Vol 1 Issue 2 February 2012

For private circulation

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Sandesh
A Monthly Financial News Letter from RBG Commodities

MY MISTAKES AS A TRADER
General Financial News
Door slams on operator rigging New Sebi rules mandate strict circuit filters on listing, with physical delivery mandatory for specified period Palak Shah / Mumbai Jan 23, 2012, 00:16 IST For many years, share price rigging of newly listed companies was a thriving business for some traders and brokers in the absence of any circuit breakers for scrips on the listing day. That will no longer be the case for Initial Public Offers (IPOs) listing on exchanges in four weeks from now.New Sebi rules say the stock of a company which has raised less than Rs 250 crore through an IPO is to attract a circuit filter of five per cent and no speculative trading will be allowed in the counter for the first 10 days, as physical delivery will be compulsory. For companies that raise more than Rs 250 crore, the stock would attract a 20 per cent circuit filter Government may cut STT to boost markets Mumbai: In a move that could lift investor sentiment, boost equity volumes and potentially raise the governments tax revenue, the finance ministry is planning to reduce securities transaction tax (STT) and extend its scope to assets other than equities, such as commodities. Banks may get to Hedge in Commodity market According to government sources, the finance ministry has written to the Reserve Bank of India (RBI) to explore ways to allow entry of banks in commodity hedging. RBI is actively considering the matter. Banks give finance against commodity as collateral and hence they take risk on the price of that collateral commodity. RBI cautions Public Once Again against Fictitious Offers The Reserve Bank of India has today reiterated that it never contacts the public via unsolicited phone calls or emails asking for money or any other type of personal information. The Reserve Bank does not maintain/give money/foreign currency or any other type of funds to individual or opens accounts for/in the name of individuals. The Reserve Bank has urged the public to remain alert and not to fall prey to frauds or scams perpetrated by individuals who impersonate to be employees of the Reserve Bank of India. Service Tax net may widen Get ready to pay tax on every service barring those in some 20 categories such as construction, health, entertainment, restaurants, non-AC rail fares, travel by the metro or public buses, etc. A key official says the way has been cleared to bring this proposal in the Budget, as the finance ministry has agreed to take states concerns on board. Co-operative societies can be appointed as Authorized Persons A co-operative society shall be eligible to be appointed as an Authorized Person. a. If all the Members/ Directors by whatever name called, of the Managing Committee/ Governing Body Comply with the requirements. b. If the object clause of the Memorandum Of Association of the Co-operative society contains a clause permitting the society to deal in commodity derivatives contract.

Not exactly my mistakes, it always happens to everyone who is in trading. Some mistakes mentioned here are my mistakes plus some mistakes of some famous traders, which they have shared in their books, articles, blogs etc., The combined average daily traded volume in Equity, Commodity and Forex across the globe is in trillions of dollars. Trading is a highly paid profession in the world. Traders are given high remuneration due to the high volume created by them and for their ability for reaping enormous profit from the trades. Inspite of their successful trades, they find time for analyzing their wrong trades. They may have wondered that, had they paid a little attention to their trading they could have avoided such mistakes. But even after such analysis they may still continue with the same mistakes. Why? Traders are never free from Greed & Fear. Usually, in trading they are actually buying other peoples fear and selling to others their Greed or vice versa. Greed in trading means, when someone buys stocks and wishes to sell at higher rate; even when the stock is cutting its all time high, they expect that the stock will go further, even at very high over bought levels. Fear in trading means when somebody buys an instrument and suppose its price comes down, they develop a fear of losing and they will try to exit at the earliest either in loss or at cost. As said earlier, traders are never free from Greed and Fear. They should use a disciplined trading system to get rid of Greed and Fear. When they were trying to mastering these factors they are actually losing control over their trades and may end up on losses. Disciplined trading practice / system includes tight stop loss, focused entry and exit point, simple tools and techniques etc., According to a famous trader, Traders are sometimes guided by some false beliefs and thoughts; That ultimately they have to make profit at the end, builds enormous pressure. Every successful trader is following some disciplined approach, but factors affecting mental condition like pressure, anxiety, agony etc., may force them to make mistakes, which may result in loss. The following factors should also be considered by them in their trading: 1. Not to trade in the initial and closing hours of trade due to excess volatility in the market. 2.Traders should become more cautious in the closing hours of other segments of markets. For e.g., a commodity trader should be more cautious in the closing times of equity / forex markets. 3. Traders should be more vigilant on trading especially if there is any data flow in the market. 4. They should trade less in if there is any holiday in the next trading day or if markets open after a holiday. 5. Traders should keep watching other markets and data closely If you want to be a successful trader, try to execute some paper trades to get some confidence. After attaining confidence, slowly start trading with minimum quantities in comparatively less risky instruments by using simple approaches / techniques. After every trading day analyze each of your trades especially your wrong trades and take corrective steps. Success always comes from simplicity; In trading also, success always comes from applying of simple logic and commonsense with confidence.
Sandeep Chandran, RBG Research Team

