may be better in the fortnight beginning March 18, or they could
be worse-largely a function of what happens in Ayodhya on March
15. As these words are being written, though, it is evident that
the Sensex has run out of steam. Its rally, after a horrible 2001,
is plateauing at 3,500-3,700 levels, market movers are busy booking
profits, and analysts haven't yet made up their minds whether the
latest upswing is a bear market rally, or a sign of better things
Our take is that it is the latter-as long as
investors enter the market with a one-to-three year perspective.
Budget 2002 doesn't have much on offer, but what little it does-the
emphasis on infrastructure and agriculture, and lower interest rates-should
result in some growth in the economy.
Says Krishnamurthy Vijayan, CEO, JM Mutual
Fund: ''We think that the economy is fundamentally strong and the
foreign institutional investor (FII) inflows will improve. We expect
the market to improve.'' If things will indeed get better, then
investors are better off sticking to bluechips (a recovery will
put these scrips into orbit), and ensuring their portfolio has enough
diversity to take the roughs that will inevitably come.
The 12 scrips listed here-two are actually
substitutes, so the effective number is 10-satisfy this criteria.
The final decision, as it should be in this age of disclaimers,
is your own.
Stock Price on March 8, 2002: Rs 306.85
Fine, you've probably heard the spin
about how the merger of Reliance Industries and Reliance Petroleum
will create a Fortune 500 company. But did you also know that it
will bring much-needed growth to RIL, which will now benefit even
more from any upturn in the petrochemical business. The merged entity
also has a stake in the group's ambitious telecom business. ''The
merged entity offers a unique exposure to the petrochemical cycle
at its trough as well the high growth telecom sector in this country,''
says Pankaj Choksy, Petro Analyst, Enam Financial. Our recommendation:
buy at current levels and on dips.
Stock Price on March 8, 2002: Rs 711.7
If Yashwant Sinha's Budget 2002 had
good news for one industry it was tobacco: excise duties on cigarettes
weren't increased. Although highly price-inelastic, the fact that
prices won't go up this year may help the industry register some
much-needed growth in volumes. And ITC, which has actually managed
to improve both its topline and bottomline in a period when volumes
actually shrunk, should benefit. What makes the stock even more
attractive is the company's ambitious plans for its non-cigarette
businesses. At, around 15 times earnings, the scrip is a great bargain
for a FMCG company.
Stock price on March 8, 2002: Rs 4,225.75
The worst may be over for Indian software
services firms. The global economy is showing signs of recovery,
and 2002 has brought with it a renewed interest in infotech outsourcing.
The first-tier Indian software services companies actually managed
to grow their business last year, but most saw their billing rates
come under some pressure.
Put simply, the fundamental strengths of Indian
software services firms haven't been damaged by the slowdown. And
Infosys, which is trying to cope with this by moving into the IT
consulting space and competing with the likes of Accenture, remains
the best bet. ''The valuations, though attractive, are not cheap.
We recommend a 'buy' at declines,'' says Anil Advani, Infotech Analyst,
Stock price on March 8, 2002: Rs 154.8
Surprised? You should be; the performance
of Star Plus at the TRP hustings, and the perceived poor record
of its promoters at corporate governance caused the Zee scrip to
slide, slide, and slide. Today, though, Zee is a must for any long-term
portfolio: the promoters have transferred all questionable transactions
into their own books; and it is evident that the Hindi 'variety
entertainment' space will be dominated by one of three channels,
Star Plus, Zee, and Sony Entertainment Television. Zee, to its advantage,
controls its distribution through a subsidiary, and has just inked
an advantageous distribution deal with AOL-Time Warner subsidiary
Turner. Buy it for your children.
HPCL & BPCL
Stock price of HPCL on March 8, 2002: Rs 314.1
Stock price of BPCL on March 8, 2002: Rs 319.25
If you've been tracking what's been
happening in the markets recently, you probably need no explanation
on why you should buy these scrips. If not, here goes: the government's
disinvestment drive seems on track; and Budget 2002 has reiterated
the government's decision to go ahead with the disinvestment of
the two oil companies, and to deregulate the pricing of oil products.
