Fundamentally Strong Companies of India

This Article is all about the List of Fundamentally Strong Companies of India.

There are so many Fundamentally Strong Companies in India. So many people have false belief that only Blue chip Companies are the Fundamentally strong Companies such as Reliance, ONGC, SBI…etc…. But the reality is that there are so many Mid cap companies there in the Indian Market which are equally fundamentally strong.

So Here is a “List of Fundamentally Strong Companies of India” -

The Fundamentally strong companies are basically divided into 3 parts according to its Market Capitalization. Large Cap, Mid Cap & Small Cap. In this Article i will list only Large cap and Mid cap fundamentally strong Indian Companies….

Large Cap Fundamentally Strong Companies of India -

01) Reliance Industries

02) BHEL

03) Larsen & Toubro

04) Bharti Airtel

05) ICICI Bank

06) ONGC

07) SBI

08) TATA Power

09) HDFC

10) Infosys

11) Reliance Communications

12) TCS

13) HDFC Bank

Mid Cap Fundamentally Strong Companies of India -

01) Jai Prakash Associates

02) Welspun-Gujarat

03) Jain Irrigation

04) Divi’s Laboratories

05) Jindal Steel & Power

06) Lupin

07) Bank of Baroda

08) United Phosphorus

09) Kotal Mahindra Bank

10) Shiv-Vani Oil & Gas

11) Crompton Greaves

12) Punj Loyld

13) Siemens

So above is a List of some Fundamentally strong companies of India. The Fundamentals of these Indian Companies are time tested by various fund managers and Sophisticated Investors.

Investors in line for dividend bonanza

Shareholders can look forward to attractive returns from their investments in India Inc, going by huge dividend payouts that some of the leading companies have doled out for FY10.

These companies rewarded their shareholders handsomely through higher dividends, after reporting a strong growth in earnings. The trend, according to analysts, is likely to extend to more companies, particularly those which generate a large amount of cash every year and don’t have major capex plans in the near future.

More than a dozen companies have announced a payout of up to 70-98%, calculated on the basis of their earnings and dividend for the year ended March 31, ’10, or December 31, ’09. The list is dominated by the two-wheeler major Hero Honda and a few other major companies like Castrol India, Nestle India and GSK Pharma. A few small and medium-sized companies also figure among high dividend-paying companies.

“It makes sense to announce large payouts if a company doesn’t have a huge debt to service and no capex plans to fund with cash generated from its operations,” said Devesh Kumar, joint MD and Group CEO, Fortune Financial Services, a Mumbai-based broking and financial services firm.

Companies like Hero Honda and other major companies in pharmaceutical and consumer goods industries don’t need to conserve resources, because they are established in their respective fields and have been generating a lot of cash every year. They have already built up a strong distribution and marketing network and don’t have any major capex plans, thus leaving good scope for them to dole out large dividend payouts, added Mr Kumar.

Hero Honda surprised its shareholders by paying a record 5500%, or Rs 110, dividend per share, including 4000% silver jubilee special dividend. At this rate, the payout ratio works out to as high as 98%. The company’s net profit jumped 74% to Rs 2,232 crore while net sales grew 28% to Rs 15,861 crore in FY10. Lubricant major Castrol India and confectionery MNC Nestle India also declared handsome dividends, with the payout ratio working out to 81% and 71%, respectively. The two companies reported a rise of 45% and 23%, respectively in their net profits.

According to analysts, many companies have been rewarding their shareholders for the past few years and could be good investment opportunity for prospective investors, provided they offer attractive dividend yield at current prices.

“The BSE Sensex has given a 3% negative return year-to-date. In such a scenario, high dividend-yield stocks would be good investment options,” said Vishal Jajoo, equity research analyst, FCH Centrum Wealth Managers. High dividend-yield stocks will ensure regular tax-free income for investors even if there is no significant appreciation in the price, he added.

According to the head of institutional dealing at a domestic broking firm, many companies offer attractive dividend yield which is more because of their beaten-down prices. He, however, cautions that investors should analyse various factors before taking an investment decision on the basis of dividend yield.

A company is considered fundamentally healthy if its debt-to-equity ratio is less than one. It should be growing with a 20% operating margin on a consistent basis. High operating margin acts as a cushion against substantial rise in input costs in the short term. The company should have high interest coverage to ensure that it will be able to protect its margins even if the cost of borrowing is on the rise, he added.

Experts' market outlook and stock picks

Jigar Shah, VP-Equity Sales, Motilal Oswal Fin Services

One should start buying in this correction with the assumption that markets can further slide by another 7-10% and should be prepared to buy at lower levels also. One cannot catch the bottom and as an investor one should not try timing the markets too much.

Retail investor should start buying the stocks where results were good and future visibility is also very strong. They should avoid getting into volatile sectors. One should select the stocks where safety margins are very high with reasonable growth. Top four ‘buys’ could be GAIL, Bajaj Auto, SBI and Cipla.

Gaurav Dua, Research Head, Sharekhan

We expect markets to remain volatile within the 4600-5400 range in the coming months and expect some gains by the end of 2010. Thus, we maintain our ‘buy on dips’ stance and a 5-10% correction from here will be ideal to buy into core portfolio stocks if you want to try and time the markets. Serious long-term investors can buy in a staggered manner now also.

Retail investors should not try to time the market and invest in fundamentally strong stocks in a phased/staggered manner. However, it is important to do your homework before you shortlist the stocks that you want to buy. We would prefer a mix of large-cap and mid-cap stocks like Tata Tea, Bajaj Holding, Gayatri Projects and ISMT.

Rahul Rege, Business Head, Retail, Emkay Global Fin SVC

Given the fact that market has corrected, this is a good time for investors to start investing. They should adopt a stock-specific approach. It may be a good idea to divide the amount one has for investing in three parts and deploy one-third at this level. Something in the auto space is a good idea.

Our bet would be on Maruti or M&M. In the large caps, one can also look at ICICI Bank or HDFC Bank. Mid caps have been outperforming the market. There we like Godawari Power which is cheap when compared to its peers. To be a little safe, we can have something in the pharma space like Torrent Pharma
or Ipca Laboratories.

Kisan R Choksey, Chairman KR Choksey Shares & Securities

Investors should take the advantage of the current bearish market to buy shares as the India Story looks robust with good potential for growth in corporate earnings.

