Bell curves -& your Portfolio. It is appraisal time!


It is appraisal time!. You heard it right and it is the annual appraisal time for your portfolio.
But for those who do not know what is a Bell curve, let us understand it first.
Let us consider 50 students in a class and measure their height. The data looks like this
Inline images 1
And if you plot the distribution on varying heights and the no of students,  using histograms and draw a curve, the curve will look like this
Inline images 2
This curve is known as Normal Distribution curve or simply Bell curve as it resembles the shape of a bell.
You will notice that the majority of the class in the middle range with in the orange color band and there are few people, who are shorter than the average of the class and some are taller than the average of the class. These are marked in yellow in the image.
In a distribution like this,  around 5 to 10% fall in the yellow band and they are known as outlier.
Similarly the portfolio you have will have stocks which give very good returns, which is on the right side of the image and there may be few stocks which are in the left yellow band and they may be giving negative return. These are the ones which pull down the overall return of the portfolio.
Appraisal system.
Many companies use this bell curve to fit their employees based on their performance. It is not necessary that the pattern may follow a bell curve like the above. But then, they force fit the performance and fit the employees into a bell curve.
Why do the do that?
a. the organisations want to reduce the average wage hike of the all the employees as a universe.
b. They want to reward the out performers very well and they may get wage hike in excess of 50 to 75% or may be more.
c. They identify the second best performers and say pay around 20 to 30%
d. The average performers get around 10 to 15% and
e. the under performers are the one on the left side yellow area, either get no increment or asked to leave the organisation.
The average hike in wages would be (0.15*75 +0.20*25+0.55*10)  which is 21.75%
The force fitting is hurting the individuals and slowly the companies are coming out of this system.
What has this to do with your portfolio.
Your portfolio of stocks may or may not follow a normal distribution like the above.
You cannot force fit the portfolio as the performance is not in your hands.
However you need to do an appraisal of your portfolio and identify the performers and non performers.
You must constantly move your portfolio  from the blue range to the green range. see image below
Inline images 1
Move your portfolio to the greener curve and this enhances your returns on the portfolio. A skewness to right is good for the portfolio and selection of good stocks will help you move right.
Do remember that keep aside your emotions. Remember
Opinions Confuse
Facts convince. 
Things to do can be summarised as below
a.  Take a look at your portfolio.
b. Find out portfolio returns and individual stock returns.
c. Try to map the distribution curve.
d. Unlike a Bell curve appraisal you cannot force fit the returns and churn the portfoio to improve the returns
e. Keep moving the greener pastures.
g. Do this once a year.
varadharajan VS

Weekly bank nifty options Play as T20 instead of ODI


Are you the one trading heavily into options? If no then skip this article as it does not make sense to you.

If you trade in options, may be you can read this.

NSE introduces weekly expiry of bank nifty options from JUne 2016

As you know, option premiums is the sum of intrinsic value of the underlying plus the time value of money.

The longer the time to expiration, for a given value of underlying, the premium will be higher. This the premise on which you must read and understand what the change to weekly options can do for you.

With the weekly expirations, the time value of money has drastically come down for a new contract from 28 to 35 days depending on the expiry period or when the last Thursday falls in a month. With the weekly options the time to expiration is 7 days or 5 trading sessions.

Therefore the probability of making or losing money in premium due to time value was higher earlier. Now, because of the premium reduction, due to weekly options, you can consider trading and benefit out of this. However care should be exercised as there is risk of volatility and hence risk of losing the premium paid.

Also the time of buying and selling the options do matter.  You can consider this option.

One of the widely traded index option is the bank nifty option. and normal day the fluctuation can be 0.25% to 0.5% and  many days it is around 1%.  Hence a 1% variation in one day can give you opportunity to trade .

Here is what you do. Let us assume the bank nifty spot is 17500. On the first day of the contract ie. on Friday, you can use a strangle option and buy a put option for a strike price of 17200 and a call option for a strike price of 17800. you can stretch the stike prices so that the premium you pay is managed well. It is possible that you can buy both options with a total premium of 60.

