Welcome to the week of GANESH CHATURTHI! I pray that Lord Ganesha smiles down on each one of you and let us start the week with some retrospection of the past and some thoughts on the future...
If you ask even the most pessimistic analyst of the Indian bourses, "Are we in a bull market?", the answer will come, may be after a pause: 'Well, yes...of course...but you know....". Ask him again: "Will the bull market contnue?" This time, he is more ready to put across his pessimistic views, but note the starting words: "Well, may be yes, but valuatiions...."
No one can predict the future exactly. We can just talk and talk about the signs that the present is emitting and feel fearful or optmistic from our experience in the past. And many people will agree that the current rally does not seem to be tiring and the strength of the NIFTY and SENSEX continues to increase. So there is no doubt that we are in a bull market and it is likely to continue. Probably till NIFTY gets quite close to 6000. But there will be corrections in between, quite a few of them. And I am a bit wary of the Q2 results because I feel that in Q2, some of the companies may not do as well as they did in Q1...primarily because of the spiralling energy and raw material costs and a slight softening in industrial demand.
This time the rally is happening with much more restraint and caution which is good. If we run too fast on a marathon, we will get tired faster and we will have to stop running much sooner. Another good thing about the bull phase that started in March last year is that there has been good healthy doses of correction, which are spread out over time. Even when the NIFTY or SENSEX runs up too high intraday, corrections happen and they come down quite a bit by end of the day. Good signs. The market is getting more mature and avoiding a reckless run.
However, the most important way to cash in on a bull market that continues in a cautious way is to rotate the investments from over-heated sectors that have already run strong from a long time to other promising sectors, that have not yet run so much. Unless you rotate, chances are that there will be sectorial corrections, quite heavy ones indeed and small investors may get trapped at higher prices.
Core Auto sector has been one of the favorites till now; it is not tiring yet, but Q2 performance may not be as expected. Q3 will be very good again. Time to avoid fresh investments and hold your portfolio; may be book some amount of profits. Rather focus on auto ancilliaries, especially those scripts that look good on the balance sheet, but which has not participated stronly in the rally yet. Apollo and JK tyres look ood and strong, but buy only on dips.
Core Banking sector surely looks a bit dull now. It needs rest. One has to be stock specific. Like you may go for ICICI or Dena bank. For the rest, buy on sufficient dips only. Like if you fancy Union Bank and if you see it below 325, you can buy a small quantity of the same. Same goes for Corporation Bank, buy as close to 600 as possible.
Avoid SBI and Axis bank.
If you see some of my recent recommendations, I am bullish on the food and beverages sector, including edible oils and starch (remember my call on Riddhi Siddhi Gluco Biols); however stock specific action is recommended. Same is true for consumer durables and appliances. I am quite bullish on the fertilizer space which may easily give us another 15-20% gains.
The sectors that did not participate in the rally so far, but are showing signs of strength are: Sugar, Telecom, Shipping, Logistics and Chemicals. In another month or two, quite a few scripts in these sectors are set to get re-rated.
Avoid a high exposure to IT stocks; Most IT stocks are quite richly valued now. I dont see fresh long term buying in this sector at present. Mining companies are not having a good time with taxes and regulatory impositions; still some stock specific buying may be seen.
Steel sector looks good to me for some re-rating. Packaging and logistics are doing well and they will continue to do well in the near future.
Moderator, powerfulpicks
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