The markets survived the IIP scare and closed on a high. A smart surge in the last hour helped indices tide over intense volatility. Nifty closed at 5,013 up 30 points, while the Sensex shut shop at 16,861 up 124 points.
Dipan Mehta, Member, BSE and NSE said investors are expecting the market to retest its lows based on possibilities of a US recession, oil touching USD 150 per barrel and other threats that exist in the global economy. He added that the chances of positive developments also exist in the market, which could take the market further up from these levels.
“All talk of market retesting its low is news driven and people expecting the market to touch new lows are basically betting on occurrence of some negative event which may or may not occur. It could be the US recession or oil touching USD 150 and many other threats which exist in the global economy at this point of time. If one is looking at the market retesting the earlier lows of the year, one is expecting some adverse event, which may or may not take place. At the same time, the chances of positive developments also exist in the market, which could take the market further up from these levels. As of now, its dependent on the news flow which we see coming over the next 2-3 months or so,” he said.
Technical Analyst Rahul Mohindar said the Nifty has moved from 4,890, which is a very interesting point or the trend decider level. "Above that, we have held those levels as well. We saw a good 4-5 day correction and traders are once again seeing an upside opportunity. Going forward, unless 17,100 crosses, I won’t enter the momentum and kind of an upside rhythm that we are really looking forward to. At the same time, I would recommend holding the Nifty long with a stop loss close to about 4,890."
Divya Mathur, Investment Director-Global Emerging Markets, SWIP, said the markets could face headwinds in the near-term though they see long-term value in India. "India is suffering from the same problems as some other Asian countries. There is the whole issue of inflation both on soft commodities, base metals, and energy. Not all of those is India specific, but once we can clear those, then the opportunities will be better for the Indian market. However, the government really needs to address those. We at SWIP are long-term investors and we see a lot of long-term value in India."
He feels sectors steel, cement and IT could go back to test the lows that it saw earlier this year. "However, we are bullish on stocks that will benefit from the domestic infrastructure story. It is a long-term theme and not a three-six months theme. So, we will be looking at companies that are exposed to infrastructure, be it on the power, or construction side. We will be taking this opportunity to buy the best-in-class companies whose valuations have come down to more attractive levels."
Technical Analyst Ashwani Gujral said today’s action is hinting at more pressure on the downside. "Going short would be advisable if there are any attempts over 5,000. Shorting at supports is never a bright idea because you will get such a sharp pull back that your stocks may get taken out because of any reason global or otherwise. If you get some kind of gap up above 5,000, fresh shorts should be initiated only at that point."
Source: Moneycontrol.com
Monday, May 12, 2008
India best bet from a 3-5 yr perspective
Jordan Kotick, Head-Global Technical Strategy, Barclays Capital, said there is nothing exciting about India. "Other markets look more attractive. The Nifty is likely to be in a plus or minus 200-points range in the near-term and in a consolidation building phase for the short-term."
However, he feels the markets are likely to go up to new highs. "India is one of the best looking market from a 3-5 year perspective. But investors need to be a little careful."
Kotick expects the recent US stock market outperformance to continue. He feels the rise in crude is stronger than expected. "It can top around USD 130 per barrel in the near-term."
Excerpts from CNBC-TV18's exclusive interview with Jordan Kotick:
Q: Where is this market headed in the slightly shorter-term because calls are getting hoarse again about the market testing the lows it made earlier this year?
A: It’s going to be pretty important, which part of the world we are talking about. The Sensex and Nifty in India is a different story than what we are seeing in other parts of Latin America or even parts of Asia.
So, when you come to the Indian stock markets, overall, there is nothing really exciting here. The market is oscillating in a range. It is probably going to be in that range for some time, unlike other parts of the world, which have much more bullish potential.
There was a time when India was in the lead. That is not the time now. That probably won’t be the case at least back until 2009.
Q: How wide a range would you put to the market now on the Sensex and Nifty in specific?
A: If you look at the Nifty, you could probably put on about 200 points on either side of it around the 5,000 area and not really break either one of that. There would be a similar story, may be a bit more expansive, maybe 7-10% around the Sensex and look for the market to oscillate. So, you can trade the range within those percentage points. You can’t look for the big moves.
The trade you had in India last year or even the year before, that trade is done now and the bull market is done. So, it is a question of how this consolidation is going to unfold and what it is likely to do is chop off a lot of people. So, if you expect a range, you will be well positioned. But if you look for the big bull move or a big bear move, you could lose a lot of money.