When the bank nifty opens on Monday or Tuesday the effect of 1 to 2% in either direction can give you good premium for one of the options and based on the directions, you can possibly make a decent money . Let us take last Friday, 17th June 2016, 18200 call option of bank nifty was available for 40 and later came down to 22 and 17300 put option was available for 30 and went up to 35. If you had bought them you could have paid Rs 70 though it is higher, as it is difficult to judge the movements on both sides. It is therefore good to buy both these simultaneously.

ALSO Note that both these options are out of the money options and hence they are available cheaper.

Therefore exercise care.

Today when the market opened the put option went to 110 and the call option ended with 12 and you could have got at least 110 from the sale of put of option, even if you don’t sell the call option there by making 110- 40-30 which is Rs 40 and with a lot size of 30 it is 1200. Assuming the brokerage though on the higher side could be 436 leaving with a profit of 764 on an invest of 2100 which is around 30% . I have tried and watched this for the last 3 weeks and there is a possibility of a money play here.

However, take care of the directions of change and movement of the market & the brokerage. Since the time to  expiration is very short, you may end up losing the whole money.

The purpose of writing this is to make people aware that there are good opportunities, if you are an option trader and weekly bank nifty has changed the game to T 20 from ODI.


For any clarifications please feel free to contact me.











How to make money while you buy medicines regularly.


Most of us buy medicines regularly from the pharmacy close to our homes and the quantum of purchase is higher, if we have a sick person or aged parents, who by age take medicines for various ailments.
Now we have an option to save some money and it could work out to as high as 20%.  This is how it works.
Medicines from the pharmacy nearby has the following advantages.
a. you can order medicines over phone.
b. Door delivery of medicines.
c. Some people also offer credit in the sense that you pay the bill once a month, like I do.
d. Flexibility with return of medicines, in case of change by the doctor.
Let us assume that one spends Rs 2000 per month on medicines every month and is purchased on cash and door delivered.
For a period of 5 years, the total expenses on Medicines work out to RS Rs. 1,20,000
Many of you are aware that Medplus offers the same facility to buy medicines online and offers discount as below
a. 10% upto Rs 1000 and 15% if the bill is above 1000.
b. Door delivery options available, if you upload the prescription or show on delivery.
c. You can place order on your mobile anywhere on the go or using a computer or Ipad.
Scenario 1
In our example the purchase per month is 2000 and hence you get a discount of 15% and hence you pay only 1700. This for a period of 5 years works out to 1,02,00.
A savings of 18000 or 15%.
Scenario 2
The savings you make of Rs 300 everyday, let us assume, that it is invested in a SIP in a debt fund. ( I have considered a Monthly Income Plan) For a period of 5 years from 1 April 11 to Mach 2016,
The total invested amount is 18,000 and the current value is 23,074. The debt fund has given a return of 10.19% CAGR.
You will now see that your return is not 15% but 19.22%
Scenario 3
Instead of paying cash, let us assume that one pays by credit card.
a. The first installment of Rs 1700, which is not paid is invested in a FD for 5 years, at 7.5% per annum compounding quarterly.
This will give a return of 764
b. The second installment is used to pay the credit card bill of the 1st month and hence there is no delay, no extra interest or charges.
c. IN the process, you transact for 5 years, 1700 per month which is 1,02,000.
Many credit card companies offer you a reward of 35 paise per 100 spent and you will earn a cash reward of 357.
d. The SIP grows to 23,074 in the previous scenario. Therefore the total savings is
23,074 +764 +357=24,195
Now the savings works out to 20.165% or one percentage point higher.
a. One needs to be extremely careful with managing credit card in scenario 3.
b. Default on payment might lead to higher interest charges which will offset the savings.
c. Past performance of MIP may or may not be achieved consistently in future
d. Return of medicines to Medplus is a disadvantage.
e. More importantly, this will be valid as long as Medplus offers discount.
If you are disciplined you can make money in this method.  Exercise care and your discretion on availing this offer.
For any clarifications, please feel free to contact me

