For a while now, in fact, ever since the stock market touched 10k, analysts and commentators have been tying themselves into knots trying to figure out whether the market is vaulting too high. The BSE Sensex has since been playing footsie with the 11k mark, but valuations still seem just about right-it's a Goldilocks market.

However, with the Sensex price-earnings (P-E) multiple reigning at about 20, experts advise caution-not so much because the P-E ratio is too high, but because markets by nature are cyclical. After all, we have had three consecutive years of high returns and now, as interest rates inch higher, we could be looking at the beginning of the end of the consumption-led boom. Right now, though, stocks seem in no mood to listen.

While cautious investors will be selling now and salting away the profits, the ambitious ones still want to play the field. Or, they might have missed the rally, but now want a piece of the action. For such investors, it's frustrating to see how expensive the market has become. They cannot take part in the frenzied buying that's going on at the counters of frontline stocks, and realise it will be foolish to look at penny stocks. What then?

What few people realise is that the market still has some good, fundamentally strong stocks going at fair prices. These have, for various reasons, not participated in the rally. They offer both a good opportunity for long-term capital appreciation and carry minimum downside risk. Some have listed recently and are trying to adjust to a market that always demands more, and are, hence, facing short-term blips. Some are frontline stocks with high dividend yields, which have been subdued in the last one-and-a-half months despite the almost 10 per cent rise in the Sensex. There are the turnaround stories, which will take a while to make their mark; and then there are the upcoming IPOs (initial public offerings) from potential blue chips like Reliance Petroleum, Deccan Airways and Sun TV.

BT Money went fishing in these turbulent waters to hook some of the best deals for you. Take a look.

Listing and After: After the Maruti Udyog IPO in 2003, investing in IPOs has been seen as a safe bet. Several scrips gave 25 per cent returns on the day of listing. Of late, though, the IPO market has not been quite so accommodating. In the recent past, quite a few aggressively priced IPOs have taken a drubbing immediately after listing. And investors are being cautioned to stay away.

According to primary market experts, a new trend is emerging-that of investing in newly listed IPOs. This is seen as a much safer bet. There are, at present, quite a few freshly listed stocks that are trading below their offer prices and trailing the broader indices, although nothing much has changed either in the company or the industry.

Analysts suggest that if you have a long-term horizon, these stocks definitely look to be up for grabs (see table: Distress Buys). S. Ramesh, Executive Director (Equity Products) at Kotak Mahindra Capital, says: "In a bull market, there are situations when the pricing tends to be aggressive, which sometimes doesn't offer immediate gains, but investors who stay invested for a slightly longer term get the returns."

Ideally, before buying such stocks, investors should either study the company or ask their financial advisor why they have dropped below the offer price. Says Ramesh: "If it is because of a general market trend and not because of the fundamentals, there is no harm in buying such stocks."

"Don't invest blindly in divident yield stocks. The dividends should be sustainable in future" Asit Koticha MD & CIO, Ask Raymond James

Take a look at Jet Airways. In the first nine months of 2005-06, Jet saw a 30 per cent rise in turnover although profits were hit severely by soaring fuel prices and lease rentals. But Jet's long-term story is still intact-with air traveller numbers increasing and its global expansion on track. Equity research firm indiainfoline.com says in its research report: "The company's SAARC operations are profitable, Mumbai-London is progressing towards break-even, while Mumbai-Singapore turned profitable within seven months of operations."

The airline's income from cargo is also on the rise. In the October-December quarter of 2005-06, cargo income stood at $19.5 million (Rs 87.75 crore) compared to $10.75 million (Rs 48.38 crore) in the corresponding period of the previous year. The Sahara deal, although now in limbo, may offer additional infrastructure to Jet in terms of aircraft, parking slots and pilots. Analysts say Jet should be able to better rationalise its routes and get access to new passengers in days to come. Its stock, which was issued at Rs 1,100, listed at a premium of 18 per cent at Rs 1,304 per share on March 14, 2005 and is now ruling at Rs 949 levels. Our take: it looks attractive at that price.