Q: Are you surprised by the strength you have seen on the Dow and S&P or are in the camp that believes it was a bit of a succour rally?
A: No, we are certainly not in the camp of the succour rally. We are going to look at things more differently. We don’t think that the economy leads the stock market. We think the stock market leads the economy and the stock markets in America bottomed a couple of months ago. So, we actually like the upside.
The US stock market has been leading the way in the last 4-6 months. We expect that to continue, which is quite different from the last couple of years where the US wasn’t leading at all. So, it is not just the Dow and the S&P. In America, it is the broad market that is the real star-the New York Stock Exchange. We are seeing a lot of positive developments.
The world is very one-sided right now. It seems that everybody has some degree of bearishness and as a good contrarian when the market is that one-sided, we want to look high. Let’s not forget, the stock market has been rallying now not for a month or five weeks, but for many months now and people are just starting to realise that. So, there is further upside this summer.
Q: What kind of chances would you give to the event that the Dow actually makes a new high for itself?
A: No, we are not going that far. We believe that the broad markets will retest their highs. It depends on the segment, something like the Dow Jones Transportation, that’s almost at a new high. But for something like the S&P or the Dow, we are looking for the market to get near its high and basically stay in a rangebound environment.
But for now, we are going to look for it to get to a new high. But be careful, some parts of the US are going to new highs. Some averages around the world are already at all-time new highs like Brazil. But you have to be careful what market you are talking about because the story can be very different.
Q: Where would you say crude is heading?
A: It has been without a doubt a dramatic move. Crude has rallied this year by about 45%. Just last year, crude was actually up 100%. Two years ago, crude was up 60%. So, it has been strong and it has just gotten there very quickly.
This is not a crude oil story; this is an energy story and about heating oil and natural gas. As long as energy is doing well, we expect crude to continue to the upside, probably on for the next couple of months.
Q: Over the medium-term, what is the Sensex displaying to you? Do you think the base-case scenario should be a rangebound year for us or we might see more weakness or conversely more strength by the time we get to the end of the year?
A: Of all those stock markets around the world that we follow, over the next 3-5 years, the Sensex is one of the best looking markets for the next three to five years. It is a very good-looking stock market. But short-term you are in a big base building stage. Best-case scenario on the Sensex is you could put on 1,000-1,200 points until the end of the year and if you can end the year anywhere flat. Don’t forget, you have come 30% from the high. So, there is a lot of ground to make up. Don’t be too impatient with the Sensex, 2009 will be a different year. Let’s just keep it stable this year. The best I think you are going to see this year is a flat Sensex.
Source: Moneycontrol.com
However, he feels the markets are likely to go up to new highs. "India is one of the best looking market from a 3-5 year perspective. But investors need to be a little careful."
Kotick expects the recent US stock market outperformance to continue. He feels the rise in crude is stronger than expected. "It can top around USD 130 per barrel in the near-term."
Excerpts from CNBC-TV18's exclusive interview with Jordan Kotick:
Q: Where is this market headed in the slightly shorter-term because calls are getting hoarse again about the market testing the lows it made earlier this year?
A: It’s going to be pretty important, which part of the world we are talking about. The Sensex and Nifty in India is a different story than what we are seeing in other parts of Latin America or even parts of Asia.
So, when you come to the Indian stock markets, overall, there is nothing really exciting here. The market is oscillating in a range. It is probably going to be in that range for some time, unlike other parts of the world, which have much more bullish potential.
There was a time when India was in the lead. That is not the time now. That probably won’t be the case at least back until 2009.
Q: How wide a range would you put to the market now on the Sensex and Nifty in specific?
A: If you look at the Nifty, you could probably put on about 200 points on either side of it around the 5,000 area and not really break either one of that. There would be a similar story, may be a bit more expansive, maybe 7-10% around the Sensex and look for the market to oscillate. So, you can trade the range within those percentage points. You can’t look for the big moves.
The trade you had in India last year or even the year before, that trade is done now and the bull market is done. So, it is a question of how this consolidation is going to unfold and what it is likely to do is chop off a lot of people. So, if you expect a range, you will be well positioned. But if you look for the big bull move or a big bear move, you could lose a lot of money.
