Time for good days

India has just concluded a historic election. It has broken away from the grip of the Nehru - Gandhi family, which has ruled India for nearly six decades after it became a free democratic country in 1947. Narendra Modi  of the Bharatiya Janata Party led the largest democracy in the world to a landslide victory attaining a majority on it's own, and  creating a record..

Though a comfortable win by Mr Modi was getting factored in, the extent of the win got many analysts by surprise. On counting day, as results started pouring in stock markets went into a tizzy. BSE Sensex opened with a gap, reached an intraday high of 25375 - a gain of 6% from previous day's close. Such stratospheric levels saw immediate profit booking and closed the day at 24120 - a lifetime time .    

Both domestic as well as international investors are highly bullish on India now as they view the new dispensation as pro growth and having the ability to deliver. Foreign investors have already pumped in large amount of money and are continuing. Looks like a long long bull market in on..

So what is to be done . As I mentioned in my earlier post, those who are invested should hold on . For those who want to enter can wait for some time . By such time contours of the new government formation will be clear and we will start getting a perspective on the govt's priorities. Technically also stocks are almost at overbought levels. Market may not correct much from here. At best it may be side wise for a while before it starts rising again. Those with a little bit of appetite for risk can start to buy slowly.

Buyers are giving IT and pharma stocks a pass at present as most expect the rupee to appreciate and hence lower the earnings of these sectors. But, like the stock market the currency market also has factored in a Modi govt. and hence any further appreciation will be limited. With a bull market in place  valuations of these sectors are bound to go up. Hence these are good contra buys at this juncture.. It is better to stay with leader like TCS and Infosys.

Disclosure: I intend buying these stocks.

Until my next then

Happy investing

Basudev

A new beginnng

Expectations from Indian economy at present are indeed very  high.  After a spell of  degrowth lasting for several years things are now looking set for a  change. Expectations are the  BJP led NDA will be able to muster enough majority to form a stable government at the centre without the push pull of parties which are not natural allies to the main party. It appears that all the parties within the NDA have got into a pre poll alliance. This is important  and is more workable than say an alliance solely to ensure formation of government by a minority party. Fashionable also are such arrangements  as "support from outside". "issue based support" etc. These serve an important purpose though, in that , it prevents a premature  election , saving a wasteful expenditure of the nation. For some expectations are even higher. They expect BJP alone to muster a simple majority.

Numbers are not the only factor which has built up the tempo. It is the belief  that  the  NDA  led by its prime ministerial candidate will deliver growth. Investment will pick up particularly in infrastrucure. Power sector will receive priority. Rural income will receive a boost which in turn will increase consumption. With agricultural  productivity increasing, the crippling food inflation will fall. This will ease the interest rate situation. India is already turning into an attractive investment destination. A great deal of foreign inflow has already taken place. Rupee will therefore appreciate and considering that India is import intensive, this will be beneficial. Policy action will be fast. Therefore if things pan out as believed  we may be in for a long bull market.

It is therefore time to make a new beginning.  Retail investors have been practically out of the market for several years due to unfavorable market conditions. Most midcap and small cap stocks which are the favorites of retail investors, have miserably underperformed.  Only the well managed. large companies have been  able to keep  their head above water. Broad based buying has not started as yet. Only selected heavyweights have seen large scale buying.  If the results on May 16 turns out to be positive then there may be an initial frenzy. Traders may latch on for short term gains. Investors need to keep their heads cool and wait for some correction to come. All the stocks mentioned in this blog earlier are still investment worthy.and can be bought after some correction..These stocks have already given handsome gains.

But if no party gets a clear majority there will be a vicious correction. One has to be prepared for that. That we will know on May16.

There is a caveat though. Global factors will as usual have an impact on Indian markets. And keep a tab on the weather.  But then stock investing is all about risks and returns. For those with an appetite for risk, it will be worthwhile.

For those who want to start right away, and want some action here is a stocks which have not appreciated much or corrected in the recent past. Downside risk is minimum and has the potential to appreciate.

Lupin : Indian Pharma companies, barring a few with management issues have done remarkably well even in adverse circumstances. Lupin's stock price has been in a secular uptrend for the past several years and in terms of business strength it is well entrenched in the industry. It has immediate support at around  955 level.and can be bought closer to this level. .
Disclosure : I have bought this stock.

Until my next then

Happy investing

Basudev
 



   

From hype to hope to reality

Indian Markets Friday rose by about  3% to close at an all time high. of 22994.for sensex and 6859 for the nifty. While markets have been inching up for the past 7/8  months on the expectation of a strong government at the centre, Fridays move indicates that its time to factor in a decisive government at the centre  post announcement of election results on May 16. For the past 3 years or so markets were depressed due to a host of factors,  which I had explained in my previous posts. Mainly, lingering inflation inspite  of  central bank's  rate tightening measures,  absence of growth push, a rapidly falling currency, vanishing investor confidence, government finance deficits etc. India's  consumption story continues and corporate India has performed well . And so it seems we may be at the bottom of the cycle and may be on the path to recovery.

If the NDA gets clear majority and forms  government at the centre  India could indeed be on the highway to growth. This is what the market perceives and will find reflection in stock prices which will then rise. However the results are on May 16 and exit poll outcomes will be out immediately after the final phase of the poll concludes on May 12. The intervening period might see high volatility.

Markets have already gone up substantially. Friday's rise can be attributed to short covering as bears start to square off their positions in anticipation of a bull run, which may well happen. But it will not be wise to enter the markets now. Those who are invested are already in profit and may hold on. For others it is advisable to wait for the election results and look out for opportunities to invest. Priorities of the new government will have to be seen. What will the new budget have in store etc. As usual I'll come up with stock ideas from time to time.

But of course there is a worry on the weather front . Though the monsoon forecast at 95% should not cause panic, there is a greater concern on the "El Nino " front.. Any untoward development anywhere globally will have an impact at most  places. Thing could get quite nasty in terms of losses to agriculture, disruptions etc. These are risks which come with investing for higher returns.

Until my next

Happy investing

Basudev