Stock advice: stay away from IT stocks

IT stocks saw heavy buying for the last 2 days on account of cheap valuations. Unless you are an ultra-short term investor (<1week), it is better to stay away from IT stocks.

Why should you not buy IT stocks?

1. IT companies still have not experienced the real impact of America recession.

2. Fall in IT stock prices was due fall in dollar value which will further fall after another rate cut in March.

3. They will experience the real impact of downfall in American economy in the coming quarters when American companies reduce their IT spending.

4. IT companies are not taking any concrete steps to face American economy recession. They should reduce the salaries by 20-30% and trim their employee strength.

5. If IT companies will not prepare for recession, they will face another 2000-01.

Which is the best IT stock?
Satyam computers. Satyam is in better position to face dollar appreciation and American economy crisis. My opinion: 2008-09 financial year will become worst performance year for IT companies. Medium and long term investors should stay away IT stocks.

Banking and Infrastructure companies will outperform other sectors in the coming quarters.

Advice for new stock market investors

Many new investors are asking me for advice on their recent “investments” in the stock markets which were bought at steep prices. Most of these investors do not know much about stock markets. They have just entered into these markets to make some easy money (brokers, media and "expert" friends are real culprits).

My advice for these “innocent” investors:

1. Indian stock markets are not investment centres at current valuations. They became gambling centres in the recent days. Can anyone finally make money in gambling?

2. Do you what happened to the investors during Harshad Mehta days and IT boom time?

3. Do you know, like Ambanis now, Wipro’s Premji became the second richest man in the world for some days due to these stock markets? Anil Ambani will become the world richest man after Reliance Power listing. Do you think they can stay there?

4. Never believe in the words of CNBC analysts and broker’s words. They will change their words according to the market sentiment. Just analyse their statements by going through the archives of business newspapers or moneycontrol.com. Do you what they have said about Ispat Industries when it was at Rs 14?

5. Don’t lose your hard earned money in the stock markets by investing at these valuations. Stock markets already discounted 2009-10 earnings also. I know it is very difficult to control one after seeing the euphoric mood among your friends. Have patience. Better opportunities will come for investments at reasonable valuations.

6. Any government will take populist decisions before elections. Don’t expect significant industry helping decisions in the election year.

7. Accumulate more knowledge about various companies and businesses by regularly reading business newspapers and magazines.

8. Know basic fundamentals about stocks like P/E ratio, Book value, historical stock prices, when to buy/sell shares etc.

9. Day trading may give you some short term gains but long term investors are always the real winners in stock markets. Never indulge in day trading. Leave it for big brokers.

10. Never invest in stock markets just basing on tips of brokers and friends. Do your own research on the company and business and its growth prospects and valuations.

11. Never invest in Z, S and other unknown company shares with poor management. They may hit upper circuits in bull markets. You will finally left with some papers with no buyers. Biggest losers in any bull market are these kind of investors who may never able to sell their shares of those unknown companies.

12. Never enter into stock markets to make big money in small time. You need to work hard by doing enough research on companies before making big money. Long term investors in good companies will always become millionaires.

13. Compared to secondary markets, IPOs are safe in these times. Focus on primary markets by investing in good IPOs.

14. But sometimes, you need to follow herds as in Reliance Power IPO. We know it is not a good idea to invest in Reliance Power at such a steep price. But in bull markets, investors never follow caution and reason. So invest in Reliance Power and book profits on the day of listing.

15. United States is experiencing its worst recession after 2001. So better prepare for more bad news.

Why Indian stock markets are rising and falling?

Current steep rise in stock markets is not due to fundaments but just due to liquidity. Mutual funds and Insurance companies are providing domestic liquidity while foreign investors are gambling in Indian markets. Foreign money will move out of our country at any point of time. Stock exchanges are adding fuel to the fire by encouraging derivative market. We have to wait and watch when this mess will clear up and better senses will prevail.

Final advice: Don’t put your hard earned money in these gambling centres. BSE Sensex will oscillate between 18,000-21,000 points for some more time. New innocent investors should stay away from Indian stock markets until the emergence of clear picture. I am against investments even in mutual funds also. Most of these mutual fund managers are inexperienced ones as they have never managed funds in bear market. Sometimes patience will save you from catastrophes. Don't move your money into stock markets from bank deposits. Greed is not good for your financial health.

Please share your opinion.

Flat markets with no major triggers

Indian stock markets will see marginal gains with gains in few specific stocks. If inflation is under control, markets will see buying in the mid session. Underperforming sectors like Cement and sugar stocks will shine due positive statements by finance minister.

Global cues: US markets are still in uncertain zone while Asian markets are in positive zone. Crude price is continuing its upward march.

Sector of the day: cement and Sugar (just my intuition).

Positive stock news:

1. Pfizer net profit rose by 7 times from Rs 35 crore to Rs 258 crore.
2. TATA Steel revived Rs 2,500 titanium project. Tata steel shares may bounce back today.
3. TCS is concentrating on Latin-America. It will acquire two IT firms in that region.
4. Infosys may acquire Capgemini.
5. IFCI is planning to sell 26% stake to institutional investors. I have invested in this stock. IFCI will definitely sell its stake at much higher price.
6. IDBI sold 2% stake in NSE.

