FEW GOOD STOCKS

It is difficult to imagine now, a few months back we were cruising at a rate of 9 percent growth, now it is a dismal 7 percent and we are trying hard to get to that figure. Inflation is at high 12 percent, crude price has shown some funny momentum but hopefully now settled at below 110 dollar per barrel. Nobody, including market pundits has anything concrete to forward their opinions on stock market. It requires braveness to pick up stocks at this juncture, especially for small investors. We don’t have much clue on what is going on there. Recently I have come across articles in which few stocks were identified which don’t have direct impact of the present economic scenario. I agreed to some extent, to their suggestions, though I believe no stock is secure from the current world economic scenario. I think it will be better to forward their recommendations for the perusal of small investors.
The stocks are
CRISIL
EDUCOMP SOLUTION
KALINDEE RAIL NIRMAN
PRIME FOCUS
TULIP TELECOM
VAKARANGEE SOFTWARES
The article also listed seven factors to look for in stocks to beat the slowdown. One can go through the article, which will also enable a small investor to pick up few more stocks other than the above listed.
Some articles are still relevant though may be two issues old.
Link: The gems in the corner (Business Today, Sept 7 2008 issue).

FEW STOCK IDEAS

The escewed market seems to be settled now.

Oil is more or less steady, gold is trying to find its groove. Probably stock market is settled and have it discovered its real worth?

But inflation is still high and rising , high interest rates should slow down loan activity and thereby growth. Monsoon activity is good, though political heat is rising. (What Mamata B is upto? Is she a real politician? Politicians should have more tact and statesmanship.)

Whenever it seems that market is going up there will be something which will pull it down. This is a out and out Bear market, though it should be a Bull market by all arguments. But market does not reacts on arguments, than on sentiments.

Can we hide from the realities for long and simply shy away from it? It will be foolhardy if we donot reap some benefits by way of changing outlook to a long term view. Some stocks I have noted below which may merit long term outlook, lets see if you agree with me.

Yes Bank

Opto Circuit

Sesa Goa

State Bank of India

BHEL

IDFC
Hope to see you in near future.

FAVOURITE STOCKS OF MUTUAL FUNDS

Should we invest in stock in these depressing days? For many it is a half filled glass situation rather than half empty. Some investors are just being adventurous and buying anything which is right now less than half of their price in their heydays. Prudent investors are judging what others are buying and why they are buying. And also for how long the prudent investors can stay invested. There are so many factors / parameters to consider before making a decision to invest. But anyway it helps a lot to steer our course if we consider what others are buying. Let’s see what the biggest investors in the market, the mutual funds are staying invested or what their preferred stocks are. I have sourced the data from The Economic Times.
Company
No of schemes invested
Sum of no. of shares held
Reliance Ind
230
3.51
Bharti Airtel
177
3.93
Infosys Tech
166
1.92
ICICI Bank
177
5.08
Larsen and Tourbo
166
1.38
BHEL
184
1.85
Reliance Comm
150
4.85
SBI
143
1.81
ITC
131
8.97
Tata Steel
155
3.27
HDFC
126
0.84
ONGC
121
3.06
Satyam Computer
111
2.82
Tata Consultancy
110
1.50
JP Associates
115
9.63
Sterlite Indd
101
1.59
UTI Bank
98
2.16
Crompton Greaves
96
6.72
Maruti Udyog
102
1.56
Tata Chemicals
75
2.65

MARKET WISHLIST

It has been a long time since I took a hiatus from blogging. It was a really turbulent period, as the market showed weakness beyond expectation. Small investors are trying to put up a brave face though bleeding inside. The maximum loss was to those who have entered into the arena in recent months.

I am trying to frame a wishlist of mine on the market after I saw an advertisement of an investment farm in a magazine. The punch line of the ad was “Riding out the turbulence. Wealth. What’s it to you?” Certainly an experience co-pilot should be of immense help, it will be the top most point of my wishlist. The co-pilots comes at a cost, small investors can ill effort the hefty amount they charge. The Indian Mutual Trust Industry is a good example. Even with all the good intentions, the regulators are at a loss how to address the issue of protecting the interest of small investors. Still it is better to park some part of our monies in some scheme which offers guaranteed return.

