Weekly Outlook on Indian Stock Markets - 30th June to 4th July, 2008

Sometimes, I wonder whether one should really be listening to the stock experts, brokers and economists who just keep murmur the new targets that stock markets will touch in the near future.The reason for such doubt is the pace with which these experts change their views on the channels.

Whilst the markets were bullish last year, these experts set new targets of 25000-30000 for the Sensex in 2008-09, sighting Asia-decoupling, strong FII inflows, etc as the reasons. And now when markets are looking bearish, the same stock experts are narrating stories about new lows, possibly in 4 digits,which markets could touch by end of this year, giving rising crude, inflation, etc as the excuses.

Sometimes, I doubt that these experts are paid well for creating such an atmosphere. Because, the inflation and the crude started giving ominous signs in the latter half of last year. Yet these experts came on the channels and talked bullish about the markets. Hence, I am slowly, but surely, starting having my own view point about the stock markets and economy than listening to the experts'advices and I am sure that many of you all would be having the same views about them.

Come let's have a rational discussion on the future of the Indian economy and the stock market. My view is that USA is artificially passing the inflation to the other economies, especially the Asianeconomies and Europe. On one side, the central banks all across the world have raised the interest rates, while on the other side, US cut its rates, hence increasing the money supply in the world, and giving further air to the inflation. The US policy makers want to curb the growth of the emerging countries through rising crude and ensure these countries do not emerge as the counter-part to USA.

There is no denying that the US economy is in dire straits at the moment. The fiscal deficit is at all time high and there is serious threat to the dollar reputation. Though, at the moment, dollar is gaining strength, but one thing is for sure that the moment interest rates go up in USA, the dollar will go down very quickly. The US cannot keep the interest rates low for long since, the inflation has gone out of comfort zone there as well and Bernanke would not like slow rate of growth and high inflation to persist in the financial system.

Hence, my long-term view for India and other emerging economies look strong. There are some very good companies in India that have made their mark in International arena. Information Technology is one such sector where Indian companies have offered the best services at low cost. Indian IT companies will stand to gain, if the companies world-wide resort to cost cutting, because this cost-cutting is done in areas like Customer Care and other back-office departments and various IT companies offer products in these domains only. Hence, any investor who is eager to invest can look at Indian IT companies for longer term perspective.

Another sector where Indian companies can do well is the Telecom and Media sectors. Telecom sector will definitely grow under any government - Left, Right or Straight. Hence, one can safely put in his money in this sector for longer term. Indian Media has emerged out as another upcoming sector in the last year and half. Many investors world-wide have increased their stake in this sector. Even in the current meltdown, the foreign stake in these companies has not decreased much, which indicates the bullishness in this sector.

Some of the stocks that can be purchased in the coming week are Vakrangee Software, TTML, Karutu Global, NDTV and Deccan Chronicle (DCHL). Vakrangee Software is the Banglore based IT company with domestic clients (CMP – 190). The company's major client is Election Commission. With elections in last one year, the company's hands will be full of projects from Election Commission.

Tata Teleservices Maharashtra (TTML) is another telecom company, which is offering good valuation (CMP - 25 Rs). The stock can be purchased with minimum target of Rs 35 in next 3-4 months.

Karutu Global has emerged as very few companies where FIIs have shown interest during this meltdown. The company is growing rapidly in the florocist industry. The stock is trading at Rs 25 Rs. and can touch 50 in next one year or so.

NDTV and DCHL belong to media industry. These companies hold good reputation in the media industry in terms of content provider. Foreign Investors and Global media conglomerates have shown interests in these companies. Recently, New York Times has bought some stake in DCHL. In the end, just want to conclude with a reminder that equities will again emerge, in an year or so. It's just the time to stay cautious and increase your investment perspective from 3-4 months to at least 1 year or so.

Wishing you a great Investing!

Weekly Outlook for Indian Stock Markets - 22nd-26th June, 2008

OK… So, the worst nightmare that the Indian stock markets had, has finally happened.

inflation numbers have touched the double-digit mark and already speculations are rife that it may touch 15% mark in the near future, especially if crude oil resumes its upward journey.

