In a candid interview with CNBC-TV18’s Udayan Mukherjee, Rakesh Jhunjhunwala, one of India’s most respected equity investors, said the Sensex could go up to 20,000 and then slip into a trading range between 15,000 and 16,000. The benchmark index won’t hit 21,000 in a straight run though, the Big Bull said.
“If the Nifty breaks 4650 decisively and holds for a week or so, it could hit 5900-6000,” Jhunjhunwala said. The markets would consolidate between 4,000-5,000 for three-four years, he added.
The correction seen in the latter part of 2008, he said, was a part of a major bull run that continues and which started in September 2001. “The bull market started in September 2001. We had the first leg up to September 2002 after which there was a correction. Then it started from April 2003, that leg lasted till 21,000,” the ace investor said. “That gets corrected back now to 7,500-8,000 and now we have resumed that bull market. So we can go to 20,000 and again come back to 16,000-15,000, make a range and then make a move which goes above 21,000.”
Here is a verbatim transcript of the exclusive interview with Rakesh Jhunjhunwala on CNBC-TV18. Also watch the accompanying video.
Q: We spoke on the day after the election results. I do not think even we imagined the market would be here. What is the screen telling you now?
A: The screen is telling me that the bear correction of the larger bull market in India is over. If the markets do not break below 4,000 levels in the next six-nine months — and the screen is telling us they won’t — then surely the fall from 6,000 to 2,500 for the Nifty and from 21,000 to 7,500-8,000 for the index was just a correction in the longer-term bull market in India. Actually, in my opinion, the correction started in September 2001 because the real bottom the market made was post-September 11, 2001 and then the market went up to 3,500 and had a historic correction back from April 2003.
Despite people’s apprehension and doubts about the economic scenario worldwide, it could be that the fall [in 2008] was just a correction. I also feel so because of the way the [subsequent] rise took place with its tremendous breadth, tremendous pace with good volumes — but with a lot of cynicism and lack of participation among the larger people.
Q: You do not agree with the consensus feeling right now that we should be scared by the pace of the rise. That we are now approaching a mini bubble kind of a situation?
A: You first asked what the screen was saying, you never asked me what my opinion was.
Just like others, there is a fair amount of doubt in my mind too. Internationally, things are not clear at all and I do not think that the downturn in the western economies — even if there is some kind of an improvement in the next 12-24 months — has really peaked. So with that knowledge about the world economy, it clouds the judgement of what can happen in India.
However, If you look at the other side of the story, I see no reason why — if Indian software exports grow by 10-15%, commodity prices hold at reasonable levels and we have good government policies — India cannot grow at double digits. We have large internal savings. If we do well, the world capital will be at our doorsteps, there will be no lack of capital if the government is able to facilitate investments. So those are the two sides but I am more tilted towards the second side because in the initial stages, they say, bull markets always go up on a wall of worry and bear markets always go down on a ray of hope.
The fact is that market is just going up in an unexpected pace and everybody is worrying. Surely I am also apprehensive about the valuation and the pace but markets are markets.
Q: When you look at the screen, what worries you? Does it worry you that valuations are far ahead of fundamentals or do you see the kind of participation or mania that you saw in 2007 or that is not visible just yet?
A: Not at all, not even 5%. I don’t go to any cocktail party where stock markets are even talked because everybody is totally left out. And the futures positions are indicative, the number of calls you get, the apprehension that people have in the buy stocks — I don’t know where the buyers are coming from but I don’t think there is even 20% of the participation of that what was in 2007.
Q: Will they all get sucked in you think before this rally tops out, people who have been sitting out?
A: It is very difficult to leave a burning cigarette in a rising market. Everybody will ultimately join. I don’t know how many calls I got when we made a 52-week high. Normally, a lot of channels call me, no channel called me to get an opinion when the market was at a 52-week high. I don’t even know how many people know we were at a 52-week high.
So I think crowd psychology-wise or sentiment-wise, I don’t think at all we are anywhere near any kind of a top.
Q: Are you trading yourself with a bit more caution because you were saying you are also in two minds right now or are you trading the kind of volumes you were trading in the big momentum of 2007?
A: I don’t think I am trading the way II was in 2007. After all, I am a human too and I am also affected by what my thoughts are. However, I am far surer about the [country’s] longer-term growth prospects and the strength than most people.
Q: Why did you pick out the level 4,000? Any significance or do you think below that…
A: Instead of 4,000, I would say 3,800 or maybe even 3,600 — no level is sacrosanct — but I would say the level where this market made a gap, that should not be violated on the downside. If it breaks 4,650 decisively, that’s what my technical analyst tells me, that market will make or at least challenge the previous high of 6,100.
Q: Do you think 6,100 is possible in 2009?
A: Did you think 4,500 was possible?
Q: I am asking you.
A: Ok. What the technical analyst says — and I also think — if it breaks 4,650 decisively on a weekly basis and holds it for a week or two, then surely we can go to 5,800-5,900-6,000 levels. We could go there, then come back to 5,000-5,200 or maybe 4,800-4,500, make a range and consolidate for a year or so and then make a new high. Another scenario: we break 4,650, we are going to go to 5,850-5,900-6,000, come back to somewhere around 3,300-3,400 and maybe spend three-four years there.
Q: Do you think that’s also possible — that the market goes there, halves from there and then spends a big…
A: It happened in 1991. So at this moment, I won’t rule out any of the scenarios but I am more inclined towards the first that we will reach 5,800-5900-6000 and then we consolidate — maybe in the 4,500-5,000 or 4,600-5,200 or even 4,000-5,000 range for the next 12-18 months. Then we go into a new high — 6,100 — and go upwards or we go back to 3,000 to 4,000 where we spend two-three years to resume higher.
Q: What is your best guess for the rest of 2009? Do you think we will actually go to 5,800-5,900 in 2009?
A: I have put a lot of caveats there — that the index should cross 4,650 decisively on a weekly basis, hold for a week or two, then I think it should. I don’t know where and what range the markets go into, but they will go into a range, spend time and only then are we going to see a big move. We have already seen a big move, we don’t know whether this move will end at: 4,800, 5,800, 5,900, 6,000? I think it will surely end before 6,000.
I do not think the Sensex will cross 21,000 in a straight line. We have to correct and we have to make a range and only then we can have the next move.
Q: Range in terms of price or time?
A: Price.
Q: And that range according to you is?
A: Who knows where it will be.
Q: What is your best case?
A: I think it will be anywhere between 3,800 and 5,000.
Q: That big a range?
A: The range could be narrower but 3,800 would be the bottom and 5,000 would be the top in that range. The range could be 4,000 to 4,500, it could be 4,500 to 5,000.
Q: After that you think a bigger bull market will commence, which goes to a new high?
A: The bull market, which has started in September 2001. We had a bull market up to 2008, we had the first leg up to September 2002 after which there was a correction. Then it started from April 2003, that leg lasted till 21,000.
That gets corrected back now to 7,500-8,000 and now we have resumed that bull market. So we can go to 20,000 and again come back to 16,000-15,000, make a range and then make a move which goes above 21,000.
Q: Right now what sums up your state of mind: wildly optimistic, terribly and totally bullish or cautiously bullish?
A: All three.
Q: With an accent on what, the caution or the bullishness?
A: I am cautious.
Q: Why? You said yourself that nobody is participated; the gaon is not into stocks.
A: I am also part of the gaon.
Q: You are a sophisticated member of the gaon.
A: Even the sophisticated ones are caught.
Q: What is making you cautious? You said valuations are not crazy and who are we to say valuations are excessive? Is it global cues which you think may turn?
A: Yes, it is the sheer psychology of the fact that the global economy is in a terrible downturn. That is put into our brains.
Q: It is not the experience of the horrific 2008?
A: No, not all that. We have had more horrific experiences.
Q: Have you? 60% down in one year?
A: Yes, why not? ‘92, though I made a lot of money back then by shorting but we also 2000, which was the worst year when from 6,000, you came back to 2,900.
Q: So the fear is global, nothing else?
A: Yes, the fear is global.
Q: There has been so much talk about how much of the next move will be led by policy initiatives, Budget, government formation etc. do you think the Budget is that big an event?
A: No, I don’t think so. Market is a constraint of so many ingredients. Therefore it is not that a single ingredient by itself is going to be the decider. I don’t think the Budget is very important from the longer-term point of view. Surely it is important because it is the first serious policy statement of the new government. But I think people distinguish the policies of government from the apparent policies and the unapparent policies; apparent reforms and unapparent reforms. I think for longer-term unapparent reforms are very important.
Today I read in the Financial Express that now they will put all the applications for environmental clearance on the net. There is going to be transparency. If you do that and if you have proper land acquisition laws, so much investment will get speeded up into this country which is far more important than any statement that Finance Minister (FM) makes or even the allocation of 20,000 crore for infrastructure spending. I think this change is worth 2 lakh crore. So I think these are the unapparent reforms which are not in your mind but they have a slow effect; where you computerize things wherever the bureaucracy is dealing with the citizens, agriculture, study of subsidies, removal of anarchic clause. These are the reforms which - Indian Telegraph Law which has been in existence in 1885 and today is 2009, a modern company law. I think so many other factors are there, policy initiatives in agriculture where you look upon agriculture as a business and where we can make these businesses profitable for the farmer, the occupation. So I think unapparent reforms are extremely important.
Q: Is the market as discerning as to understand the value of those kind of reforms that you speak about?
A: I think so. Over a period of time all long-term investors will.
Q: What is the market pricing in in your eyes from the Budget this time around?
A: Maybe it is pricing out a lot of the disillusion or the alarm or the sheer fright of what could happen in the world economically then commodity prices have picked up that has bee priced in. I think also people are expecting dollar weakness that is reading to money in emerging markets. I think there is some paint-up demand and I think there is a lot of selling in panic. Mr Ramesh Damani’s father used to say, “In a bull phase, shares zameen mein chale jaate hai aur bear phase mein zameen se aajate hai.” So the buyer is there, he is invisible, we don’t know who he is and I don’t think that all the qualified institutional placements (QIPs) will go through and I don’t think that QIPs are ultimately going to lead to sensible money being lifted out of the markets.
Q: You don’t think all the real estate companies will manage to raise how much they want to raise?
A: I don’t know about the real estate companies or infrastructure companies or whatever companies. I don’t think that all the QIPs that have come out for money, are going to go through despite wherever the market is.
Q: How would the market take that if some of those QIPs bombed?
A: Fair enough. I would be happy. I have 20,000 market cap I want to raise Rs 5,000 crore. You haven’t earned Rs 2,000 crore in your life, you want to raise Rs 5,000 crore. The cumulative profit in life is not exceeded Rs 2,000 crore.
Q: Do you think there will be any tweak with the general capital markets taxation structure in this Budget, long-term capital, short-term capital or even STT for traders is likely in your eyes?
A: I don’t think that STT is entirely unjustified tax. I think the fair thing – I don’t think to reduce the rate marginally, bring it to more reasonable levels and to allow people who are not investors but business traders to allow that as an advance tax payment. I think that is the more fair thing. I don’t demand evolution of STT.
Q: But no change in the capital gains tax structure?
