INDIAN STOCKS- GUIDE TO INVESTING SAFELY "SELL IMMEDIATELY - IF YOU HAVE NOT SOLD OUT COMPLETELY, SO FAR."
Psychological Techno - Fundamental Decision Support System
***AIM :: TO PREVENT LOSS TO SMALL INVESTORS .
(Produced by a team of eminent personalities lead by Colonel John Chenetra (MBA).VICE PRESIDENT HR IMCL(HINDUJA GROUP)
WE HAVE NO MOTIVE OR DESIRE FOR PERSONAL GAINS
The sole aim of this website is to prevent the slaughter of the "Small Investor" in the "Indian Stock Markets" mainly caused by the manipulation of "Large Operators" and misinformation spread by some elements in the "Media"
HIGHLIGHTS
* Free service hence high level of objectivity
* Prepared by world famous team of research analysts
* Conscious effort to be simple & to avoid technical jargon
* Brief and self explanatory
* Assist commoner make informed rational decisions
* Give level playing field for rich and poor
* Special Portfolio Service to assist NRIs whose funds can help India grow rapidly.
*NOTE 1- This site "psychologically conditions" you & coaxes you to take "rational decisions." It is strongly recommended that all pages be visited in sequence before giving buy & sell orders.
*NOTE 2- This site is purely advisory in nature and does not take any responsibility for any gains or losses caused to investors who are advised to take collect information/advice from all sources and then take their own decisions.
***ADVICE FOR TODAY - SELL, SELL, SELL if you have not done so already AND SELL AT MARKET PRICE OR THE BEST PRICE YOU CAN GET IMMEDIATELY
The fall has started. IT WILL BE DEEP & PAINFUL and PAINFUL. DONT RE-ENTER TILL SENSEX FALLS TO AROUND 9000 LEVELS AS IT SHOWS IN THE STRATEGY SECTION. EVEN THEN BUY IN SMALL AMOUNTS OF THE BLUE CHIPS ONLY
Who would have imagined that the SENSEX would almost touch the magical 12000 level. It is hoped that all our patrons have steadily booked profits. The few who have not, for God's sake "SELL OFF NOW AT MARKET PRICE". Let us admit it - "NONE OF US EVER IMAGINED THAT WE WOULD MAKE SO MUCH MONEY. THEN WHY SHOULD ANY OF US TRY TO BARGAIN FOR THE LAST FEW RUPEES AND FACE SUCH HEAVY RISK". The first indications of a correction are alrealy visible and I advice all our patrons to take notice.
Just lie back and enjoy the profits you have made.DONT BOTHER WHERE THE MARKET HAS GONE AFTER THAT. Remember you have made more money than any other generation in the history of stock markets. Is it worth trying for another for the last 5% running the risk of losing all the 95% you made.
DO NOT RE-ENTER TILL THE CONDITIONS IN THE STRATEGY SECTION GET FULFILLED. DO NOT WAIT FOR THE TOP. ONLY FOOLS & NOVICES DO SO.
This rise has been primarily because of low interest rates, heavy liquidity, and recognition by the world that india is on a high growth path of 8 to 9 % and likely to power ahead of even China. The long term story is no doubt grerat(Please read the 'Article' at the end) but there is a limit to "Bullishness"
Now interest rates are slowly rising and "Crude Oil prises are high. Both will reduce profitability of companies. This will bring down the markets sooner than later.
One thing is clear. This fall is going to be deep when ever it happens.There common understanding is that a conscious effort on the part of the finance minister and the broking community to talk up the markets and prevent a drastic fall. They are unlikely to succeed if foreign investors are looking for an exit. They are looking for taking the second phase of the reforms forward. This is unlikely to happen. It is unwise to remain invested in the markets now when the markets are so high. Now that we have sold out at such high levels, it is better to sit on our profits for a while & wait for the market to fall to lower levels. Even the best of investors like Warren Buffet cannot predict what is going to happen in stock market tomorrow. But a common man with some common sense does understand that the market cannot keep going up all the time. Hence use the biggest virtue of a long term investor which is 'patience' & enjoy the profits God has given you & pull out some of the profits from the stock market & invest in real estate, gold or other assets"
***BUY TODAY
NIL (Keep selling till you have no shares left)
***SELL TODAY
Maruti Udyog
SAIL
Hero Honda
Tata Tea
Infosys
Mah and Mah
Satyam
Tata Power
HCL Tech
Bharti Tele
Wipro
Bajaj Auto
ABB
Sun Pharma
HLL
Reliance
IPCL
Hindalco
Zee
SBI
MTNL
BHEL
Tata Motors
NALCO
Reliance Energy
Shipping Corp
GlaxoSmithKline
Dr Reddys Labs
BPCL
Indian Hotels
ONGC
ITC
Tisco
Grasim
Cipla
Ranbaxy Labs
ICICI Bank
Tata Chemicals
Colgate
Dabur
India
HPCL
HDFC
HDFC Bank
Guj Ambuja Cem
VSNL
Larsen
ACC
PNB
Oriental Bank
***TOPICS COVERED
1.STRATEGY (for investing safely and how a novice can build a Portfolio)
2. RISK PROFILE
3. RELEVANT QUOTES
4. MACRO ECONOMIC SITUATION
5. INDUSTRY ANALYSIS
6. SHORT TERM TRENDS
7. LONG TERM TRENDS
8. TIPS
9. FII ACTIVITY
10.FI ACTIVITY
11.INVESTOR EDUCATION CAPSULE
12.NRI / FOREIGN INVESTOR GUIDE
13.PERFORMANCE OF PAST RECOMMENDATIONS
14.IDEAS (Bright ideas, thoughts and doubts)
15.EXPERT COMMENTS (Words of wisdom from experienced players)
16.MUST READ
17.TAX TIPS
18.ABOUT ISA (India Share Analysis . com)
***STRATEGY(Building a Portfolio & Booking Profits)
(IN A NUTSHELL)
1. BUYING - Wait till SENSEX falls to its 3 year average and buy in 5 lots (at every rise) after a fall of 10%.
2. SELLING - Overall the basic aim is to have sold half the portfolio when it has given a gain of 30% and to sell half of the balance at every further rise of 10%. THIS REQUIRES DISCIPLINE AND CAN BE A COSTLY MISTAKE AS THE MARKET TIME & AGAIN HAS PROVED THAT IT IS UNPREDICTABLE AND CAN FALL RAPIDLY LEAVING INVESTORS LEFT WITH REGRET. Two ways of achieving this is given below.
NOTE - Look up the “MODEL PORTFOLIO” at the end & watch us build itover a period of time. You may follow us if you like
1. Having booked profits recently you should not invest immediately. Enjoy your profits for a while.
2. Patience is the most important quality in the stock markets.
3. It is a good idea to take out 80% of the profits you have made and buy other assets like a house or some land in a growing city like Pune, Bangalore, Hyderabad etc
4. Buy only shares from industries where India has core competence like SOFTWARE, BIO-TECHNOLOGY, FMCG, PHARMA, TEXTILES, ENGINEERING etc.
5. Buy in small lots, but keep adding at every fall of 10%. Buy on a day the SENSEX starts to rise. Concentrate on long term profits and wait till clear direction emerges. Avoid being a "contrarian" !!! It is no fun standing in front of a running train!!!
6. It is not possible (nor necessary) to buy at the lowest point or sell at the highest point
REMEMBER - "If you can consistently make 30% every year you will be very rich even if you are now starting with a only a few thousands.”
BEGINERS GUIDE TO BUILDING A GOOD PORTFOLIO (In Simple Steps)
1. Open "Economic Times" news paper and find Stocks Page (Generally Page 10).
2. Find the following tables :-
(a) Names of Stocks in the Bombay Stock Exchange Sensitive Index (SENSEX or BSE 30 Index) and Names of Stocks in the National Stock Exchange Index (Nifty or NSE 50 Index).Present list is given below.
(b) Tabular Column showing the High and Low of both SENSEX & NIFTY in the past 3 Years.
3. Find AVERAGE LEVEL OF SENSEX OVER LAST 3 YEARS (as given below). YOU MUST START BUYING STOCKS ONlY WHEN THE SENSEX REACHES AROUND THESE LEVELS (Otherwise keep waiting- you can deploy funds in Fixed Deposits or other assets easily convertible into cash at short notice.
Example of finding AVERAGE LEVEL OF SENSEX OVER LAST 3 YEARS
YEAR-HIGH-LOW
2006-12,500-9200
2005-9700-7030
2004-6750-4200
OVER ALL AVERAGE=8230
IMPORTANT
THIS IMPLIES THAT ONE SHOULD START BUYING SHARES WHEN SENSEX REACHES 7813
4. PRACTICAL STEPS & RULES FOR BUILDING A PORTFOLIO
(a) To begin with invest only that much money in the stock market which you can afford to lose completely.
(b) Buy only in 5 small lots never exceeding 30 % (of the total you intend to invest in the market.) at any one time.
(c) Start building the portfolio with small lots of top 15-20 Shares in the SENSEX which belong to different industries. These are the current leaders in their respective industries. The current list is given below:-
(i) ONGC, Reliance Industries, Indian Oil (Oil & Gas Industry)
(ii) Hindustan Lever (HLL), ITC, Nestle (Fast Moving Consumer Goods)
(iii) Tata Seel, Steel Authority of India (Steel)
(iv) Tata Motors(Old name TELCO), Mahindra & Mahindra (M & M) Bajaj Auto, Hero Honda(Automobile Industry)
(v) GlaxoSmithKline Beecham Pharma (Glaxo), Ranbaxy Laboratories, Dr Reddys Labs, Cipla (Pharmaceuticals)
(vi) Gas Authority of India (GAIL)(Natural Gas Industry)
(vii) Infosys, Wipro, Tata Consultancy (TCS) Satyam Computers (Software)
(viii) BHEL, Tata Power, Reliance Energy (Power Industry)
(ix) State Bank of India (SBI), ICICI, HDFC Bank (Banks)
(x) Larsan & Tubro (L & T)(Engineering)
(xi) Hindalco (Aluminium)
(xii) Indian Rayons, Arvind Mills (Textiles)
(xiii) Balrampur Chinni Mills (Sugar)
(xiv) Grasim, Gujarat Ambuja Cement, Ultratech Chemco, ACC (Cement)
5. At any time you should have at least 10 shares belonging to different industries.
6. Never buy a share when it is falling. Wait for it to rise and buy it on that day. If it falls the day after wait till the day it starts to rise and buy another lot of the same size. This is called "Averaging"
IMPORTANT:
NEVER TRY AVERAGING IN A SHARE WHICH IS NOT IN THE SENSEX OR NIFTY.
