You can't go wrong if you listen to what this 47-year-old chartered accountant from an agricultural family says. "Buy only stocks that are very cheap," says Raamdeo Agrawal, the Joint Managing Director of Motilal Oswal Securities, adding that going wrong with this would be as difficult as getting a bad deal when "buying something worth Rs 10 for Rs 2." And how does one zero in on "cheap" stocks. Simple, comes the answer, either the assets or the earnings should be a bargain. For instance, 12 months back Hero Honda's stock was languishing at around Rs 180, a price-earnings multiple of seven because of the uncertainty surrounding the entry of Honda's 100 per cent subsidiary into the market. And 15 months back, the Bharti Tele-Ventures stock was trading at Rs 25, the same as its book value. Today, the Hero Honda scrip trades at around Rs 500 and the Bharti Tele-Ventures one at Rs 170. Agrawal picked both. As he did IPCA Labs when its price-earnings multiple was 2.5 and its market price half its book value (Rs 70 and it trades at Rs 695 today). The higher the gap between value and price (Agrawal calls this "gun powder"), the greater the chances of an upside.

Banking will remain hot...

...as will engineering...

...and 2003's darling oil & gas

As the infrastructure boom continues, companies close to it should do well

SECTORS AND STOCKS FOR
SHORT-TERM SPECIALISTS

There's something about making your investment in the stockmarket pay, and pay big within a year. The BT 50, India's first free float index, is at 220 as this sentence is being written, but chances are, it will go up even further in the next 12 months. As for the Sensex, Abhay Aima, Country Head (Equities and Private Banking Group), HDFC Bank, expects it to "reach 6,800-7,000 levels by March 2006". If it is short-term (read: 12 months) appreciation you are after, repeat after us: "India Shining". That's right, all sectors participating in the India Shining story will continue to, well... shine in the next 12 months. So, count oil and gas, infrastructure, and construction in. "As the infrastructure boom continues, companies close to it, like construction major L&T, should do well," says Pradeep Dokania, Executive Vice President, DSP Merrill Lynch. As should, by direct inference, other engineering and capital goods companies such as BHEL and Siemens. And, by an indirect one, banks, since credit offtake from corporates should increase. "The creation of a national gas grid will put GAIL in a very strong position," adds Jigar Shah, Head of Research, K.R. Choksey Securities, referring to the sequel to the fairy tale of the year 2003: enormous gas finds, some significant oil strikes, and the launch of a state-of-the-art landing point for LNG.

Power could be the next telecom...

..and agriculture, the next big thing

Agriculture and power are both shoo-ins. farm reforms are long overdue; power sector ones have happened

SECTORS AND STOCKS FOR
MEDIUM-TERM MODERATES

It is hard to go wrong in the medium term (now, that's an entry for the annual famous last words competition this magazine is considering launching). And picking sectors that will do well in the next one-to-three years is as close to a no-brainer as you can get. Agriculture and power are both shoo-ins. The first because agriculture sector reforms are long overdue and could happen soon after the new government is sworn in. That would mean boom-times for companies in sectors as diverse as fertilisers, pesticides, and tractors (we saw your comment about there not being too many investing opportunities in agriculture coming, Constant Reader). And the second, because power sector reforms have already happened; indeed, some analysts posit that power could go the telecom way in the next three years. "Since its valuation hasn't yet shot up, Tata Power is a good medium-term investment," says Sunil Shah, Managing Director, HDFC Securities. "The national power grid will open up huge opportunities for the Power Trading Corporation (PTC) and this is a must for your portfolio," adds Raamdeo Agrawal of Motilal Oswal. For the record, PTC's IPO was oversubscribed 46 times and the stock, which was issued at Rs 16, now trades at around Rs 44. Given the showing of the Reliance Energy scrip at the bourses, one is convinced of the logic of Messrs Shah and Agrawal. In January 2003, the stock of the company (then called BSES) was trading at around Rs 225. Today, it trades at around Rs 775. We rest our case.

More people will buy cars...

...more retail businesses bloom...

...and more tourists visit the country

SECTORS AND STOCKS FOR
LONG-TERM LUGGAGE-LUGGERS

Simply put, four words sum this up: the greater India story. For those not in the know, this story concerns the country's shifting demographics and the resultant emergence of new consuming classes and new consumption patterns. "Concentrate on sectors that cater to the aspirations of the growing middle class because these will outstrip the expected secular growth of the economy," is the advice proffered by Nilesh Shah, Senior VP and Head (Portfolio Management), Kotak Securities, to anyone investing with the long-term in mind. For instance, organised retail could well be the next big thing in India. Or passenger cars (India's largest car manufacturer Maruti Udyog is a listed company). Or travel and tourism. "An established efficient player like Thomas Cook should benefit from the growth (of the economy in the long term)," says K.R. Choksey Securities' Jigar Shah. Most analysts believe long-term investors would do well to avoid the fast moving consumer goods sector altogether. One reason for this is increased competition that could see prices of FMCGs falling even further. Another, as DSP Merrill Lynch's Dokania sees it, is "the growth of organised retail" that will be accompanied by the resultant increase in the bargaining power of retailers, a la Wal-Mart. And finally, as some analysts are at pains to point out, prices of FMCGs in India are far higher than those for similar (sometimes, the same) products in parts of South and South East Asia. This will change sooner than latter, they warn-enough and more reason for the long-term investor to stay away from stocks of FMCG companies.