TOP 50 Blue Chip companies India

1) RELIANCE INDUSTRIES

India’s largest company by marker cap, has largely underperformed the Sensex in the last few months. This was due to concerns about the sustainability of CRMs, RIL-RNRL dispute etc. But with Singapore GRMs showing a marked improvement we feel that this will push RIDs GRM back into double digits. RIDs upstream business also remains on track with the ramp-up of KG D6 and whatever bottleneck is there will soon be sorted out. On the basis of SOTP (sum of total parts), one can expect 20-25 per cent of upside from the current level over the next few quarters.

2) SBI which controls about a fifth of the marker share in bank credit, will be the primary beneficiary of credit expansion. In addition to this what is in favour of SBI is the huge infrasrructure expenditure that is lined up by the government for the next core operating profit growth and its current price to book few years. Also, the likely consolidation of SBI’s associates with the bank will further improve its performance. We feel that with the revival in the interest margin the bank is expected to deliver value of 2x is attractively valued.

3) JINDAL STEEL & POWER is a part of the USD 12 billion Jindal Group. It is engaged in the production of metallics, steel products and power. ‘Vith the revival in the steel sector and the government’s special fillip to the power sector, the company stands to benefit and post better figures in the near future. Also, with increasing merchant power tariffs and rise in steel prices, the company’s financials will surely get a boost. These events will help the company to maintain its growth momentum of the last five years wherein it has progressed at a rate of more than 30 per cent CAGR at all such levels as the topline and bottomline.

4) GUJARAT STATE PETRONET is a 38 per cent subsidiary of Gujarat State Petroleum Corporation and is engaged in the development and maintenance of a state-wide gas transmission network in Gujarat. The company currently operates about 1,420 kms of transmission network, covering 15 out of the 25 districts in Gujarat, and has a capacity of 50 mmscmd. The company that saw its sales and profit doubling in the first nine months of FY10 due to a huge jump in volumes transported (an increase of 96 per cent) is also trading at a discount to some of its peers like Gujarat Gas and make sense to invest in the counter.

5) IDFC which is involved in providing financial assistance for infrastructure projects, also has an asset management company and an investment banking division. The company earns almost 54 per cent of its income from interest and this includes loans advanced for infrastructure projects and treasury income. The balance of the total revenue comes from non-interest income and includes fees from asset management and inveitment banking. Considering the future growth in infrastructure lending and the robust capital market, we feel that the stock is going to outper form in the broader market.

6) TATA CONSULTANCY SERVICES India’s largest software exporter, provides a wide range of IT services, outsourcin and business solutions. TCS derives maximum revenues from North America and for Q3FY1O it was 52.5 per cent. When we analyse the company’s revenues segment-wise, it is dominated by the BFSI sector and for Q3FY1O it contributed with 45 per cent, followed by telecom and retail & distribution that contributed 12 per cent each. Going forward we can see a strong upside on the back of an increase in demand from the US. Moreover, recovery from Europe is expected to further increase the demand.

7) BANK OF BARODA is one of the strongest public sector banks that has again demonstrated its strong fundamentals through its Q3FY1 0 results. There was a 9.5 per cent jump in the Nil primanly due to a better than expected rise in credit off-take, which was 23.5 per cent against an average of around 20 per cent for PSBs. Even its quality of assets is one of the best in PSBs, with the PCR at 89 per cent, net NPAs at 0.31 per cent and restructured loans at just 3 per cent of outstanding loans. The scrip of the bank is trading at P/BV of 1.9 of FY1OE and this certainly looks reasonable enough.

L&T is India’s largest engineering and construction companies offering exposure to an entire capex cycle. It has 23 subsidiaries and 27 associates focusing on a diverse range of products and services and several BOOT projects to get contracts for its EPC business. It’s NBFC (L&T Finance) andsoftware subsidiary (L&T Infotech) have begun to grow rapidly and might go for separate listings by the next fiscal. L&T offers the best proxy play on the entire capex cycle in India. Improved visibility in the new order pipeline and a shift in sales in favour of higher margins, oil & gas and manufacturing sales will boost L&T future growth.

9) SUN TV NETWORK is a part of Sun Network, one of India’s largest media conglomerate, and has a reach of more than 95 million households in India. Currently the company has 56 lakE subscribers who pay Rs 26 per month and the company expects this base to grow to 80 lakhs by FY12. With increasing budget allocation towards regional advertising since there is strong competition in Hindi GEC space, Sun TV Network will stand to benefit quite a lot. This is already evident from its Q3FY1O results wherein its advertisement revenue has posted growth of 46 per cent.

10) PETRONET LNG

which is into imports and re-gasification of liquefied natural gas (LNG), is an outcome of the support of four Navratna PSUs namely GAIL, bC, ONGC and BPCL. PLNG imports LNG from Ras Gas, Qatar and supplies it to three of its promoter. The best part of this is that the Gas Sales Purchase Agreement is for 25 years and hence guaranteed off-take from promoters ensures better earning visibility. Moreover, PLNG gets a 5 per cent increase in tariff each year. PLNG’s Q4FY1O results are going to be better as the 2.5 MTPA additional supply from Ras Gas will commence from January 2010.

11) CIPLA is India’s largest pharmaceutical company by sales. The company has a different business model from other generic players as It has tied up with local players in the international market instead of a direct presence in the market, making it less vulnerable to generic competition. These partners have filed 64 ANDAs till date and have received 36 approvals of which 23 products have been commercialised.The company is also negotiating with MNCs such as Pfizer, GSK, and Boehringer for long-term supply agreements. Its launch of CFC-free inhalers in the EU and the US remains a key long-term trigger.

12) SESA GOA has achieved 15.1 MT of iron ore sales in FY09, registering a volume groh of 22 per cent on a YoY basis. Going forward, the sales volume are expected to grow at a CAGR of 25 per cent in FY09- 1 2E due to a continuation in Chinese demand and Sesa Goa’s ability to maintain a high share in India’s iron ore exports to China. Additionally, capacity expansion of pig iron from 0.25 MTPA to 0.625 MTPA along with expansion of met coke capacity will give this company a boost.The company is also looking to set up a 5-6 MT steel plant in Jharkhand and Orissa through aJV.

13) IVRCL INFRASTRUCTURE & PROJECTS is India’s leading player in EPC contract. It has also entered the real estate development space through its subsidiary IVR Prime. It has one more listed subsidiary, Hindustan Dorr Oliver, which recently acquired a UK-based heavy engineering concern called Davy MarkEam.The company has also ventured into the asset owner- ship space by bagging three BOT toll road projects and a water desalination project. Its order book at the end of Q3FY1O was 22,000 crore with roads and water projects comprising a major portion

14) PENINSULA LAND is a part of the Ashok Piramal Group and is a real estate developer with exposure to commercial, residential and retail projects located primarily in Mumbai. But now the company has spread its reach to other cities like Nasik, Goa, plete projects of 4.1 million sq feet in the next couple of years and Pune, Hyderabad etc. It is expected thatthe company will 11.4 million sq feet of projects are expected to generate revenues over the next six years. It has a very low debt-equity ratio of 0.3x at the end of FY09. Presently the stock ofthe company is available at just 9.5 times of its last 12-month earnings.

15) GTL is a part of Global Group of companies and is India’s largest network services player in India having presence in 51000 cell sites at the end of FY09. GTL addresses the network life cycle requirements of telecom OEMs and carriers. With the total global spend on telecom sector by 2012 expected to be anywhere around USD 57 billion, companies like GTL having presence in 44 countries (FY09) and addressable market of USD 16 billion there is immense possibility to grow. Company’s 9MFY1 0 profit and is currently trading at26 times its last 12 month earnings.