Q: Are you surprised by the strength you have seen on the Dow and S&P or are in the camp that believes it was a bit of a succour rally?
A: No, we are certainly not in the camp of the succour rally. We are going to look at things more differently. We don’t think that the economy leads the stock market. We think the stock market leads the economy and the stock markets in America bottomed a couple of months ago. So, we actually like the upside.
The US stock market has been leading the way in the last 4-6 months. We expect that to continue, which is quite different from the last couple of years where the US wasn’t leading at all. So, it is not just the Dow and the S&P. In America, it is the broad market that is the real star-the New York Stock Exchange. We are seeing a lot of positive developments.
The world is very one-sided right now. It seems that everybody has some degree of bearishness and as a good contrarian when the market is that one-sided, we want to look high. Let’s not forget, the stock market has been rallying now not for a month or five weeks, but for many months now and people are just starting to realise that. So, there is further upside this summer.
Q: What kind of chances would you give to the event that the Dow actually makes a new high for itself?
A: No, we are not going that far. We believe that the broad markets will retest their highs. It depends on the segment, something like the Dow Jones Transportation, that’s almost at a new high. But for something like the S&P or the Dow, we are looking for the market to get near its high and basically stay in a rangebound environment.
But for now, we are going to look for it to get to a new high. But be careful, some parts of the US are going to new highs. Some averages around the world are already at all-time new highs like Brazil. But you have to be careful what market you are talking about because the story can be very different.
Q: Where would you say crude is heading?
A: It has been without a doubt a dramatic move. Crude has rallied this year by about 45%. Just last year, crude was actually up 100%. Two years ago, crude was up 60%. So, it has been strong and it has just gotten there very quickly.
This is not a crude oil story; this is an energy story and about heating oil and natural gas. As long as energy is doing well, we expect crude to continue to the upside, probably on for the next couple of months.
Q: Over the medium-term, what is the Sensex displaying to you? Do you think the base-case scenario should be a rangebound year for us or we might see more weakness or conversely more strength by the time we get to the end of the year?
A: Of all those stock markets around the world that we follow, over the next 3-5 years, the Sensex is one of the best looking markets for the next three to five years. It is a very good-looking stock market. But short-term you are in a big base building stage. Best-case scenario on the Sensex is you could put on 1,000-1,200 points until the end of the year and if you can end the year anywhere flat. Don’t forget, you have come 30% from the high. So, there is a lot of ground to make up. Don’t be too impatient with the Sensex, 2009 will be a different year. Let’s just keep it stable this year. The best I think you are going to see this year is a flat Sensex.
Source: Moneycontrol.com
Sunday, May 11, 2008
Markets likely to recover by year-end
Robert Parker, Vice Chairman, Credit Suisse Asset Management, said the markets will recover by year-end, but will be volatile in May-June. He told CNBC-TV18, "The markets went from extremely oversold to overbought last week. Oil has crossed USD 120 per barrel, which has an inverse correlation with markets. Global Central Banks have indicated that more rate cuts may not help."
According to Parker, problems in the US financial markets are not over. "Growth in the US was negative, if we discount 0.6% inventory growth." He feels crude is also a worry.
The strengthening rupee was causing some damage to the Indian economy, he added.
Excerpts from CNBC-TV18's exclusive interview with Robert Parker:
Q: What’s your feeling, its not just been an India specific rally, its been a pretty much a strong global pullback, do you think the global markets now need to ease off a bit in the term?
Parker: If we go back to one week ago, I would say there are 3 danger points that we identified one week ago. First of all the global equity market after the rally of the 3rd week of March until a week ago, clearly technically the markets have gone from extremely oversold during mid-March to a more overbought position a week ago. The second factor has been the uptrend in commodity prices and notably the continued uptrend in the oil prices which earlier today has been trying to test USD 125/bbl and I would highlight the end of the current market, there is a near perfect inverse co-relation between the oil price and the global equity markets. The third factor which has not been much talked about but I do think over the past few weeks we have had a clear signal from the world’s Central Banks, notably from the European Central Bank and the Federal Reserve that the markets can not rely on further cuts in interest rates and associated with that of course is the co-relation with the bond market yields and the equity markets.
From late March until about a week ago we have had quite a large back up in the bond market yields particularly the back up in the 2 year treasury yields and that relationship meant that the equity markets in recent days have become vulnerable.