7. 80% of the money you invest must be in the top 50 companies mentioned above. 20 % may be invested in other A group, B1 or B2 stocks and that also when the index is below the 3 YEAR AVERAGE and the share has risen for at least 3 out of the last 5 days. A novice should NEVER BUY B1 & B2 Shares.
8. When ever a particular share has given a profit of 30 % sell at least half of that share.
9. When ever all the shares you have (Meaning whole Portfolio) has given an overall profit of 20 % start selling 10 % on each day the SENSEX falls. (Do not sell on days SENSEX rises)
10. When ever the SENSEX crosses the all time high sell 20% on each day the SENSEX falls.
EXAMPLE OF HOW THE STRATEGY WORKS OVER ALL :-
NOTE : Working is for a total investment of 1 Lakh spread over 10 Companies in equal amounts of Rs 10,000 each
1. Select 10 Companies from the list above.
2. Start buying only when SENSEX reaches around the 3 YEAR AVERAGE of 4684.
3. BUYING THE FIRST LOT(or one fifth of the total amount to be invested) ---
----(a)Look for shares in the above list which have risen on the previous day.
Buy approximately equal amounts worth of each share (This means if you have Rs 1 Lakh to invest and intend to finally end up with a portfolio of shares of 10 companies, then buy each company share worth Rs 2000)
----(b) Watch the other shares that had not risen. Buy Rs 2000 worth each of them on which ever subsequent day whenever each of them rises.
4. Monitor each of the shares every day. If any of them falls more than 10% from the previous price then buy another lot worth Rs 2000 on the first day it begins to rise.
5. Stop buying each share when ever you have completed 5 lots.
6. Keep doing this procedure till you hav bought 5 lots of each of the 10 shares and thus reached a total investment of 1 Lakh )which you had intended to invest.)
7. If at any stage the market or the shares starts rising and running away do not panic and rush to Buy. The market is known to always give another chance. EVEN IF THIS DOES NOT HAPPEN BE HAPPY WITH THE PROFITS YOU MADE FROM THE SHARES YOU HAD ALREADY BOUGHT. YOU AT LEAST DID NOT LOSE !!!!!
8. A NOVICE SHOULD NEVER BREAK THE RULES.
9 SELLING IS EASY IF YOU CAN LIMIT YOUR GREED AND CONTROL YOUR FEAR.--- THE OVER ALL AIM (for the whole Portfolio)IS TO BOOK PROFITS - HALF AT 30% and HALF of the SUBSEQUENT BALANCES ON EVERY RISE OF 10%. There two ways this can be achieved :-
1. One way to achieve this "OVERALL AIM" (When we are dealing with individual shares in a Portfolio) - When the whole portfolio has given a gain of 30% start selling individual shares (one third of each)on every day you see each of them fall.
2. The second way to achieve this "OVERALL AIM"(When we are dealing with individual shares in a Portfolio) - When the whole portfolio has given a gain of "JUST 20%" start selling 10% worth of (any or all) shares on every day the SENSEX falls.(If the SENSEX rises above the "All time High sell 20% on every day the SENSEX falls)
!!!! Easier said than done !!!
YOU WILL SOON REALIZE THAT THE MOST DIFFICULT THING TO DO, IS TO "LIMIT YOUR GREED AND CONTROL YOUR FEAR"
Don't regret if you the market runs up further after you have sold all your shares. Remember what one of the greatestors of all time said "SELL, REGRET, GROW RICH"
*** COMPANIES TO WATCH
RELIANCE (Group)
1. Watch all Reliance Group of Mukesh Ambani
2.Downward risk is considerable.
3. Theses is a long-term growth stories and deserve to be picked up at every decline.
4. However it is likely to give many trading opportunities but do not get tempted.
5. With the decontrol of Petroleum Products and pricing of fuel Reliance will steadily gain market share.
6. It is believed that other world players have put their capacity expansion plans on hold.
7. A number of favorable Government announcement are expected.
GLAXO
1. Proclaimed as India's Most Respected Company by BS Survey
2. Market leader with Multinational Parentage.
3. Scores very high on most parameters selected by our analysis team.
4. Likely to gain maximum from new "Patents Regime" and any further dilution of Drug Policy.
5. Available at very reasonable levels as most Pharma stocks were beaten down
6. Strongly supported by Foreign parents-Glaxo & Welcome after merger worldwide.
7. Will greatly gain from R&D
WIPRO
1. India's top software cum hardware company.
2. Fallen from very high levels.
3. Consistent growth over a number of years.
4. Investor friendly Management
5. Net profit growth of over 70% in last year. Profitability likely to increase.
6. Likely to lead Bull charge in software.
KODAK
1. Undisputed market leader. in its own industry.
2. Consistent growth pattern over many years.
3. Not caught Investor Fancy yet. Hence available cheap.
4. Likely to show spectacular long term growth.
5. Secured very high scores on most parameters selected by our analysis team.
6. Very strong Brand Name and Brand Recall.
MONSANTO
1. Multinational company and leader in genetically modified seed technology.
2. This technology successfully used in many countries for high yield and saving of pesticides
3. Likely to be given clearance for some of its new products.
4. Share price likely to fall further.
5. Leader in Biotechnology sector in India, which will be a high growth, competence area.
6. Biotechnology shares appear to be leaders in the next boom.
7. Excellent research facility also supported by parent
HDFC
1. This is one of the most respected companies, and a clear market leader. Entry into insurance is likely to bring strategic advantages.
2. Still we have decided to recommend a sell because this was recommended by us at very low levels. It is good to book profits and later enter at lower levels.
3. Watch this share continuously as it has a 31% holding in HDFC Bank which will have a better growth story, given its e-commerce initiatives and dominant market position
4. HDFC has reached a high PE ratio and we feel a correction is over due.
5. Is a merger of the two companies likely ?????
6. Given the current situation it is better to sell HDFC and wait and watch.
BATA
1. This is one of the few of our recommendations which gave returns well beyond our own expectations.
2.BATA has been a loss making company. Its turn around efforts have not been spectacular.
3. Its large work force has been a cause of concern and has been facing labour problems
4. It has run up considerably and it is wise to book profits now.
5. It can become a sourcing point for its parent in Europe.
6. Its has made attempts improve its marketing effort.
7. There appears to be a shift in the market towards cheaper brands where there are many players and stiff competition.
Tata Power
1. This was recommended at very low levels by us.
2. It is good to book profits at this stage..
3. Tata Power no doubt will be a great growth story in the future but we feel that it is wiser to book profits and re-enter after a likely correction.
4. The correction is specially likely because the Tata Group has not announces any specific steps for the company
5. Reliance Energy is likely to offer stiff competition.
6. However Tata Power may gain from any favourable announcement by the government for the piower sector as a whole.
7. You may not sell if you are a very long term investor.
***SWITCH TO THE FOLLOWING SHARES / INDUSTRIES
Switch from weak stock to fundamentally strong companies in competitive industries given below.
1. Pharma industry : Dr Reddy, Glaxo, Novartis, Ranbaxy, Cipla, Pfizer.
2. Software industry : Infosys, Wipro, TCS, HCL Technologies
3. Biotechnology : Monsanto, Biocon, Aventis, Nath Seeds.
4. FMCG : Hindustan Lever, Nestle, Marico, Gillette, ITC.
5. Cement : ACC, Gujarat Ambuja, Grasim, Ultra Tech
6. Other Industries : Tata Steel, Ashok Leyland, Tata Motors, Raymond,.Welspun, Arvind Mills.
***RISK PROFILE
1. The market had run up from 4200 levels.Hence the fall can be deep.
2. Buying at present levels is prone to considerable risk.
3. However old & new economy stocks are reporting good results. Sectors like Cement, Steel, Engineering, Power, Technology still present good opportunity in the long run. However it is wise to wait and watch now.
4. For ICE (Information, Communication, Entertainment stocks), Cement, Steel, Engineering, Textiles, Pharma and Power the long term term prospects are very good. However it will be safe to let the market bottom out and then re-enter
5. Considering the fact that the SENSEX in the past has fallen steeply after crossing all time highs,it can be said that it is likely retrace atleast to 4800-5000 levels.
6. The Three main risks are "Rise in Oil Prices and Strengthening of the dollar and Terrorist attacks 9/11.
7. Pharma with the "NEW PATENTS REGIME" and Textiles with the "PHASING OUT OF QUOTAS" are likely to be volatile though may be positive for both industries for both industries in the long term.
8.. The strong fundamentals- Political stability, Good Budget, Monsoons, low Inflation, ongoing reform and strong buying by FIIs in the long term augers well for the market in the long term. In the short term there is considerable downward risk.
***RELEVANT QUOTES
Fools rush in where Wise men fear to tread.
Better to be safe than sorry.
Patience is divine
The above sum up the present situation best.
ALL TIME WORDS OF WISDOM
A fool who knows exactly how foolish he is makes a lot of money on the stock markets but a wise man who does not know how wise he is loses all his money.
Sell, Regret, Grow rich. (The converse is not true- this means don't even hope to sell at the top or buy at the bottom)
As l long as investment is not made on borrowed funds and stock picking is restricted to market leaders there is one will get a chance to enter at lower levels and handsome profits can be made in the next 6-8 months. This involves conditioning the mind to see the situation objectively and controlling the emotions of FEAR & GREED.
***MACRO ECONOMICS
Political stability appears to be achieved by the UPA.
Global risks have mounted but the market has moved in a manner that has left everyone speechless.
Is this still a bull market? Structurally and fundamentally, it is still one for the long term.
But for the short term is there going to be a deep correction ???
Bull runs normally rest on a 4 key things. Strong corporate earnings, robust economic growth, reasonable valuations and global investor confidence. It is debatable whether valuations are reasonable but the other three are in place. This means that the long term trend is up but in the short term there can be a correction. So it is wise to wait for the market to bottom out and in fact rise may be 4 to 5 persent and then enter.
Crude oil prices are refusing to come down. This is a big negative specially for India.
US interest rates will rise this year. This is a very crucial factor, as without global inflows all emerging markets will struggle to move up. Interest rates will rise in India as well. The falling rupee will hurt imports.
***INDUSTRY ANALYSIS
1. FMCG, software, pharma, telecommunication, entertainment likely to gain.
2. Cement stocks have good long term prospects. Closely monitor run up significantly. ACC, GUJARAT AMBUJA GRASIM, Ultratech etc Start buying on signs of bottoming out.
