I had blogged earlier about how the next sector to be touted will be those of export oriented companies.
Sure enough, S Naren of ICICI Pru made the following statement”We have always believed in exports as a theme.We took this call over the past two years and could
consider adding to exporters of technology, pharmaceuticals,
auto parts and textile”, he said, without naming any companies.
Watch out for more and more fund managers join the chorus.
An peculiar aspect of the Indian equity market is the herd like behavior of its brokerage community.One a meme (idea) takes root it quickly spreads and soon everybody are chasing the same stocks
To illustrate, in 1999-2000 , the IT sector was the meme.All brokerages recommended IT stocks, their clients bought it,so the stocks rose which led to recommendation upgrades and so on till the bubble burst.
The same cycle played out in various sectors over the years…telecom, realty, infra and so on
Recent memes that have done well in the last one year or so are FMCGs, Private banks etc
Now the meme that is fast gaining currency are Export Oriented Companies.
Like all memes, the underlying premise is simple and sound.Our dear Rupee has collapsed from around 45 Rs/$ to around 60 Rs/$. So export oriented companies should be raking in the moolah and laughing all the way to the bank.
Watch out as this idea spreads and becomes popular and brokerages start recommending names for this play.
How to play this game?Soros would have climbed on to the bandwagon, rode the wave up and got out before the collapse.
But then not all of us are destined to be a Soros !
Jayant Manglik of Religare Securities recently wrote an article where he predicts that Nifty will cross 6600 by Dec this year.In the article, he states “our valuations are reasonable. Nifty price to book is at multi-year lows,”
I thought it would be interesting to see how the Nifty P/B fared over the years:
The current P/B of 3.07 is is certainly higher than the 5 year low hit on 27 Oct, 2008 when it was 2.12.The current P/B is however is slightly lower than the 5 Year average of 3.28 and 5 Year Median of 3.3
I came across this article where a brokerage firm does a “Realty Stock Check”-which realty stocks to buy/hold.Found it fairly amusing that there was no “sell” in the title.
Brokerages tend to treat the realty business like any other business.But do they seriously believe that the balance sheet/p&l statements of a realtor reflect the true state of affairs?
Cold hard cash is the mother’s milk which runs the realty business in India.You need cash to buy the land (no land owner will settle for 100% white), you need cash to pay off the contractors,you need cash to manage the politicians, you need cash to manage the officials etc
In Mumbai, builders routinely pay a couple of crores even before construction starts.
When such a large part of the realty business is done off the books,then does looking at the balance sheet etc make any sense?
Realty stocks can be a good medium for speculation/punting.But if you want to make real money from realty, forget the stock and research the hard asset.
Yesterday, RBI paused its rate cut cycle citing inflation worries.
Apparently, everything in India is prone to inflation except stock prices !
Out of around 1354 stocks which are regularly traded on NSE, around 1090 stocks (a whopping 80%) are trading below their 200 day averages and only 264 stocks are trading above their 200 day averages.
This is when the Nifty is trading flat for the year to date and is slightly above its own 200 Day average.
One wonders what will happen if the Nifty were to crack 15%-20% from here.This is not an unrealistic possibility considering the following: