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A Portfolio Restructuring Dilemma Kapil Shah (Kapil), a 35-year-old working professional, was looking for advice from technical analysis experts for his stock portfolio

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A Portfolio Restructuring Dilemma

Kapil Shah (Kapil), a 35-year-old working professional, was looking for advice from technical analysis experts for his stock portfolio. Kapil wanted to restructure his portfolio by exiting stocks with poor returns and buying new ones with potentially high returns so that he could generate good returns from his portfolio, which he planned to liquidate wholly or in part to meet his future financial needs. Kapil had started investing in the stock market in his mid-twenties. At that time, he used to invest in any stock only after doing Fundamental analysis. Kapil Shah (Kapil) had started investing in the share market in his mid-twenties and had seen some ups and downs over a decade. Kapil then decided to overhaul all his existing stock positions on the increasing prospects of the Narendra Modi-led National Democratic Alliance coming to power in India in May 2014. On the election results day – May 16, 2014 – he bought ten stocks to ride the possible development wave agenda of the new government. However, by the end of February 12, 2016, his portfolio had generated a return of only 1.96%. Things became tough for Kapil as repayment for a

loan fell due on August 22, 2016. Kapil wanted someone’s help to ensure he generated good returns from his portfolio so that he could repay the loan by liquidating a part or even his complete stock portfolio. For this, he contacted Dhaval P Vyas Investment Research, one of the leading financial consultancy firms in India. Based on Kapil’s profile, Dhaval P Vyas suggested that Kapil drop six underperforming stocks and purchase six stocks that he expected would perform better in the future. What should Kapil do now?

Questions: (20 Marks)

1. How to use various technical analysis tools and technical analysis software to recommend any stock to a client.

2. How and why any technical analyst selects any particular stock to buy/sell.