Thursday, February 28, 2008

Budget 2008: Good times ahead

PC is going to present Union budget for the 7th time, and this time its a far cry from the good old days with share market in shambles. And it is expected to remain in the same state of inertia for the time being unless the budget is a hugely populist one. Chidambaram is notoriously famous in investor community with his share of Capital gains tax, ST tax, Service tax and 'whatelseisremaining' tax. But this time, investors can expect relief (read no new taxes) and he may infact lend a helping hand in the form of reduced income taxes, ofcourse for a helping hand in return (Congress).

Whatever be the budget, India's long term growth story remains intact. So, Happy investing....

Sunday, February 24, 2008

Last week for IPO market

Last week registered three important events for Indian capital markets including oversubscription of REC IPO, listing of OnMobile Global and bonus declaration from Reliance Power. While nothing can be said categorically about REC, many market participants believe that the IPO could mark reversal in trend in primary market.

OnMobile Global listed at a good premium and climbed further in subsequent trading sessions to touch a high of 579. Strong listing even in choppy market conditions is another proof of fundamental soundness of company. While listing of KNR Constructions & Bang Overseas was lackluster, which later fell like a pack of cards, they were not expected to be out-performer at the first place. KNR is a fairly small infrastructure company with neither broadness nor depth in operations, like IVRCL or Simplex. On the other hand OnMobile is a specialized software company with high margins.

The lesson is, retail investors should come out of the mould of quick listing gains mentality. While they might make money in some IPOs, but the chances of getting stuck with a dud stock are equally even.

Reliance Power announced a bonus for all investors save promoters in the ratio of 3:5 (i.e. 3 new shares for 5 held). While the valuations of Reliance Power can be contested, one should understand that sometimes it’s simply not possible to evaluate a company on conventional matrices like P/E ratio, especially when the Reliance tag is prefixed to a Power or Infratel or anything else.

On another note, bonus declaration is a welcome surprise by someone who raised Corporate Governance issues 3 years back at the time of separation. This is not to hail Anil Ambani, but a similar move can not be expected from a KNR or Bang Overseas. Or is it a masterstroke in a bid to outdo the organized hammering of the scrip by some operators as Ambani Junior earlier accused. Who knows or who cares, Shall I say?

Thursday, February 14, 2008

Growth Story: The Indian way

Indian Stock markets have witnessed an abrupt crash after a dream run in 2007. Maybe, the run up was a little too stretched and thus when FIIs decided to sell, it was all the way to bottom. It can be argued that the market was trading at all time high and one shouldn't have entered at the first place and sort of things.

In hindsight, it may appear logical as well, but the bottomline is that the sensex is trading below 17,000 and majority of retail investors are in red, including the writer of this blog. And it is not just the retail investors who have lost heavily to the cheater 'Ambani', as some people call him deriving vicarious pleasure by doing so. Centurion Bank of Punjab has lost FORTUNES (mind it, all caps) to the tune of INR2.6bn (that translates to Rs 26 crore). The amount is significant as it is more than half the profits it earned in December quarter.

However, the point i'm driving home is that some investors find an opportunity in flat market and do some value buying, while others continue to loose money. Both are important for the market to keep functioning properly. We shouldn't forget that stock market is merely a trading place where money and stocks change hands. Only way to make money in the market is to put your faith in the stocks you pick. The long term growth story is still intact, even after a moderation in corporate earnings.

Warren Buffett used common sense to invest in American Express and Coca-Cola. To hell with the theories of coupling and decoupling, can't we see that the average Indian is better off compared with 90's. It doesn't require rocket science to see where India is headed for the next 10 years if not 20. And it is not just about IT and ITES, even manufacturing is attracting a lot of investment.

In conclusion, all I'm saying is keep ur eyes open, do not fully rely on tips. Take lead from tips, do your own research, and if u happen to invest in XYZ after all this research, do not panic. It is still the same XYZ irrespective of all the selling from FIIs. And it is not that difficult to spot multibaggers in Indian market. Pick Punj-Lloyd or Gujarat NRE Coke or Petronet LNG, but again do your research and don't just invest money in these companies, invest FAITH.