The second point of my wishlist will be to learn from my mistakes I have committed in the past. But, alas, I am a small investor and only a small fraction of small investor has shown this trait so far and I should not be an exception.

The third point I wish that the so called market experts on TV should be able to decipher the signal market is giving. In most cases I have seen these free experts fails in much of a similar fashion of a free iron I got with an annual subscription of a magazine. The TV experts have huge fan followings among the small investors.

In one of my earlier blog I promised to book profit whenever the chance presents itself. I wish I could have learned the trick when to book instead of a simple promise. Profit booking is another wish of mine.

Market maxim says buy, when the market is down. I am hardly left with any monies to buy, and I am not sure to take a loan to buy stocks right now. I wish I have some money to invest.

The wish list can be extended to many more points, probably the market is like our life, good things remains elusive.

SUNNY SENSEX DAYS: HOW FAR AWAY

Sensex is below 16K after half a year, inflation crossed past the crucial 5%, Karat and party drawing attention with pre-election gimmick, UPA is in election mood handing over soaps and above all--- the fears of recession in USA is catching up. It is mesh in American job market, there is an unexpected drop of payroll. It is now in air that the total credits related write off will be in the range of $ 1 trillion. The economy massacre is now a global phenomenon initiated in North America.

But the fall of Indian Stock Market is hardest amongst peers.

The Sensex has lost 21% in 2008, but still the average price earning multiple of Sensex stocks is still at 21.58. China ranks over us theirs at 36.03 after a fall of 13.6% in 2008. In the same time Hang Seng dropped 16.5%, Kospi by 11.6% and Japan Nikkei by 5.8%.

The technical analysts are most worried lot, both the key indices Sensex and Nifty have crossed the crucial 50 week moving averages indicating an onset of bear phase of our market.

Why we are going down faster than other markets, probably due to more inflow of FII money to India compared to other markets last year. So money will head out in tough times. The more money came to our market as it presented a better earning potential.

The robust earning potential can not go wrong as drastically and at such a short time frame as our market is now presenting before us. So probably Indian stock market is more attractive now.

So it is a buy time for small investors! ! ! !

No, with another very strong NO.

Markets are mostly driven by sentiment. Right now the sentiments of investors are abysmally low; it does not appear to me that it will improve so fast at least in India. No sensible investors will go for market till political situation of left vs. others of UPA stabilizes.

Wait till appropriate time (Do not rush), have some money in pocket then go for a short term kill.

POWER STOCK: RELIANCE POWER AND AFTER

Many investors walked through the Dalal Street and many an event happened in the background after the mega IPO of Reliance Power. It was an epoch making issue, investors of all hues ignoring all boundaries made it a point to invest in this offer. The power sector is the most happening sector right now and in the days to come, it held out much promise. In one of my earlier blogs (link) I discussed the issue as I was sure the issue will be a block buster and only a few will repeat its performance in future. I am still bullish in power sector in Indian context. (Earlier Popular Blogs link1, link2)

It is still a mystery what followed just prior to and after listing of the issue. We saw the melt down of Indian stock market, pundits tried to find out reasons, and as usual it is always easier to find the exact reason after any mishap. Post mortem report-"weak global cues". But interestingly some HNI and Institutional investors off loaded their holding of the issue just like a hot potato from their hand.

All of a sudden, few pundits suddenly discovered power stocks in India are over valued; so far we along with the same set of pundits were over optimistic in this sector. Now, many small investors panicked and sold off their holdings.

It seemed to me as a well orchested event that followed one after another in a systematic way. Whatever it may be, but it was successful, many small investors who invested in the issue with their hard earned money and some even with borrowed fund sold off their holdings and incurred heavy loss.

