research, Kotak Securities

It was largely anticipated that gold prices could hover in a range for some time. It was as if investors had a hunch that gold prices were at their peak. Yet, a sharp fall in international gold prices over the past few days took everyone by surprise. As India looks to attract more foreign capital flows, this fall in gold prices could just be the good news India needs to be an attractive investment destination.

Here are pointers that explain why falling gold prices could be good news for India:

By Jaimit Doshi, Head - marketing, Kotak Securities

There are always two sides of a coin. Goals are common but the route to achieve them can vary. The compliance team came to us with a brief saying they wanted to promote the right way of doing things.

Inspiration came to us in the form of mythology and the Indian construct of ethics. Jay and Vijay - both mean victory but both have a different route to achieve it. Vijay wants to win and win at all cost. In Vijay's battle field, there are winners (of course Vijay himself) and then there are losers. And on Jay's battle field, there are no losers, there are only winners. He chooses to play the win-win situation. Hence while they mean the same, we always use the phrase Jai Ho to greet each other in our day to day life. This daily life ethic gave us the inspiration for the memorable Jay Vijay mailers. Of course none of this theory was explained explicitly in the mailers. Those were simple situations where Vijay wanted to win without thinking about the consequences but Jay won by doing the right thing. It was simply and aptly communicated and the employees got the message up front.

Then came another challenge from the same Compliance Team. For those who think that they are a bunch of constricting folks, I urge you to think again. They did show remarkable verve by challenging us to take the concept further.

This time we borrowed from film lore and where else to look than the Badshah of them all - Bollywood. Especially the Munna Bhai Series. Here we have two really sweet characters. They both want the job done. The focus on the goal is single minded and blinkered. They are lovable, caring, soft and in many ways true to themselves. They will achieve their goals but one is used to doing it without a consultation with his conscience and the other, elder, has seen his inner side. He has met the Mahatma and like no other soul, he has been touched by it. So the elder thug always tells the younger one to do the right thing while explaining the consequences. He knows that Circuit is not a bad guy. He just is sometimes tempted to cut corners, but a quick check with Munna will ensure he follows the right path.

Both, Jay Vijay and Munna Circuit, tell us the same thing in different ways. One seeks victory for all and the other urges you to look inside of you. They are two sides of the same coin. We have inside of us all these characters. In every action or interaction, we have a choice. It is up to us to choose a path that aligns our interest with the client ensuring a win-win; and to look inside when no one is looking and find the right answer. There are always two characters shown - also emphasizing the insight that ethics is community construct. We are what we are because we live in a community that ties us in a range of acceptable behavior. So sometimes in doubt - choose to chat with a Jay or a Munna around you. Most likely, if you have chosen your colleague well, you will also - choose the path well.

By Dipen Shah, Kotak Securities

After a challenging previous year, Samvad 2068 provided some cheer to the markets. For much of the year, there was frustration and near-despair. However, concerted action by US / EU central banks and the subsequent reforms initiatives by the Indian Government have provided a much needed boost to our markets in the last 10 weeks. The benchmarks have recovered from the lows of 2011.

The new Samvad brings with itself, hope of a better future. The Government is in a mood to bring the economy back on the high growth path and that, according to us, can be a big positive, if the Government carries out with further reforms. The US elections have ensured continuity in and minimal disruption of US economic policies. The easy monetary policy also seems set to continue. EU has so far, succeeded in averting any major defaults.

No doubt, there will be periods of uncertainty and anguish and concerns. There may be corrections in markets. The fiscal cliff in US is expected to be the first big test for global equities. EU chiefs will also have to keep on working hard to avoid catastrophes. And more importantly, the Indian policy-makers will face a big test in the ensuing winter session. The last budget before 2014 elections will also be important.

However, we are hopeful of a much better Samvad 2069. Given this backdrop, we have selected some stocks which look attractive to us from an investment perspective.

By Dipen Shah, Kotak Securities

Every 3 months, companies, big and small, announce how they have fared in their business. So how does that impact you, the investor?We demystify the concept

What are Quarterly Results: Companies that are listed on stock exchangeare required to report the amount of profits and revenues generated over a period of time to a regulatory authority. In India it is SEBI, in the US, it is the Securities and Exchange Commission, and in the UK, it is the Financial Services Authority. Typically, an earnings announcement is unveiled on a quarterly basis and represents activity in the previous three months.

A quarterly earnings statement is a report card of a corporation's financialperformance during the quarter.Quarterly or annual balance sheets reveal how healthy a company is compared to the previously reported numbers.

Often, shares in a company will trade in heavy volume in response to the earnings results. This means that many investors will either buy or sell shares based on what the earnings announcement reveals.For instance, financial analysts set an expectation for what the earnings results will be. If the company meets or exceeds those estimates, the stock price will rise. If estimates are missed and earnings are worse than anticipated, market participants often will punish that stock by selling shares and subsequently putting pressure on the value of that stock.