Retail investors are advised to adopt a selective approach, focusing on companies whose growth is driven by the domestic consumption story. Our top picks include Hindustan Dorr-Oliver, Banco Products, Transformers & Rectifiers and Allied Digital Services.

stock investing glossary for your handy reference

• 52-Week High/Low: The highest and lowest price at which a stock traded in the past 12 months or 52 weeks
  
• Annual Report: An annual publication that public corporations must provide to shareholders to describe their operations and financial conditions
  
• Bear Markets: A market condition in which the prices of securities are falling or are expected to fall
  
• Blue Chip: A nationally recognized, well-established and financially sound company
  
• Bonus Issue: An offer of free additional shares to existing shareholders
  
• Bull Markets: A financial market of a certain group of securities in which prices are rising or are expected to rise.
• Capital Gain: An increase in the value of a capital asset that gives it a higher worth than the purchase price
  
• Credit Risk: the risk that the issuer will default or fail to pay the debt.
• Cyclical Stock: A stock that rises quickly when economic growth is strong and falls rapidly when growth is slowing down
  
• Defensive Stock: A company whose sales and earnings remain relatively stable during both economic upturns and downturns
  
• Delisting: The removal of a listed security from the exchange on which it trades
  
• Dividend Payout Ratio: The ratio of dividend paid to shareholder to its earnings
  
• Dividend Policy: The policy a company uses to decide how much it will pay out to shareholders in dividends
  
• Growth Stock:Shares in a company whose earnings are expected to grow at an above-average rate relative to the market
  
• Income Stock: A stock with a history of regular dividend payments that constitute the largest portion of the stock's overall return
  
• Index: A statistical measure of change in an economy or a securities market
  
• Insider: Any person who has knowledge of, or access to, valuable nonpublic information about a corporation
  
• Interest Rate Risk: the risk that bonds get affected from interest rate changes
• Life Cycle: The course of events that brings a new product into existence and follows its growth into a mature product and into eventual critical mass and decline
  
• Margin of Safety: A principle of investing in which an investor only purchases securities when the market price is significantly below its intrinsic value. To Calculate Margin of Safety, click here...
  
• Market Capitalization: The total dollar market value of all of a company's outstanding shares
  
• Mergers And Acquisitions - M&A: A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another with no new company being formed
  
• Preferred Stock: A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock
  
• Price-Earnings Ratio: A valuation ratio of a company's current share price compared to its per-share earnings. Further explanation on Price to Earnings Ratio, click here...
  
• Recurring Revenue: The portion of a company's revenue that is highly likely to continue in the future
  
• Reverse Stock Split:A reduction in the number of a corporation's shares outstanding that increases the par value of its stock
  
• Secondary Market: A market on which an investor purchases an asset from another investor rather than an issuing corporation
  
• Small Cap: Refers to stocks with a relatively small market capitalization
  
• Speculative Stock: A stock with extremely high risk relative to potential return
  