16) HDFC BANK is one of the most fundamentally sound banks in India. In the rising interest rate scenario, banks with strong retail and CASA deposits are best positioned to tackle the situation. In Q3FY1O the bank saw its margins improving sequentially by 10 bps to 4.3 per cent, driven by strong traction in CASA deposits which are up by 38 per cent and now form for 51 per cent of the total deposits. Even the asset quality is under control and delinquency rates have declined from 2.1 per cent in 1HFY1O to 1.2 per cent in 3QFY1O. The total restructured assets

17) ORACLE FINANCIAL SERVICES SOFTWARE of the best Indian IT companies when it comes to product play, is one with focus on high margin banking product segments. This segment of the business contributes more than 60 per cent of the total revenue. With the US economy already showing signs of revival we feel the market forthe company’s main product Oracle Flexcube is going to pick up. What entices confidence in the company is its parentage of Oracle, one of the most successful product companies. This helps it in getting access to the big banks which are already clients of Oracle.

18) ING VYSYA BANK (IVBL) is one of those banks which have shown continuous improvement in their performance in the last few years, including FY09 that was tough for the entire sector. For example, its cost to income ratio has declined from 84.3 per cent in FY05 to 64.5 per cent in FY09 and gross NPAs declined from 5 per cent to 1.9 per cent in the same time. We think IVBL gives an opportunity to participate in the growth of the Indian banking operations helped by a major foreign financial partner viz, the ING Group. The current price to adjusted book value provides the perfect opportunity to enter the counter.

19) INDIA INFOUNE straddles the entire financial services space with offerings ranging from equity research, equities and derivatives trading, commodities etc. The company has a network of 976 business locations (branches and sub-brokers) spread across 365 cities. In Q3FY1O its income stood at Rs 319.48 crore, up by 38.7 per cent YoY. Its profit before tax stood at P.s 96.85 crore, up by 113.5 per cent YoY. With the increase in the levels of disposable income in the hands of an individual more saving is likely to pour into the equity markets and hence such a company with extensive reach is going to benefit from the move.

20) KARUR VYSYA BANK has maintained its old generation private bank status with measured and consistent growth. In Q3FY1 0 its growth came in close to 30 per cent on NIT, fee income and PAT, advances have increased by 26.5 per cent YOY basis. Its NIMs continue to be steady at 3.1-3.2 per cent, asset quality has remained under strict control with slippage this quarter at an incredibly low Rs 1 crore, NPAS remained negligible and provisioning has been high at close to 90 per cent. Apart from the performance, KVB is an attractive takeover candidate given its niche positioning.

21) POWER GRID CORPORATION OF INDIA (PGCIL) a Navratna public sector enterprise, has the distinction of transmitting about 45 per cent of the total power generated in the country. The current inter-regional capacity of PGCIL is more than 20,800 MW and is expected to increase to 37,700 MW by 2012 through the strengthening of regional grids and more inter-regional links. On the valuation front, the company’s share price is available at 21 times of its last 12 month earning which is lower compared to its industry peers.

22) USHA MARTIN The Usha Martin Group is a Rs 3,000 crore conglomerate engaged in the manufacturing of steel and steel wire ropes. The company’s sales volume is expected to get a boost in the next few quarters as the new DRI kilns and the SMS mills will be operational by that time. But the real fillip in the company’s margins will come by FYi 1 when the bacard integration of the company will be fully operational as the company has started extracting coal from its mines. The company will use even its captive sponge iron. The CMP discounts its last 12 month stand alone earning by 33.5 times.

23) INFOSYS TECH NOLOG!ES India’s second largest software exporting company will benefit with improvement in the external environment that will lead to a better pricing regime and will generate good volumes going forward. Even though the company largely remains conservative in its guidance, it has increased its earning and revenue guidance for FY10 compared to a drop in revenue that was predicted earlier. Moreover, the hike in IVIAT is not likely to effect the company as it is paying tax higher than MAT. The current share price of the company discounts its last 12 month earning by 24.8 times.

24) ONMOBILE GLOBAL is a niche player and one of the largest value-added servicesstock price seems to be stretched with a trailing PE of 37.72 times, it is just Red because of its debt-free status and the exponential growth that the company may witness in its revenue and margins after its international operation starts contributing to the company’s financials. (VAS) companies for mobile, land-line and media service providers. Apart from having a strong domestic presence, the company has international footprints too. Though the present valuation of the company’s

25) ERA INFRA ENGINEERING is a diversified infrastructure company with presence in construction, turnkey projects and public private partnership projects with plans to venture into new business verticals like irrigation, hydro power, etc. The current order book of roughly Rs 8,000 crore is 3.3 times of the FY09 revenue, thereby providing good earning visibility. What is good about this order book is that more than 50 per cent of this is from the infrastructure sector with 75 per cent of it being government contracts. Presently the stock is trading at just 9.71 times as compared to its last 12 month earnings.

26) SHRIRAM TRANSPORT FINANCE CO. (STFC) is a non-b anking financial companyconstruction equipment financing business. The scrip that is currently trading at around 2.8 times of its adjusted book value will get a further boost once it acquires a banking license which will substantially reduce the of funds. with a niche presence in financing pre-owned trucks and small truck owners. The company has a market share of 70 per cent in old vehicle financing and 30 percent in new vehicles. STFC is also angling for a banking license. The company is planning to enter the

27) HAVELLS INDIA is a leading player in the electric equipment sector in India. The company operates in four segments viz.switchgears, cable & wire, lighting & fixture and electrical consumer durables. They contributed 36.9 per cent, 9.5 per cent, 19.7 per cent and 28.3 per cent respectively. The company has recently entered into the manufacturing of ceramic metal halide and plans to produce 1 million units annually, 90 per cent of which will be exported. The scrip is currently trading at 15.4 times of its last 12 month earning which does not look overvalued if one were to take into consideration its growth plan.

28) CADILA HEALTHCARE is an Ahmedabad-based company that is involved in developing, manufacturing and selling pharmaceutical products in India and overseas. It is active in certain segmWnts of therapeutic areas that include cardiovascular, gastro Market intestinal etc. The company has formed a new joint venture with Novavax Inc called CPL Biologicals which will be developing and manufacturing vaccines, biological therapeutics and diagnostics. The strong traction in the domestic and export businesses, and the increasing visibility of business from Hospira JV, augurs well for the company’s continued growth prospects.

29) BLUE STAR This company is India’s largest central air-conditioning provider. The company operates in three strategic business unit (SBU) areas viz. electro-mechanical projects & pack— aged ac systems, cooling products and professional electronics & industrial systems. It is the first SBU whose contribution is 78 per cent, followed by cooling products that contributes 16 per cent. The order book of Rs 1,890 crore at the end of December 2009 is around 75 per cent of its FY09 revenue. Looking at the cheap valuation and the company’s order book, one can picked up the scrip for ‘cool’ profits.

30) ASHOK LEYLAND India’s second-largest truck maker Ashok Leyland, which showed a lagged performance earlier, has started showing signs of catching up. For the month of February, sales of the company jumped two-fold. The company’s financials will get a further boost after the recent commissioning of its Uttarkhand Plant with a capacity of 75,000 units per annum that will allow it to obtain excise duty and income tax benefits. The current price of the share discounts its last 12 month earnings by 28 times which might look a little expensive but looking at the future growth potential, one would do well to invest in the counter.

31) BAJAJ ELECTRICALS is a diversified electrical company and operates with different business units such as engineering & projects (E&P), luminaries and consumer durables. It is the con- sumer durables’ segment that contributes most to the topline with 42 per cent share of total revenue followed by E&P with 32 percent. BEL has recently raised Rs 160 crore through QIP (at a rate of Rs 785 per share), part of which is being used to repay the debt. Currently the stock is trading at a price earning ratio of 13.8 times and one can certainly look forward to ‘electrifying’ returns.

