Blog posts of '2024' 'August'

A Patient Investor

Let's meet Mr.Chandu, a long-term investor who bought 100 shares of Reliance Industries in 1977. Fast forward to today, and Mr. Chandu's holdings have grown to a remarkable 1280 shares with a market value of around Rs. 35-40 lakhs. But the story doesn't end here.

The Bonus Bonanza

Reliance Industries has a history of rewarding its loyal shareholders with bonus issues. If the company's board approves the proposed 1:1 bonus issue on September 5th, Mr.Chandu's 1280 shares will magically transform into 2560 shares. With the current share price hovering around Rs. 3000, you might think that Mr. Chandu's investment would be doubled, worth well over Rs. 75 lakhs (Rs.3000 * 2560 shares) ! But wait! A bonus issue does not double your wealth. After a bonus, the share price adjusts itself and corrects by the bonus amount, at least theoretically. So, assuming the stock corrects 50% (because it is a 1:1 bonus), the value of Mr.Chandu’s holding would still be the same Rs. 35-40 lakhs.

However, Mr.Chandu isn't disheartened. He understands that bonus issues can offer benefits beyond immediate financial gains. Increased liquidity and the positive sentiment among investors can be advantageous for both Reliance Industries and its shareholders like Mr.Chandu.

CAGR and Dividends

Over the years, Reliance Industries has delivered a consistent Compound Annual Growth Rate (CAGR) of around 19%, where the broader market indexes like Nifty deliver around 12-13%. This impressive performance is a testament to the company's sound business strategies and strong leadership.

In addition to capital appreciation, Mr.Chandu has also received a significant amount of dividend income over the years. Approximately Rs. 1,35,600 has been added to his investment kitty through dividends alone.

The Power of Patience

Mr.Chandu's story is a powerful reminder of the long-term benefits of investing in quality stocks. By staying patient and holding onto his Reliance shares through thick and thin, he has reaped substantial rewards.

Conclusion

Reliance Industries has not only been a financial success story but has also played a pivotal role in India's economic growth. For investors who have been part of this journey, the rewards have been truly bountiful.

Remember: This blog post is for informational purposes only and does not constitute financial advice. It's always recommended to consult with a financial advisor before making any investment decisions.

Stock name: Abbott India Ltd.

Pattern: Cup and handle pattern

Time frame: Daily

Observation:

The stock has experienced significant upward movement since December 2023. From March to August 2024, it formed a cup and handle pattern on the daily chart, breaking out on 22 August 2024 with substantial volume. Following the breakout, the stock has continued to rise. Technical analysis suggests that if the current momentum is maintained, it may see further upward movement. It's advisable to look for additional confirmations, such as RSI levels and the MACD indicator.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: Godrej Industries Ltd.

Pattern: Cup and handle pattern

Time frame: Daily

Observation:

The stock has shown strong upward movement since November 2022. Between May and August 2024, it formed a cup and handle pattern on the daily chart and broke out on 27 August 2024 with significant volume. The stock has sustained the breakout with slight upward movement. As per technical analysis, if the stock is able to maintain the momentum it may see further upward movement. It's advisable to look for additional confirmations, such as RSI levels and the MACD indicator.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• Singapore Airlines (SIA) has received approval from the Indian government for its foreign direct investment (FDI) in the merger between Vistara and Air India, which was announced in November 2022. This merger, aimed at creating a dominant full-service airline, will see SIA hold a 25.1% stake in the combined entity. The merger, which has also received anti-trust and regulatory clearances, is expected to be completed by the end of 2024, pending compliance with Indian laws.
  
  
• Starting November 1, 2024, the Indian government will remove the cap on sugar diversion for ethanol production, allowing the use of cane juice, syrup, and various molasses types. Distilleries are also permitted to purchase up to 2.3 million metric tons of rice from the Food Corporation of India for ethanol production. This policy aims to boost renewable energy while ensuring stable sugar availability. The Department of Food and Public Distribution, along with the Ministry of Petroleum and Natural Gas, will monitor the impact on sugar supplies to maintain domestic availability.
• Despite the excitement among retail investors over Reliance Industries' (RIL) bonus share announcement, the company's Annual General Meeting (AGM) did not provide any new catalysts for brokerages to raise target prices. While the listing of RIL's consumer-facing businesses, Reliance Jio and Reliance Retail, could lead to a re-rating of India's most valuable stock, Mukesh Ambani made no mention of this during his AGM speech, leaving target prices unchanged.