A: That is linked to STT. You impose the STT as an alternative to the capital gains which is a far better and an easier system then you make the rate reasonable for STT, continue it and allow the people who treat it as business income to treat it as an advance tax payment and make that system. So that when a person initiates that trade, he can say whether it is a capital gain trade or it is a business trade and you cannot change it, one entity can have only one or if he does it, he has to specify before that takes place.
Q: You don’t think all the real estate companies will manage to raise how much they want to raise?
A: I don’t know about the real estate companies or infrastructure companies or whatever companies. I don’t think that all the QIPs that have come out for money, are going to go through despite wherever the market is.
Q: How would the market take that if some of those QIPs bombed?
A: Fair enough. I would be happy. I have 20,000 market cap I want to raise Rs 5,000 crore. You haven’t earned Rs 2,000 crore in your life, you want to raise Rs 5,000 crore. The cumulative profit in life is not exceeded Rs 2,000 crore.
Q: Do you think there will be any tweak with the general capital markets taxation structure in this Budget, long-term capital, short-term capital or even STT for traders is likely in your eyes?
A: I don’t think that STT is entirely unjustified tax. I think the fair thing – I don’t think to reduce the rate marginally, bring it to more reasonable levels and to allow people who are not investors but business traders to allow that as an advance tax payment. I think that is the more fair thing. I don’t demand evolution of STT.
Q: But no change in the capital gains tax structure?
A: That is linked to STT. You impose the STT as an alternative to the capital gains which is a far better and an easier system then you make the rate reasonable for STT, continue it and allow the people who treat it as business income to treat it as an advance tax payment and make that system. So that when a person initiates that trade, he can say whether it is a capital gain trade or it is a business trade and you cannot change it, one entity can have only one or if he does it, he has to specify before that takes place.
Q: You track Indian Oil etc for a long time though you don’t own them; do you think there will be change in the policy this time around or unlikely?
A: My personal judgement is it is unlikely.
Q: Why do you say that?
A: Because it will require immediate raise in prices of petrol and diesel and no government wants to give a message in its first three months of power but they may change it. If I was there to decide, I would do it tomorrow because we never realize one thing, whether I pay and you pay, it is the government of India pays and I think this kerosene subject is incredulous I don’t know who is using this kerosene and we are entitled to all of this. So at least they should reduce - all of these subsidies should be below the poverty line. I think petrol pricing - at least they should free it, why do you want a control on petrol prices.
Q: But you are saying even that he may not do?
A: He may do that, there must be some tweaking, he may do that – I think petrol and Liquefied Petroleum Gas (LPG) should be decontrolled immediately. Liquefied Petroleum Gas (LGP) all are using it. I think for diesel – they can offer a subsidiary of Rs 1-3/liter and for kerosene – I don’t think they will do it but if I were to decide to raise it tomorrow, it should be done today. Q: You know he won’t do it?A: We don’t know.
Q: Do you think the optimism post the electoral result is justified on infrastructure sector?
A: Over a period of time surely the optimism is justified and I am an interested party. Similarly there will be tremendous build up in Indian infrastructure - you cannot have the companies tomorrow which can build this infrastructure because there is prequalification, there is experience, capital requirement lot of barriers and volumes will surely give them very good profitability. And also a lot of Chinese companies and all come to India, they complete failed. I am told that Indian companies are doing well internationally also. So I don’t think this performance was unjustified.
Q: Do you think valuations today are also pricing in too much of optimism for infrastructure?
A: I don’t think so because some of them were beaten very badly. Largecaps like Larsen & Toubro (L&T) and all have fancy valuations but the other stocks were beaten up very badly. Nagarjuna Constructions has gone from Rs 375 to Rs 38.
Q: Quadrupled from there or trebled?
A: I still think it is 1/3rd from Rs 375.
Q: Is that the right way to look at the sector?
A: It is not the right way but it is also not the right way to look at it from Rs 38.
Q: In absolute terms do you think valuations are run ahead of fundamentals or they justify current price?
A: Who knows who justifies value and valuation? Is there any mathematics professor who can give me a formula that this is the right valuation? I don’t want to comment on the valuation of any sector. If you feel so, don’t invest.
Q: What about real estate? You have not been very bullish on that space, has that view changed over the last six months or so?
A: I am not bullish.
Q: Why do you not like the sector at all, they have started cutting the prices, balance sheets have been repaired?
A: Because even if they have to sell all their projects at their projected prices, the current market caps and the debt more than justify it and the present land prices cannot replace that. I am a real estate company, I have 10,000 acres of land acquired twenty years ago, then to bring into my valuation, I am selling 2,000 acres every year, you priced it in. Acquire that 10,000 acres land again at the same price and show me.
This is not Hong Kong where government is giving land every year 500 acres, 200 acres. I have no investment in real estate space and it is too volatile also.
Q: Are you generally worried about where valuations have reached or you think that is not necessarily the case at this point?
A: In midcaps the valuations are still not anything which is a whack out of the world and we cannot look at valuation isolation – when I initially came into the markets, if the price to book was very high, I was worried - for example a company like Hindustan Lever. But the fact is that I have seen so many studies when return on equity (RoEs) are high, price to book is very high. So I just cannot look at this company has 20 P/E and it is very expensive this company has 8 P/E and it is not expensive.
Q: But the fact that so many companies are rushing in to raise capital, does it worry you?
A: But a lot of them are on the verge of bankruptcy. They have no option and of course there are some good ones – if you had gone to some of the companies, for example if the company’s price was Rs 250 at 2007, they wanted Rs 375. Now if the price is Rs 90, it would be at Rs 85. So they are doing it because they don’t have choice and some are having old habits, money is available, take it, ambitions have no limits.
Sunday, June 28, 2009
Shankar Sharma's Speaks........A Bear......
The stock markets are living in extraordinary times. During the past two years, the indices made headlines for all reasons right and wrong. The Sensex made a historic high of 21,000 in January 2008 then pummeled all the way to 8,000 levels in nine months flat — in October 2008. Between March and May, it again made headlines for almost doubling from its lows, a breath-taking move that included a momentous upper circuit-locking move for the first time in history.
Is the vicious bear market over? Are we in a bull market? Shankar Sharma, Managing Director of First Global — one of the few analysts who timed the market better than most in 2008 — said the rally may come to an end with a few weeks’ time or a month or two. “I suspect we continue for about a month but globally there are enough fault-lines appearing in this rally. So the reverse of green shoots is probably beginning to appear in the form of rising bond yields and in the form of economic data still not being uniformly robust,” Sharma said in an exclusive interview with CNBC-TV18.
The best trade from hereon would be the metal and oil space, Sharma said. “The best trade globally right now is the commodity space, which is the industrial metals space. For oil, we have been bullish from about the early USD 50 per barrel range,” he said.
“The other aspect is the weakness of the dollar,” he said. “In the short run, the weakness of the US dollar is great news for EMs both in terms of liquidity as well as inflating the price of their natural resources. There are very many places in this market which are resources companies: Reliance is a quasi-resource company as are the Tata Steels, Hindalcos of the world. You can play the same trade in India, the tape is telling very clearly that the metal space is the one that will outperform for a reasonable while to come. Now, I am talking about weeks and not really months but weeks are good enough to make money in the markets.”
Q: Is the bear market over, you think?
Sharma: I don’t want it to get over ever because in a bear market we make 100% in two months, which is impossible to make even in a year in a bull market. Why on earth would we want this bear market to get over? This is terrific and amazing — we see industrial production come in at 1.4% and that’s an amazingly high number in context of the -1% etc that we were running at. So we want the bear market to continue because we can make money lot faster and quicker and a lot more easily than in a bull market.
Q: Do you think a durable uptrend has started despite the moves of the last few weeks?
Sharma: Go back last year, when we were genuinely very bearish and I do remember having expressed a certain notion that there was one big rally in this market which would take us close to the highs — 16,000-18,000, something like that. That was probably after the October meltdown had happened. The fact that we are in one shouldn’t surprise us, but the fact that it has done it so quickly is a matter of surprise without any doubt. However, given the magnitude of the fall last year, there was one huge rally in the market and that’s exactly what we are seeing just now.
Going back to 2007 I was a fearless bull, and in 2008 I was a fearless bear. January-February-March 2009 I was a fearful bear and now I am a fearful bull — that’s the evolution.
We have played the markets reasonably well over the last four weeks but particularly post elections because to our mind being cued prior to the elections was fraught with danger — because just as we saw a limit-up day you could have easily seen two limit-down days had something like Mayawati come to the Centre etc. So there is no point in being extra smart in markets, sometimes you just let the first move happen and wait for a reasonable amount of clarity to happen and that big risk got taken out on May 18. Since then, our view has been that we are going to see strong uptrend particularly in the second-liners. That’s precisely the way we have seen the markets play out. I suspect we continue for about a month but globally there are enough fault-lines appearing in this rally — and any reasonable analyst must take note of those factors, just as reasonable analysts should have taken note of the green shoots in February, March or April.
So the reverse of green shoots — I don’t know what the word would be for that — is probably beginning to appear in the form of rising bond yields and in the form of economic data still not being uniformly robust. However, commodity data and commodity prices being extremely robust can probably lead to a similar situation to what we saw in the middle of last year — May-June-July — when the world was clearly slowing down but crude, copper, aluminum, commodity stocks, steel stocks were all rocking. Even inflation was doing well. And we all know how that ended. Somehow I feel we're headed in a similar direction.
Q: What about the bullish aspect of it. One month you said — you think it’s conceivable that the index goes to 17,500-18,000 before it tops off or are you saying the index won’t move that much but the broader market will do better even from here if there is one month left in this rally?
Sharma: That is the side to which I would go to: the latter in which you will not see the narrow indices — Nifty and Sensex — do very well. They will be up but they won’t be up as spectacularly as the second-line indices would. That’s pretty much the pattern we are seeing in the last four weeks or so, three weeks since the election results came in. The Sensex has not moved up as much as the second line index has, so this big disconnect in performance will continue till the Budget or a tad thereafter. However, that’s precisely what the worrisome thing is — when you see rallies of this kind to enjoy, just as we enjoyed the November 2007 rallies or the Jan-Feb 2000 rallies. We are in that situation. I don’t think it’s like doomsday just yet but I think we are getting close to that probably in about four-five weeks time.
Q: Would you be still riding it from your bullish positions or would you be slowly starting to take profits?
Sharma: Our view is that the best trade globally right now is the commodity space, which is the industrial metals space. For oil, we have been bullish from about the early USD 50 per barrel range — but remember not for any fundamental reason: we don’t think oil demand bounces back in any meaningful way for a while to come.
However, the markets are not just about fundamentals, something went from USD 150 per barrel to USD 35 per barrel, bounced back, the trend changed, you ride that trend. I have said earlier many times that we have crude and an effective way of looking at markets which is that momentum is the only thing that works perennially, valuations and fundamentals don’t necessarily work all the time. The momentum was looking very strong at USD 50–USD 55 per barrel and it still continues to look strong. We will see when that begins to slacken and that rally will still continue. So industrial metals, copper or aluminum, the rally in those will assist stocks belonging to those sectors and oil on its own, we think USD 80–USD 85 per barrel is pretty much on the cards.