32) Divi’s LABORATORIES is a Hyderabad-based pharmaceutical company focusing on CRAMS and is a well-established player in the custom chemical synthesis and API/intermediate segment. Divi’s custom synthesis clientele includes 20 of the top 25 pharma companies. Its recent entry into carotenoids is yet to scale up and hence would provide further room for revenues. DLL has been a consistent dividends paying company. Its margins are one of the best in the industry and moreover it is available at 22.76x. Our recommendation is that investors should buy this scrip at its current levels.

33) MAHINDRA & MAHINDRA FINANCIAL SERVICES Strong and sustained growth in the automobile sector is definitely going to help M&M Financial Services. Further, its noteworthy financial performance for Q3FY1O is an added advantage. For Q3FY1O its total revenues were Rs 393 crore and its bottomline was Rs 95 crore as compared to Rs 353 crore and Rs 44.5 crore in Q3FYO9. On the valuation front, the scrip is trading at 2x of its adjusted book value. As regards the other details, its net NPAs were at 2.30 per cent (3.8 per cent in Q3FYO9) and this has been adequately capitalised with a CAR of 19.4 per cent.

34) SINTEX INDUSTRIES operates in two divisions’ viz, textiles and plastics. Though it started as a textile cpany, it will be its plastic division which will drive future growth. This is because of the government’s emphasis on infrastructure and a pick-up in private capex. The monolithic segment of the company has an order book position of around Rs 1,500 crore. The integration of its foreign subsidiaries will further boost its stock’s performance. At its CMP of Rs 258.65, the stock is trading attractively at 9x of its FYi 1E earnings. Anot er important t ing a out t e company is its cash in hand of Rs 1,200 crore.

35) LIC HOUSING FINANCE (LICHF) will be one of the primary beneficiaries of the rising interest rates for at least afew years because 85 to 90 per cent of the company’s outstanding asset portfolio is on a floating rate basis while only 50 per cent of the total sourcing of funds is on a fixed rate basis. LICHF had a total outstanding mortgage portfolio of Rs 34,170 cr. at the end of Dec. 2009. The assets’ quality of the company is well under control and the net NPAs at the end of Q3FY1O were just 0.77 per cent. The stock is currently trading at two times of its adjusted book value. This certainly looks attractive.

36) EXIDE INDUSTRIES is India’s largest manufacturer of lead acid storage batteries with a revenue share of 25 per cent. The company has a strong presence in the branded automotive battery market with a market share of over 72 per cent. It also has a 50 per cent stake in ING Vysya Life Insurance Co. The battery demand in India is expected to remain strong due to the rising sales of vehicles and the demand for replacements. The scrip is currendy trading at 18 times its last 12-month earnings. Vhat make the scrip attractive are its robust sales growth linked with improvements in the auto sector and the declining cost.

37) THERMAX is a zero-debt company with its ROE consistently greater than 25 per cent. Engaged in providing solutions in the sector of energy and environment engineering, the total order backlog of the company at the end of Q3FY1O was Rs 5,612 crore, which is 1 .45x times of its FY09 stand-alone earnings. This provides good earning visibility for the next 18 months. Moreover, we feel that the expected entrance of the company into the super-critical boiler segment will re-rate its valuations. The company’s stock is currently trading at 21.3x of its FY20 11 EPS, which is attractive enough to make investors buy into this one.

38) VOLTAS a Tata Group company is well diversified geographically and in business segments and is india’s leading air conditioning and engineering services compant. It is also the largest MEP contractor in the Middle East. The company will largely benefit from the improving economic environment and increasing oil prices. It has also increased its stake to 100 per cent in the Saudi Arabia subsidiary. Its CMP of Rs 171 discounts its last 12-month consolidated earning by 18 times which we feel is low as it will be re-rated once the growth momentum picks up in the Middle East and India.

39 ) TORRENT PHARMACEUTICALS is engaged in the manufacturing and sale of branded as well as non-branded generic pharmaceutical products domestically and internationally with a focus on chronic therapeutic formulations for cardio- vascular and central nervous systems, Torrent has planned capital expenditure of around Rs 600 crore over the next 3-4 years for setting up new plants to increase production capacities. It plans to invest Rs 350 crore for a proposed formulation plant at the Dahej SEZ to cater to the demands of the US market.

40) OPTO CIRCUITS is a Banglore-based company engaged in the design, development, manufacture and marketing of medical electronic devices and healthcare products in India, Europe, US and the rest of Asia. Its healthcare products include pulse oximeter, pulse oximeter sensors, fluid warmers, cholesterol monitors etc and the company supplies its products to OEM in the medical electronics’ field. The contracts entered into by the company’s subsidiary Criticare in the US and Europe will drive future growth. Its newly launched product Dior (catheter) has been well-accepted in India and Europe.

41) EDUCOMP SOLUTIONS This is one of the companies that thrive on spending allocated for education. It therefore is a recession-proof company and is expected to grow at an astounding pace backed by higher budgetary spends on education by the Indian government. The company is investing heavily to derive advantage from this opportunity and plans to increase the number of schools under its Smart Class business from 2,574 to 20,000 in the next 5 to 6 years. We expect the company to maintain its growth rate of above 45 per cent in both topline and bottomline for the next three years.

42) TITAN The company which believed in creating a segment rather than entering into one offers a wide range of products ranging from watches to eyewear and jewellery. The company commands a 60 per cent market share in the organised watch market. However, it is the jewellery division which contributes more than three-fourth of the company’s total revenue, followed by watches that chips in with 20 per cent while the rest is taken up by eye- wear and precision engineering. With gold prices finding easy acceptance by the consumers and the favourable base effect, we believe that this scrip will add glitter to your portfolio.

43) COLGATE PALMOLIVE has maintained its leadership in the Indian oral care market of approximately Rs 4,500 crore. It commands a total market share of 46 per cent in oral care and almost 52.4 per cent in the toothpaste segment that contributes up to 70 per cent of the company’s total revenue. Going forward we feel that the company as well the total market will grow primarily due to a shift of people from using tooth powder to toothpaste and lower penetration of the oral care market in India. The per capita consumption level in India is just 108 gms/year compared to 255 gms/year in China.

44) SIMPLEX INFRASTRUCTURE is an eight-decade-old company and has completed more than 2,100 projects so far. The order backlog of the company at the end of December 2009 was Rs 10,606 crore. A majority of this order book comprises the power sector (28 per cent) followed by building and housing (19 per cent). Now the company has entered into real estateinvestment. development through a joint venture to expand its business. Interestingly the company is trading at a discount to its peers like Nagarjuna Construction, making it attractive for

45) DABUR INDIA is one of country’s leading players in the FMCG segment. It operates in eight consumer categories viz. hair oil, health supplements and foods. Dabur’s topline and bottomline has grown consistently in the last five years and will continue to do so with a slew of new products to be launched soon. The company also has the advantage of commanding good pricing levels. Different products in the OTC pharma category and skin care are likely to be launched in FYi 1 and this will help the company to maintain its momentum.

46) CROMPTON GREAVES is a part of the USD 3 billion Avantha Group. The company is organised into three business groups’ viz, power systems, industrial systems and consumer products. The current order book of the company roughly stands at Rs 6,000 crore which is a little more than 70 per cent of its FY09 revenue. It was slowdown from the international market which resulted in a decrease in orders. Going forward, as the economic cycle improves andinvestment cycle picks up, the company will see its order book growing.

47) CUMMINS INDIA is a 51 per cent subsidiary of Cummins Inc USA, the world’s largest indpendent diesel engine designer and manufacturer for units above 200 horse power. It also caters to the growing market for gas and dual fuel engines. It is its engine business which contributes almost 88 per cent to the total revenue. The company has lined up new products such as small generators. It is virtually debt-free with a debt equity ratio of just 0.01 and has returns on net worth higher than 30 per cent. The has been consistently paying dividends and for FY09 the yield was 2 per cent.