Q: Two issues if you look forward a few weeks from now firstly how would you map the Dow which has had a great rally and is just eased off a little bit in the last few days and the dollar, which is in the midst of a seeming rebound?
Parker: I think we are going to see a big divergence in market movements over the balance of May and going into early June and the rest of the year. I can put forward an analysis saying that the market will recover in the second half of the year.
However during May and June I think the market volatility will increase and I think that risk factors which we were talking about earlier for equity market and the dollar will weigh on those markets negatively. In terms of the dollar, we have obviously seen up until two days ago a stronger dollar, the euro against the dollar has pulled back from around 1.6, at one stage we were close to 1.53 and likewise on the Yen if we go back a month, the Yen was trading at 96-98 on the US dollar and then we had a pullback to close to 106.
In terms of trading today on the Foreign Exchange markets the bias on the dollar is somewhat weak and I think that will continue. Over the next month the Yen will test 100 again against the US dollar, it will probably fail that level but certainly we at these levels have gone short on the dollar again. On the dollar-euro I think we could move back to probably 1.57-1.58.
On the equity markets and notably the American equity market, I think the key factor to think about is that after 0.6% annualized GDP growth in the first quarter that was largely due to inventory accumulation, if you strip that out then the growth in America was negative in the first quarter. In the second quarter there is a high probability that the American economy will contract. I think we could have further sub prime problems being announced not from the banks but from the insurance companies.
So a weak economic environment, oil prices short-term staying high until we get a correction down on the oil prices and I think the unwinding of what was last week and in the beginning of this week somewhat overbought equity market. A month ago we were positive on markets but I’m afraid that we are the opposite now taking a one month to 6 weeks time horizon.
Q: From a global investor’s perspective are people getting a little skittish about Indian macros inflation at more than 7.5%, the rupee losses 4% suddenly versus the dollar in just about a week’s time, the deficit probably seeming to expand quite sharply because of oil prices not being passed down etc. Are global investors getting a bit edgy on the macro’s here?
Parkar: My clear answer to that is no. What we have seen in the last week on the Foreign Exchange markets should not be looked at necessarily in an Indian context but what is happening to the emerging market currency is generally. Coming back to my earlier point about the change in Central Bank policies over the last few weeks, with now Central banks largely on hold in terms of the interest rate action that has been dollar supportive and where we have had big hot money capital flows not just in the last month but over the last 6 months obviously has been into higher interest rate emerging market currencies.
What we have seen over the past few weeks and this will probably continue in the near-term is large whether its hedge funds or institutional investors, who have been long on the emerging market currencies and they have been taking profits.
I would also like to highlight to other countries one is China, where there is heavy evidence that the strong appreciation in the Chinese Renminbi (RMB) seen over the last year and a half with the move from 8.3 to 7 against the US dollar. I think there is lot of evidence now that we could have a period of 6 months or longer of the Chinese RMB stabilizing between 6.9and 7. Another country which has much more significant current account deficit than India is Turkey; there we have also seen quite heavy selling on the currency. Another one worth mentioning is South Africa, where there is again heavy selling on the currency.
In term of the macro economic impact, let’s not forget the one of the reason that we were quite cautious on the Indian equity market for the last 6 months was the impact of the strength of the Indian rupee. I would argue that if we go back one month, we are reaching a situation where the strength of the Indian rupee was causing some damage to the Indian economy. One has got the balance right between inflation, the strength or weakness of the currency and the current account deficit but I would argue that probably the strength of the currency a month ago was having an adverse impact.
Q: Sum up for us the next 10% move in equities in India and in emerging markets is up or down in your eyes?
Parker: Since the end of June last year, global banks have written off USD 330 billion and we are in the end game for bank write offs, although we may have some problems in the US insurance industry and in terms of capital raising, banks have raised over the past 6 months USD 220 billion. We have gone in the banking system from a situation which was exceptionally fragile at the end of last year and the first quarter of this year, to actually a situation where the bank capitalization is certainly nearly back to adequate levels.
To come back to your question, I don’t think we are going to have a 10% move down over May and early June. I however do think, the Indian and global markets are going to trade to the downside where the downward move is going to be modest and we are going to be forming a base in equity markets as we go into the third quarter. I think an improvement in terms of the commodity price outlook ie. the oil prices down plus an improvement in the US economy as it starts to see a better growth prospects. Then we actually could see in the third quarter much better equity market prospects.
