Market Watch: Is sensex losing senses ?

Dear Friends,

It's a great pleasure to be back on the blog after a gap of nearly one month. The last one month was full of action with sensex touching landmarks of 11 k and 12 K. Its looks like that the Indian stock markets have found a unleashed energy source of relentlessly moving up and as if there is no doom day to happen !

The recent leg of the bull run was dominated by the large cap stocks and those who have bought Reliance Industries stock would be jumping with joy. The stock has delivered excellent returns to its investors and has jumped from 700 to 1000 in 3 months. The tech counter was buzzing with strong numbers posted by IT companies and robust guidance by the bellwether stock Infosys. My Investment Idea on Gujarat Ambuja which was given at a price of Rs. 67 also reached its target (actually exceeded it in a big way) and is currently quoting at 120.'

Aksh optifibre saw a lot of volatility and I saw some hot tempered comments from some of our viewers when the stock touched a low of 62 before striking back to Rs. 80.

Its time to take a stock of all the investment ideas discussed and I will shortly start reviewing each idea in the current context. Will also post some new ideas.

Coming back to the markets, Indian stock markets recent run have proved the point which I wanted to make in my earlier article on India's growing dominance in the world markets and the maturity levels of the Indian stock markets.

But at the same time , I want to let you know that we should understand the sensex psychology before getting sweeped away in the wind of fast-bucks tactics. India Inc. has been successful in selling its growth story to the foreign as well as Indian investors and what we see as a result is the mad rush to occupy a pie in the Indian growth by Indian as well as foreign institutions. No body wants to be left behind. In such scenario, the supply of stocks gets sucked up by the unrelenting demand and hence the stocks prices go sky-rocketing.

In such a scenario, the markets starts factoring even the 3 years forward growth and buys in anticipation. Hence, we should understand that the value we are putting on a stock is based on the assumption of a particular performance of the company for next few years and hence whenever the investors would find a mismatch between the anticipation and actual performance the stock will be punished, sooner or later. This will lead to volatility in the stock markets.
Hence , Investors are advised to invest in fundamentally sound stocks at this juncture and keep themselves away from purely momentum stocks.

If you are trading on some news or momentum, it is advisable to be disciplined and not convert those trading moves in your investments.

On my headline for this post, No, the sensex is not loosing its senses. The leading world markets are currently trading at 1 times or more their GDP to market capitalisation and Indian stoks markets are about to touch that magic number. This shows that the stock market is truly reflecting the growth pattern of the economy.

The future direction of the markets will be ascertained by the ongoing results season. Invetsors are advised to regularly keep booking profits henceforth and if the momentum continues to get reinvested to enjoy the next round.

Will dwelve upon some stocks that will outperform their peers in the next post !

Happy Investing !

20 comments:

sunilahuja said...

Rajesh Ji Nice to see u after a long gap

Waiting anxiously for your next post

alok said...

Hello Rajesh,

I daily used to open your blog only to be disappointed by your colourful holi blog.But to my surprise today was the day when you posted after a long period of time.I know had you been there with us from 11k to 12k we would have gained a much.Neverthless since now you are back we expect some fireworks from your side.Truly speaking i rely on you as much i would rely on any one else in this world.This is not exaggeration,the way in which you reply to the querries and it may sound very funny but your photograph also gives a sense of calmness about you.The way in which you have taken time out to share your information and analysis with us just shows that there is still some humanness left in otherwise unhuman world where each piece of information and expertise is sold at a premium price.

Will look forward to your blogs.Happy investing days are back i guess.What about gurgaon,you finally settled well in your new envoirns.

warm regards,
Alok.

Tim MMF said...

First time here. Great blog and nice post. You offer some good analysis and advice.

I'm launching the Carnival of Business, if you'd like to participate please visit the link.

Vineet Jain said...

Thank you Rajesh day for geting back again.Hope we all will again start getting your expert pieces of advice and guidance.You deep insight of stocks and market insight is really acknowledgeable and all of us who followed your advice must have benefited.We hope to see you again more frequently as you were earlier....Thx so much

Vineet

Narendra said...

Welcome back Rajesh.
Feels like, we didn't hear from you for a very very long time. You are telling that, it is only one month!
Anyway, it is good to see you back.

Keep posting.

Regards,
Narendra

Kamlesh K. Jain said...

Pls sms me ur new mobile nos or call me.... kamlesh

rohit sharma said...

Dear Sir,
It was a treat to our eyes to see your new post on th blog! hurray ! investment guru is back.
Sir after reading your latest article I feel like saluting you for your deep knowledge of stock markets and more than that your willingness to share it with us.
I am your big time follower and regularly read your blog. I hope now I can put some more money in the markets based on your new investment ideas.

Anonymous said...

good to see you back rajesh. The latest post was thought-provoking and informative. hope to see some investment ideas soon on this blog.

Anonymous said...

what's going up with Reliance Industrial infrastructure? Continuous upper circuit for third session! does anybody has any info on this ? rajesh, i know it was on your third eye reco, so can u put some light on the movement?

KK

Anonymous said...

Hi Rajesh,

I was looking at Satyam as a long term investment and found some contrasting data.