GVK Power & Infrastructure, the holding company of the GVK Group's power business, is another such example. The IPO received overwhelming response from investors, being oversubscribed 25 times. However, gvk's stock, which touched a high of Rs 368 soon after listing (offer price: Rs 310) is today trading at Rs 255. While fuel availability is a risk, analysts point out that GVK has a track record of timely project implementation, which should make it a good buy even today.

Sure Shot Gains: Obviously, not all IPOs are going to fall on their faces after listing. There are quite a few companies with terrific track records and huge potential that will almost certainly list at a premium. In the recent past, IPOs that have given smashing returns include wind energy player Suzlon, which has returned 362 per cent since its IPO in September 2005, Shree Renuka Sugar (295 per cent since October 2005), logistics player Gateaway Distipaks (260 per cent since April 2005), IVRCL Infrastructure (236 per cent since March 2005) and Educomp Solutions (236 per cent since December 2005).

Though IPO ratings have not really captured anybody's imagination, Sushil Muhnot, Managing Director, IDBI Capital Market Services, advises investors to look at the industry outlook, followed by the management track record and the company's fundamentals before investing. "Investors should look at whether the industry is growing, the company's competitive advantages and future earnings capacity, the international competition, and the track record of the promoters." (See Up For Grabs).

Liquid, Safe, Reliable: If you are totally risk averse, and will look only at industrial biggies like the Tatas and Birlas or frontline stocks like ITC and ONGC for your portfolio, the best way to locate such stocks is to calculate dividend yields. Analysts use this formula: dividend per share multiplied by 100 and divided by the market price per share.

The best part? You get these returns by staying invested for a very short term. You could, for instance, stay in a stock for just four months and earn a dividend yield of 4 per cent-that works out to annualised returns of 12 per cent, which is much higher than bank deposits or even post office savings. While high dividend yield stocks are a good protection in a falling market, if and when the market does go up, they also offer good scope for capital appreciation. "One shouldn't blindly invest in dividend yield stocks. The dividends should be sustainable in future," cautions Asit Koticha, MD & CIO, ask Raymond James.

"Look at the industry's competitive advantages, future earning capacity and promoters' record " Sushil Muhnot MD, IDBI Capital Market Services

Analysts suggest that apart from dividend yields, there are other factors like low price-to-book value and market capitalisation-to-sales ratio that should be taken into account before buying such stocks. In fact, you can also spot good dividend yielding stocks in the portfolios of mutual funds, since many funds in the past have launched dividend yield schemes like the Tata Mutual Fund and Birla Mutual Fund.

Always Valuable: For those of you who are willing to take a little bit more risk while still staying in the index universe, the next best route is to spot the good, solid stocks that have, for various reasons, underperformed the index in this rally (see table: The Rise And The Fall). These index stocks have trailed the benchmark index, but does that mean they are weak buys? On the contrary, their fundamentals remain very strong. Examples: stocks like ICICI Bank and Ranbaxy. Not only are they in fast growing industries like banking and pharma, they are the leaders in their respective areas. Both have posted strong profits growth, of 24 per cent and 97 per cent, respectively (third quarter 2004-05 to third quarter 2005-06). You can't go far wrong with such stocks, and buying them at declines is what you should be waiting for.

The Renaissance: There was a time when shareholders told Ratan Tata to close down Tata Motors. And an IDBI restructuring report in the late 90s said sail (Steel Authority of India) was dead. Today, not only are both alive and kicking, but are laughing all the way to the bank. There are many more such turnaround stories around. They may have been left behind in the bull run, but this is the time to buy them, and wait patiently till they find their place in the sun.

The upturn in the commodities market, the buoyant growth in the overall economy and drastic restructuring have lifted the fortunes of many companies in the last three years (see box: Back In The Black). Whether in iron and steel, chemicals, paper, tea, glass, or FMCG, the turnaround bug has bitten a lot of companies. Examples: Assam Company, Apeejay Tea, Titan Industries, Andhra Petro, Raman Newsprint and Everest Industries.