• Stock Exchange: A market in which securities, options or futures are traded
• Arbitrage : Business of buying in one exchange and selling in another to take advantage of price differences.
  Auction : A mechanism used by the Stock Exchange to fulfill its obligation to the buyer of a security. It is done when the seller is unable to deliver the scrips sold by him. The security in question is offered by a member who has ready possession of the scrips.
• Bear : An operator who expects the share price to fall
  Bear Market : A weak and falling market where buyers are absent
  Blue Chips : Shares of financially sound, well established companies with a track record of good growth and regular payment of dividends.
  Bonus Shares : Shares allotted to the existing shareholders by capitalising the reserves into additional capital. When market expects a company to come out with a Bonus Issue, the price of the shares normally goes up.
  Book Closure : A company closes its register of members for updating the records to facilitate payment of dividends or issue of rights of bonus shares. Book closure is the period during which this process is done and deliveries are not effected in the clearing house.
  Bourse : A Stock Exchange
  Bull : An operator who expects the share price to rise and takes position in the market to sell at a later date.
  Bull Market : A rising market where buyers far outnumber the sellers
• Call Option : An option where the buyer gets the right to buy the underlying security at a specified future date.
  Carry Forward : Settlement where positions are carried forward from one settlement to another settlement.
  Cash Settlement : Payment for transactions done in one settlement on the due date.
  Circuit Breaker : A mechanism used to restrain the market when it gets overheated. The Exchange may relax the limit after a cooling off period of about half an hour.
  Clearing House : It is a legal counter party to both legs of every trade. The netted purchase and sale positions of the trading Members are settled through the Clearing House.
  Company Objection : In some cases, the companies send back the certificates received for transfer citing reasons for their inability to do so. The letter sent by the Company is known as Company Objection.
  Cum Bonus : A share is described as cum bonus when the purchaser is entitled for current bonus
  Cum Dividend : A shares is described as cum dividend when the purchaser is entitled for current dividend
  Cum Rights : A share is described as cum rights when the purchaser is entitled for current rights
• Day Order : The quantity that remains untraded is not cancelled until the end of the day.
  Dealer : A Dealer is a user who works on behalf of the Trading Member
  Delivery Based Trading : When a share is bought or sold for the purpose of receiving or effecting deliveries.
  Dematerialisation : Process of converting a security from physical form to electronic form
  Derivatives : A financial contract between two or more parties and it is derived from the future value of an underlying asset.
  Disclosed Quantity : An order entered in the system wherein only a fraction of the order quantity is disclosed to the market.
  Dividend : Cash payment made to the shareholders out of the profits of the company.
• Ex Bonus : A share is described as Ex Bonus when the buyer is not entitled for the Bonus. The seller remains the beneficiary.
  Ex Dividend : A share is described as Ex Dividend when the buyer is not entitled for the Dividend. The seller remains the beneficiary.
  Ex Rights : A share is described as Ex Rights when the buyer is not entitled for the Rights. The seller remains the beneficiary.
  Expiry Date : The date and time after which a writer of an option cannot exercise his rights.
  Exposure Limit : The limit allowed to the Broker by the Exchange or to the customer by broker. It is the total value upto which one is allowed to hold open positions at any point of time.
• Futures Contract : An agreement between parties for a specified asset for performance on a fixed date in future.
  Hedging : It is protecting an existing asset position from an adverse future position. A hedger takes an equal and opposite position in the futures market to the one he holds in the equity market.
  Insider Trading : Trading carried out by people who have access to non public price sensitive information.
  Limit Order : A buy or sell order where price is specified at the time of order entry
  Long Position : A bull position in a security
  Margin : An upfront payment made by the customer to take position in the market. His exposure limit is fixed based on the margin money brought in by him.
  Mark To Market : A notional profit or loss of a long or short position as compared to the current market price.
  Market Order : An order where no price specification is mentioned at the time of placement
  NSCCL : National Securities Clearing Corporation Limited. The Clearing Corporation of the National Stock Exchange.
  NSE : National Stock Exchange
  Offer : The price at which a share is available in the market
  Offer Price : The price at which a company offers its shares to the public through issue of a prospectus
  Order Cancellation : A facility available in the trading system where one is allowed to cancel the order placed earlier.
  Order Modification : A facility available in the trading system where one is allowed to modify an earlier order.
  Pay In : The designated day on which the members pay securities and funds to the clearing house
  Pay Out : The designated day on which the Clearing House effects payment and deliveries to the members
  Price Band : It sets up the upper and lower limits for a share's movement on any given day. It is based on the previous trading day's closing price. The system will not accept the orders that are out of bound.
  Price Rigging : A process where persons collude to artificially increase or decrease the price of a security
  Put Option : An option where the buyer gets the right to sell the underlying security at a specified future date.
  Quote : Prices at which a share can be bought or sold
  Record Date : The date on which the beneficial owner of the Corporate Benefits is determined.
  Rematerialisation : Process of converting the shares from electronic form to physical form
  Rights Issue : Issue of new share to the existing shareholders at a price which is normally lower than the current market price of the old shares. It is issued in a fixed ratio to the those shares which are already held.
  SEBI : The Securities Exchange Board of India, the regulatory body controlling the functioning of Stock Exchanges in India.
  s Loss Order : An order placed with a 'trigger price'. It is placed to minimise the losses and the order can be either for a purchase or a sale.
  Volume : The total number of shares that are transacted in a scrip. It helps in analyzing and understanding the reasons behind price
  Average Annual Return
  The percent profit your Mutual Fund or your portfolio of shares is making on a yearly basis. If the report period is shorter or longer than a year, the average annual return is converted to an annual rate.
  Bearish Market
  A prolonged period of falling prices in a stock market. The adjective ‘Bearish’ describes an opinion or outlook that expects a decline in price, either by the general market or by an underlying stock, or both.
  Bid Price
  The price at which a buyer is willing to buy an option or stock.
  Bluechip
  A stock considered reliable with regard to dividend income and capital value is called Blue chip. Such shares of renowned companies with established and stable businesses can offer the investors a steady flow of earning.
  Bond
  It is a promissory note issued by a company or government to the lenders. A bond invester lends money to the issuer and in exchange, the issuer promises to repay the loan amount on a predetermined maturity date alongwith a specified amount of interest.
  Bonus Share
  A share issued by companies to their shareholders free of cost by capitalisation of accumulated reserves from the profits earned in the earlier years.
  Book Closure
  Dates between which a company keeps its register of members closed for updating. It happens prior to payment of dividends or issue of new shares.
  Brokerage
  Brokerage is the commission charged by the broker for selling or buying securities. SEBI determines the maximum brokerage chargeable in India.
  Bullish Market
  A rising market with abundance of buyers and few sellers. ‘Bullish’ Describes an opinion or outlook in which one expects a rise in price, either by the general market or by an individual share.
  Circuit Breaker
  When price of a stock increases or decreases by a certain percentage in a single day it hits the circuit breaker. Once the stock hits the circuit breaker, trading in the stock above (or below) that price is not allowed for that particular day.
  Close-ended Mutual Fund
  A mutual fund that allots units to investors only at the time of the New Fund Offer and which has a fixed tenure. The investors can redeem their units only after the completion of the tenure of the scheme.
  Convertible Bond
  Bonds that can be converted into common stock of the company at the option of the holder.
  Corporate Dividend
  The portion of net income earned by a company that is distributed among its shareholders. It is usually declared as a percentage of the paid-up value or face value of the share. This pay-out is not guaranteed. The amount you receive may vary from company to company and year to year.
  Correction
  It is a temporary reversal of trend, usually negative, in share prices. This could be a decrease following a consistent rise in prices or an increase following a consistent fall in prices.
  A short-term drop in stock market prices is generally viewed as bringing overpriced stocks back to a level closer to companies’ actual values. A healthy market will correct from time to time.
  Debenture
  A loan raised by a company, paying a fixed rate of interest and which is secured on the assets of the company. Interest on debentures must be paid by a company whether it makes a profit or not. If the debenture holders do not get paid, they can legally force the company into liquidation to realise their claims on the company’s assets.
  Demat
  Shares that are in the electronic form is called dematerialised shares or demat shares. Trading dematerialised shares is demat trading. Dematerialisation is the process by which shares in the physical form are cancelled and get credited them in the form of electronic balances, which are maintained at a depository.
  EPS
  It is Earnings per share, the amount of corporate earnings available to common stock shareholders. In other words, EPS is a company’s profit divided by its number of shares. If a company earned Rs. 2 crore in one year and had 4 crore shares of stock outstanding, its EPS would be Paise 50 per share.
  Equity
  The ownership interest of common and preferred stockholders in a corporation.
  Equity Investments or Equities are those shares issued by a company which represent ownership in the company. Common and preferred shares are usually called equity stock.
  ESOP
  It is Employee Stock Option (Ownershop) Plan, that encourages employees to buy the stock of their employer. ESOP gives to an employee shares of stock in the company as a deferred compensation benefit.
  Initial Public Offer (IPO)
  When a company offers its shares to the public for the first time, it is known as an Initial Public Offer.
  New Fund Offer (NFO)
  When a mutual fund offers units of any of its schemes to the public for the first time, it is known as a New Fund Offer.
  Open-ended Mutual Fund
  Mutual funds which are open throughout the year for sales and repurchase. Investors can redeem their units on all working days.
  Security Transaction Tax (STT)
  A tax on any purchase or sale of securities on any stock exchange in India.
  Technical Analysis
  The method of predicting future stock price movements based on observation of historical stock price movements in the market.
  

fundamentally strong stocks to buy

Buy low PE, high book value, high investments, high assets holdings stocks meeting one of the above criteria for example:

Jindal South West Holdings ( when its Sun Investment is listed in a year or so, JSWHL will cash out; that does not mean you wait two years to buy; Now is the time to buy while JSWHL has gone low from its peak)

MTNL (very high book value and land assets, investments, reserves etc whatever it takes it has)

Jhunjhunwala Va (constantly rising high income profits, dividend paying, small capital)

Cairn ( valuable assets in ground and might discover more oil; price is very attractive and better than most IPOs)

Usha Martin Infotech ( very high book value, going to be very big in eLearning field which it had given away to IIT Chennai in 2001)

Maars Software: High value land holdings,high book value I think one will do beter buying above kind stocks

How (NOT) to make money from Stock Markets

Stock Market is undoubtedly the best investment vehicle around. The high return albeit a little risky route for making your hard earned money for you. But, the way they behave is erratic so to say the least. You will find so many people bad mouthing the markets with one liners such as:

• “It is a gambling machine where you make coins and lose rupees”
• “It is the playground of big(filthy rich) people”
• “Markets are more unpredictable than girls”

I am sure there are more. But, is there any truth in the allegations? Yes, there is a slight unpredictably in how the market functions and manipulations do happen with the so called big sharks playing their dirty cards.

