Thursday, August 11th, 2022 13:46:29

Celebrating The Bull’s Run

Updated: November 13, 2010 11:53 am

Dhanteras which is celebrated at the time of Diwali is known to be the festival of wealth. The market condition on this day gets better as people invest for progress in business and career at Muharat trading. Like every year, this year also Dhanteras is expected to bring good investment opportunity to the Indian investors though the gold price is at an all time high.

Take a look at the road post-Independence India has covered for the stock market. It was a time in 1946, when there were only seven stock exchanges in the country with 1,125 listed companies. Few today can even recall doyens of the market at that time like Premchand Roychand or Phiroze Jeejeebhoy, who were the law insofar as the stock market of those days was concerned.

                History was made when the 30-share BSE sensitive index crossed 1,000 points on July 25, 1990. Marketmen were all euphoric and looked for yet higher trajectory and two years later on March 30, 1992 the market closed at 4091.4 points. A month later on April 28, 1992, when Harshad Mehta’s run was actually halted the sensex declined by a massive 12.8 per cent to a record fall of 570 points, pulling the index down to 3,869.9 the securities scam of 1992 had begun.

                Today, investors treat such falls much more casually. With the sensex cruising above 20,000 points and still climbing, the investors once again are waiting for another record to surpass. Today, there are more than 4,900 listed scrips on the BSE alone the number one in the world in terms of listed scrips. And not to speak of the number of scrips, the ever-spiralling Sensex, is now looks set to go beyond the unchartered realms of the 25,000, something that few would even dare to speculate upon even two decades ago. The market capitalisation (closing scrip price multiplied by number of paid-up equity shares of a company) of Indian stocks has broken every known record so far.

                So, it may be good time to book profit. Reliance Industries, for example, has given its shareholders a massive Rs 98,672 crore over and above their expected return in 2009-10. Share-holders of Tata Steel got Rs 34,188 crore more than the expected return. The public sector oil major, Indian Oil Corporation too has given its shareholders a handsome Rs 7,200 crore over and above their expected returns. The unprecedented growth of the Indian stock market has attracted a huge amount of foreign capital too after its doors were opened to foreign investors with economic liberalisation. Infrastructure, automobile, pharmaceuticals, banking and IT are the sectors, where opportunity looms large in the upcoming days.

CHOOSE SECTORS FOR INVESTMENT COMPANIES

Infrastructure sector

India remains an attractive market to infrastructure investors, driven by the strong fundamentals of economic and population growth. In the 12th Five Year Plan, the government is targeting 50 per cent of investment (Rs 45,000 billion) for the sector to come from the private sector, equal to USD 500 billion which can be viewed as hidden opportunities. Kamal Nath, India’s Minister for Road Transport and Highways has embarked on an ambitious plan to get USD 70 billion of investment into the road sector over the next three years

with more than half from the private sources. A chartered financial analyst, based in Kolkata, said, “For sustaining growth, investment in infrastructure’s stock like IRB, IVPCL Infra, ITNL, Jaiprakash, ILFS, Srei appears to be beneficial for the investors.”

Automobile sector

India is the world’s second largest manufacturer of motorcycles, with annual sales exceeding 8.5 million in 2009. India’s passenger car and commercial vehicle manufacturing industry is the seventh largest in the world, with an annual production of more than 2.6 million units in 2009. By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation’s roads. Mahesh Shah, the past president of ICSI and ICWAI said, “The easy availability of car loan through banks and finance companies has accelerated the purchase of cars amongst the middle-class segment of the country.” The automobile industry in general posted strong sales number in the first half of this financial year 2010-11, though the growth rate tapered off a bit due to base effect of interest rate hike last month. The passenger vehicles segment grew at 33 per cent during the April to September period while the commercial vehicle segment grew by 41.6 per cent. “The Indian Auto stocks that are expected to perform well in the coming days (on the basis of expected Q2 results) are Tata Motors, Mahindra & Mahindra, Bajaj Auto and Maruti Suzuki,” he informed.

Pharmaceutical sector

The Indian pharmaceutical industry will grow by over 100 per cent over the next two years. The industry is the third largest in the world in terms of volume and fourth in terms of generic medicine production. According to the All India Organisation of Chemists and Druggists (AIOCD), the pharmaceuticals industry in India will grow by over 100 per cent over the next two years. The Ministry of Health and Family Welfare of India allocated Rs 195 billion for National Rural Health Mission for the year 2009-10. But the same has been increased to Rs 223 billion in the financial year 2010-11, which implies an increase of 14 per cent from earlier year. So, domestic consumption will naturally be benefited by that. According to Pradip Dey, a stock market analyst, “Investor can go for the stocks of Lupin Ltd, DR Reddy’s Laboratories, Aurobindo Pharma Ltd and Sun Pharmaceuticals Ltd.”

IT sector

IT, one of the fastest growing sectors in Indian economy is one of the most attractive investment options as the government and the private sector both go in for massive technological upgradation. According to industry experts, the major companies that are going to perform good in the upcoming days are TCS, Infosys, Wipro and HCL Tech. There will be two major threats for the companies in this sector. The policy risk will be important to watch out for as governments may take protectionist measures. In the US, the state of Ohio banned outsourcing and the federal government raised a limit. If more states and governments follow the trend then it will affect Indian companies. The other risk is from the MNCs such as IBM, Accenture etc. Many of the MNCs have developed large bases in China and many other countries to lower costs. This has made them competitive with the Indian companies.

Banking and financial sector

Indian banking systems is one of the few in the entire world to be resistant against the sub-prime crisis. The BSE performance in last one year has been 32 per cent higher outperforming the broader market index Sensex. Both domestic and foreign banks are interested in increasing their share in the Indian banking sector’s pie because it has remained resistant against the sub-prime crisis, which engulfed banks in the US and Europe. Banking and infrastructure finance are growing with increasing revenues and deposits. RBI is considering giving licenses for new banks. Private sectors banks like small banks may give good harvest as they may take over. So at this time the market experts are hopeful about the future prices of UCO, State Bank of India, Allahabad, Union Bank of India, HDFC, Yes and ICICI. A major concern for the banking sector is slippages from the restructured assets.

By Samarpita Roy

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