April 25 was not a great day for the market. The Sensex tanked by 268 points. On that day, however, almost all realty stocks zoomed up. Is this symptomatic of the general trend in real estate stocks? Till recent times, these companies were hardly the movers and shakers of the market; indeed they were mostly small, regional players that nobody had heard much about. Suddenly, with the boom in real estate, these companies have come into their own. Every second real estate company wants to tap the public for funds, everybody is talking of rapid expansion plans, and the scrips are selling like hot cakes.

The last one year, in fact, has been extraordinarily good for these stocks (see Zipping Ahead). Consider this: Unitech's stock climbed from a 52-week low of Rs 320 to Rs 5,221 on April 26, with a corresponding increase of over 14 per cent in revenues and 49 per cent in gross profits (nine months ended December 31, 2005, against the previous year). Ansal Properties and Infrastructure's share was trading at a 52-week low of Rs 115 in May 2005 and moved up to Rs 1,048 on April 26. Revenues and gross profits jumped 91 per cent and 246 per cent, respectively, for the quarter ended December 31, 2005 (year-on-year).

Peninsula Land (formerly Morarjee Realties) has come out of the red with a 187 per cent jump in revenues. The scrip moved from Rs 119 in May 2005 to Rs 920 on April 26. Similarly, the Mahindra Gesco stock touched Rs 768 on April 26 against a 52-week low of Rs 112 last June, with revenues and gross profits climbing 18 and 21 per cent, respectively.

Clearly, the sector is in the middle of a phenomenal growth phase, and well into a strong valuation revision. "The entire real estate sector is getting re-rated," agrees Amitabh Chakraborty, Head (privileged client group research), BRIC Securities. Why now? A buoyant economy has meant lots of money swimming around in the system, a fair bit of which is going into land. Low interest rates have pushed up housing demand and generated huge shortages. Add to this the government's commitment to push infrastructure.

Traditionally, real estate stocks have not been considered kosher, a reputation that's now changing. "Earlier, real estate was a dirty word in the capital market and valuations were low because of bad accounting practices and cash dealings. Of late, some companies have shown that their books are clean and have thus achieved fair valuations," says Prithvi Haldea of Prime Database.

It's equally important, however, to check that the valuations are not going through the roof, especially as a bull market pushes up both good and bad stocks. However, Chakraborty says the higher valuations are a result of pure asset play coming into the Indian market. "P-Es (price-earnings ratios) have increased because of the underlying assets available with these companies," he says.

Not only this, analysts are upbeat about a further rise in valuations on the back of a booming economy. "If the economy has to grow, real estate and infrastructure, being integral parts of it, will also move in the same direction," says Amul Gogna, Executive Director, ICRA. Industry experts say economic growth at 8 per cent can push real estate and infrastructure growth by 20 per cent.

TO MARKET, TO MARKET

Parsvnath Developers: The IPO (amount undisclosed) is expected to open in May, when the company floats 33 million shares (face value: Rs 10), of which two lakh shares will be reserved for employees. Post-IPO, the promoters' 100 per cent stake will be diluted to 75 per cent. For the nine months ended December 31, 2005, revenues stood at Rs 410.8 crore and profit after tax at Rs 69.5 crore (up from Rs 306.8 crore and 18.4 crore in 2004-05). The company's asset base as on December 31, 2005, was valued at Rs 746 crore. Apart from residential and commercial properties, Parsvnath also plans to venture into IT parks and hotels. The company develops both premium and budget properties, and is present across 30 cities. DLF's K.P. Singh: lot to smile about DLF: Expected to open in June, the IPO will raise an estimated Rs 11,000 crore. DLF Chairman K.P. Singh and his family's 99.5 per cent stake will come down to about 85 per cent. DLF plans to consolidate its different entities into a single business renamed DLF Ltd. The total paid-up equity capital is about Rs 350 crore. Of the 1.75 billion shares (face value: Rs 2), 195 million are for public offer. Pre-IPO, 3.5 million shares will be up for allotment through employee stock options and 31 million for private placement. For 2005-06, DLF's revenues and profit before tax were around Rs 2,000 crore and Rs 700 crore, respectively. With projects spread over 18 cities, DLF has a land bank of about 300 million sq. ft, valued at more than Rs 1,00,000 crore. It works with residential, commercial, and retail property, and plans to enter hotels and SEZs (special economic zones). Ansal Properties and Infrastructure (APIL): A follow-up issue of about Rs 2,000 crore is on the cards. APIL has a paid-up equity share capital of Rs 17.5 crore, divided into 17.5 million shares (face value: Rs 10). The company's market cap as on April 26 was Rs 1,834.77 crore. APIL develops residential and commercial property mainly in Tier-II cities where, being a first mover, it manages to acquire land at competitive prices, according to APIL chairman Sushil Ansal.