3. ICE stocks may fall to very attractive levels & must be picked up then. They will lead the Bull Charge..
4. Biotechnology stocks need a very close look. Monsanto Chemicals likely to do well after getting clearance for its genetically modified cotton variety. These shares have started looking up after a fall of almost 45%.
5. Courier companies like BLUE DART are likely to gain a lot from E_Commerce initiatives.
6. PHARMA companies both Indian and MNCs specially Dr REDDYS, CHEMINOR DRUGS, CIPLA RANBAXY, NOVARTIS, GERMAN REMEDIES etc likely to do well after the new laws on "Product Patents"
PHARMA INDUSTRY
1. Valued at $ 4 Bn. Likely to do well after the new laws on "Product Patents"
2. Industry likely to see consolidation ( mergers & acquisitions ).
3.Most MNCs setting up 100% subsidiaries.
4. Danger of MNC launching new drugs through subsidiaries.
5. Big players working out co-marketing arrangements. eg. Ranbaxy & Glaxo.
6. Product patent regime from 2005 against present process patent.
7. Indian companies stepping up R & D. eg Dr Reddy, Cipla, Ranbaxy.
8. These likely to capitalise on drugs going out of patents in international markets because of cheap local production. (in 2003 approximately $ 7 bn)
9. Drug price control order is a menace. Likely to be diluted soon.
10. Slow down in domestic retail sales.
11. Unbranded products flooding the markets. ( Cipla, Cadila, Wockhardt)
12. Export to Russia & CIS countries resumed in 1999 end. (Hoechst Marion, Dr Reddy)
13. Future profit areas are cardio vascular, anti diabetes, anti viral & anti depressant. Volumes will come from vitamins
FMCG ( Fast Moving Consumer Goods)
1. Consists of personal care, cosmetics & home products.
2. Premium urban segment v/s popular segment. (price lower 70%)
3. Urban market saturated - most venturing into rural markets.
4. Advertising & marketing costs high. Low margin high volume business.
5. Boom in future as GDP likely to grow at 7%.
6. Preference shifting to branded products.
7. Dominated by MNC - HLL, P&G, Colgate etc.
8. Good monsoons crucial for growth in demand.
9. MNCs likely to gain with relaxation of import curbs & will distribute parents products in India.
10. Mergers & acquisition likely in future.
11. Companies restructuring & using IT to control inventory & distribution costs & supply chain management etc. Eg: HLL, ITC.
12. Product development, new launches & brand building crucial.
13. It is a defensive sector & investors invest to hedge risks in other industries.
14. This sector is completely dominated by HLL, ITC, Colgate, P&G etc.
15. These are solid companies & give good long term stable returns.
***SHORT TERM TRENDS
1. Market trend has not yet emerged but there is a slight bias to fall..
2. Overall the valuations are high and hence it is wise to continue to hold cash and wait for a clear trend to emerge.
3. Market likely to see fluctuations rapidly on a day to day basis. Watch for signs of a crash.
4. The influence of day traders (buying and selling on the same day) is clearly visible. This is likely to be a dangerous game
5. Software and Cement Industries should be watched very carefully.
6. The quarterly results of companies are likely to be good and individual shares may run up before the results..
7. The NASDAQ seems to be poised at cross roads & any rise will propel Indian software shares sharply upwards.
8. Old economy stocks to show steady rise. FMCG to regain its shine.
***LONG TERM TRENDS
1. The long term trend is downwards, watch out for steep corrections.
2. The SENSEX and NIFTY are giving a false picture. It is wiser to look at all the shares as a whole basket and compare are going up or down every day.
3. Many of the time tested Blue Chips may fall. Wait for them to bottom out and start rising before buying.
4. Sell steadily till an upward trend emerges. this may take a long time
5. Book profits specially in all B1 and B2 group shares if you haven't done so already.It is dangerous to continue to hold them.
***TIPS
1. Listen to all tips and rumours but do not take action on any of them. Write them down date wise and look at them after a month. More often than not you will feel happy you did not act.
2. Keep close watch on Pharmaceutical, Biotechnology, Textile Construction Engineering and Cement companies.
3. W#atch old favourites- Blue Chips like RELIANCE, HINDUSTAN LEVER, L&T, GRASIM,
4. INFOSYS, WIPRO, HCL TECHNOLOGIES and SATYAM COMPUTERS.
***FII ACTIVITY (Activity of Foreign Financial Institutions)
1. Foreign Financial Institutions (FII) have started selling.
2. FIIs are bullish over the long term but they seem to have learned a few tricks from the Dalal Street Punters.
***FI ACTIVITY (Activity of Indian Financial Institutions)
1. No fixed pattern can be discerned from the activities of the Indian Financial institutions.
2. Despite having a predominant position as far as investments and muscle power are concerned they seem to prefer to play second fiddle. Otherwise there is no reason why a few FIIs and Punters could move such a large market at will. This they do because they know they will get away with it.
3. Incompetence or vested interests may be considered as a reason.
4. They are likely to follow the Government in most matters
***INVESTOR EDUCATION CAPSULE
1. The aim of preparing this capsule is to train the small investor to take rational decisions based on information collected from every possible source with the clear understanding that EQUITY MARKETS ARE NOT TO BE SEEN AS GAMBLING DENS but a collection of KNOWLEDGEABLE, COOL HEADED, SKILLFUL PEOPLE WHO TAKE CALCULATED RISKS AND UNDERSTAND THE IMPORTANCE OF CONTROLLING AND MASTERING THE EMOTIONS OF FEAR, HOPE & GREED.
2. This capsule is being scientifically designed to cater to the needs of a "PURE NOVICE" and aims to gradually guide him along to achieve an experts understanding of not only INDIAN MARKETS but also GLOBAL and REGIONAL MARKETS as we believe that the Indian Markets have already achieved integration with Global Markets.
***NRI / FOREIGN INVESTOR GUIDE
1. THE NRIs have special needs and requirements. We are preparing a special training capsule to train them so that the hard earned money that they send home can be deployed profitably to cater to their old age and pension needs. More than this the money they send to India should be used to help India develop rapidly to eradicate poverty.
THE FOLLOWING FACTORS HAVE ENHANCED ATTRACTIVENESS OF INDIAN STOCK MARKETS:-
# THE EXPIRY OF FERA.
# CHANGE IN GOVERNMENT POLICY ALLOWING 100% MNC subsidaries.
# REMOVAL OF TEXTILE QUOTAs AND NEW PATENT LAWS.
# OPENING UP OF VARIOUS SECTORS TO FOREIGN INVESTMENT.
# SOPs FOR VENTURE CAPITALISTS..
2. ONLINE TRADING, DEMATERIALIZATION OF SHARES AND CONCESSIONS/REMOVAL OF TAX ON GIFTS TO BLOOD RELATIONS HAVE MADE IT POSSIBLE FOR INVESTMENTS BY NRIs TO BE HASSLE FREE.
3. WE SHALL BE SHORTLY PROVIDING A COMPLETE SERVICE FOR HASSLE FREE MANAGEMENT OF PORTFOLIOS WITHOUT THE USUAL RISKS OF STEALING OF SHARES, DEFRAUDING etc.
For details write to our Chief Analyst:-
Lt. Colonel John Chenetra MBA (Pune University)
(Portfolio Manager with 20 years experience - General Manager at Unity Infraprojects Ltd),
Contact Details
E mail jcjohn24111955@hotmail.com
Mobile +91 9870037383
For Investment advice e-mail at :- jcjohn24111955@hotmail.com
***PERFORMANCE OF PAST RECOMMENDATIONS
The record of the performance of all the shares recommended by us is almost unbelievably good. We must admit that we ourselves sold out our "Model Token Portfolio" prematurely as we strictly followed the rules we have recommended in "STRATEGY". Hence we did not actually achieve the full potential.
We do not regret this at all.
The thumb rule is "IT IS BETTER TO BE SAFE THAN SORRY"
We must also admit that we were lucky we started when the markets had fallen to very low levels in 1998 and since then we have seen 3 major "Bull Runs"(High Levels of the SENSEX). This does not happen all the time.
But more important than the good luck we had is the fact by following the rules and strategy we laid down for ourselves we managed to buy into the markets at low levels (not the lowest) and sold at high levels (Not the highest). This means WE MADE EXCELLENT PROFITS and NOT MAXIMUM PROFITS. This is one lesson which every "Small Investor" must learn as soon as possible.
NOTE :-You should note that most small investors have made losses since 1998 because they acted on rumours and tips and entered when the markets were high and every was talking about it and again acted in panic on rumours and tips when every one was predicting doom and sold when the market was low.
that all the recommendations were followed. Hence this gives the percentage appreciation of the portfolio of an investor who started investing in 1998 and has continued to participate till date. The overall return achieved over these years is an unbelievable 834%.
***IDEAS
• Will the Prime Minister and Finance Minister be forced to go slow on reforms ??
• Will the UPA Govt become unstable with the struggle in West Bengal and Kerala where the Congress and Communists are direct rivals in elections ???
• When will the next stock market scam break out???
• Will FIIs funds continue to flow into India.???
• When will hedge funds move out of India ?? Will this create havoc ???
• Will there be another major earthquake or tsunami or other natural calamity???
• How will US deal with North Korea & Iran??? War or Sanctions??
• What shape will Iraq takel ??
• Budget ??
• Will Indo - Pak dispute get worse or will it be resolved.???
• Will there be another 9/11 type of strike by Al Quida ???
• Will a terrorist group get hold and use a nuclear / biological / chemical weapon???
• Will J&K , Assam & North Eastern States situation get worse ??
• What short term effect and long term of New Products Patents Laws and Removal of quotas on the Indian Pharma and Textile Industries respectively.
• Will Crude Oil and fuel prices rise phenomenally ???
• Will the Dollar strengthen against the rupee or the other way round ???
• DON'T LET ALL THIS RATTLE YOU. WE WILL MAKE MONEY IF WE CAN KEEP A COOL HEAD !!!
***EXPERT’S COMMENTS
@ Sell-Regret but you will grow rich.( Book your profits too early) Opposite not true.
@ Select top 5 Blue chips- Buy when SENSEX reaches about 20% above previous years' low-Sell all on overall appreciation of 30%.Repeat every time these conditions occur.
@ When you meet Housewives on Dalal Street- Run for your life !!!
@ Read your News Papers (and Investment Magazines) 3 Months late- You will make more sense- and of course more Money ???