48) BHEL Forming the backbone of the Indian energy sector, BHEL is equipped to meet the national agenda of providing ‘Power to All by the Year 2012’. ‘With its capacity of 10,000 M’V of power generation systems per annum, BHEL is India’s largest engineering enterprise in energy related infrastructure sector. The company is expanding its manufacturing capacity to 15,000 MW per annum, which is proceeding apace, and to 20,000 per annum by December 2011. The company sets generate 73 per cent of the total power generated in the country. The scrip is currently trading at 31 .63x its twelve months trailing earnings.

49) YES BANK has outpaced many of its peers and industry average in terms of financial performance. The topline of the bank increased by CAGR of 167 per cent whereas its bottomline increased by more than 80 times during the five-year period ending FY09. And we expect that the bank will continue its perfor- mance going forward as it intends to expands its reach by increasing its branch network by five times over the next five years. The current price to adjusted book value of the bank at approximately three times may appear somewhat stretched but looking at the growth rate we feel that there still is room for further progress.

Mid-Cap Funds to Outperform Blue-Chip Funds

Hit hard when stockmarkets were battered last year, laggard equity funds focused on India's small and mid-cap stocks are likely to outperform their larger peers in the next three years as risk appetite returns in the wake of the election victory by the reform-minded Congress party.

Small and mid-cap stocks in sectors such as real estate, and especially low-cost housing, housing and infrastructure have already been rising more than their larger counterparts in the past few weeks on expectations of a continued decline in interest rates, improved liquidity and infrastructure investments by the government.

"A lot of these small-cap stocks were beaten down more than their large-cap peers as rising costs and a liquidity crunch hurt," said Mohit Mirchandani, head of equity investments at Taurus Mutual Fund, which had average assets under management of 5.97 billion rupees ($127.8 million) as on May 31, 2009.

"But as confidence among investors grew and risk appetite returned, we have seen these stocks jump and in a rising market like the current one, this outperformance could be sustained," he added.

Fund managers said Congress's victory should bring policies that promote investment and create an investor-friendly economic environment.

Since May 18, the first trading session after election results handed a clear mandate to the reform-friendly Congress-led United Progressive Alliance, smaller stocks have outperformed the benchmark index. The Bombay Stock Exchange's Sensex has risen 21.9% between May 18 and June 1, while the BSE Midcap Index is up 36.7% and the BSE Smallcap index has surged nearly 45%.

But last year, while the BSE Sensex fell 52.4% in the wake of the credit-crunch, the small cap index plunged 72.4%, and the mid-cap index lost 67%. Manish Sonthalia, a fund manager at Motilal Oswal Securities, said that the valuation gap between large cap and small cap stocks will contract as the room for upside in small- and mid-cap stocks is still much higher.

"I feel good mid-cap stocks have the potential to grow earnings at 30%-40% annually for the next three-to-four years, mainly due to a lower equity base compared to large-caps," said Amar Pandit, chief executive of Mumbai-based private wealth management firm My Financial Adviser, referring to how earnings per share at companies with smaller equity float tend to be higher.

Suhas Sumant, a fund manager at Sharekhan Ltd., said small and mid-cap stocks, and thus funds, should gain 30% to 40% annually in the next two-to-three years, compared with blue-chip stocks, which should only go up around 15%-20%.

Large-cap stocks are trading at a price-to-earnings ratio of 16 to 18 times one-year forward earnings, well above the 4-8 times small and mid-cap stocks are trading at, Mr. Sumant said.

A survey of more than 175 mutual funds by Value Research shows that mid-cap funds have generated an average return of 35.57% in the month of May, due to the election win, while small-cap funds have returned 45.71%.

In comparison, large-cap mutual funds have returned just 28.06% on average in the month. Still, the downside for smaller stocks is also greater than that for large-caps in a slumping market, as evidenced by last year's performance, said Dhirendra Kumar, chief executive officer at Value Research, an independent provider of investment information on mutual funds.

"The higher the reward, the higher the risk," he said.

Deven Choksey, managing director at K.R. Choksey Securities, said some "quality-mid cap ideas" include stocks like infrastructure projects financing firm Infrastructure Development Finance Co, state-owned lender IDBI Bank Ltd., construction company JMC Projects India Ltd., and power equipment maker Areva T&D India Ltd.

Mid-cap and small-cap stocks chosen by funds should work not just on the valuation front, but also have good business fundamentals, strong management and growth potential, said Value Research's Mr. Kumar.

Sharp rally in blue-chip stocks

Sharp rally in blue-chip stocks:
The stock markets have rallied quite significantly over the last couple of months. The Sensex has gone from the 8,000 levels to the 12,000 levels and the Nifty has gone up from the 2,400 levels to the 3,600 levels. This market rally has been quite broadbased. There was a sharp rally in many blue-chips, especially the severely beaten-down stocks and sectors like banking and real estate. There have been some good earnings posted by many front-runner companies last month.

The markets are trading in a range from the last few days in anticipation of the election results. The fact that the markets have not corrected significantly during the last few days shows that investors are expecting a stable government at the centre.

Here are some strategies for investors:

A stable government at the centre means stable policies. That is why the markets pay so much attention to the election results and remain sensitive to the developments around the formation of a stable government.

The next few days are going to be quite volatile for the markets and it is difficult to predict their short-term direction. Risk-averse investors are advised to track the developments on the political front, and stay out of any active trading or investments in the markets in the next few days.

Identify good buys:

Investors can do their homework of identifying the fundamentally-good stocks. In case there is a sharp correction in the markets, they can enter into these stocks slowly in smaller quantities. Usually, it is seen that markets over-react to negative news and it is difficult to predict the bottom of the markets in these situations. Investors should not panic and invest only their risk capital in the markets. Historically, it is seen that fundamentally-strong stocks bounce back immediately as soon as the correction is over.

With the formation of a stable government at the centre, the markets are expected to witness a sharp rally. Again, in that case, investors should take a realistic view of the situation and not get carried away with market sentiments. Existing investors should book some profits at higher levels and those looking at entering the markets should wait for them to get stable rather than chase stocks.

Prepare for opportunities:

The markets have rallied quite significantly over the last couple of months on the back of positive sentiments in the global markets, betterthan-expected results delivered by corporates, and expectations of a stable government here. The markets have not corrected significantly since the rally from March.

Analysts believe that a logical correction is due in the markets but the strong bullish under-current is holding the markets strong. In case the markets do not correct or consolidate immediately after the results, they will correct after a few weeks when things stabilise. Investors should keep some liquidity in hand to use any such investment opportunity.

Track markets:

Patience and regular tracking are the most important aspects of equity investing. Experts advise investors to watch the markets closely.

It is advisable to invest in the markets with a medium to long term perspective. Day trading is quite risky.

Blue Chip Stocks, For Fixed Returns

When you are trying to invest in a stock market, your thoughts will be oriented in how to make profit. You will start collecting all related information on how to make a profit with the right kind of investment. Here you might have come across the term, blue chip stocks. Blue chips are used in the game poker and there it is considered to have a high value.

Blue chip stocks are related to stock market. They are mainly used by investors to make maximum financial benefits. They help the investors to achieve their goals through a proper investment.

Blue chip stocks refer to your investment in well-established companies. Your investments are safe and highly profit making when you are investing in such companies. They are having wide product areas and a strong collection of customers with them. These companies are having fixed earnings throughout the financial year. They are making high credits and their liabilities are least. Blue chip stocks pay the investors a fixed dividend. This has to be done independent of whether the company is making profit or not. The company might be facing a fall, which is worst. Yet the investor will receive his share from them.

There is a high advantage felt by the investors in making their funds invested in blue chip stock market. They can expect fixed revenue without any fail. They get a sure return on the money invested in such safe companies. This is mainly preferred by retirees. They want to make investments from where they can get a fixed profit without fail. The non-profitable organizations can rely on blue chip stocks to avoid a financial risk.

