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Sunday, April 6, 2008

Indian stock market,brokerage houses/analysts/investing community.

1. One of the biggest problems afflicting brokerage houses/analysts/investing community etc is herd mentality. When market was going up, almost everyone was shouting from rooftop that market will continue to go up, giving new higher targets for NIFTY. When market started coming down, same very gentlemen became more and more bearish with each passing day.Hardly anyone had the guts to go contrarian. No one opined that worst is almost over and that it is time to buy and that markets can go up marginally in near future. Herding is done to avoid being proven wrong. Many senior persons of some brokerage houses have been giving blanket recommendation to sell everything and stay liquid or invest in FD. This advise shoudl have been given in Dec 07

2. After every fall in the market, voices become louder to avoid midcap and small cap scrips and to go only for largecaps. This writer has always selected the scrips onthe basis of their real investment worthiness in terms of earnings visibility, PE Ratio, bottomfishing etc irrespective of which segment they fall in. It may be noted that after market crash, naturally first largecaps take lead in rising which instils confidence. Then, midcaps and smallcaps follow the rise. But, ultimately, rise in smallcaps and midcaps is much faster than largecaps. In last 1-2 weeks, fall in smallcaps and midcaps was really severe. However, it may be clarified that this writer has rarely recommended scrips which are included in BSE's smallcap and midcap index. Due to selling Bear Stearn, Citigroup etc in large quantities of midcaps, there was panic amongst retail investors who also started selling. Finally, investors were desparately selling at loss (despite knowing that such scrips are undervalued) to offset against profits earned upto Dec 07 so that they dont have to pay capital gains tax. This selling will no longer be there and I expect such scrips to go up handsomely in April once Q4 results start pouring in.Patience will pay good dividends by staying invested in fundamentally undervalued scrips.

3) I have also recomended some property play with good businesses.Just because 2 plots at BKC were not sold, tonnes of reports have poured in about imminent crash in real estate market and hence, sell reports on entire real estate sector. However, such sweeping judgement is not wise. Firstly normally all builders remain sold (at least 70-80% of total area under construction) for next 8-15 months. Hence, profits of real estate companies should be very good even in 08-09. I strongly recommend to hold these scrips even now as share prices of same are ridiculously low. Like, too much premia is given to hot stories, too much discount has been given to these scrips. Bad news has been blown out of proportions.

Conclusion:-Have seen so much of these that its been a ritual to suggest all these.I assure rather i gurante if you guys would follow these no matter what the market environemnt remains you people would always be in money.

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