- Citi has maintained a ‘Buy’ rating on Colgate Palmolive with a Price Target of Rs. 444, CMP: Rs. 367.55
- JM Financial has given a ‘Buy’ rating on ITC with a Price Target of Rs. 238, CMP: Rs. 176.40
- IL&FS Investsmart has given a ‘Buy’ rating on TCI (Transport Corporation of
- IndiaBulls has maintained a ‘Buy’ rating on Aditya Birla Nuvo with a Price Target of Rs. 1,571, CMP: Rs.1,077.20.
July 18, 2008
Stock Picks of Brokerage Firms
June 15, 2008
Investment in Companies with Unique Business Models
It has been often observed in the market that companies that are in a unique business perform very well in the market in the long-run. These companies show a strong growth both in their toplines and bottomlines since they are a niche player in the market. Consequently, the stocks of such companies give handsome returns & their valuation commands a scarcity premium. These types of companies have characteristics like they have a first mover advantage or a technological edge over others etc. Therefore, investment in these types of companies proves to be a prudent investment. There are a few companies that have a unique business models. They are:
1. Nitin Fire Protection: It is a leading player in fire protection, safety, security and intelligent building management systems. It has interests in high pressure cylinders, fire extinguishers and fuel dispensers. The company has been in an expansion mode as the demand for each of its products is growing tremendously.
2. Everest Kanto Cylinders: It is
3. Educomp Solutions: This is one of the rare educational content creation & delivery players in the market. The company has a strong order book for its online education solutions. During FY07, it signed on 2,819 Govt. schools as compared to 613 a year earlier. During the first quarter of FY08, it added 2,800 more schools. With such a high-paced client acquisition and low capital expenditure, company’s profitability is likely to leap frog this year.
4. GMR Infrastructure: It is a diversified infrastructure player across sectors such as power, roads and airports. After getting
5. Mic Electronics: It is one of the few players globally. It is in the light emitting diode (LED) business which a very few competitors across the world and the only listed player in
6. Bartronics: It has a first-mover advantage in the radio frequency identification (RFID) solutions & smart cards markets. The company is the largest smart card maker in
June 10, 2008
Is It The Right Time to Buy?
So, the Indian Stock market continues to fall and it is well below its
I would say probably not. Although most analysts say the fundamentals of Indian companies are strong in the long run, I beg to differ a bit. Firstly, the high level of inflation will impact the profitability of Indian companies and that is why the market is trying to discount this fact. Secondly, in
Once the inflation demon is controlled the sanity in the market will be back and the impact of inflation on corporate earnings will become clear. That may be the right time to accumulate the fundamentally sound stocks. Till then stay put.
June 7, 2008
Real Estate Mutual Funds to Help Retail Investors Diversify
Until now, retail investors were not able take advantage of real estate boom due to high investment requirement which could run into crores of rupees. But with Real Estate Mutual funds (REMFs) it will be possible for even small investors to earn good returns. Now you don’t need to buy property to actually benefit from the high capital gains it offers. You can simply invest through REMFs.
In case of venture capital funds, the minimum investment size is around Rs. 1 crore. For REMFs, this is expected to come down to about Rs. 10,000. Thus it will give small investors one more investment avenue to diversify their portfolio. This spells well for retail investors because Real estate as an asset class provides excellent risk adjusted returns along with low correlations with other asset classes. However, they are riskier than diversified equity funds as REMFs focus on only one sector.
As per SEBI regulations, REMFs are going to be close-ended funds. So you don’t have the option to selling the units back to the fund. You can sell units only on the exchange. The investment timeframe will be equal to the fund tenure. Therefore it will be a good investment if you are a long-term investor.
These funds will primarily invest in real estate projects and in equity, debt & debentures of real estate companies. They will earn returns from properties by way of rents & capital appreciation, interests, dividends & share price appreciation from shares of real estate companies.
For steady returns one should go for a fund which invests large part of its corpus in rent producing properties. And if one wants quick appreciation, one should go for a fund that invests in the early stages of development projects.
May 30, 2008
How To Beat Fund Managers?
It is often seen that mutual funds fails to beat benchmark indices. This happens despite the fact that mutual fund managers are paid professionals who actively manage the fund. So what’s the use of investing in mutual funds? This question often arises in the minds of investors. If the investor has enough time at his disposal then he/she can do without mutual fund, directly invest in the market and easily beat the indices. He will have to invest his time for doing this and always keep the following points in mind:
Have the Right Time Horizon on Mind
One should have the right time frame in mind before investing in any stock. If you are thinking about trading in a particular stock than you should exit the stock as soon as your target price is achieved. In case, the target is not achieved within the time period pre-decided by you then you should take the loss. Most people aren’t so sure about their investment horizon. If there is a loss or marginal profit, they keep on increasing their time frame in anticipation of achieving their price target and eventually end up with a huge loss. Therefore, it is very important to be sure about your investment horizon and stick to it. Similarly if you are investing for a long-term, you should given enough time to your stock to get handsome appreciation. Usually, the period of less than a year is considered as short-term and the period of at-least a year is called Long-term in investment parlance.
