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22 November, 2007

DILEMMA FOR SMALL INVESTORS:

It seems that we lack confidence to see our market above 20,000 mark of Sensex. If we go anywhere near the mark, we simply falter and whimper back to the so called comfort level of some 18,000. Are we still lacking in the conviction of a strong matured Indian Stock Market, which is not dictated by Hangseng, FTSE or Dow as fast as it is doing right now. I agree that no market can be insulated against the development in overall world scenario, if we consider the superimposition of economies.
But if any market is to climb higher, the Indian stock market is the most obvious choice. (Link to earlier post: here, here) Probably even the congenial Bears will tell; right now we are in a very good phase of Bull Run as almost all factors are favouring it. (Link: here)

The present lowering of market has presented us with a good chance to pick up some stocks which were in our radar for some time, at attractive price. The momentum boys RNRL, RPL, Nagarjuna Fertiliser, Bongaigaon Refinery and a host of other stocks have came down to a comfortable level to pick up. Some bigger boys L&T, Reliance, REL, Punj Lloyd, RCOM, State Bank etc. are now in pick-able price.
No wonder market pundits welcome correction. Should we wait for this correction to be over or just pick them up like that? It is a million dollar question. If we cannot effort to spend time in front of a computer to pick up stocks at theoretically correct time: it is simply not possible. For somebody of my type, who has engaged in other important jobs and cannot effort to spend time in front of a computer, I think picking up stock at a price at my comfortable level is the best bet.

I am sure; anyway we are going to have our market at a higher level in near future.

Now a small stock-poem

My stock: I do not sell it

If my stock remains at level, I do not sell it,
I wait for my stock to react.

If my stock goes down, I do not sell it,
I should not book loss, I can wait for some more time.

If my stock goes up, I do not sell it,
My stock will go up still higher.

I have my disciplines, I keep that in my mind
But never to practice.

19 November, 2007

POWER STOCKS: IDENTIFY THE WINNERS

The buzz word in the Indian stock market at present is “Power”. Being bullish in Indian stock market, more so in the power sector (earlier post: Power shows: Market this week) made me to have a look in this particular direction.
The recently introduced BSE Power Index is just an indication of aspiration the market have in this particular sector. This sector was neglected so far due to some prevailing draconian rules. With the development of economy and overall living standards of our country, Government can’t effort to ignore this sector. Let’s have a look at those power stocks which had entered into Indian stock market this year

Power Finance Corporation
Power Grid Corporation
Surjyachakra Power
Indowind Energy

All have done well so far in the market for their unique business models. To me these four stocks are yet to have a proper valuation and so they still have some upside left to be realized. If we consider the demand supply mismatch of power in our country the power stocks are most likely to appreciate and be outperformers to index. We have already seen some actions in this sector.

Some real big players are poised to enter our stock market in near future. Entry of these companies will further strengthen this sector. The noticeable will be the followings:

Reliance Power
Rural Electrification Corp.
NHPC
BGR Energy


We already are in the midst of a very good Bull Run of our market. The market may correct itself in a stock specific way, every time after a very good run. The concern for small investors for a proper area to park their profit may well be answered by stocks in this particular sector.

A good selection of mid cap power stocks at this juncture may yield some multibaggers. Fundamentally good power stocks are for some really long time hold, at least for a decade or till the demand supply mismatch will be shorted out (till 2017 as per investment bank Artherstone).

14 November, 2007

THE GREAT INDIAN BULL RUN

It seems that I am destined to miss the excitements of stock market during any of my hiatus from the blog to attend other engagements. The Sensex remained there at tantalizingly near 20,000 when I shined off, then it slided by around 2000 points for lack of cues. It made a resounding recovery of 924 points in a biggest single day rally to be there at its very correct place near 20,000. It reconfirmed my standing (my earlier popular blog: Should we buy stock now?) that there is still some time left for Bears to set in. For now it is the “Great Indian Bull Run”.

Market pundits always maintain, “bull markets don’t just die of old age, historically only one factor has terminated bull runs: rapidly rising interest rates. Bear markets occur when earnings collapse due to an economic recession, which in turn is brought about when real intereat rates cross the threshold of pain”. (Ruchir Sharma: The Sky Isn’t Falling –Yet, November 5, 2007, Newsweek)

To go by the above referred article there are still some way to go before the Indian Stock Market enters into the “bubble” territory. History shows the bubbles peaks when average stock price reach the level of 50-60 times projected earnings for the coming year. Some examples of bigger bubbles are NASDAQ in 1989 and Hong Kong market back in 1973, when the P/E ratio peaked at 55. The bubbles were busted by respective central banks by tightening measures.

Any tightening measure will result in slowing of overall economics of our country which the government will very reluctantly opt for, in all possibilities.

There are some theories floating around like “look beyond the index stocks”. This is a dangerous proposition to small investors as most of the small investors only look at the stock price movement, not beyond that. Some penny stocks are good bait for those unsuspecting small investors by those big great white sharks lurking in the deep blues of uncertainties. They should always value the fundamentals rather than unwanted tips from those uncertain sources.

A few issues back Outlook Money (15th October, 07) came up with nine good mid cap infrastructure stocks which seem to fit the bill for small investors. For small investors these stocks may be kept in their radar for picking up when the stock price and market allows picking (refer my earlier very popular blog: Waiting forever to be discovered by world). For our benefit let me note them down below:

Bharat Bijlee: Good order book and earning visibility.
Bharati Shipyard: Cost competitiveness results in better standings.
Era Infra Engg: Good project execution.
Hercules Hoists: Diverse Product Range in a modern manufacturing facility.
India Cement: Biggest cement manufacturer in South India.
Indo Tech Transformer: Impressive growth potential.
International combustion: Niche product range.
Paramount communication: May be the growth story to come next.
Voltamp Transformers: Should ride the infrastructure growth story.

In the mean time let us bask in the glory of Sensex Sun and as old adage says: make hey while the sun shines.