The market capitalization with blue stock is large. It is the largest liquid stocks in stock market. The shares are with the largest companies in particular areas. There can be risks associated with blue chip stocks. Yet the risk is always a part of stock market and can be expected in any kind of investment.

Blue chip stocks are often very expensive. Since there is a surety of return with blue chip stocks, they are costly. Hence, the small-scale investors find it really difficult to get their investments with a blue chip stock. The Dow Jones industrial average is the leading blue chip stocks in the whole world.

You can get a blue chip stock from brokers or direct purchase stocks. Mutual funds are a better choice to invest if you want a blue chip stock investment. There you can get more blue chip stocks. This relaxes you from all financial risks.

26 blue-chip companies in India

Asian Paints - Painting the world red
Asian paints is the market leader in India’s paint industry with a commanding market share of about 39% in the organized segment. It is among the top 10 players in decorative segment in the world. Asian Paints has also undertaken overseas acquisitions which has transformed it into India’s premier paints multi-national company (MNC). Apart from the domestic market, the company has expanded its presence in the international arena through acquisitions in the recent past (operates in about 22 countries). On a consolidated basis, 73% of revenues comes from domestic paints markets, 21% comes from international business and remaining 7% from chemicals business.

Asian Paints is positioned to benefit from the housing construction boom in the country. The company has presence in both Decorative and Industrial Coating segment of the Paint business. Both this segment constitutes 92% of the topline of APIL. In Industrial coating segment which comprises Automotive Coating, powder coating and protective coating, APIL serves/operates directly in the protective coating and have presence in other two sub-segments i.e. Automotive Coating and Powder coating through Asian PPG Inds(a JV Co. with PPG of US) and Asian Paints Industrial Coatings Ltd(a 100% subsidiary of APIL). APIL's product range includes Wall paints, Metal paints, Wood Finishes, Primers and others. Vertical integration has seen it diversify into specialty products such as Pentaerythritol and Phthalic Anhydride. Apart from offering the customers a wide range of decorative and industrial paints, it even custom-creates products to meet specific needs.

BPCL - Leading player in Gas
Bharat Petroleum Corporation (BPCL) has made rapid strides and emerged as one of India’s leading petroleum majors alongside its public sector units.

(PSU) peers such as HPCL and IOCL. The company’s current refining capacity stands at 8.5 MTPA and is expected to increase to 12 MTPA by FY05. Its two subsidiaries Numaligarh and Kochi Refinery increase the combined capacity to 19 MTPA. BPCL`s network includes 4,850 retail outlets and 1,800 LPG distributors. It plans to enter exploration in next three years and is known for its pro-activeness.

Bharat Petroleum Corporation (BPCL) traces its history to 1928 when the Burmah Shell Oil Storage & Distribution Company of India was incorporated in England to enter the petroleum products business in India. The business of the Company grew substantially given the international backing of Shell and it achieved the leadership position in India. Today the company produces a diverse range of products, from Petrochemicals and Solvents to aircraft fuel and specialty lubricants. It manufactures petroleum and petroleum products, asphalt, bituminous substances, carbon, carbon black, hydrocarbons, mineral substances and the products/by-products derived there from. The organization structure of BPCL was revamped and six new Strategic Business Units (SBU's) have been created.

Cipla - a broad product range
The Chemical, Industrial & Pharmaceutical Laboratories which came to be popularly known as Cipla, is one of the largest domestic pharma companies with focus on the anti-asthma segment. The company enjoys a near dominant position in the asthma segment. The company also has a major presence in the anti-infectives and cardiovascular segments. Cipla has traditionally focused on the domestic market. However, off late, it has increased focus on the exports market and is now exporting drug formulations to over 140 countries.

One of the largest drugs manufactures, Cipla manufactures and markets bulk drugs and formulations. It is now ranked second in India in terms of retail pharmaceutical sales. It has manufacturing facilities at Kurkumbh, Bangalore, Patalganda and Vikroli in Mumbai. All the bulk drug facilities have been approved by the US FDA and the formulation facilities have been approved by the Medicine Control Agency, UK; the Medicine Control Council, South Africa; the Therapeutic Goods Administration, Australia and other international agencies. Cipla has a very wide product range which includes antibiotics, anti-bacterials, anti-asthmatics, anti-inflammatory anthelminites, anti-cancer and cardiovasculars. In domestic formulation market, antibiotics are the mainstay, which contributes around 50% of the company's revenue. Some of the leading brands are Ciplox (Ciprofloxacin), Novamox (Amoxycilin) and Norflox (Norfloxacin). Cipla also has in its product portfolio Zidovir (zidovudine, anti-A IDS drug). Cipla was one of the first among the Indian pharmaceutical companies to introduce ampicillin and norfloxacin.

Container Corporation - Gaining from its monopoly status
Container Corporation of India (Concor) is a subsidiary of Indian Railways. Concor enjoys a monopoly in handling import and export of the nation's trade in containers through rail routes. It has a network of inland container depots (ICDs) all over the country. Today, by most accounts, there is believed to be a wagon shortage of anywhere between 40 and 50 per cent of total demand. The company provides logistic solutions to various terminals connected through railways (28), roadways (6) and ports (5). With more than 8,000 owned and leased containers, the company is one of the most efficient logistic companies in India. A monopoly position in moving containerized cargo is unlikely to be threatened for a few more years. There will likely be improvement in its cargo carrying capacity over the next 18 months as wagon expansion gathers pace. The expanding geographical footprint through inland container depots, a steadily rising level of containerized traffic, and the enhanced facilities for containerization at two recently-commissioned ports etc. augurs well for this giant. Concor plans to establish a strategic presence at some major container handling ports in order to have a presence at both points of the transportation stream. Acquisition of new rail flat cars will lower rail haul cost in real terms and transit time.

Dr Reddys - a best bet from pharma
Dr. Reddy's Laboratories (DRL), is one of India’s fastest growing pharma companies. The company develops, manufactures and markets a wide range of pharmaceutical products in India and overseas. The foresightedness in recognizing generic opportunities in developed markets and initiatives like spearheading basic pharma research demonstrates management vision. The company is fast emerging as a specialty pharma company. Dr Reddy's new drug discovery research initiatives have resulted in the company having an excellent NCE pipeline.

DRL is probably the only basic research and development player in the Indian pharma industry. DRL has built up a formidable pipeline of molecules in the segments of diabetes, oncology and pain management. DRL was the 1st Indian company to export drugs to Europe and CIS. The company has over 190 finished dosage brands and 60 active pharmaceutical ingredients currently in production. Dr. Reddy's actively pursues a basic research program under the aegis of Dr. Reddy's Research Foundation (DRF). The merger with Cheminor Drugs (the swap ratio at nine shares of Dr. Reddy's Laboratories for 25 shares of Cheminor), has made DRL the third largest pharmaceutical company in India with participation in every element of the value chain. DRL is a major player in the domestic finished dosages market and many of its brands are leaders.

GAIL- capitalizing on the gas
GAIL (India) is a monopoly player and India's largest natural gas transmission and marketing. Its distribution network of pipeline (about 4500km) is spread across India. It is a major producer of LPG (capacity of 1.1mtpa) in the country. Its petrochemicals capacity is about 300 thtpa and has a presence in exploration through joint ventures. It has plans to import nearly 7.5 mtpa LNG in the country by FY05 through JV with Petronet LNG. GAIL sources most of its gas from ONGC and sells it onward to buyers adding on the transmission charges. In addition to transmission charges it gets a marketing margin on the gas sourced from private players. But the private players' gas supplies account for just 16 per cent of the total gas marketing business of GAIL.