Should we pass on the blame to the promoter of the issue? Probably not, ADAG tried their best to allot shares to all small investors, (fifteen, sixteen shares) we are not complaining.

But the recent positive news of bonus shares, to make up the loss of investors, is laudable. The news also boosted the stock link. With this particular small gesture ADAG showed how they care for their investors. It also shows that they are bold enough to admit that may be their pricing of the stock was high.

Will it be very high expectation for the small investors to have such gestures from the houses of repute in future? May be ADAG set a high standard to emulate for all business houses.

IS INDIAN STOCK MARKET BEING MANIPULATED?

“The present slide of Indian stock market is due to global cues”, the market pundits are saying. By the very word “global cues” they are hinting to the “recession” of North American economy. All the major markets, including the robust emerging markets are showing weakness, and many are even hinting that the bears are taking over from the bulls.

To give a loose definition of recession: it is a contraction of economic activities spreading more than just a few months and becomes evident within a few months from the onset of it. The complex web of financial world which connects the world’s market makes it difficult to predict how the US recession will affect a particular market. So, generally many theories fly around. It is easier to press the panic button by one and for all. We have seen that rumors gain more ground than in normal condition.

Now we will come to know the “theory of decoupling of economies” will prove its mantle, as is being professed by many economists. But it seems the pillars of market are developing cracks, and may be it will be too late to welcome the onset of so called “decoupling of economies”.

Not going to financial theories and jargons, we should remember that the small investors are bleeding and the loss is far greater for small investors as they are not equipped to deal with falling market.

I always had some hunch of suspecting about the manipulation of our market by some unscrupulous operators. This particular view is probably shared by most of the small investors. We all will welcome the Regulator SEBI to play their positive role in this kind of manipulation if there is any.

Recently I have come across an interesting blog, which I think those who have the lingering doubts on market manipulation should go through it. LINK.

Can we do anything more than keeping our finger crossed anticipating the rebound of our market after the Budget session of Parliament?

BUDGET 2008-09: POWER STOCKS

If you have noticed that before every budget the fertilizer stocks goes up anticipating some kind of package from Government. Generally all agriculture-based industries expect some kind of tax soap from the central budget. In most cases the budget addressed the expectations in the form of subsidies and tax cuts. And these measures helped our agriculture to arrive at where it is today.

As we are ushering our country to “Developed Economy”, it is the time to set our priority in some more areas too. The infrastructure sector needs financing to speed up the developmental activities. The success of Government is measured by good governance. Good governance includes the facilities provided to the citizens. The recent Gujarat election showcased the importance of good governance or development, to the political parties. With the developing economy, the common people expect basic infrastructure/facilities, and probably will shun the divisive politics the parties are now practicing.

Ours is power starved country, even with all out effort it will take some time to fill the gap of demand and supply. The power sector is targeting an increase of 78,500 mw in generating capacity during the 11th Plan (2207-2012) and the overall funding requirement will be Rs. 10,60,000 crore. It will be Herculean task to raise that much amount even with the proposed Tax-free Power Bonds, Power Vikash Patra and disinvestment of public sector power companies. The participation of private sector is of paramount importance to achieve the objective, the VC s and PE funds should be encouraged with additional tax benefits.

With the above in view the most likely gainers will be the power sector stocks. There should be secular growth in the sector and the growth should encompass the capital good companies manufacturing power equipment. The story has relevance and is already established by the eager participation in the recent Reliance Power IPO.

I am as always very bullish in this sector (link, link, link) and believe that this is the sector which will provide some silver linings in the dark cloud of overall gloomy picture of Indian stock market.

It is now the duty of small investor to do some research and pick the power stocks which will provide excellent growth opportunity.

NORTH AMERICAN SLUMP AND TWO STOCKS OF MY FANCY

The news of economic slump or the recession in North American market is probably the most dreaded word in world economic order. No body can ignore the huge impact of North American Market though few may try to wish it away. The slide of today’s market is the knee-jerk reaction by the world stock market on the latest assessment of situation over there. The situation will remain grim for some more time and probably there will not be any positive trigger for some more time if we believe the pundits and fund houses.