Stock name: Welspun Corp Ltd.

Pattern: Flag and pole pattern

Time frame: Daily

Observation:

The stock began a strong upward trend on June 25, 2024, followed by a consolidation phase from July 12 to August 12, 2024. This created a flag and pole pattern on the daily chart. On August 12, 2024, the stock broke out with substantial volume, and on August 16, it confirmed the uptrend with a large green candle, again supported by high volume. According to technical analysis, if this momentum persists, the stock may continue to rise further. It's advisable to look for additional confirmations, such as RSI levels and the MACD indicator.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: LTIMindtree Ltd.

Pattern: Cup and handle pattern

Time frame: Daily

Observation:

Since May 2022, the stock has been trending upward. Between January and August 2024, it developed a cup and handle pattern on the daily chart. On August 28, 2024, the stock experienced a significant breakout with high volumes. As per technical analysis, if this momentum continues, the stock may rise further. It's advisable to look for additional confirmations, such as RSI levels and the MACD indicator.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• The U.S. has raised concerns about linking domestic fast payment systems, like India’s UPI, for global transactions. Federal Reserve's Christopher J. Waller cautioned that such interlinking could increase risk management burdens for banks and may not necessarily lead to faster or cheaper payments. While India supports this move to reduce remittance costs, Waller emphasized potential trade-offs and uncertainties, particularly regarding legal, compliance, and operational challenges.
  
  
• Trent, led by Noel Tata, is set to open its first overseas Zudio store in Dubai next month, targeting the Indian diaspora. The store will be located in Silicon Oasis Mall. Zudio, which now contributes over a third of Trent's revenue, has seen significant growth in India. Future expansion will depend on the store's performance in Dubai.
  
  
• L&T Technology Services (LTTS) aims to grow its three new verticals—mobility, sustainability, and tech—into $1 billion revenue segments. Currently, these verticals generate $416 million, $354 million, and $411 million, respectively. While LTTS hasn't set a timeline for this goal, it plans to drive growth through large deals and technology investments. Despite margin improvements in mobility and sustainability, tech margins have declined, and the company is working to improve them through increased offshoring and a higher mix of fresh talent.

Stock name: Bharat Dynamics Ltd.

Pattern: Double top pattern

Time frame: Daily

Observation:

The stock experienced a rapid rise starting in February 2024 but cooled off between May and August 2024, forming a double top pattern on its daily chart. It has not yet broken out of this pattern and is currently hovering near the breakout line, which now serves as support. The RSI is below 40, indicating bearish momentum. According to technical analysis, a significant breakout with strong momentum may lead to further downward movement.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: Jammu & Kashmir Bank Ltd.

Pattern: Head and shoulders pattern and retest

Time frame: Daily

Observation:

After the post-COVID market crash, the stock recovered well and trended upward. Between September 2023 and July 2024, it formed a head and shoulders pattern on the daily chart, breaking out on July 8, 2024, with strong volume. Following the breakout, the stock underwent two significant retests and is currently moving along the breakout line. It has completed its second retest and is now trending downward. The stock has also shown a bearish signal on the MACD and has a low RSI level. According to technical analysis, if this momentum continues, the stock may move further downwards.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• Tata Motors plans to source battery packs for its electric vehicles from China's Octillion Power Systems to address performance issues and diversify its supply chain, according to a report. Currently, Tata Motors sources batteries from Tata AutoComp Systems. The first vehicle to feature Octillion batteries will be the Curvv.ev. Despite a decline in EV sales in India, with a 2.92% drop in July, Tata Motors controls 68% of the market and recently became the first Indian company to rank among the top ten most valued global automotive firms.
  
  
• Shriram Finance, an Indian non-banking financial company, plans to raise between $1.25 billion and $1.5 billion from international markets in the current fiscal year, according to CEO Y.S. Chakravarti. The funds will be sourced through a combination of loans and bonds, aiming to diversify the company's borrowings. This fundraising effort follows a directive from India's central bank, which now requires lenders to hold more capital for loans to non-banking financial companies (NBFCs), increasing the cost of securing funds.
  
  
• Indus Towers is set to become a subsidiary of Bharti Airtel after Airtel's stake in the company increases to 50.005% following a buyback exercise. The buyback involves 56.7 million equity shares priced at ₹10 each. Once the process is complete, Indus Towers will officially become a subsidiary of Airtel under the Companies Act, 2013. On the day of the announcement, Indus Towers' shares rose 1% to ₹437.40, while Airtel's shares also saw a slight increase, closing at ₹1,522.50 on the BSE.