Source: Moneycontrol.com
According to Parker, problems in the US financial markets are not over. "Growth in the US was negative, if we discount 0.6% inventory growth." He feels crude is also a worry.
The strengthening rupee was causing some damage to the Indian economy, he added.
Excerpts from CNBC-TV18's exclusive interview with Robert Parker:
Q: What’s your feeling, its not just been an India specific rally, its been a pretty much a strong global pullback, do you think the global markets now need to ease off a bit in the term?
Parker: If we go back to one week ago, I would say there are 3 danger points that we identified one week ago. First of all the global equity market after the rally of the 3rd week of March until a week ago, clearly technically the markets have gone from extremely oversold during mid-March to a more overbought position a week ago. The second factor has been the uptrend in commodity prices and notably the continued uptrend in the oil prices which earlier today has been trying to test USD 125/bbl and I would highlight the end of the current market, there is a near perfect inverse co-relation between the oil price and the global equity markets. The third factor which has not been much talked about but I do think over the past few weeks we have had a clear signal from the world’s Central Banks, notably from the European Central Bank and the Federal Reserve that the markets can not rely on further cuts in interest rates and associated with that of course is the co-relation with the bond market yields and the equity markets.
From late March until about a week ago we have had quite a large back up in the bond market yields particularly the back up in the 2 year treasury yields and that relationship meant that the equity markets in recent days have become vulnerable.
Q: Two issues if you look forward a few weeks from now firstly how would you map the Dow which has had a great rally and is just eased off a little bit in the last few days and the dollar, which is in the midst of a seeming rebound?
Parker: I think we are going to see a big divergence in market movements over the balance of May and going into early June and the rest of the year. I can put forward an analysis saying that the market will recover in the second half of the year.
However during May and June I think the market volatility will increase and I think that risk factors which we were talking about earlier for equity market and the dollar will weigh on those markets negatively. In terms of the dollar, we have obviously seen up until two days ago a stronger dollar, the euro against the dollar has pulled back from around 1.6, at one stage we were close to 1.53 and likewise on the Yen if we go back a month, the Yen was trading at 96-98 on the US dollar and then we had a pullback to close to 106.
In terms of trading today on the Foreign Exchange markets the bias on the dollar is somewhat weak and I think that will continue. Over the next month the Yen will test 100 again against the US dollar, it will probably fail that level but certainly we at these levels have gone short on the dollar again. On the dollar-euro I think we could move back to probably 1.57-1.58.
On the equity markets and notably the American equity market, I think the key factor to think about is that after 0.6% annualized GDP growth in the first quarter that was largely due to inventory accumulation, if you strip that out then the growth in America was negative in the first quarter. In the second quarter there is a high probability that the American economy will contract. I think we could have further sub prime problems being announced not from the banks but from the insurance companies.
So a weak economic environment, oil prices short-term staying high until we get a correction down on the oil prices and I think the unwinding of what was last week and in the beginning of this week somewhat overbought equity market. A month ago we were positive on markets but I’m afraid that we are the opposite now taking a one month to 6 weeks time horizon.
Q: From a global investor’s perspective are people getting a little skittish about Indian macros inflation at more than 7.5%, the rupee losses 4% suddenly versus the dollar in just about a week’s time, the deficit probably seeming to expand quite sharply because of oil prices not being passed down etc. Are global investors getting a bit edgy on the macro’s here?
Parkar: My clear answer to that is no. What we have seen in the last week on the Foreign Exchange markets should not be looked at necessarily in an Indian context but what is happening to the emerging market currency is generally. Coming back to my earlier point about the change in Central Bank policies over the last few weeks, with now Central banks largely on hold in terms of the interest rate action that has been dollar supportive and where we have had big hot money capital flows not just in the last month but over the last 6 months obviously has been into higher interest rate emerging market currencies.
What we have seen over the past few weeks and this will probably continue in the near-term is large whether its hedge funds or institutional investors, who have been long on the emerging market currencies and they have been taking profits.
I would also like to highlight to other countries one is China, where there is heavy evidence that the strong appreciation in the Chinese Renminbi (RMB) seen over the last year and a half with the move from 8.3 to 7 against the US dollar. I think there is lot of evidence now that we could have a period of 6 months or longer of the Chinese RMB stabilizing between 6.9and 7. Another country which has much more significant current account deficit than India is Turkey; there we have also seen quite heavy selling on the currency. Another one worth mentioning is South Africa, where there is again heavy selling on the currency.
