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Buy ICICI Bank Relative Valuations Look Good


Note: Part of newsletter sent on 04-September-2015 to my newsletter subscribers.

Frankly I do not like giving tips for paid or free. But sometimes its very tempting that I cannot stop myself. 🙂

Right now ICICI Bank is currently at 256, and is looking very attractive to buy.

It is almost 35% down from its recent high of 393.

There is NOTHING WRONG with the bank – so this is clear panic sell. Compare this to HDFC Bank and AXIS Bank. They are not that down. This is known as Relative Valuations. Bargain hunters look for it as well. 

According to WikiPedia:

Relative valuation also called valuation using multiples is a generic term that refers to the notion of comparing the price of an asset to the market value of similar assets. In the field of securities investment, the idea has led to important practical tools, which could presumably spot pricing anomalies. These tools have subsequently become instrumental in enabling analysts and investors to make vital decisions on asset allocation.

According to InvestoPedia.com:

A business valuation method that compares a firm’s value to that of its competitors to determine the firm’s financial worth. Relative valuation models are an alternative to absolute value models, which try to determine a company’s intrinsic worth based on its estimated future free cash flows discounted to their present value. Like absolute value models, investors may use relative valuation models when determining whether a company’s stock is a good buy.

If you have free cash you can buy ICICI Bank equity in cash for a quick 10-15% return probably in 2-3 months.

IMPORTANT: DO NOT BUY MORE THAN 3-5% OF ALL YOUR TRADING ACCOUNT HOLDING. ITS IMPORTANT TO DIVERSIFY RISK. JUST BECAUSE YOU BELIEVE IN ME DOES NOT MEAN WHAT I SAY WILL ALWAYS BE CORRECT. TAKE YOUR OWN DECISION.

I hope you understand this very important thing – learn to diversify risk. This 10% profit will definitely come soon – but still you should know where to draw the line and how much to invest.

I have done a few things as well. Will share in a separate email.


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About the author: I started trading stock markets since 2007. However my first 3 years were losses. Then I dedicated almost 1 year on studying, researching, paper trading options and learned a lot in that time. Since 2011 I am trading Nifty options profitably. Call me if you need any help trading options on 9051143004.

{ 15 comments… add one }
  • Amit Chowdhury

    Sir
    As you r saying to buy icici wd u plz plz give some idea about Tata elxi as I have taken position ,apologized for without your advice I bought it
    Thanks in advance

    • Amit, no need to apologize. Sorry but I do not trade in companies that I am not comfortable with. I am a trader not speculator.

  • Pramod B

    Thanks a lot sir ji.

  • Anil Punjabi

    Dear Dilip ji,

    Thank you very much for helping me in understanding the most important rule of trading : Define your Risk & Reward ratios if you want to survive in the market.

    Regards

    Anil Punjabi

    • Welcome Anil. That is the FIRST RULE of trading. People who follow survive, else they perish with a huge loss.

  • Sukanta Mitra

    What is you view about Amtek Auto?

    • Amtek Auto? No View. I do not trade such companies. For me they do not exist. Thank You.

      • Sukanta Mitra

        Actually I am stucked in this company bought 200 shares @ 129 should i hold or hold?

  • Ajit Wadkar

    Dear Dilip Sir,

    Kindly suggest strategies in the following circumstances:

    1)When we are sure that mkt will move either 50 to 100 points up or down but will not be stagnant.

    2)When we know that mkt will either go up 50 to 100 pts or remain above previous close but will not close below previous close.

    Thanks & Regards,

    Ajay Wadkar

    • Ajay, first tell me how do you know that? 🙂

      There are many strategies if you know what will happen.

  • Vijay Kumar

    Thank you for good advice
    Appreciate it.

  • marina s rao

    Dilip ji,

    Namasthe.

    Learning points from this post :

    Learn to diversify risk

    ThanQ.

    M S Rao

    • Diversifying risk is a very important chapter of making money from stock markets. Thanks.

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