Monday Morning Market Musing - Markets await FED Rate Cut

Markets were volatile on Friday as at every rise there is some profit booking seen but at the same time the selling is getting absorbed with new buyers coming in.



FED is expected to make rate cut in its meeting on 11th December and there should be a rate cut of 0.25%. This should fuel further rally in our markets. However we are at a level once again where there will be lot of volatility and only stock specific activity is needed.



Many of the blog readers have asked me about the right time to enter GMR Infra. Please remember that you can actually enter a stock any time if you find value in that stock. One should always be prepared for the dip in the stock and treat it as opportunity to make more money. GMR Infra has a very good business model and it is a stock one shoud hold for long term to reap benefits. I expect GMR to touch 550 Rs in another one year and this could change if GMR bags a couple of Airports. GMR is going to soon come out with IPO for its subsidiary GMR energy which should straightway give additional 25% valuation to the current price.



Reliance Petro is likely to start its operations in June 2008 and I have tried to do some analysis on the kind of Revenues it is likely to make based on its parent company.



Reliance Industries is likely to have an EPS of around 110 for this year and around 145 for next year. Reliance has about 54% of its profits from Refinery business which means its EPS from refinery will be around 80 Rs next year.



Reliance refinery capacity is 660,000 bpd where as RPL is going to have capacity of 580,000 bpd. Reliance equity is 139 crores where as RPL equity is 450 crores. Based on the equity and capacity RPL should make and EPS of around 25. However since RPL is in SEZ zone and there will not be any taxes, the EPS will be around 35.



Now in the first year of operation in 2008 starting in June for 10 months RPL should make an EPS of 28 and even assuming it does not start full capacity from day one, EPS should be 20.



In 2009, RPL should make an EPS of atleast 50 running to full capacity. This should give RPL a fair value of atleast 1000 Rs on a 20 PE ratio. so RPL should be value around 1000 by March 2010. If market gives more PE Of 30, the target can be achieved much before that.



Reliance Industries is around 2800 but has lot of value. Reliance plans to double its existing refinery capacity by 2012 and has good amount of stake in RPL. If RPL prices increases, it indirectly benefits Reliance. I expect Reliance to go for stock split around 3000 levels or worst case at 4000 levels. The stock split should from 10 Rs to 2 Rs. Post stock split Reliance should touch 2000 Rs again in next 2 years which means 10000 target on current price.

Each stock I recommend has some growth story or the other in it. Speculation stocks may or may not click but one can try their luck in them. All the speculation stocks that I recommended have clicked.
There are many investors who are stuck with stocks because they bought it at higher levels or bought it without any analysis and since those stocks lack growth, their prices remain stagnant.When they see all other stocks zooming and every one making huge profits, these investors would definitely cursing themselves and praying to god like the famous adnan sami song.

"Kaise kaison ko diya hai

Aise vaison ko diya hai

Mujhko bhi to lift kara de

Thodi si to lift kara de"

Invest with Confidence and invest in stocks with good growth story, then you need not ask anyone to lift you..... :)