The other aspect is the weakness of the dollar — the way it is behaving lately. I am not making an outright case for that but it is possible — I reckon 50:50 chances — that if the dollar makes a new low against the Euro in which case again you will see attendant issues emerging out of that which is commodity prices are very strong but inflation coming back strongly. Most importantly, US bond yields going further beyond to where they have reached. So this cookie probably can fall apart with a combination of these factors that I am outlining which I think might take a couple of months to play out or even maybe six weeks or three months to play out.
Q: So in your eyes, is it conceivable that the dollar-Euro goes to between 1.5-1.6, crude goes to USD 85/barrels in the near term, and what would that mean for emerging market (EM) equities which is the asset class which most we are concerned with?
Sharma: I have always maintained one thing which is what people kept asking me through the bear market, what would force you to change your view? What fundaments would you want to see to change your view? I said I really don’t care too much about fundamentals; the only thing I care about is the strength or the weakness of the US dollar because that determines almost everything in this world of investing. The moment you started to see that — around March-April, from 1.25-1.30 or 1.35 — momentum became strong in the fall of the US dollar versus most EM currencies and then the trade obviously changed. When the US dollar falls, EMs do well because both in terms of money flows as well in terms of inflation of basic commodities.
In the short run, the weakness of the US dollar is great news for EMs both in terms of liquidity as well as inflating the price of their natural resources, which is exactly why you’d notice last year Russia and Brazil were absolutely hot markets in the period from April till July-August — they are resource rich and do well in such situations. India is a trickier play because it is resource-deficient although there are very many places in this market which are resources companies: Reliance is a quasi-resource company as are the Tata Steels, Hindalcos of the world. You can play the same trade in India, the tape is telling very clearly that the metal space is the one that will outperform for a reasonable while to come. Now, I am talking about weeks and not really months but weeks are good enough to make money in the markets.
Q: So you are saying the favourite trade, aside of buying metals is probably still chase the Sterlite and Hindalco which haven’t topped out in the near term?
Sharma: Exactly. Our take is: there is still room in these stocks. I was telling somebody the other day: he said none of the fundamentals really support any of the trades you are recommending. I said: great, welcome to the new world of investing.
What you should do is, do your complete fundamental analysis; do it with complete objectivity and then the stocks that come out the best on those fundamentals—never buy them; stocks that come out the worst on those fundamentals, go right ahead and buy them. That’s the news paradigm, this is the new investing mantra and I don’t want to sit out of this investing mantra. I think you can play the trade and you can be reasonably nimble and get out of harm’s way. I think markets are reasonable—they give you enough chances to get out of a trade—it’s not that overnight everything collapses. There is no such thing on most cases unless there is huge catastrophe.
Q: Would you be still riding it from your bullish positions or would you be slowly starting to take profits?
Sharma: Our view is that the best trade globally right now is the commodity space, which is the industrial metals space. For oil, we have been bullish from about the early USD 50 per barrel range — but remember not for any fundamental reason: we don’t think oil demand bounces back in any meaningful way for a while to come.
However, the markets are not just about fundamentals, something went from USD 150 per barrel to USD 35 per barrel, bounced back, the trend changed, you ride that trend. I have said earlier many times that we have crude and an effective way of looking at markets which is that momentum is the only thing that works perennially, valuations and fundamentals don’t necessarily work all the time. The momentum was looking very strong at USD 50–USD 55 per barrel and it still continues to look strong. We will see when that begins to slacken and that rally will still continue. So industrial metals, copper or aluminum, the rally in those will assist stocks belonging to those sectors and oil on its own, we think USD 80–USD 85 per barrel is pretty much on the cards.
The other aspect is the weakness of the dollar — the way it is behaving lately. I am not making an outright case for that but it is possible — I reckon 50:50 chances — that if the dollar makes a new low against the Euro in which case again you will see attendant issues emerging out of that which is commodity prices are very strong but inflation coming back strongly. Most importantly, US bond yields going further beyond to where they have reached. So this cookie probably can fall apart with a combination of these factors that I am outlining which I think might take a couple of months to play out or even maybe six weeks or three months to play out.
Q: So in your eyes, is it conceivable that the dollar-Euro goes to between 1.5-1.6, crude goes to USD 85/barrels in the near term, and what would that mean for emerging market (EM) equities which is the asset class which most we are concerned with?
Sharma: I have always maintained one thing which is what people kept asking me through the bear market, what would force you to change your view? What fundaments would you want to see to change your view? I said I really don’t care too much about fundamentals; the only thing I care about is the strength or the weakness of the US dollar because that determines almost everything in this world of investing. The moment you started to see that — around March-April, from 1.25-1.30 or 1.35 — momentum became strong in the fall of the US dollar versus most EM currencies and then the trade obviously changed. When the US dollar falls, EMs do well because both in terms of money flows as well in terms of inflation of basic commodities.
In the short run, the weakness of the US dollar is great news for EMs both in terms of liquidity as well as inflating the price of their natural resources, which is exactly why you’d notice last year Russia and Brazil were absolutely hot markets in the period from April till July-August — they are resource rich and do well in such situations. India is a trickier play because it is resource-deficient although there are very many places in this market which are resources companies: Reliance is a quasi-resource company as are the Tata Steels, Hindalcos of the world. You can play the same trade in India, the tape is telling very clearly that the metal space is the one that will outperform for a reasonable while to come. Now, I am talking about weeks and not really months but weeks are good enough to make money in the markets.
Q: So you are saying the favourite trade, aside of buying metals is probably still chase the Sterlite and Hindalco which haven’t topped out in the near term?
Sharma: Exactly. Our take is: there is still room in these stocks. I was telling somebody the other day: he said none of the fundamentals really support any of the trades you are recommending. I said: great, welcome to the new world of investing.
What you should do is, do your complete fundamental analysis; do it with complete objectivity and then the stocks that come out the best on those fundamentals—never buy them; stocks that come out the worst on those fundamentals, go right ahead and buy them. That’s the news paradigm, this is the new investing mantra and I don’t want to sit out of this investing mantra. I think you can play the trade and you can be reasonably nimble and get out of harm’s way. I think markets are reasonable—they give you enough chances to get out of a trade—it’s not that overnight everything collapses. There is no such thing on most cases unless there is huge catastrophe.
Q: On a bubble meter — if I can coin that phrase — if 2007 was 9, what have the last three months been. What would the reading be?
Sharma: It’s not a bubble. Put it in context: we had a huge deflation of equity prices last year. We are seeing little bit of an inflation of equity prices this year. Even after having run-up so much, a lot of stocks are still off significantly from their peaks, which only tells you that how big the old bubble was — that even after having had such a strong run, look at so many stocks and the peak is a huge distance away. It is like running a marathon and saying: "I have come a long way", and then you look at the distance and it's just 10 miles. So, it is something of that kind that you are still a fair distance away. I don’t think this is a huge bubble. But yes, given the compression of timeframe of this move, one could argue that it is a garden variety bubble, if you will.
Q: Let me present this scenario to you, which is different from what you are suggesting and see what probability you attach to that—the market corrects but then consolidates between 12,500-15,000 for few weeks, which is just maybe 15-20% lower from here and then eventually, over the next six months, goes on to make a new high, which is more than 21,000?
Sharma: Absolutely possible. I have been around too long to say that it’s not possible, that it cannot happen. I would even go to the extent of saying that Jeremy Grantham (veteran investor and founder of GMO) wrote an interesting thing and which is that the amount of money that has been thrown at the so-called problem that may or may not move the GDP but that’s enough to move stock market. That is because, in a stock market, it's barely 30 stocks you need to move for the market to look extremely good. That’s probably what the phenomenon is across the world, particularly in emerging markets, given the fact that the dollar does look extremely weak in the short run. There is nothing to suggest that why we can’t get at least close to the highs if not absolutely make a new high — whether we sustain those highs or not, that’s another matter but you have a fair shot at it now. It can’t be ruled out.
Q: What is a more likely outcome in the foreseeable future as you see it, not beyond the next few weeks? Do you think global equities and Indian equities can rediscover a secular trend up or down or do you think we will have alternate bouts of mini bull markets and mini bear markets over the next couple of years –six months each even?
Sharma: It will be like navigating your way through molasses. Go back to October last year – we had a 30% down month. Any bear thinking that November would follow was mistaken – you could have bet on a 5% down month or an 8% down month but not a repetition of a 30% down month. So flip it around this time – May was an extraordinary month. Don’t bet on repeats of those things happening. We will need to settle down to a more gradual pace of rise and a faster pace of declines as mirror opposite to what happened in the period November to March when the declines kind of stopped getting that severe and the rallies were fairly sharp. We would probably see the reverse of that happening that the declines become quite sharp, the rallies become little bit weaker because we have already put in a close to 100% under our belt. So much as the goldilocks thing would be desired by all of us. I doubt if it’s going to be that simple that everything is forgotten and we are all friends again — bull and bear — and life goes on.
I think the challenges are still there; momentum is strong, we play the momentum game, we think we can see when the momentum ends and we think we can exit before the momentum goes out of this mini bull market, if you will. But to expect that the next three months will be as easy as May was? I think that’s being optimistic being a bull. If you were a bear in November and to think that you would make another 30% back-to-back returns on top of what you made in October, that was being optimistic too.
Q: What would you look at as a first warning sign of flagging momentum? Of course the market will move sharply maybe but in advance would you look at either the price of crude or dollar-euro or anything which can tell you that the music is beginning to fadeout?
Sharma: When global equity start to underperform global commodities that’s the first sign that I would want to watch out for because normally the twin should go in the same direction by and large. When the two begin to diverge and you can see a bit of divergence creeping in, you are seeing markets like China – India is belonging to a different planet presently and it’s on a nice high so exclude India from the basket just now – other markets have been a little bit of a struggle whilst crude has been on an absolute fire, commodities, industrial commodities have been doing well. Gold, of course, doesn’t belong to the same camp but that had an okay run from USD 880 per ounce to USD 950-960 per ounce.
That disconnect is what I would watch out first and foremost and I think you are seeing very early signs of that disconnect beginning that global equities are beginning to struggle, global commodities are rocking. I am not saying it will be an exact repeat because markets don’t normally repeat the same script that quickly but I am just saying, make sense to be cognizant of what happened in May-June-July-August 2008 – a similar situation happened. I am saying that’s the one thing I would watch out for.
Q: You started the discussion by saying you still see the broader market outperforming. Do you think that midcap have not caught up enough or because of the fact that they are still so much blow their 2007-2008 highs that they can carry on for a bit longer.
Sharma: For a bit longer. I think if we just look at the highs of most midcap names including even some largecap names there like I said not even in striking distance of their highs. Given that amount of room on the upside there is nothing to say why they can’t be up 20-30-40% in a very quick span of time. Like I said Suzlon on a good week puts on 40% so why even talk of weeks where you can do that in a few days.
Q: You described yourself as a fearful bull at this point is the accent on the bull or on the fear?
