Warren Buffett and value Investing

"You ought to be able to explain why you’re taking the job you’re taking, why you’re making the investment you’re making, or whatever it may be. And if it can’t stand applying pencil to paper, you’d better think it through some more. And if you can’t write an intelligent answer to those questions, don’t do it." Warren Buffett

There have been a lot of Investment guru’s around the world, but one name that is cynosure of all eyes and is most respected for his investing sense is, undoubtedly, Warren Buffett. Though I do not cover such articles on my blog, I thought it would be a good idea to occasionally post few such posts featuring the great investors and their ideologies. And when it comes to investing , who should we talk of first, other than warren buffett, who is the Second richest person in the world and he did it all through investing. We will cover Benjamin Graham, Charlie, David and of course India’s investing sensation Rakesh Jhunjhunwala among others in a series of posts.

The Oracle of Omaha – Investing since Childhood
About Buffett’s Personal Life
Warren Edward Buffett was born on August 30, 1930. The only boy, he was the second of three children, and displayed an amazing aptitude for both money and business at a very early age. His father was a stock broker turned Congressman.

In 1947, a seventeen year old Warren Buffett graduated from High School. It was never his intention to go to college; he had already made $5,000 delivering newspapers (this is equal to $42,610.81 in 2000). His father had other plans, and urged his son to attend the Wharton Business School at the University of Pennsylvania. Buffett stayed two years, complaining that he knew more than his professors. When Howard was defeated in the 1948 Congressional race, Warren returned home to Omaha and transferred to the University of Nebraska-Lincoln. Working full-time, he managed to graduate in only three years.

Buffett married Susan Thompson in 1952. They had three children, Susie, Howard, and Peter. The couple began living separately in 1977, though they remained married until her death in July 2004. His daughter Susie lives in Omaha and does charitable work through the Susan A. Buffett Foundation and as a national board member of Girls, Inc. On his 76th birthday Buffett married his longtime companion, Astrid Menks, who had lived with him since his wife's departure

An Investor by birth
Warren showed an Investing aptitude since his early childhood. He was a born Investor though he refined his Investing sense under stalwarts like Benjamin Graham.

As a boy, irrespective of his family background, he delivered newspapers to make extra money and this probably sparked his interest in the media where he has made several successful investments including the Washington Post Company, a stock that has made him a lot of money and which he vows never to sell.

At the age of 13, Buffett filed his first income tax return, deducting his bicycle as a work expense. At the age of 15, Buffett and a friend spent $25 to purchase a used pinball machine, which they placed in a barber shop. Within months, they owned three machines in different locations.

Association with Benjamin
Buffett enrolled at Columbia Business School after learning that Benjamin Graham and David Dodd, two well-known securities analysts, taught there. Buffett graduated and wanted to work on Wall Street.

Buffett offered to work for Graham for free but Graham refused. He purchased a Texaco gas station as a side investment, but that venture did not work out as well as he had hoped. Meanwhile, he worked as a stockbroker. He finally got the job with Benjamin Graham’s firm and, as he generously acknowledges, learned a lot about stock investment from The Master.

Graham retired and folded up his partnership. Since leaving college six years earlier, Buffett's personal savings grew from $9,800 to over $140,000. He returned home to Omaha and created Buffett Associates, Ltd., an investment partnership.

Berkshire Hathaway
In 1962, Buffett discovered a textile manufacturing firm, Berkshire Hathaway, that was selling for under $8 per share. Through his partnership, Buffett eventually purchased 49% of the outstanding shares. Buffett maintained BH's core business of textile milling, but by 1967 was expanding into the insurance industry and other investments.

Berkshire first ventured into the insurance business with the purchase of National Indemnity Company. In the late 1970s, Berkshire acquired an equity stake in the Government Employees Insurance Company (GEICO), which forms the core of its insurance operations today (and is a major source of capital for BH's other investments). In 1985, the last textile operations (BH's historic core) were shut down.

