Thursday, June 11, 2009

Structural Shift in Momentum


Change of Baton

1) From what was clearly a tapered rally from expensive Large-caps to under-valued Mid-caps, is now turning its head from Mid-caps back to the Large-caps. There was no possibility of the benchmark indices moving higher without the support & participation of the leading heavy weight counters.

2) The expensive heavy weight stocks are back in the vogue what with an all-important event in the form of Union Budget not so far away. However, mid-caps are not the absolutely forgotten lot. There is still a bullish tend prevailing amongst the mid-caps but in ones which are left behind in the race of mid-cap momentum or the ones that stand to benefit majorly from the Budget announcements.


Passing the Parcel

This shows to a great extent that mid-caps, which had under-performed big time during the last 3 months to their larger counterparts, are no more in 'Comfort Zone'. Speaking comparatively, even large-caps are no less cheap than their smaller counterparts. But, perhaps, they can support the ongoing phase of euphoria more strongly on the base of their superior fundamentals.

It is difficult to predict the top of this 'Mini' bull phase of last 3 months. But, we can keep tracking the signs the markets are providing. Like, for example, we saw Large-caps bloom in the initial part of the rally from Sensex 8000 to 10000 levels. Later, from Sensex 10000 to 12000 levels, we got to witness large-caps being valued in the 'Fair Valuations' Zone. At the same time, mid-caps which had under-performed from Sensex 8000 to 10000 levels , started catching in the later part of the Sensex journey from 10000 to 12000 levels.


In the later part of the excess euphoria from Sensex 12000 to 15000 levels, based on combined effects of excess global liquidity & re-rated fundamentals of India on the back of Political stability and likely Reform movements, we witnessed large-caps attaining euphoric valuations which needed support on the base of 'Forward Earnings' estimates. Mid-caps & Small-caps rised vertically as if there is no tomorrow.

Now, we're witnessing that the baton is being passed on from mid-caps to Large-cap as benchmark indices are up to test newer highs. These are times of euphoria where 'Greed' factor takes the front seat and if investors do not exercise caution, they may be in for some sort of pain when markets witness even a mild correction in the rally. Investors should adhere to patience and not make fresh purchases until there is a meltdown of the over-exuberance in the short to medium term horizon. Though, they can ride the momentum on the back of their already invested portfolio.

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12 comments:

Anonymous said...

GOOD EXPLIANATION BULLS.

MOHIT

DARK KNIGHT ABHAY said...

nice post..

i have FUTURE CAP HOLDING(MIDCAP) AT 148 BOUGHT AT 11000 LEVELS DURING THE RALLY.
THE STOCK TOUCHED 328 AND NOW ITS NEAR 278.
IT;S A SHORT TERM BUY..

WHAT DO U SAY ..

I HAVE SELIING THE STOCK ON EVEERY GAIN...

Viral Rajnikant Dholakia said...

Dear Abhay,

Future Cap is a relatively new company on the block. The only 'plus' point about the company is that it is managed by well-known Kishore Biyani who is behind the success of Retail giant Pantaloon Retail.

Since you had bought the stock from short-term perspective, I would recommend you to book majority of the gains in this counter and shift to Infrastructure related finance stocks like PFC, IDFC, REC, etc.

Though, from valuations perspective IDFC is relatively expensive around current levels; but, may be, the momentum in this counter is expected to sustain until Budget a few weeks from now.

Antriksh Patel said...

Hi Viral,

At what price should on enter Everonn Systems?

Thanks,

Antriksh Patel

Viral Rajnikant Dholakia said...

Dear Antriksh,

The stock price of Everonn Systems has appreciated 3-4 fold in last 3 months. The stock was quoting at Rs.150 levels during Mid-May 2009.

Comparatively speaking, Educomp has merely doubled in the same period of last 3 months under contention. However, the valuations of Educomp is a bit more expensive as compared to Everonn, it deserves the premium as against Everonn based on its size and nature of operation.

Both the stocks are hot favourites for short-term picks until Union Budget to be announced on July 06, 2009.

Everonn being a low priced stock of below Rs.500 and Educomp being a large priced stock of around Rs.3000/- it is obvious that Everonn has sought favour of Speculators.

But, going forward, Educomp is a much safer bet. I have already given a short-term call on Educomp as on June 04, 2009. The entry, exit and Stop loss levels are celarly mentioned in the call.

Antriksh Patel said...

Dear Viral,

Thanks Viral. Hats off to you and your knowledge. I would like to quote a statement read somewhere; I don't remember the exact words but is something like, "If you cannot explain it in simple words, you don't know it clearly.". Your precise knowledge and your attitude of sharing knowledge is benefiting all of us over here. Thanks.

Antriksh Patel

Mohit said...

Bulls,

Can you write something or suggest some stocks which are good at current valuations or say if you can give some buying range for long term stocks.

What are your views on Alok, PFC and Kalindee on CMP from trading and long term view.

Thanks

Mohit

Ravi said...

Hi Sir,

can you tell us on below stocks for long term view.

Camson bio
SRM energy
hindalco
gipco

Thanks
Ravindra

DARK KNIGHT ABHAY said...

thanks for ur reply viral.

Sunil N. Karande said...

Hello Viral,

CALS REF is in the top volumes for the last 1 year or so..i think this stock has a very reputed management...http://www.cals.in/news-and-media.asp.......

Cals signs MoU to set refinery project worth Rs 20000 crore in Haldia
CALS Refineries Limited, a North India-based company, has signed a MoU with the West Bengal Industrial Development Corporation and the Haldia Development Authority for a Rs 20,000 crore refinery project in Haldia.


Is it worthy to invest into the stocks for long term?ya its a loss making co but anyhting can happend.....they got a very reputed chairman...

Mohit said...

hey Bulls,

I was wondering what is the story of cals refineries is a complete frod they talk huge plans are the plan only in air or some real material recent news about their Mou with BPCL made me think that this company should have some good prospects not sure. can you clarify on this stock....it seems to be really cheap if it suceeds its plans.....or just a operator scrip

Sunil N. Karande said...

TATATELE is going to roll out GSN all over india and it is one of the cheapest network in india....debt ratio is 0...cash flow operating activity is good for the last 2 years....investment of 2billion$ in GSM....i think this stock can make the poor a rich and richer a very rich if he keep the stock for long term.....i think this is a multibagger stock of the future...what u say on this Mr Viral....CMP IS 40.....according to tech analysis i find out that this stock is moving in the upward direction....good stock for short term as well as for long term.....