Understand the Business of the Company
Remember the golden rule of investing “Never invest in a business you don’t understand”. This is very important. You must have the decent knowledge of the business of the company you are investing in. Before picking a stock you have to familiarize with the business of the company. Gather necessary information by reading, through internet etc. This would give you a rough idea about the future prospects of the company, the sector in which it is operating and the general business conditions. If you are thinking about picking a stock from a particular sector then pick the best performing company in that particular sector.
Always go for Good Management
This is very crucial since good management not only runs the company successfully but it also takes into consideration the investors’ interest. It is being often seen that companies with good management are also very investor friendly. Companies with good management can survive even the worst market conditions. Therefore it is always prudent to prefer well-known management over relatively inexperienced or unknown management. This factor should be considered thoroughly before selecting the stock.
Keep Track on the Numbers
While picking a stock it is very important to keep track on the quarterly numbers of the company. This would give an idea how the company is doing. Pay attention to comments on the results coming out of various quarters such as TV, Business Newspaper etc. This will make you aware if any company has the habit of fudging with the numbers.
Review Your Stocks Regularly
Buying stocks & forgetting about them is not a prudent strategy. You should constantly watch out for news on the company and read every bit of information available so as to make sure that you don’t end up with a junk stock. If you think that the fundamentals of the company is getting worse then dump the stock. The habit of regularly reviewing your stocks would allow you to let go the under-performer and pick the out-performers.
May 24, 2008
Companies giving high interest rates on FDs
There are many companies that accept deposits from public. But most of them offer interest rates that are quite less than what banks offer on their FDs. Still there are a few good companies that offer much higher interest rates than bank FDs. Following are details of such companies’ Fixed Deposits:
| COMPANIES | PERIOD (YEAR) | ||
| 1 | 2 | 3 | |
| 1) Jaiprakash Associates Ltd. | 11% | 11.5% | 12% |
| 2) Jindal Stainless Ltd. | 10% | 10.5% | 11% |
| 3) Television-18 | 10% | 10.5% | 11% |
| 4) Sriram Transport Finance Corp. | 10% | 10.5% | 11% |
| 5) Sriram City Union Finance Corp. | 10% | 10.5% | 11% |
| 6) Ind-Swift Ltd. | 11% | 11.5% | 12% |
| 7) ABT Industries | 9% | 9.5% | 10% |
- Minimum Amount of Deposit for all the companies are Rs. 10,000/- while for Jindal Stainless Ltd. it is Rs. 21,000/-
- Rate of Interest mentioned above is for Non-Cumulative schemes. On Cumulative schemes rate of Yield could be higher.
- Ind-Swift Ltd. accepts deposits for 6 month period for which the rate is 10% p.a.
- Most of the companies give additional 0.5 % interest to Senior citizen.
- More details & application forms may be available from your broker or financial advisor.
May 17, 2008
Brokerage Houses Stock Picks
- IndiaBulls has given a ‘buy’ rating on Axis Bank with Price Target of Rs.1,111, CMP: Rs. 901.65.
- Prabhudas Lilladher gave ‘out-performer’ rating on Volt-amp Transformers with a Price Target of Rs. 1,611, CMP: Rs. 1,100.50.
- Pinc Research has initiated a ‘buy’ rating on Redington (
- Sharekhan has given a ‘buy’ rating on Opto Circuits India with a Price Target of Rs. 460, CMP: Rs. 337.80.
May 12, 2008
Ways To Beat Inflation?
Inflation diminishes the purchasing power of the currency. It affects everybody badly since we have to shell out more amount money for purchasing the same amount of product/services. Salaried class is not much affected by the inflation since their salaries are sensitive to inflationary trends. Similarly people running business or profession are also least affected as they can always raise rates, fees, prices along with the costs of operating their business or profession. But the fixed income earners, whose only source of income is their investment, bear the brunt of high inflation. In the recent times of high inflation which is well over 7% p.a. it becomes all the more important for such people to earn more than the rate of inflation so as to earn positive real income. For that one has take smart investment decisions.