Stock name: Punjab National Bank

Pattern: Head and shoulders pattern and retest

Time frame: Daily

Observation:

The stock has been on an upward trend since the COVID market crash. From February to August 2024, it formed a head and shoulders pattern on the daily chart, with a breakout on August 5th, supported by slightly above-average trading volume and a bearish MACD. However, the stock has faced a retest immediately after the breakout, indicating that it requires additional confirmation. According to technical analysis, if the stock gains downward momentum, it may continue to decline.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: ITC Ltd.

Pattern: Cup and handle pattern

Time frame: Daily

Observation:

Since the post-COVID market crash, the stock has generally trended upward. Recently, it has stabilized, forming a cup and handle pattern on the daily chart from January to August 2024. The stock has yet to break out from this pattern and is currently hovering near the breakout line, which may act as resistance. The RSI levels are currently in a favourable zone. According to technical analysis, if the stock achieves a breakout with substantial momentum, it may continue to move upward.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• Adani Power has incorporated a new subsidiary, Adani Power Middle East Ltd., in Abu Dhabi to invest in the power and infrastructure sectors. The subsidiary, fully owned by Adani Power, has an authorized capital of $27,000. This move aligns with Adani Power’s strategy to expand its presence in the thermal power sector, both in India and internationally. Recently, Adani Power signed an ₹11,000 crore contract with Bharat Heavy Electricals Limited (BHEL) to develop three supercritical thermal power projects in Rajasthan and Madhya Pradesh, each with a capacity of 2x800 MW.
  
  
• Hindustan Unilever (HUL) has been issued a tax demand of ₹962.75 crore by the Income Tax Department for failing to deduct Tax Deducted at Source (TDS) on a ₹3,045 crore payment made to acquire intellectual property rights from GlaxoSmithKline (GSK). The demand includes ₹329.33 crore in interest. The issue relates to the acquisition of the Horlicks brand and other health drink brands from GSK. HUL plans to appeal the order, asserting that it has a strong case based on judicial precedents and intends to recover the tax from relevant parties.
  
  
• Vedanta Ltd has assembled a ₹30,000 crore war chest from various funding sources, including recent fundraises and existing cash reserves, to reduce debt and drive growth. The funds will support debt reduction, transformational projects, and a planned demerger aimed at unlocking value and attracting major investments into its independent businesses.

Stock name: Piramal Enterprises Ltd.

Pattern: Double bottom pattern and retest

Time frame: Daily

Observation:

The stock had been in a downward trend but stabilized between December 2023 and July 2024, forming a double bottom pattern on its weekly chart. In July 2024, it registered a breakout from this pattern, supported by average trading volume. Although there was some upward movement post-breakout, the stock experienced a significant retest. Currently, it has rebounded from the retest with a strong RSI. According to technical analysis, if the stock can sustain its rebound momentum, it may continue to move upward.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: BLS International Services Ltd.

Pattern: Cup and handle pattern and retest

Time frame: Daily

Observation:

The stock has demonstrated an upward trend, forming a cup and handle pattern on its daily chart from February 2024 to August 2024. On August 6, 2024, it registered a breakout with significant trading volume, supported by a bullish MACD indicator. However, after the breakout, the stock experienced a retest and briefly closed below the breakout line. Currently, it has rebounded from the retest and is moving upward again. According to technical analysis, if the stock maintains its current momentum, it may see further gains.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• RBI Governor Shaktikanta Das announced that the Unified Lending Interface (ULI), a new platform for frictionless credit, is in its pilot stage and will be launched nationwide soon. The ULI aims to speed up the credit process, especially for rural borrowers, by streamlining digital information flow. Das shared this update at the Global Conference on Digital Public Infrastructure in Bangalore, while also cautioning financial institutions about the risks of Artificial Intelligence.
  
  
• Tata Sons, the holding company of the $410-billion Tata Group, has repaid over ₹20,000 crore in debt, allowing it to remain a private, unlisted company. This move comes after the RBI classified Tata Sons as an NBFC-Upper Layer (NBFC-UL) in 2022, which would have required it to list its shares within three years. By reducing its debt significantly, Tata Sons has avoided this requirement and has offered to surrender its certificate of registration to the RBI.
  
