Investment Guru rules ; Sensex turns 10K

With liquidity refusing to dry up, Is 11K on the cards ?
The BSE sensex touched the magical number of 10K in yesterday's trade, much to the delight of the Investors. When the experts were getting nervous at the beginning of this year and claiming that the road to 10K would not be easy, Investment Guru Blog showed the right way to the Investors. The blog carried an article stating that 10 K would be achieved not later than by March,2006.
With the pyschological mark of 10K beyond us, certain experts have again started ringing caution bell. But let me tell you, this time they are not fully wrong. I will explain you 'why' later in the article.

The 10K events has aslo carried uncertainty in the minds of Investors as to what should be future course of action. Should they books profits on the table or should they hold in anticipation of further rally ? Lets take a look at what is going in in the markets.

What's up with the India Growth Story ?
The Q3 results have been satisfactory except for the oil marketing companies. The aggregate profitability of Corporate India (excluding these oil marketing companies) has grown by 23 %. The GDP growth rate is also expected to outperform the economists estimate of 6.5 to 7%
Foreign investors are still queued up to invest in India.

India Vs. Other growth economies
As per current estimated , India Inc is trading at a P/E of 18. This looks reasonable if we compare it to the P/E of other growth economies like Taiwan, Hongkong, Korea which are currently running at P/E levels of 16-21.

The above data may suggest that the valuations going ahead would look stretched and the Indian markets may have lost its competitive advantage to other economies. However, Investment Guru is of the view that Indian economy has a potential which is unmatched to these econmies and this will held the markets in a strong position in the long term.

FII & Retail Combo
FII's have pumped in arounf $3 Billion in the last 1000 point rally. The US and Japanese are still queued up to invest in the India story. Another interesting thing was that this 1000 pts. rally was not fuelled only by FII's, but a equal credit goes to the retail investors who have participated in the rally.

What's hot, what not ?
Though the past rally has been broadly secular in nature across caps and sectors , the sectors which are expected to remain hot would be Software, Pharma , Private sector banks, aluminium, copper and infrastructure.

Steel and PSB's may show some stagnant growth and the oil marketing companies would be picked only by those with contrarion approach. The upstream oil companies will continue to attract big ticket investments. The outlook for telecom sector is stable with negative bias due to pricing pressure. Auto & Auto ancillaries would continue to be performer.

A note of caution
Since the markets have reached a stage where the stock prices are driven more by liquidity than pure valuations, it is advisable to take caution for the near future. The traders are busy making money with the volatility round the corner and investors should differenciate good stocks with momentum stocks unless they are in trading mood.

A special note of caution for the recently listed IPO's which have seen unrealistic valuations. Please check the fundamentals and growth potential of these stocks before investing in them.

Investment Guru will continue to guide you through this exciting journey of the Indian Stock Markets

Happy Investing !!

25 comments:

Manoj said...

Hi Rajesh
Execellent write-up
Keep up your good work .

Anonymous said...

Really a good work. Tons of thanks to you.

satishmanatti@gmail.com

Anonymous said...

Dear Rajesh
Excellant 10 K write up.Keep it up.
Royal orchid I got 40 shares .Do you suggest to retain for lonterm or sell.Please advice.
M R Kale

Anonymous said...

Hats off to you sir! Tbe article shows your deep understanding of the markets. This will further increase our confidence in your investment Ideas.
I am holding Gujarat Ambuja for long term.

Anonymous said...

Hi Rajesh,

I am holding GUJAMBUJA, PARADYNE, ABG SHIPYARD AND RELIANCE INDUSTRIES stocks, Could you please comment on above stocks whether I should hold or sell?
Thanks for everything.

Anonymous said...

Hi Rajesh,

Cool information. Thanks a ton for all such valuable information. Now I have one que. for u...

Gujarat Ambuja is in news for all the reasons.
1. Holcim deal
2. Not up to the mark 3Q results.

Can you please updated all the investors on this stock.

Regards,

Supal

Rajesh Soni said...

Dear visitors, Thanks for all the aprreciation. This makes my job even more tough :)

Rajesh Soni said...

Dear Mr. Kale,
Good to see your comment after a long time.
There has been a change in the way new IPO are listing. Previously IPO's were giving good listing gains and hence we were advising to sell on listing day. Now the markets have become more smarter. The IPO prices are rigged few days after listing. So you need to take a judicious call as to what was your expectation from this share and whether that expectation has been acheived. If yes, you can book profits. Timimg the markets is not so easy.So better to set our expectation and trade accordingly.

