Its official! With sun shining bright in the sky, summer is out on the Indian shores.
Though on the contrary, Indian financial markets have been seeing an altogether different weather this year. Today, the sky over Dalal Street is engulfed with dark clouds of Inflation, Credit Crisis and Lower GDP. It rained heavily in Late January and since then; we have been seeing occasional thundershowers hitting the Dalal Street every now and then.
Will this rain going to stop or will it take a catastrophic shape of heavy floods on Dalal Street, only time has the answer… The best what we can do is to carry an umbrella and rain cover, while going out for investing.
In investing terminology, caution investing and regular loss / profit booking has become the key to survival. Do not expect your stock to get double in 3 weeks and do not ever think that your stock cannot reduce to half of your invested value in 3 weeks. The danger of downside is much more than the upside now.
If we look closely, last few years of bullishness has created a strong sense of resilience and optimism within ourselves. Even today, we have strong faith in the Indian economy and look optimistic enough to be among the top 5 economies in the next 10-15 years. Probably, this aura of sanguinity has helped us in bouncing back after every deep cut.
This is exactly what we have seen during last week as well. Technically though, the last week bounce looked more like a short covering than consolidation and fears of another cut look quite real and close. Inflation numbers have gone from bad to worse and government is unable to cure this disease, as yet. Also, if inflation remains high, RBI may be forced to increase CRR rate during its annual monetary review on 29th April. If this actually happens, it will be quite a dampener for Indian markets.
Amidst such scenario, retail and HNI investors have a tedious path to choose. The Caution Investing should be the mantra for them. Pick good value stocks and invest in them partially. The concept of Averaging-Out will help you fetch a stock at the good price, because whenever any downpour comes; all the stocks go down, no matter how attractive they may seem according to the valuations.
Telecom Sector
The sector that looks really attractive for long term is the telecom sector. On of the most important reason for this is the tremendous scope of growth in this sector. As of now, the private sector has not participated in a big way in encouraging the telephony in rural and semi-urban areas. With stagnation coming in metro cities, the companies will be forced to look at small pockets for customers.
Also, the government will also encourage it in a big way, be it Left, Right or straight Government. Since, the sector relies totally on domestic consumption, and with huge Indian population to cater to, the sector has the capacity to outperform others in the future.
After the recent downpours, the stocks which belong to this sector are available at attractive prices. Buying TTML (Tata Teleservices) at 27 Rs will always be a safe bet for long term. It can’t go worse than this. Bharti with its rich experience in this sector will always be a stock to buy for a long term perspective. Even it is a very good buy at 700-750 levels.
Mid Cap Stocks
There are some good mid cap stocks that are in the offering. Two such stocks are Karuturi Networks and Vakrangee Software. In both these stocks, FIIs have hiked their holdings in last few quarters. Vakrangee is the long term bet. The company operates for domestic clients and hence, is protected from global slowdown. It may remain range bound for weeks (between Rs 170-220), but has the potential to cross 400 Rs in a year’s time.
Karuturi has now become the World’s largest exporter of Roses after taking over Sher Exports (Kenya based company). The company has been exporting mainly to Europe and importing raw material from US. Thus, apart from normal margin, it also stands to gain extra on the account of Euro-Dollar movement.
In the end, Equities have always been the game of High-Risk and High-Gain where only 1 out of 10 people earns and that one person takes away the profit of remaining 9 persons. To be that one person, you must be smart enough to differentiate between a trap and an opportunity. Those, who are strong willed to take their chances, are always welcome. Rest; please learn to contend with Bank Interests and Fixed Deposits now.
Wish you all a Happy Investing!!
Saayonara