This buoyancy is likely to remain as long as demand stays higher than supply of residential and commercial property. Given India's population, land shortage, and the rising number of the middle class, this looks probable. Says Rajiv Singh, Vice Chairman, DLF Group: "The next two-three years look bright for our industry."

There are some concerns. Says Haldea: "Realtors may benchmark themselves against peers with higher P-Es, without having similarly benchmarked management practices." Tracking promoter and performance record, thus, will assume huge importance for investors.

For the near future, most experts see the good news continuing. "I don't see a downside for two-three years except under two circumstances-either the Sensex slides or a real estate scam breaks out," says Haldea. Also, the spurt in property prices has seen developers' margins improving. "The EPS (earnings per share) has gone up because per sq. ft land rates have shot up," says Chakraborty.

If companies continue to deliver strong earnings, the stocks seem fairly valued. As with any investment, but doubly so in an emerging sector, do your due diligence. With the market proving extremely volatile in recent times, you could wait for the next fall before buying. Says Chakraborty: "If you invest in real estate stocks now, you won't regret it a year down the line."

The other good news for realty investors is the expected arrival of Real Estate Investment Trusts (REITs), which will let people park their funds with real estate companies against a piece of property, and buy and sell those in small units (like company shares). "REITs will bring in more liquidity, taking valuations even higher," predicts Chakraborty. Experts say that just as mutual funds encouraged people to enter the capital market, so too will REITs boost realty. "There is tremendous interest to invest in real estate, but entry barriers are very high. REITs should definitely come in," says DLF's Singh. Evidently, realty stocks are ready to go places.

Kiddie Cover
Are you buying a child policy as investment or insurance? If the former, is it really such a smart move?
By Nitya Varadarajan

RAVINDER KUMAR BHATIA, 37, and Indu, 28, run a boutique for designer clothes in Faridabad. Their son Ritvik is eight, and they have bought Aviva Life's Young Achiever policy, which will mature when he is 18 and ready for higher studies. Says Bhatia: "I wanted a policy that would give me a lump sum in time to fund Ritvik's college education." PREMIUM: Rs 10,000 p.a. (for 15 years) POLICY: Unit-linked SUM ASSURED: Rs 80,000 MATURITY AMOUNT: Rs 3 lakh

When Kishore and Rekha Naik had a baby girl six years ago, one of the first things they did, apart from going gaga with pink, was to buy her an insurance policy. Naik, who works in Stockholding Corporation, was very clear about where his priorities lay. "Making future financial provisions for my child was my aim," he says, as he describes the Child, Marriage and Education policy he bought from Life Insurance Corporation (LIC).

With the galloping cost of education, parents are afraid that they just might not have what it takes to support their children through a course in an ordinary college, leave alone one in a medical or engineering school, or in an university abroad. This is why parents these days are opting for child insurance cover to try and hedge against a huge future expense.

One thing is clear-most parents are buying child insurance not as risk cover, but as a safe investment. Which is how it should be-covering the child's life is absurd, since the raison d'etre of life insurance is to cover against estimated earnings loss, and that's hardly your concern, unless, of course, your kid is Macaulay Culkin and you live off his earnings.