  
• Jio Financial Services Ltd has received approval from the Department of Economic Affairs to raise its foreign investment limit to 49% of its equity share capital. Currently, foreign investors hold 17.55% of the company's shares. Despite a 6% decline in net profit in the first quarter ending June, Jio Financial has recently introduced new services like mutual fund loans and auto insurance. The company, a non-banking arm of Reliance Industries Ltd, was demerged in July 2023.

What is DTAA?

Often, income that originates in India is taxed within the country. However, Non-Residents of India, who are residents of another country, may find that the same income is taxed again in their country of residence, resulting in double taxation. To prevent this, India has established Double Taxation Avoidance Agreements (DTAA) with over 90 countries. These agreements aim to ensure that income is taxed only once, specifying how, where, and at what rate the income will be taxed. The primary purpose of DTAA is to provide clear guidelines on taxation, avoiding the burden of double taxation on the same income.

What are the ‘tie-breaker’ rules?

Like any other tax law, the DTAA also places a major emphasis on the residential status of a person. Generally, all the DTAA mentions their scope as – This agreement shall apply to the residents of one or both the countries. However, to claim the benefit of DTAA, you must be a resident of one country and the income should be generated in the other country. So basically, you cannot be a resident in both the countries. Now generally the DTAA follows the residential classification of the respective country. Say for example, as per the respective laws you are a resident in USA and a Non-Resident in India, then it becomes a very easy for the further process. However, if by definition of the local laws you have a residential status in both the countries then what? Here comes the ‘tie-breaker’ rules of DTAA. You can consider this as a super over or a penalty shootout arranged by DTAA to decide the final winner (which country can claim you as a resident). Let’s understand how this game is played:

If there is a situation where an individual is resident of both the countries, then the residential status will be determined as follows:

1. The individual will be resident in the country where he has a permanent home available. In case he has permanent home in both the countries, he will be deemed to be resident of the country with which his personal and economic relations are closer (centre of vital interests).
2. If the country where he has his main interests can't be determined, or if he doesn't have a permanent home in either country, he will be considered a resident of the country where he has a regular place to stay.
3. If he has a regular place to stay in both countries or in neither, he will be considered a resident of the country of which he is a national.
4. If he is a national of both countries or neither, the authorities of the contracting countries will resolve the issue by mutual agreement.

(Ok this is really too much. In this case let the competent authorities take charge)

(Please note that these are general tie-breaker rules, and specific DTAAs between countries may have differing provisions. This information is provided for conceptual understanding only and should not be considered professional advice.)

What are the documents required and the procedure to claim benefit of DTAA in India?

An individual will need the following documents/details:

1. PAN card, if available
2. Proof of residential address in your residential country
3. Duration of residential status as stated in the TRC (Tax Residency Certificate, this is issued by the local tax authorities)
4. Taxpayer status (Individual in our case)
5. Proof of nationality
6. TIN or any other unique tax identification number in country of residence
7. Digital Signature Certificate, if available or a functioning Indian mobile number

Now the second question, how to claim the benefit. You can claim the benefit of DTAA in two ways: at the time of withholding tax or when filing your income tax return (ITR).

1. At Withholding of tax:
   1. Claiming the benefit at the time of withholding taxes prevents extra tax from being withheld, avoiding working capital blockage.
   2. You must file Form 10F with the Indian tax department, which can be done online.
   3. Submit Form 10F to the tax deductor, who will then apply the DTAA tax rates instead of regular Indian tax rates.

2. At Income Tax Return (ITR) filing:
   1. Indian tax laws allow you to choose the more beneficial tax rate between regular laws and DTAA rates.
   2. Compare the tax rates and choose the beneficial one when filing your ITR.
   3. If you missed claiming the DTAA benefit at the time of withholding taxes, you can get a refund of the extra tax withheld when you file your ITR.

(These steps provide a general understanding of the DTAA claim process, but specific requirements and procedures may vary. It is advisable to consult a professional for detailed guidance.)

Stock name: Cyient Ltd.

Pattern: Double bottom pattern and retest

Time frame: Daily

Observation:

The stock has been declining since December 2023 but formed a double bottom pattern from April to August 2024 on its daily chart. It broke out of this pattern on August 20, 2024, with strong trading volume, leading to some upward movement. Currently, the stock is undergoing a low-volume retest, which has cooled the RSI from overbought levels. According to technical analysis, if the stock rebounds from this retest with good momentum, it may continue to rise further.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: Archean Chemical Industries Ltd.