In term of the macro economic impact, let’s not forget the one of the reason that we were quite cautious on the Indian equity market for the last 6 months was the impact of the strength of the Indian rupee. I would argue that if we go back one month, we are reaching a situation where the strength of the Indian rupee was causing some damage to the Indian economy. One has got the balance right between inflation, the strength or weakness of the currency and the current account deficit but I would argue that probably the strength of the currency a month ago was having an adverse impact.
Q: Sum up for us the next 10% move in equities in India and in emerging markets is up or down in your eyes?
Parker: Since the end of June last year, global banks have written off USD 330 billion and we are in the end game for bank write offs, although we may have some problems in the US insurance industry and in terms of capital raising, banks have raised over the past 6 months USD 220 billion. We have gone in the banking system from a situation which was exceptionally fragile at the end of last year and the first quarter of this year, to actually a situation where the bank capitalization is certainly nearly back to adequate levels.
To come back to your question, I don’t think we are going to have a 10% move down over May and early June. I however do think, the Indian and global markets are going to trade to the downside where the downward move is going to be modest and we are going to be forming a base in equity markets as we go into the third quarter. I think an improvement in terms of the commodity price outlook ie. the oil prices down plus an improvement in the US economy as it starts to see a better growth prospects. Then we actually could see in the third quarter much better equity market prospects.
Source: Moneycontrol.com
Friday, May 9, 2008
Don't be "tempted" to buy shares. Buy MFs!
t is but natural to be attracted towards equity. The stories – some true and some fictitious – of people having become millionaires overnight, are bound to tempt anyone. But let’s face facts! Equity is not easy money; equity markets are not everyone’s cup of tea.
It’s our hard-earned money, which is at stake. So let’s be very objective about it.
Do we have sufficient capital?
It is plain common sense that a diversified portfolio with say 15-20 stocks is less risky than a concentrated portfolio with say only 3-4 stocks.
However, for a common investor, capital is usually limited. With this limited money supply it will not be possible for him to adequately diversify his portfolio. In such circumstances, MFs offer an alternative to be part of a well-diversified portfolio even with just Rs.100.
Of course, a concentrated portfolio could deliver super-normal returns. But then the risk is also very high. This high-risk high-reward strategy would not be suitable for a vast majority of common investors. It only suits a few select expert investors with very high net-worth.
Secondly, with limited capital it is difficult to buy high-priced shares say Reliance @2500 or Infosys @2000, etc. This forces us to buy low price shares. (Note that we are just talking ‘price’ here. This should not be confused with ‘value’. That is a subject matter for another discussion). Generally high-priced shares will be good stocks and low-priced shares may not be so good stocks. Thus, with limited capital we could end up with a substandard portfolio.
Given the fact that limited capital could mean concentrated and inferior portfolio, MFs may be a more preferable route for those who cannot bring in adequate money for investment.
Do we have sufficient knowledge & expertise?
Ok, let’s be very honest and frank here.
* Do we have more knowledge about companies, economies, markets, etc. than a well-qualified and experienced professional fund manager?
* Can we read the balance sheets as easily as a fund manager and draw right conclusions?
* Can we identify the upcoming sectors? Or those that could face downturn?
* Do we have the soft skills such as risk appetite, intuition, discipline, patience and such other qualities, which distinguish a good manager/investor from a bad manager/investor?
In short, are we smarter than the fund manager?
In most cases, the answer would be ‘No’.
Then tell me why we, as amateurs, should enter the difficult terrain of equity markets, when we have the opportunity to let the best man (and woman) do the job for us?
Do we have sufficient time & resources?
For a moment let’s us assume that we have (a) big money to invest and (b) also a very good understanding of the markets.
But do we have the 3rd important criteria i.e. Time & Resources?
There are more than 6000 listed companies. Some of them are successful, some were successful and some will be successful. We need to buy stocks that will be successful; we need to get out of those whose successful phase is about to end; and we need to hold on to those who are still in the success phase. This timing is very critical for making money.
The problem is that this list keeps changing quite often and it requires continuous research to keep oneself updated. How many of us have the time to read hundreds of annual reports? In fact, how many of us can get hold of all these reports? Moreover, annual reports are not everything? How many of us can visit companies, meet their management, discuss their plans, etc.? What about meeting independent industry experts? How many sectors can we be expert in? Even if we could do all this, can it be done regularly – day after day, year after year?
