Texmaco & Reliance

Seems to be a good bet in the rail space. They manufacture wagons for Indian Railways and have a good order book. Recent results (Q4 Mar 2008) were superb and sales have doubled over the financial year 2007. At Rs 1550 the stock offers a good opportunity to counter rising oil prices and could be accumulated at every decline (about Rs 1400 would be a good rate to BUY).

Another stock to watch and buy on major corrections in the market is Reliance Industries. Its gas projects will come onstream in a few months and contribute to the top and bottom lines.

Real opportunities

The next destination for investment in the real estate space around Bangalore is definitely Bidadi.

1. BMRDA township project awarded to DLF and its expected that in 3-4 years we will see something come up.
2. Industries already exist in the vicinity
3. Bangalore Metro

Plots are in the range of Rs 700/sqft at present. For a holding period of around 5 years, returns could be quite good.

Watch out for the next correction

The next correction is round the corner. Prepare your buying lists and get ready to pick up some great stocks at bargain prices. This could likely be the market bottom, so it may be offer open while stocks last ;-)

Why do liquor company stocks do well in bear markets ?

Because investors who have lost money need to drown their sorrows :-)

Bunch of overpaid jokers

Why do these so called equity analysts and fund managers have jobs? They are employed using our money to tell us when is the best time to enter or exit the market or make such calls on our behalf. AMCs charge a whopping 2+% per annum in management fees for equity mutual funds which go into the salaries and perks of these characters.

And what do they do to earn this money? Parrot the line that everyone in the market who is worth their salt knows anyway. Recommend infrastructure stocks when they are at PEs of 20-30 and paanwaalas and their aunties have already bought them. Say that the market is strong and will do well in 2008 when the subprime crisis was looming in global markets. Put out research reports on over-researched companies like L&T and NTPC. Do they deserve the money they are gobbling up?

Medium term strategy

There is unlikely to be any spectacular recovery in the markets. On every bit of bad news, there is likely to be severe correction which might take the Sensex down to 12000 or below levels. However, volumes are thin and it means that shares are moving from weaker to stronger hands.

The strategy for the long term investor is to identify a list of good stocks (might be some from the existing portfolio which are beaten down) and buy in small quantities on major falls in the market. My sense is that this phase will last atleast till July and post that, we could see some signs of recovery.

Budget headlines

So the FM has presented a partly populist budget as some quarters feared. The populist fare dished out on the agricultural loan waiver was viewed as a big negative and also its effect on the bottomlines of PSU banks. However the budget says that it has provided for the write off so this might mean that PSU banks do not get impacted. The fine print will have to be studied.

On the positive front, the FM changed the individual income tax slabs to give a considerable tax break. The take home pay of India's middle class has gone up and this should increase consumption and savings as well. Good news for industry and the financial sector as well (though the short term capital gains tax increase put a dampener on celebrations - my view is that is will curb speculation and encourage investment, which is good).

The reduction in excise duty on things like small and hybrid cars also spells good news for the middle class and the automobile segment. In addition, a whole list of consumer products from footwear to plasma televisions have got cheaper. All this should aid the consumption story which should drive production and eventually the capital goods industry as well.