WINNING STROKES: THINK DIFFERENT:

I have earlier talked of a level of 6500 on the Sensex as the worst case scenario, considering a P/E of around 6 (six) while comparing it to the Great Depression in early 20th Century.

My recent reasoning is also based on the fact that many banks today have a shockingly large exposure to leveraged derivatives such as futures, options and even more exotic instruments.

The most dangerous part is that underlying value of assets represented by such financial derivatives at quite a few big banks is greater than the total value of all their deposits. The estimated representative value of all derivatives in the world today is around $90 trillion, over half of which is held by U.S. banks...speculating in leveraged derivatives poses one of the greatest risks to banks that have succumbed to the lure. Leverage almost always causes massive losses eventually because of the psychological stress that owning them induces.

THE QUESTION REMAINS WHETHER ALL THESE FACTORS ARE ALREADY BUILT IN THE CURRENT VALUE OF SENSEX OR NOT!!!

It is because the Stock Markets world-wide discount such happenings well in advance. Those who are investing since a decade should have noted that in the last bear phase of 2000--2003, the Sensex started to move up, the day US attacked the Iraq. Moreover, the Indian Banking industry is pretty safe due to Strict Regulations. Hence India is more or less miles apart from any such catastrophe.

Therefore, the moot question is: Is it so easy to reach that level of 6500 in the Present Circumstances, even though the chances/possibilities, look a little remote (80:20)?? These are to be discussed with the Paid Groups in the Sunday Report.

So what should an average investor do with his/her portfolio at present.....Sell out all the stocks for better valuations ahead or keep holding the scrip in the Portfolio or Average out select counters or go for bottom fishing or.............???

Another thing which has come to my notice, that the media is ripe with rumours that I have turned a bear from a "raging bull" and is up to make a killing by shorting.

Actually even the clients of my PMS do not know what I do with my Individual Portfolio for the Short Term. Like Rakesh Bhai I maintain utmost secrecy in all my account. To make things a bit complex I also do not trade with a Single Brokerage House. Hence at a given point of time no one (including my assistants and family members) never know what scrips I am holding or what is the correct size of my portfolio. Hence I would urge you not to give ears to what the general speculation is there in the markets about my portfolio. Just one thing which I want to point out is that: I have made a killing within a couple of years of any major Crash of the markets. I had earlier mentioned in this blog a number of times that I purchased Alphageo Ltd at Rs.5 (five) in 2003-04, only to sell some of the shares at Rs.350 in 2006 and the remaining in 2007. Similarly, I purchased Aban Llloyd Ltd at Rs.145 during the Iraq--US was and made a killing when the share price of oil companies shot up post war. Same is the case of Selan Exploration Technologies Ltd (bought at Rs.72 in 2006 and sold at Rs.280 in 2008) and many such scrips including my historic buying of Hazoor Media at Rs.7 and Radhe Developers Ltd at Rs.7.5 during the bear phase or when no one was looking at them.

Only remember that stocks generally have a tendency to move up in the future and hence I have seen very few people in my life who have better in good companies like State Bank of India, Infosys Technologies Ltd or Wipro during the lean phase and lost their deposits.

Making money in the stock market does not require too much brain as is made out to be by some Vested Interest Groups---much easier than the Graduate Programmes of any Engineering Branch. As mentioned by the noted analysts, Mr. Siddhartha Chatterjee (of Kolkata) in a number of his programmes on Television [It seems neither NDTV Profit or CNBC TV18 or Zee Business have ever heard his name---it is unfortunate. It shows how the New Delhi or Bombay based News Channels give coverage to the Eastern Part of India. I was also thinking on the same lines when yesterday, I watching a Nonsense talk show on Raj Thakrey, by CNBC TV18, hoisted by Karan Thapar. I think Mr.Tapar has run out of steam as far as his choice of topics are concencerned, when he thought to chose a Cheap Subject on a non-entity named Raj Thakrey. I would only say that, the way some political parties are trying to rake up "Bhoopi Putra issue", is DANGEROUS AND IS A SURE SHOT DOSE TO BREAK OUR COUNTRY INTO PARTS.....My experience in North East attests to my views---India is one and there should not be fanning of any such Dangerous issues which could hit the integrity of India.....What will happen if the same issue is raked up in West Bengal, Hyderabad, Chennai, Bangalore, or Jaipur or...........I liked the comments by the eminent lawyer Kapil Sibal on this issue................]