However, the Stock Markets are not the ones to be blamed.

For the sake of simplicity, lets compare the Stock Market with a SUV. They are fast, uber cool and give the driver a rush of adrenaline. But, will it give the same pleasure to someone who does not know how to handle the powerful engine that a SUV has or does not have the zeal to test its true potential on rough terrain? The answer is a big NO.
The reason is simple, “It is a misfit”.

Hard to digest, but that’s what all the people are who bad mouth the markets. A clear misfit.

Without further ado, here are some of the ways you can (not) make money in the stock market. I should clarify at the onset that my idea of a stock market investment is a medium to long term strategy which focuses on increasing capital and not fast gains.

Stock Markets are (NOT) a Get Rich Quick Scheme

This is one thing that lures early investors to the Stock Market. A friend / relative makes a quick buck in the Stock Markets and he / she becomes the holy angel telling everybody about the latest Get Rich Quick Scheme – “The Stock Markets”.

If you have a friend/relative like that and you can get influenced by their views, you are definitely (not) going to make money from the Stock Market.

I should (not) follow the best equity advisors on TV/Internet

If you thought you scraped through the first one unharmed, this one is surely the way to have your investments turned into sand. I have nothing against the so called equity experts but a blind faith in their opinions is the sure-fire way to burn your investments to pure ash. The so called equity experts have their own rationale for their advice and that need not align with your profile. Moreover, there are always some personal motivations running deep which influence their picks.

I could almost do another post on this point alone. But the idea is, “Following Equity Experts blindly does not work in Stock Markets”.

I (do not) need to set any Investment Goals

This is the big daddy of Equity Investment debacle in general. A tendency that there is hardly enough investment to set goals is a disaster waiting in the wings. If you thought Investment Goals were for people with lot of money invested, think again. How can you expect to make money in the Stock Market if you do not know how much you want to make. I never put down any investment goals and as a result, I never knew when to place a SELL call on my holdings.

Have clear and reasonable goals documented somewhere and decide the Target BUY price, Target SELL price and so on. It will atleast help you avoid those huge fluctuations in the market when there is too much speculation.

The Stock I am holding has come down to half their price, but they will rise again*

This is one simple reason to have your wealth eroded via the Stock Markets with a ‘*’. Let’s consider that your buying decision was well researched and the company fundamentals still look strong. The idea here is that some stocks have a lot more than fundamental play riding on them. They are momentum stocks and cyclical in nature. So, it is always suggested to Cut your losses and Keep Cash Handy.

Cash in hand will give you an opportunity to re-enter at lower levels and make profits when the markets are going good. Believe me, there is nothing like seeing Green in the portfolio.

* If you have bought in a stock like L&T at high prices, the above may not hold.Some stocks are worth passing generations and short term losses should not bog you down.

I should (not) buy in bulk to ensure maximum gains

This is one ideology that is both true and rubbish at the same time. True, since it saves you a lot of money on the Transaction Costs and moreover, the gains based on per share basis make it a good strategy to buy huge chunks as and when possible. But, do we keep a little buffer cash to invest more should the shares go down for short term. If you don’t then it is calling for trouble. Always buy shares in a reasonable and suitable lot based on the cash position. Even if the share in your portfolio is a potential multi bagger it can go downhill for sometime. Keep some cash handy to increase positions in the share by buying at low prices.

Come to think of it, I can go on writing a book on ‘How (NOT) to make money from Stock Market’. But, as of now these were some things I thought are the biggest mistakes that we (or mostly amateur investors) make while investing in Stock Markets.

Midcap MF+ SIP = A Great Investment

Is there a safe way to invest in Market? – There is none – Some are safer and some are riskier, depends on your appetite for Risk.

This Finance Friday post is directed at people who are just getting into Stock markets and want to start with a relatively safer option.

A SIP (Systematic Investment Plan) is considered one of the safest Investment vehicles available in the markets today. The basics of an SIP are basically an extension to the MF (Mutual Funds) where regular purchase of units is done every month for a pre-decided amount.

In Simple terms, it helps you average out your buying price which fluctuates based on the market volatility. But, is any SIP good enough to be termed ‘The’ Investment .

It sure ain’t. There are umpteen factors which decide the profitability of an SIP similar to what holds for any equity based investment. With a plethora of choices available in mutual fund SIP’s one can be spoilt for choices and making the right choice can be often difficult.

The answer in my humble opinion, as is clear from the title is a Mid-Cap focussed fund. Now, the rationale here is pretty straight forward. Mid Cap funds are among the most volatile lot. They are the wild bulls at times and turn bears just as wildly. Basically, mid cap funds come with a potential risk in lieu of equally high profits.

So, how could you cut down on the risks when dealing with a mid-cap mutual fund. An SIP in a good mid cap fund is what will make the investment much more fruitful.

What better way to prove it than some real stats. Luckily, I happened to chance upon an article on BT with stats on some mid-cap mutual funds. The stats below will help understand the investment rationale behind the ‘Mid Cap Fund+SIP’ combination

FUND 3-MONTH RETURN 6-MONTH RETURN 1-YEAR RETURN JM Basic 43 89 -32 Magnum Global 44 83 -7 Sundaram BNP Paribas Select Midcap 49 86 7 DBS Chola Midcap 48 83 2

(Source: Business Today)

All the mutual funds are midcap funds from one of the better AMC’ s in India. Did you notice anything common between the returns spanning various tenures.

• All have stupendous 3 and 6 monthly returns
• All have poor or marginal 1 year returns.

But, then why should this data suggest going for an SIP. First, the 3 month and 6 month returns are courtesy of the recent bull market we witnessed. Moreover, Mutual Funds in my opinion are comparatively long term plays(2-3 years).

Moreover, most of the Mutual Funds have a exit load if sold before 1 year. So, people generally buy and hold mutual funds for at least more than a year.

Now, given that the performance of mutual funds fluctuates like the data suggests, would you prefer doing a bulk purchase in a mutual fund. My answer is NO. Simply, because if i invest in a midcap MF at the peak of bull run, there is every chance that my investment can go for a toss should the bears run rampant.

But, with an SIP i am accounting for the volatility since my investment is going to be in a phased manner and the purchases are going to be made irrespective of a bull or bear market.

