9 Month Update

Happy New FIN-Year !!
Are you thinking of joining the party seeing my 25th Jan portfolio? It might not be very wise !
Sensex and Nifty distract all and I am also in that “all”. Last week was a sterling show of strength. Have you lost out in the gain? Not really. If you check we are still 18% down from July ’08.
Can it run up more ? sure it can as I believe the fair value of the sensex around 12-13 K. if it shoot up to 12K I would wait for it to correct till around 10K to buy and if it goes down from this level I would wait for 8.5-9K to buy. Can you start buying now , sure. On a day when the Sensex is down 300-400 points you can pick up some good companies. If you take a 1-2 yr horizon companies like Ashok Leyland at around 20 is very attractive but I would wait for it to dip before I buy.

Oct-Nov was a good period to buy. Companies like SAIL, RIL, TISCO and M&M have given returns of anywhere between 30% to 90% returns! It is almost impossible to time the bottom, but if you find great value it is time to buy. In the period of Oct-Nov the downside was around 10% but the upside seemed more than 40-50% so it was a buying period.

There are mails floating around speculating that Sensex’s new high might be at 37000! can it happen sure it can but first we must go beyond the 21K of 2008 and I don’t think that will happen in a hurry. It would also be a terrible thing to happen. Look at Japan, some years back it was at 40K and now it is bouncing along the bottom of around 8K. The 40K high might never be reached again.

MFs are again becoming active and trying to woo the retail investor. I just cannot understand this mentality. How can you just give someone your hard earned money and do what can be easily be done by you. It just takes 3-4 hours a week to do some basic research and buy good stocks. If you are hard pressed for time and cannot spend even these 3-4 hours per week then sure, go ahead, and give your money to MF managers. If you are planning to invest then I would suggest that you wait for the results to be out this month before deploying fresh cash. Price/Earnings, Price/Book and Price/Cash are some basic indicators to go by before picking up stocks. Current P/E ratio might give wrong inputs as the price is low and earnings are of previous quarter. P/B and P/C are still good. In the lows of Oct and March some companies like Indiabulls Realty were at prices lower than cash! Such valuations are worth dying for. There are still quite a few companies at such valuations. You just have to find them and read up on them to ensure that your investment is safe.

Note - My value picks are beating the Nifty by more than 9% !

Happy Investing.

8 Month Update

A very happy Holi to all. As the markets were closed these last 2 days, I took the liberty of updating this page 2 days after the 9th. I am happy I delayed it as a swallow has been sighted and it may be the harbinger of spring and an end to the long and cold winter. The last 2 days the US markets are surging. Most markets across the world had fallen more than 60% from the top and it seemed the US would also follow suit. The US markets have much more depth than any of the emerging markets and chances are that it would not go below 6500 on the Dow. Yesterday that Dow was more than 6% up and today also it has opened positive. My guess is that the US market has bottomed out. The Sensex may or may not have bottomed out. But this is a great time to buy. The best of companies fall the last and are the first to recover. So watch out for the ones that will surge 5-7% in this month or the next. These blue chips should be good to buy for the long time. Good telecom companies are still going strong. 2 wheelers sales have picked up and 4 wheelers (retail) are also showing signs of coming to life. Inflation is down to 3%. Steel industry will benefit from the pick up in auto sales. Even banks like ICICI have grudgingly reduced rates. Even the layoffs in India are almost done with. I believe that 3 more things are yet to happen. One, the Interest rates are yet to come significantly down. Two, real estate yet to collapse and three, gold prices are yet to come down. People who have made a killing in gold will slowly sell and come back to equities which are very attractive levels. The money locked in FDs will also come to equities as with lower interest rates they will not be attractive for long.
With the elections just around the corner in India and things slowly turning around, the markets will not surge up in a hurry. But Tata Steel at around 150 and SBI at less that 900 might not be available by the time elections are over. If a single party get a majority then it is surely impossible to see such attractive prices in future.

My value picks are still out performing the nifty by 0.7% while the normal ones are underperforming by more than 15% !

Wishing you a Happy Holi once again and happy investing.