Berkshire Hathaway , a massive holding company headquartered in Omaha, Nebraska, USA, that oversees and manages a number of subsidiary companies. Berkshire Hathaway's core business is insurance, including property and casualty insurance, reinsurance and specialty nonstandard insurance. The Company averaged a phenomenal 25%+ annual return to its shareholders for the last 25 years while employing large amounts of capital and minimal debt.

Warren Buffet’s Value Investing principles

The business the company is in should be simple and understandable.

The firm should have a consistent operating history, manifested in operating earnings that are stable and predictable.

The firm should be in a business with favorable long term prospects.

The managers of the company should be candid. As evidenced by the way he treated his own stockholders, Buffett put a premium on managers he trusted. The managers of the company should be leaders and not followers.

The company should have a high return on equity. Buffett emphasizes return on equity (ROE), a key measure of a company's profitability. He prefers to invest in companies where he can confidently forecast future ROEs at least 10 years out. He is particularly fond of firms that don't require a lot of capital, as they tend to produce much higher returns on equity.

Consistently Strong Free Cash Flow. Buffett also seeks companies with significant free cash flow. Always mindful of the risks associated with investing, he ensures that his companies have plenty of money left over to invest in their growth after they have paid the bills.

Limited Debt. In the 1990s, Buffett bought insurers Geico and General Re because he liked how the companies limited and managed their debt.Buffett also likes the "float" that insurance companies offer. Policyholders pay premiums up front, but claims are paid out later -- providing insurance companies with a steady stream of low-cost cash to play with. Until policyholders collect on their policies or claims, the company can invest those billions in stocks/bonds or other areas, and who better to invest that money than Buffett himself?

Margin of Safety. If you understood a business perfectly and the future of the business, you would need very little in the way of a margin of safety. So, the more vulnerable the business is, assuming you still want to invest in it, the larger margin of safety you'd need.

Read More!

Tanla Solution Allotment Status Tomorrow

Dear Friends,

I can make out the intense curiosity among the investors to see their allotment status for Tanla Solutions IPO. Some of our friends are trying to spread rumors about allotment status on various forums. Hence, I decided to call up Karvy and confirm. Based on the information I received , Karvy is going to put the allotment Status on its Website by 10 AM tomorrow, 28th December,2006. You can check the allotment status tomorrow by clicking the link below

Tanla IPO Allotment Status
Read More!


High on Promises, Low on Performance

Stock : Aksh Optifibre

CMP : Rs 41.90

Risk : High

Outlook : Negative

I am sure a lot of Investors are dying to see something on this stock. This stock which was a turnaround attraction in the year 2004 and again in the year 2005 had not been able to deliver returns to its shareholders in terms of both delivering on its promises of high growth and creating shareholder wealth.

Investment Guru blog had also recommended the stock on November 26th, 2005 classifying the stock as a strong turnaround candidate and strong business outlook. This blog carried a short term tag of 90 and long term tag of Rs. 120 for the stock. The stock, though delivered its short term target, failed to keep up its commitment of strong growth and has been a laggard since then. I have been getting lot of queries from the visitors too, to write a review on this stock. I know the news is not good for the investors but let us take a hard bite on this and see what's this stock is up to.

Returns to Investors

Photobucket - Video and Image Hosting
You can make out from the above chart that this stock has been a continuous laggard for the whole year and is currently trading near to its 52 week low of Rs. 39. The stock was trading at Rs . 41.90 as on 26th December,2006. The volumes have also followed suit with spikes at certain intervals, which however didn’t resulted in impacting the price positively. On an overall basis the stock has eroded the investor wealth by 53% within the last one year.

What went wrong with Aksh Optifibre ?
I do not have a copy of the annual report of the company. However from the summary of the results shown in the table below, the company has failed to deliver on the promises of strong growth backed by strong order book and 50% capacity expansion to meet the projected growth. So what went wrong with the company’s plan? I think the answer needs to come from the company’s chairman. I had written an email to the company secretary, asking him to clarify certain questions on the performance of the company, however there was no response from their side.

Photobucket - Video and Image Hosting

Sales down Sharply
The company’s sales for the quarter ended Sep’06 are down by 50% over the previous quarter and down 69% over the quarter ending Sep’05.