Given this premise, it's interesting to see just how smart an investment move this really is. First, of course, there are several non-investment reasons to buy insurance. One, the cover is in your child's name for a specific purpose, which ensures that nobody can misuse the funds in case of your demise. Second, in case of a divorce, your child is provided for, regardless of legal tussles. Last, in case of an unforeseen event, you might dip into all your other savings and investments, but will be unable to touch your child's college fund (that is what this is, effectively).

Start Early

To make the most from a child's policy, there are some absolute must-dos. First, buy before the child turns one, and definitely before she turns five. After that, no returns from the insurer will be commensurate with your premium outgo. Another reason to buy early is because most child policies counter-insure the parent (beneficiary is child), and premiums rise proportionately with age. Next, always buy a rider for premium waivers, which ensures that if the parent dies, future premiums are waived while keeping the policy alive.

Another important factor is the policy term. Do you want the money when the child is 18 or 21? Some policies give you the final bonus payment when the child is 24 or 26. At that age, she is probably already working and does not need the money, while you should ideally be thinking more about your own retirement corpus.

However, the fact remains that no financial planner will ever advocate child policies as an investment product. Ideally, you should buy a pure term policy to cover risk; term covers have the lowest premiums, so you can invest the remainder in other avenues like mutual funds. If periodic payments are your concern, then why not an endowment or money-back policy? In fact, says Chandra Mehra, Marketing Manager, Kotak Mahindra Old Mutual Life: "Many of our clients go for single premium endowment policies, with flexibility in payback periods if desired. This achieves the same objective as a child policy." And if assured returns are what you want, then you could always consider Kisan Vikas Patras (KVP) or Public Provident Fund. However, unlike child insurance, KVP does not have any tax benefits. Even so, a little strategy might yield surprising rewards.

For the purpose of number crunching, take LIC's Komal Jeevan, among the most conservative child policies. Here, the child's life is covered, but only after the age of seven. In case of demise before that, you only get back premiums paid. If the demise is after this, you get the sum assured and bonuses/guarantees.

Let's take a Rs 1 lakh policy for a child younger than one year, for a premium-paying term of 18 years and a policy term of 26 years. At Rs 7,281 per annum (excluding riders), your total premium outgo will be Rs 1,31,058. The child will get Rs 20,000 each at age 18 and 20, and Rs 30,000 each at age 22 and 24. At age 26, she will get Rs 1,95,000 plus a bonus of about Rs 10,000. Therefore, the total amount received is Rs 3,05,000. This means your capital of Rs 1,31,058 has earned Rs 1,73,942.

Now, assume you collect Rs 14,600 (roughly two annual premiums), and invest it in Kisan Vikas Patra at age zero of your child. After two years, again invest Rs 14,600 in KVP, and repeat for a total of five tranches at two-year intervals. Since the capital doubles roughly every eight years, with regular re-investment, you can get Rs 58,400 each at ages 18, 20, 22, 24 and 26. At age 26, the total sum accrued will be Rs 2,92,000. After factoring in tax at the maximum rate of 30 per cent, actual earnings work out to Rs 1,31,400 on a total outgo of Rs 73,000 (14,600 x 5).

Comparatively, therefore, your Kisan Vikas Patra is a far more efficient earner than the child policy. As R. Ramakrishnan, former executive director, LIC, and member, Malhotra Commission, says: "Even post-tax, Kisan Vikas Patra offers better returns than the best life policies, but of course it misses out on the insurance front."

These days, insurance companies are coming out with variants to try and improve returns while ensuring risk cover and safety of capital. According to Vivek Khanna, Director (Marketing), Aviva Life, the company's Young Achiever is a unit-linked policy where not all profits from a bull market are put into the accumulated fund; an amount is kept aside and added on during a bad market year. "We do this for clients who don't like volatility in returns, and there is always growth," says Khanna. Shop around for the best deal, and be clear about what you expect from your policy before you sign up.

-additional reporting by Mahesh Nayak

NEWS ROUND-UP

The Silver Edge

You should have celebrated new year by gifting yourself a silver bar in January. Just four months down the line, your investment would have earned nearly 46 per cent, with prices having shot up from about Rs 13,000 to Rs 18,953 per kg. In fact, prices were at an all-time high of Rs 21,940 per kg before sliding.