The situation may not be as bad, the overseas fund especially the North American funds should come out as a result of the recession and it should come to Emerging Markets and a major share will come to Indian stock market.

Indian domestic market is also large enough to sustain of its own. Imagine the crores of consumers; they can drive the economy forward. Luckily we did not become an export dependent/oriented economy though we strived to become one.

Anyway let’s discuss one stock “YES BANK” which caught my fancy recently, though I was very much aware of it and kept in my radar for a long time. But somehow it did not follow it up.

The stock has high return on equity, high growth and zero NPLs. The unique business model of the Bank presents promises for future growth. Detailed report is available in this link.

Another stock is GMR Infra, market lowered premium on this stock after its announcement of overseas acquisition. I am bullish on this stock and I think it is a good buy below hundred and seventy buck with a horizon of one year minimum. The analysis of the stock is available from the same link above.

The last correction and the topsy-turvy-yo-yo have reconfirmed my belief in profit booking.

MAKING MONEY IN INDIAN STOCK MARKET

"The market may test the last bottom again", a stern warning from different quarters.
"Stay away from market till it stabilizes. The market is under bearish fever." warning from another source.
"One should not buy in a falling market" - all the above warnings are from respected houses and pundits, when the market goes down.

"Ours is growth story", "difficult to copy our business model", "market is insulated from the rest of the world" and so on all the positive thinking from the same set of houses and pundits when our market was going up.

Why the contradiction of finding darkness in a lighted room? Very high level of spiritual intelligence?

To me the above is due to the heavy stakes the market pundits and fund houses have in the market. So they flounder and panick at the drop of a hat, and we have seen the grim faces of them in the TV screen recently. The same grim, smileless, serious faces in the TV which makes a mountain out of a mole hill everytime the market goes down.

Their heavy accent and drooping eyes make the small investors more nourvous, but they donot sell our stakes as fast as they advice and themselves do. We, small investors have our sweet time gap of selling and buying. And it is for various obvious reasons. We have experienced in most cases sweet time gap of selling and buying benefits us. Panick selling and buying are not for small investors.

We still make money and we take the correction as an opportunity to buy where-ever we zero in and whatever small fund we may have.

Can anybody lose money in a long time bull market.

PREPARE FOR PICKING STOCKS

It is always difficult to be sure in stock market. The days before, when I did put down my opinion as “it is probably not the right time to pick up stock for small investors”( LINK), many of my friends were at serious difference with me.

I had my own reasons to come up with a statement like that.

As always the small investors tend to pick up stocks at higher price. How many of us could pick up our stocks at bottom, yesterday we came to know about the turn around of the market a tad later, by the time, it wheezed past many a miles, certainly we lost some good ground.

But again, the yesterday’s rally was the turn around of the market?

Probably not, the market again went down today for some reason that we could not think of. It seems the market will behave in weird way for some more time.
Or to me, till the liquidity re-injected from the refunds of Reliance Power IPO. That means after a week time. We can wait for some more time till a clear picture.

There are many a stocks which are at very attractive price right now. But the stocks which were at their best before the slide may not go back to the original position at the same rapid stride. History has many instances. Zoom your attention to the stocks with good fundamentals and which has prospects to grow, stock market always pays premium to growth story.

I have identified few stocks for picking up when the market stabilizes, but again I am suffering from liquidity crunch like most small investors.

Powergrid

GMR infra

PetronetLNG

ONGC

IFCI

RNRL

Nagarjuna Fertilizer

RPL

May be it is the right time to buy as per the market pundits, but listen to your inner self too. Most of the time, in such situation the gut-feelings presents the answer.

The loss or gain is yours, so nobody is going to shoulder responsibility but everybody will claim credits.

