INTRODUCTION
As advertised on its web site, Capitalvia Global Research Ltd( http://www.capitalvia.com) is an Investment Advisory Company which provides recommendations for securities traded in NSE and BSE, commodities incuding bullions, metals and agro-commodities traded on the MCX, NCXEX. Hereafter I will refer to Capitalvia as CV.
This is a review of CV's Stocks-Cash product, which I had subscribed to in mid October 2011. Stock-Cash gives intraday margin calls i.e. you are expected to square off your position the same day. A subscriber usually get 3-5 cash calls per day. The prices are based on NSE prices. On its site, CV claims to "assure accuracy of 85%-90% in our recommendations with personal attention given to each and every client".
CV publishes its targets as per the standard Entry Price, T1, T2, T3, Stop Loss method using a variety of channels including SMSes and its chat site. CV also publishes Track Sheets on its web site which cover its past performance e.g. Stock Cash performance is available since 01-Jul-2007.
CV's publishing of its extensive past performance was one of things which encouraged me to try them. The other thing was a decent performance during the trial period(about 75%) during which time unfortunately I did not notice some of the problems reported below.
PERFORMANCE REPORTING METHODOLOGY
Past Performance is reported for each product. You will find the following excel documents on its site - Derivative, Commodity, Stocks, Delivery. I will be referring to the Stock Cash worksheet under the Stocks.xlsx. The format is the following which is self explanatory -
Date SCRIP QTY. RECO RATE BOOKED AT 1 BOOKED AT 2 BOOKED AT 3 Profit / Loss TOTAL POINTS P & L
Date - date of recommendation
SCRIP - the NSE symbol of the scrip
QTY - quantity of the stock, CV recommends taking an exposure of Rs 2, 00, 000/- per call but sometimes it recommends the quantity on the call itself, so if a stock costs Rs. 1000, you will be taking an exposure(Long / Short) of 200 shares per call, if the quantity is not specified.
RECO - LONG or SHORT as per the call
RATE - NSE Price at which the call is recommended
BOOKED AT 1 - First target for call(T1), note that this may be modified after the original call i.e. the original call may recommend booking at 100 but may be subsequently revised to book at 99.8. CV recommends a 60-20-20 split between T1-T2-T3 i.e. book 60% at first target, 20% at second and 20% at third.
BOOKED AT 2 - Second target for call(T2)
BOOKED AT 3 - Third and final target for call(T3)
Profit / Loss - Calculated numbers per target.
TOTAL POINTS - a very loose definition of max profit / loss
P & L - Total profit / loss per call
PROBLEM1
Whenever T2 and T3 are used(and they will be used only when T1 has been achieved), the total profit is calculated on the maximum target reached whereas only the appropriately divided sub-quantity should be calculated for each position.
e.g. consider a call given on 30-Sep-11,
Date SCRIP QTY. RECO RATE BOOKED AT 1 BOOKED AT 2 BOOKED AT 3 Profit / Loss TOTAL POINTS P & L
30-Sep-11 AXIS BANK 193 SHORT 1038 1032 1025 1011 1156.07 1348.75 2697.50 27.00 5202.31
Since the call was booked at three different rates, 60% of the quantity would have been booked at T1(1032), 20% at T2(1025) and 20% at T3(1011) i.e. approx 117 at 1032, 38 at 1025 and 38 at 1011 giving a total profit of Rs 2234, not Rs 5202 as mentioned!
This problem applies to every single call that CV reports as having touched T2 or T3! THIS IS OUTRIGHT FRAUDULENT!
PROBLEM2
e.g. consider a call given on 28-Oct-11,
Date SCRIP QTY. RECO RATE BOOKED AT 1 BOOKED AT 2 BOOKED AT 3 Profit / Loss TOTAL POINTS P & L
28-Oct-11 SBI 105 SHORT 1900 1891 947.37 0.00 0.00 9.00 947.37
After the first target was met at 1891, the message from Capitalvia was to book 60% at 1891 and keep 1907.40 as the revised SL for the remaining quantity.
Hence 60% of the quantity i.e. 63 would have been booked at 1891 and the remaining quantity(42 shares) hit SL at 1907.4 giving a total profit of Rs 256.20, not Rs 947.37 as they mention!
This problem applies to every single call that CV reports as having touched T1! In some cases, it may not get to the revised SL but whatever is the closing for the stock when automatically sqaured off by your broker; certainly not the profits claimed by CV. THIS IS OUTRIGHT FRAUDULENT!
PROBLEM3
On 04-Jan, there was a buy call for a scrip(OBC) and 30 min later there was a revision to T1. The stock did touch T1 but it was before the revised call was given. After the revised call, the scrip never touched revised T1! In fact, the stock then hit the revised SL.
Inspite of this, in their track sheet, CV reports that this was booked at T1, which is misleading at the least, if not outright fraudulent.
This problem applies to some calls i.e. CV usually gives profit booking calls fairly but resorts to this when they are under pressure to inflate numbers in lean periods.
PROBLEM4
Calls come after the entry price e.g. a call to sell a stock below 740 may come in when the price is already 738. So, while CV will calculate profit from 740, it is actually less than 738 for the investor. This is happening more often now when CV is under pressure to perform.
CONCLUSION
PROBLEM1, PROBLEM2 & PROBLEM4 result in an padding of more than 70% in reported profits and PROBLEM3 turns losses into profits on excel!
I have reported these problems to CV several times and got no clear response. Hence, I believe that their action is intentional and fraudulent.
Between 17-Oct-2011 and 04-Jan-2012, CV has reported 212 calls with 149 calls reported as profitable and 63 as loss-making with an accuracy of around 70% by their own reckoning against 85%-90% claimed. And, some of the "profitable" calls in the 70% are outright manipulations. I think the actual number would be around 60%. So while you are assured of reaching their SL numbers on the calls they report as having hit SL, on the remaining, you will not book the full profits mentioned or may actually hit the revised SL.
As every investor should know, an accuracy of 60% is a recipe for making losses after counting all overheads like brokerage, taxes and CV's own charges. Hence, even if an investor religiously follows all the calls instantaneously, he/she can expect to make losses. I think Stock Cash is not one of their preferred products and does not get much focus. I have also noticed the following
recommendations tends to get in at the end of an upswing or downswing when a stock has already moved significantly that day i.e. the calls are not proactive but defensive.
they have a fetish with the current lows or highs of the day e.g. if a stock, which has made a low of 84.05 during the day, is currently trading at 85.6 and CV is bearish, the call will come to sell below 84. I think a lot of price action is lost there.
T1, where 60% of quantity is booked, is usually less than 1% whereas the SL is almost always 1%
You are better off doing your own research before investing.
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