Here are some smart investment strategies to tackle inflation:
1. Park your money in Real Estate at the earliest.
If you don’t have your own house then you should buy that at the earliest. It should be kept in mind that everything appreciates except the value of rupee. I you buy the house you need in time, you are automatically hedged against inflation. The value of house/real estate appreciates more than your fixed deposits. So the value of the house you purchased today would be much more than the value of your fixed deposits say a ten years from now. If you delay your decision to buy your house, you will have shell out far more amount of money afterwards.
As an investment also real estate is better than most other investments. You can easily earn handsome amount of rents which are also subject to inflationary pressures. You can raise your rental earnings when the cost of living goes up everywhere.
2. Invest in Higher Interest Instruments.
During the periods of high inflation it is best to keep your money in fixed deposits having short maturity period. Since higher inflation rates are often followed by higher interest rates, it is better to keep all your options open at this time. You can invest in company deposits which gives higher interest rates than bank deposits. But remember this instrument is quite risky so invest only with those companies that have clear track record of repayment. Alternatively you can invest in Fixed Maturity Plans (FMP) offered by mutual funds from time to time. They usually generate better returns than bank FD.
3. Invest in Equities and Mutual Funds.
It has been established by various studies that equities generate superior real returns over the long-term vis-à-vis any other asset class. So equities should be a part of everyone’s portfolio. If you have time at your disposal, you can invest directly in the stock market after doing proper research on your own. If you don’t have time to track the performance of your stocks regularly, you can go for a diversified equity mutual fund with proven track record. You can also go for a balanced mutual fund if your risk appetite is low.
4. Invest in Gold
Gold has always proved to be a good hedge against inflation since time immemorial. You can invest in gold in the form of bullion, bars, coins or jewellery. Now you can also invest in gold through exchange traded funds investing in gold.
April 18, 2008
RULES FOR SELECTING MID-CAP STOCKS
Select relatively well known names
Even in the mid-cap universe, there are a number of well-known companies, which are run by reputed managements. These companies are well-known in the market for their products and services and most investors can easily identify the companies by their field of business. Investing in unfamiliar companies should be strictly avoided.
Stick to solid fundamentals
While investing in mid-cap stocks, investors must be extra careful to buy only those scrips that pay regular dividends and have a good track record of profits. Dividends may not be a critical factor while investing in large-cap companies. However, in case of mid-caps, it is important to look for higher dividend yields to ensure that even if the stock has to be kept for a long time investor gets some return on his funds. Higher the dividend yield, the safer it is to invest in that stock.
In case of going for a growth company, quarterly performance of the company should be tracked closely. Since these companies do not give dividends but they have great future, their performance should be closely monitored.
Book profits quickly in case of sharp rise
In case an investment in mid-cap counter gains sharply in the short term, profit should be booked quickly. Or at least a part of the holding should be sold to book profit and bring down the cost of the balance holding. Usually mid-cap stocks see spurts in trading volumes. Therefore, it is a smart strategy to sell a part of the holding when the stock is in focus. Do not wait too long in anticipation of a very big gain.
Don’t get swayed by rumours
Investment decisions should not be swayed by rumours or positive news-flow on a counter. If a stock has already risen sharply or the fundamentals in respect of yield do not appear healthy, investors should think twice before investing. Usually mid-cap stocks see increased activity around the time of some positive news-flow from the company.
Don’t average blindly
Do not average your cost of holding by buying more shares on a decline unless fundamentals warrant value investing.
Don’t take decisions
Resist the temptation to make a quick buck. This is the most important principal to be kept in mind. Hasty investment decisions usually lead to huge losses later. And in case a bad or hasty decision has been made, it would be wise to keep a stop loss. Only fundamentally sound stocks should be kept for long term.
April 16, 2008
Short Selling & SLB to be effective from April 21
Short selling of stocks and Securities Lending and Borrowing mechanism kicks in on April 21 on BSE & NSE. All classes of investors would be allowed to short sell. Institutional investors will not be allowed to indulge in day trading. Moreover they will have to disclose upfront if their transaction is short sell or it’s a normal trade. Retail investors will have the option of disclosing their trades as short sell by the end of the day.
To begin with, the stock lending and borrowing mechanism will happen in 250 stocks which are a part of F&O list. The entire transaction would be completed on a T+1 basis and the lending or borrowing will be for a period of seven working days. So, if one borrows a stock today, the squaring up of that will take place after seven working days from the date of borrowing of the stock. SLB transaction session will take place between
The margins and collaterals will be applied on an upfront basis. For some market participants, there are some position limits which have been placed at around 10% of the market-wide limit. Also, the market-wide limit for these stocks would be for 10% of free float. But for individual clients, the position will be 1% of the market-wide limit.
