BUY INFOSYS - TARGET HIGH !!!

5 reasons why Infosys is the stock to watch out for in 2013

NDTV | Updated On: November 23, 2012 13:44 (IST)

Securities firm Jefferies has said earnings downgrade for Infosys, Indias second largest software services exporter, is coming to an end and it is likely to be the stock to watch out for in 2013.

Here are five facts:

1. Jefferies today increased its target price for Infosys to Rs. 3,000 crore per share, and said it maintains a ‘buy’ recommendation on the stock.
2. According to the investment firm, India’s second largest software services exporter is unlikely to see further earnings downgrades. Infosys reported a 24 per cent year-on-year gain in quarterly profit for the fiscal second quarter ending September. On a sequential basis, net sales rose 2.5 per cent to Rs.9,860 crore, while net profit edged up 3.5 per cent to Rs. 2,369 crore. In the June quarter, Infosys had reported Rs. 9,616 crore in sales and Rs. 2,289 crore in net profit. Analysts said the results were in line with expectations.
3. Brokerage consensus is close to the worst-case scenario, and expectations have halved from Infosys versus a year ago. Last month, Espirito Santo reiterated its ‘buy’ call on the stock post earnings, saying all known ramp downs are largely over and all planned price negotiations have been completed in the first two quarters.
4. IDFC Securities has an ‘outperform’ on the stock. Over the last few quarters, TCS and HCL Tech have steadily gained because they have managed to outperform rivals Infosys and Wipro in a challenging environment. TCS expects to end fiscal year 2013 with a growth in excess of 11-14 per cent in contrast to Infosys, which sees dollar sales growth at 5 per cent. However, Hitesh Shah of IDFC Securities told NDTV Profit that the growth rates of bigger companies like TCS and Infosys are likely to converge with each other going forward. "We may see a slight uptick in growth for Infosys and Wipro and a slight downtick in growth for TCS and HCL Tech," he added.
5. TCS trades at a premium to Infosys because it has repeatedly impressed the Street with strong earnings. Rich valuations have prevented many brokerages to come out with an aggressive call on TCS. In contrast, Infosys seems to be undervalued after the recent correction, according to many analysts. HDFC Securities has changed its view on Infosys from ‘negative’ to ‘slightly positive’ post earnings. "One positive thing to note is that the market traction for the non-linear platform business (of Infosys) has improved with around 60 clients and over $480 million (Rs. 2,657 crore) of bookings. This should help to restrict the margin contraction, compensating for commoditization of certain parts of IT (information technology) services," HDFC Securities said.

Story first published on: November 23, 2012 10:38 (IST)http://profit.ndtv.com/news/market/article-infosys-the-stock-to-watch-out-for-in-2013-jefferies-313695?pfrom=home-latest

GAIN-20 per cent daily!!

There's method in madness

Even high-risk takers have a rigid adherence to a plan which is admirable

Devangshu Datta / New Delhi Nov 19, 2012, 00:51 IST

One of my friends is a dedicated trader with a very unusual, high-risk style. He is only interested in highly liquid stock futures contracts. On average, the margin on a stock futures contract is roughly 15 per cent – about 6.6 times leverage.

My friend is only interested in futures that have lots of 4,000 shares or more. Ideally, he prefers lots of 8,000 shares or more. For a 4,000 lot, a swing of 10 paisa is worth roughly Rs 400, gain or loss, neglecting brokerages. A Rs 1 swing therefore implies a gain or loss of Rs 4,000 per lot. It’s double that for an 8,000 lot and three times as much for a 12,000 lot.

There are 33 stock futures available with lots of 4,000 or more. By the way, these stocks also meet most reasonable standards for diversification. They are all large caps, of course, (like all stocks in the F&O segment) and between them, these 33 cover some 18 sectors.

On an average, a Rs 1 swing is equivalent to 14 per cent of margin for that select group of 33. Not surprisingly, my friend's returns are extraordinarily variable. There are days when he doubles his margin and days when he loses half of it. According to him, he tends to make or lose nearly 20 per cent a day. He makes money a little more often than he loses, and he usually makes more on a winning trade than he loses when he's wrong.

It should be mentioned that he's a horse-racing aficionado, who entered financial markets simply because they have more financial depth than horse-races. So he's got the stomach required to sleep soundly at night while operating at these risks-levels.

Having decided to operate in this fashion however, he has been sensible enough to do his best to eliminate unnecessary losses. He allocates his bets carefully and he never has an exposure of more than 20 per cent of his capital at a given instant. He doesn't ever carry overnight positions.

He has strict stop losses. He never doubles up or averages down. He absolutely ignores all extraneous data. He is not interested where the Nifty is going, or what the European Central Bank is doing and its impact on currency positions. He will not bet on anything outside this group, no matter how tempting it may seem. Given the diversification within the group however, this is not a major constraint. Marketwide or sector-specific moves are usually reflected.

Within the group of 33, he watches everything of short-term interest. This is not so difficult, given the internet and reasonable computer literacy. He has automated alerts for all news pertaining to these 33 stocks. He has constructed an index, which incorporates this population. He runs a colour-coded “map of the group” (red for losers, green for winners) to give him a visual heads-up. He knows the correlations of each of these stocks with the Nifty and their cross-correlations with each other. He runs technical analysis on various parameters to try and isolate the trends within the group. He tracks insider disclosures and FII/DII holdings and buy/sell patterns.

Applying these methods keep him occupied and interested as well as being quite profitable on the whole. These methods are also scalable to a larger population of stocks as well, and to stocks chosen according to less hair-raising volatility criteria.

What may not scale is the almost inhuman discipline. It is one thing to decide, right or wrong, that a given set of instruments will suit your trading style the most. It is entirely another to be able to focus on those instruments to the exclusion of everything else.

I wouldn't advocate using these methods. Even experienced traders might find 20 per cent daily swings scary. Nor are his risk-management methods necessarily the best. But the rigid adherence to a plan is admirable.

http://www.businessstandard.com/india/news/there/s-method-in-madness/492921/