• Bull market – I get less funds but the NAV goes higher.
• Bear Market- Even though the NAV is falling, the number of units I get is more.

So, with a SIP investment one can ensure that the volatility of a mid cap fund is factored in and my investment is protected.

Why Warren Buffet Makes Money and You Don’t

When we are talking about Stock Market Riches, the Oracle of Omaha – Mr. Warren Buffet’s name has to be taken in the same breath. The world’s richest man sits on the top of the world having made him a fortune investing in stock markets over a period of time. What’s more, he has done it for millions of his shareholders as well, invested in Berkshire Hathaway.

Did you know that a $10,000 investment in Berkshire Hathaway in 1965, the year Warren Buffett took control of it, would grow to be worth nearly $30 million by 2005

The marketplace is abuzz with Buffet’s investment principles with dozens of books and millions of citations on the Internet. But, then we haven’t seen anyone come remotely close to the fortunes that Mr. Buffet has made.

Technical and Fundamental Analysis apart, there are some very simple yet important principles which are highlighted in Mr. Buffet’s Investment rationale.

Never invest in a business you cannot understand

Sound simple. The philosophy is so profound yet how many of us tend to avoid it. One look at his portfolio and the statement makes all the more sense .Coca-Cola, Nike, Procter & Gamble, J&J. The business intricacies apart, the companies make products we can all relate to and probably use them too on a regular basis.

Risk can be greatly reduced by concentrating on only a few holdings

How many of us have heard, “Never put all eggs in one basket” or Diversification is the key to effective investment. But, then aren’t we culprits of over-diversification at times. I remember holding 17 stocks in my portfolio at one time. Over diversification leads to dilution of possible gains and it is difficult to track 17 companies at once.

Mr.Buffet’s portfolio has a list of 41 stocks. It may sound too much, but then he has accumulated them over years and has hundreds of people managing his investments now.

Patience

This single word is the game changer of sorts. This virtue alone separates the likes of Mr. Buffet, Peter Lynch from the average Joe. The explanation for this is best understood in terms of Mr. Buffet’s principles itself.

1. Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years
2. Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market
3. The advice “you never go broke taking a profit” is foolish
4. Buy a business, don’t rent stocks

The quotes speak for themselves; invest in Stock Markets to become a co-owner and not to make profits out of fluctuations.

It would be wrong to say that these 3 are the principles that made Mr. Buffet his riches. A lot of research and number crunching is responsible for Mr. Buffet buying stocks at a “Fair” price or on the basis of intrinsic value which the whole world is trying to figure out. But these are some no-nonsense jargon free fundamentals that can go a long way in ensuring a long term healthy investment portfolio.

I would like to know from Stock Market Enthusiasts out there – Do you think that if you stick to these 3 principals of Mr. Buffet, you will make money in Stock market?

Who Made You The Maximum Money In The Stock Market This Year

This year has been a see-saw ride as far as the Stock Markets are concerned. The Markets witnessed one of the worst falls but staged a comeback of sorts during the later part of the year. The fall was meteoric owing to the global economy slowdown which turned out to be disastrous for the Indian Stock Markets.

The Shareholders wealth tumbled like nine pins. But, at the same time the fall bought the valuations of stocks to decent levels exposing new investment opportunities. When the markets tanked to 8k levels, the investors were too sceptical to invest. But, the Indian Economy recovered at a good pace and things started turning around.

The markets saw some real good short term bull rallies which took the BSE Sensex close to 12k levels. With 12k levels sustaining for a short duration, it was clear that the markets are heading for a uptick. The rise to current levels of 17k has been a free ride so to speak.

But, of all this see-saw ride in the Stock Market, who made the maximum money for Investors. There is little room for surprises here though. It was indeed Reliance Industries.

Reliance Industries has emerged as the biggest wealth creator for the third time in a row. It has created Rs 1,514- billion worth of wealth contributing 15.6 per cent of total wealth created in FY 09. (Source: Motilal Wealth Creation Study)

This is not too surprising given the DNA of Reliance Industries.Reliance has played the Indian Stock Markets like no other organization has. The founder knew all tricks of the trade and is still remembered as the master of Stock market dynamics.Moreover, Oil and Gas will always be a sector which will drive wealth creation. Being in short supply, it is a pricey commodity and Reliance Industries is pretty much the market leader in the Indian Sub-Continent. ONGC comes close but the government subsidies take its toll on its profit margins.

Another interesting result from the study is UNITECH , which has been termed as the fastest wealth creator. It has been my personal favourite over the years. The stock being from the realty sector is bound for volatility but makes for a very profitable short to medium term buy. Unitech has always been the punters bet and a traders delight.

To get an idea of the the price volatility that Unitech has witnessed for the past two years, its best to look at the graphs from FY08 to FY09

Keeping BSE as a benchmark , Unitech fell from highs of 546 levels to the maximum lows of 21.The figures bear the testimony of the volatility that Unitech witnessed in the year marred by U.S. financial crisis.

But, it did rise like a phoenix(from its shattering lows) of the year ending 2008. Here is the Unitech price movement from the year 2009 to Dec 2009,

The stock rose from its lows of 24 to highs of 118 levels and the stock mostly saw a consistent uptrend for the given period. That’s almost 5x gains for the year. No wonder, it was the fastest wealth creator for FY09. However, as is clear from the two graphs, a stock like UNITECH may not be the most prudent choice for a long term horizon. Given the cyclic nature of realty/infra sector, it only makes sense to keep a profit booking strategy in a stock like Unitech.

The long term portfolios will still take considerable time to show some green but the investors who made fresh purchases during the start of the year are definitely sitting on decent profits.

Is the Indian IT Sector set for a Stock Market rebound ?

The Indian IT sector , the darling of trade pundits is seeing some kind of resurgence since the start of the year.After a tumultuous last year which saw the Indian Stock Market losing nearly 50-60% of its value, IT stocks fared ever so badly.

It was however evident since most of the revenue that the Indian IT sector comes from overseas with almost every company getting around ~60% revenue through North America alone.A recession hit U.S. economy came as a jolt to the IT sector since IT spending literally froze overseas.

Now, with the economy on its path to recovery and the U.S. getting back on its feet, the picture looks rosy for the IT/ITES sector in India.

• Industry analysts are confident of a turnaround and they have come up with promising IT spend estimates.
• The Indian IT giants Infosys, TCS have both bettered the industry expectations with their quarterly results.

The pullback of the IT sector is evident from the fact that Infosys, Wipro are all trading close to their 52-week highs.With Infosys raising the revenue guidance for the fiscal, the market experts have further raised their expectations from the IT sector and recommending BUY calls on stocks Like Infosys.