***MUST READ
1. The following reading material is recommended:-
a) Making Money On The Stock Markets by SS Grewal.
b) Stock Market Logic by Lovelock.
c) Quarterly results in Capital Market (magazine)
d) Investor guide in Economic Times (on Mondays)
e) Smart Investor in Business Standard (on Mondays)
f) Survey of Indian Industry ( annual publication by Hindu newspaper)
***TAX TIPS
1. With ZERO Long term capital gains tax Stock Markets have become a MUST for all as bank rate is low and is taxed.
2. Do not delay booking profits by letting the lure for getting advantage of ZERO Long term capital gains tax (by holding share for more than one year). Remember you would be saving tax only marginally as Short Term Capital Gains tax is only 10 % . It is not worth the risk.
3. Invest maximum amount in the account of the member of your family who is in the lowest tax bracket.
4. The capital gains made by a child is clubbed with the income of the parent.
5. Maximum use of savings (including mutual funds & investments under section 88 of Income Tax Act up to a maximum of Rs.70,000) should be made out of the profits you make in the stock markets. This helps you to limit risks also.
6. It is a good idea to take a large housing loan & buy residential property to take advantage of tax benefits on the interest paid & the repayment of capital.
7. Reallocation of invest able funds among family members must be done.
8. Booking of capital losses to get rid of weak stocks held in your portfolio is a good idea as it offsets capital gains.
***ABOUT ISA (indiashareanalysis com)
India Share Analysis is a free investment and personal finance site set up in 1998 by a team of eminent professionals lead by Lt Colonel John Chenetra (MBA) - General Manager - Unity Infraprojects Ltd. All team members have over 20 years experience in Portfolio Management. The research team consists of a pool of ten well known Portfolio Analysts, Chartered Accountants and finance professionals.
This site is prepared WITHOUT THE DESIRE FOR ANY PERSONAL GAIN for any of our team members.
The SOLE AIM is to PREVENT LOSSES TO THE SMALL INVESTOR because of the lack of good advice and correct information.
The software support is provided FREE OF COST to us by SPARK SOFTWARE GROUP owned solely by its Chairman & Managing Director - Lt Colonel John Chenetra who is also our "CHIEF PATRON"
Spark Software has also been registered as 100% EOU (Export Oriented Unit) in the Software Technology Park of India located in the Millennium Business Park , New Bombay. Spark Software is a market leader in Techno Fundamental Decision Support Systems.
***MODEL PORTFOLIO
(We presently don't hold any shares as we have completely booked profits as recommended in the "Rules for Investing" in "Strategy". We shall wait patiently for the SENSEX to fall to the 3 year average of 7813 before we start buying in small lots as again suggest in "STRATEGY". Watch us as we build it steadily in future. You may follow us if you like.
PORTFOLIO
Lot1 Lot2 Lot3 Lot4 Lot5 Total
Name No / P No / P No / P No / P No / P No / P
ONGC
Reliance
Indian Oil
HLL
ITC
Nestle
Tata Seel
SAIL
Tata Motors
M & M
Bajaj Auto
Hero Honda
Glaxo
Ranbaxy
Dr Reddys
Cipla
GAIL
Infosys
Wipro
TCS
Satyam
BHEL
Tata Power
Reliance Energy
SBI
ICICI
HDFC Bank
L & T
Hindalco
Indian Rayons
Arvind Mills
Balrampur Chinni
Grasim
Gujarat Ambuja
Ultratech
ACC
Ashok Leyland
Aventis Pharma
Balaji Telefilm
Bharti Tele
Colgate
Digital Global
Finolex Cables
Global Trust
GTL
Guj Gas
HCL Tech
HDFC
HDFC Bank
HFCL
Hind Oil
Hinduja TMT
ICICI Bank
Infosys
IPCL
ITI
Mastek
Neyveli
NIIT
P and G
Padmalaya Tele
Polaris
Rolta
Shipping Corp
Silverline
Sonata
Tata Chemicals
Tata Elxsi
Videocon Int
Birla Corp
ETC Networks
FAG Bearings
Greaves
Micro Inks
iGATE
Ispat
Jyoti Structure
Madras Fert
Mahavir Spinnin
Morepen Lab
Orient Info
PSL
Rallis India
Rama Newsprint
Avaya GlobalCon
United Brewerie
Voltas
Welspun Guj
Godrej Foods
Centurion Bank
Varun Shipping
IndraprasthaGas
MRPL
ABB
Container Corp
Glenmark
Mah and Mah
Maruti Udyog
Moser Baer
Sun Pharma
Chambal Fert
Cholamandalam
Ashok Ley Fin
Blue Star
Deepak Fert
Coromandel Fert
Kochi Refin
SRF
Tube Investment
Andhra Bank
Carborundum
Bank of India
Madras Petro
TRF
IVRCL Infras
INDIA’s GROWTH STORY
The Indian equity market has come a long way. Just to cite an example – it crossed the Dow Jones (DJIA) index levels on March 29, in intra-day trades, the first time in over 10 years. Comparing the sensex to the Dow is itself a significant achievement, since the DJIA is the best-known market indicator in the world.
In the past three months, investors have seen returns of 25% from the overall market and a few sectors have even delivered nearly 50% returns (see table 1). The underlying statement is that the Indian stock market is definitely quite buoyant, but a few questions have started popping up on its continued sustenance.
Some market players have even started going underweight on India. Let’s take a look at some of the key factors that help the Indian equity market thrive and analyse weak links in those factors, if any.
Long-Term Growth Story: India’s long-term growth story remains intact. No other economy in the world, not even China, threatens to grow at an aggressive growth rate of 8% YoY (year-on-year) over the next few years.
If estimates from research firms are considered, India may grow significantly over the next couple of decades, when several Asian economies in the world are expected to slow down. This is a big positive for the Indian equity market. Already, India has started showing its mettle.
India’s contribution to the world GDP has started to increase significantly. The Indian story is a domestic-led consumption one. Infrastructure is top priority and privatisation programmes (airports, ports, etc) are running full throttle. And India Inc is marching ahead - Reliance is expanding its refinery and entering into retail, developing a new city with 32,000 acres at a cost of Rs 25,000 crore.
ITC is making rapid progress in hotels, paper and agri-commodities business, apart from tobacco-related businesses. Indian pharma companies are buying out big international pharma companies. HLL’s fortunes are changing after the pickup in the retail sector, Bajaj Auto is setting up new facilities, L&T’s order book is burgeoning and TCS, Infosys and Wipro continue to dominate the IT sector in the world.
There’s a question which remains unanswered though — is the sensex overvalued, at this point in time? Not really, if you take a long-term view on the Indian economy. The question of a hefty premium that Indian market continues to get continues to boggle many investors.
The benchmark index is currently quoting at more than 20x times the historical price-earnings ratio (P/E). However, ex-oil, the P/E multiple shoots to around 24 times. This is based on historical data. The forward premiums are 17 and 14 times FY07 and FY08 respectively.
In comparison, almost all emerging markets, are quoting at forward premiums of less than 10. The trailing premiums are also less than 20x. But according to various analysts, India deserves that premium for a few reasons. First and foremost, India is the only economy that will continue to grow aggressively at 8%-plus for several years.
Secondly, the Indian growth story is domestically-inclined (infrastructure, rural development, retail spending, etc), and as such, external factors have little impact on the growth prospects. Thirdly, India provides geo-political stability and so concerns are addressed quickly.
Fourthly, India’s economy is increasingly becoming transparent. Fifthly, India Inc, as a whole, seems to enjoy more credibility than its Asian counterparts. Lastly, India Inc has started to show more confidence in itself and started to expand capacities. Foreign institutional investors (FIIs) and Liquidity: This brings us to the liquidity question, which keeps giving sleepless nights to many market players. The three-year bull run in the Indian equity market is clearly on the back of huge foreign institutional investors (FIIs) inflows.
Since the beginning of this bull run in late April ’03, FIIs have pumped in a record $30bn-plus (Rs 1,30,000 crore-plus) into Indian equities. Are they showing signs of slowing down? Not yet. In fact, FIIs have continued to pump money into the Indian equity market with increased YoY momentum. FII inflows in Indian equities have risen 25% YoY.
Even during the first three months of the current calendar year, FII inflows are not showing any signs of down. FIIs had bought Indian equities worth $3.6bn (Rs 16,000 crore) till the last week of March, in line with their buying during the first three months of every year since ’04.
Will the FIIs move out? FIIs want better returns on their investments and so if other economies don’t grow as fast as India, foreign funds will definitely find their way here. Here’s another quick reference check. The number of registered FIIs in India has consistently moved up from 540 in ’04 to 686 in ’05 to 882 during the current year.
This shows the huge interest that FIIs have here. New FIIs will bring in new money into the Indian market, indicating the increasing depth of money. So, even if a section of FIIs become bearish on India, a few may still remain bullish. There are two instances which prove the above.
First, when most Western FIIs took a call to cut positions in India late last year, the Japanese went bullish on India pushing the market up further. As such, the western FIIs had to pay the price for going naked short on India. Another instance was the recent March phenomenon.
A few FIIs went short in the derivatives market in March on the back of post Budget weakness. The Indian market has seen profit booking in March for the previous five years. But the market is almost on the verge of ending positive for the month, forcing these FIIs to cut their short positions.
Another point of concern for a few market players is the rising interest rates in the US and around the world. The Fed raised the interest rate in the US by another 25 basis points (0.25%) to 4.75 during the current week. There are estimates that US interest rates will rise by another 75 basis points (0.75%) during the current year to settle at 5.5%.
Will this dry down liquidity in the Indian market as defensive money starts to flow back into interest earning securities? The answer is positive, but the fact is that much of this defensive money has tasted blood. And at least some part of this will continue to be ploughed into the equity market.
Retail Interest: Small retail investors — perhaps the weakest link in the bull run so far — are entering big time into the equity market. This is clearly evident from the collections made by new schemes by various mutual funds. Some of the recent NFOs have cumulatively collected Rs 10,000 crore upwards.
Part of this money is definitely retail, which will find its way into the equity market, sooner rather than later. This will pump up the liquidity further. In the early ’90s, contribution of the household sector to equities was nearly 12-15% of the savings.
But lately, the Indian household sector contributes a meagre 1.8% of their savings towards equity and equity-related assets. But this seems to be changing for the better now. Next, the government intends to foray part of the pension money into equities.