From profits to Losses
The company’s operating profits were down 6% versus Sep’05. The net loss was 0.05 % as compared to a net profit margin of 15% in Sep’05.

Shareholding Pattern

As of September ’06, the shareholding pattern looks as follows :

Promoters : 30%

Mutual Funds : 8%


Corporate : 12%

Individuals : 41%

Others : 9%

From above we can make out that a large chunk of the stock is in hands of the public. FII’s hold only 9000 shares in the company (One Investor). This shows that the stock’s price movement will depend on large extent to the its ability to draw FII attention . However the possibility of same looks bleak.

Slew of announcements

Foray into IPTV
The company in association with MTNL on October 17, 2006 has announced the launch of India's first IPTV Service in Delhi. The Service will offer traditional television broadcast, video and Music on demand and video calling TV facilities. However, the ability of the company to deliver in this new initiative is questionable.

Amalgamation of Aksh BroadBand Ltd.
The company is considering amalgamation of Aksh Braod band Ltd. With itself.

Issue of Fresh Equity

The Board of Directors of the Company on December 05, 2006 has passed a resolution by circulation recommending for the issue of fresh equity / ADRs / GDRs / FCCBs / Convertible Bonds, in the domestic market and / or International Offerings through Public Issue, Rights issue, Preferential issue and / or Pvt Placement with or without green shoe option to the extent of USD 30 mn with a green shoe option of USD 4.5 mn, subject to approval of shareholders to be obtained by means of Extra-Ordinary General Meeting of the shareholders of the Company to be held on January 06, 2007.

Outlook on the stock
After reviewing the company’s performance and its stock price movement , Investment Guru is of the view that Investors should not expect much to happen on this counter. Though the stock is quoting near its 52 week low, the chances of a speedy recovery doesn’t exists. The company has to deliver better results and revive confidence of the investors in order to move its stock price upwards. Read More!

Sensex Today: Sensex inches up by 45 pts.

Tech Mahindra, I-flex, Glenmark & Moser Baer in thick of action

Sensex behaved again in the manner we predicted yesterday. Marred with lot of volatility, it finally managed to add 45 points with an intra day volatility of 260 points. Action was seen in the Auto stocks primarily on renewed buying interest. However, Tech Mahindra was the star attraction of todya's trade. The stock closed 20% higher with no sellers at Rs. 1490. The company has announced the signing of a five-year deal to provide BT with strategic sourcing services. This contract is expected to create new revenue for Tech Mahindra in excess of $1 Billion over this period.

However the day was not good for I-flex investors as the stock tumbled by 11% on fears of dumping of the stocks by large players in open market. The stock, intrestinglly, was quoting at a huge discount in futures yesterday as compared to its closing price in cash segment.

Another attraction was listing of the Great Offshore. The stock settled at Rs 725 on NSE which is in line with market expectations. Read More!

Sensex Today : Sensex down 42 amid Volatility

Sensex gets slimmer , sheds 42 points

Yes, the sensex behaved the way we have discussed yesterday. The day was marked with immense volatility. This trend will continue tomorrow and we will see swings between the bears and the bulls. Traders should be cautious and small investors should stay away from trading at such junctures. Stock picking at lower levels may continue.

Attractions of the day

The two IPO's listed in line with Investment Guru's expectation. Sobha Developers started with the fireworks to list above 1000 levels and finally settled at 925. The stock is trying to move in tandem with Parsvanath Developers and may find support at 850-875 levels.

Ruchira disappointed on listing. The stock though quoted a high of Rs.24 slipped away to discount and could not recover from the lows.

Tech Mahindra touched its all time high amid talks of company bidding for UK operations of Tiscali.

Gitanjali Gems was also in the first half with news that it has acquired a majority ownership interest in Samuels Jewelers Inc. which operates 97 retail jewelry stores in 18 states throughout the United States. However, the euphoria died down with stock finally settling at Rs.220 Read More!

Shobha will Rock, Ruchira may Disappoint

Two IPO's are listing today on NSE and BSE. Lets see the possible listing and strategy.