So who’s better placed to do a good research – a MF with its’ full-fledged research team or we, who are as it is too busy with our own jobs?
Contrary to all this, choosing MFs is a relatively much simpler job. Also, it doesn’t require close monitoring. Thus it becomes the best option for most of us to enjoy the fruits of equity, without having to devote too much time, money and effort.
Source: Moneycontrol.com
It’s our hard-earned money, which is at stake. So let’s be very objective about it.
Do we have sufficient capital?
It is plain common sense that a diversified portfolio with say 15-20 stocks is less risky than a concentrated portfolio with say only 3-4 stocks.
However, for a common investor, capital is usually limited. With this limited money supply it will not be possible for him to adequately diversify his portfolio. In such circumstances, MFs offer an alternative to be part of a well-diversified portfolio even with just Rs.100.
Of course, a concentrated portfolio could deliver super-normal returns. But then the risk is also very high. This high-risk high-reward strategy would not be suitable for a vast majority of common investors. It only suits a few select expert investors with very high net-worth.
Secondly, with limited capital it is difficult to buy high-priced shares say Reliance @2500 or Infosys @2000, etc. This forces us to buy low price shares. (Note that we are just talking ‘price’ here. This should not be confused with ‘value’. That is a subject matter for another discussion). Generally high-priced shares will be good stocks and low-priced shares may not be so good stocks. Thus, with limited capital we could end up with a substandard portfolio.
Given the fact that limited capital could mean concentrated and inferior portfolio, MFs may be a more preferable route for those who cannot bring in adequate money for investment.
Do we have sufficient knowledge & expertise?
Ok, let’s be very honest and frank here.
* Do we have more knowledge about companies, economies, markets, etc. than a well-qualified and experienced professional fund manager?
* Can we read the balance sheets as easily as a fund manager and draw right conclusions?
* Can we identify the upcoming sectors? Or those that could face downturn?
* Do we have the soft skills such as risk appetite, intuition, discipline, patience and such other qualities, which distinguish a good manager/investor from a bad manager/investor?
In short, are we smarter than the fund manager?
In most cases, the answer would be ‘No’.
Then tell me why we, as amateurs, should enter the difficult terrain of equity markets, when we have the opportunity to let the best man (and woman) do the job for us?
Do we have sufficient time & resources?
For a moment let’s us assume that we have (a) big money to invest and (b) also a very good understanding of the markets.
But do we have the 3rd important criteria i.e. Time & Resources?
There are more than 6000 listed companies. Some of them are successful, some were successful and some will be successful. We need to buy stocks that will be successful; we need to get out of those whose successful phase is about to end; and we need to hold on to those who are still in the success phase. This timing is very critical for making money.
The problem is that this list keeps changing quite often and it requires continuous research to keep oneself updated. How many of us have the time to read hundreds of annual reports? In fact, how many of us can get hold of all these reports? Moreover, annual reports are not everything? How many of us can visit companies, meet their management, discuss their plans, etc.? What about meeting independent industry experts? How many sectors can we be expert in? Even if we could do all this, can it be done regularly – day after day, year after year?
So who’s better placed to do a good research – a MF with its’ full-fledged research team or we, who are as it is too busy with our own jobs?
Contrary to all this, choosing MFs is a relatively much simpler job. Also, it doesn’t require close monitoring. Thus it becomes the best option for most of us to enjoy the fruits of equity, without having to devote too much time, money and effort.
Source: Moneycontrol.com
Buy Pratibha Industries, target of Rs 480
PINC Research has maintained its buy rating on Pratibha Industries with a 12-month price target of Rs 480 in its May 8, 2008 research report. "Pratibha Industries Ltd’s (PIL’s) sales doubled to Rs 2.2 billion in Q4FY08. This was on back of a strong order book and increasing contribution from its HSAW pipes division. However, surge in raw material cost/sales by 478 bps led to a slide in OPM to 10.3%. This along with higher depreciation contained net profit growth to 61% at Rs 103 million. PIL’s current order book (core construction business) stands at Rs 20 billoion, with major chunk (60%) being accounted for by Water Management Projects (WMPs). While urban infrastructure projects constitute 32% of the order book, road projects account for the balance."