According to estimates, even if the government decides to invest only 5% of the pension reserves into equities, close to Rs 30,000 crore will find its way into the Indian equity market.
***AIM :: TO PREVENT LOSS TO SMALL INVESTORS .
(Produced by a team of eminent personalities lead by Colonel John Chenetra (MBA).VICE PRESIDENT HR IMCL(HINDUJA GROUP)
WE HAVE NO MOTIVE OR DESIRE FOR PERSONAL GAINS
The sole aim of this website is to prevent the slaughter of the "Small Investor" in the "Indian Stock Markets" mainly caused by the manipulation of "Large Operators" and misinformation spread by some elements in the "Media"
HIGHLIGHTS
* Free service hence high level of objectivity
* Prepared by world famous team of research analysts
* Conscious effort to be simple & to avoid technical jargon
* Brief and self explanatory
* Assist commoner make informed rational decisions
* Give level playing field for rich and poor
* Special Portfolio Service to assist NRIs whose funds can help India grow rapidly.
*NOTE 1- This site "psychologically conditions" you & coaxes you to take "rational decisions." It is strongly recommended that all pages be visited in sequence before giving buy & sell orders.
*NOTE 2- This site is purely advisory in nature and does not take any responsibility for any gains or losses caused to investors who are advised to take collect information/advice from all sources and then take their own decisions.
***ADVICE FOR TODAY - SELL, SELL, SELL if you have not done so already AND SELL AT MARKET PRICE OR THE BEST PRICE YOU CAN GET IMMEDIATELY
The fall has started. IT WILL BE DEEP & PAINFUL and PAINFUL. DONT RE-ENTER TILL SENSEX FALLS TO AROUND 9000 LEVELS AS IT SHOWS IN THE STRATEGY SECTION. EVEN THEN BUY IN SMALL AMOUNTS OF THE BLUE CHIPS ONLY
Who would have imagined that the SENSEX would almost touch the magical 12000 level. It is hoped that all our patrons have steadily booked profits. The few who have not, for God's sake "SELL OFF NOW AT MARKET PRICE". Let us admit it - "NONE OF US EVER IMAGINED THAT WE WOULD MAKE SO MUCH MONEY. THEN WHY SHOULD ANY OF US TRY TO BARGAIN FOR THE LAST FEW RUPEES AND FACE SUCH HEAVY RISK". The first indications of a correction are alrealy visible and I advice all our patrons to take notice.
Just lie back and enjoy the profits you have made.DONT BOTHER WHERE THE MARKET HAS GONE AFTER THAT. Remember you have made more money than any other generation in the history of stock markets. Is it worth trying for another for the last 5% running the risk of losing all the 95% you made.
DO NOT RE-ENTER TILL THE CONDITIONS IN THE STRATEGY SECTION GET FULFILLED. DO NOT WAIT FOR THE TOP. ONLY FOOLS & NOVICES DO SO.
This rise has been primarily because of low interest rates, heavy liquidity, and recognition by the world that india is on a high growth path of 8 to 9 % and likely to power ahead of even China. The long term story is no doubt grerat(Please read the 'Article' at the end) but there is a limit to "Bullishness"
Now interest rates are slowly rising and "Crude Oil prises are high. Both will reduce profitability of companies. This will bring down the markets sooner than later.
One thing is clear. This fall is going to be deep when ever it happens.There common understanding is that a conscious effort on the part of the finance minister and the broking community to talk up the markets and prevent a drastic fall. They are unlikely to succeed if foreign investors are looking for an exit. They are looking for taking the second phase of the reforms forward. This is unlikely to happen. It is unwise to remain invested in the markets now when the markets are so high. Now that we have sold out at such high levels, it is better to sit on our profits for a while & wait for the market to fall to lower levels. Even the best of investors like Warren Buffet cannot predict what is going to happen in stock market tomorrow. But a common man with some common sense does understand that the market cannot keep going up all the time. Hence use the biggest virtue of a long term investor which is 'patience' & enjoy the profits God has given you & pull out some of the profits from the stock market & invest in real estate, gold or other assets"
***BUY TODAY
NIL (Keep selling till you have no shares left)
***SELL TODAY
Maruti Udyog
SAIL
Hero Honda
Tata Tea
Infosys
Mah and Mah
Satyam
Tata Power
HCL Tech
Bharti Tele
Wipro
Bajaj Auto
ABB
Sun Pharma
HLL
Reliance
IPCL
Hindalco
Zee
SBI
MTNL
BHEL
Tata Motors
NALCO
Reliance Energy
Shipping Corp
GlaxoSmithKline
Dr Reddys Labs
BPCL
Indian Hotels
ONGC
ITC
Tisco
Grasim
Cipla
Ranbaxy Labs
ICICI Bank
Tata Chemicals
Colgate
Dabur
India
HPCL
HDFC
HDFC Bank
Guj Ambuja Cem
VSNL
Larsen
ACC
PNB
Oriental Bank
***TOPICS COVERED
1.STRATEGY (for investing safely and how a novice can build a Portfolio)
2. RISK PROFILE
3. RELEVANT QUOTES
4. MACRO ECONOMIC SITUATION
5. INDUSTRY ANALYSIS
6. SHORT TERM TRENDS
7. LONG TERM TRENDS
8. TIPS
9. FII ACTIVITY
10.FI ACTIVITY
11.INVESTOR EDUCATION CAPSULE
12.NRI / FOREIGN INVESTOR GUIDE
13.PERFORMANCE OF PAST RECOMMENDATIONS
14.IDEAS (Bright ideas, thoughts and doubts)
15.EXPERT COMMENTS (Words of wisdom from experienced players)
16.MUST READ
17.TAX TIPS
18.ABOUT ISA (India Share Analysis . com)
***STRATEGY(Building a Portfolio & Booking Profits)
(IN A NUTSHELL)
1. BUYING - Wait till SENSEX falls to its 3 year average and buy in 5 lots (at every rise) after a fall of 10%.
2. SELLING - Overall the basic aim is to have sold half the portfolio when it has given a gain of 30% and to sell half of the balance at every further rise of 10%. THIS REQUIRES DISCIPLINE AND CAN BE A COSTLY MISTAKE AS THE MARKET TIME & AGAIN HAS PROVED THAT IT IS UNPREDICTABLE AND CAN FALL RAPIDLY LEAVING INVESTORS LEFT WITH REGRET. Two ways of achieving this is given below.
NOTE - Look up the “MODEL PORTFOLIO” at the end & watch us build itover a period of time. You may follow us if you like
1. Having booked profits recently you should not invest immediately. Enjoy your profits for a while.
2. Patience is the most important quality in the stock markets.
3. It is a good idea to take out 80% of the profits you have made and buy other assets like a house or some land in a growing city like Pune, Bangalore, Hyderabad etc
4. Buy only shares from industries where India has core competence like SOFTWARE, BIO-TECHNOLOGY, FMCG, PHARMA, TEXTILES, ENGINEERING etc.
5. Buy in small lots, but keep adding at every fall of 10%. Buy on a day the SENSEX starts to rise. Concentrate on long term profits and wait till clear direction emerges. Avoid being a "contrarian" !!! It is no fun standing in front of a running train!!!
6. It is not possible (nor necessary) to buy at the lowest point or sell at the highest point
REMEMBER - "If you can consistently make 30% every year you will be very rich even if you are now starting with a only a few thousands.”
BEGINERS GUIDE TO BUILDING A GOOD PORTFOLIO (In Simple Steps)
1. Open "Economic Times" news paper and find Stocks Page (Generally Page 10).
2. Find the following tables :-
(a) Names of Stocks in the Bombay Stock Exchange Sensitive Index (SENSEX or BSE 30 Index) and Names of Stocks in the National Stock Exchange Index (Nifty or NSE 50 Index).Present list is given below.
(b) Tabular Column showing the High and Low of both SENSEX & NIFTY in the past 3 Years.
3. Find AVERAGE LEVEL OF SENSEX OVER LAST 3 YEARS (as given below). YOU MUST START BUYING STOCKS ONlY WHEN THE SENSEX REACHES AROUND THESE LEVELS (Otherwise keep waiting- you can deploy funds in Fixed Deposits or other assets easily convertible into cash at short notice.
Example of finding AVERAGE LEVEL OF SENSEX OVER LAST 3 YEARS
YEAR-HIGH-LOW
2006-12,500-9200
2005-9700-7030
2004-6750-4200
OVER ALL AVERAGE=8230
IMPORTANT
THIS IMPLIES THAT ONE SHOULD START BUYING SHARES WHEN SENSEX REACHES 7813
4. PRACTICAL STEPS & RULES FOR BUILDING A PORTFOLIO
(a) To begin with invest only that much money in the stock market which you can afford to lose completely.
(b) Buy only in 5 small lots never exceeding 30 % (of the total you intend to invest in the market.) at any one time.
(c) Start building the portfolio with small lots of top 15-20 Shares in the SENSEX which belong to different industries. These are the current leaders in their respective industries. The current list is given below:-
(i) ONGC, Reliance Industries, Indian Oil (Oil & Gas Industry)
(ii) Hindustan Lever (HLL), ITC, Nestle (Fast Moving Consumer Goods)
(iii) Tata Seel, Steel Authority of India (Steel)
(iv) Tata Motors(Old name TELCO), Mahindra & Mahindra (M & M) Bajaj Auto, Hero Honda(Automobile Industry)
(v) GlaxoSmithKline Beecham Pharma (Glaxo), Ranbaxy Laboratories, Dr Reddys Labs, Cipla (Pharmaceuticals)
(vi) Gas Authority of India (GAIL)(Natural Gas Industry)
(vii) Infosys, Wipro, Tata Consultancy (TCS) Satyam Computers (Software)
(viii) BHEL, Tata Power, Reliance Energy (Power Industry)
(ix) State Bank of India (SBI), ICICI, HDFC Bank (Banks)
(x) Larsan & Tubro (L & T)(Engineering)
(xi) Hindalco (Aluminium)
(xii) Indian Rayons, Arvind Mills (Textiles)
(xiii) Balrampur Chinni Mills (Sugar)
(xiv) Grasim, Gujarat Ambuja Cement, Ultratech Chemco, ACC (Cement)
5. At any time you should have at least 10 shares belonging to different industries.
6. Never buy a share when it is falling. Wait for it to rise and buy it on that day. If it falls the day after wait till the day it starts to rise and buy another lot of the same size. This is called "Averaging"
IMPORTANT:
NEVER TRY AVERAGING IN A SHARE WHICH IS NOT IN THE SENSEX OR NIFTY.