Shobha developers is expected to follow suit of its brother Prasvanath and the stock may list in the range of 1000-1050. Investors are advised to book profits if the listing happens above these levels.

Ruchira papers is also listing today. However this IPO may not delight the investors and is expected to list near its issue price of Rs. 23. A listing above Rs. 25 should be considered as a window for booking gains. Read More!

Sensex Today : Sensex sheds 350 points

Correction a welcome move for New year

The sensed tanked 350 points today. Market sources are attributing the fall to the weaker asian markets. The asian markets were weak following Thailand's central bank statement that international investors must pay a 10 percent penalty to take funds out of the country within a year. The Thai central bank's currency controls heightened concern about emerging markets. However I see more into today's correction than mere the asian play.

Well, I believe that the markets are gearing itself up for the next year and hence it becomes imperative for the markets to correct a bit in order to start the new year at a modest note. The newsflow are just aiding the biggies to drive the markets in this direction.

Markets to remain volatile

On one hand some big FII's are on the selling spree, there are others who are waiting on the sidelines to invest in Indian story. This will lead to volatility in the markets with selling pressure to continue and at the same time investment at lower levels to gather momentum.

The right approach at this stage is to enter the fundamentally strong stocks at such dips. For example Reliance Industries , L&T, ONGC are few such stocks where entry can be made at lower levels. These and similar stocks will be the leaders in the pull back rally.

The tale of Two IPO's

We are through with the Cairn and Tanla IPO's and both had a contrasting finish. The Tanla solutions IPO met with good success with issue being oversubcribed 38 times and the issue price was fixed at the upper band of Rs.265.

Cairn energy, which created lot of exictement with pre IPo biz, failed to eventually impress the investors with most research agencies coming with a long term outlook on the stock. This shows that the primary motive of the investors remains to make big bucks in short time frame from the IPo listings. The issue price has been fixed at the lower band at Rs. 160. With lower subscription numbers , the chances of listing gains are bleak and investors investing for listing gains may be disappointed. ZEE News has reported quoting a research firm that the issue may trade between Rs.89-174. However this is a very broad range. Investment Guru blog will publish its outlook once the allotment status is out.

Stocks to watch
Investors should consider buying on dips in Reliance Industries, Larsen & Tourbo, Punj Lloyd, Yes Bank and Infosys with a short to medium term outlook (2-4 months). Read More!

IPO Update :Cairn Energy - A Long Term Story

Will Sand-dunes deliver Oil ?

Here is a different IPO and of course the Investment Guru blog would be covering this a bit differently than other IPO updates. One reason why this IPO is close to me is that it is betting on the land of warriors, Rajasthan, and the success of this venture would turn the fortunes for the state in terms of both employment opportunities and economic growth. Let’s come out of the emotions and talk about this energy giant’s IPO and what it offers to the investors.

Investment Guru’s Outlook on Cairn energy IPO
Friends, the story is going to be interesting with the nature of operations of the company and the state of the operations. Cairn Energy is a newly incorporated company and is in the business of oil exploration. We will talk more about the company later in this post.

However, a basic question in investor’s mind is what should be the outlook for investing in this IPO. There are three scenarios as far as performance of the stock on the bourses is concerned. The listing should be a good considering the appetite for the stock. Second, this company is going to deliver results in long term. So Investors should consider this IPO as an investment opportunity from a long term perspective.

Now next question is “What would happen in medium term”? In medium term the stock price would be more a factor of the news on oil exploration success or failures and a little on the crude oil prices. So if cairn energy comes with the news that it is revising the estimated oil reserves in a particular block or say it has found oil somewhere else, the stock price would move accordingly. In absence of any news the stock is expected to remain lackluster.

My suggestion is to take either a listing gain approach or a long term investment approach.

About the IPO
Cairn energy is entering the capital markets with a public issue of 32,87,99,675 equity shares of Rs 10 through a 100% book-building process at a price band of Rs. 160 – Rs. 190 per share. The object of the issue is to fund the acquisition of shares of Cairn India Holdings Limited , fund development of the Rajasthan Block, as well as further development of other producing fields and fund other exploration and appraisal activities.

