Got the guts to make tons if money by short selling LIC Housing Finance Limited ?

[ Money, Money on the Wall, tell me who's the smartest of them all l

America, the land of opportunities – a land where people make loads of money even as people continue losing loads of money, Yes, that’s what guys like James Chanos do – he is a Master Strategist when it comes to short selling. James is in fact stronger and mightier than James Bond when it comes to making money off the street.. James is President and founder of Kynikos Associates, a New York based investment company that is focused on short selling.

Way back in 2000-01, James made a killing short selling Enron. Many of you may be aware that the Enron stock declined from $90 in August 2000 to a low of $1 near the end of 2001. Over this period, James Chanos was a short seller of Enron during 2001, increasing his short position as more information surfaced. Kynikos profited greatly and Chanos himself became somewhat of a celebrity as a consequence of his early awareness of Enron’s problems.

Closer to home, we may not be having specialist investment boutiques specializing in short selling but one thing I can vouch for – there are many smart guys on our own beloved soil who make tons of money short selling – they have done it before and they are doing it now. Yes, buddy, you got it – these smart folks have been brutally short selling LIC Housing Finance Limited for the past few sessions. LIC Housing Finance Limited which was quoting at Rs.1320 on 18 November went downhill and rested today at Rs.932/share, down by 29.39 per cent. So, you want to be the next James Chanos of India?

And probably you are wondering how low could low be – the Support of Rs.816 or the 52 week low of Rs.712.80 or some lower mandatory figure rocking like a pendulum in your head? Well, buddy you may be on the way of making a killing in the next few sessions by short selling LIC Housing Finance Limited. That’s if you were to believe what the experts are saying : “The stock could remain under pressure in the near term due to uncertainty over the company’s future growth strategy,” Religare Capital Markets said in a note. The brokerage said that though it doesn’t expect any serious financial impact from the scandal, the stock could underperform its peers in the near term.

In a research note Thursday Kim Eng Securities said that unless investor fears are assuaged, they are likely to continue selling the stock, at least in the near term. With foreigners holding 42% in LIC Housing, the stock may dip further, it added.

The stock selloff is just part of the story: The bigger concern is the blow to the credibility of India’s state-run banks and insurance companies, long regarded as trustworthy and reliable by the general public. It will be harder for LIC Housing to recover from this than from a stock slump [ wsjonline ]

LIC Chairman T.S. Vijayan openly addressed this fear. ” More than the financial thing, it is the reputational risk that we are facing, not only to LIC Housing Finance, but to Life Insurance Corp. also, “ said Mr. Vijayan speaking to television channel CNBC-TV18 Thursday.

In a very bizarre case, LIC Housing Finance Ltd is a stock that can go further downhill because of the "bribery" issue and consequent negative sentiments etc in which case the fundamental-cum-technical aspects go for a toss. In such a scenario, smart investors indulge in SHORT SELLING wherein they buy the stock on "gap down " and wait patiently for the stock to be hammered down mercilessly as is happening for the last few sessions. And, these short sellers will continue making money for another few sessions until the "fear" factor evaporates and confidence about this stock gets resorted back to normal.

So, who said you can't make money in a falling market. When you short sell a stock, there is always the risk of losing money if the stock price goes up. Of course, you can always set a hard Stop Loss and play the game and be a winner if the stock continues going downhill in which case you would have learnt your FIRST LESSON IN SHORT SELLING, if you havn't done it before. But short selling is an art that should be embraced when there is bad news flowing or rather when blood has started running in the streets. You have to be pretty smart to pick the right stock at the right time in order to play this dangerous game called Short Selling. Expect short sellers to make a killing on LIC Housing Finance Ltd in the days to come.

So, buddies, do you have the guts to make tons if money by short selling LIC Housing Finance Limited – do so at your own risk because short selling is for the dare devils who can dare to dive 30000 feet from an airplane without worrying whether the parachute will open or not !

And yes, if you make money after reading and acting on this write-up, you owe me a moral responsibility - you need to treat me with just a cup of sizzling hot coffee in a nice cozy restaurant. When the market opens on Monday 29 November, sell LIC Housing Finance Limited, if its in the red, place a stop loss and pray for the profits to flow into your account until the closing bell - and yes, don't forget to square off the deal by buying back the quantity of shares you sold at start of the day.

Remember : Boom or Bust, the smartest guys on the street know how to make a killing but you need guts, you need drive, you need a laser sharp mind and you need a big heart to smile if you lose MONEY!

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd