morning thoughts...
The markets stayed subdued
and in a range with couple of stocks outperforming the markets.
Technically the same trend
is likely to continue and one must keep focus on individual stocks as movement
will be huge ,index might remain in a range
However ,since most
investors assume bluechips to be overvalued, it is the midcap stocks that are
garnering the maximum interest. In fact the stocks of some of these smaller
companies are fetching valuations not seen for long. As one can see from the
chart, the markets have already started pricing in this recovery. In
the year till date, the BSE-Midcap Index has gain by 25% versus Sensex's gain
of 15%.
Nevertheless, in terms of
valuations, the midcap index is currently trading at trailing twelve months
price to earnings multiple (P/E) of 11 times and at a price to book value of
0.99 times. This seems to be at a significant discount to Sensex that is trading with P/E ratio of 17.7 times and a P/BV
ratio of 2.8 times. In absolute terms as well, the midcap index is trading 17%
lower than its highs of 2008. High risk perception, economic slowdown and
downgrade in the earnings over last few years had penalized the midcap stocks.
However, with hopes of the
new government offering better scope for growth, investors are betting big on
the re-rating potential of midcap stocks.
It is only companies with efficient management and strong balance sheets that will be able to withstand competition and ride along with the economic growth wave in the long term across the cycles and will lead to real wealth creation for investors. Hence, we would recommend investors to stick to bottom-up approach and invest in companies with strong competitive advantage, efficient management and sustainable business model that can survive for a long time to come. While certain midcap stocks may be ripe for re-rating, it would be best to implement the lessons from the past and act accordingly. A good way to differentiate winners from losers in the mid-cap segment will be how these companies have fared in the tough times in the past.
Further, in order to minimize risks associated with equity investing, investors must stick to the ideal asset allocation. With a disciplined approach, it is quite likely that investors will witness such quality midcap companies wearing the large cap crown in the long term.
It is only companies with efficient management and strong balance sheets that will be able to withstand competition and ride along with the economic growth wave in the long term across the cycles and will lead to real wealth creation for investors. Hence, we would recommend investors to stick to bottom-up approach and invest in companies with strong competitive advantage, efficient management and sustainable business model that can survive for a long time to come. While certain midcap stocks may be ripe for re-rating, it would be best to implement the lessons from the past and act accordingly. A good way to differentiate winners from losers in the mid-cap segment will be how these companies have fared in the tough times in the past.
Further, in order to minimize risks associated with equity investing, investors must stick to the ideal asset allocation. With a disciplined approach, it is quite likely that investors will witness such quality midcap companies wearing the large cap crown in the long term.
Once again after the dramatic may of month mega astrological
change takes place of 3 and 5 june when jupiter will be in trine incline motion
with pisces
Our weekend open calls created wealth yet again
Our special open free call triple bumper option HUL 600 ca
tripled in 30 minutes and cash fo call TV TODAY rose by 15 rs in sleeping
markets ( given as open free call on facebook and yahoo messenger to all )
Indoco remedies rose 15 rs
Yes bank 560 ca and dlf 210 ca doubled
Sell call of silver fell 490 rs and gold crashed by 320 rs
Our advance nifty predictions yielded 790 points in nifty and
2500 points in bank nifty in 15 days