Pre-IPO placement has happened at Rs. 176.48 per share
A lot of excitement for the IPO has generated because of the pre-IPO placement of company’s shares at a price of Rs. 176.48. The placement has been made to Malaysian oil giant Petronas (17.65 crore shares), Merril Lynch (1.27 crore shares), ABN Amro (1.27 crore shares) and Videocon Industries (63.7 lac shares).

This placement shows the belief of these giants in the success of cairn energy venture and the business model. On the huge success of the preplacement, the chief executive of cairns, Sir Bill Gammell, commented ““We are delighted to have gained such substantial backing for our pre-flotation placing. The positive response confirms our belief that this is the best strategy for Cairn to develop and grow our world class business in India.”

Understanding the Industry
In 1997, the NELP was implemented. The NELP was designed as a means of allowing participants in the Indian oil and gas industry to compete on equal terms for exploration acreage. Successful bidders are required to enter into production sharing contracts with the Government.

The oil and gas industry in India is still dominated by two Government-controlled entities, ONGC and Oil India Limited. However, significant private-sector participants in the industry (other than Cairn India) include Reliance Industries, BG Group and Videocon Industries Limited.

Indian Domestic Energy Demand
India is a net importer of crude oil and natural gas. In 2005, India consumed 115.7 million tonnes of crude oil, yet it produced only 36.2 million tonnes. The International Energy Agency has predicted that between 2003 and 2030 India will experience an average annual oil demand growth rate of 2.7%, which may be compared with China’s predicted average annual oil demand growth rate of 3.3%. In contrast, the predicted world growth rate is expected to be 1.4%

Understanding the company
Cairn is an independent oil and gas exploration and production company. The company is listed on the London Stock Exchange since 1988, with head office in Edinburgh. It holds material exploration and production rights in India, Bangladesh and Nepal.

Cairn India (CIL) was incorporated on 21 August 2006 to consolidate Cairn’s business and interests in India. CIL is acquiring its assets and business through acquisition of Cairn’s subsidiaries: Cairn Energy Australia Pvt Ltd (CEA), Cairn Energy hydrocarbons (CEH) and Cairn Energy India Holdings B.V.(CEIH).

In the first six months to June 2006, Cairn’s gross production from existing oil assets (Ravva, Lakshmi and Gauri) was 87,500 barrels of oil equivalent per day (bpd). Of this, CIL had a working interest in 24,000 bpd.

What is company’s strategy ?

Sustain production from and maintain low operating costs in existing producing fields.

Execute Rajasthan Block Northern Fields development to reach first commercial production at Mangala during 2009.

To harness the significant resource base in Rajasthan.

Identify new opportunities for growth in reserves and production

What works in favour of the company?
The company has interests ranging from 40% in the Lakshmi and Gauri oil and gas fields to 22.5% in the Raava oil and gas field. It has 70% interest in the two development areas in the Rajasthan Block. As at 30 June, 2006, it has estimated proved and probable reserves, of 472 mmboe.

Seven year tax holiday from corporate tax in respect of each eligible unit in the Rajasthan Block.

Significant portfolio of exploration and appraisal acreage in eastern, western and
northern India.

What are the Risk Factors ?
The start of production from the ‘‘RajasthanBlock’’ may be delayed and such delays may result in significant cost overruns.

Plateau production rates from the Rajasthan fields may be less than forecast.

There may be issues with availability of proper infrastructure facilities like transportation, fueland water which may further delay the production plans.

Crude oil and natural gas initially in place, reserves and resources data are only estimates and are inherently uncertain, and the actual size of deposits may differ materially from these estimates.

The company is expected to have negative cash flows even after commencement of production for some time.

For the year ending 31st December 2006, the company has potsed a net profit of Rs. 92.5 crores. The EPS works out to be 0.52 per share. However, one cannot take a decision of investing in this IPO based on the current financials. This a pure play on the future and that’s why it is a long term bet.

Ciarn needs to be valued on the basis of its oil reserves and discoveries. However, company’s prospectus does not shares much information on valuation from this perspective.