Scheme of Stock lending and borrowing will neither attract STT nor Capital gains as stock lending and borrowing does not lead to transfer of securities. However, short selling transactions and profit from such transactions will be subject to STT and Capital Gains Tax.
March 26, 2008
HOW TO AVOID MISTAKES IN STOCK MARKETS
Profit booking is the key to successful investing in stock market. Those investors who book profits regularly have a higher risk taking ability as they can afford to invest in stocks where others have not moved in yet. Over-owned stocks pose a higher risk of loss when the markets turn down.
There are some common mental mistakes we all make, that often lead to losses. Some of these avoidable errors are:
Over confidence
This can lead to complacency and over-exposure. It is the most common mistake investors make when they are making profits. In equity markets you can never throw caution to winds.
Herd Mentality
We often get swayed by what others are buying and then try to be a part of the crowd. We are tempted to believe that crowd is always right. If mid-caps are rising then we buy these stocks even when we know little about the companies. This leads to a paralysis when price suddenly falls and we are unable to take a call on the stock.
Excessive aversion to loss
Inability to book a loss when an investment goes wrong is the single biggest cause for losses to investors. More often than not, a small loss turns into a much bigger loss. Remember, a 40% loss started off as a 5% loss. Unless a stock has been bought on strong conviction of Long-term appreciation, those who make investments for quick gains must learn to exercise stop loss.
Fear of uncertainty
When we make money, there is instant euphoria. When we start to lose money, there is a sudden deer caught in the headlights type of emotion, which makes us unable to do the right thing. We fear that the moment we sell, will be the moment that it starts to rebound. This leads to inaction. If we book profits and the stock still moves higher, we feel bad. Therefore, if a stock is moving up most investors refuse to book gains. And many a times this ultimately leads to a loss.
Fear of making an incorrect decision and feeling stupid
This too leads to inaction. We often opt for inaction when faced with fear of making wrong choice. However, little do we realize that not acting in time too is a choice that we made unknowingly.
Reluctance to admit mistakes
This is another behavioural pattern that leads to incorrect decisions. In markets, we are loathe to admit that we made a wrong decision. However, admitting a mistake and taking corrective action often saves a lot of money.
Believing that investment success is due to their wisdom rather than a rising market, but failures are not their fault
This is another classical pattern. When the mid-caps are rising, we may believe that we were smart enough to identify the undiscovered jewels. However, believe it or not, if the sentiment turns no amount of ‘strong fundamentals’ is going to save their current valuations. The recent crash is a strong evidence of this fact where the mid-cap and the small-cap had a free fall.
Inaccurate assessment of investment horizon
Most investors make investments for short term but when the trade turns into a loss, they stick to it claiming that it was a long-term call. This could often lead to huge losses.
Forgetting the powerful tendency of regression to the mean
This is the most important lesson for investors. All stock prices must ultimately revert to their long-term averages. All sudden and sharp run-ups come to an end in a most unpleasant way for investors.
March 22, 2008
PORTFOLIO TRACKER TOOL
For any investor it is very important to keep track of his/her investments on day to day basis. In a volatile market when the market value of ones portfolio changes dramatically everyday, it becomes very difficult to calculate Profit and/or Loss on investments. So I have made a Portfolio Tracker Tool based on Excel.
The Portfolio Tracker can calculate the amount of profit or loss that you are making on individual stocks and also total amount of profit/loss that you are making on your entire portfolio. It can show the profit/loss in percentage terms. Beside that you can also know the percent weightage of each stock in your portfolio. All you have to do is just enter the name of the scrip, quantity of shares, purchase price per share and current market price of each stock. It’s a very valuable tool. I’m using it since 2004.
In order to access the tool click the link given below:
March 19, 2008
WEALTH CREATION IDEAS
WEALTH CREATION IDEAS
1. Investors have overwhelming affection for things that are certain.
2. Technology has changed but human psychology has not.
3. Risk comes from not knowing what you are doing.
4. Never mistake activity for achievement in portfolio management.
5. Money is made when greed meets Mr. Earnings & Mr. Pessimism.
6. Trade with a trend not your Friend.
7. Quality, rather than quantity of ideas will result in Big Money.
8. Changes in opinion, but nothing else, cause changes in stock price.
9. In Investing, courage becomes the supreme virtue after analysis.
10. Own not the most, but the Best.
11. Investors & Traders learn nothing & forget everything.
12. Chief losses to investors come from the purchase of low quality stocks in boom time.
13. If we shopped for stocks the way we shop for socks, we would be better off.
14. Have ability to differentiate few outstanding companies from masses.
15. Though difficult to practice, think ahead of the crowd.
16. Plan your play & play your plan. Don’t delay.
17. Too much of churning is injurious to your wealth.
18. Patient investors, buying value instead of hype, win out.
19. Growth is not enough to sustain a profitable investment strategy.
20. Always play for meaningful stakes.
21. When you sell in desperation, you always sell cheap.
22. Earning money is easy, but preserving wealth is difficult.
23. There is no formula to figure out intrinsic value of a stock, you have to know the business.
24. Don’t confuse brains with the bull market.
25. Wealth Creation is the art of buying a rupee for 40 paise.
26. “Margin of Safety” renders unnecessary accurate estimate of future.
