WINNING STORKES: THINK DIFFERENT:

The markets have gone for a correction yesterday and is down today (The Sensex is now down 488 points). The natural question arises what to do now.....should we buy or sell out and exit. I think it is better that we go for the first option---that is buy and reap good gains in the August--October rally and then again some gains in November---February rally. The stocks are available at very cheap valuations and deserve to be bought at the current CMP. The historical P/E of Sensex is also looking attractive at the present moment.

Hence, I think one should utilise these small corrections in the markets or these meaningless correction in the markets to buy good stocks at reasonable valuations; it is because of the fact that the markets are fundamentally looking wonderful. Whatever I have said on chartical formations can change suddenly if the government starts announcing reform measures and hence do not depend too much on the charts---they are known to cause terrible harm to the financial health of investors.. The new conglomerate under the stewardship of Dr.Manmohan Singh could go for quick Reforms Process, which earlier got jolted due to the Left. Now with these “Kachara Group” out of the government I think we are in for better times going forward.

The following are the points needs to be looked at more closely at this point of time:

• The inflation could come down further in the coming weeks due to the fall in Crude Oil prices and also due to good monsoon in some parts of India. This will not only be positive for the markets but will also bring relief to the common man or the man on the streets. The crude oil price are going now where and is expected to further crash to $110 per barrel. One should remember that this is the Summer Driving season in the US and if this season is not able to lift the Crude Prices, then be rest assured that the Crude Oil is expected to correct dramatically further and may even go below $100 in the next couple of months. In the Summer Driving season, the demand for crude maximises.
• The government could go for reforms or start the reform process in a new way after the Left stalled any efforts in this direction earlier. These reform processes could dramatically change the fundamentals of the markets.The FM is already speaking of a 8%--9% growth in this Fiscal and hence I do not think we should worry too much as this value of the Sensex.
• The Indian Markets have corrected more than most of its Asian Peers except China and hence a bounce could be expected any time. I think the time has come for the markets (or Nifty) to move above 4500 mark and gradually shift towards 4800 mark, before going for another round of correction. We will now progressively move up in the next few trading sessions.
• The banks could be best bets at this time because, of the fact that the we could have a softer interest rate scenario/regime going forward if the inflation cools down further. A CRR hike of 25 basis point (if any) is already factored in the current market valuations. Hence banks could now fall in the best buy category. I have already recommended Axis Bank, Yes Bank, DCB, Indus Ind Bank, Vijaya Bank and SBI.
• With the Lok Sabha Elections round the corner the government of India could roll out populist measures in the next few months, which would be good for the markets.
• Since we are more or less a domestic driven economy we are different from South Korean or Japanese Economies. We are not export dependent like Japan or South Korea and hence any slowdown in the US or Europe will have minium effect on our fundaments. Yesterday the US markets fell due to some trivial reasons. The housing sector is already in a downturn and there is nothing new in it and hence the US markets should not have gone down on this reason. I think the US markets were looking for an opportunity for a correction after long rally put the weekly Oscillators in the slightly overbought territory.
• The Indo US Nuclear Civil and Nuclear Co-operation will open new vistas for both the US and India. India is looking for huge orders from the US companies. Hence we should look into the companies who are into defence sector or some companies which could be benefited immensely from this deal. The infrastructure companies are expected to do well going forward. I have already recommended Punj Lloyd and Reliance Industrial Infrastructure Ltd. The Reliance Industries Ltd came out with good set of numbers whatever the cynics try to make me understand. In such a difficult situation if the numbers are so good then we can imagine how the company will perform when the situation will improve in the next few months.

Hence in this situation, I think it is the best time to buy good scrips at reasonable valutions to reap good gains going forward. I am again Reiterating all to buy Reliance Group of Companies, due to their proximity to Congress and Samajbadi Party (SP).