Under such gloomy environment, the million dollar question is that what should investors do? Is India shining story under threat now? Will government fail to curb the inflation? Will the stock markets go down to as low as 4 digits in the near future? And hence, as an investor, should I put my money in the stock markets at the moment or not?

Let's put out all our fears and ration them logically. Right from our childhood, we are taught to follow the paths of great men at the time of adversity. If we talk same in the context of stock markets, no one comes near to Warren Buffet who, with his unique style of investing, has able to provide rich dividends to his shareholders in all good and bad times. The primary reason, as he says, for this success is VALUE INVESTING.

Stock Markets, at every stage – be it bad or good, will continue to offer some stocks at good values. As an investor, we must learn to identify them and buy such stocks at regular intervals.

Like its past golden days, stock markets will not remain in the bad days as well forever. Soon or later, it will again start buzzing with the voices of optimism. If we look at the past, Indian stock markets are able to tide over various adversities like Harshad Mehta Scam, Ketan Parekh Scam, South East Asian crisis and IT bubble bust and yet, it managed to touch new highs. Hence, the lesson that the past teaches us is to remain optimistic. Invest in the companies that hold future and are offering at good prices.

This week edition will look into such stocks and sectors.

One of the sectors that need mentioning is the Telecom sector. The sector is bound to succeed in coming future. The telecom revolution is bound to happen under any circumstances and under any government. Even the pure Leftist-government will continue to encourage rural telephony and broadband. On the contrary, Right wing parties will pitch for telecom more aggressively than their counter-parts. Hence, a long term investor can look at the companies that are into telecom sector or offering assistance to companies belonging to this sector.

For instance, TTML is one good telecom stock, which is coming at good price (28 Rs). Slowly and Steadily, Tata Teleservices are able to snatch a good pie of customer base. Though, it is not near to Reliance, Bharti or BSNL in terms of the customer base, yet it is able to fetch good chunk of customers through its low cost services. Also, one must not forget the strong backing of Tata conglomerate, which may help TTML acquire some other telecom company much larger than itself. If that actually happens, the shareholders could get rich dividends as well.

Another sector, which is worth mentioning, is the Information Technology. The last year has been a pretty bad one for the IT companies. But with Rupee again depreciating, the companies stand to gain extra in terms of currency parity. Though, the major risk that this sector is having is the slow down in US economy, which may have a bearing on their customer base. Personally though, I believe that US economy slow down may bring more business to the Indian IT companies, since US based customers will resort to cost-cutting and low-cost services of Indian IT companies will help them get extra business from their US customers.

The front-line company that holds well in this sector is Satyam Computer Services. Unlike Infosys and Wipro, who are having major US clientele from financial sector, Satyam clientele also comprises of companies from other sectors like Telecom, Courier, etc. Hence, the company will not face the brunt of mayhem in US financial sector as deeply as some of its peers like Infosys and Wipro may face.

In mid-cap space, companies like Nucleus Software and Patni Computers stand to gain as well. Last year, the investors completely exited from these stocks. But now with re-emergence of IT, these companies may see heavy bout of buying than other IT companies.

Besides, there are few Indian companies that are doing well, despite the slowdown. Take for Instance, Karuturi Global. This Banglore-based company is the World's largest producer of Roses. The company has recently acquired land in Africa and looking to expand itself in Europe as well. The company exports largely to Europe and is insulated from Dollar-Rupee fluctuation. Karuturi stock is trading at 25 Rs (Face Value =1 Rs) and going by various research reports, the stock is poised to touch 35 in the near term (3 months).

Despite the setbacks, I would like to end this week edition with the note of Optimism.

It is good that markets have corrected in last 6 months. Events like Inflation, Oil crisis, Sub-prime will continue to come and offer long term investors some good buying opportunities into the quality stocks. Though, one must not lose "Patience" and invest after "Thorough Research".

Wish you all a very Happy and Quality Investing.