The company dominates the gas sector, transporting 90% of the total piped gas. In addition, it operates seven plants to process natural gas into LPG, apart from having a small presence in the petrochemicals and oil & gas exploration sectors. Natural gas is increasingly being looked at as an important source of energy in India, primarily as it is a cheaper substitute to naphtha, currently used as feedstock/fuel by industrial users. At present, there is almost a 50% shortfall in the requirement for natural gas, with demand estimated at 151 million metric standard cubic meter per day (mmscmd), while current production is estimated at only 84 mmscmd. With more availability, usage of gas as energy source will go up from the current 10% to about 20% in 2025, as per ministry estimates. Gail appears well set to optimally capitalize on the future gas transportation potential in the country. It is currently the only player with a pipeline network across the country, the backbone of w which is the Hazira-Vijaipur-Jagdishpur (HBJ) pipeline connecting western and northern India.

Grasim - Cementing the future
Grasim Industries Ltd (GIL), the flagship of the Aditya Birla group of companies, is almost a monopoly in VSF (viscose staple fiber) in the domestic market and is also the lowest cost producer in the world. The company is also among the major cement players in the country with a total capacity of 12 million tonnes (8% of country’s capacity). The company has emerged as the largest producer of cement in the country, (a capacity of around 30 m tonnes) controlling around 22% of the total cement capacity in the country. It also produces sponge Iron, Chemicals and textiles.

The company has successful Joint ventures (JVs) abroad that include viscose staple fiber plants in Thailand and Indonesia and carbon black plants in Thailand and Egypt and pulp plants in Canada. Joint ventures in India are Tanfac Industries, Bina Power Supply Company, Birla AT&T Co., and Bihar Caustic & Chemicals. The company has recently divested its stake in Mangalore Refinery and Petrochemicals. Grasim is also well placed to pursue further capacity expansion in cement through acquisitions and by setting up new units. Its strength in distribution would ensure that marketing additional volumes would not be a problem. This has been evident over the past two years, as it has outperformed the industry. The profitability of its VSF business - in which it is a monopoly - is likely to be better as prices have been increased this fiscal. The cloud over the VSF business imposed by poor rainfall a month ago has also lifted, courtesy of the revival from the monsoon. A strong balance sheet with the potential to raise equity and debt at attractive prices is a strength that remains undiluted.

HCL - the tech smart company
HCL Technologies, one of the largest players in the software services sector, is focused on research and development (R&D) outsourcing. Its service offerings include technology development (30% of revenues in 3QFY03), product-engineering (16%), networking (10%), application development (35%) and ITES (9%). Its strong relationships with clients (some of whom are on long-term contracts) would ensure good flow of business and stability of revenues. It works with prestigious clients like Cisco, Alacatel, Bankers Trust, Toshiba, etc. Currently the company has an order book position of $400mn out of which $375mn is from long-term contracts.

HCLT offers services in cutting edge technologies in the area of web / e-commerce, technology development services and networking services. It has one of the highest portion of revenues (among Indian software companies) coming from e-commerce / internet. This would ensure that its margins would be protected to a large extent by virtue of it being able to demand the best billing rates and balance out the effect of the increase in manpower cost. The company has shown excellent results for the current quarter with a revenue growth of 63%yoy and PAT growth of 167%yoy.

HDFC - Stable performer
HDFC Bank (HDFCBK) was incorporated in Aug. 1994 and promoted by Housing Development Finance Corporation Limited (HDFC) India's premier housing finance company which also enjoys an impeccable track record in India as well as in international markets. A good understanding of the retail sphere as well as inorganic growth initiatives has made the bank the second largest private sector bank in the country.

India’s largest residential mortgage finance institution, HDFC has always been a high-performer, recording a creditable 30 percent growth per annum on an average. HDFCBK is providing service in 163 cities with a branch network of 312. Its ATM network has crossed 900 and it has 26400 Point of Sale (POS) Terminals at various merchant outlets. Nearly 100 cities are covered under Phone Banking. HDFC Bank concentrates in four areas - corporate banking, treasury management, custodial services and retail banking. It has entered the banking consortia of over 50 corporates for providing working capital finance, trade services, corporate finance and merchant banking. It is also providing sophisticated product structures, sound advice and fine pricing mainly in areas of foreign exchange and derivatives, money markets and debt trading and equity research through its state-of-the-art dealing room.

HLL - the leader in consumer market
Hindustan Lever (HLL) is India's largest fast moving consumer goods (FMCG) and the dominant market leader with a wide array of brands, a distribution network and tremendous cash power. It is No. 1 or a strong No. 2 in categories like soaps, detergents, tea, culinary items (sauces, jams, noodles), ice-creams, personal care (skin creams, lotions), hair care (shampoos, oils) and oral care. Its product folio is supported by one of the strongest and most sophisticated distribution networks penetrating remote corners of India. During the last decade, HLL has acquired a dominant position in the Indian marketplace despite facing cut-throat competition from regional players.

Unilever, a Fortune 500 company, holds 51% equity in HLL. However, the company is facing pressure on sales both in volume and value terms. Lifting of quantitative restrictions on food products has led to the market getting flooded with imported goods. Competition is severe in segments such as soaps, detergents and oral care. In foods and ice cream business the company has to face severe competition from well-entrenched local producers (especially wheat flour and ice cream). Project Millennium: HLL launched the Project Millennium after sensing a need to recharge their growth engines in the backdrop of the opportunities being created by the needs of the consumers and the development of infrastructure and deployment of technology in India. In line with Unilever's decision to prune its brand portfolio, HLL is focusing on its top 30 brands out of a total of 110 brands, which contribute more than 75% of the turnover. The plan is to give disproportionate support to its top 30 brands.

HPCL - garnering market share
Hindustan Petroleum Corporation Limited (HPCL) is the second largest petroleum and refining company in India having a market share of over 20%. It has the second largest retail outlet network after IOCL. In the Marketing segment its performance has been better as compared to other four PSUs in terms of gain in market share. In the branded segment its product ‘Power’ and ‘Tourbo Jet ’ have established themselves well. HPCL holds 11.1 percent of the total refining capacity in India.

HPCL has two refineries, one at Mumbai (5.5 m tonnes) and the other at Visakh (7.5 m tonnes). The company has about 4863 retail outlets and owns 71% of these. It has plans to set up a grass root refinery of 9 m tonnes at Bhatinda by FY06. The customer base of HPCL for its LPG business stands at about 0.7 m. The company is in a position to benefit from its refining activity as refining margins have strengthened considerably in recent times and this situation is likely to continue for sometime. The de-bottlenecking and modernization programs at Mumbai and Vizag would improve the operating efficiency and would yield better margins as the company would be processing products compatible with the latest Euro norms.

Hero Honda - Racing Ahead
Hero Honda Motors Limited (HHML), the largest manufacturer of motorcycles in the world, is a joint venture promoted by Hero Cycles (P) Limited and Honda Motor Company of Japan. The company is the market leader in the motorcycle segment with a 44% market share in FY03 (50% in FY02). The company is also the largest producer of motorcycles among all Honda companies in the world. Splendor is the single largest selling two-wheeler model worldwide. Hero Honda's main characteristics are its four-stroke engine technology; fuel efficiency and low exhaust pollution levels. It exports to around 31 countries including Sri Lanka, Africa, west Asia, Bermuda, Zaire, and Paraguay.

The Indian two wheeler sector is the largest in terms of volumes (70%) among all the segments in the automobile industry. The segment can be further categorized into three main sub-segments - scooters, motorcycles and mopeds. With strong brand equity of its fuel-efficient vehicles, a wide range of motorcycles, and backing of the global leader Honda, HHML is well placed in the sector. With the consumer shift towards motorcycles not likely to abate in the foreseeable future, growth in the motorcycle segment seems set to continue. The company has indigenized more than 95% of its components. HHML sources most of its component requirement from third party vendors. This allows greater flexibility in production planning. Materials cost is relatively high and overheads are lower.