DO NOT BUY: WAIT FOR SOME MORE TIME

The present fall of Indian stock market is so violent and vicious it forced me out of my slumber of so called bloggers block. The sudden and completely unanticipated tanking of the market is the result of many factors and the factors were cumulative. That is the reason of this violent fall trailing with some bloody aftermath after every fall.

I was shivering in front of my computer when I saw the freefall of the market as if there is no bottom, interestingly similar feelings was there when the market was going up at a frenetic pace (my earlier blog). Such wild movement of the market is definitely not good for the small investors.

But market reign supreme. The market is very vindictive in the hands of market operators. Probably it calls for proactive Regulators which do not yield to the stage managed hulla-bol of unscrupulous element.

Probably, after a long time, the market is reinventing value, and discarding momentum. In that case what will be our next logical step to rise like Phoenix from the ashes of our portfolios?
Should we cherry-pick some good mid cap stocks, large cap stocks, dividend paying stock and what not at some attractive price as some experts are dishing out their advice.
(Sometime I can not stand some experts who pose as Mr. Know-all and have some preconceived ideas which in most cases turn out to be wrong, but never accepted it. aka. ONGC, RNRL, L&T haters )

For me sit tight and watch is the best policy for the time being and buy my stock only after the market turns around from the bottom of this abyss.

I am very much sure we have a bull market ahead of us and may be these developments are for the best interest of us.

STOCKS FOR 2008: CALLS FOR REALIGNING STRATEGY

It was interesting to note the following ten top performing stocks in 2007. Link- Time-Blog.

Inner Mongolia Yitai Coal Co. Ltd., China, 1017%
Jai Corp. Ltd., India, 877%
Reliance Natural Resources Ltd., India, 823%
Ispat Industries Ltd., India, 742%J
indal Steel & Power Ltd., India, 664%
Essar Oil Ltd., India, 570%
Shougang Concord Int'l Enterprises Co. Ltd., Hong Kong, 534%
China National Building Material Co. Ltd., China, 496%
Lanco Infratech Ltd., India, 487%
Adani Enterprises Ltd., India, 467%

Surprised? Let me quote from the same source that out of hundred top performing stocks in 2007, fortyone are from India.

We are extremely bullish in India story and the above is just another support to our bullish outlook. We are an emerging market, and we have many hidden gems whose earning potential is not yet fully exposed. Above all , we have our unique stock/financial market which has a judicious mixture of domestic and foreign earning potentials.

But still, it may not be possible to repeat this kind of extraordinary feat year after year. To sustain similar kind of growth to our portfolios, it certainly calls for realigning of strategy and to have a peek into the minds of market pundits. Some good prescriptions of stocks for the year 2008 are already doing rounds in the world of investors. These prescriptions if you look at them have their own merits. These suggestions at times go terribly wrong leaving the investors high and dry. So, small investors are to apply their own discretion.

I personally liked few suggestions and these may be used as guideline for framing strategy for next year.

Business-standard: Some picks which does not need much expertise, still should reaffirm our faith in known stocks.

Moneycontrol.com: Mainly observations from Pundits. Interesting reading, for the contradictions.

DeadPresident: The most interesting, stock selection by mortals, must read page.

Business Today (Print edition) has also published their list of companies for the year 2008.

Happy New Year.

RELIANCE POWER IPO: STOCK FOR SMALL INVESTORS

The plan to list Reliance Power Limited was a welcome step from R-ADA group and is eagerly anticipated by small investors. The red herring prospectus for the issue was submitted to SEBI on October 3. The company is supposed to sell 11.5% of post paid up capital of the company, which media reports have said may raise $2.8 billion. Probably it will be India’s biggest IPO. Reliance Power also has in interests in infrastructure, telecoms and financial sector. ADAG holds the company through various group companies including Reliance Energy which holds around 50% of the stake.

According to media report around 30% of the shares will be for retail clients, 10% will be for HNIs and rest 60% will be for Institutional Investors. There are reports that the face value of the stock may be of RS 10/- instead of Rs 2/- as initially proposed. link. The issue will definitely require the support from FIIs and DIIs. Some sources informs that the issue may be delayed by some more time. Link.

