Indian Stock Markets seem living dangerously at the moment, especially after witnessing the kind of movement they showed during last week's trading. Markets were up by 5% on Wednesday, then down 4% the next day and finally closed 2% up on Friday.
Such kind of volatility is interpreted in different ways by Bulls and Bears. Bulls are calling it a "Strong Resistance", whilst on the other side; Bears are calling it a "Final Resistance before 10000 mark". Well, who is right and who is wrong, only the future will decide, but as investors, we must keep hunting for good stocks. First let's look at some of the sectors that are in limelight now a days:
Real Estate (Stay Away)
The sector that hammered the most in last few weeks is the Real-Estate sector. And there are some voices raised in the markets about the attractive valuations for this sector. No doubt as a trader, the sector may see some pull back, but fundamentally the sector has more downside risks that upside potential. The economy slowdown will have an impact on pockets of everyone, especially in the Middle Class. At the same time, increase in interest rates has further pull people out of the housing markets. Besides, real-estate companies have been facing problems due to rise in prices of Cement and Steel that have further increased their input costs. In this vicious circle of less demand and increased input prices, the companies may put brakes on their expansion plans. Hence, it is better for investors like you and me to stay away from this sector.
The sector that hammered the most in last few weeks is the Real-Estate sector. And there are some voices raised in the markets about the attractive valuations for this sector. No doubt as a trader, the sector may see some pull back, but fundamentally the sector has more downside risks that upside potential. The economy slowdown will have an impact on pockets of everyone, especially in the Middle Class. At the same time, increase in interest rates has further pull people out of the housing markets. Besides, real-estate companies have been facing problems due to rise in prices of Cement and Steel that have further increased their input costs. In this vicious circle of less demand and increased input prices, the companies may put brakes on their expansion plans. Hence, it is better for investors like you and me to stay away from this sector.
Infrastructure (Hold)
Infrastructure Sector has also got a severe beating like Real estate but holds much more potential than its counter-part. The governments (both State and Center) have been emphasizing strongly on improving the infrastructure, and that is the strongest prospect for this sector. Another advantage is that this sector is insulated from consumer's behavior and rather more dependent upon the economy. Hence, any consistent downside in the growth rate of economy can hamper the prospects of this sector, whilst on the other side; consistent growth rate will push up this sector. As of now, the growth rate seems OK (without taking inflation into account). If inflation gets controlled, the sector will continue to grow. So, any investor who is looking in horizon of 2-3 years, can start putting money in this sector. Companies like GMR Infra, IRB Infra are good stocks to buy at these levels of below.
Infrastructure Sector has also got a severe beating like Real estate but holds much more potential than its counter-part. The governments (both State and Center) have been emphasizing strongly on improving the infrastructure, and that is the strongest prospect for this sector. Another advantage is that this sector is insulated from consumer's behavior and rather more dependent upon the economy. Hence, any consistent downside in the growth rate of economy can hamper the prospects of this sector, whilst on the other side; consistent growth rate will push up this sector. As of now, the growth rate seems OK (without taking inflation into account). If inflation gets controlled, the sector will continue to grow. So, any investor who is looking in horizon of 2-3 years, can start putting money in this sector. Companies like GMR Infra, IRB Infra are good stocks to buy at these levels of below.
Information Technology (Buy)
Information Technology has been the blue-eyed boy of Indian economy for last few years and is expected to remain so in coming years as well. The IT companies have been performing well consistently, albeit, have faced the forex crisis last year. Their low-cost services due to currency parity (difference between foreign currency and Indian currency), quality labor, will help these companies in growing in coming years. As an investor, it is better to put money in those IT companies which are well-diversified into various domains (like Telecom, Finance, Logistics). For instance, Satyam and TCS are better than Infosys and Wipro in terms of domain diversification.
Information Technology has been the blue-eyed boy of Indian economy for last few years and is expected to remain so in coming years as well. The IT companies have been performing well consistently, albeit, have faced the forex crisis last year. Their low-cost services due to currency parity (difference between foreign currency and Indian currency), quality labor, will help these companies in growing in coming years. As an investor, it is better to put money in those IT companies which are well-diversified into various domains (like Telecom, Finance, Logistics). For instance, Satyam and TCS are better than Infosys and Wipro in terms of domain diversification.
Trading Ideas for the week
This week is expected to see some buying interests in some of the real-estate and infrastructure stocks like DLF, REL, GMR, JP Associates. One can trade in these stocks. The best strategy, though, is to hedge the portfolio by buying a Nifty Put for 3800 in the proportion of 1:3 i.e., buying 10000 Rs value of Nifty Put {(LTP+ Strike Price)*50}, along with 30000 Rs of stocks in the Cash market.
This week is expected to see some buying interests in some of the real-estate and infrastructure stocks like DLF, REL, GMR, JP Associates. One can trade in these stocks. The best strategy, though, is to hedge the portfolio by buying a Nifty Put for 3800 in the proportion of 1:3 i.e., buying 10000 Rs value of Nifty Put {(LTP+ Strike Price)*50}, along with 30000 Rs of stocks in the Cash market.
The stocks which are at attractive levels and can be accumulated for long term are IRB Infra, Karuturi Networks, Vakrangee Software, Balasore Alloys, DCHL, NDTV. These companies have shown consistent growth in last 2-3 years and have seen FII interest, despite the slow down.
Wish you a great investing and profitable trading this week!!!
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