Hindalco - lowest cost global producers of aluminum
Hindalco Industries Ltd (Hindalco), an AV Birla Group company, is India’s largest aluminium producer and has the distinction of being one of the lowest cost producers of the metal in the world. Hindalco is a non-ferrous metals powerhouse, which has two key divisions - aluminium and copper. Captive bauxite mines and power plants ensure Hindalco’s competitiveness and profitability even at low LME prices. In the coming years, the usage of aluminium in different applications like transportation, packaging and construction etc will increase. Hence Hindalco’s move from being just a metal producer to being a down stream player will pay rich dividends. It will improve margins and make it is less susceptible to the fluctuations in LME aluminium prices. The company also has copper as its business segment, which it acquired recently from Indo Gulf.

The key driver of earnings growth for the aluminium division will be sustained volume growth, better value-added product profile, strong international prices and reasonably good domestic demand. Hindalco accounts for 44% of India's primary aluminium production. Hindalco has recently acquired from Alcan Aluminium (Alcan) around 38.84 million shares of Indian Aluminium Company, (Indal) aggregating to 74.6% holding. Indal's strength in Alumina and downstream products would ideally dovetail with Hindalco's strong presence in metal.

IOC - major oil marketing player
Indian Oil Corporation (IOC) is the country’s largest oil refining and marketing company (about 48% market share in retailing). IOCL controls 10 of India's 18 refineries with an annual capacity of 49.30 MMTPA. It also owns and operates crude oil and product pipelines of 7170 Km with an annual capacity of 52.75 MMTPA. The total pipeline network was increased from 6325 km to 7170 km with enhanced capacity of 52.85 MMT. IOC`s subsidiaries includes Bongaigaon and Chennai petroleum. IOCL has the highest refining capacity in the country today.

Indian Refineries & Indian Oil Company were set up in 1958 and 1959 respectively, to build national competence in the oil refining and marketing business. In 1964 these two companies merged to form the India Oil Corporation (IOCL). The high differential in the prices of crude oil and of petroleum products (the finished product) during 2003-04 ensured good margins for Indian refiners. IOC’s refining margins continue to be well above $8 per barrel. The world over, refineries are stretching their capacity utilization as there has been an increase in oil demand. Demand is expected to be higher by 2.6 million barrels per day in 2004 over levels in 2003. Of this incremental demand, 0.6 million barrels comes from the Organization for Economic Cooperation and Development countries and China accounts for 0.8 million barrels a day. In 2003-04, India’s total consumption of petroleum products was about 107.7 million tonnes, registering a growth of over 3 per cent for the second year i n succession after a flat year in 2001-02.

ITC - The farmland push
ITC Ltd dominates the $2.7 billion Indian cigarette industry with over 70% share. The company has emerged as a strong No. 3 in the Indian luxury hotel segment (capacity over 1,500 rooms) and also runs the largest packaged board business in Asia. It is one of the largest exporters of agro/marine products in Asia. Its new businesses include garment retailing, packaged foods, greeting cards, matchsticks and incense sticks.

ITC has diversified its brands across products categories. Its successful brands include Gold Flake, Wills, Classic, Bristol and Scissors. It also sells two luxury filter brands of its parent company Benson & Hedges and 555. The growth in the cigarettes business was affected in the past couple of years mainly due to poor growth in agriculture and the moribund state of the economy. The fortunes of the economy, in particular the rural sector, are now on the upswing. This will boost the profitability of the cigarette segment.

Infosys - Things are extremely rosy
Infosys Technologies Ltd(Infosys) became the first Indian company to be listed on American Stock Exchange. Infosys is one of India's leading information technologies(IT) services companies. It is mainly engaged custom software development, maintenance, re-engineering services, e-commerce and internet consulting as well as dedicated offshore software development centers for certain clients. The company also develops and markets certain company owned software products.

Mentored by the iconic N.R. Narayana Murthy, and run by the level-headed Nandan Nilekani, the Bangalore-based software giant provides customized software development and maintenance of branded services, software solutions, product engineering services and other related IT functions. It has 31 global development centers around the world of which 18 are in India -6 in Bangalore, 2 each in Bhubaneshwar, Chennai, Mangalore, Pune and one each in Hyderabad, Mohali, Thiruvananthapuram and Mysore. Infosys Technologies is an interesting stock, which trades at a price-to-earnings multiple of nearly 30 times its earnings for the year ended March 2004. However, there is scope for appreciation over the long-term. In addition, the revision in earnings and revenue growth rates in the course of the year, as had happened in 2003, can lead to share price gains.

Moser Baer - A storage play
Moser Baer is one of the few companies that have brought global recognition to the `Made in India` tag. The company is world’s third largest and India’s only player in optical data storage products. Operating through 6 manufacturing plants in India, the company has developed 5 global brands. Moser Baer derives more than 80% of its revenues from export markets, particularly from the European region.

Moser Baer has established itself as one of the three key manufacturers in the global optical data storage markets. It has a foothold in all the segments of the optical media market ranging from Recordable and Rewritable Compact Discs (CD-R/RW) to Recordable Digital Versatile Disk (DVD-R). Using its flexibility in product range, the company has managed to cater to the increased demand from the DVD-R market and enhanced its market share. In the latest quarter ended December 31, 2003, DVD accounted for 18 per cent of the company's revenues and is likely to increase steadily. In addition, the average selling prices of CD/ DVD has remained stable in the recent quarter, despite a steady decline in the DVD prices.

Mahindra - benefits from tax incentives
Mahindra & Mahindra (M&M) is engaged in the manufacture of utility vehicles (UVs), tractors, light commercial vehicles (LCVs) and three-wheelers. While the automotive division, comprising UVs, LCVs and three-wheelers, contributed to 68% of its revenues, the farm equipment division accounted for 26% of revenues and the rest from others. The tractor market continues to exhibit steady growth. M&M has a software subsidiary in Mahindra British Telecom (MBT). The company had in the past hinted at a listing for its software subsidiary and the valuations of its software subsidiary will drive the valuations of M&M.

M&M could be one of the biggest beneficiaries of the excise duty exemption that the Union Budget has extended for tractors. The Budget has a rider for tractor manufacturers that could potentially wipe out most of the benefit from the excise duty exemption. This is the absence of Modvat credit on components that are outsourced. Excise duty exemption will now be available only for components that are manufactured and consumed in-house by tractor manufacturers. As a result, companies that have a higher percentage of own components in the final product (tractor) will be able to reap the full benefit of the excise exemption. This is where M&M could potentially score over the other tractor manufacturers.

ONGC - Making money in the oil value chain
Oil and Natural Gas Corporation (ONGC) is India’s biggest player in terms of profitability and is the first company to cross the $2.2 billion mark in terms of net profits in FY03. It is engaged in exploration and production of oil and gas, both onshore and offshore. Revenues come from selling crude oil and natural gas to domestic refineries and other user industries. Most of its production of crude oil comes from Bombay high. Its foreign arm, ONGC Videsh, deals with acquiring equity stakes abroad to meet crude oil requirements.

The entry of new players in petroleum marketing has raised a lot of excitement, but it is the refining segment of the oil business that is currently making money. Those investing with a long-term perspective need to consider a few important risk factors such as the direction of crude oil price movement and government policy that have a critical bearing on ONGC's prospects. The most important variable in ONGC's business is also its most uncertain one - movement of crude oil prices. With the dismantling of the administered price mechanism, ONGC is now fully exposed to global oil price swings. The company's revenue and earnings move up and down in line with prevailing global oil prices.