Rajesh Soni said...

Hi Anonymous!
Except Paradyne, you can hold the rest of three stocks if you are a long term investor.

Rajesh Soni said...

Hi Supal,
Yes GACL has been in news recently with the Holcim deal.
The cement industry looks strong and GACL will definitely get the advantage of being a popular brand and excellent network.
However,since the holcim deal has been sealed at Rs. 90, the short term prospects in terms of stock price are not too bright. But it would be a wise decision to hold on to the stock since the long term prospects are bright.
So decide if you want short term gains or wish to hold to get more appreciation in long term and act accordingly.

saurabh. said...

Hello rajesh,

I am planning to invest a portion of my money in sme good mutual funds.I talked about it to my friends.They suggested to invest in NFO'S as they are cheap but contrary to it i read in a newspaper article that NAV'S do not matter and one must invest in good funds with a proven track record irrespective of their NAV'S,now now i am totally baffled,hope you will show the perfect way to proceed, do suggest some funds from varied sectors which can be invested in.

Thanks,
Saurabh.

jaw_amo said...

I m holding many listed ipo's plz suggest whether to hold or sell
1.Repro india
2.Km sugar 3.Renuka sugar
4.Kernex micro
5.AiA Engg
6.Triveni Eng
7.Royal orchind and nitin spinners
Among the lot i have bought AiA, renuka and kernex thru secondary market.In kernex i m suffering a los while other tho have given me handsome gains

Anonymous said...

Hello Rajesh,

Could you please comment on listing strategy for ENIL and Gujarat State Petronet Ltd.

Regards,
Anonymous

Anonymous said...

Hi rajesh,

Any thoughts on the Indo Tech Transformers IPO issue ?

Thanks & Regards,
Nick

Anil Kumar said...

Hi Rajesh,

Now Aaksh is going up what to do sell or hold??

Thanks
Anil

saurabh said...

Rajesh ji,

No answer for my question,please sir do tell something regarding good mutual funds.

Waiting eagerly,
saurabh.

Blog Intro said...

This Blog has been Intorduced! on BlogIntro.com

Rajesh Soni said...

Hi Saurabh,
I would prefer putting my money in an existing Mutual which has a good and consistent track record of performance.
I am not sure if you looking at mutual funds from tax planning view or from pure Investment view.
If yuou are looking for tax planning than HDFC tax saver, HDFC long term advantage and Franklin Taxshield are good funds to invest in.

For pure investment purpose, you need to assess you risk apetite and select a fund which has given consistent return in the range you are looking at.

However, I do not say that one should totally ignore new funds, If the new fund has come from a good mutual fund house and the theme is appelaing you can put some money there also.

Rajesh Soni said...

Hi Anil,
The stock has not shown the momentum that I was expecting from it. However, the fundamentals remain intact. SO i would say that if you were looking for just short term gains you can exit the stock at 85 levels. Otherwise you can hold it for long term

Rajesh Soni said...

Hi Anonymous.
I would suggest booking profits in the price range of 260-270 for ENIL

Anil Kumar said...

Hi Rajesh,

Thanks for your valuable suggestions and now its on 76 and I will wait for long term.

But suggest me regarding Beeyu Overseas. Time period is over and still its on 16 whereas I bout at 18.85. Is there any chance..... or we can sell now in loss.

Thanks and Regards
Anil Kumar

Anonymous said...

Guruji,

I would like to contact you on an issue other than stock markets, but in the finance field itself. Could u give your mail id or if you can't, mine is faberfx@gmail.com. Thanks

AsH said...

Rajesh,
What is meant by cut-off price for retail investor in IPO? What price(lowest/highest or cut-off) should be quoted to assure share allotment?
Thanks

Anonymous said...

Inox leisure allotment status is now available on Karvy website !

ssnkumar said...

Hello Rajesh,

Very nice right up and at the right time!
Please do write more such articles.
And it has been quite sometime since you posted an Investment Idea.
Please do post some tips for the current market.

I have one query regarding a scrip.
I want to know about the prospects of IDFC.
I had bought it at Rs.71.5 few months back and after that, it has been around the same price and also went down to 68!
So, I want to know, whether it is good to hold or sell?

Please do share your valuable views on this.

Regards,
Narendra