Where are the Buying Oppurtunities

             As I stated in my previous post, I analyzed a lot of mid & large caps very cheaply placed in current times carrying huge upside potential in coming 3-4 years. Also, I shifted my mindset on the more stable blue chips from the micro market capped small caps which always carry a risk of manipulations & operator control. From my research I found that there are lot of sectors and high value industries ready to explode revenue-wise where one could invest for multibagger returns.
             To start with, I would talk about a high profit margin sector dealing with packaging films- Bi-axially Oriented Poly-Ethylene Terephthalate (BOPET) films & BOPP films - serving the recession free Packaging industry which is growing exponentially with time. Yes, I am talking about top rated companies like SRF, Uflex & Polyplex. Please note that these synthetic resin or engineering plastic industry is still not government regulated and hence, enjoy very high profit margins yr by yr. SRF & Polyplex are looking very attractive with a time range of next 2-3 years - looking at the growth chart on Sensex in last 3 years.
              Well, there are lot of other market proven sectors - Banking & Infrastructure scrips (not to forget Infrastructure growth is on top in Government todo list in current 5 year plan). Some of the blue stocks like Punjab & Sind Bank (listed on bourses last December), Petronet LNG (will be a FIIs favorite sooner or later) are in their 1st bull run & should be bought asap on any dips. Quite evident, when FIIs buy these blue chips are the one immediately benefitted & I am pretty sure these will move up with time. Another hit sector - Education - I would point @eGovernance software companies specifically EdServ Softsystems & ABM Knowledgeware. Also with the deregulation in non phosphatic fertilizers with modest subsidy I find some highly consistent scripts like Rama Phosphates & Liberty Phosphates worth accumulating. Just for information, the promoters stake in Rama Phosphates has shooted from 41% to 81% now in last 4 quarters. Both these phosphate houses have registered around FY11 EPS of 22 and are ready for the next major upswing in their prices. Then, there are some not so known market leaders we need to keep watch on - Photoquip India for example is the manufacturer of Elinchrom based flash studio lightings extremely popular throughout the world; we have Cosco India - the only known sports goods manufacturer listed in the market. Another biggie script in shoes & apparels - Cravatex growing thick & fast hosting the FILA brand in India. Watch these counters friends … they can be the next TTK Prestige or Page Industries or Titan Industries - you never know. These scrips according to me hold big promise & I see them riding on back of mass consumer consumption in India.
              On the contrary, I normally do not like companies from Government regulated sectors like sugar, cement, petroleum industries, selected food items, tea etc. Also, I keep distance to these channel analysts who advise to pick such stocks - bottomline is to do your own research rather than listening to someone. Stay tuned friends - I will be covering some of the above mentioned mid caps soon in my coming posts ..

Enjoy Reading …..

Markets in Consolidation Moods - My learnings continues ...

Continuous Learning - Lots of surprises the way FIIs go bell and hell ...
    Well, already 5 months since I wrote last here.. Apologies for that friends but I was trying to learn & analyze the recent highs & lows on Nifty whole summer. You see, the market is primarily ruled by FIIs since they are the cash rulers across global markets. I do predicted in October that FIIs will have the routine post Diwali selling bringing a modest correction which did not happened. Moreover, to my surprise they even not sold in last December - a normal FII trend across EM markets after a cumulative buying in last 18 months - to walk away & show profits to their customers & stakeholders. They sold post mid-Jan this FY which many thought should have happened before - not to ignore that Sensex PE almost reached 26 before the panic button was pressed by FIIs & DIIs too (I will talk about this magic Sensex PE range of 25-28 in depth sometime). Even when the post Jan correction was going smoothly this year when post budget rally by FIIs in a span of 3 weeks totally took me by awe. I thought FII will take Nifty to hit that magical PE range but it turned out to be a short covering when the same FIIs pulled the market down to 5400 levels in same time - definitely there was the Libyan issue, Japanese Tsunami  & European debt crisis which added fuel to fire.   

Formula 1 : Trend of small caps
    I found out that most of the stocks I recommended last year are small caps with market capital less than 200 crores. Many of my stocks got beaten badly in this recent 15% correction from 6350 Nifty levels to 5400 now this summer. Its important to understand movement patters of small caps - normally they participate in last leg of a bull rally when they can even command a PE of 12+ wrt to their earnings. Else rest of times (correction phase or consolidation times) they are tentative always for a beating & get stagnant in range of 2-5 forward PE. So its important to understand business models & revenue growth of such firms deeply. In corrections, small caps are the first to be sold out on counters and hence, an investor should sell small caps once a bull rally reaches its peak - historically, market PE of 25-28 is a signal for a U- turn on Nifty. The 2001 crash, 2008 Jan reversal and 2011 Jan corrections after peak of 26-28 PE suggest that FIIs consider this range as the boundary conditions for liquidity. It is this time one should get out of small caps firstly …. Also not to forget, many of these small caps have very small equity base and with a marginal profits they can show heavy EPS in some Qs (so beware) and small caps with market cap of less than 50 crores can shut their business too if they default...

The learning continues -
    As I said, small caps have their patterns & if traded properly in time & on specific times, they will give you fastest and maximum ROI compared to mid & large caps. All these summer I walked through several mid cap scrips and blue chips too & deduced that yes, they are FIIs paradise - reasonably too. There are lot of mid caps I see very attractive in current times in some specific industry sectors I will talk about in my coming post - stay tuned!
Additionally, I see a few large caps which got listed in recent years which are in their first bull run & quite cheaply placed on bourses.