According to experts, a global demand-supply mismatch is behind the price rise. This is primarily due to Barclay's proposed Silver ETF (exchange-traded fund), which will require Barclay's global investors to buy up to 130 million ounces of silver (approximately 4,000 tonnes) prior to the ETF being approved. Industrial demand has also risen-almost 9 per cent in one year-driving prices up.

The overheated market is now in correction mode. A little more decline is expected, but once present contracts expire, you could look at buying in, says Sunil Ramrakhiyani, Head of Commodity, IL&FS. There is a degree of volatility as well, with 6-7 per cent declines some days. Prices fell sharply on April 21, giving investors a shock. Says Suresh Nair, Vice-President, Kotak Commodity: "The market rallied too fast. The cooling off was expected."

However, the long-term trend is bullish, so see if you can use future corrections as well to invest. Analysts expect returns of 30 per cent in coming months, with prices expected to bounce back to Rs 25,000 per kg levels. "Don't expect wonders though," says Ramrakhiyani. "It will take six to 12 months to touch these levels."

As a serious investment, the best way to buy silver is in the futures markets, says Nair. The impact cost is higher if you buy it physically. Buying a futures contract lets you buy more for lesser outgoes (you pay only margin money). Only hitch: you have to pay the margin money if the metal slips below purchase price.

-Mahesh Nayak

Back To The Future

India's F&O (futures and options) market has indeed come of age, with NSE (National Stock Exchange) today the world's largest in single stock futures. In January, it traded seven million-plus contracts beating nearest rival Euronext.life by almost six times. NSE also ranks number three in global index futures.

F&O trading started on NSE in 2001 and has more than doubled in the last three years. Remarkably, though, the share of single stock futures (SSF) trading alone has grown from 50 per cent since inception to almost 67 per cent last month. In fact, trades rose 99.73 per cent (from Rs 23,69,450 crore to Rs 47,32,507 crore) between September 2005 and March 2006. Says Siddarth Bhamre, Derivatives Analyst, Angel Broking: "Open interest (the number of outstanding contracts) is rising in the market and this is leading to greater activity in this segment."

While F&O market volumes are understandably multiples of the cash market, a comparison of the past six months is remarkable-in September 2005, the cash segment's turnover was Rs 1,45,393 crore compared to F&O's of Rs 3,99,756 crore.

The SSF segment has undoubtedly fuelled the surge in futures trading, reflecting not only the general optimism of the market, but also increasing market maturity. Interestingly, retail investors' share of this business is a staggering 63 per cent, unlike the West where it is largely an institutional play. And today, the older carry-forward trading has been replaced by robust risk-control measures, closely monitored by SEBI (Securities and Exchange Board of India) and the exchanges.

However, don't imagine this means wide retail participation. Actually, some 200 NSE members dominate the market and of these the top 25 members have consistently controlled almost 40 per cent of futures trades. Says Bhamre: "The Indian market is in the process of getting mature and liquidity is increasing. As this happens, the market should start becoming more spread out."

-Ahona Ghosh

Worst CAS Scenario
Unless suitably amended, CAS in its present form is extremely consumer unfriendly.

CAS: Customer friendly or not...

Who wants CAS or conditional access system? Consumers don't want it, broadcasters are opposing it, and most cable operators are also against it. The Delhi High Court has ruled that CAS (now in force in Chennai only) be implemented across other metros. For some reason, CAS is being hailed as customer friendly. In its present form, it is anything but that. Says Bijon Misra, CEO, Consumer Voice: "CAS will only add to the consumers monthly bill."