The industry PE average comes to 25.14 and competitors are generating returns on net worth in the range of 18-30%.

Issue Opens : 11-Dec-2006
Issue closes : 15-Dec-2006
Registrar : Intime Spectrum

When the Allotment Status is out you can check it from the link below


Additional References

World Energy Outlook 2006

News on OIL

India's Energy Future

Cairn Energy Website

Write up on Cairn Energy Read More!

Shobha Developers : Check Allotment Status

Shobha developers IPO allotment status is out ! You can check if you got shares alloted by clicking the link below.

Shobha Developers Allotment Status

Successful applicants have been alloted 10 Shares.

Additional References

About Shobha developers

Current Projects Read More!

IPO Update - Tanla Solutions

Betting on Big Boys, Outlook Stable

Tanla Solutions has eneterd the capital markets with an offer of 1.59 crore shares at a price band of Rs. 230-265. Investment guru recommends investors to subscribe to the IPO with a short term outlook. The stock may give listing gains in the range of 25-30%.

Lets take a look at the company in detail :

Tanla is a provider of integrated telecom solutions and products for the wireless market.

The company specialize in providing SS7 messaging infrastructure software products including Short Messaging Service Centre (SMSC), High Density Media Servers (HDMS), optimal routing solutions, welcome roamers, voice mail servers and Aggregator Services and offshore services including software development, infrastructure management services and technical support services.

The major part of the company’s revenue is driven by its subsidiary in UK. The company boasts of high profile clients including Vodafone, O2 and Hutchison. Forex fluctuations can have a significant impact on company revenues since 98% of the revenues are derived in foreign currency.

Top 5 clients constitutes around 49% of its revenues. Hences, the revenue sources are skewed in favour of these companies. Howevr, this should not a worrying factor give the niche the company enjoys in its segment.

The company states established and proven products and services, Leading telecom companies as clients, Scalability of solutions, cost efficiency due to India operations, flexible pricing model and focus on R&D as its competitive strengths.

On a consolidated basis, the company’s revenues have grown rapidly during FY06 and the first half of FY07 has also shown significant increase. The company revenues have grown by 282% to reach 63 crores in FY06 . In first half of FY07 the company has already done business of 87 crores, 138% above its full year revenues of FY06.

Net profits grew 444% in FY06 to reach 30 Crores mark. For the first six months of FY07 the company has already achieved 35 crores in profits, more than what it did in full year in FY06.

The company’s operating margins stood attractive at 55.7% in FY06 and 51.3% in first half of FY07.

The proceeds pf the IPO would be used for Setting up infrastructure facility for a development centre at Hyderabad, disaster recovery centre at Bangalore, establishing overseas offices and R&D.

Valuations : The weighted average EPS for last three years stood at 5.39. However since the company is on a high growth path, we should also consider the current EPS. The EPS for the six months ending sept.,2006 stood at 10.47.

On a consolidated basis the weighted average Return on Net worth stood at 58.24%. For the first half ending Sep.,2006, the return was 46.87%. The pre-issue net asset value per share as of Sep. 30 stood at Rs. 22.33.

If we annualize the first half EPS of the unconsolidated entity the EPS comes to 13.5 giving a PE of 19.6 at the higher price band. There are no listed comparables belonging to same industry.

Issue Opens : 11-12-2006

Issue Closes: 14-12-2006

Registrar : Karvy

Additional references :

About Tanla Solutions

Product Profile of Tanla Solutions Read More!

Stocks in News -Reliance, Tata, DLF IPO

Reliance Retail set to buy Adani Retail
RIL has decided to acquire Adani Retail, the Gujarat based retail chain controlled by the Rs 13,500 crore Adani Group. The Adanis have about 54 stores across all formats such as neighbourhood stores, supermarkets and hypermarkets, spread across 15 cities in Gujarat. The company had planned to have about 65 stores by the end of this year.

Tata Steel enters shipping business
Tata Steel has entered into a joint venture with Japan's largest shipping line Nippon Yusen KK to transport dry-bulk and other cargo. The venture will lower Tata's transportation cost and make Nippon Yusen's shipping line accessible.

