morning thoughts...
The markets bounced right from the support levels mentioned and ended in positive for the day.
Technically the markets looks positively volatile for the coming sessions.
Astrologically with the change of jupiter auto stocks will outperform , tata motors , maruti , force motors are the strongest.
The Indian markets have witnessed more than its fair share of scams and scandals. Many a time promoters have been right at the center of them. From insider trading to outright accounting fraud, we have seen it all. This might lead some people to believe that scams related to the markets can only be something that are large in scale. We certainly do not subscribe to this view. Smaller financial shenanigans are quite common. Mostly the phrase, 'the devil lies in the detail' is quite an appropriate one we believe.
A few days back, market regulator SEBI, slapped a fine of Rs 130 m on Reliance industries for allegedly misleading investors regarding the company's 'Diluted EPS'. Whatever the facts of this particular case might be, we believe that investors should be aware of the importance of the core issue of 'per share earnings'. This is important because ultimately, the company's profits belong to all its shareholders. Thus, the sanctity of the reported per-share profit is crucial. Consider this simple example. If a company reports a net profit of Rs 1000 m and it has 10 m shares outstanding then the reported basic earnings per share (basic EPS) will be 100 (i.e. 1000/10). This is simple enough in theory but in practice, things can get murky. EPS is a number that can be easily tampered with.
Warrants issued to promoters and stock options issued to top employees, opens the door for the increase in share capital. Thus in the example above, if 1 m shares are issued as options/warrants, then there is a potential for the number of shares to increase, as and when they are exercised. This is where the 'Diluted EPS' comes in. The diluted EPS is calculated by factoring in the all the shares that can dilute the earnings, due to the increase in the share capital. Thus in our example above, the diluted EPS will be 90.9 (i.e. 1000/11). While the difference in basic and diluted EPS might appear small, in reality, it makes a big difference. The reason is that over a period of time, the dilution can result in a huge loss of value.
Long term investors, should be vigilant about the number of shares that can be issued when calculating EPS. The market regulator certainly understands its importance. The per share earnings is often the basis for valuing a company. Even if a company is growing its profits, the growth in EPS may be muted due to the share dilution. Thus investors must take a call if the earnings growth can be sustained. If not then it would be a poor idea to invest your money in such a stock. It is not a good idea to accept the reported EPS at face value. We believe that a business should be valued after assuming the full possible dilution.
Coming to the commodity markets bullions , base metals and energy will trade volatile with a negative bias for the coming session.
TUESDAY WEALTH CREATORS
FII AND JACKPOT - BUY SRF AND TATA MOTORS
DOUBLE BUMPER OPTIONS - BUY TATA MOTORS 460 CA , CESC 700 CA
BUY NIFTY AND BANK NIFTY
Mondays wealth creators
Buy crude rose 49 rs , copper 3 rs , natural gas 5 rs
Buy nifty rose 67 rs , bank nifty 98 rs
Jackpot and fii - macmillan india rose 51 rs , gpil rose 17 rs
Double bumper - mahindra and mahindra 1250 ca doubled
The markets bounced right from the support levels mentioned and ended in positive for the day.
Technically the markets looks positively volatile for the coming sessions.
Astrologically with the change of jupiter auto stocks will outperform , tata motors , maruti , force motors are the strongest.
The Indian markets have witnessed more than its fair share of scams and scandals. Many a time promoters have been right at the center of them. From insider trading to outright accounting fraud, we have seen it all. This might lead some people to believe that scams related to the markets can only be something that are large in scale. We certainly do not subscribe to this view. Smaller financial shenanigans are quite common. Mostly the phrase, 'the devil lies in the detail' is quite an appropriate one we believe.
A few days back, market regulator SEBI, slapped a fine of Rs 130 m on Reliance industries for allegedly misleading investors regarding the company's 'Diluted EPS'. Whatever the facts of this particular case might be, we believe that investors should be aware of the importance of the core issue of 'per share earnings'. This is important because ultimately, the company's profits belong to all its shareholders. Thus, the sanctity of the reported per-share profit is crucial. Consider this simple example. If a company reports a net profit of Rs 1000 m and it has 10 m shares outstanding then the reported basic earnings per share (basic EPS) will be 100 (i.e. 1000/10). This is simple enough in theory but in practice, things can get murky. EPS is a number that can be easily tampered with.
Warrants issued to promoters and stock options issued to top employees, opens the door for the increase in share capital. Thus in the example above, if 1 m shares are issued as options/warrants, then there is a potential for the number of shares to increase, as and when they are exercised. This is where the 'Diluted EPS' comes in. The diluted EPS is calculated by factoring in the all the shares that can dilute the earnings, due to the increase in the share capital. Thus in our example above, the diluted EPS will be 90.9 (i.e. 1000/11). While the difference in basic and diluted EPS might appear small, in reality, it makes a big difference. The reason is that over a period of time, the dilution can result in a huge loss of value.
Long term investors, should be vigilant about the number of shares that can be issued when calculating EPS. The market regulator certainly understands its importance. The per share earnings is often the basis for valuing a company. Even if a company is growing its profits, the growth in EPS may be muted due to the share dilution. Thus investors must take a call if the earnings growth can be sustained. If not then it would be a poor idea to invest your money in such a stock. It is not a good idea to accept the reported EPS at face value. We believe that a business should be valued after assuming the full possible dilution.
Coming to the commodity markets bullions , base metals and energy will trade volatile with a negative bias for the coming session.
TUESDAY WEALTH CREATORS
FII AND JACKPOT - BUY SRF AND TATA MOTORS
DOUBLE BUMPER OPTIONS - BUY TATA MOTORS 460 CA , CESC 700 CA
BUY NIFTY AND BANK NIFTY
Mondays wealth creators
Buy crude rose 49 rs , copper 3 rs , natural gas 5 rs
Buy nifty rose 67 rs , bank nifty 98 rs
Jackpot and fii - macmillan india rose 51 rs , gpil rose 17 rs
Double bumper - mahindra and mahindra 1250 ca doubled