Ranbaxy - Global sales drive growth
Ranbaxy Laboratories Ltd (RLL) is India’s largest pharma company, having a strong presence over a wide range of therapeutic segments like anti-infective, GI tract, multivitamin, cardiovascular, NSAIDs and dermatologicals. It exports products to over 70 countries with ground operations in 25 and manufacturing facilities in 7. Currently International sales contribute 50% of total sales. Though anti-infectives remain its core business, Ranbaxy's R&D thrust has resulted in the company having the most enviable R&D pipeline in the country. Ranbaxy houses one of the best pools of scientists in Asia and with a strength of 350 scientists working under its roof, Ranbaxy has many leading molecules in the pipeline. The mega deal with Bayer AG, Germany to develop once a day Ciprofloxacin is a testimony of its R&D capabilities. Moreover, Ranbaxy’s foray into Novel Drug Delivery Systems has helped it reap rich dividends (Ciprofloxacin).

And that's not all, the company is not content with all this and plans to become a global player. To achieve this goal it has set a sales target of achieving sales of $1bn by 2004. With a strong pipeline of products to tap the attractive generic market in the US, Ranbaxy's moves merit attention. With 40 products pending approval with the US Food and Dug Administration, of which more than half are applications that involve a patent challenge, the upside possibilities in case Ranbaxy emerges successful in patent litigation, are indeed immense. Developments on this front need to be closely tracked and can be used as a cue to considering exposure in the stock.

Reliance Industries - Indian powerhouse
India’s most admired company, India’s largest private sector company, ranked no. 189 in terms of net profit in the Fortune 500, and the world’s largest producer of polyester staple fiber and polyester filament yarn, Reliance Industries Ltd (RIL) is highly rated first in the poll on financial performance, return to shareholders and growth prospects. It has presence in petrochemicals (about 60% of India’s capacity), petroleum and recently entered into oil and gas exploration.

Within the country, Reliance is the largest manufacturer of PX, PTA and MEG, with a market share of over 80%. RIL has grown into petrochemical major since its modest beginning with a synthetic fabric mill at Naorda. Reliance's consolidated profits were nearly the same as standalone profits as profits from Reliance Energy and IPCL were eaten away by losses in Reliance Infocomm (which is expected to be out of the red by the end of this fiscal).

SBI - Bulging loan book
The State Bank of India is the largest commercial bank in India in terms of profits, assets, deposits, branches and employees. This is one of the oldest public sector banks in the country. SBI has a branch size of over 13,600 branches and a large ATM network spread across the country. While SBI is a public sector bank controlled by the government it is governed by a separate act called the SBI Act of 1955. SBI was set up with the objective of extending banking services for the development of the rural sector.

SBI plays a vital role in providing working capital and term finance to the Indian industry. Due to its large network of branches, SBI has been able to garner a large chunk of deposits from the rural sector. It is also a leader in the international banking business. SBI has eight business units: namely, corporate banking, international banking and domestic banking for concentrating on core areas; associate banks division for looking after the working of these banks; credit division to monitor the overall credit; and three other business units-finance, corporate development and inspection for in-house work, to help keep the mammoth organization in order. The key to State Bank of India’s latest results lies in its advances growth. The bank, however, has a number of advantages. By virtue of its size, its ability to stay in the business for a considerably longer period is assured. It can explore growth opportunities outside the Indian sub-continent, too. The size can also be leve raged to grow its other businesses - notably credit cards, insurance, mutual funds, and as a primary dealer. This could compensate for the constraints to growth in the banking business. This has been in evidence over the past two years. The non-banking business of SBI has been growing at a much faster pace than its banking business.

Satyam - betting on offshoring
Satyam Computers is one of the leading players in the software services space and the fourth largest software exporter in the country . The Company is a multifaceted, totally integrated IT solutions provider. Originally incorporated as a private limited company in 1987, Satyam has escalated to a full-fledged global company, employing 5500 IT professionals in India, U.S. Japan, U.K., Singapore and Europe and offering a range of expertise in diverse areas of Information Technology.

Satyam is all geared up to survive the brutal competition and volatility of the IT industry through its strategy of a diversified portfolio of fine quality end-to-end products and services. Satyam's focus on enlarging the portfolio of services offered to the existing customers is fuelling growth. For example, besides the traditional application development projects, the company has managed to rope in several clients for CRM, data warehousing and data mining. The market for software development and maintenance services is intensely competitive at the international level. For customers coming to India looking for offshore vendors, there is competition from some of the largest Indian Software companies. On a relative valuation basis, Satyam continues to trade at a sizeable discount to its frontline peers, Infosys and Wipro.

Tata Motors - On the Move
Tata Motors (Formerly known as Tata Engineering and Locomotive Company Ltd),Controlled by the House of Tatas, it is the sixth-largest manufacturer of trucks in the world. Tata Motors has been dazzling the Indian automobile industry with a slew of launches in the last two years. The success of Indica and Indigo has clearly helped the company reinvent itself. The commercial diesel vehicles, which were called Tata Mercedes Benz, are now sold under the name Tata after the expiry of the collaboration agreement with Daimler-Benz, Germany. Apart from manufacturing light, medium and heavy commercial vehicles, it also manufactures passenger cars, utility vehicles, excavators and machine tools.

With volume growth continuing to be robust and the company able to pass on some of the higher costs, Tata Motors should continue to fare well given that the economy is growing at a healthy pace. Tata Motors is India’s largest commercial vehicle (CV) manufacturer with a commanding 67% share in medium and heavy commercial segment (M/HCVs). While CVs contributed to 64% of revenues, sale of cars and spare parts accounted for 27% and 6% of revenues respectively in FY03.

Wipro - the diversified giant
Beginning humbly as a small edible oil producer, this Bangalore-based company has metamorphosed into a world-class software giant. Wipro is India’ s third-largest exporter of software services and has a diversified business model catering to areas of IT, health sciences, consumer care and lighting. IT services now contribute to around 70% of Wipro's total revenues, and includes a wide range of services like package implementation, systems integration, application development, R&D services and BPO.

The fortunes of the diversified Wipro continue to be dominated by Wipro Technologies, its global IT services and products segment. For 2003-04, Wipro Technologies accounted for 74 per cent of revenues and 86 per cent of profit before interest and tax. Strong revenue growth in these years, a differentiated set of service offerings and a good acquisition-led strategy have bolstered the fortunes of Wipro Technologies. Sustained improvement in operating profit margins, however, holds the key to its future valuation. Wipro Lighting is a major diversification of Wipro, manufacturing and marketing lighting products for households and the commercial and industrial markets.

VSNL - Ringing Right
Videsh Sanchar Nigam Limited (VSNL)is the principal provider of international telecommunication services in India. Over the years the company has been transformed from an overseas-switched voice company to an internationally recognized telecommunications company utilizing and offering a full range of digital technology. VSNL is the largest player in Internet segment in India. In 2002, VSNL was acquired by the Tata group and is an important cog in Tata group’s plans of providing services across the entire telecom value chain. VSNL completed its maiden GDR issue to the extent of USD 527 million. GOI was holding 52.97% stake in VSNL of which it has divested a 25% stake to the Tata Group as a strategic partner along with the right to manage the company. M/s Panatone Finvest Limited, a company which is owned by various Tata Group companies, has picked the stake. Consequent to this divestment, the Government of India (GOI) stake in VSNL has come down to 26.12%. Subsequent to all above issues, VSNL has now become a Tata group company.

The markets cheered VSNL's acquisition of Tyco Global Network, which has three times as much combined capacity of the other players on the India-US route, and will enable VSNL to leverage the growth in the country’s IT and BPO businesses. But VSNL has been diversifying its services. Services other than international telephony and related segments accounted for a quarter of revenues in the second quarter of the current fiscal, compared to 14 percent in the first quarter. The company is focused on broadbasing the revenue streams by strengthening its NLD (National Long Distance) foray, capitalizing on the retail broadband business opportunity and firming up the DTH (Direct-to-Home) plans. But all these plans are capital-intensive, entail high risk and the returns from these will accrue only over the medium-to-long term. On the downside, however, in the near term, the expected decline in bandwidth prices and competitive pressure in international telephony business m ay put sustained pressure on margins. And the restructuring to consolidate all telecom assets within the Tata group also remains an uncertain variable.