Rate cut by RBI and Sensex


As widely expected, RBi cut the repo rates ( interest rates) from 6.75% to 6.5% and with this the total reduction in the last 15 months starting January 2015 is 150 basis points or 1.5%
However the market has behaved slightly different to the rate cut by a decline in sensex of 516 points on 2nd April 2016.
Just wanted to share how the sensex has moved for each of the rate cuts since last January which is below
Inline images 1
Not all rate cuts have been received positively by the market
Market is expecting beyond the rate cut.
If you do a correlation and regression analysis based on the set of data available you will see that the correlation coefficient is – 0.74 which means the market is correlated inversely with respect to the rate cut.
The market goes down with the rate cut!
What are the reasons for this?
a. There is pick up in urban consumption but the consumption is not so good in rural areas
b. The rural economy is dependent on Monsoon and with two consecutive years of failure the demand has slowed down.
c. The expectations that the results of the quarter ending March 16 for various companies is expected to be muted or not very good.
d. Worried global economy and slow growth projected.
While there are many other reasons, the above predominant reasons, are having a negative sentiment and leading to a negative correlations.
What we as investors should know and be doing?
There are signs that the growth is picking up Read by clicking on this link
Are we at the inflection point?  Read this.
These things only are indications that good things are yet to come and may be around the corner. Stay invested and
One of the easy ways is to start a SIP.
Keep this quote always in mind
Investors want to do today, what they should have done yesterday – Larry summers
We all have felt like this.
To start your SIP today, do contact me

Coke, Pizzas, Pollution & stress make Hospitals an Investment option


Greetings on the new financial year. On this new financial year starting, we can look at a new sector which is normally overlooked.
Hospitals in India.
The spending of government on health care is not raising higher and is way below the developed countries. In developed countries, the allocation is around 10% of GDP and in India this year it is just 1.3% which is less than 40 k crores.
Some of the factors which will see growth in revenues in Health care are:
a. The medical tourism in India is likely to touch $8 billion or around 5500 crores by 2020
b. The life span of the individuals in increased and has gone up by 8 years in the last 35 years from 65 to 73 years.
this can be considered as boon or a Bane. A bane for people who are sick and need to spend more on health care.
c. There are lot of lifestyle diseases which are now affecting the youngsters including depression
d. Addiction to drugs, tobacco, alcohol are only adding to the problems.
e. There is so much of pollution around us, in water, air, food we eat which does affect our body.
f. New viruses which keep surprising everyone like Zika, Ebola etc
g. You also have the medical inflation around 12% for the last 5 years, This means you treatment cost will go up 10 times in the next 20 years.
95% of the people die due to some illness and undergo treatment.
Therefore, there is strong case for the revenue of the hospitals to grow.
DO we know how much it costs to build a hospital?
The current estimated  cost to build a hospital is 40 to 50 lacs per bed.  This means it requires 100 crores to build a hospital of 200 beds. If we calculate the interest the pay back period will be more than 10 years, depending upon, how much the hospitals charge. 
This is big entry barrier for setting up  a hospital. Though there are small hospitals who cater like kirana stores, we must focus on big hospitals as investors. 
Now which are the hospitals which are listed in India 
Inline images 1
Of this we see nationally there are four with good market cap and of the four two are recent issues.
You can consider Apollo Hospitals and Fortis. But understand the performance, Management of these stocks before investing.
This is new sector with a high growth prospectus and will be everlasting.
Also read the survey on Best HOspitals.
See the out performance of Apollo hosptials vs Fortis.
Please note the first two hospitals AIIMS and CMC vellore are not listed.
Inline images 2
I will be glad to help build your portfolio.
Watch out for this space where you will see how a SIP in Apollo in the 5 years would have made a difference to your portfolio