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EQUITY MIRROR
In the Last issue of Sandesh, we have mentioned about the expected rally in the Indian Indices. Market kick started the year on a strong note. Indian markets gave a return of 11% in the month of January. Much awaited rally was seen in the beginning of the year with all the positive Economic news from the US and Fed Chairman, keeping the Interest rate low and pledge to keep it low until 2014 overshadowing the entire negative news flows from the European region. Nifty shot up from levels of 4600 to 5200 in the month of January Itself. The surprise rate cut by the RBI also helped Indices for its great come back from lower levels. The RBI's move to cut cash reserve ratio by 50 basis points can aid the net interest margins of banks in the coming quarters. This will also improve liquidity in the financial system, thus easing short-term borrowing rates for both banks and companies. We think that the short term traders can go for a profit booking at the levels in between 5200 5300. In present scenario Nifty has good support around 4920 levels and Resistance around 5345 levels. The Extend of the profit booking will depend upon the performance of the Global Indices. The Quarterly performance (Q3) from the Indian Corporate was mixed. But the earnings report from Indian Banking Industry came out in bright colors. Among Private Sector Banks, The ICICI Bank reported a net profit of Rs.4,563 crore for the nine-month period ended in December 31, 2011, against Rs.3,699 crore in the year-ago period, up by 23 per cent. The Bank reported a consolidated net profit of Rs.5,833 crore for the nine months against Rs.4, 525 crore, up 29 per cent. The Earnings forecast of Infosys was not up to the mark. And the results of Index Major, Reliance Industries Ltd reported a 13.5% drop in net profit at Rs 4,440 crore for the quarter ended December 2011 against market expectations of Rs 4,5004,700 crore. Net sales were at Rs 85,135 crore and gross refining margins stood at $6.80 per barrel. These stocks witnessed some selling after announcement of results and they recouped from the lows along with the market. The main reason of the recouping is that this kind of worrying economic numbers is already discounted in the market before its announcement. Another energizing factor for Indian Economy is in terms of food inflation numbers, which entered negative zone has given good support to Economy. Food inflation was in the negative zone at minus 1.03 per cent for the week ended January 14 even as prices of other edibles continued to rule at higher levels. Especially owing to a drop in food prices, headline inflation in December slipped from near double-digit levels during the major part of 2011 to a two-year low of 7.47 per cent in December. From this month onwards the Government will announce only Monthly food inflation. Apart from the inflation numbers for manufactured items, the monthly WPI data contains the break-up for all other article segments, including food, non-food and fuel. The headline or overall inflation data for January 2012 is to be released on February 14. Also, from this month onwards, the government will come out with a retail inflation data based on the all-India Consumer Price Index. The first nationwide CPI numbers for the month of January will be released on February 21. There were some rumors spreading in the market that the Government may reduce securities transaction tax in the Union Financial Budget. If any such decision comes, it will certainly be too positive a factor for the market.
RBG Research Team

COMMODITY MIRROR
Last Month Precious metals was in the hands of Bulls and in case of Base metals nobody won the battle. Rubber, Pepper, Jeera, and Crude oil prices crumbled. Pepper: In the tug war between Bears and Bulls in Pepper, for the month of January, Bear was considered to be dominant. Pepper Prices declined from the levels of Rs. 33100 to around 29000 levels in the month of January. At Present Levels, Rs. 28,700 seems to be a good support and Resistance is seen around 31200 levels in the February Contract. According to IPSTA, Spot rates of pepper (garbled) were unchanged at Rs 312 per kg and that of un-garbled was steady at Rs 297 per kg. Arrivals declined to 7 tons but trades were up at 60 tons at Cochin market as on first week of February. According to Reuters, Singapore Mercantile Exchange is going to start trading in International Pepper Futures on February 10. Rubber: Rubber Prices witnessed a fall in the prices from the levels of Rs. 197 / KG to Rs. 188 / KG in the Month of January alone. According to Reuters, Thai rubber intervention scheme to shore up prices is expected to start in mid-February after several legislative steps have been completed. Technically Rubber Prices seems to be weak, support seen around Rs. 180 / KG levels and Resistance seen around Rs. 198 / KG. According to Rubber Broad there would not be much fluctuation in the natural rubber (NR) price, even though many of the major rubber consuming nations were still under the shadow of economic uncertainties. Precious Metals: Gold in the Month of January witnessed a huge pull back from the levels of Rs. 27382 / 10 gms to Rs. 28504 / 10 gms. Similarly shot up from the levels of Rs. 51330 / Kg to Rs. 57023 / Kg in the month of January. The main reason behind this was weakening of dollar with support of a mix of positive economic news especially from US and Euro Zone. Fed going to keeping the Interest rate low and pledge to keep it low until 2014 overshadowing the entire negative from the European region. The Fed decision will attract a lot of investors to precious metals. Next month also we are bullish in precious metals. The Gold prices may touch Rs. 30,000 per KG in the months to come. Energy Futures: Crude Oil prices tumbled from the levels of Rs. 5300 / barrel to Rs. 4700 / barrel in the month of January. The mean reason the rise in crude oil prices in the last weeks of December mainly due to the Geopolitical Issues in Iran. U.S. crude oil futures were traded in the last week of January at sixweek lows, weighed down by weak demand and rising inventories. Recent data released shows that, last week U.S. refineries cut crude processing to a nine-month low of 14.2 million barrels a day, helping inventories rise by a higher-thanexpected 4.2 million barrels The combination of falling demand and resulting rising inventories in the world's biggest oil consumer is putting pressure on prices, which may make a further downward move toward $90 a barrel. Base Metals: Base Metals showed a mixed trend this month due to some mixed news flows from Euro Zone and US. A Data from China showed a decrease in the consumption of base metals like copper and lack of clarity in the monetary policies of the Chinese Government also reflected the base metals prices.
RBG Research Team

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