Welcome to the Technofunda Investing community. Thank you for being Life Long Learner...!!!
Share this newsletter Via: LinkedIn, WhatsApp, Twitter
You can view all previous newsletters here
📈 Market Kya Lagta Hai
Nifty 50 🔻-2.09%
Midcap 150 🔻-4.12%
Smallcap 250 🔻-5.95%
|
Sectors in Focus
Major Corporate Developments This Week
- L&T Technology Services gets cybersecurity order worth Rs. 800 crores from Maharashtra State Cyber Dept.
- JSW Neo Energy has received Letter of Award (LoA) for ISTS-connected solar capacity of 700 MW from Solar Energy Corporation of India Ltd (SECI), against Tariff based Competitive Bid invited for setting up of 1,500 MW ISTS-connected Solar Power Projects.
- RailTel gets work order worth Rs. 113.46 Cr from Odisha Computer Application Centre.
- Eris Lifesciences to acquire 19% equity stake in Swiss Parenterals for Rs. 237.50 crore.
- Biocon Biologics will sell its Indian branded formulations businesses to Eris Lifesciences in a deal worth Rs. 1,242 crore ($150 million).
- One 97 Communications (Paytm) - company gets approval to participate in UPI as a TPAP.
- Shakti Pumps - company received a Rs. 93 crore order from the Maharashtra Energy Department.
- KSB receives orders of around Rs. 267 crores for supply of Pumps for Kudankulam site, Tamil Nadu state, India. Scope of the order is supply of Pumps along with accessories including motors. The sales/ supply of products/ services for the order is expected from quarter 4 of FY 2025.
- L&T Technology Services (LTTS) has won a first-of-its-kind program in India worth around $100 million (Rs. 800 Crore) from Maharashtra State Cyber Department, under the Government of Maharashtra.
- Kalpataru Projects gets order worth Rs. 2,445 Cr in transmission & distribution, buildings & factories businesses.
- JSW Energy bagged LoA from Solar Energy Corp for 700 MW ISTS connected solar capacity.
- Power Mech received order worth Rs. 306 cr from Southeast Central Railway.
- Bajel Projects secured goods & services contract worth Rs. 358 cr from Power Grid.
- PC Jeweller - the State Bank of India accepted its proposal for one time settlement of its outstanding debt.
- Adani Green Energy - its stepdown subsidiary Adani Renewable Energy Fifty-Nine Ltd. signed a power purchase agreement.
- Adani Green Energy Ltd (AGEL), has operationalized 126 MW wind power capacity in Gujarat. This marks the completion of the 300 MW of project, with 174 MW being operationalized earlier. The 300 MW wind project will produce ~1,091 million electricity units, leading to an avoidance of approximately 0.8 million tons of CO2 emissions annually.
- Genesys International Corporation secured a groundbreaking deal with the Brihanmumbai Municipal Corporation (BMC), marking a significant validation of the Genesys New India Map stack. The contract, valued at Rs. 155 Crores marks a significant milestone in advanced mapping technology being used for multiple use cases.
- Zydus Lifesciences has received final approval from the United States Food and Drug Administration (USFDA) to manufacture and market Chlorpromazine Hydrochloride Injection USP, 25 mg/mL and 50 mg/2 mL (25 mg/mL), Single-Dose Vials.
TechnoFunda Investing Quote from Legends -
Bill Ackman's statement underscores the critical importance of objectivity and rationality in investment decisions. He conveys that successful investing demands a disciplined approach, where decisions are based solely on factual analysis and devoid of emotional biases. This philosophy suggests that emotions such as fear or greed can cloud judgment, leading to suboptimal investment choices. Ackman's insight guides investors towards a more analytical and dispassionate strategy, aiming for methodical, fact-based decisions to achieve long-term success in the financial markets.