The present proposal has consumers paying Rs 75 and taxes for 30 free-to-air channels. They pay extra for pay channels. Broadcasters have not yet announced a la carte prices for channels, meaning consumers can't buy individual channels but have to buy the entire bouquet. This defeats the purpose of CAS, which was to give consumers choice. "Today, one gets all channels for Rs 100-400 a month, depending on the locality one stays in. Under CAS, you will have to pay at least Rs 300 for a basic bouquet of all mainstream channels," says Misra. Consumers also have to pay for the STB (set-top box; Rs 2,000-4,000) and a monthly maintenance fee. In Chennai, for instance, consumers are not being allowed to pay a refundable deposit on STBs, even though STBs don't work across cities/localities.

The consolation: since broadcasters and cable operators have not been able to sort out their issues, CAS is unlikely to be implemented this year at least. "By next year, direct-to-home (DTH) services will be readily available and CAS will automatically be rendered pointless," says a top broadcaster. Consumers, rest assured.

-Archna Shukla

SMARTBYTES

Rates Rule

Here's one more option for risk-averse investors on the lookout for short-term investment avenues-the 36-year-old south-based co-operative Repco Bank. It is offering interest rates that are 50 basis points to 1 percentage point higher than public sector banks. Repco's 1-3 year deposit earns 6.75 per cent against the 6.25-6.50 per cent of PSU banks (see box) and its above-three year deposits earn 7.5 per cent. The bank, which is registered as a co-operative society, has the Indian Government holding a 47 per cent stake and the state governments of Kerala, Tamil Nadu, Andhra Pradesh, and Karnataka the rest. However, factor in the main risk associated with Repco-the recent history of several co-operative banks going bust.

-Anand Adhikari

Riding The IPO Wave

Impressive IPO (initial public offering) returns in the past two years have prompted Standard Chartered Mutual Fund's latest Enterprise Equity Fund. The three-year, close-ended fund, primarily investing in equity IPOs, hopes to gain from post-listing premiums. Says Naval Bir Kumar, Managing Director, Standard Chartered AMC: "We think more than 250 companies are slated for listing in the next two-three years." Interestingly, the fund won't invest in issues below Rs 10-20 crore, which eliminates penny stocks. Chief concerns: the primary market looks good now, but will suffer when sentiments turn bearish, impacting the fund's returns. Second, the fund will miss out on long-term gains post listing, as it is mandated to offload stocks (irrespective of gain or loss) 15-20 days after listing. Says Hemant Rustagi, CEO, Wiseinvest: "The scheme is bad for long-term investors." This one's fine for short-term players who want to ride the IPO wave.

-Mahesh Nayak

INTERVIEW: Ashu Suyash, Country Head, Fidelity International
"Over Time, Equity Beats All Asset Classes"

"We don't believe in launching a slew of funds; we believe in steady growth and good returns.

It's the world's largest independent asset management company, with over $1.2 trillion (Rs 54,00,000 crore) assets under management and a clientele of over 20 million. In an interview with Nitya Varadarajan, Ashu Suyash, Country Head, Fidelity International, says: "We don't believe in launching a slew of funds; we believe in steady growth and good returns." Excerpts:

What would you label as Fidelity's special strength?

Our in-house research; investments are undertaken only after we meet companies, check out their businesses, and are satisfied on various parameters. We also have a strong global research base, which maps out trends in India versus other markets, which we leverage here.

How are you playing the Indian market?

We feel this market is nascent and has tremendous potential. Compared to others, we tend to have fewer funds. We would first like to complete our basic portfolio. Today, we have about Rs 3,600 crore assets under management, and an investor base of 500,000. The budget announced that domestic funds could go offshore; once the final guidelines come in, we will be well positioned for this, as we have the best global fund range.

Isn't retail participation in mutual funds still poor?

People have been conservative and are just beginning to look beyond conservative avenues of savings, like fixed deposits. There are just 2.5 lakh unit holders today-awareness has to grow before mutual funds become more popular at the retail level. We undertake wide intermediary education even before a fund is launched, so that people understand asset classes and how long-term investors can gain.

Fidelity is said to actively discourage fund churning. Tell us how you ensure this?