Sharma: It’s an oxymoron, right? Bulls are not supposed to be fearful; bears are supposed to be fearful because the tide is always against them. I think I am fearful. You can place equal weights on both. When I talk to folks and I tell them that you should go out and buy all these rubbish companies and they say what has happened to you? What are you saying? And I say, yes, you have to lose it if you have to make money in this market because if you had bought NTPC over Reliance Power, you were the biggest fool in the world. You have to go out there and buy companies which have greater promise of the future but less promise in the present and that is the trade we are on. When you are on a trade like that, you have to be fearful.
I am not a kid out of school who starts to believe the the goodness of markets is to make everybody rich. It is not my perspective on markets. The markets are meant to make everybody poor and only a small percentage rich. I want to belong to that small percentage. Hopefully my clients also want to belong there as well. That is why I am fearful. The kind of stocks that are going up — and not the stocks that ordinarily — would not make you sleep peacefully at night, but, that said, markets do not turn to suit your own investing philosophies, you have to turn your investment philosophies to suit what the market is asking you to do at that point in time. That’s what momentum investing is all about.
Is the vicious bear market over? Are we in a bull market? Shankar Sharma, Managing Director of First Global — one of the few analysts who timed the market better than most in 2008 — said the rally may come to an end with a few weeks’ time or a month or two. “I suspect we continue for about a month but globally there are enough fault-lines appearing in this rally. So the reverse of green shoots is probably beginning to appear in the form of rising bond yields and in the form of economic data still not being uniformly robust,” Sharma said in an exclusive interview with CNBC-TV18.
The best trade from hereon would be the metal and oil space, Sharma said. “The best trade globally right now is the commodity space, which is the industrial metals space. For oil, we have been bullish from about the early USD 50 per barrel range,” he said.
“The other aspect is the weakness of the dollar,” he said. “In the short run, the weakness of the US dollar is great news for EMs both in terms of liquidity as well as inflating the price of their natural resources. There are very many places in this market which are resources companies: Reliance is a quasi-resource company as are the Tata Steels, Hindalcos of the world. You can play the same trade in India, the tape is telling very clearly that the metal space is the one that will outperform for a reasonable while to come. Now, I am talking about weeks and not really months but weeks are good enough to make money in the markets.”
Q: Is the bear market over, you think?
Sharma: I don’t want it to get over ever because in a bear market we make 100% in two months, which is impossible to make even in a year in a bull market. Why on earth would we want this bear market to get over? This is terrific and amazing — we see industrial production come in at 1.4% and that’s an amazingly high number in context of the -1% etc that we were running at. So we want the bear market to continue because we can make money lot faster and quicker and a lot more easily than in a bull market.
Q: Do you think a durable uptrend has started despite the moves of the last few weeks?
Sharma: Go back last year, when we were genuinely very bearish and I do remember having expressed a certain notion that there was one big rally in this market which would take us close to the highs — 16,000-18,000, something like that. That was probably after the October meltdown had happened. The fact that we are in one shouldn’t surprise us, but the fact that it has done it so quickly is a matter of surprise without any doubt. However, given the magnitude of the fall last year, there was one huge rally in the market and that’s exactly what we are seeing just now.
Going back to 2007 I was a fearless bull, and in 2008 I was a fearless bear. January-February-March 2009 I was a fearful bear and now I am a fearful bull — that’s the evolution.
We have played the markets reasonably well over the last four weeks but particularly post elections because to our mind being cued prior to the elections was fraught with danger — because just as we saw a limit-up day you could have easily seen two limit-down days had something like Mayawati come to the Centre etc. So there is no point in being extra smart in markets, sometimes you just let the first move happen and wait for a reasonable amount of clarity to happen and that big risk got taken out on May 18. Since then, our view has been that we are going to see strong uptrend particularly in the second-liners. That’s precisely the way we have seen the markets play out. I suspect we continue for about a month but globally there are enough fault-lines appearing in this rally — and any reasonable analyst must take note of those factors, just as reasonable analysts should have taken note of the green shoots in February, March or April.
So the reverse of green shoots — I don’t know what the word would be for that — is probably beginning to appear in the form of rising bond yields and in the form of economic data still not being uniformly robust. However, commodity data and commodity prices being extremely robust can probably lead to a similar situation to what we saw in the middle of last year — May-June-July — when the world was clearly slowing down but crude, copper, aluminum, commodity stocks, steel stocks were all rocking. Even inflation was doing well. And we all know how that ended. Somehow I feel we're headed in a similar direction.
Q: What about the bullish aspect of it. One month you said — you think it’s conceivable that the index goes to 17,500-18,000 before it tops off or are you saying the index won’t move that much but the broader market will do better even from here if there is one month left in this rally?
Sharma: That is the side to which I would go to: the latter in which you will not see the narrow indices — Nifty and Sensex — do very well. They will be up but they won’t be up as spectacularly as the second-line indices would. That’s pretty much the pattern we are seeing in the last four weeks or so, three weeks since the election results came in. The Sensex has not moved up as much as the second line index has, so this big disconnect in performance will continue till the Budget or a tad thereafter. However, that’s precisely what the worrisome thing is — when you see rallies of this kind to enjoy, just as we enjoyed the November 2007 rallies or the Jan-Feb 2000 rallies. We are in that situation. I don’t think it’s like doomsday just yet but I think we are getting close to that probably in about four-five weeks time.
Q: Would you be still riding it from your bullish positions or would you be slowly starting to take profits?
Sharma: Our view is that the best trade globally right now is the commodity space, which is the industrial metals space. For oil, we have been bullish from about the early USD 50 per barrel range — but remember not for any fundamental reason: we don’t think oil demand bounces back in any meaningful way for a while to come.
However, the markets are not just about fundamentals, something went from USD 150 per barrel to USD 35 per barrel, bounced back, the trend changed, you ride that trend. I have said earlier many times that we have crude and an effective way of looking at markets which is that momentum is the only thing that works perennially, valuations and fundamentals don’t necessarily work all the time. The momentum was looking very strong at USD 50–USD 55 per barrel and it still continues to look strong. We will see when that begins to slacken and that rally will still continue. So industrial metals, copper or aluminum, the rally in those will assist stocks belonging to those sectors and oil on its own, we think USD 80–USD 85 per barrel is pretty much on the cards.
The other aspect is the weakness of the dollar — the way it is behaving lately. I am not making an outright case for that but it is possible — I reckon 50:50 chances — that if the dollar makes a new low against the Euro in which case again you will see attendant issues emerging out of that which is commodity prices are very strong but inflation coming back strongly. Most importantly, US bond yields going further beyond to where they have reached. So this cookie probably can fall apart with a combination of these factors that I am outlining which I think might take a couple of months to play out or even maybe six weeks or three months to play out.
Q: So in your eyes, is it conceivable that the dollar-Euro goes to between 1.5-1.6, crude goes to USD 85/barrels in the near term, and what would that mean for emerging market (EM) equities which is the asset class which most we are concerned with?
Sharma: I have always maintained one thing which is what people kept asking me through the bear market, what would force you to change your view? What fundaments would you want to see to change your view? I said I really don’t care too much about fundamentals; the only thing I care about is the strength or the weakness of the US dollar because that determines almost everything in this world of investing. The moment you started to see that — around March-April, from 1.25-1.30 or 1.35 — momentum became strong in the fall of the US dollar versus most EM currencies and then the trade obviously changed. When the US dollar falls, EMs do well because both in terms of money flows as well in terms of inflation of basic commodities.
In the short run, the weakness of the US dollar is great news for EMs both in terms of liquidity as well as inflating the price of their natural resources, which is exactly why you’d notice last year Russia and Brazil were absolutely hot markets in the period from April till July-August — they are resource rich and do well in such situations. India is a trickier play because it is resource-deficient although there are very many places in this market which are resources companies: Reliance is a quasi-resource company as are the Tata Steels, Hindalcos of the world. You can play the same trade in India, the tape is telling very clearly that the metal space is the one that will outperform for a reasonable while to come. Now, I am talking about weeks and not really months but weeks are good enough to make money in the markets.
Q: So you are saying the favourite trade, aside of buying metals is probably still chase the Sterlite and Hindalco which haven’t topped out in the near term?
Sharma: Exactly. Our take is: there is still room in these stocks. I was telling somebody the other day: he said none of the fundamentals really support any of the trades you are recommending. I said: great, welcome to the new world of investing.
What you should do is, do your complete fundamental analysis; do it with complete objectivity and then the stocks that come out the best on those fundamentals—never buy them; stocks that come out the worst on those fundamentals, go right ahead and buy them. That’s the news paradigm, this is the new investing mantra and I don’t want to sit out of this investing mantra. I think you can play the trade and you can be reasonably nimble and get out of harm’s way. I think markets are reasonable—they give you enough chances to get out of a trade—it’s not that overnight everything collapses. There is no such thing on most cases unless there is huge catastrophe.
Q: Would you be still riding it from your bullish positions or would you be slowly starting to take profits?
Sharma: Our view is that the best trade globally right now is the commodity space, which is the industrial metals space. For oil, we have been bullish from about the early USD 50 per barrel range — but remember not for any fundamental reason: we don’t think oil demand bounces back in any meaningful way for a while to come.
However, the markets are not just about fundamentals, something went from USD 150 per barrel to USD 35 per barrel, bounced back, the trend changed, you ride that trend. I have said earlier many times that we have crude and an effective way of looking at markets which is that momentum is the only thing that works perennially, valuations and fundamentals don’t necessarily work all the time. The momentum was looking very strong at USD 50–USD 55 per barrel and it still continues to look strong. We will see when that begins to slacken and that rally will still continue. So industrial metals, copper or aluminum, the rally in those will assist stocks belonging to those sectors and oil on its own, we think USD 80–USD 85 per barrel is pretty much on the cards.
The other aspect is the weakness of the dollar — the way it is behaving lately. I am not making an outright case for that but it is possible — I reckon 50:50 chances — that if the dollar makes a new low against the Euro in which case again you will see attendant issues emerging out of that which is commodity prices are very strong but inflation coming back strongly. Most importantly, US bond yields going further beyond to where they have reached. So this cookie probably can fall apart with a combination of these factors that I am outlining which I think might take a couple of months to play out or even maybe six weeks or three months to play out.
Q: So in your eyes, is it conceivable that the dollar-Euro goes to between 1.5-1.6, crude goes to USD 85/barrels in the near term, and what would that mean for emerging market (EM) equities which is the asset class which most we are concerned with?
Sharma: I have always maintained one thing which is what people kept asking me through the bear market, what would force you to change your view? What fundaments would you want to see to change your view? I said I really don’t care too much about fundamentals; the only thing I care about is the strength or the weakness of the US dollar because that determines almost everything in this world of investing. The moment you started to see that — around March-April, from 1.25-1.30 or 1.35 — momentum became strong in the fall of the US dollar versus most EM currencies and then the trade obviously changed. When the US dollar falls, EMs do well because both in terms of money flows as well in terms of inflation of basic commodities.