For avid investors, therefore, it seems there's no such thing as a bad time to go fishing. What's important is to find out which fish you should be catching in these waters.

Cities Of Joy
As the realty boom spreads to Tier II cities, see if it's time to perk up your property portfolio.
By Rahul Sachitanand

COIMBATORE

INDORE

Want a piece of land in Mumbai or Bangalore? Well, prices have zoomed 100 per cent or even more in some cases, and things look too hot to handle (see Building A Bubble? elsewhere in the issue). That's no reason, though, to keep realty out of your portfolio. What you have to do is shift your sights and start looking at smaller cities and non-metros. Developers and realtors say land rates and rentals there are significantly lower and investors can buy prime real estate for a fraction of what they would pay in metros.

"Prime real estate in central Mysore, for example, costs as little as a fifth (per sq. ft) of what it does in Bangalore. As companies such as Infosys and Wipro set up base here, we expect significant growth over the next two years," says Jagdish Babu, CEO, Sankalp Group, a Mysore-based real estate firm.

As an investment vehicle, real estate has moved right to the top of the class. Over the past 12 months, returns from real estate have been around 30 per cent, competing closely with gold that gave 30-35 per cent and equity 40 per cent. Returns from safe instruments like bank fixed deposits, on the other hand, were between 4 and 6.5 per cent. It's no exaggeration to say that investing in real estate today could be one of the best ways to grow your money, provided you are comfortable with the higher risk and illiquid nature of the investment.

Gold prices may have peaked, say traders and exporters, and future growth is likely to be muted. Experts predict a 10-15 per cent returns on gold over the next 12 months. And though equity has been rocketing skywards, analysts expect the market to be range-bound between 10,000 and 11,000 going forward. This makes real estate a real contender for a place in your portfolio, especially since you are assured a regular income (from rentals) plus capital appreciation.

One of the risks in real estate investment is to buy in over-priced metros or over-valued suburbs, where prices are already at unrealistic levels. The chances are high that rates might either fall or plateau in the coming months. One way to neutralise this is to buy land outside the metros. According to realtors, real estate in smaller towns has appreciated significantly already, but there is still room for growth.

Of course, it will come with attendant problems. How will you monitor your investment? Are you going to be able to visit this city often enough to keep an eye on the tenants in your flat or your plot of land? Squatters are a very real problem, and if you are going to hire caretakers, make sure you factor that into your cost of investment. Most people usually buy land in towns where they already have friends or family, so that they can tap them for help. But if you can solve the logistics issues, opportunities are available aplenty.

CHANDIGARH

There is now enough internal demand in small towns—you don't have to wait indefinitely to find buyers

"Land prices in small towns like Coimbatore have gone up by at least 50 per cent," says C. Subba Reddy, CEO, Ceebros Property Management. High-potential areas in Coimbatore include Race Course, R.S. Puram, Peelamedu and Vadavalli. On Mysore's outskirts, Brigade Developers' new development, Brigade Splendour, on the Lalita Mahal Road, has apartments selling for around Rs 75 lakh. Mysore, which until 24 months ago was a city of independent and spacious bungalows, is transforming rapidly into the next big destination in Karnataka. "Infosys and Wipro have invested heavily in Mysore and several other home-grown companies, too, are beginning to expand here," says Sankalp's Babu. Mysore isn't alone in attracting attention from it biggies. Visakhapatnam will soon house a 50-acre Satyam campus and is already a base for global financial services giant HSBC's BPO (business process outsourcing) operations; TCS and Wipro have also been allotted land here. And evidently housing, retail and other developments follow close on the heels of such interest.

In fact, administrative bodies in sec B towns like Nagpur are trying to woo investors with overhauled civic set-ups. Says a senior executive with Persistent Systems, a leading provider of outsourced software product development services: "There has been a noticeable clean-up in the city, there are new concrete roads and encroachments have been removed." DLF Developers has set up a Rs 240-crore, 800,000-sq. ft it park in the city, and a company representative says: "Industries like it act as catalysts in these small towns and draw in large realtors."