Even if bids for the two companies do not display the irrational
exuberance those for IBP did, they are estimated to be at a significant
premium to current prices. Reliance and Shell are both keen on bagging
the companies; and Texaco and ongc have evinced some interest too.
''HPCL and BPCL will benefit from the dismantling of the APM. The
privatisation of the two companies is a big positive,'' says Motilal
Oswal, Chairman and Managing Director, Motilal Oswal Securities.
Indo Gulf Corporation
Stock Price on March 8, 2002: Rs 45.7
True, Budget 2002's reduction in the
import duty on copper (from 35 per cent to 25 per cent) bodes ill
for copper companies like Indo Gulf and Sterlite. Still, Indo Gulf
enters our portfolio as a commodity pick on the strength of two
factors: a strong up-trend in international copper prices; and a
price-earnings multiple of just 3. This is probably the right time
to get a foot in.
Stock Price on March 8, 2002: Rs 133.35
The performance of the Indica v2 has
seen the Tata Engineering scrip perform well over the past few months;
an economic recovery could propel it to new heights (the sales of
commercial vehicles is closely linked to the growth of the economy).
Falling diesel prices could also help Tata Engineering's prospects.
Stock Price of GlaxoSmithKline Pharma on March 8, 2002:
Stock Price of Ranxbaxy on March 8, 2002: Rs 852.25
No portfolio is complete without a
pharma stock. Glaxo holds the promise of assured growth; Ranbaxy
and DRL (Doctor Reddy's), that of exponential, but marginally risky,
future growth. Investors who covet value over all else need only
look as far as the scrips of pharma multinationals: impending product
patents and the relaxation of the drug pricing regime (fewer drugs
now come under this) should see them do well. Glaxo SmithKlineBeecham,
which has restructured its portfolio recently, is a good bet.
Ranbaxy and DRL are for aggressive investors.
Their current valuations may be a tad stretched, but their research
initiatives could help these companies rake in the moolah in the
future. Ranbaxy, courtesy, its strong generics (drugs going off
patent) play in the US and Brazilian markets may have an edge over
DRL. Says C. Shreehari, Analyst (Pharmaceuticals), Khandwala Securities:
''In the last couple of years, the generics market has really opened
up and Ranbaxy has benefited from it.'' Caveat: Indian pharma stocks
are volatile, and investors would do well to spread out their buying
to three to four lots, at every dip.
Stock Price on March 8, 2002: Rs 246.55
We just couldn't leave this one out.
The recent reduction in excise duties on several fast-moving consumer
goods (shampoos, skin creams, and the like) should help HLL boost
volumes; the company has already decided to pass on the benefit
to consumers. Still better, Budget 2002's emphasis on agriculture
should help HLL, believe analysts like Parag Parikh's Rajeev Sampat,
thanks to the company's ''rural thrust''. With its strategy of focusing
on power brands starting to kick in towards the end of the last
year, HLL does look like a sound long-term buy. However, the scrip
has gone up in the last fortnight and large investors will certainly
book profits on it (read: sell). Ergo, buy on dips.
Stock Price on March 8, 2002: Rs 231.1
Banking adds just that bit of diversity
to any stock portfolio, and SBI, a stock that some consider a proxy
of the Indian economy, may just be the right banking scrip to pick.
Despite the slowdown, the bank has consistently performed well,
and its diversifications into areas like insurance will hasten its
transformation into a universal bank (SBI already is the number
one institution in providing home finance in the country). Says
Rajat Rajgarhia, Banking Analyst, Motilal Oswal: ''The increasing
retail focus along with strong margins has contributed to the financial
performance. The constant upgradation of the it platform also augurs
well for the bank.'' Our take: it is a safe buy at the existing