Impact of the downgrade

As expected Monday lost another 300+ pts after S&P announced it's downgrade of US. Markets may continue to slide more depending on global cues. At the time of writing this post, Dow and Nasdaq are down 2.3% and 2.9% resp. Indian markets may open weaker on Tuesday. But it seems selling in the Indian markets may abate soon. As mentioned earlier investors may look for picking up stocks in a staggared manner. Stocks mentioned earlier continue to hold promise and are a buy on every decline.

Additionally, panic in the markets, as are being seen now, not only throws up profitable opportunities but relative outperformers are discovered also. Such corrections help us identify strong stocks which will outperform. Following are a few such stocks. They have declined only minimally so far and when the market turns they will surely give better returns. Fundamentals also support their outperformance.

ABG Shipyard, ACC, Dabur, GVKPIL, Idea Cellular, Petronet LNG, Powergrid

One can also consider BHEL. In view of its disinvestment plan it may be better to wait and buy the stock through its public offer. However if the price falls further one may even buy from the secondary market.

Disclosure: I hold all the above stocks except BHEL which I intend buying around 1600
level/through public offer.

Happy investing

Basudev

Eventful week - Time to bargain hunt

Last week the markets gave the jitters literally. The sensex lost nearly 900 pts. and the nifty nearly 270 pts. As it is, investors deserted the markets after the last rate hike fearing a slow down in the economy. Such fear is not unfounded. Indian corporates are going to face margin compressions and it will be an uphill task to maintain bottomline growth.

With languishing markets, Govt's plan to raise money through disinvestment is already in a mess. Two big ticket disinvestment programs, that of ONGC and SAIL are in the back burner. Which means keeping deficits within target is going to be elusive. This has a direct bearing on how much Govt can spend on development. So much for infrastructure developmet. No wonder infrastructure stocks are a thoroughly crumpled lot.

On the international front S&P's downgrading of America is expected to have some effect on India. If debt servicing costs for America indeed goes up, it will have to cut expenditure. This will impact our exports both goods and services.

However in such a scenario commodity prices will also climb down and this includes Oil in particular. This is going to augur well for India as we can see inflation cooling off. This will prompt RBI to ease up on rate tightening. If that happens we can see our markets rejoicing in no time.

The crucial thing to do therefore is to keep an eye on commodities with crude in particular focus.

Now that markets have corrected significantly one can start accumulating blue chips
and other growth stocks. Sure prices may erode further, but thats a risk one has to take if one has to be in stocks. Over a period these will deliver profits. The stocks mentioned in this blog are still in profit/or a minimal loss inspite of the recent carnage. Additions can also be made in these. Few more stocks which can be money compounder are as follows

Coal India, L&T, JP Associates, Tata Steel, SBI, Infosys/TCS

Disclosure : I hold/intend to hold the above stocks.

Happy investing
Basudev