In the short run, the weakness of the US dollar is great news for EMs both in terms of liquidity as well as inflating the price of their natural resources, which is exactly why you’d notice last year Russia and Brazil were absolutely hot markets in the period from April till July-August — they are resource rich and do well in such situations. India is a trickier play because it is resource-deficient although there are very many places in this market which are resources companies: Reliance is a quasi-resource company as are the Tata Steels, Hindalcos of the world. You can play the same trade in India, the tape is telling very clearly that the metal space is the one that will outperform for a reasonable while to come. Now, I am talking about weeks and not really months but weeks are good enough to make money in the markets.
Q: So you are saying the favourite trade, aside of buying metals is probably still chase the Sterlite and Hindalco which haven’t topped out in the near term?
Sharma: Exactly. Our take is: there is still room in these stocks. I was telling somebody the other day: he said none of the fundamentals really support any of the trades you are recommending. I said: great, welcome to the new world of investing.
What you should do is, do your complete fundamental analysis; do it with complete objectivity and then the stocks that come out the best on those fundamentals—never buy them; stocks that come out the worst on those fundamentals, go right ahead and buy them. That’s the news paradigm, this is the new investing mantra and I don’t want to sit out of this investing mantra. I think you can play the trade and you can be reasonably nimble and get out of harm’s way. I think markets are reasonable—they give you enough chances to get out of a trade—it’s not that overnight everything collapses. There is no such thing on most cases unless there is huge catastrophe.
Q: On a bubble meter — if I can coin that phrase — if 2007 was 9, what have the last three months been. What would the reading be?
Sharma: It’s not a bubble. Put it in context: we had a huge deflation of equity prices last year. We are seeing little bit of an inflation of equity prices this year. Even after having run-up so much, a lot of stocks are still off significantly from their peaks, which only tells you that how big the old bubble was — that even after having had such a strong run, look at so many stocks and the peak is a huge distance away. It is like running a marathon and saying: "I have come a long way", and then you look at the distance and it's just 10 miles. So, it is something of that kind that you are still a fair distance away. I don’t think this is a huge bubble. But yes, given the compression of timeframe of this move, one could argue that it is a garden variety bubble, if you will.
Q: Let me present this scenario to you, which is different from what you are suggesting and see what probability you attach to that—the market corrects but then consolidates between 12,500-15,000 for few weeks, which is just maybe 15-20% lower from here and then eventually, over the next six months, goes on to make a new high, which is more than 21,000?
Sharma: Absolutely possible. I have been around too long to say that it’s not possible, that it cannot happen. I would even go to the extent of saying that Jeremy Grantham (veteran investor and founder of GMO) wrote an interesting thing and which is that the amount of money that has been thrown at the so-called problem that may or may not move the GDP but that’s enough to move stock market. That is because, in a stock market, it's barely 30 stocks you need to move for the market to look extremely good. That’s probably what the phenomenon is across the world, particularly in emerging markets, given the fact that the dollar does look extremely weak in the short run. There is nothing to suggest that why we can’t get at least close to the highs if not absolutely make a new high — whether we sustain those highs or not, that’s another matter but you have a fair shot at it now. It can’t be ruled out.
Q: What is a more likely outcome in the foreseeable future as you see it, not beyond the next few weeks? Do you think global equities and Indian equities can rediscover a secular trend up or down or do you think we will have alternate bouts of mini bull markets and mini bear markets over the next couple of years –six months each even?
Sharma: It will be like navigating your way through molasses. Go back to October last year – we had a 30% down month. Any bear thinking that November would follow was mistaken – you could have bet on a 5% down month or an 8% down month but not a repetition of a 30% down month. So flip it around this time – May was an extraordinary month. Don’t bet on repeats of those things happening. We will need to settle down to a more gradual pace of rise and a faster pace of declines as mirror opposite to what happened in the period November to March when the declines kind of stopped getting that severe and the rallies were fairly sharp. We would probably see the reverse of that happening that the declines become quite sharp, the rallies become little bit weaker because we have already put in a close to 100% under our belt. So much as the goldilocks thing would be desired by all of us. I doubt if it’s going to be that simple that everything is forgotten and we are all friends again — bull and bear — and life goes on.
I think the challenges are still there; momentum is strong, we play the momentum game, we think we can see when the momentum ends and we think we can exit before the momentum goes out of this mini bull market, if you will. But to expect that the next three months will be as easy as May was? I think that’s being optimistic being a bull. If you were a bear in November and to think that you would make another 30% back-to-back returns on top of what you made in October, that was being optimistic too.
Q: What would you look at as a first warning sign of flagging momentum? Of course the market will move sharply maybe but in advance would you look at either the price of crude or dollar-euro or anything which can tell you that the music is beginning to fadeout?
Sharma: When global equity start to underperform global commodities that’s the first sign that I would want to watch out for because normally the twin should go in the same direction by and large. When the two begin to diverge and you can see a bit of divergence creeping in, you are seeing markets like China – India is belonging to a different planet presently and it’s on a nice high so exclude India from the basket just now – other markets have been a little bit of a struggle whilst crude has been on an absolute fire, commodities, industrial commodities have been doing well. Gold, of course, doesn’t belong to the same camp but that had an okay run from USD 880 per ounce to USD 950-960 per ounce.
That disconnect is what I would watch out first and foremost and I think you are seeing very early signs of that disconnect beginning that global equities are beginning to struggle, global commodities are rocking. I am not saying it will be an exact repeat because markets don’t normally repeat the same script that quickly but I am just saying, make sense to be cognizant of what happened in May-June-July-August 2008 – a similar situation happened. I am saying that’s the one thing I would watch out for.
Q: You started the discussion by saying you still see the broader market outperforming. Do you think that midcap have not caught up enough or because of the fact that they are still so much blow their 2007-2008 highs that they can carry on for a bit longer.
Sharma: For a bit longer. I think if we just look at the highs of most midcap names including even some largecap names there like I said not even in striking distance of their highs. Given that amount of room on the upside there is nothing to say why they can’t be up 20-30-40% in a very quick span of time. Like I said Suzlon on a good week puts on 40% so why even talk of weeks where you can do that in a few days.
Q: You described yourself as a fearful bull at this point is the accent on the bull or on the fear?
Sharma: It’s an oxymoron, right? Bulls are not supposed to be fearful; bears are supposed to be fearful because the tide is always against them. I think I am fearful. You can place equal weights on both. When I talk to folks and I tell them that you should go out and buy all these rubbish companies and they say what has happened to you? What are you saying? And I say, yes, you have to lose it if you have to make money in this market because if you had bought NTPC over Reliance Power, you were the biggest fool in the world. You have to go out there and buy companies which have greater promise of the future but less promise in the present and that is the trade we are on. When you are on a trade like that, you have to be fearful.
I am not a kid out of school who starts to believe the the goodness of markets is to make everybody rich. It is not my perspective on markets. The markets are meant to make everybody poor and only a small percentage rich. I want to belong to that small percentage. Hopefully my clients also want to belong there as well. That is why I am fearful. The kind of stocks that are going up — and not the stocks that ordinarily — would not make you sleep peacefully at night, but, that said, markets do not turn to suit your own investing philosophies, you have to turn your investment philosophies to suit what the market is asking you to do at that point in time. That’s what momentum investing is all about.
Can one believe this? SS says 21k is possible in 6 months..!......
Q: Let me present this scenario to you, which is different from what you are suggesting and see what probability you attach to thatthe market corrects but then consolidates between 12,500-15,000 for few weeks, which is just maybe 15-20% lower from here and then eventually, over the next six months, goes on to make a new high, which is more than 21,000?
Sharma: Absolutely possible. I have been around too long to say that its not possible, that it cannot happen. I would even go to the extent of saying that Jeremy Grantham (veteran investor and founder of GMO) wrote an interesting thing and which is that the amount of money that has been thrown at the so-called problem that may or may not move the GDP but thats enough to move stock market. That is because, in a stock market, it's barely 30 stocks you need to move for the market to look extremely good. Thats probably what the phenomenon is across the world, particularly in emerging markets, given the fact that the dollar does look extremely weak in the short run. There is nothing to suggest that why we cant get at least close to the highs if not absolutely make a new high whether we sustain those highs or not, thats another matter but you have a fair shot at it now. It cant be ruled out.
My Comments:
He never said so in his any past interview this ever, see how he is showing his true colors.....those who are thinking of market has not the legs to cross 4700 nifty or feels that this trend is not going to last long needs to read SS interview at moneycontrol.........Afterall he is a bear and he is doing 360 digree vault face.........I have never seen such a person who is so learned can take a U turn like this....
Now he is ready to believe any probability.......I donno what to tell about him .
Sharma: Absolutely possible. I have been around too long to say that its not possible, that it cannot happen. I would even go to the extent of saying that Jeremy Grantham (veteran investor and founder of GMO) wrote an interesting thing and which is that the amount of money that has been thrown at the so-called problem that may or may not move the GDP but thats enough to move stock market. That is because, in a stock market, it's barely 30 stocks you need to move for the market to look extremely good. Thats probably what the phenomenon is across the world, particularly in emerging markets, given the fact that the dollar does look extremely weak in the short run. There is nothing to suggest that why we cant get at least close to the highs if not absolutely make a new high whether we sustain those highs or not, thats another matter but you have a fair shot at it now. It cant be ruled out.
My Comments:
He never said so in his any past interview this ever, see how he is showing his true colors.....those who are thinking of market has not the legs to cross 4700 nifty or feels that this trend is not going to last long needs to read SS interview at moneycontrol.........Afterall he is a bear and he is doing 360 digree vault face.........I have never seen such a person who is so learned can take a U turn like this....
Now he is ready to believe any probability.......I donno what to tell about him .
What I wants to ask SS is , didn't he read Jeremy Grantham before his interview?How come he give such a jutification quoting Jeremy Grantham?He categorically stated that in no way our market can go beyond 11500 or 12500 and maximum upto 16k and now he says he do not want to look at the fundamentals.It is the liquidity that brings the market up but then why he said that for atleast 4-5 yrs our market cannot see a new high and he was so sure about that......giving all sorts of reasons.Even Ramesh Damani was saying that we will definately not see a new high for 4-5 yrs but RD atleast admits that he read the market wrongly while SS do not confess anything.
SS is surpirsed by the V shape recovery ....he is overawed by the strength of our market as it has come with vol.Though the prices are way below the high and hence SS is suggesting to buy Midcaps which he never was fond of.I remember very clearly how he was speaking time and again on Ril, SBI, L&T that they will go much below the level they made in Oct 08 or Mar 09! I think SEBI should debar Mr Shankar Sharma from speaking anything on Media.
Saturday, June 27, 2009
What a move!
Market went up by over 400 points just making all technical analyst prove wrong.
There are two sides on any given day for market.Bulls and Bears....and as we saw SS giving a bear call yesterday, market went up.As soon as bulls saw that short position is created due to bearish view from their master,SS, bulls took the market up..........
But it implies that now Bulls had got the strength to take the fight in Bears camp and give them run for their money.Small day traders and speculators needs to understand that they needs to understand the market better then following expert.
I again reiterate that we can touch 20k-21k by Dec 2009 instead of 2010 which I use to write in past and we can even touch 30k-31k by Dec 2010.......