📚 Book I'm Reading This Week
In "The Joys of Compounding," Gautam Baid merges the concepts of value investing and lifelong learning, emphasizing their mutual benefits for not just enhancing investment acumen but also for personal development. He highlights how wisdom from renowned investors like Ben Graham and Charlie Munger can guide both financial success and individual growth. Baid champions consistent learning habits—like daily reading and journaling—to foster intellectual depth and personal virtues, showcasing that the principle of compounding can enrich one's financial standing and overall life satisfaction through disciplined practice and knowledge gain
|
TechnoFunda 101 - Power Capsules
Learn technical as well as fundamental concept in a simple way
Simplifying the Concept of Risk-Reward Ratio
Understanding the Risk-Reward Ratio (RRR) is pivotal for every investor, irrespective of their trading strategy or the analysis method they rely on. Below, let’s unravel the complexities of RRR, using a straightforward approach.
What is Risk-Reward Ratio (R:R)?
The Risk-Reward Ratio calculates the potential reward an investor can earn for every unit of currency risked. It is a measure widely used across financial markets to assess the viability and attractiveness of a trading position or investment decision.
Calculating R:R - A Simple Illustration
Consider a simple scenario of a short-term trade:
- Entry Price: ₹55.75
- Stop Loss: ₹53.55
- Expected Target: ₹57.20
From this, we calculate:
- Risk: Entry - Stop Loss = ₹55.75 - ₹53.55 = ₹2.20
- Reward: Expected Target - Entry = ₹57.20 - ₹55.75 = ₹1.45
- RRR: Reward / Risk = ₹1.45 / ₹2.20 ≈ 0.65
Given an RRR of 0.65, this trade would be less appealing, indicating the risk outweighs the expected gain.
Benchmark for a Good R:R
For a trade to be considered worthwhile, it should offer a Reward-to-Risk Ratio higher than a certain threshold, which varies among traders. A generally advocated RRR is at least 1.3, meaning, for every rupee risked, an earning of ₹1.30 or more is expected.
For example:
- Entry Price: ₹107
- Stop Loss: ₹102
- Expected Target: ₹114
Calculating the RRR for this:
- Risk: ₹107 - ₹102 = ₹5
- Reward: ₹114 - ₹107 = ₹7
- RRR: ₹7 / ₹5 = 1.4
In this example, every ₹1 risked expects to bring ₹1.4 in return, marking it as a more attractive opportunity.
Personalizing R:R Thresholds
Every trader should define their minimum acceptable RRR based on their risk tolerance. While some may be comfortable with a 1:1 ratio, others might seek a more conservative ratio, like 2:1, aiming for double the return against the risked amount.
An Illustrative Scenario
Imagine a scenario where technical analysis signals a promising trade:
- Entry Price: ₹100
- Stop Loss: ₹92.82
- Expected Target: ₹107.19
Calculating the RRR:
- Risk: ₹100 - ₹92.82 = ₹7.18
- Reward: ₹107.19 - ₹100 = ₹7.19
- RRR: ₹7.19 / ₹7.18 ~ 1
This indicates a balanced scenario where the potential reward is almost equal to the risk, suitable for traders comfortable with a 1:1 ratio.
Conclusion
In trading and investing, the Risk-Reward Ratio is an essential metric that helps in making informed decisions. It not merely influences the attractiveness of a trade but also aligns investment choices with personal risk management strategies. Remember, a successful investment strategy often boils down to consistently applying a disciplined approach to assessing risks and rewards.
🎙️ Top 7 Strategies to Ride Volatile Markets
Keep Compounding...
|
|
Vivek Mashrani, CFA
Founder, TechnoFunda Investing
|
|
|
You Can Share This Newsletter...!!!
|
|
|
Follow all my content on my social media handles below
|
Disclaimer:
- The content provided on this page by the publisher is not guaranteed to be accurate or comprehensive. All opinions and statements expressed herein are solely those of the author.
- The information found on this newsletter should not be interpreted as investment advice, nor does it express any viewpoint on the future trading prices of any company's securities. The opinions and information shared here should not be taken as specific guidance for making investment decisions.
- The content, including opinions and expressions, present on this newsletter, is not a direct or indirect offer or solicitation to buy or sell securities or financial instruments mentioned. The securities quoted are for illustration only and are not recommendatory.
- Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
- By accessing the site or affiliated social media accounts, you signify your agreement to this disclaimer and the terms of use.
- Neither the publisher nor its affiliates assume liability for any direct or consequential losses arising directly or indirectly from the use of the information provided in this content.
