Expect higher volatility
2/9/2012 9:36 PM Thursday
Investors across the country have been surprised by the sustained rally, but are equally anxious to know if this rally would extend or if it would come to an abrupt halt. What is more disconcerting is that some of the counters have spurt smartly after remaining market underperformers in the last one year or so. Take the case of Reliance Industries, which has been a market underperformer since the beginning of 2008. Reliance was at Rs 1423 (adjusted price) in January 2008 and today it is at Rs 850, down by 40 per cent, while during the same period, the Sensex and Nifty are down by 13 per cent each. This is despite the fact that Reliance is up by 21 per cent since the beginning of 2012. Will this outperformance on a year-to-date basis get carried forward for the rest of the year?This kind of share price movement has been seen not only in Reliance Industries, but also with other prominent counters like State Bank of India, Larsen & Toubro, Reliance Communications, Pantaloon Retail, Suzlon and Educomp Solutions. All of these are ‘A’ group companies, each having a wide following amongst investors. The total shareholders of these seven companies are as many as 86 lakh investors spread across the country. Hence, our research team decided to guide the investing community on what needs to be done with these counters now.
One common feature that runs through the seven selected companies, apart from the fact that they are ‘A’ group counters, is that they have underperformed in a big way in the last one year or so but have done extremely well since the beginning of 2012. Also, all these companies have a wide following among retail as well as institutional investors. Our team of analysts has given a view on each of the companies keeping in mind a one year perspective, and I am sure that readers would find this useful to keep a tab on their portfolio. Our cover story on page number 61 brings to you our view on these companies.
The next one month is very crucial for the market for a couple of reasons. First, the results of the state assembly elections would be known by then. This is very important for the markets, as a poor show by the Congress would mean that reforms would be a casualty. Also, the Union Budget 2012 would be presented on 16th March, 2012. The Budget would give a sense of how the government intends to put the economy back on the growth path, as not only are the GDP numbers slipping, but the fiscal deficit is worsening too. This makes India vulnerable to global shocks (Read our take on fiscal deficit on page number 24). My understanding is that the market situation would be more volatile in the next one month due to a series of important news flows, and hence calls for extra caution from investors.
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