BSE IT Index ( MoneyControl)

However, is it all good news for the IT sector that makes it a no brainer to start building positions in the IT stocks? Well, I have my concerns,

• Rupee Dependency : As mentioned earlier, The IT sector derives a major chunk of its revenues from overseas.That means that the de-facto billing currency is Dollars( $) . A appreciating rupee spells dooms for the IT companies and eats into their profits.Rupee recently touched its 15 month highs and continues to stay strong against the dollar.

Is The IT Sector taking into account the Currency Exposure

• Human Resources : After huge cost cutting measures and a large scale hiring freeze in the last year, the IT sector has taken off salary freeze and announced plans to ramp up hiring.From the quarterly reports, both TCS and Infosys have reported resource utilization around 60-70% . The bottom line is going to take a hit with increased salaries and increased hiring.

Is The IT Sector confident of Increased Business and Efficient Resource Utilization

The two factors directly influence the top line and the bottom line respectively.The market outlook looks positive for the IT sector but i presume a Cautious approach is the way ahead as far as investments in the IT sector is concerned.

India Growth, Stock Markets, SEBI Regulations & more..

India Growth Story Is Still On Track, says IMF

Even with a back breaking food inflation and policy tightening from the government, the India long term growth story is still very much on the right track.The International Monetary Fund (IMF). Betting on the strong fundamentals of the Indian economy, the IMF expects Indian economy to grow at 8% in the next financial year. This is considerably higher than the current 6.75% growth rate.The IMF also estimates the wholesale inflation to ease down to 5.5% in FY11.

Interestingly, the IMF wants the government to act fast on the policy reforms.It suggests withdrawing the fiscal stimulus that was provided last year since the economy is back on track. Since, the demand is picking up across the industries, they feel that the economy is good enough to accelerate without the fiscal stimulus. The relaxation in taxes and the huge fiscal stimulus has seemingly increased the fiscal deficit which can be difficult to manage if continued for long.

The IMF also sees the removal of economics stimulus as a measure of easing up the ever increasing inflation.There is also an expectation that rupee appreciation will help manage increase capital inflows and lead to stability in the markets.

So, looks like RBI did time it right while going ahead with the CRR hike a few days back. The bond market will seemingly see some action with banks being asked to purchase more bonds.

What are your predictions for the Indian Economy Growth ? Will it continue to grow at a healthy rate.

The Stock Markets continue their downward slide

The Indian Stock Markets seem to be headed downwards. The markets have corrected quite a bit from earlier levels of 17k and hovering around 16 k levels currently. The NTPC FPO offering did raise the hope of the markets yesterday but guess it was short lived. The Sensex lost 1.6% to end at 16,224.95 on account of heavy selling across various counters led hugely by Technology stocks. The year 2010 has not turned out to be very good for the Stock Markets where the Sensex has corrected almost 7% and is now expected go down even further.

Today’s decline was attributed to negative global clues. The news of sharp rise in Sovereign Credit Default Swaps of Greece, Portugal and Spain led the European markets into a crisis whose after effects were also felt in the latter half of the trade in Indian Markets.All major indexes including the IT, Metal, Realty ended in red with the OIL sector also faring badly on account of the growing uncertainty of the oil price regulations.

The Indian Stock Markets have not been able to gain momentum this year with a consistent flow of negative news from both domestic and global markets.The buyer interest is not visible in the market and traders are offloading their positions in the wake of rising food inflation which continues to rise.

The stock markets are looking quite vulnerable at the moment.How do you expect the markets to behave in the short term? Is it still a Buying market or there is more pain left

SEBI continues its effort to bring transparency in Capital Markets

SEBI has been instrumental in its efforts to bring transparency into the capital markets and make the markets more Investor happy.With a slew of reforms both for the primary and secondary markets, SEBI has now turned its focus on setting things right for the Mutual Fund sector.

After pulling out the Reliance MF ad a while back on account of not following the stipulated guidelines, SEBI seems to have revised the regulations for the Mutual Fund advertisements.SEBI has been facing the ire of some MF participants that the existing guidelines are ambiguous and do not give a clear direction.

Now, SEBI has standardized the risk warnings in advertising Mutual Fund products and the new rules will be implemented from May 1

SEBI has made it mandatory for all MF advertisements to carry a complete 5 second audio-visual disclaimer which states ““Mutual fund investments are subject to market risks, read all scheme-related documents carefully”

We all are subjected to those tall claims made by AMC’s and telesales making false claims for their product.The use of catch phrases like “ Double You Investment in 5 years” and “200% returns consistently” have become common practise.No agent or product promoter cares to explain the finer details of the investment product and they make merry off unaware investors.

I really hope that SEBI also actively make amends in the way certain Investment products are marketed.It will do a heap of help and the investors will be able to make informed decisions rather then being duped by hugely over hyped product descriptions from the marketers.

Is Sugar Industry headed for a Down cycle?

Just as the world was witnessing a gradual recovery, over the last year, from the worst crises after the Great Depression, the asset class which clearly stood out and could be easily termed as a star performer for the FY 2009-10 is Sugar as a commodity.

Sugar – As the best performer? Na…A jackpot by no means for its Consumers but for its investors in this commodity-class or probably even stocks of companies involved in manufacturing of the white sugar. The price of sugar has moved up – from Rs.20 per kg a couple of years back to Rs. 50 per kg just two weeks back – on the back of demand supply mismatch in this commodity over last year.

The Bitter Tale of Sweet Sugar

However, after witnessing a huge upsurge, the sugar prices have turned bitter for a major part of last couple of weeks on the back of sharp downswing in the international prices. The sugar prices in the international markets had witnessed a peak of $740 per tonne this year.

Over the past week, the sugar prices have seen a correction of about $30. While the over-all slump from the peak price-point stands at around sharp 20% off from its peaks at sub-$550 per tonne, triggering a panic amongst traders and speculators holding long positions in the commodity or sugar stocks.

Has the Down Cycle Begun?

India remains the world’s largest consumer of the sugar and hence largely affected by the fluctuating tales of this white sweetener. At the same time, India’s policy initiatives and consumption pattern of the sugar also has a volatile bearing on the international prices of sugar as a commodity.

Charts Courtesy: Business Standard

As per an article in the Economic Times,
“Local sugar supply estimates for 2010-11 surged to an estimated 26 mt —two million tonne higher than the annual domestic consumption, indicating that India’s import dependency in the coming year would be virtually nil.”

