General Trading Chat

[travi]

I recall some PE formula change by NSE, then searched for it.

I found this article:
Nifty 50 looks attractive overnight? Don’t fuss; it’s a mathematical change (moneycontrol.com)

 

[timepass]

I recall some PE formula change by NSE, then searched for it.

I found this article:
Nifty 50 looks attractive overnight? Don’t fuss; it’s a mathematical change (moneycontrol.com)

Thanks. But the divergence has been going on for two years now.

 

[cinderblock]

It should keep diverging over time, no?

Nifty keeps going up on average because earnings are up.

But PE is a ranging metric mainly because of how it is calculated with E in the denominator.

 

[vigne5h]

Hi guys, I have a some doubts in the HGS Tender buyback.

Details:
Buyback announced in December 2022
Ex-Buyback day : 06/March/2023 (Monday)
Buy Back price: Rs.1700

As you can see in the pic the stock was trading in a range (Rs. 1290 - Rs.1310) from December to March.
On March-03 (Friday) people start to buy the stock and it raised Rs. 50 in a day with high volume spike. And then the next trading day (March 06 Monday Ex-buy back day) the stock opened gap down around Rs 1150. So I assume who ever bought the stock on march 03 dumped it on the next trading day march 06.


My Doubt is this:

1. If someone bought 50 HGS stocks on March 03 for Rs. 1350 (50*1350 = 67500).
2. Then sell it on the next day (Ex-buyback day) March 06 for Rs. 1200 (50*1200 = 60000)
3. He made a net loss of Rs. 7500 ( Buy 67500 - sell 60000= net 7500)
4. But this person is eligible for buy back of 50 stocks as he bought it before the ex buy back date. His name goes into the companies record book.
5. Let say the tender for buy back opens in April 2023 and the person again buy the 50 shares in the open market for Rs. 1020 (as on 31.03.2023 the stock is trading at Rs.1030) and apply for the tender.
6. He make some money as per the acceptance ratio of the stock. Lets assume 20 share bought back by the company for Rs. 1700. And he sell the remining 30 shares for Rs. 1020 in the market.

So his net profit is ,
Buy price 501020 = Rs. 51000
Sell price 301020 = Rs. 30600 (Just assume no loss in selling the remining shares)
Buy back by company 20*1700 = Rs. 34000 (Credited to his bank account)
Net Profit (1700-1020 = 680 ; 680 * 20 = Rs. 13600)

1. This way he made Rs.13600 profit which is tax free. (Tender Buy backs are tax free - am i right)
2. And is it possible for him to set off the loss he made in step 3 Rs. 7500 against other short term capital gain he made in some other trades.

I want to know,

1. Am I looking at this scenario correctly or not.
2. Is it possible for someone to gain from the share buy back and also do some tax harvesting at the same time.
3. Am I missing some tax related or regulation related issues which prohibit this whole process.
4. Will this assumption work in the market. (A person entered just before the ex record date and exited on the ex record date, and he got his name in company’s record book)
5. Please let me know if I am missing something here. whether this strategy works or not.

Thank you.

 

[timepass]

Looks like stretching a bit but banknifty 5 min shows a H&S with 150 pts height.

 

[travi]

It should keep diverging over time, no?

Nifty keeps going up on average because earnings are up.

But PE is a ranging metric mainly because of how it is calculated with E in the denominator.

is there a website that has adjusted past data with the new formula so the chart is consistent?

or say MAR-APR 2020 PE ratio range was around 19-20 so what would the new formula value be back then.

 

[cinderblock]

Don't know about the new formula or other website. I just looked up the link in timepass post. I will post here if I find something tomm.

 

[cinderblock]

So, from Apr'21, PE is now calculated using consolidated earnings and not standalone like before.
This resulted in a ~15% drop in PE starting April 21.
Maybe, I am not sure if you can just adjust all prior PE down 15% to make the comparison uniform

https://www.capitalmind.in/nifty-pe-ratio/

 

[travi]

Ofc, this is not ideal but one can use sensex in which parameter has not changed.

https://www.bseindia.com/markets/keystatics/Keystat_index.aspx

 

[travi]

quoting from article:
The exchange cannot be blamed for its method and rather, it is the reporting structure for companies specified by SEBI that seems flawed. It is not mandatory for companies to report consolidated financial numbers at the end of every quarter.

source: What’s the true P/E ratio? - The Hindu BusinessLine