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Investment tips for crisis times

Ram Prasad Sahu, Jitendra Kumar Gupta in Mumbai


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investors to rejig their portfolio to limit losses and opt for stocks

• 2009 may not be good for the


en by more than half from its January 2008 peak of 21,206 points.
salaried class
ple of weeks, have eroded a substantial chunk of investor wealth.
• Ramalinga Raju resigns,

vestors are clueless as to where the markets would be headed over reveals shocking details

• 10 stocks that can earn good

returns in 2009
rvive a slowdown

market is and what strategies one needs to adopt to tackle the

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ation, credit growth, the IIP numbers -- all point to a muted phase

rld Economic Outlook projections for 2009 has cut India's GDP
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• Master the Stock Market


substantially down from the nearly 9 per cent GDP growth rate
• Industry Market
ch are engines of world consumption, are expected to grow at just
• Business Guru speaks

ricted to 4.9 per cent during April-August 2008 (against 10 per


Moneywiz
8. Credit growth to the consumer durables sector and autos, good
• Stocks & MFs

-y, auto loans have barely moved registering a growth of just 1 per

h continues to attract investments on top of a huge trade surplus. While FIIs together own only 25 per cent of Indian equity, it is their high ownership of free floating stock

de to pull out and which results in a worsening of the current account deficits.

state assemblies and to Parliament over the next six months are internal factors which will significantly impact sentiment. Pre-poll uncertainty, a vote-on-account Budget a

ly in the third quarter of 2009.


le for the monetary policy tightening and subsequent rise in interest rates, and which has also brought spending and investments to a grinding halt, is trending down at 11.4

p below the double digit market much before the current fiscal runs through. A cut in interest rates, which is on the cards sooner than later, could boost business and consum

sentiment (the other key determinant of equity prices) might improve as speed of response is much better now than in the past crashes. Says Nilesh Shah, deputy managin

he response to the current crisis has been much swifter. Governments across the world have swung into action and pumped more than $3 trillion so far."

esident equity, Religare Securities "Don't expect a V shaped recovery, there is still pain left in the system." A more prolonged U-shaped recovery would mean that markets

undaram BNP Paribas, believes that India's growth numbers, though lower, will top most other markets.

alling commodity prices, she believes, could make the markets attractive once more to domestic and foreign investors.

small, experts advise that you be prudent with decisions related to your equity portfolio.

xit their equity holdings as they are likely to book heavy losses, for new investors with a surplus to invest this is a good time to fish for quality stocks at reasonable prices.

nvestment at one go and time the market." Agrees Dinesh Thakkar, CMD, Angel Broking, "Invest 25 per cent of your surplus now and the remaining in dips spread over th

uffle portfolio), if need be. That's because, if you don't, you may get stuck with companies that may be going nowhere, thereby losing an opportunity to make good the loss

ng your funds or you will be speculating which is not advisable on both counts of managing risk and enhancing returns. Preferably, add companies that are leaders in their

management and strong entry barriers, apart from healthy financials that will help them tide the current rough patch. Besides these qualities, there are some more factors th

t, follow the traditional conservative principle of cash is king. Look for companies which have a record strong positive free cash flow as it can be used to buy out businesse

not only going to be difficult, it might stretch the balance sheet. Companies that are less leveraged can expand and do not have to cough up cash at regular intervals to pay

and low leverage, investors need to keep an eye out on how global demand plays out before investing in the IT sector. While FMCG and pharmaceuticals are defensive sec

n allow little flexibility in operations. Notice that the market is already punishing companies, which have taken up huge expansion plans and need funds to take them forwa

e erosion over the last month), which is building India's largest private sector hydroelectric project at a cost of Rs 5,600 crore (Rs 56 billion), tripling its cement capacity an

es its need for capital and comes at a time when established names such as Hindalco [Get Quote] and Tata Motors [Get Quote] have struggled to get their pricing right f

at the end of FY08 and can fund its mega plans by a combination of internal accruals and debt. It is also generating a cash profit of about Rs 10,000 crore (Rs 100 billion) a

company does not qualify automatically for investments. Some also tend to look at stocks in relation to their valuations a few months back, indicating that after a 50-60 per
Bonanza Portfolio, a financial services firm, "Companies (in the capital goods sector for example) which performed in the earlier bull run might not be the best bets due to h

quire large amounts of capital to sustain their business.

dering the scorching pace of growth in telecom. The company, however, is in the middle of a pan-India expansion of GSM network and is expected to spend Rs 50,000 cro

d the shares by 35 per cent over the last month. If you can handle volatility and adopt an aggressive approach to stock buying, you could add this to your portfolio.

lieve fund managers such as Sandip Sabharwal, executive director-equity and CIO of J M Financial AMC. He says that, with a likelihood of interest rates easing, investors

a good idea. Check for past dividend record and the cash flow situation in the first two quarters and you will get a fair idea of what the annual picture will be like to arrive

mes that come to mind and fit the high dividend yield criteria at current prices. For investors who wish to invest in markets but don't have the patience or time to track every

aged in one instrument which is not only easy to track but is the cheapest low cost mutual fund scheme available in the market. Here, the Nifty BeES from Benchmark Mut

unity to invest. Historically a price-earnings multiple of 10, or 50-60 per cent off the top signals a bottom. At a consensus FY09 EPS of Rs 980, you are getting the entire S

over the next two years, expect the medium term (up to 12 months) to be choppy in light of the global turmoil (still far from having achieved stability), domestic slowdown

ering economic growth. So, for the time being, give a higher weightage to safety and thereafter, ensure that you don't pay a high price for stocks, even if they are expected
http://www.rediff.com/money/2008/oct/20perfin1.htm

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