We are now in a start of unfolding a new bull market which should take us to newer high which I have been writing here since couple of months.Buy stocks which has gone down so much with good fundamentals.I have given you an example of Gayatri Project where I wrote all the things one needs to see while investing and I can still say that there are many more things I have still not written in that post which looks good for the co.
The journey is up and market is going to get better and better.Reactions or correction are going to come.More and more MF managers are now becoming bullish.Viz: Maorgan Stanely(Ridham Desai),Nomura, Credit Sussie,JP Morgan etc etc.RJ already said in his last interview at CNBC that this was a bull market correction.......
There are two sides on any given day for market.Bulls and Bears....and as we saw SS giving a bear call yesterday, market went up.As soon as bulls saw that short position is created due to bearish view from their master,SS, bulls took the market up..........
But it implies that now Bulls had got the strength to take the fight in Bears camp and give them run for their money.Small day traders and speculators needs to understand that they needs to understand the market better then following expert.
I again reiterate that we can touch 20k-21k by Dec 2009 instead of 2010 which I use to write in past and we can even touch 30k-31k by Dec 2010.......
We are now in a start of unfolding a new bull market which should take us to newer high which I have been writing here since couple of months.Buy stocks which has gone down so much with good fundamentals.I have given you an example of Gayatri Project where I wrote all the things one needs to see while investing and I can still say that there are many more things I have still not written in that post which looks good for the co.
The journey is up and market is going to get better and better.Reactions or correction are going to come.More and more MF managers are now becoming bullish.Viz: Maorgan Stanely(Ridham Desai),Nomura, Credit Sussie,JP Morgan etc etc.RJ already said in his last interview at CNBC that this was a bull market correction.......
Friday, June 26, 2009
Surya Roshni...........another Gem!...cmp Rs 40.00
Friends,
I am again giving you a same type of stock which is going cheap.
Surya Roshni is the company I am talking about.Again same parametres can be compared like Gayatri Project Ltd.It has a turnover of Rs 1000 cr and it cmp is just Rs 40.Means a Rs 1000 cr company is available at just Rs Rs 104 cr ! That is a great deal.
I just read the annoucement that they are going to invest Rs 550 cr in next 1 year and they are targetting to make Surya Roshni a billion dollar co.Means the sales will rise to Rs 4500 cr by 2012 and that is achievable as they are already at Rs 1000 cr.
Looking at the last qr result they have performed very well on earning front and they are exporting in many countries.
This is another multibagger in making according to me.
I have mentioned about Agro cos in my last post and gave some name.One need to look at those and buy some stocks in that sector.
Coming back to Surya Roshni I would like my readers to find the order book position etc.......But the reason to recomend it here is,it is in lighting sector and in they make eco friendly bulbs and with US Prez putting more emphasize on eco friendly sector it is good for Surya Roshni.
It has also got a Steel division which makes Pipes and that is an added advantage for this multibagger in making....
I am again giving you a same type of stock which is going cheap.
Surya Roshni is the company I am talking about.Again same parametres can be compared like Gayatri Project Ltd.It has a turnover of Rs 1000 cr and it cmp is just Rs 40.Means a Rs 1000 cr company is available at just Rs Rs 104 cr ! That is a great deal.
I just read the annoucement that they are going to invest Rs 550 cr in next 1 year and they are targetting to make Surya Roshni a billion dollar co.Means the sales will rise to Rs 4500 cr by 2012 and that is achievable as they are already at Rs 1000 cr.
Looking at the last qr result they have performed very well on earning front and they are exporting in many countries.
This is another multibagger in making according to me.
I have mentioned about Agro cos in my last post and gave some name.One need to look at those and buy some stocks in that sector.
Coming back to Surya Roshni I would like my readers to find the order book position etc.......But the reason to recomend it here is,it is in lighting sector and in they make eco friendly bulbs and with US Prez putting more emphasize on eco friendly sector it is good for Surya Roshni.
It has also got a Steel division which makes Pipes and that is an added advantage for this multibagger in making....
Thursday, June 25, 2009
Gayatri Project Ltd.............A Gem in making.........cmp Rs 166....
Friends,
Gayatri Ltd is a gem in making.It is fondly known as GPL.
It has a BV of 170, eps of almost 40 and 10 paidup,40% dividend even in bad scnario last year and has over 7000 cr project in hand and to be exact it is Rs 7643.45 cr .Let me put it in this way.A 1000 cr turnover co is available at just Rs 166 cr !..Isn't that a great thing to buy this stock as early as possible?It happens only in India.....The bear market has brought down the valuation of such great co so low that one miss tracking it....that is how bear markets are......they give life time opportunity...
It has interest in Infra projects that varies from Highway Projects,Irrigation projects, Ports and Airports,Dams,Canals etc etc....
I am briefing some of the details they claims they have executed.........
"
The company was originally incorporated on September 15 1989 as Andhra Costal Construction Private Limited in the state of Andhra Pradesh for undertaking construction activities. The name of the company was changed to Gayatri Projects Private Limited with effect from March 31 1994 and was converted into a public limited Company on December 2 1994. On April 1 1994 Gayatri Projects Private Limited took all the assets and liabilities of Gayatri Engineering Company a partnership firm which was established in the year 1975 as a "Special Class Contractors" on a going concern basis. Gayatri Engineering Company had been undertaking civil and engineering works of various state governments central governments public / autonomous bodies / corporations.
The Company has executed different construction projects during the last 16 years and gained adequate experience. We have constructed about 644.00 Km of the Highways and 1113.00 Km of Irrigation Canals. We have executed 21 irrigation projects amounting to Rs. 58399 lakhs. We have completed irrigation projects such as Construction of five packages of Narmada Main Canal comprising of the 50.60 Km Upper Krishna Project comprising of 44.00 Km Sriram Sagar Project comprising of 954.00 Km and KC Canal comprising of 64.00 Km. We have executed 7 projects for construction of dams and reservoir amounting to Rs. 7533 lakhs in which major ones include construction of Kaniti Balancing Reservoir for Vishakhapatnam Steel Plant construction of raw water pond for Jindal Vijaynagar Steel Ltd. construction & raising of ashpond dykes to ancillary works for NALCO Ltd. etc. We have executed 9 highway and runway projects 8 site leveling projects and 3 industrial projects amounting to Rs. 57562 lakhs Rs. 9433 lakhs and Rs. 3478 lakhs respectively. Our projects are largely concentrated in the Southern and Western Regions.
Our Company owns a fleet of construction equipments comprising of heavy earth moving machines such as hydraulic excavators loaders dozers earth compacters concreting plants such as batching plants concrete mixers transit mixers concrete pavers road equipment such as vibratory tandem rollers electric paver finishers mechanical paver finishers hotmix plants static rollerstruck mounted pressure bitumen sprayer integrated stone crushing plants quarry equipments like wagon drills jack hammers air compressors transportation equipments such as cars and jeeps tippers tractors water tankers trailers fabrication and erection plant such as welding generators gas cuttings sets work shop equipments cranes generators and other miscellaneous equipments.
We are currently executing projects amounting to Rs. 105 016 lakhs of Public works /Irrigation Departments of various State Governments namely Andhra Pradesh Madhya Pradesh Chattisgarh and Gujarat and for other clients. Out of the projects in hand the highways constitutes projects amounting to Rs. 40 700 lakhs irrigation projects Rs. 63 068 lakhs and otherworks constitutes Rs. 1 200 lakhs. In addition we are also executing projects in our various joint ventures in which our share of contract value to be executed works out to around Rs. 69 000 lakhs. Most of these projects would be completed within period of 36-42 months.
Our Company is an ISO 9001 - 2000 engaged in execution of major Civil Works including Concrete/Masonry Dams Earth Filling Dams National Highways Bridges Canals Aqueducts Ports etc. "
My Comments:
Recently one gr of investors are taking stake at Rs 135 for 9% holding and they are supposed to raise the stake finally to 15% and then 36%.Apart from over 60% is held by promoters private corporate bodies are holding 19% stake which takes the holding to almost 80% and rest only 20% is with public.That is a very good scenario according to my mind.
Annocement:
Gayatri Projects Limited Secures Two New Orders
Gayatri Projects Limited announced that it has secured two new orders along with Ratna Infrastructure Projects Pvt. Ltd under Joint Venture namely (GAYATRI - RATNA JOINT VENTURE) with a total projects cost of INR2,131.62 crores (INR.21316.2 million) M/s. Gayatri Projects Ltd share is 80% and Ratna Infrastructure Projects Pvt. Ltd share is 20%. The entire works has to be executed with in a period of 54 months.
Well,
Winning a single project of Rs 2100 cr at a time speak the capacity of executing such type of projects ,where Gayatri Project is having 80% stake.According to me this is just another PSLLtd in making.Order pipeline is at the high and showing equally excellent performace on earnings augurs well for the Company.
I can say that I have fallen in love with this stock and I curse myself why I wasn't able to recognize when it went down to just Rs 40 in Mar 09!Maybe I was not tracking it very religiously at that point of time.
But even at this price of Rs 166 which has come up from a low of 40 ,is still a great value buy and one can earn multiple returns from this co in next couple of years.
Gayatri Project Ltd latest Order book position copied from other site:
One may think how I can bring the exact order book figure and hence this listing....
It is easy.What one needs to do is google and open all link to see what is there and one can find it.......It is a question of how much one is keen to have all information of a perticular co....where one wants to invest........
I can only say here that if I can do it from America then any one in the world can do it for any perticular co at any given time......One needs the desire to find and fire in the belly to go deep .....No one is telling me about any co.I find it on my own......and I can challenge that one will never find a copy from other sites as well in what I write......One of my friend has come out with a buy call when Gayatri was just Rs 70.....I came to know just today. He use to contribute in many stock market magazine as well....will not quote which magazine they are.....just to hide his idendity ...