7. 80% of the money you invest must be in the top 50 companies mentioned above. 20 % may be invested in other A group, B1 or B2 stocks and that also when the index is below the 3 YEAR AVERAGE and the share has risen for at least 3 out of the last 5 days. A novice should NEVER BUY B1 & B2 Shares.
8. When ever a particular share has given a profit of 30 % sell at least half of that share.
9. When ever all the shares you have (Meaning whole Portfolio) has given an overall profit of 20 % start selling 10 % on each day the SENSEX falls. (Do not sell on days SENSEX rises)
10. When ever the SENSEX crosses the all time high sell 20% on each day the SENSEX falls.
EXAMPLE OF HOW THE STRATEGY WORKS OVER ALL :-
NOTE : Working is for a total investment of 1 Lakh spread over 10 Companies in equal amounts of Rs 10,000 each
1. Select 10 Companies from the list above.
2. Start buying only when SENSEX reaches around the 3 YEAR AVERAGE of 4684.
3. BUYING THE FIRST LOT(or one fifth of the total amount to be invested) ---
----(a)Look for shares in the above list which have risen on the previous day.
Buy approximately equal amounts worth of each share (This means if you have Rs 1 Lakh to invest and intend to finally end up with a portfolio of shares of 10 companies, then buy each company share worth Rs 2000)
----(b) Watch the other shares that had not risen. Buy Rs 2000 worth each of them on which ever subsequent day whenever each of them rises.
4. Monitor each of the shares every day. If any of them falls more than 10% from the previous price then buy another lot worth Rs 2000 on the first day it begins to rise.
5. Stop buying each share when ever you have completed 5 lots.
6. Keep doing this procedure till you hav bought 5 lots of each of the 10 shares and thus reached a total investment of 1 Lakh )which you had intended to invest.)
7. If at any stage the market or the shares starts rising and running away do not panic and rush to Buy. The market is known to always give another chance. EVEN IF THIS DOES NOT HAPPEN BE HAPPY WITH THE PROFITS YOU MADE FROM THE SHARES YOU HAD ALREADY BOUGHT. YOU AT LEAST DID NOT LOSE !!!!!
8. A NOVICE SHOULD NEVER BREAK THE RULES.
9 SELLING IS EASY IF YOU CAN LIMIT YOUR GREED AND CONTROL YOUR FEAR.--- THE OVER ALL AIM (for the whole Portfolio)IS TO BOOK PROFITS - HALF AT 30% and HALF of the SUBSEQUENT BALANCES ON EVERY RISE OF 10%. There two ways this can be achieved :-
1. One way to achieve this "OVERALL AIM" (When we are dealing with individual shares in a Portfolio) - When the whole portfolio has given a gain of 30% start selling individual shares (one third of each)on every day you see each of them fall.
2. The second way to achieve this "OVERALL AIM"(When we are dealing with individual shares in a Portfolio) - When the whole portfolio has given a gain of "JUST 20%" start selling 10% worth of (any or all) shares on every day the SENSEX falls.(If the SENSEX rises above the "All time High sell 20% on every day the SENSEX falls)
!!!! Easier said than done !!!
YOU WILL SOON REALIZE THAT THE MOST DIFFICULT THING TO DO, IS TO "LIMIT YOUR GREED AND CONTROL YOUR FEAR"
Don't regret if you the market runs up further after you have sold all your shares. Remember what one of the greatestors of all time said "SELL, REGRET, GROW RICH"
*** COMPANIES TO WATCH
RELIANCE (Group)
1. Watch all Reliance Group of Mukesh Ambani
2.Downward risk is considerable.
3. Theses is a long-term growth stories and deserve to be picked up at every decline.
4. However it is likely to give many trading opportunities but do not get tempted.
5. With the decontrol of Petroleum Products and pricing of fuel Reliance will steadily gain market share.
6. It is believed that other world players have put their capacity expansion plans on hold.
7. A number of favorable Government announcement are expected.
GLAXO
1. Proclaimed as India's Most Respected Company by BS Survey
2. Market leader with Multinational Parentage.
3. Scores very high on most parameters selected by our analysis team.
4. Likely to gain maximum from new "Patents Regime" and any further dilution of Drug Policy.
5. Available at very reasonable levels as most Pharma stocks were beaten down
6. Strongly supported by Foreign parents-Glaxo & Welcome after merger worldwide.
7. Will greatly gain from R&D
WIPRO
1. India's top software cum hardware company.
2. Fallen from very high levels.
3. Consistent growth over a number of years.
4. Investor friendly Management
5. Net profit growth of over 70% in last year. Profitability likely to increase.
6. Likely to lead Bull charge in software.
KODAK
1. Undisputed market leader. in its own industry.
2. Consistent growth pattern over many years.
3. Not caught Investor Fancy yet. Hence available cheap.
4. Likely to show spectacular long term growth.
5. Secured very high scores on most parameters selected by our analysis team.
6. Very strong Brand Name and Brand Recall.
MONSANTO
1. Multinational company and leader in genetically modified seed technology.
2. This technology successfully used in many countries for high yield and saving of pesticides
3. Likely to be given clearance for some of its new products.
4. Share price likely to fall further.
5. Leader in Biotechnology sector in India, which will be a high growth, competence area.
6. Biotechnology shares appear to be leaders in the next boom.
7. Excellent research facility also supported by parent
HDFC
1. This is one of the most respected companies, and a clear market leader. Entry into insurance is likely to bring strategic advantages.
2. Still we have decided to recommend a sell because this was recommended by us at very low levels. It is good to book profits and later enter at lower levels.
3. Watch this share continuously as it has a 31% holding in HDFC Bank which will have a better growth story, given its e-commerce initiatives and dominant market position
4. HDFC has reached a high PE ratio and we feel a correction is over due.
5. Is a merger of the two companies likely ?????
6. Given the current situation it is better to sell HDFC and wait and watch.
BATA
1. This is one of the few of our recommendations which gave returns well beyond our own expectations.
2.BATA has been a loss making company. Its turn around efforts have not been spectacular.
3. Its large work force has been a cause of concern and has been facing labour problems
4. It has run up considerably and it is wise to book profits now.
5. It can become a sourcing point for its parent in Europe.
6. Its has made attempts improve its marketing effort.
7. There appears to be a shift in the market towards cheaper brands where there are many players and stiff competition.
Tata Power
1. This was recommended at very low levels by us.
2. It is good to book profits at this stage..
3. Tata Power no doubt will be a great growth story in the future but we feel that it is wiser to book profits and re-enter after a likely correction.
4. The correction is specially likely because the Tata Group has not announces any specific steps for the company
5. Reliance Energy is likely to offer stiff competition.
6. However Tata Power may gain from any favourable announcement by the government for the piower sector as a whole.
7. You may not sell if you are a very long term investor.
***SWITCH TO THE FOLLOWING SHARES / INDUSTRIES
Switch from weak stock to fundamentally strong companies in competitive industries given below.
1. Pharma industry : Dr Reddy, Glaxo, Novartis, Ranbaxy, Cipla, Pfizer.
2. Software industry : Infosys, Wipro, TCS, HCL Technologies
3. Biotechnology : Monsanto, Biocon, Aventis, Nath Seeds.
4. FMCG : Hindustan Lever, Nestle, Marico, Gillette, ITC.
5. Cement : ACC, Gujarat Ambuja, Grasim, Ultra Tech
6. Other Industries : Tata Steel, Ashok Leyland, Tata Motors, Raymond,.Welspun, Arvind Mills.
***RISK PROFILE
1. The market had run up from 4200 levels.Hence the fall can be deep.
2. Buying at present levels is prone to considerable risk.
3. However old & new economy stocks are reporting good results. Sectors like Cement, Steel, Engineering, Power, Technology still present good opportunity in the long run. However it is wise to wait and watch now.
4. For ICE (Information, Communication, Entertainment stocks), Cement, Steel, Engineering, Textiles, Pharma and Power the long term term prospects are very good. However it will be safe to let the market bottom out and then re-enter
5. Considering the fact that the SENSEX in the past has fallen steeply after crossing all time highs,it can be said that it is likely retrace atleast to 4800-5000 levels.
6. The Three main risks are "Rise in Oil Prices and Strengthening of the dollar and Terrorist attacks 9/11.
7. Pharma with the "NEW PATENTS REGIME" and Textiles with the "PHASING OUT OF QUOTAS" are likely to be volatile though may be positive for both industries for both industries in the long term.
8.. The strong fundamentals- Political stability, Good Budget, Monsoons, low Inflation, ongoing reform and strong buying by FIIs in the long term augers well for the market in the long term. In the short term there is considerable downward risk.
***RELEVANT QUOTES
Fools rush in where Wise men fear to tread.
Better to be safe than sorry.
Patience is divine
The above sum up the present situation best.
ALL TIME WORDS OF WISDOM
A fool who knows exactly how foolish he is makes a lot of money on the stock markets but a wise man who does not know how wise he is loses all his money.
Sell, Regret, Grow rich. (The converse is not true- this means don't even hope to sell at the top or buy at the bottom)
As l long as investment is not made on borrowed funds and stock picking is restricted to market leaders there is one will get a chance to enter at lower levels and handsome profits can be made in the next 6-8 months. This involves conditioning the mind to see the situation objectively and controlling the emotions of FEAR & GREED.
***MACRO ECONOMICS
Political stability appears to be achieved by the UPA.
Global risks have mounted but the market has moved in a manner that has left everyone speechless.
Is this still a bull market? Structurally and fundamentally, it is still one for the long term.
But for the short term is there going to be a deep correction ???
Bull runs normally rest on a 4 key things. Strong corporate earnings, robust economic growth, reasonable valuations and global investor confidence. It is debatable whether valuations are reasonable but the other three are in place. This means that the long term trend is up but in the short term there can be a correction. So it is wise to wait for the market to bottom out and in fact rise may be 4 to 5 persent and then enter.
Crude oil prices are refusing to come down. This is a big negative specially for India.
US interest rates will rise this year. This is a very crucial factor, as without global inflows all emerging markets will struggle to move up. Interest rates will rise in India as well. The falling rupee will hurt imports.
***INDUSTRY ANALYSIS
1. FMCG, software, pharma, telecommunication, entertainment likely to gain.
2. Cement stocks have good long term prospects. Closely monitor run up significantly. ACC, GUJARAT AMBUJA GRASIM, Ultratech etc Start buying on signs of bottoming out.