"At the CMP of Rs 327, PIL trades at a P/E of 8.2x and EV/EBIDTA of 5.9x FY10E earnings. A healthy order book, strong presence in WMPs and revenues from the pipe manufacturing should enable PIL to capitalise on opportunities in the infrastructure sector. We maintain a ‘BUY’ recommendation with a 12-month price target of Rs 480," says PINC research report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
"At the CMP of Rs 327, PIL trades at a P/E of 8.2x and EV/EBIDTA of 5.9x FY10E earnings. A healthy order book, strong presence in WMPs and revenues from the pipe manufacturing should enable PIL to capitalise on opportunities in the infrastructure sector. We maintain a ‘BUY’ recommendation with a 12-month price target of Rs 480," says PINC research report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
Buy Nelcast, target of Rs 230
Emkay Research has maintained its buy rating on Nelcast with target price of Rs 230 in its May 8, 2008 research report. "Nelcast reported 37.2% YoY top line growth to Rs 1139.2 million for quarter ended March 2008 compared to corresponding quarter last year. For FY08, net sales reported growth of 16.6% YoY to Rs 3564.5 million as compared to Rs 3057.6 million in corresponding period last year. The company reported 10.1% YoY growth in EBDITA in Q4FY08 to Rs 127.1 million compared to corresponding quarter last year. For FY08, EBITDA witnessed growth of 18% YoY. Total expenditure witnessed increase of 43.8% YoY during the fourth quarter mainly due to increase in raw material costs and other expenses."
"The stock is currently trading at 4.3x FY09E EPS of Rs 25.6 and 3.7x FY10E EPS of Rs 29.9. It is trading at 2.6x FY09E and 1.9x FY10E EV/EBDITA. We believe these valuations are attractive and offer excellent long term investment opportunity considering its size, past track record, customer profile and its potential to improve its revenues and operating margins going forward. We maintain 'BUY' on the stock with target price of Rs 230," says Emkay's research report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
"The stock is currently trading at 4.3x FY09E EPS of Rs 25.6 and 3.7x FY10E EPS of Rs 29.9. It is trading at 2.6x FY09E and 1.9x FY10E EV/EBDITA. We believe these valuations are attractive and offer excellent long term investment opportunity considering its size, past track record, customer profile and its potential to improve its revenues and operating margins going forward. We maintain 'BUY' on the stock with target price of Rs 230," says Emkay's research report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
Buy Bartronics, tgt Rs 312
Angel Broking has maintained buy rating on Bartronics India with target price of Rs 312 in its May 08, 2008 report. "Bartronics India (BIL) reported an outstanding 495% yoy growth in its 4QFY2008 Top-line. This was a result of impressive growth in its Automatic Identification and Data Capture (AIDC) Solutions business, specifically in the RFID Solutions business, as also contribution from the Smart Cards segment. Apart from this, as may be recalled, BIL had acquired a US company towards early 2008, which contributed Rs 33 crore to Topline. Strong growth in sectors like Retail has led to robust growth in the company’s RFID Solutions business. BIL provides end-to-end solutions in this space, including pilot testing and software integration."
" Going ahead, we expect BIL to record a CAGR growth of 60% in Top-line and 53% in Bottom-line over FY2008-10E. We estimate Margins to be stable to slightly negative. At the CMP, the stock is trading at 7.2x FY2010E EPS. We maintain a Buy on the stock, with a revised 12-month Target Price of Rs 312 (Rs 364), downgraded on account of lower estimates for the company’s Smart Cards Business owing to the under-performance witnessed this fiscal. However, our estimates do not factor in any potential acquisitions that BIL is likely to carry out, particularly in Europe. To the extent that the company does make any profitable acquisitions going ahead, there exists an upside to our estimates." says Angel Broking report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
" Going ahead, we expect BIL to record a CAGR growth of 60% in Top-line and 53% in Bottom-line over FY2008-10E. We estimate Margins to be stable to slightly negative. At the CMP, the stock is trading at 7.2x FY2010E EPS. We maintain a Buy on the stock, with a revised 12-month Target Price of Rs 312 (Rs 364), downgraded on account of lower estimates for the company’s Smart Cards Business owing to the under-performance witnessed this fiscal. However, our estimates do not factor in any potential acquisitions that BIL is likely to carry out, particularly in Europe. To the extent that the company does make any profitable acquisitions going ahead, there exists an upside to our estimates." says Angel Broking report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
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