No doubt it will be a bonanza for retail investors as power sector is the dominant sector for immediate future.

There is some good news for the investors before the issue. Reliance Power has bagged the Krishnapatnam Ultra Mega Power Project. It has already bagged the Sasan and Mundra mega power projects. All the development is likely to make the issue more attractive.

www.bsensedaily.com has furnished a list of projects currently handled by Reliance Power Limited as follows:

• Rosa Phase I, a 600 MW coal-fired project in Uttar Pradesh scheduled to be commissioned in March 2010.
• Rosa Phase II, a 600 MW expansion of Rosa Phase I which is scheduled to be commissioned in September 2010.
• Butibori, a 300 MW coal-fired project scheduled to be commissioned in June 2010.
• Sasan 3,960MW UMPPs promoted and awarded by the Government of India is expected to be the largest pithead coal-fired power project at a single location in India,scheduled to be commissioned by April 2016.
• Shahapur, a 4,000 MW coal-fired(1,200 MW) and combined cycle gas-fired (2,800 MW) project in Shahapur, scheduled to be commissioned in March 2011.
• Urthing Sobla (400 MW), a run-of-the-river hydroelectric project, located on the Daulinganga River in Uttarakhand scheduled to be commissioned in March 2014.
Five other projects—the gas-fired Dadri project (7,480 MW), the coal-fired MP Power project (3,960 MW) and three run-of-the-river hydroelectric projects, Siyom (1,000 MW), Tato II (700 MW) and Kalai II (1,200 MW).

There are some controversies too. ADAG has alleged some market forces working against the mega issue and trying to thwart it. Link. REL investors are unhappy to find that no approval was sought from them for listing the issue as it has direct bearing on the income of REL. and so on. There is already premium on this issue in the grey market and some of the market operators are making losses, as the issue is delayed for various reasons but the grey market premium on the issue is increasing steadily. Link: Reliance Power IPO clouds grey market.

There is already a blog on this mega issue. But the buzz in the overall Indian finance Blogosphere about the mega issue of Reliance Power IPO is mixed and evoking different emotions. Most of the Indian Stock Market Blogs are maintaining a very neutral stand and just passing on the information on the issue only.

Yours truly is very bullish in the growing story of Power stocks and believes that this issue is genuinely going to lift our stock market to a few notches higher.

CAPITAL GOODS STOCKS: FULL OF PROMISES

One should have presence in stock market in a sector which is relevant and have the potential to grow aggressively in short and medium term. And icing on the cake will be if one can pick up stocks in that sector at an attractive value. The above is the most ideal situation for any investor.

The renewed emphasis on Indian infrastructure sector is noticeable in recent past, and the capital goods stocks are reaping maximum benefits. They have ever increasing order books as the result of overall well being of Indian economy. The strong quarterly numbers in this sector confirms that the general concern of this sector like execution risk, momentum of order book and funding will not be problem in foreseeable distance. We should not forget, we are targeting 9% GDP growth in the 11th Five Year Plan.

I have identified some stocks which in all probability will be the future leaders in capital good sector. The large caps like L&T, BHEL, Suzlon Energy are already been in the radar of most of the small investors.

The strong momentum of some visible mid caps is noticeable; Thermax, Punj Llyod, Cummins, Siemens, Alfa Laval etc are holding good promises.

Now for small investors let’s go back to first para of this blog: to pick up the selected capital good stocks at attractive value. Stock market is full of surprises, nobody is sure when the stocks will be presented to us on a platter to our likings. But can we pick them at that opportunate moment? I am not sure, downward price of any stock makes us doubting Thomas, and we miss the opportunities.

Let’s be prepared and not miss any opportunity. These stocks will make our portfolio richer.