Earlier, people hesitated to go to small towns due to a lack of connectivity, but this has improved significantly over the last few years, with toll roads, the spread of broadband and the expansion of large real estate developers into these towns. "If you buy land or an apartment in these towns, you don't have to wait indefinitely to find a buyer. There is now demand being generated internally to make this a viable investment," says Brigade's Jaishankar.

Realtors argue that the 30 per cent growth in it and the overall 8 per cent growth in the economy will lead to a real estate boom in these emerging towns a few years down the road. Most large companies are today talking about keeping several hundred employees in these locations. In Vizag, Satyam plans to hire some 5,000 people over the next few years, while Infosys has nearly 2,000 employees in Mysore. Real estate consultancy Jones Lang LaSalle estimates a demand for over 1 million sq. ft in Tier III towns over the next couple of years.

MYSORE

While real estate agents may be a dime a dozen in these cities (Nagpur reportedly has 300), investors need to be cautious when buying land here. "The growth of the real estate market and the presence of large developers has made investing in Bangalore much easier than in, say, Mysore or Mangalore," says Jaishankar. Despite the growing market in these towns, realtors recommend that people buy and hold land or an apartment for a few years before cashing out. "The growth curve is just beginning in these towns and it will take a few years before it peaks. So, while it may be a great time to buy property, investors need to be prepared to wait for at least a few years to make the most of the opportunity," points out Reddy.

NEWS ROUND-UP

Waiting In The Wings
Low on valuation, high on assets-PSU banks look to be the dark horses in this market.

Private sector banks may hog the limelight when it comes to services and hype, but the good old public sector ones still rule the credit advances market with a share of close to 80 per cent. With interest rates rising again, the focus is back on SMEs (small and medium enterprises) and non-metro retail markets, and public sector banks are better placed to tap this opportunity. "We are positive on the public sector bank universe as a whole due to its undervaluation, lower P-Es and higher returns on equity," says equity research firm Edelweiss Capital.

Punjab National Bank has the largest composition of low-cost deposits (48.5 per cent). Its focus on maintaining yields on its advances portfolio, its blend of SME, retail, corporate and agriculture clientele, and its high interest margins (3.5-4 per cent) make it look good. Says Pankaj Namdharani, Investment Analyst at SPA Securities: "PNB's asset quality is very good and we expect the price to touch Rs 600 over a period of two years."

Union Bank of India is trading at 1.25 times 2006-07 estimated book value. "This stock is undervalued, considering the 21-23 per cent return on equity (RoE)," says Edelweiss Capital. Analysts think the bank will be able to maintain its high RoEs even after its recent equity dilution.

Syndicate Bank is another dark horse that looks attractive in the short- to medium-term. Last week, it became the first public sector bank to launch a BPO to optimise surplus human resources. In the December quarter, the bank has returned to the black with a net profit of Rs 187.88 crore as against a loss of Rs 78.11 crore (mostly treasury loss) in the corresponding period the previous year. "The only looming danger is the rising loan book (advances) in the banking space, which could breed non-performing assets," says Asit Koticha, MD & CIO, ASK Raymond James. Meanwhile, an interim dividend of 15 per cent is on the way for the bank shareholders.

-Anand Adhikari

Cover All Or Else
Finding it tough to get your old car insured? Call IRDA.

Old wheels: Drive carefully for your own sake

Although IRDA (insurance regulatory development authority) has categorically announced that companies cannot refuse any vehicle owner third party insurance cover, the question remains: will the private sector toe the line? These companies are notorious for turning away any customer who even smells of risk; this not only discriminates against customers, but also burdens public sector insurers, who claim 150 per cent outgo in the third party segment.

Private insurance cover is easy when you first buy a vehicle because that's the low-risk stage. But after the second year, you will not get a renewal notice even if your insurance is comprehensive and not just third party cover. Never mind old vehicles, private insurers will not touch certain brands like Bajaj Pulsar, which they classify as 'youth' bikes and, thus, accident-prone. Owner-driven vehicles that have crossed five years cannot get cover, and beware if there is change of ownership; even if the vehicle is just two years old, you can't get insurance. And of course tractors, commercial vehicles, taxis and vintage cars are taboo. In fact, private companies have even stopped agent commissions for vehicles that are not new.