We know how excessive trading in a fund can hurt other investors, so we introduced the exit load. We turn down applicants if we find they are market timers, or if the offer document is not filled properly, raising suspicions on other grounds like money laundering. Our Know Your Customer norms are more stringent than market practice. SEBI (Securities and Exchange Board of India) has only recently disallowed new fund expenses being amortised over five years. But at Fidelity, we have always kept an entry load of 2.25 per cent; all other costs are borne by the AMC (asset management company).

What kinds of schemes can investors expect?

We have been the first to introduce the Special Situation Fund and also the Multi-Manager Cash Fund. Fidelity Equity Fund (Growth) has delivered 78.50 per cent returns since inception, outperforming the benchmark BSE (Bombay Stock Exchange) 200 by 15.12 per cent. We also launched the Fidelity Tax Advantage Fund.

What makes your Special Situation Fund different from other contra funds?

Every contrarian pick makes for a special situation, but contra funds are just a sub-set of special situations. Our investing mandate is far wider. For instance, we don't stop with turnarounds in companies, or those with under-appreciated growth, or even out-of-favour stocks. We could also look at companies that sell at significant discounts to assets, or those with a unique product. Other picks may be potential candidates for mergers and acquisitions, or those where the management is restructuring business.

Finally, how should investors react to the market today?

Valuations are at the high end of historical ranges. However, the underlying long-term trends remain positive as key drivers stay. Investors must remember that equities are for long-term investing and that over time equity outperforms all other asset classes. To beat market volatility, investors can buy systematic investment plans (sips), which enable them to take advantage of cost averaging by regular investing.

Latest Hits
They are not brand new, but these funds are winning at the box office.
By Anand adhikari

You would like the returns of equity without the risk. So would we all. Unfortunately, that's not possible in this less-than-perfect world. What's next best? To try and find the best possible entries into an overheated market. Every investment advisor will tell you that playing the market is all about timing and hedging your bets. But there's nothing more difficult-you can never predict when the market is going to peak or bottom out. Even at a Sensex level of 12k, there are enough voices telling you there's still some steam left.

For the average investor, the safest way to get into equity and avoid the whole issue of timing is via mutual funds. In recent times, the biggest attraction in the fund universe has been glamorous new fund offerings or NFOs, which have managed to garner huge amounts. But is there a safer bet?

Yes, say fund managers, pointing to an interesting variant on the theme. Investors should not look at NFOs themselves but at recently listed NFOs that tapped the market when Dalal Street was below 10k. Says K.K. Mital of Escorts Asset Management Company, "Any newly listed NFO that has fully invested its corpus offers potential for returns, going forward." Whereas, as Mital points out, any NFO today will take time to invest its entire money into the market. In addition, there is the additional cost of entry loads that comes with NFO investments.

Unlike IPOs (initial public offerings), mutual fund schemes are listed exactly at par or below par. And when the portfolio value goes up (say after three or six months), the NAV (net asset value) also inches up, which prompts many investors to immediately exit the scheme. This promptly lowers the NAV. "NAVs of newly listed NFOs are always under pressure as short-term investors get out soon after listing," says the CEO of a private sector mutual fund.

And that's where your opportunity lies. Always study the NAV pattern, look for good schemes among recently listed NFOs and see how you can benefit from timing your entry into the market at the below-12k level (see table). Newly listed schemes are less risky because they have some track record, a readymade portfolio, and investments have already been locked in at below 12k levels. Take care only to try and buy in lots, so that you can exploit the law of averages, and go for a fund house with proven credentials.

There is another route to taking exposures in existing schemes, and that is through a fund of funds, which is a vehicle that invests only in existing schemes. In fact, a fund of funds is an ideal instrument if you wish to invest large sums of money into existing schemes. For instance, if you plan to invest Rs 1 lakh in five existing schemes, it makes sense to invest the entire sum in one fund of funds, maybe two, which will not only reduce your entry cost but also offer you a much larger diversification.

Year Of The Tortoise
Old economy stalwarts like capital goods and consumer durables outpaced the zippy IT and pharma sectors.
By Mahesh Nayak

The just ended financial year has been significant in more ways than one. Not only did the Sensex touch record heights, it did so on the back of some sturdy performance from old economy companies. In fact, contrary to expectations, the hot new sectors like infotech and banking looked a bit frayed at the edges through the year.