DLF IPO likely to hit market in February
The DLF group’s much-touted IPO will finally see the light of day. The group, which has already resolved the issue with its minority shareholders, is now in the process of filing the draft red herring prospectus (DRHP) with Sebi. Sources in the company told ET, “The DRHP will be filed by December 15 and the issue should hit the market in February.” Read More!

Sensex dreams 14000, Momentum strong

Investors should play safe at current levels, stocks to watch

I was away from the markets for most part of this week and hence couldn’t post on the listing strategy of parsvanath developers and other stocks in action. Will try to cover the back log through this post.

Taking stock of the markets

The markets didn’t disappoint me as far as the weekly statistics are concerned. The BSE Sensex added around 142 points to its tail to touch 13845 mark. So we are roughly 165 points away from the 14000 mark and it would not be a surprise if this level is attained in the coming week. The F& O expiry went smoothly with good rollover seen for December. Let’s see what is driving the markets and the possible scenario. We will also look at few stocks which may give good returns in short term.

What is driving the markets ?

Economic trends continue to delight

India’s economy grew by 9.2 per cent in the last quarter (July-Sep), driven by rising activity in both manufacturing and services. The improvement in the July to September period puts the country on course to match growth levels being achieved by China. Growth in the previous quarter, April to June, was 8.9 per cent. Manufacturing output rose by 11.9 per cent in July to September. The services sector, which accounts for more than half of India’s GDP, continued to be buoyant, with trade, hotels and transport services growing by 13.9 per cent. (Times Online)

The positive economic indicators has provided the boost to the already ongoing strong momentum backed by strong Q2 Results. The strong performance has lead to re-rating on outlook on India as an Investment Story.

F&O Expiry was smooth
Futures Open Interest was up by Rs 748 crore. Options Open Interest was up by Rs 260 crore (Rs 2.60 billion). Markets witnessed an rollover at 62 % . Nifty December Futures closed at a 17 points premium to the cash markets on the derivates expiry day.

Technicals are positive
The Markets are trading well above the 50 DMA and 100 DMA which indicates that the bullish momentum is expected to continue in the short term. There can be bouts of profit booking as sensex tries to breach the 14000 mark.
Photobucket - Video and Image Hosting
FII & Mutual Fund

Photobucket - Video and Image Hosting
FII’s bought Rs. 9380 crores of equity which was their highest net investment in last 5 months. Mutual funds are still maintaining a cautious approach and were net sellers to the tune of 24 crores in Nov-06. Investing circles are abuzz with news that FII’s may further step up buying this month as allocations will be made for new year 2007. However I feel that FII’s may throw up some surprise by deviating from this routine. They have already invested a good amount in the past few months and hence may defer further buying till a correction happens.

What is the probability of Correction ?
Corrections should not be considered a devil and it is quite healthy for markets to correct at regular intervals. This takes away the risk of a market crash. We have not seen any major correction and it would not be a surprise to see correction happening in coming sessions. However, I believe that certain Mid cap stocks would continue to shine due to the news flow and strong growth prospectus.

Conclusion on Market Trends
Well, the markets are expected to rise a bit more due to string momentum and may breach the 140000 mark, however profit booking may take center stage at those levels. So keep fundamentally strong stocks, may it be large or mid caps, in your portfolio.

Stocks in Focus
Gitanjali Gems
The stock is in news following talks of buying a US-based jewellery retail chain, comprising 100 stores in line with its plans to increase retail operation. The company has also received an approval for a special economic zone (SEZ) for the gems and jewellery sector at Panvel. To be spread over 25.23 acres, this will be Gitanjali’s second SEZ, after the 200-acre Rajiv Gems Park at Shamshabad, Hyderabad

ERA Constructions
This is another construction stock which has caught investor fancy in past few sessions. The stock was locked at upper circuit on Friday. The stock has scope of further appreciation by another 50 Rs.

Other Stocks that may gain ground are Karnataka Bank, Yes Bank, Shipping Corporation of India and Skumars. Read More!