27. Multi-baggers are found in huts & lost in palaces.
28. When fear subsides, intrinsic value wins out.
29. No matter how fast firms are growing, there are limits to valuation.
30. No stock picker has ever had a 100% success rate.
31. Valuation always matters when buying stocks.
32. Short term transactions frequently act as invisible foot, kicking society in the shin.
33. Never buy a stock because it has low price.
34. Three things determine the direction of the market: Earnings, Interest Rate & Psychology.
35. Be fearful when others are greedy. Be greedy when others are fearful.
March 15, 2008
Strategies For New Investors
Since Reliance Power IPO many people are waiting on the sideline to invest money in stock market. But due to the failure of Rel. Power IPO and simultaneous fall in over-all market these people are left totally confused. The good thing now is that people has not panicked and still want to put their money. They are just waiting to time the market. Moreover there are number of people who want to build their portfolio.
For such investors who are totally new to the market, the best strategy would be to start building their portfolio without waiting for the market to bottom out. One must remember that it is practically impossible to time the market. One cannot buy at absolute bottom and sell it at absolute peak. Hence, points to be kept in mind are:
1) Invest in Large Cap and Reputed Mid-caps only
Start deploying 15-20% of one’s capital at this level in the Large Cap companies which are 35-40% below their January highs. There are many such companies which have seen such a fall. Besides that there are many reputed mid-cap companies which are now available at attractive levels. One can deploy another 15-20% of cash when market falls further or when the stocks short listed by you falls 5-10% from your purchase price. This way one can average out one’s acquisition price. But remember to invest in well-known companies only as these are the safe bets as against small and relatively unknown companies where risk of wiping out of your capital is much higher.
2) Never invest in Lump-sum at one go
It is really a bad idea to invest your entire capital at one go. However convinced you may be that market or your stock will move higher, you should not be fully invested at once. A little bit of bad news which may emerge out of the blue is enough to bring down the stock price further. Recent case being that of ICICI Bank which was quite attractive at Rs.1000 before the news about its indirect involvement in the sub-prime crisis broke out. Those who might have invested his entire capital allocated for that scrip at above Rs. 1000 would not be in a position to add more quantity of that scrip at current level. So deploy only 15-20% of capital at every attractive level.
3) Ideal Portfolio should not have more than 10 to 15 scrip
This is one of the most important things which small investors often don’t care about while building portfolio. Some people invest their entire capital in just one or two scrip while others go on buying large number of scrip. Sometimes they have more 50-60 different scrip in their portfolio which is not at all a good strategy. A large number of scrip in one’s portfolio has many demerits of its own. While over-exposure in just one or two companies is too risky as your entire fortune is linked with those companies only.
Therefore, ideally a good portfolio is one in which there are no more than 10 to 15 different companies. Investment should be spread across those sectors which are out performing the market or have a great future ahead. Never invest in many companies in the same sector. Just one or two well-known and profitable companies from each sector should be picked.
4) Have Patience
Give some time to your investments to grow. Never act in haste either to buy or sell. Usually large-cap move up immediately if market rises. But mid-caps even the quality mid-cap take time to rise. So give adequate time for your investment to rise. Sell or book partial profit only when your investment gives very high return.
March 13, 2008
Time to start Shopping!
Today sensex closed at 15357 which is lowest closing since
I think this is the time one must start buying the quality stocks whether large-cap or mid-cap. Especially those waiting on the sideline with intention of entering the market should start putting at least 20% of their capital. They can invest further if the market falls even more. But one must start investing only if they have one year horizon in mind because this is not a trader’s market anymore nor can one invest with a view of doubling their capital instantly.
My Favorite Stocks for Long-term Investment:
Everest Kanto
Reliance Inds.
GMR Infra.
ICICI Bank
HDFC Bank.
Stocks for Short-term trading:
Buy Cairn
Sesa Goa can be traded in the range between 2900 to 3600.
Everest Kanto can be traded in the range between 276 to 310.
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