3. ICE stocks may fall to very attractive levels & must be picked up then. They will lead the Bull Charge..
4. Biotechnology stocks need a very close look. Monsanto Chemicals likely to do well after getting clearance for its genetically modified cotton variety. These shares have started looking up after a fall of almost 45%.
5. Courier companies like BLUE DART are likely to gain a lot from E_Commerce initiatives.
6. PHARMA companies both Indian and MNCs specially Dr REDDYS, CHEMINOR DRUGS, CIPLA RANBAXY, NOVARTIS, GERMAN REMEDIES etc likely to do well after the new laws on "Product Patents"
PHARMA INDUSTRY
1. Valued at $ 4 Bn. Likely to do well after the new laws on "Product Patents"
2. Industry likely to see consolidation ( mergers & acquisitions ).
3.Most MNCs setting up 100% subsidiaries.
4. Danger of MNC launching new drugs through subsidiaries.
5. Big players working out co-marketing arrangements. eg. Ranbaxy & Glaxo.
6. Product patent regime from 2005 against present process patent.
7. Indian companies stepping up R & D. eg Dr Reddy, Cipla, Ranbaxy.
8. These likely to capitalise on drugs going out of patents in international markets because of cheap local production. (in 2003 approximately $ 7 bn)
9. Drug price control order is a menace. Likely to be diluted soon.
10. Slow down in domestic retail sales.
11. Unbranded products flooding the markets. ( Cipla, Cadila, Wockhardt)
12. Export to Russia & CIS countries resumed in 1999 end. (Hoechst Marion, Dr Reddy)
13. Future profit areas are cardio vascular, anti diabetes, anti viral & anti depressant. Volumes will come from vitamins
FMCG ( Fast Moving Consumer Goods)
1. Consists of personal care, cosmetics & home products.
2. Premium urban segment v/s popular segment. (price lower 70%)
3. Urban market saturated - most venturing into rural markets.
4. Advertising & marketing costs high. Low margin high volume business.
5. Boom in future as GDP likely to grow at 7%.
6. Preference shifting to branded products.
7. Dominated by MNC - HLL, P&G, Colgate etc.
8. Good monsoons crucial for growth in demand.
9. MNCs likely to gain with relaxation of import curbs & will distribute parents products in India.
10. Mergers & acquisition likely in future.
11. Companies restructuring & using IT to control inventory & distribution costs & supply chain management etc. Eg: HLL, ITC.
12. Product development, new launches & brand building crucial.
13. It is a defensive sector & investors invest to hedge risks in other industries.
14. This sector is completely dominated by HLL, ITC, Colgate, P&G etc.
15. These are solid companies & give good long term stable returns.
***SHORT TERM TRENDS
1. Market trend has not yet emerged but there is a slight bias to fall..
2. Overall the valuations are high and hence it is wise to continue to hold cash and wait for a clear trend to emerge.
3. Market likely to see fluctuations rapidly on a day to day basis. Watch for signs of a crash.
4. The influence of day traders (buying and selling on the same day) is clearly visible. This is likely to be a dangerous game
5. Software and Cement Industries should be watched very carefully.
6. The quarterly results of companies are likely to be good and individual shares may run up before the results..
7. The NASDAQ seems to be poised at cross roads & any rise will propel Indian software shares sharply upwards.
8. Old economy stocks to show steady rise. FMCG to regain its shine.
***LONG TERM TRENDS
1. The long term trend is downwards, watch out for steep corrections.
2. The SENSEX and NIFTY are giving a false picture. It is wiser to look at all the shares as a whole basket and compare are going up or down every day.
3. Many of the time tested Blue Chips may fall. Wait for them to bottom out and start rising before buying.
4. Sell steadily till an upward trend emerges. this may take a long time
5. Book profits specially in all B1 and B2 group shares if you haven't done so already.It is dangerous to continue to hold them.
***TIPS
1. Listen to all tips and rumours but do not take action on any of them. Write them down date wise and look at them after a month. More often than not you will feel happy you did not act.
2. Keep close watch on Pharmaceutical, Biotechnology, Textile Construction Engineering and Cement companies.
3. W#atch old favourites- Blue Chips like RELIANCE, HINDUSTAN LEVER, L&T, GRASIM,
4. INFOSYS, WIPRO, HCL TECHNOLOGIES and SATYAM COMPUTERS.
***FII ACTIVITY (Activity of Foreign Financial Institutions)
1. Foreign Financial Institutions (FII) have started selling.
2. FIIs are bullish over the long term but they seem to have learned a few tricks from the Dalal Street Punters.
***FI ACTIVITY (Activity of Indian Financial Institutions)
1. No fixed pattern can be discerned from the activities of the Indian Financial institutions.
2. Despite having a predominant position as far as investments and muscle power are concerned they seem to prefer to play second fiddle. Otherwise there is no reason why a few FIIs and Punters could move such a large market at will. This they do because they know they will get away with it.
3. Incompetence or vested interests may be considered as a reason.
4. They are likely to follow the Government in most matters
***INVESTOR EDUCATION CAPSULE
1. The aim of preparing this capsule is to train the small investor to take rational decisions based on information collected from every possible source with the clear understanding that EQUITY MARKETS ARE NOT TO BE SEEN AS GAMBLING DENS but a collection of KNOWLEDGEABLE, COOL HEADED, SKILLFUL PEOPLE WHO TAKE CALCULATED RISKS AND UNDERSTAND THE IMPORTANCE OF CONTROLLING AND MASTERING THE EMOTIONS OF FEAR, HOPE & GREED.
2. This capsule is being scientifically designed to cater to the needs of a "PURE NOVICE" and aims to gradually guide him along to achieve an experts understanding of not only INDIAN MARKETS but also GLOBAL and REGIONAL MARKETS as we believe that the Indian Markets have already achieved integration with Global Markets.
***NRI / FOREIGN INVESTOR GUIDE
1. THE NRIs have special needs and requirements. We are preparing a special training capsule to train them so that the hard earned money that they send home can be deployed profitably to cater to their old age and pension needs. More than this the money they send to India should be used to help India develop rapidly to eradicate poverty.
THE FOLLOWING FACTORS HAVE ENHANCED ATTRACTIVENESS OF INDIAN STOCK MARKETS:-
# THE EXPIRY OF FERA.
# CHANGE IN GOVERNMENT POLICY ALLOWING 100% MNC subsidaries.
# REMOVAL OF TEXTILE QUOTAs AND NEW PATENT LAWS.
# OPENING UP OF VARIOUS SECTORS TO FOREIGN INVESTMENT.
# SOPs FOR VENTURE CAPITALISTS..
2. ONLINE TRADING, DEMATERIALIZATION OF SHARES AND CONCESSIONS/REMOVAL OF TAX ON GIFTS TO BLOOD RELATIONS HAVE MADE IT POSSIBLE FOR INVESTMENTS BY NRIs TO BE HASSLE FREE.
3. WE SHALL BE SHORTLY PROVIDING A COMPLETE SERVICE FOR HASSLE FREE MANAGEMENT OF PORTFOLIOS WITHOUT THE USUAL RISKS OF STEALING OF SHARES, DEFRAUDING etc.
For details write to our Chief Analyst:-
Lt. Colonel John Chenetra MBA (Pune University)
(Portfolio Manager with 20 years experience - General Manager at Unity Infraprojects Ltd),
Contact Details
E mail jcjohn24111955@hotmail.com
Mobile +91 9870037383
For Investment advice e-mail at :- jcjohn24111955@hotmail.com
***PERFORMANCE OF PAST RECOMMENDATIONS
The record of the performance of all the shares recommended by us is almost unbelievably good. We must admit that we ourselves sold out our "Model Token Portfolio" prematurely as we strictly followed the rules we have recommended in "STRATEGY". Hence we did not actually achieve the full potential.
We do not regret this at all.
The thumb rule is "IT IS BETTER TO BE SAFE THAN SORRY"
We must also admit that we were lucky we started when the markets had fallen to very low levels in 1998 and since then we have seen 3 major "Bull Runs"(High Levels of the SENSEX). This does not happen all the time.
But more important than the good luck we had is the fact by following the rules and strategy we laid down for ourselves we managed to buy into the markets at low levels (not the lowest) and sold at high levels (Not the highest). This means WE MADE EXCELLENT PROFITS and NOT MAXIMUM PROFITS. This is one lesson which every "Small Investor" must learn as soon as possible.
NOTE :-You should note that most small investors have made losses since 1998 because they acted on rumours and tips and entered when the markets were high and every was talking about it and again acted in panic on rumours and tips when every one was predicting doom and sold when the market was low.
that all the recommendations were followed. Hence this gives the percentage appreciation of the portfolio of an investor who started investing in 1998 and has continued to participate till date. The overall return achieved over these years is an unbelievable 834%.
***IDEAS
• Will the Prime Minister and Finance Minister be forced to go slow on reforms ??
• Will the UPA Govt become unstable with the struggle in West Bengal and Kerala where the Congress and Communists are direct rivals in elections ???
• When will the next stock market scam break out???
• Will FIIs funds continue to flow into India.???
• When will hedge funds move out of India ?? Will this create havoc ???
• Will there be another major earthquake or tsunami or other natural calamity???
• How will US deal with North Korea & Iran??? War or Sanctions??
• What shape will Iraq takel ??
• Budget ??
• Will Indo - Pak dispute get worse or will it be resolved.???
• Will there be another 9/11 type of strike by Al Quida ???
• Will a terrorist group get hold and use a nuclear / biological / chemical weapon???
• Will J&K , Assam & North Eastern States situation get worse ??
• What short term effect and long term of New Products Patents Laws and Removal of quotas on the Indian Pharma and Textile Industries respectively.
• Will Crude Oil and fuel prices rise phenomenally ???
• Will the Dollar strengthen against the rupee or the other way round ???
• DON'T LET ALL THIS RATTLE YOU. WE WILL MAKE MONEY IF WE CAN KEEP A COOL HEAD !!!
***EXPERT’S COMMENTS
@ Sell-Regret but you will grow rich.( Book your profits too early) Opposite not true.
@ Select top 5 Blue chips- Buy when SENSEX reaches about 20% above previous years' low-Sell all on overall appreciation of 30%.Repeat every time these conditions occur.
@ When you meet Housewives on Dalal Street- Run for your life !!!
@ Read your News Papers (and Investment Magazines) 3 Months late- You will make more sense- and of course more Money ???