This indicates a scenario of marginal supply-side surplus over the domestic demand scenario for the up coming year. In other words, it could be a pointer towards self-sufficiency in demand-supply equation for the world’s largest sugar consuming nation.

Thus, improving demand-supply equation in the domestic sugar market, which would result into lower dependency on imports, is one of the prime reasons for softening of the international prices of the sugar as a commodity.

As in any asset class which allows build-up of speculation, the volatility usually lasts for a longer period and occasionally even over-stretched in reply to relative fundamental shift in the asset class. Thus, even speculators have played their own role to play in dragging down the commodity prices sharply due to initial fears of a possible negative turnaround in the prospects for the sector going forward.

India is the biggest producer of sugar behind Brazil. Additionally, India is also the biggest consumer of sugar in the world. This could internally lead to local realignment of sugar production based on the consumption pattern of the domestic economy.

In a way, this directly affects the production output of sugar from India which forms a substantial chunk of global output as well. In fact, the woes for sugar prices is further fuelled by expectations of better crop output from the world’s leading producer Brazil.

Policy Initiatives for Sugar Industry

Until now the government had extended the duty free regime on the import of raw sugar up to March 2010 in order to combat the rising prices of sugar domestically. The government had given permission to private traders to import refined sugar at zero-duty with quantitative restrictions. This measure was initiated in order to augment domestic supply of sugar and consequently keep sugar prices under the check.

As per the official of Indian Sugar Mills Association (ISMA) as quoted by Economic Times,
“We have urged the government to re-impose import duty on white sugar at the earliest as our survival is at stake. Sugar is being offered at the Kandla port at Rs.30, 000 per tonne and there are no takers. World prices are also nose-diving, signaling the end of a profitable cycle.”

By above, the ISMA provides to convey the government that with sudden fall in prices of international sugar prices and the prevalence of zero-duty structure, the domestic sugar prices needs to be shielded by the sharp fluctuation in global sugar prices by way of import duty on sugar thus ensuring that domestic output remains competitively priced against cheaper imports.

Domestic production price for sugar are slated to be around little over Rs.35 per kg leaving little margin of profit for home producers on their refined products. Currently, the domestic prices are prevailing around Rs. 42-44 after sharp price correction witnessed in last couple of weeks.

To sum it up, the prospects of softening consumption demand and improving production estimates from India, better production estimates from leading producer Brazil and softening of international prices globally has led the analysts to debate in open as to whether the down cycle has actually begun in the global sugar industry.

The stock price of leading Sugar companies like Bajaj Hindustan & Shree Renuka Sugars have slumped to over 35% from their peak prices on the back of speculative built-up in these counters fuelled by higher commodity prices over the past year.

Top 5 Sectors to Invest in FY 2010-11

New financial year 2010-11 kicks-off much on the back of pompous global recovery witnessed during the second half of the FY 2009-10. And, equity markets are no laggards in terms of catching these cues before hand.

However, the markets have remained largely range bound since June 2009 to March 2010 within the range of 4500 to 5300 on the Nifty index. This range bound movement can be termed as a broad based consolidation after a scorching pace of market recovery from its recessionary trough levels.

Now, that markets are again back at Nifty 5300 levels, it is on the verge of a likely breakout. Hence, it would be a prudent idea to have a check as to which sectors and industries would it be worthwhile for the investors to plough their hard earned money. Investors would be keen to know which sectors are placed better to be among winners for the FY 2010-11.

1) Power Sector

With the rising population and growth story of India, the need of fast paced growth in power generation is increasingly gaining importance. Energy is one of the major contributors to the economic development of a country.

The government has targeted electricity for all by 2012 by the end of 11^th Five Year Plan. The demand of electricity is growing exponentially. And, herein lays the opportunities for investors to plough their money in public and private sector companies both.

At present, coal based thermal power plants accounts for almost two-thirds of the energy needs of the country. However, the government is increasingly becoming aware about the benefits of generating power through cleaner nuclear power plants.

More recently, during the Budget 2010 announcement, the government has also laid emphasis on the development of non-conventional energy resources such as Solar and Wind Energy. Rural electrification is also a significant initiative by the government to allow access to electricity in remote regions in India.

Stock Picks: NTPC (Power Generation), Power Grid Corporation (Power Transmission), Tata Power (Power Generation) and Rural Electrification (Power Sector NBFC) and BHEL (Power Equipments).

2) Food Processing

As the growth of the economy chugs forward and consequently generates more employment and raises the standard of living of the middle class population; the demand for dynamic and processed food products will witness a manifold rise.

The processed food comes with enhanced food life and value added services to the raw form of food products. It also provides boost to the farmers as increasingly modern techniques goes into production of food and other activities involved thereafter. As per an estimate, Indian food industry is expected to grow to $280 billion by 2015.

The food processing treatment can be spread across various food products like products with low shelf life such as fruits and vegetables, dairy products & grain processing and storage among various other fields related to food products.

The upcoming years are likely to witness a fast growth in ready-to-consume food products like health drinks, frozen food products for low-shelf life food articles, readymade Aata (flour), fruit juices, ready-to-cook meals, quicker snack products like noodles and pastas, etc. with increase in percentage of working couples and busy life style.

The total plan allocation to the food processing industry has gone up sharply from Rs.650 crore during the 10^th Five year plan to Rs.4030 crore during the 11^th Five year plan.

Stock Picks: ITC, Ruchi Soya, LT Foods and REI Agro.

3) Banking & Finance

Banking industry is said to be a mirror of an economy’s health. A Sound banking system serves as a significant trade enabler to the country. During the recent global crisis, Indian banking industry came out with flying colors on the back of stringent stipulations laid down the Central bank.

With the opening up of the sector in early Nineties by the government, the industry has received a significant boost by the emergence of the private sector banks which increased competitiveness and enhanced the level of banking facilities to a top notch level.

However, during the recent global recession, even the lagging public sector banks have made a big come back on the back of large up gradations to suit the hi-tech services provided by the private sector and foreign banks.

For a sustained economic growth for the country, unmatched banking and financial services is a must in order to facilitate the increasing need of swift and hassle-free transactions. Banking sector is an enabler to the economic growth.

Stock Picks: HDFC Bank, SBI, ICICI and Bank of Baroda.

4) Infrastructure

The economic development of a country is directly linked with the infrastructural status of the country. Infrastructure not only acts as a enabler to higher growth but also generates employment and serves the social needs of the people of the country.

If the economy is an emerging one like India which is a laggard on the infrastructural front, the growth in the infrastructure industry gains all the more importance. High transaction costs arising from inadequate and inefficient enabling infrastructure can go a long way in stunting the growth rate of the economy.