Here is the order Book List:
Read on:
1...4-laning from Km.93.00 to Km.60.00 of Bijni to WB Border Section of NH-31C in Assam (AS-10)
Assam
186.52
2.4-laning from Km.60.00 to Km.30.00 of Bijni to WB Border Section of NH-31C in Assam (AS-11)
Assam
149.56
3.Rehabilitation and Upgrading of km.104.000 to Km.170.000 of NH-25 to 4 lane Configuaration in the State of Uttar Pradesh (UP-4)
Jhansi, UP
373.92
4.Four Lane to Meerut - Muzaffarnagar Section (Km.52.00 to Km.131.00) of NH-58 in the State of Uttar Pradesh
Meerut, UP
182.00
5. MPRDC Program Phase - II Road No.19 , SH-26, Khargone - Barwani 85.20 Km (ii) Project Road No.20, SH-31, Khargone - Bistan 21.00 Km - MP 10
Khargone, MP 70.00
6. Four Laning of National Highway from Km 40.0 to Km 60.5 of Maibong - Lumding Section of NH-54 in Assam Contract Package - EW-II (AS-27)
Assam 139.08
7. Upgradation of Roads from Ramanathapuram to Tuticorin (TNRSP 04)
Tuticorin, Tamilnadu 82.13
8. Design, Construction, Development, Finance, Operation and Maintenance of Km.0.000 to Km.49.700 on NH-25/26 in the State of UP on BOT Basis - UP2
Jhansi, UP
345.00
9. Design, Construction, Development, Finance, Operation and Maintenance of Km.49.700 to Km.99.005 on NH-26 in the State of UP on BOT Basis - UP3
Lalitpur, UP
253.00
10. Rehabilitation and Upgrading of Ambikapur (Km 4) to Sernersot (k 65) Section in Chattisgarh
Ambikapur, Chattisgarh
65.18
11 ..Rehabilitation and Upgrading of Kapsara (Km 38) to Hathidad (Km 62) and Rajkheta (Km 83) to Dhanwar (KM 110.6) and Ramanujgaj (Km 0 to Wadrafnagar (Km 53.80) Section in Chattisgarh
Kapsara, Chattisgarh
118.07
12. Design, Construction, Development, Finance, Operation and Maintenance of ORR from Bongulur to Tukkuguda - AP-4
Hyderabad, AP
362.00
13...Improvement of Naranpur-Pandapada - Harichandanpur - Brahmanipal - Duburi Road
Duburi, Orissa
311.89
14..Construction of Eight Lane Access Controlled Expressway as Outer Ring Road to Hyderabad City in the stretches from Patancheru to Shamirpet -Package 2
Hyderabad, AP
323.97
Sub Total : Rs..2,962.31
B :IRRIGATION
15...Construction of Earthen Dam of Hiranyakeshi (Sarafnalla) Medium Project, Kolhapur
Kolhapur, Maharashtra
31.08
16..Polavaram Project Right Main Canal- Excavation of Canal from km.71.50 to km 105.10 (Pk-4)
Polavaram, AP
301.30
17..Veligonda Project - Closing of Sunkesula Gap. Excavation of Feeder Teegaleru Canal
Veligonda, AP
347.07
18..Flood Control Measures for Visakhapatnam Air Port
Visakhapatnam, AP
51.20
19..Investigation, Design and Earthwork Excavation of GNSS Main Canal from Km 119.00 to Km 141.350
Kadapa, AP
111.96
20..Raising and Widening of flood bank of VLB from Km.0.000 to Km.24.000
Dowalaiswaram, AP
17.17
21..Package II - Nagavali - Formation of Flood Bank on Nagavali River
Nagavali, AP
61.45
22..Raising and Widening of flood bank of GRB from Km.50.000 to Km.60.000
Dowalaiswaram, AP
13.56
23..Raising and Widening of flood bank of GRB from Km.60.000 to Km.85.100
Dowalaiswaram, AP
31.36
24..Rajiv Sagar Lift Irrigation Project, Dummugudem - Package No.33/2006
Dummugudem, Khammam
281.61
25..Execution of Canal System of Indira Sagar Project Main canal from R.D.130-935 to 155-00 Km
Khargone, MP
242.55
26..Package No.9 : Dummugudem Nagarjuna Sagar Project Tail Pond Link Canal From Km.206 to Km.244 (upto tail end) i.e., to carry 19000 Cusecs
Dummugudem, Khammam, AP
617.09
27..Package No.8 : Dummugudem Nagarjuna Sagar Project Tail Pond Link Canal from Km.182 to Km.206
Dummugudem, Khammam, AP
1,088.21
28..Chintalapudi Lift Irrigation Scheme – Detailed Investigation, designs and construction of Lift Irrigation Scheme - Chintalapudi - Package -1
Chintalapudi, Eluru, AP
620.07
29..Chintalapudi Lift Irrigation Scheme – Detailed Investigation, designs and execution of Main Canal - Chintalapudi - Package No.2
Chintalapudi, Eluru, AP
497.95
Sub Total : 4,313.63
C :OTHERS
30..Civil works for Madharm Mines for Rashtriya Ispat Nigam Limited
Madharam, AP
12.72
31..Construction of 678 ML Capacity Summer Storage Tank at Repalle
Repalle, AP
10.59
32..Construction of Internal Road in JSL Plant Premises AT Kalinga Nagar Industrial Complex, Duburi, Jajpur
Jajpur, Orissa
15.00
33..Roads, Drains & Culverts (Part-A) for DHDT Project of M/s.BRPL
Bongaigaon, Assam
7.83
34
Civil Work for Beneficiation Plant No.2, at Toranagallu
Toranagallu, Karnataka
18.77
35..Civil Work for Jaggayyapeta Mines (Zone - II)
Jaggayyapeta, AP
3.26
36..Civil Work for Track Hopper in RMHS
Toranagallu, Karnataka
7.95
37..Civil Engineering Works of 14 MM Power - Phase II - facilities for Coke
Visakhapatnam, AP
2.01
38..Civil Engineering Works for Construction, Modification & Expansion of Phenol Waste Water..Treatment Plant of Visakhapatnam Steel Plant
Visakhapatnam, AP
7.76
39..Civil work for Road and Drain, Welfare Office, Community Centre, Security Post etc., at Gobarghati
Gobarghati, Orissa
12.46
40..Civil work for Road and Drain, Welfare Office, Community Centre, Security Post etc., at Gobarghati
Gobarghati, Orissa
13.65
41..Civil and Structural Work for our 0.6 MTPA Pellet Plant and 15MW Captive Power Plant
Bellary, Karnataka
18.16
42..Civil Work for Sub-Stations & Other Building & Cable Tunnel for power Distribution System
Jamshedpur, Orissa
57.65
43..Civil Engineering Works of Coal Handling Plant - Phase II facilities
Visakhapatnam, AP
7.87
44..Structural Steel Work for Sub Station
Jamshedpur, Orissa
5.72
45..Civil Engineering works for Coal Handling Plant
Visakhapatnam, AP
8.19
46..Civil Engineering Work for Installation of By-Product Plant (Phase-II)
Visakhapatnam, AP
11.75
47..Civil Construction Works for 1.2 MTPA Pellet Plant Project, MSPL Limited, Halavarthi Village, Koppal Dist., Karnataka
Hospet, Karnataka
19.50
48..Neelachal Ispat Nigam Limited - Civil Works of Auxiliary units for Phase-II Project of integrated Iron & Steel Plant being set up at Kalinga Nagar industrial complex, Duburi
Duburi, Orissa
14.77
49..Neelachal Ispat Nigam Limited - Balance Civil Works in BOF, GCP & CCP Area for Phase - II Project of Integrated Iron & Steel Plant being set up at Kalinganagar Industrial Complex, Duburi, Orissa
Duburi, Orissa
28.41
Sub Total : 284.00
D:OTHER WORKS / URBAN BUILDINGS
50..Construction of Park Hyatt Hotel at Hyderabad
Hyderabad, AP
83.50
Sub Total : Rs 83.50
Grand Total : Rs..7,643.45
Monday, June 22, 2009
Don't panic............
Friends,
Market was going to give reaction.I wrote it here few days back that we can have correction of 2000 points and that is what happening now.But take this as a chance to buy your favourite stock in this dips.
Market is good and after a hefty runup from 8000 to 15500 it has to take rest.Cash gr stocks are sheding some of the gains and one need to select which one they wants to buy in this dip.
I read somewhere that Ril MF has come out with a prediction this a Monster Bull run is in offing and they are starting Microcap MF where they will invest in Microcap and when they will feel that those stocks are overvalued they will sell them and will invest in Bonds and debt intruments.While reading this one can come to the conclusion that Microcaps are going to outperform the market in a big way.
According to my belief , budget is going to be good for stock market with some relief in STT and ST Capital gains Tax.There will be disvestment in PSU stocks to control fiscal deficit.It will be infrastructure oriented and that will push up infra spending.I have been emphasizing on this sector since long and have also listed co in this sector.Another sector to watch out is irrigation sector where I have pointed Rungta Irrigation and EPC Ind as a dark horse.
Keep a watch on Agri stocks like Aries Agro,Nagarjun Agritec,Usher Agro etc.....I like these stocks as they have potential to outperform the market in a big way.
I would like to have a special mention on Excel Crop which is United Phosphorous gr people.Excel Crop is a gem in making.Even United Phosphorous is an excellent buy.
Market was going to give reaction.I wrote it here few days back that we can have correction of 2000 points and that is what happening now.But take this as a chance to buy your favourite stock in this dips.
Market is good and after a hefty runup from 8000 to 15500 it has to take rest.Cash gr stocks are sheding some of the gains and one need to select which one they wants to buy in this dip.
I read somewhere that Ril MF has come out with a prediction this a Monster Bull run is in offing and they are starting Microcap MF where they will invest in Microcap and when they will feel that those stocks are overvalued they will sell them and will invest in Bonds and debt intruments.While reading this one can come to the conclusion that Microcaps are going to outperform the market in a big way.
According to my belief , budget is going to be good for stock market with some relief in STT and ST Capital gains Tax.There will be disvestment in PSU stocks to control fiscal deficit.It will be infrastructure oriented and that will push up infra spending.I have been emphasizing on this sector since long and have also listed co in this sector.Another sector to watch out is irrigation sector where I have pointed Rungta Irrigation and EPC Ind as a dark horse.
Keep a watch on Agri stocks like Aries Agro,Nagarjun Agritec,Usher Agro etc.....I like these stocks as they have potential to outperform the market in a big way.
I would like to have a special mention on Excel Crop which is United Phosphorous gr people.Excel Crop is a gem in making.Even United Phosphorous is an excellent buy.
Wednesday, June 17, 2009
Anils WINS the case against Mukesh......Kudos to Anil.....
Friends,
I have a liking for Anil Ambani and that I have written here many times.
I congratulate Anil Ambani for winning the case against his big brother Mukesh Ambani.
There is nothing in RNRL , it is just a Khokha unless it gets the gas from Ril Ind RNRL is ZERO but now as they have won the case RNRL become a value play as it is going to get 28 mmcmd gas at $2.34 per million British thermal unit (mmBtu).
Mr.Mukesh Ambani will go for the upper court to fight it our there which is Suprem Court and he has already decided to do that and that was the reason why RNRL went down yesterday.
Well,coming back to market I would again say that don't panic in any downside.Market direction is up only.
The best Budget pick would be PSU's which I am writing here since long.
Here goes the list again.
1)BP
2)HP
3)All smallcap PSU banks
4)MaxIndia
5)IOC
6)EPC
7)Rungta irrigation(dark horse)
8)RilCap
9) All Infra co
10) National Fertilizer
11)IFCI
12)IDBI
There are some stocks I can't recall.I have been writing about HPCL,BPCL and IOC since long.I have also written that finance sector can outperform market and that is coming true.Even when some of the starlwarts were sceptic on giving call on finance sector I wrote here that this sector can outperform the market.
I would like to have a special mention on Max India.This is my favourite counter and if I remember correctly I told to one of my very good friend , jigs,who also writes at mmb still with the same name, when Max India was 10 paid up and 200 and I gave a target of 1000 at that time to him.He was not sure Max India can touch 1000 but was sure that it can touch 450 something.Ultimately Max India touch 1000 and more and now it is 2 paidup and it is still Rs 227 , means it is still rs 1135. I still say that if one will buy even now then Max India has the capacity to touch again Rs 1000 even with 2 paidup.It is a real multibagger in making
I would also like to make a special mention on Srei Infra which I have recomended many times.It is still a buy.