***MUST READ
1. The following reading material is recommended:-
a) Making Money On The Stock Markets by SS Grewal.
b) Stock Market Logic by Lovelock.
c) Quarterly results in Capital Market (magazine)
d) Investor guide in Economic Times (on Mondays)
e) Smart Investor in Business Standard (on Mondays)
f) Survey of Indian Industry ( annual publication by Hindu newspaper)
***TAX TIPS
1. With ZERO Long term capital gains tax Stock Markets have become a MUST for all as bank rate is low and is taxed.
2. Do not delay booking profits by letting the lure for getting advantage of ZERO Long term capital gains tax (by holding share for more than one year). Remember you would be saving tax only marginally as Short Term Capital Gains tax is only 10 % . It is not worth the risk.
3. Invest maximum amount in the account of the member of your family who is in the lowest tax bracket.
4. The capital gains made by a child is clubbed with the income of the parent.
5. Maximum use of savings (including mutual funds & investments under section 88 of Income Tax Act up to a maximum of Rs.70,000) should be made out of the profits you make in the stock markets. This helps you to limit risks also.
6. It is a good idea to take a large housing loan & buy residential property to take advantage of tax benefits on the interest paid & the repayment of capital.
7. Reallocation of invest able funds among family members must be done.
8. Booking of capital losses to get rid of weak stocks held in your portfolio is a good idea as it offsets capital gains.
***ABOUT ISA (indiashareanalysis com)
India Share Analysis is a free investment and personal finance site set up in 1998 by a team of eminent professionals lead by Lt Colonel John Chenetra (MBA) - General Manager - Unity Infraprojects Ltd. All team members have over 20 years experience in Portfolio Management. The research team consists of a pool of ten well known Portfolio Analysts, Chartered Accountants and finance professionals.
This site is prepared WITHOUT THE DESIRE FOR ANY PERSONAL GAIN for any of our team members.
The SOLE AIM is to PREVENT LOSSES TO THE SMALL INVESTOR because of the lack of good advice and correct information.
The software support is provided FREE OF COST to us by SPARK SOFTWARE GROUP owned solely by its Chairman & Managing Director - Lt Colonel John Chenetra who is also our "CHIEF PATRON"
Spark Software has also been registered as 100% EOU (Export Oriented Unit) in the Software Technology Park of India located in the Millennium Business Park , New Bombay. Spark Software is a market leader in Techno Fundamental Decision Support Systems.
***MODEL PORTFOLIO
(We presently don't hold any shares as we have completely booked profits as recommended in the "Rules for Investing" in "Strategy". We shall wait patiently for the SENSEX to fall to the 3 year average of 7813 before we start buying in small lots as again suggest in "STRATEGY". Watch us as we build it steadily in future. You may follow us if you like.
PORTFOLIO
Lot1 Lot2 Lot3 Lot4 Lot5 Total
Name No / P No / P No / P No / P No / P No / P
ONGC
Reliance
Indian Oil
HLL
ITC
Nestle
Tata Seel
SAIL
Tata Motors
M & M
Bajaj Auto
Hero Honda
Glaxo
Ranbaxy
Dr Reddys
Cipla
GAIL
Infosys
Wipro
TCS
Satyam
BHEL
Tata Power
Reliance Energy
SBI
ICICI
HDFC Bank
L & T
Hindalco
Indian Rayons
Arvind Mills
Balrampur Chinni
Grasim
Gujarat Ambuja
Ultratech
ACC
Ashok Leyland
Aventis Pharma
Balaji Telefilm
Bharti Tele
Colgate
Digital Global
Finolex Cables
Global Trust
GTL
Guj Gas
HCL Tech
HDFC
HDFC Bank
HFCL
Hind Oil
Hinduja TMT
ICICI Bank
Infosys
IPCL
ITI
Mastek
Neyveli
NIIT
P and G
Padmalaya Tele
Polaris
Rolta
Shipping Corp
Silverline
Sonata
Tata Chemicals
Tata Elxsi
Videocon Int
Birla Corp
ETC Networks
FAG Bearings
Greaves
Micro Inks
iGATE
Ispat
Jyoti Structure
Madras Fert
Mahavir Spinnin
Morepen Lab
Orient Info
PSL
Rallis India
Rama Newsprint
Avaya GlobalCon
United Brewerie
Voltas
Welspun Guj
Godrej Foods
Centurion Bank
Varun Shipping
IndraprasthaGas
MRPL
ABB
Container Corp
Glenmark
Mah and Mah
Maruti Udyog
Moser Baer
Sun Pharma
Chambal Fert
Cholamandalam
Ashok Ley Fin
Blue Star
Deepak Fert
Coromandel Fert
Kochi Refin
SRF
Tube Investment
Andhra Bank
Carborundum
Bank of India
Madras Petro
TRF
IVRCL Infras
INDIA’s GROWTH STORY
The Indian equity market has come a long way. Just to cite an example – it crossed the Dow Jones (DJIA) index levels on March 29, in intra-day trades, the first time in over 10 years. Comparing the sensex to the Dow is itself a significant achievement, since the DJIA is the best-known market indicator in the world.
In the past three months, investors have seen returns of 25% from the overall market and a few sectors have even delivered nearly 50% returns (see table 1). The underlying statement is that the Indian stock market is definitely quite buoyant, but a few questions have started popping up on its continued sustenance.
Some market players have even started going underweight on India. Let’s take a look at some of the key factors that help the Indian equity market thrive and analyse weak links in those factors, if any.
Long-Term Growth Story: India’s long-term growth story remains intact. No other economy in the world, not even China, threatens to grow at an aggressive growth rate of 8% YoY (year-on-year) over the next few years.
If estimates from research firms are considered, India may grow significantly over the next couple of decades, when several Asian economies in the world are expected to slow down. This is a big positive for the Indian equity market. Already, India has started showing its mettle.
India’s contribution to the world GDP has started to increase significantly. The Indian story is a domestic-led consumption one. Infrastructure is top priority and privatisation programmes (airports, ports, etc) are running full throttle. And India Inc is marching ahead - Reliance is expanding its refinery and entering into retail, developing a new city with 32,000 acres at a cost of Rs 25,000 crore.
ITC is making rapid progress in hotels, paper and agri-commodities business, apart from tobacco-related businesses. Indian pharma companies are buying out big international pharma companies. HLL’s fortunes are changing after the pickup in the retail sector, Bajaj Auto is setting up new facilities, L&T’s order book is burgeoning and TCS, Infosys and Wipro continue to dominate the IT sector in the world.
There’s a question which remains unanswered though — is the sensex overvalued, at this point in time? Not really, if you take a long-term view on the Indian economy. The question of a hefty premium that Indian market continues to get continues to boggle many investors.
The benchmark index is currently quoting at more than 20x times the historical price-earnings ratio (P/E). However, ex-oil, the P/E multiple shoots to around 24 times. This is based on historical data. The forward premiums are 17 and 14 times FY07 and FY08 respectively.
In comparison, almost all emerging markets, are quoting at forward premiums of less than 10. The trailing premiums are also less than 20x. But according to various analysts, India deserves that premium for a few reasons. First and foremost, India is the only economy that will continue to grow aggressively at 8%-plus for several years.
Secondly, the Indian growth story is domestically-inclined (infrastructure, rural development, retail spending, etc), and as such, external factors have little impact on the growth prospects. Thirdly, India provides geo-political stability and so concerns are addressed quickly.
Fourthly, India’s economy is increasingly becoming transparent. Fifthly, India Inc, as a whole, seems to enjoy more credibility than its Asian counterparts. Lastly, India Inc has started to show more confidence in itself and started to expand capacities. Foreign institutional investors (FIIs) and Liquidity: This brings us to the liquidity question, which keeps giving sleepless nights to many market players. The three-year bull run in the Indian equity market is clearly on the back of huge foreign institutional investors (FIIs) inflows.
Since the beginning of this bull run in late April ’03, FIIs have pumped in a record $30bn-plus (Rs 1,30,000 crore-plus) into Indian equities. Are they showing signs of slowing down? Not yet. In fact, FIIs have continued to pump money into the Indian equity market with increased YoY momentum. FII inflows in Indian equities have risen 25% YoY.
Even during the first three months of the current calendar year, FII inflows are not showing any signs of down. FIIs had bought Indian equities worth $3.6bn (Rs 16,000 crore) till the last week of March, in line with their buying during the first three months of every year since ’04.
Will the FIIs move out? FIIs want better returns on their investments and so if other economies don’t grow as fast as India, foreign funds will definitely find their way here. Here’s another quick reference check. The number of registered FIIs in India has consistently moved up from 540 in ’04 to 686 in ’05 to 882 during the current year.
This shows the huge interest that FIIs have here. New FIIs will bring in new money into the Indian market, indicating the increasing depth of money. So, even if a section of FIIs become bearish on India, a few may still remain bullish. There are two instances which prove the above.
First, when most Western FIIs took a call to cut positions in India late last year, the Japanese went bullish on India pushing the market up further. As such, the western FIIs had to pay the price for going naked short on India. Another instance was the recent March phenomenon.
A few FIIs went short in the derivatives market in March on the back of post Budget weakness. The Indian market has seen profit booking in March for the previous five years. But the market is almost on the verge of ending positive for the month, forcing these FIIs to cut their short positions.
Another point of concern for a few market players is the rising interest rates in the US and around the world. The Fed raised the interest rate in the US by another 25 basis points (0.25%) to 4.75 during the current week. There are estimates that US interest rates will rise by another 75 basis points (0.75%) during the current year to settle at 5.5%.
Will this dry down liquidity in the Indian market as defensive money starts to flow back into interest earning securities? The answer is positive, but the fact is that much of this defensive money has tasted blood. And at least some part of this will continue to be ploughed into the equity market.
Retail Interest: Small retail investors — perhaps the weakest link in the bull run so far — are entering big time into the equity market. This is clearly evident from the collections made by new schemes by various mutual funds. Some of the recent NFOs have cumulatively collected Rs 10,000 crore upwards.
Part of this money is definitely retail, which will find its way into the equity market, sooner rather than later. This will pump up the liquidity further. In the early ’90s, contribution of the household sector to equities was nearly 12-15% of the savings.
But lately, the Indian household sector contributes a meagre 1.8% of their savings towards equity and equity-related assets. But this seems to be changing for the better now. Next, the government intends to foray part of the pension money into equities.
According to estimates, even if the government decides to invest only 5% of the pension reserves into equities, close to Rs 30,000 crore will find its way into the Indian equity market.
posted by COMMUNICATIONSSIMPLIFIED | 12:48 AM
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