Pattern: Cup and handle pattern and retest

Time frame: Daily

Observation:

Since its listing in November 2022, the stock has been on an upward trend. Recently, from February to August 2024, it formed a cup and handle pattern on its daily chart, breaking out on August 22, 2024, with strong trading volume. However, the stock is now undergoing a retest of this breakout, requiring further confirmation of momentum. The RSI is currently in a favourable zone, and according to technical analysis, if the stock capitalizes on the breakout and gains momentum, it may continue to move higher.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• The Adani Group, led by Gautam Adani, sold a 2.8% stake in Ambuja Cements for Rs 4,200 crore, leading to a 4% rise in the stock price. Following this sale, the group's stake in the company now stands at 70.33%. This comes after Ambuja Cements recently acquired Penna Cement for Rs 10,422 crore, enhancing its market share in southern India. The sale was conducted via a pre-market block deal, with Holderind Investments, an Adani Group entity, offering shares at a slight discount to the previous closing price.
  
  
• HDFC Bank has rejected a $2 billion proposal from Japan's MUFG to purchase a 20% stake in its non-banking subsidiary, HDB Financial Services. Instead, the bank's board has opted to pursue a listing of HDB to meet RBI regulations. This decision halts what would have been the largest FDI deal in India's financial services sector, disappointing Japanese officials who had strongly supported the transaction.
  
  
• Dabur India Limited has signed a Memorandum of Understanding (MoU) with the Tamil Nadu government to establish its first manufacturing unit in South India. The initial phase of the project involves an investment of Rs 135 crore, with plans to scale up to Rs 400 crore over five years. The facility aims to meet the rising demand in South India, create approximately 250 direct jobs, and boost economic development in the region. This strategic move will also enhance Dabur's sourcing of agricultural produce from local farmers in Tamil Nadu.

Stock name: NMDC Steel Ltd.

Pattern: Double top pattern and retest

Time frame: Weekly

Observation:

The stock has been on an upward trend since its 2023 listing, but from January to August 2024, it consolidated and formed a double top pattern on the weekly chart. In August 2024, the stock broke out from this pattern, but the low trading volume raises doubts about the breakout's strength. The stock is currently moving above the breakout line. Therefore, additional confirmation is needed for both the breakout and potential downward movement. If the stock gains downward momentum, further decline may follow according to technical analysis.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: Hindustan Petroleum Corporation Ltd.

Pattern: Cup and handle pattern and retest

Time frame: Daily

Observation:

Since October 2023, the stock has experienced rapid upward movement. From February to August 2024, it stabilized and formed a cup and handle pattern on the daily chart. On August 21, 2024, the stock broke out from this pattern with slightly above-average trading volume, supported by a bullish MACD indicator. However, the stock is currently facing a retest with a very high RSI level, suggesting the need for further confirmation to assess the breakout's momentum. If the stock continues in the breakout direction, stock may rise according to technical analysis.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• Tata Capital Ltd has sought approval from the Competition Commission of India (CCI) to merge with Tata Motors Finance Ltd (TMFL). The merger, approved by both companies' boards in June, will result in Tata Capital issuing equity shares to TMFL shareholders, giving Tata Motors a 4.7% stake in the merged entity. This move supports Tata Motors' strategy to exit non-core businesses and concentrate on emerging technologies. Tata Motors Finance, the vehicle financing arm of Tata Motors, primarily finances Tata vehicle sales. The merger proposal will be filed with the National Company Law Tribunal.
  
  
• HDFC Bank has outpaced its peers in attracting deposits, despite having significantly fewer branches than State Bank of India. The Reserve Bank of India's push to improve the credit-to-deposit mix has intensified competition among banks, but public sector banks have struggled to keep up, even with their extensive branch networks. HDFC Bank, the largest private sector lender in India, achieved substantial deposit growth, highlighting its strong performance in the ongoing competition for liabilities.
  
  
• In its first full year of operations, Tata Electronics achieved a remarkable ninefold increase in sales, largely driven by the acquisition of Wistron's iPhone assembly plant near Bengaluru. The company's consolidated income surged to ₹3,802 crore in FY24, up from ₹401 crore the previous year. Despite this growth, Tata Electronics reported a net loss of ₹825 crore due to high expenses. The acquisition allowed Tata Electronics to join Apple's global supply chain, making it the only homegrown iPhone assembler in India. However, the net loss widened due to high depreciation and interest costs.