Thanks & regards


You don’t need a Health Insurance – if and only if ———-


I have been writing about the various aspects of health insurance which briefs about
a.  The medical inflation and the amount one needs to consider for coverage
b. Your cash flow and the possible recovery in case of a claim
c. How it is different from Life insurance
d. I had earlier mentinoed about the features you must consider while taking a health insurance policy.
Now there are few people, who consider not taking a health insurance policy. Therefore I thought of writing under what conditions, you need not take a health insurance.
1.   If you are rich, you don’t need a health insurance.
After all , health insurance is to cover your financial losses. If you are rich enough to pay for the medical expenses that may arise for your family, you don’t need a health insurance.  Industrialist like Birlas, Amabani’s don;t need a health insurance.
How do you check that?
If you can afford 5 crores and your net worth is not pinched then you can be rest assured that you don’t need a health insurance
2. If you are covered under schemes like CGHS, you need not take health insurance.
CGHS is a scheme of the central government which provides health care for central government employees even after retirement. If you are covered under this you can opt not to take health insurance.
However please keep in mind that you will have to undergo treatment only in designated hospitals and you cannot choose the hospitals for treatment.
3. If you are working in a company, with no retirement, and if the company takes care of all your expenses for medical treatment.
You can be director on board
4. If you are among the 5% of the people who die unnaturally in India
There are approximately 730 people who die for every one lakh people and this works out to approximately 90 lacs death in a year.
Of this only 5 lacs ( approximately ) die due to unnatural deaths.
1.28 lacs due to suicide
1.8 lacs due to road accidents
19 710 due to fire accidents
3,650 in prisons
others in Rail, Air and stampedes etc
Most of these unnatural deaths are instantaneous and hence no hospitalisation is involved.
If you are not covered in any of the above four categories, you must seriously consider taking a health insurance policy which will ensure
a. Quality of treatement
b. Minimise financial losses
c. Reduce your liabilities due to less or no borrowings.
It is better to borrow and pay the premium than to borrow for the treatment which is very costly and may not be affordable.
As usual I am there to help you choose the right policy and cover for you and your family

Nice story I read. You will like it too

I read this just now and thought if sharing it with you hot hot.

Indrani wife of Lord Indra had a pet parrot which was nearing its end. However Indrani was not wanting it to die and asked Indra to save the parrot from Death. Indra thought of Brahma the creator and requests to save the parrot. Brahma says my job is to create and protecting is not my job. It is taken care by Lord Vishnu.
They both meet Vishnu and seek his help. But Lord Vishnu says that though his role is to protect the parrot is at the fag end of its life and Siva takes care of destroying life and we shall go to him.

Siva on hearing the details says this job is delegated to Yama and he only can save the parrot and all the four Indra Brahma Vishnu Siva meet Yama. On seeing his bosses Yama is shivering and gets to know the purpose of their visit.

He then explains the process he follows which is foolproof and well documented.  And the process is as below. This process  is approved by SEBI AMFI RBI and exchanges.

Every life’s fate is decided and when he should act is also decided.
The event of occurrence is written in a label and is hanging in a room
That room has the labels of every life
When the incidence happens automatically the label falls down.
All he has to do is pick up the label and act
But he says that there is one way they can save the parrot.
That is go Into the room and take the label of the parrot and change the way the want.
All of them agree and all of them enter the room

As they enter the room they see a label falling down.
Yama picks up the label and to every one’s surprise he notices that it is of the parrot and hence the parrot dies.

Now knowing the parrot has died they were anxious to know what was written on the label.

It was written

The moment Indra Brahma Vishnu Siva &Yama enter this room the parrot will die and it so happened.

This is precisely happening in the market today
When FII are bullish and investing more
When fund houses are bullish on The markets and come with more NFOs that too with closed ended schemes
When the advisors / distributors go all out to sell and increase their AUM and Payout
When Media is Gung  Ho of the market and have more analyst talk the same on their shows
When. More IPOs come and gets over subscribed and listing  gains are huge
And finally line Yama the retail investors enter the room (market) that is the time the market collapses like the parrot.

When the market collapses the retail investor loses the money … the parrot.

Sometimes you feel you are better of not entering the room you could have saved the parrot.

I saw this analogy and thought of sharing

varadharajan VS