"While the public sector is also reluctant, it does not turn away customers," points out an agent. Of course, the public sector loads the premium i.e., levies the additional charges, but with no choice, customers have to make do. In fact, agents are forming networks to service clients. So, after the first year, the Royal Sundaram agent will pass the client on to his National Insurance friend for renewed cover.

Royal Sundaram Managing Director Antony Jacob says, however, that his company provides third party cover to all vehicles, including old ones. Says Jacob, "Royal Sundaram supports IRDA's initiative as it is a customer-oriented measure." Till other companies respond similarly, you can, for now, at least take your complaint to IRDA for redress. Since the onus of proof is on you, make sure you have some written communication to show.

-Nitya Varadarajan

House that: It pays to invest in service apartments

Just investing in a flat is so passe. Enter service apartments, those five-star places you can lease out to MNC bosses at sky-high rentals. If you're tempted by the concept, here's the latest twist in how this investment idea can be milked. Allied Investments and Housing, a Chennai-based developer building 60 such apartments in an upmarket part of town, is offering a new investment variant.

You buy the apartment outright from Allied Investments, but lease it right back to the company (self-occupation is not an option). The lease ensures you a minimum guaranteed return of 8-9 per cent on your investment, whether or not Allied succeeds in finding a tenant. While Allied takes on the onus of finding you a lessee, it also takes 30 per cent of the rental towards maintenance expenses like electricity, water, marketing fee, etc.

So, if you invest in the smallest apartment, a 650-ft studio for Rs 35 lakh, you are guaranteed about Rs 23,000 per month (8 per cent per annum), or if there's a tenant, you stand to get roughly Rs 2,000 per day minus maintenance, which works out to about Rs 42,000 per month (roughly 14 per cent). It's a long-term contract-you sign up for 10 years. After that, if you want out, you can either re-sell the flat to Allied Investments or to somebody else willing to buy the 'lease' option.

You can invest more-Rs 48 lakh for a 900-sq. ft flat, or even Rs 68 lakh for a 1,500-sq. ft one. Bookings and rentals will be transparent and posted online, says Mohammed Arshad, Director, Allied Investments, adding that his studio apartments are sold out. Talk of realty reigning.

-Nitya Varadarajan

SMARTBYTES

Won't Be Smooth Sailing

-Krishna Gopalan

Star Health's Jagannathan: Expect more

Move Over, Mediclaim

Low-fuss settlement, competitive premiums, old age concessions... can the country's first standalone medical insurance company offer all this? More, insists V. Jagannathan, Chairman, Star Health and Allied Insurance. With health insurance a loss-making portfolio, general insurers at present are giving customers quite a run-around. Star Health is a pure-play, cross-subsidisation won't be an issue, and you can expect more amenable services at reasonable rates. Star will launch five policies in end-April, and will soon expand its range, offering cover up to age 65 with no fuss. Its post-65 cover, however, will be loaded. Also, pre-existing conditions will be insured after three claim-free years. "A team of 50 in-house doctors will manage three-four claims per day," says Jagannathan. These doctors will also accompany customers during hospital admissions and discharges, so that's goodbye to inflated claims.

-Nitya Varadarajan

Heady Times, Heady Returns
Most mutual funds gave fantastic returns during the just-ended quarter.
A BT-MutualFundsIndia.com report.

It has been an amazing quarter-the sensex breached the 10k and the 11k marks, and also overtook the Dow Jones index. It touched 10k on February 6, 2006, and 11k just 29 days later. Unabated FII (foreign institutional investor) inflows, a good Budget and the strong economic outlook steered the Sensex from 9,390 in early January 2006 to 11,279 by the end of the quarter. The Sensex and the NSE Nifty have returned 20.11 per cent and 19.92 per cent, respectively, during this period. FIIs purchased Rs 17,954 crore worth of stocks, a 68 per cent increase over the previous quarter. Mutual funds (MFs), which were sellers of equity in January and February, turned buyers again in March, making net investments of Rs 2,624 crore by the end of the quarter.