Expectations of the country's economic boom continuing unabated helped old economy companies in areas like engineering, construction and infrastructure. The capital goods sector stayed strong on sustained buying in engineering and construction stocks, with the index gaining 156 per cent to touch 8,170. Stocks like BHEL (Bharat Heavy Electricals Ltd), Siemens, BEML (Bharat Earth Movers Ltd), Gammon India, L&T (Larsen & Toubro), Praj Industries and Crompton Greaves were the major gainers, with stock prices doubling during the year. "Increasing capex and spending on infrastructure development augur well for capital goods; the area is seeing continuous investor interest," says R. Sreesankar, Head (Research), IL&FS Investsmart. In fact, according to Shriram Iyer, Head (Research), Edelweiss Securities, even though sectoral calls are difficult at current market levels, the capital goods sector belies this (even now).

Renewed buying also helped the FMCG or fast moving consumer goods (110 per cent) and Consumer Durables (115 per cent) indices to post gains, outperforming the benchmark BSE (Bombay Stock Exchange) Sensex (74 per cent). "Price rises and increased volumes lifted the FMCG sector," says Iyer. On the other hand, a strong sector like banking suffered from tight liquidity, falling deposits, and rising interest rates, which impacted banks' other income. The sector posted the worst performance among indices at 37 per cent.

Another shock came from pharma, with large companies like Ranbaxy Labs and Biocon pulling down the overall performance of the Healthcare index. The index's 51 per cent gain came from select large- and mid-caps like Cipla, Aurobindo Pharma, GlaxoSmithKline, Divi's Labs, Lupin, and Sun Pharma. In the past year, these stocks grew investor wealth by 80-160 per cent.

Again, the 115 per cent gain in the Consumer Durables index came mostly from select stocks and not overall sector performance. Titan Industries rose 279 per cent following the surge in gold prices, while Blue Star rose 180 per cent and Videocon Industries 79 per cent. Says Sreesankar: "The lack of pricing power has been the key reason for the comparative underperformance of other consumer durable companies."

Yesteryear's star it Index returned only 49 per cent, and that was driven by financial technology companies. Leading lights like Infosys (32 per cent), TCS (34 per cent), Patni Computers (23 per cent), and HCL Infosystems (14 per cent) gave a subdued show.

Although companies like Bharti Tele-Ventures, Television Eighteen, Adlabs, and VSNL (Videsh Sanchar Nigam Ltd) gave excellent returns, the effort was not enough to push the Tech Index above the benchmark. Say analysts: "The relative underformance of it and tech was because interest shifted towards old economy and infrastructure companies."

Overall, the performance of most sectors was satisfactory but the year ahead spells caution. Says Rushabh Sheth, Director, Karma Capital: "Re-rating across all sectors in the Indian equity market is over. From here, inflows will slow down, as concerns over oil and commodity prices put pressure on input costs. Corporate performances will be the reality check for most companies and their stock valuations."

While some sectors like banking might turn surprise aces, overall, sector-wise decisions are not going to be easy in coming months. Your best bet would be to stick to bottom-up stock-picking.

Value-picker's Corner

PETRONET LNG; PRICE: RS 59

As natural gas company Petronet LNG expands its Dahej terminal from 5 mtpa (million tonnes per annum) to 12.5 mtpa, its net profits for the quarter ended December 31, 2005 grew to Rs 49.6 crore, from a loss of Rs 0.4 crore in the previous corresponding quarter. Meanwhile, net sales nearly doubled to Rs 1,030 crore. Existing lenders to the Dahej project have expressed confidence in the company, agreeing to extend an additional Rs 1,230 crore to it. The expected boom in the LNG sector and Petronet's access to funds for expansion is making analysts take a second look at this stock. Brics Securities recommends a buy, with a target price of Rs 90 per share.

-Mahesh Nayak

Trend-spotting

-Anand Adhikari