POWER STOCKS: IDENTIFY THE WINNERS-II

There is a lot of hullabaloo about the valuation of power stocks in the Indian stock market. Being bullish (earlier post: here and here) in this sector made me to have a rethink. The power stocks passed a long period of sluggishness due to some archaic laws . There is a severe shortage of power in our country and with very conservative estimate the supply shortage to demand will remain until for at least another decade. Now government is putting emphasis on infrastructure and power. Logically power stocks are best bet to invest with a long term horizon.

The valuation of REL, NTPC, Power Grid, Tata Power are in the forties of their annualized sustainable earnings. Neyveli Lignite Corporation, Gujarat Industries Power Company, Lanco Infratech and GVK Power have higher valuations than a year ago. Power equipment manufacturers like BHEL, Cummins, Crompton Greaves are also have high valuation.

It seems that the power sector is in a different platform right now, which reminds me of the IT stocks a year back. The IT stocks justified their high PE with sustained earnings for a long period. Can the power stocks repeat the feat of IT stocks? Debatable! May be power stocks may correct to some extend in the days to come and to me that will be an opportunity to pick up some value stocks for some long term investment.

Some really attractive IPOs are coming in this sector. Reliance Power, NHPC and REC will present small investors a chance to pick them up at good valuations.

What about the recent listing Surjyachakra Power and IndoWind Energy? Surjyachakra Power has a tie up with a Chinese company to for a coal-fired project in Orissa. They are also good pick for small investors as they still have to find their groove in Market.

One should not worry for the power stocks in their portfolios as they are long term winner and outperformers in Indian Stock Market.

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.

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).

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.

HOSTILE TAKEOVER: SMALL INVESTORS CONCERN

The upward movement of the Indian Stock Market is unabated; sometime it is scary as a small investor to be there, in front of the computer. Capitals of all forms and from all types of sources are entering in the market. It seems the flow will continue for some more times. The recent entry of some Pension indicates the robustness of Indian Stock Market. Some of these funds are well managed and proactive. They generally do not allow Corporate Houses to fiddle and they demand results. We are entering into a more matured stock market scenario in near future.

 

Hostile takeover in our market is virtually non existent, though it is a norm in developed markets. In many cases the hostile takeovers are welcomed by small investors, as they result in matured pricing of a stock.  Recently, there was a rumour of potential take over of Hindalco by a multinational corporation. It is scary not only for the small investors at this dizzy height but also to the corporate houses. The phenomena of hostile takeover will be reality in the coming years.  

 

The leading corporate houses are taking pre-emptive steps by increasing stakes in their companies. Though it is seen as to leverage the India growing story and exercise greater control in the companies; it will act as effective shield against hostile takeover too. I will furnish some figures in the table below which will tell stories if analyzed.

 

Corporate house	Company	Promoters holding % (June-07)	% increase in last one year
ADAG	Reliance Communication	66.75	24.52
ADAG	Reliance Capital	52.40	16.95
ADAG	Reliance Natural Resource	49.95	4.89
ADAG	Reliance Energy	35.90	30.90
Mukesh Ambani	Reliance Industries	50.98	1.15
Tatas	Tata Steel	33.77	6.89
Tatas	VSNL	76.24	4.72
Tatas	Indian Hotel	29.17	0.77
Tatas	Tata Tea	35.40	6.45
Tatas	TCS	79.12	-4.57
Bajaj	Bajaj Hindustan	40.90	3.19
Bajaj	Bajaj Auto	30.11	0.33
UB	United Spirit	38.10	1.78
OP Jindal	Jindal Stainless	42.56	1.98
OP Jindal	JSW Steel	46.43	1.28
Infosys	Infosys	16.54	-2.87
Satyam	Satyam	8.79	-0.39
Wipro	Wipro	79.58	-1.51
HCL	HCL Technologies	67.55	-1.75

 

The new equation of ownership may effect small investors, because in India the management and the promoters are same unlike other developed markets.

 

The increase in stake may dissuade potential take over premium of the stocks where the promoters are holding majority interest of the company. But at the same time the promoters will be at bay as they will always under pressure from those FIIs in addition to small investors best freind SEBI.

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