The MF industry's assets under management (AUM) crossed Rs 2,00,000 crore, and stood at Rs 2,17,464.93 crore at the end of the quarter. Diversified funds delivered impressive returns (category average: 19.78 per cent), while ELSS (equity-linked savings schemes) and equity-oriented balanced schemes were the next best performers, giving average returns of 18 per cent and 15 per cent, respectively. The performance of the new funds (NFOs) launched in the quarter has also been good, with average three-month returns of 20.84 per cent.

Growth funds retained their charisma (see The Big Picture) and till end-February, accounted for assets of Rs 77,560 crore, 36 per cent of the total industry corpus. Liquid and income funds came second, with AUMs at Rs 72,868 and Rs 51,453 crore, respectively. Liquid and balanced funds reported 16 per cent and 2.3 per cent rise in corpus over the previous quarter, but gilt and debt funds were out of favour, showing negative growth of 8 per cent and 3.56 per cent, respectively.

NFOs: Nineteen schemes were launched this quarter in the growth category. In the open-ended category, there were five growth schemes and two ELSS, while the close-ended category saw 20 income and two equity schemes.

AUMs: The industry AUM for the quarter increased by Rs 18,608 crore, up from Rs 1,98,856 crore to Rs 2,17,464.93 crore. Standard Chartered MF witnessed the highest increase of 43 per cent, from Rs 8,252 crore to Rs 11,813 crore, while HSBC MF added 40 per cent. Benchmark MF reported the highest fall of 68.3 per cent from Rs 3,041.74 crore to Rs 961 crore and ING MF fell by Rs 901 crore. Reliance MF, with a Rs 16,859-crore corpus, might soon surpass Prudential ICICI MF, the largest private AMC (corpus: Rs 21,366 crore on February 2006).

Other trends: NFOs dominated the quarter. Reliance Equity, of course, created history with a record mobilisation of Rs 5,700 crore from 9.29 lakh investors. SBI Bluechip came next, collecting Rs 2,850 crore. If this pace continues, the industry is expected to surpass its previous year's collection of Rs 25,334 crore through new fund offers. This is a healthy sign for the capital market, which is currently dominated by FIIs.

Close-ended funds: In the debt category, FMPs (fixed maturity plans) continued to attract investors with their predictable returns and tax advantages. Budget 2006 proved friendly, with several measures calculated to put the zing back into the industry.

Scheme Returns: Diversified funds posted average returns of 19.78 per cent during the quarter, much higher than last quarter's returns of 8.45 per cent. Tata Infrastructure Fund topped the charts with returns of 32.99 per cent; the Sensex returned 20.02 per cent over the same period.

The corpus of ELSS funds surged, as investors scampered to make their tax-saving investments. These funds gave average returns of 18.01 per cent. Principal Tax Savings Fund was the topper here, giving 26.96 per cent while Principal Tax Saver came next with returns of 24.56 per cent.

Balanced funds: Can Balanced II (24.09 per cent) led the pack; the benchmark crisil Balanced Fund Index posted 10.67 per cent compared to the category average of 15.34 per cent. In fact, the leading balanced funds have delivered returns on par with the top ELSS schemes.

The average returns for liquid funds were 1.38 per cent; LICMF Liquid topped the charts here with returns of 1.60 per cent. The fund has an expense ratio of 0.5 per cent, which is lower than the category average. Prudential ICICI GFTP Fund emerged as the top performer among gilt funds with returns of 1.84 per cent. The category failed to generate good returns due to the lacklustre performance of the debt market during the quarter. The benchmark I-Sec Composite Index delivered returns close to 0.17 per cent.

Among monthly income plans (MIPs), LIC MIP topped with quarterly returns of 6.84 per cent, compared to the category average of 3.32 per cent.