1. As per this link : http://www.dnaindia.com/report.asp?NewsID=1025406&CatID=4

Its 2005-06 EPS is 30.50 and there guidance for 2006-07 is 36 Rs EPS.
But BSE/NSE suggests that its EPS is 38.51

Can you please provide your views on this ?

What do you think is it a good bat at CMP 759 Rs (It came down from 850 levels) or should I still wait for it to come down ?

Thanks,
Supal Patel

Anonymous said...

Hi Rajesh,

What is your view on Hero Honda?

I found below mentioned positives :

1. Its growing consistantly. (Sales grew avg. 25% in last 3 yrs)
2. Its trading cheaper then its peers. Its current P/E is 20.5 (Bajaj Auto P/E 30 and TVS Motors 30 P/E)
3. Great dividend track record.

What do you say ? Is it a buy ?

Thanks,

Supal Patel

Anonymous said...

Hi rasoni...
good to c u after a long time... was an avid follower of ur blog.
btw it would be great if you could give ur view on BSEL infrastructure...
it is a relatively small co... with an EPS of around 6, & trading at roughly around 40-50, i.e. at a PE of < 9, wheras all its peers have an PE of 20+.
is it a good stock to hold in 1`s portfolio...

thanks,
Kurian

Rajesh Soni said...

Dear friends
Thanks to all for your kind wishes on my comeback :)
On KK: Yes the stock is buzzing thanks to the focus of reliance on infrastructure projects. But it would not be a good idea to enetr at current levels as the stock may correct to some extent in coming days.

On Supal :
From long term perspective, satyam is definitely a good buy. But I would suggest that you wait for markets to correct a bit in order to make an entry.

On Supal : Hero Honda per se is a leader in the two wheeler segment but the valuations look stretched. Wait for a correction to eneter the stock.

Kurian : I do not track the stock. But if a stock is not performing when the whole sector is buzzing, there would be a reason behind it. You can have a look at the order book position, nature of contarcts the company deals into and the future growth prospects in comparison to its peer to find the reason. If you are a long term investor, I would suggest you stick to solid stocks like L&T,IVRCL and Nagarjuna to name a few.


The markets are on a rise and I am constantly advising viewers not to make heavy purchases at these levels. You would definitely get better prices to invest. If you want to enter , keep on booking profits at reasonable intervals so that you dont leave much on the table.

Anonymous said...

What are your views on polaris oftware. The stock has come down to 109 and has been swinging between 109-120 levels. Is it worth a buy to play in this range ?

Anonymous said...

Hi Rajesh,

Thanks for yr views on Hero Honda and Satyam. I totally agree with you.

What is your current view on Gujarat Ambuja ? As per yr investment idea I entered in this script at 68 Rs and it has achieved its target of 120 Rs.

Although it has posted exceptional results many analyst(HDFC Sec.) feel that now there is no fundamental steam left in this script as they do not have any expansion plan in near future.

What do you feel? Should we book profit and enter in some other cheaper cement stock ?

Please share yr view on the same.

Thanks and Regards,

Supal Patel

sunil kumar said...

Hi Rajesh ji,
Welcome back. I visit ur page every 2-3 days. Your views have been of greate value to me. In the recent month I exited from BalrampurChini, Cipla, DaburPharma, Havells, MothersonSumi, MSPSteel, NarmadaChem, PetronetLNG and Ranbaxy. Now I am on 70% cash and presently holding NTPC, GAIL, RicoAuto, BirlaEric, IGL, ITC, ShanthiGear, VarunShip and WockPharma. Though I was expecting the correction but could not get a chance to buy again anything and most of the stocks are near or above my sale price. Do u feel I am on right track? Should I start some buying again? Please give ur views.
Regards,
Sunil Kumar

Anonymous said...

Dear Rajesh
Nice to sea your write up after long time.Now you must have settled in your new job and can spare some time your blog.
Will appreciate your advice on G E shipping demerger.Do you sea any profit at rs.268/share ?
Also any profit in buying Grindwell Norton at rs.670 ? as there is bonus 1:1 and stock split to rs. 5. You may wish to reply today as market is open tomorrow.Please note that yr job proirity is first.
Regards,
M R Kale

Rajesh Soni said...

Hi Sunil
I feel you should not have exited from Dabur, PetronetLNG and cipla counters. If you are unable to deploy your cash in markets you can opt for parking the money for time being in the IPO's as they are generating good returns. You can reenter the markets on declines.

Rajesh Soni said...

Dear Mr. Kale
Yes, you are holding on to a good stock. I would advice you to maintain hold on the stock from medium to long term perspective.

randomthoughts said...

Sensex is loosing all its senses. Its behaving like a deaf & dumb person. Players are willing to take risk which was unthinkable 10 years back.

How anybody can explain a quote of Rs 100 for RPL equity. As a matter of fact its steep even at Rs 60, IPO price for a greenfield refinery that is very complex & not likely to be operational for 2 years. U are right that investors are buying where the future growth for 3 years is build into the CMP.

As anticipated it crashed to issue price. Investors are still bullish on RPL vis a vis MRPL which is quoting at Rs 31, earning decent profit, having a large expansion on hand & ONGC as its godfather.