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ANALYSING MOVEMENT OF SBI SHARE PRICES USING EMOTIONAL QUOTIENT | Plan N Progress
Plan N Progress
A Path for Prosperity
ABOUT
FINANCIAL PLANNING
I refer to my articles WHAT IS THE RIGHT VALUE OF A SHARE ? and FORMULA FOR MARKET
PRICE OF A SHARE ? an Emotional way .
State Bank of India is the premier public sector bank in India and its shares price movements are intensely
watched by the investors a s a key to banking sector shares
As a test case , I wanted to test Emotional quotient arrived by the formula described in my earlier article on
this share to know emotions
broker recommendation as quoted in money market .com , again a leading financial site . We can see
various recommendations from bearish to neutral to bullish stances taken by various brokerage houses
and targets from rs 1900 to Rs 3200 . . Against this backdrop , I have tried to test Emotional quotient .
For analysis purpose , I took 30.05.2009 as
sheet of 31.03.2009 would have been published by May end . I took Book value at that time to reflect the
Follow
original financial position of State Bank of India
for my study purpose As per formulas (Refer for full details
Progress
M(t)x =
B(t)x B(O)x
[S]^l*
E
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where
S = S(t) /S (0 )Joinand
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Where
Otherwise E(M) =
I calculated various quotients based on the book values , markets highs and lows of every year and related
index Nifty movements . Findings are as below :
2009
2010
2011
2012
2013
2014 as
on
09.06.14
BV
912
1038
1023
1251
1445
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ANALYSING MOVEMENT OF SBI SHARE PRICES USING EMOTIONAL QUOTIENT | Plan N Progress
MP
1869
2235
2236
2097
2088
2720
NIFTY
4530
5066
5550
4925
6124
7610
1.000
1.118
1.225
1.087
1.352
1.6800
NIFTY H
5380
6310
5625
6170
7360
NIFTY L
4000
4990
4540
4860
5280
S H
1.188
1.393
1.242
1.362
1.625
S L
0.883
1.102
1.002
1.073
1.166
1.049
1.117
1.085
0.853
0.521
2500
3515
2529
2551
2833
1510
2165
1576
1815
1452
E(H)*
1.466
1.950
1.330
1.047
0.936
P4571
E(AH)1.346
P(AH)3646
E(L)*
0.743
1.121
0.605
0.576
0.006
P1593
E(AL)0.610
P(AL)2518
EPS
143
144
116
174
206
EPS/BV %
15.67
13.87
11.33
13.90
14.26
0.741
Emotional
quotients
:
Rs 1452 .
3 Presently SBI is trading at Rs 2,720 with E of 0.741 which is a lower mid range between 0.006 and 1.95
4 . If SBI can hit the maximum Euphoria of last 5 years which is at E= 1.95 , its prices can peak up to RS
4,571 .If we take average highs of last 5 years which is E=1.346 , its price can go up to Rs 3,646 .
5. If investors lose all hopes on SBI , its E can plummet to E = 0.006 , the historic low of last 5 years and price
can skip back to Rs 1,593 . If we take average of low of last 5 years which is E= 0.610
, then corresponding
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ANALYSING MOVEMENT OF SBI SHARE PRICES USING EMOTIONAL QUOTIENT | Plan N Progress
movement of Index would change emotional value also . Further Index gets affected by the movement of the
share in question also . E would be constantly changing with movement of Index , even when there is no
change in its market value . The formula has to be fine tuned to take into account dynamic nature of S and
its dependence on E
So what we can do in this scenario ?
First an investor should is to decide whether stocks are worth picking or not .
If we go by the history of SBI , it is earning profits reasonably well over the years in spite of global slowdown
, slower growth and raising inflation in the country , changes in its top management etc . EPS is steady and
BV is raising . It is also leading public sector bank . Hence I would be willing to put my stakes here . But at
what price ?
1. Emotional quotient has swung from 0.006 to 1.95 and now it is at 0.741. This quotient is almost the same
lower side quotient 5 years back . It can go up to 1.95 over the years if history repeats . But it has also
plummeted to 0.006 in recent times . Even if it has only once gone to such a low-level , Twice it has gone
down to around 0.60 which is almost the average of 5 years low . Hence I would prefer to wait till
it reaches
at least E of 0.60 which corresponds to around Rs 2,500 price line . As I fear it may also touch historical
low of E =0.06 , I will buy starting below Rs 2, 500 and go on adding additional shares at every dip of
around Rs 200 and continue to buy till it reaches about Rs 1, 600 , the current book value of the scrip .
I know that past performance is no guarantee for future and history may not repeat also . Hence Bank
always making profit or E never turning negative is not guaranteed events .
can incur loss in future . I being neither astologer nor palmist , I do not know what is the future of SBI and
its shares . I leave the guessing job to other experts in the field . I may not be able to tell now whether prices
will move to 3200 or to 2000 . But I HAVE STRATEGY to implement when markets go low or high . But
being greedy to make more money than a bank deposit give and expecting it SBI prices may reach Rs 3, 500
to Rs 4,5oo over the period if E touches 1.346 to 1.95 , I will be willing to put my bets on and will be ready to
lose my investment if some thing adverse happens . . Any how the amount I will be willing to invest in SBI
will not be more than 5 % of total investment I may make in stocks . Please refer my earlier article on
investment rules I make MY GAME ! MY RULES !!
Note this strategy may work only for long-term investors and not for short-term traders .
I will be coming with analysis of another stock in my next article . If you are interested to
receive my future articles , you may follow this blog by giving your email address .
I will be happy to receive your feed back and comments on this article .
PS : I have given links to various news sources at the bottom of the blog . Interested readers may click on
them to view the latest news
DISCLAIMER :
No content on this blog should be construed to be investment advice. You should consult a qualified financial
advisor prior to making any actual investment or trading decisions. All information is a point of view, and is
for educational and informational use only. The author accepts no liability for any interpretation of articles or
comments on this blog being used for actual investments.
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