Negative stock news:

1. SBI will hike home loan EMIs. NPAs will rise due to defaults.

My stock opinion:

1. As I said, Hindalco is returning back. Never invest in a stock just basing on the rumours. Shares of those stocks that rose without fundamentals will not able to sustain those valuations. I suspect the rise behind RPL even though it is a sound stock for long term.

2. Don’t get depressed by seeing the results of wire and wireless. It is a good long term story. Like telecom, investors will have to face losses in the initial stages due to big investments in the infrastructure. If you are a long term investor with 2-3 year horizon, it will be a multibagger. Accumulate this stock. Along with RPL, this stock will be future leaders in their field.

3. Cement companies may not sustain yesterday’s high rise for long term. Monsoon period is generally not good for cement companies.

4. Don’t be fooled by the Pfizer profits. Most of this income is from other sources but not from main businesses.

5. Due to good monsoon, fertiliser stocks will shine in the coming weeks.

6. ITL shares may see some selling pressure due to BSNL GSM equipment order troubles.

7. Religare bought ADK foods. Closely watch this stock as it is a acquisition target.

8. Tata Tea may bounce back on Cadbury buying rumours. Caution advised.

9. TVS Motors will continue to see selling pressure due to poor results.

10. Stay away from current IPOs. There will be good IPOs in the coming weeks.

11. Among entertainment stock, Shree Ahtavinayak is currently available at attractive value.

12. KRBL posted unimpressive results but stock is already bottomed out.

My stock investments in the last 3 days:

1. IFCI- So much value left in this stock.
2. Dhampur sugar mills – Low valuations. Strictly for long term.
3. Wire and Wireless – strictly for long term.
4. TFCI- short to medium term.
5. Hindustan Sanitary ware – with risk.
6. Mastek – Medium to long term.

Please share your opinion on my stock views.

10 tips for Stock market investors

Investing in stock markets is an art; It is a science; You can never earn money in markets without hard work.

Stock Investment Advice:

1. Never invest in stock just based on rumors. If they become news, you may hit jackpot, if not you will be bankrupt.

2. Never invest in stocks just based on the broker or magazine recommendations. That stock price may have already risen due to these recommendations.

3. Never invest in IPOs which are overpriced or from promoters who have bad credentials.

4. Entering or exiting a stock that bit late may be better than making instant decisions based on rumors that could lead to losses.

5. Fundamentals are more important along with entering price. Though Reliance industries, SAIL, Bharti, ABB and Sun Pharma are good stocks with strong fundamentals, you may not get good returns due to their share price (over valued).

6. Never invest in as stock that rose too much too soon. Though Mind tree consulting, Idea and ICRA are good stocks, they rose too much within a short span of their listing.

7. Invest in fundamentally sound stocks at reasonable price. Stocks like Hindalco, Reliance Petro, Crompton Greeves, Finolex cables are good bets. Sectors like shipping, power and Bio-technology are future stars.

8. You may never get high returns in the already over heated market. If you want very good returns, invest in good midcaps (future large caps). Investors in 2007 may not reap rewards as in 2006.

9. Never invest in penny stocks which may hog lime light in bull markets.

10. Never change your targets without any reason. Greed is the major reason for the losses of investors.

Always invest. Never speculate. Do your own research. Never follow herd.

Investment strategy for black Monday (April 2, 2007)

BSE SENSEX will lose around 300-500 points on black Monday (1-4-207) as Reserve Bank of India raised Repo rate and CRR. Though global cues are not that bad, market will crash due to heavy selling in select stocks from panic Investors. India Stock Markets will see correction in this week. Investors should monitor their investments carefully.

Investment strategy:

Exit from Banking, Auto, Construction and FMCG stocks as they rely heavily on consumption power of people which will be decreased due to RBI measures. Bank shares will be worst affected.

Stocks for Day Traders:

Tata Power, Moser Baer.

Advice for long term Investors:

Enter into select mid cap stocks on Monday evening as they will be available for attractive prices. Exit from blue chip stocks like ICICI Bank, SBI and Reliance Industries. In my opinion, Mid-cap shares may give high returns in this financial year.

Conclusion:

Market movements in this week will decide the future direction of Indices. Failure to control the inflation despite corrective measures of RBI and Government is a major conern.

Don’t get panic. Wait for opportunities. Never follow the mob.

10 Qualities of a young Investor

Pre-requisites of a young investor:

1. Discipline – Most essential quality.
2. Ability to follow rules
3. Love for hard work.
4. Ability to identify mistakes and rectify them
5. An investor must be skilled in reading and understanding financial statements.
6. A trader should have good knowledge of technical analysis.
7. One must spend time on study, analysis and preparation of trading plans.
8. Youngsters should find good role models like Warren buffet, Mark Faber, Peter Lynch, Rakesh Jhunjhunwala etc.
9. Never hesitate when it comes to investing in knowledge.
10. Young investors would do well to make long term plans and goals and work towards achieving them.

Message to young investors:

1. Have a definitive goal in life and work towards it.
2. You should sacrifice some hobbies in order to achieve your goal.
3. Dissociate yourself from people who have a negative influence on you.
4. Dare to dream.
5. Do not afraid of failures.
6. Be open to change and in imbibing new ideas.

Please comment on this article.

Source: Business line.