The broad term of infrastructure can cover a wide range of infrastructural facilities from ports and road, rail, transport, aviation, water needs, mining and construction among other fields of operations. Better infrastructure can lead to faster enabling services.

Stock Picks: L&T, Patel Engineering, IVRCL Infrastructure, Hindustan Construction (HCC and Thermax.

5) Oil & Gas

One sector that has disappointed until now is Oil and Gas sector. The prospects of the sector have witnessed a lagging demand as the global economy is still to witness a complete recovery. The recent crisis has stolen a huge chunk of the demand of oil and gas which is needed to stoke the growth engines of every major economy.

Most of the large companies were building new capacities before the breakout of the recession. This new capacities led to excess supply and falling demand at a time when the demand was hit on account of slowdown and crisis. This led to plunge in the operating margins of the refiners who were stuck with excess supplies of crude products.

However, with the recent advent of a recovery on the horizon, there is a gradual pick-up in the global demand for oil and gas, as economies are back to pump money for higher capacity utilization of their resources in order to meet increasing demand of goods and products. Demand for petro products is expected to improve over next one year.

Top 5 Stocks to Invest in Indian Markets

Following are the Top 5 selected stocks:

Mahindra & Mahindra

The research undertaken by the author says that she is betting on the demand for Autos from the rural areas of India.

Further, she moves along with stock pick of M&M, as the company is a dominant player in the tractor market with 41% of the market share and also boasts of a smart portfolio of utility vehicles like Scorpio and Bolero. The company is also looking to diversify its business into non-auto businesses like IT and finance.

My View: Most of the automobile stocks, including M&M, have appreciated more than 3 times from their recessionary lows. Automobiles was the worst hit sector during the global recession, while at the same time it has outperformed the most, during the phase of recovery on the back of renewed consumer demand.

At the current market price of Rs.502/-, M&M has more than trebled from its lows of Rs.120 as on January 2009. After such a steep run-up, probably it could be a better idea for an investor to wait for the stock to correct somewhat and enter a consolidation phase.

NTPC

The second stock pick as per Wall Street Journal report is NTPC, based on the expectation of huge capacity addition in the power space of India over the next few years. Given the size and ownership of NTPC, the company is expected to grow at the same pace as some of the other new private players in the industry.

The stock is expected to grow along with the industry with its expansion plans on track. The research has placed an emphasis on the stock as a good defensive bet with healthy growth prospects.

My View: The Power sector has witnessed a flurry of action from a number of private sector players in the last couple of years. The supply side constraints in the power scenario for India have led to emergence of a number of private players to cater to this industry with ever-increasing power demand.

However, most of the new private companies which have tapped the public market to meet its funding requirements have come at rather steep valuations during their IPOs. To make the matters worse, most of these companies are yet to go through their investment cycle and wait-out due to long gestation period for most of their power projects.

Comparatively speaking, NTPC, which already has installed capacity and running operations, could well prove out to be a better bet in terms of current valuations at 19 times its earnings.

Bharti Airtel

The Wall Street Journal author Shefali Anand expects a lot of potential growth in subscriber numbers that is still remaining in the India’s telecom industry. Further, while backing the prospects of Bharti Airtel’s stock, the author confesses that the immediate future of this company continues to remain pretty cloudy.

However, the author emphasizes on long term investments with 5-7 years horizon until when the positive effects of consolidation in the sector could be more pronounced in nature. The company is also well-placed to benefit from the 3G revolution, the auction process for which has already kicked off.

My View: This is the stock pick with which I agree the most with the author of the wall Street Journal. Bharti Airtel, among with other telecom stocks, is currently quoting at depressed valuations on the back of adverse effects of stiff price wars prevailing in the telecom industry.

According to me, investments in Bharti Airtel seem to be the best bet among the large cap companies at current market valuations for most of the stocks. Post Africa’s Zain acquisition, the company is in a better position to diversify its revenue source and allay the fears of saturation in the Indian markets.

With ongoing 3G auction, Bharti Airtel could be the best bet for true long term investors with horizon of over 3 years of investment duration. The company is also expected to benefit the most from the implementation of Mobile Number Portability.

Federal Bank

The research has placed faith in Federal Bank based on the view that as the economy chugs with its growth, which will result in incremental borrowing for the individual business funding requirements. This aspect could lead to rise in the fee income of this bank. The author is also betting on the banks ability to control its NPAs.

The author has preferred to go with this bank as it has a sound presence in the southern India and that this bank itself could be an acquisition target by some larger bank wanting to cement its place in the South markets.

My View: Banking industry is said to be a mirror reflection of an economy’s health. Instead of Federal Bank, I would be tempted to go for few other Public Sector Banks like Bank of Baroda or Bank of India or even a small-cap bank like Indian Bank.

Bank of Baroda’s wide base has helped it to tap all the resources in rural, semi-urban and metro markets. Bank of India is estimated to notch around 15% earnings in FY10 and even higher over next one year.

Small-cap Indian Bank has witnessed a best turnaround over last few ears. This bank has performed well on all quality parameters. This bank boasts of NIM of over 3.5% in more than last 3-4 years. Its RoA at 1.6% in FY 2009 was the highest across all the banks.

J.K. Lakshmi Cement

From the allied infrastructure space, the author has chosen to go with J.K. Lakhsmi Cement as India chugs along with increased activity in areas of homes, roads, airports and other infrastructural projects where cement is predominantly used in structural works.

The cement stocks have registered a sharp gain in the previous year and have witnessed a bearish trend around this year due to rising raw-material costs of coal and large supply overhang. The author has further cautioned investors about the volatile ride in this small-cap counter.

My View: Rather than hand picking this cement company, the author could have directly gone for a good infrastructure company with niche presence in certain specific segment. Currently the cement industry is passing through the phase of glut.

My pick from the infrastructure industry would be Patel Engineering which is one of the leading players in the construction segment mostly concentrated in hydro power projects. The company also has mild presence in irrigation and road projects.

To name one another company from the infrastructure space, Hindustan Construction Company, with interests in construction of power, road and bridges, dams and marine works among other business operations. The company was also involved in construction of the famous Bandra-Worli Sea Link in Mumbai and is now involved in a premium hill station project of Lavasa

My Top 5 Stock Picks

Currently, most of the front line stocks are more than fair valued. Hence, my stock picks at current market valuations would involve a blend of large-cap and mid-cap stocks both. In fact, some of the mid-caps are still trading below their book value and could pick up pace as market advances and investors starts surfing for under-valued counters:

• Bharti Airtel
• DLF
• Videocon Industries
• Patel Engineering
• Everest Kanto Cylinder