All my old calls are still worth looking at.Viz: Innocorp Ltd,SKS Logistic,Jayaswal Neco etc etc ....they will move when their time will come.
I am sorry to write here that I have no time to go through my old recomendation and hence not able to write them but if anyone wants to know do ask me.There are some calls which I gave here may not move at all and they are my blunders.They were rank bad calls as I was not able to guess it properly but that was a human error and I have tried my best to recomend here for all readers as best as I can.
As you all know I am not a good analyser of BS and likes and so that can happen with me.
I have a liking for Anil Ambani and that I have written here many times.
I congratulate Anil Ambani for winning the case against his big brother Mukesh Ambani.
There is nothing in RNRL , it is just a Khokha unless it gets the gas from Ril Ind RNRL is ZERO but now as they have won the case RNRL become a value play as it is going to get 28 mmcmd gas at $2.34 per million British thermal unit (mmBtu).
Mr.Mukesh Ambani will go for the upper court to fight it our there which is Suprem Court and he has already decided to do that and that was the reason why RNRL went down yesterday.
Well,coming back to market I would again say that don't panic in any downside.Market direction is up only.
The best Budget pick would be PSU's which I am writing here since long.
Here goes the list again.
1)BP
2)HP
3)All smallcap PSU banks
4)MaxIndia
5)IOC
6)EPC
7)Rungta irrigation(dark horse)
8)RilCap
9) All Infra co
10) National Fertilizer
11)IFCI
12)IDBI
There are some stocks I can't recall.I have been writing about HPCL,BPCL and IOC since long.I have also written that finance sector can outperform market and that is coming true.Even when some of the starlwarts were sceptic on giving call on finance sector I wrote here that this sector can outperform the market.
I would like to have a special mention on Max India.This is my favourite counter and if I remember correctly I told to one of my very good friend , jigs,who also writes at mmb still with the same name, when Max India was 10 paid up and 200 and I gave a target of 1000 at that time to him.He was not sure Max India can touch 1000 but was sure that it can touch 450 something.Ultimately Max India touch 1000 and more and now it is 2 paidup and it is still Rs 227 , means it is still rs 1135. I still say that if one will buy even now then Max India has the capacity to touch again Rs 1000 even with 2 paidup.It is a real multibagger in making
I would also like to make a special mention on Srei Infra which I have recomended many times.It is still a buy.
All my old calls are still worth looking at.Viz: Innocorp Ltd,SKS Logistic,Jayaswal Neco etc etc ....they will move when their time will come.
I am sorry to write here that I have no time to go through my old recomendation and hence not able to write them but if anyone wants to know do ask me.There are some calls which I gave here may not move at all and they are my blunders.They were rank bad calls as I was not able to guess it properly but that was a human error and I have tried my best to recomend here for all readers as best as I can.
As you all know I am not a good analyser of BS and likes and so that can happen with me.
Friday, June 12, 2009
First Global takes a U turn on Satyam..........
Friends,
It is rediculous to hear from First Global taking a U turn and now speaking in Media that they like Satyam! It was they who gave a sell call and predicted that Satyam will become ZERO.
I don't know how much people needs to follow them but I think that they should be brought to books why they gave a sell call on Satyam and now projecting a target of 120 which is very near to my target of 150.
Devina Mehra of First Global likes Satyam as the company still has a real business and real clients. "We see Satyam’s FY10 EPS at Rs 9.5."
With regard to markets, Mehra said largecap stocks appear fully valued. She added that valuations in the market are still very expensive. "There are over-expectations in the market in terms of the Budget."
Global equities, Mehra feels, will see a correction but that may not be a huge one.
Also read: Exercise caution at current levels: Motilal Oswal AMC
Here is a verbatim transcript of the exclusive interview with Devina Mehra on CNBC-TV18. Also watch the accompanying video.
Q: What are your thoughts on Satyam and this turn around that we have seen in the stock over the last few sessions?
A: We like Satyam because if you look at Satyam it is not like Worldcom or Enron where the whole thing just disappeared at the end of the scandal that broke out and at the end of it you had only debris there. Satyam had a real business and it still has real clients willing to pay for that real business. Valuations were still factoring-in scandal ridden management whereas the management had changed and the business was still going on pretty much as usual; slightly lower volumes as can be expected but nothing disastrous. For FY10, even assuming some revenue decline and assuming a 25% EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization), which we had modeled for, we are still getting an EPS for about Rs 9.5. So it looked attractive. We have a buy out there on the stock with a target price of Rs 110–120.
Q: What about the market? We have come a long way since we spoke last from 15,500 how do are you guys mapping it?
A: It has not come such a long way in terms of the Sensex when we last spoke. I think we spoke couple of weeks ago and I had said that I see a party continuing basically most of this month. The run up to the Budget and especially on the midcaps that has pretty much panned-out and my view still remains the same that a number of largecaps appeared fully valued. If you look at BHEL or anything of that kind or Reliance or L&T the valuations are still expensive. You are still talking 25–26 times earnings for most of them. For commodity stocks like Reliance, you are still talking 18–19 times earnings. The good bank like HDFC Bank is still at 3.5 times book value. So the valuations seem to be capturing most of it as far as the largecaps are concerned. So that remains the cause for concern. There is some amount of over expectations with the Budget so let us see how the Budget is able to meet that.
Q: What about the global backdrop in terms of equity markets? Are you feeling comfortable about that as well or do you think it is looking like it is beginning to stall now?
A: I think global equities again will see a correction maybe not a huge correction but a correction nevertheless. If you look at economic fundamentals also you had all the government just throwing everything they had into the cauldron for an economic recovery so every possible fiscal measure, every possible monetary measure has been taken. But a lot of the core problems in terms of the restructuring requirements have not been sorted out so you still have a situation where there is possibility that either with a small recovery you have a flat lining or you again have a decline so that becomes a problem. You look at the
Q: So how are you mapping the rest of the year from here? From where we are, do you see modest upside and what about the downside in case of a retracement?
A: Like I said, up to the Budget things look very good and one will have to take a call then on what happens specifically on various sectors. What level of disappoint or happiness is there with the Budget. I think here also the government is working with a lot of constraints. You have a situation where you do not have that much levy on the fiscal side even without massive investments you are still talking of a 10–12% fiscal deficit. Again the GDP numbers here is a bit misleading because you had the GDP coming in ahead of expectations but when we disaggregate the numbers we found that that the nominal GDP had actually dropped very dramatically from about 19% growth in Q2 to 8% growth in Q4 whereas the real GDP did not show that much of a drop and that was because the inflation measure was showing a very low reading. I am not sure whether that inflation number completely captures what is happening in the economy because you had the tax collections coming in below expectations so what is really happening in the economy is a concern. So I said a number of tools and the kind of headroom the government has to do many things. That is limited. Also the government’s priorities may not be the same as what the markets priorities are. If this government goes for an inclusive growth policy which means that one has to look at what is happening in the villages, what is happening to the poor which may or may not go down that well with the markets in the short-term. In terms of macro risk factors, the other one is whether how the monsoon does because this time whatever recovery or lack of a slowdown we have seen is all getting driven by rural demand. So one part is that if monsoon fails there is a direct impact on the agriculture side but it will also have an impact on many other goods because of the pattern of the demand.
Q: Did you have a chance to look at the acquisition Sesa Goa made overnight? Any thoughts on that?
A: I have not really had a chance to look at that so I would not like to comment.
Thursday, June 11, 2009
Satyam at 80...........
Satyam hits upper circuit for second day
Our Bureau MUMBAI
THE prospect of fresh money flowing into Satyam Computer has further livened up interest in the stock. Already boosted by the company’s better-thanexpected revenues and profits, which were revealed for the first time on Tuesday since its accounting scam, the Satyam stock has hit the 10% upper circuit for the second straight session to close at Rs 73.50 on Wednesday. Investors are also enthused by the likelihood of the upcoming open offer not being successful, with the current stock price way ahead of the open offer price of Rs 58. A failed open offer will lead to Tech Mahindra exercising the option to subscribe to fresh shares of Satyam to raise its stake in the company to 43%, analysts said. While a successful open offer will result in money flowing to Satyam shareholders, issuing of fresh shares would result in the funds, set aside for the open offer, to flow directly into the company. “Tech Mahindra has infused Rs 1,760 crore for a 31% stake and would further infuse Rs 1,140 crore in case the open offer at Rs 58 (much below Satyam’s CMP) does not invoke a response,” said Vihang Naik, an analyst with Motilal Oswal Securities, in a report. Analysts believe that the likely cash infusion, coupled with reduction of staff costs, would put the company back on track. “Backed by the strong focus on cost re-alignment (in line with revenues), direct interest from senior management in the Mahindra group and experience in running Tech Mahindra, we expect Satyam to see a sharp turnaround in revenues and profits by end-2009/beginning 2010,” JP Morgan India’s report said.
MY Comments:
We were discussing on Satyam since it was below 18.I wrote here that Satyam is looking good to me.One day Shankar Sharma came out and said Satyam will become ZERO and I didn't accept his arguements and I gave reason for that as well that why Satyam can't become ZERO.
I wrote to buy Satyam at that time and now it is 80 means from 18 to 80...."teen" becomes "ty"....
I also wrote that Satyam can touch 150......that is where it is heading for......
Our Bureau MUMBAI
THE prospect of fresh money flowing into Satyam Computer has further livened up interest in the stock. Already boosted by the company’s better-thanexpected revenues and profits, which were revealed for the first time on Tuesday since its accounting scam, the Satyam stock has hit the 10% upper circuit for the second straight session to close at Rs 73.50 on Wednesday. Investors are also enthused by the likelihood of the upcoming open offer not being successful, with the current stock price way ahead of the open offer price of Rs 58. A failed open offer will lead to Tech Mahindra exercising the option to subscribe to fresh shares of Satyam to raise its stake in the company to 43%, analysts said. While a successful open offer will result in money flowing to Satyam shareholders, issuing of fresh shares would result in the funds, set aside for the open offer, to flow directly into the company. “Tech Mahindra has infused Rs 1,760 crore for a 31% stake and would further infuse Rs 1,140 crore in case the open offer at Rs 58 (much below Satyam’s CMP) does not invoke a response,” said Vihang Naik, an analyst with Motilal Oswal Securities, in a report. Analysts believe that the likely cash infusion, coupled with reduction of staff costs, would put the company back on track. “Backed by the strong focus on cost re-alignment (in line with revenues), direct interest from senior management in the Mahindra group and experience in running Tech Mahindra, we expect Satyam to see a sharp turnaround in revenues and profits by end-2009/beginning 2010,” JP Morgan India’s report said.
MY Comments:
We were discussing on Satyam since it was below 18.I wrote here that Satyam is looking good to me.One day Shankar Sharma came out and said Satyam will become ZERO and I didn't accept his arguements and I gave reason for that as well that why Satyam can't become ZERO.
I wrote to buy Satyam at that time and now it is 80 means from 18 to 80...."teen" becomes "ty"....
I also wrote that Satyam can touch 150......that is where it is heading for......
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