Monday Morning Market Musing - Wait for Opportunity

Markets tanked on Friday led by Reliance as there was no news of stock split or bonus as was expected. There was lot of speculation that stock split could be announced in the AGM but when this did not come, profit booking started and punters started exiting.

The only good thing to cheer about is on the political stability front. We are now certain that there will not be any mid term elections and cong is even ready to dump the nuclear deal to appease the left parties. For the moment this issue is resolved.

Markets should open positively today based on the politcal cues adn global cues but I believe that at every rise there will be profit booking and hence we will see correction. If this does not happen and if markets move up again to 19k then we may see a huge meltdown before we touch 20K. The correction at that time will be sharp. I however believe we will have some correction this week as probability is more and not many triggers left for Bulls to lead the charge.

IFCI will remain in lime light till the bidding process is complete and I believe those who stay invested in this counter should get 120 to 130 Rs in next 4 months if every thing goes well. Those who are holding zero cost shares in this counter will not have anything to worry.

Powergrid corp is having high PE at present but I believe this is due to the future growth and power sector re rating. However please wait for this stock to dip before you make fresh purchase. It should come down.

To make a comparision, Infosys used to quote at a PE of 35 just around 9 months back. It is now quoting at less than 25 PE on its FY08 expected EPS of 80. Powergrid corp is now at a PE of close to 30 which shows how the power sector has been in lime light for the past few months.

I believe one can accumulate IT stocks by investing small amounts of profits . Infosys is the best bet for this purpose. It has the ability to withstand rupee appreciation and considering the growth plans it should give decent returns from here as the fall in IT stocks has been overdone.

If the dollar quotes at 41 levels again and PE for Infosys goes to 25 also, you will get 25% min on just the PE value. Added to this if IT sops continue even beyond FY09 though chances are less in my view, it will add fuel to fire to IT stocks. Stay invested in Infosys and try to put some of your profits in Infosys so as to reap rich rewards and risk will be less.