The Importance of Quarterly results: Every quarter, companies announce their profits and earnings, other important information and, in some cases, their guidance for what they expect the next quarter's activity to be like. Companies are mandated by law to announce these results within 45 days of the quarter end. This period is known as 'earnings season'.Quarterly earnings are necessary as they give early signals of the happenings in a company. Investors get information about the company's performance during a quarter, rather than having to wait till the year-end. Necessary action can be taken by the investor based on these results. What most people focus on in these reports is the earnings per share number, which divides the earnings or profits of the company by the number of shares outstanding. This number is commonly described as EPS.

What is trading on quarterly results? Trading by quarterly results is when you are betting on a stock to go up or down right after the company reports its quarterly earnings. If you believe that any company will produce better results than the general market expectation, then there is high probability that the stock price will rise once the results are announced. Taking appropriate action can help you in making quick returns.

Is trading on quarterly results the right approach for you? First of all, trading earnings results is a high risk, high reward style of trading. If you are a beginner or if you cannotsee the price of your stock going down sharply on a single day, then you should not trade on earnings results. That is because sometimes, a stock can drop more than 10% when a company's earning is contrary to your expectation and below market expectations.

That is not to say trading earnings is not profitable. If you do it correctly, you can make money in a few days. A stock can go up over 10% in a single day when the company reports good earnings or earnings that beats market expectations.

How Can You Trade Ahead of Earnings result? You can trade ahead of earnings results, by buying shares in advance when you expect a company to announce better-than-expected results.

Though that can be a profitable strategy,remember that if the stock price moves against your position, sell out and manage your risk. These usually aren't investment plays, only short-term trading plays that may last a day or so, so don't let a trade that went bad turn into an investment. And remember that these earnings trades are speculative and risky in nature so always be ready to revise your positions.

High probability trading on quarterly results: Here are a few strategies that participants can use to make a high probability trade using earnings results. Let's say if you are going to trade a particular stock, below is some research that you must do before trading.

1. General Stock Market - Is the general market good? Are other companies reporting good earnings? If the answer is no then you should be more cautious and likely stay away from trading the earnings results. In a bad market, even good results may lead to a fall in stock price.

2. Stocks within the same sectors - Are other stocks in the same sector reporting good earnings? In the case of IT stocks, you will want to check how the whole IT sector is doing. There are companies that this company does business with or competitors that report earnings prior to the target company. If they are doing well, chances are that the target company will also do well.

3. How the stock is doing - You need to do research on the company itself and on the stock movement. Is the company beating earnings estimate over the past quarters or is it falling short? Is the company doing well relatively to the other companies in the sector? If yes, the probability of the company repeating the performance is relatively higher.

4. Stock Charts - You need to study the general trend of the stock. Is it in an uptrend? Is the chart bullish? If the chart is bullish, there is a good chance that it will continue.

Happy Trading :)

For both, Domestic and Global economies, markets have been moving in a narrow band on alternate bouts of optimism and despair. Domestically, there have been spurts of optimism, especially on the reforms front - once when the Prime Minister took over the Finance Ministry and now, with Chidambaram holding that portfolio. On the global front also, optimism soared on positive comments, which have not been backed by follow-up action, especially from the European Central Bank.

In India, WPI inflation continues to remain high due to high fuel and food inflation. Monsoon has been below-par, raising concerns on food price inflation. Industrial production in June came at a modest 2.4%. Thus, we are facing challenges on both, growth and inflation. Current valuations, at about 13.5x FY13 earnings estimates, provide only moderate upside to the median range of 15x one-year forward earnings.

With no major global events expected in the near term, we believe that Government reforms are the only positive trigger markets can look forward to. The gridlock continues likely due to lack of political consensus and it remains to be seen how much political will can the leadership muster to push through some of the initiatives. I remain optimistic, though relatively less than before, on the reforms front.

In the current scenario, a bottoms-up approach would be the best approach. Investors should accumulate stocks of companies having ethical managements and strong balance sheets across sectors. We can take a more constructive long term view of the markets and investment-led sectors if there is some initiation on the reforms front.

The month of May saw Indian and global markets under selling pressure led by negative global cues, mainly related to political uncertainty in Greece. Major political setbacks in Europe led to sharp fall in equities and commodities after concerns were raised whether struggling euro zone economies will continue to pursue austerity measures or not. Worries about Greece increased after the two parties which had backed the austerity measures, crucial to resolving the bloc's debt crisis, failed to win the majority or form a coalition Government. 

By Dipen Shah, Head – Fundamental Research, Kotak Securities

After a long wait, the Government has taken the first step (though a minor one) in a series of expected reform initiatives. The petrol prices have been increased by about 11%, wiping out the under-recoveries for that fuel at one go. This  move is aimed at helping the Oil Marketing Companies as they were the only ones who were bearing the petrol under-recoveries. To that extent, there is no change in the subsidy burden of the Government,. This will lead to some increase in inflation, but it is not expected to be a major impact.

By B Gopkumar, Executive Vice President and Head (Broking), Kotak Securities

“The duty on Gold has just been doubled, looks like we NRIs can only look forward to investing in bank deposits now”. This statement from my NRI brother got me thinking that how come he never talks about investing in equities in India. I probed him further and realized that the last year was particularly good for NRIs investing in debt. Not only was the dollar at an all-time high, the opening up of deposit rates by RBI gave them an option to park their NRE funds for rates as high as 9.60% tax free. Which investor would not want to lap up such an opportunity?