The category average returns for income plans was a dismal 0.57 per cent; here, Chola Income Plus Fund returned 3.39 per cent. The benchmark CRISIL Composite Bond Fund Index registered a meagre 0.07 per cent returns for the same period. In the sector fund category, JM Basic Fund topped with returns of 31.15 per cent, while FMCG Funds gave a category average of 19.36 per cent; pharma gave 13 per cent and JM Healthcare Sector Fund topped the rankings with 13.18 per cent returns. Infotech Fund posted average returns of 12.25 per cent. Banking funds were the only dampener, delivering negative returns of 0.25 per cent.

Going Forward: Buoyed by a phenomenal rise in stock market indices, mutual funds have rewarded investors handsomely. Existing funds have given phenomenal returns while a plethora of new funds have garnered huge investments. The low penetration of mutual funds in India, the strong outlook on the economy and the opening up of newer investment avenues like commodities and gold mean the industry has great potential to break new ground. For investors, the buzzword continues to be caution. They should assess their risk-return profile carefully, ignore short-term slumps and take informed decisions. Investors with a long-term horizon should take a risk with equity but in a disciplined manner. All in all, an action-filled quarter.

Negative Numbers
Careful research into company fundamentals is doubly important in a rampant bull market.

Heard of tyche peripheral or goldcrest finance? neither had we, till we found that their prices had appreciated up to 117 per cent in less than three months, even as the companies posted steady losses.

While smart investors will not, hopefully, buy unknown stocks, what about frontline ones like Tata Steel or Zee Telefilms? Their financials are nothing to write home about, but their stock prices have been rising steadily. Says Rajesh Boghani, Dealer, Parag Parikh Securities: "The market is chasing momentum stocks, ones they expect will deliver."

Tata Steel's net profit has fallen 15 per cent (December 2005 quarter) and Zee Tele's 11 per cent, but the stock prices have surged 20 per cent and 44 per cent, respectively, in the past nine weeks. Shipping Corporation's price is also rising on expectations of freight rate hikes. The Tata Steel scrip is moving on talks of firming steel prices and further investments in infrastructure, and Zee Tele's on reports of ad rate hikes and implementation of CAS.

Time to buy? Step carefully, say analysts. While it's true that Tata Steel's financials have been impacted by externals like demand slowdown in China, there's little upside for the stock from a short- to medium-term perspective. And Zee Tele's, at around Rs 235, already discounts future earnings. Again, regarding Shipping Corporation, R. Sreesankar of IL&FS Investsmart warns the rate hike might not be sustainable as new vessels will enter the market.

The market obviously loves all stocks today, but that's no reason to abandon caution.

-Mahesh Nayak

Value-picker's Corner

ALOK INDUSTRIES; PRICE: RS 71

Integrated textiles player Alok Industries' revenues and net profits have grown at 28 per cent and 31 per cent (compounded annually), respectively, over the last four years. With a Rs 2,300-crore capex plan underway in home textiles and apparel; plus increased orders from clients like GAP, Wal-Mart and JC Penny; and with domestic retailing plans, revenues should zoom. The captive power plant under construction should reduce input costs and also cushion fluctuating cotton prices. IDBI Capital predicts profit growth at 38 per cent over the next three years, but the stock price might take time to respond, so buy for the long term. Over the next 15 months, analysts expect Alok to touch Rs 95.

-MN

Trend-spotting

Following the easing of norms in the Budget, Franklin Templeton has launched the first scheme investing in overseas securities, while UTI Mutual Fund has filed its Titan scheme to invest in Dow Jones scrips. However, the history of overseas investments is not too encouraging. Principal PNB's Global Opportunities Fund returned 17 per cent last year (29 per cent since its 2004 launch) compared to 66 per cent from diversified equity funds. Of course, PNB had investment restrictions, but the fact is the action is now in India. With foreign institutional investors pumping money into Indian equity, overseas investments diversify risk, but Indian securities are probably more lucrative. Plus, managing currency fluctuations will be a major concern for such funds.

-MN