According to Mr.Chatterjee (CA and CS): Buy when you think the price of a share is less (or consolidates at a price) and sell when the price is above your buy price. Simple isn't it..??!!

The things picked up during distress selling are generally considered to be best bargains. Hence my suggestions would be not to go by any blanket rule but applying ones brain and reasoning for any buying or selling.......

Hence if you believe in the media/market speculation and sell ur holdings at the price of water, you will be responsible for your actions and should never blame me.

Defence is the best form of offence

Defence is the best form of offence. Yes, you are reading it right! With the Indian equity markets on a downhill, investors are left with no other option but to be on the defensive. And why not?

Defensive sector stocks are the safest place to park your funds in these volatile times. The growth prospects appear bright and the consumer discretionary sector has been least impacted by the current slowdown. History is also on its side.

Consumer stocks have always performed better when the times have been uncertain and journey tough. Here’s an insight into why it makes sense to invest in consumer stocks, and how they can help you sail through the rough waters ahead.

RECESSION-PROOF: For the uninitiated, defensive stocks are essentially companies that tend to perform steady under complex economic conditions. The stocks are usually from sectors such as FMCG and healthcare that are considered to be less risky than sectors such as capital goods, banking and automobile.

Elaborates Mukesh Gupta, director of Wealthcare Securities: “These stocks generally belong to diverse sectors and are difficult to define. They can be divided on the basis of products into personal care, processed food and household products. Inherently, these stocks are less volatile, don’t get influenced considerably by short-term market trends and their prices fall less in the event of a downturn.”

Take for instance, the performance of consumer stocks such as Hindustan Unilever, Colgate-Palmolive (India), Nestle India and Sun Pharmaceutical Industries in the last three months. These stocks have all delivered single or double digit three-month returns on the BSE, even as stocks from other sectors are offering negative or little returns during the said period.

Analysts advise that investors should typically increase their exposure to consumer stocks during bear attack, since these stocks tend to underperform during a bull run. Currently, most of the consumer stocks are quoting at one-year lows.

PROMISING PROSPECTS: The numbers are pretty encouraging. The FMCG market has been growing more than 10% growth since 2005 and is expected to grow at a compounded annual growth rate of 10-12 % over the next few years. The penetration of many product categories in the segment is still low, and thus, the growth potential of the FMCG industry looks promising.

“Growth of agricultural income year-on-year ensures bright prospects for penetration into the rural areas as that segment has been by far the least penetrated. With a constant increase in the per capita income over the last five years, the Indian consumer is headed for a better life-style. Since the per capita income in India is much lower than the other developed world, the potential for growth is very high,” feels Gupta.

INVESTMENT HORIZON: According to financial planners, investors should ideally allocate around 20% of their core portfolio in consumer discretionary stocks in current times. The portfolio allocation, however, is subject to change depending on the market dynamics. “Considering the bloodbath has punished sectors across the board, consumer stocks have provided a safe haven for investors in the last few months,” says Anil Advani, head of research, SBICAP Securities.

This is one sector, feel analysts, which will not disappoint in major turbulence. “CNX FMCG index has given an average return of around 18% in the last five years. You can expect a return of 15-18% in this sector.

However, keeping in mind the current scenario, when investing in equity, you should have a minimum investment horizon of three to five years,” says Gupta. The writing is on the wall now — the best offence is a good defence right now.