Month: July 2006

It was 24th of July, 1991 when then Finance minister, Dr.Manmohan Singh opened the gates of liberalisation. Financial Express has an excellent coverage here.

I contradict the views expressed by Mr S P Tulsian statign that Reliance Petroleum is a good buy. Please note that Mr Tulsian holds Reliance Petroleum and has probably bought them at levels of Rs85 and thus recommending it to small investors. Please don’t fall prey and avoid this.

Some facts about Reliance Petroleum

1.Reliance’s Petroleum unit is in deep shit. They are unable to supply oil at the same cost as PSUs do. Their Petrol Pump franchisees are complaining and thus reliancei s paying out of pocket to maintain the goodwill.
2.Reliance Petroleum doesn’t even have a refinery so where is the question of stock outperformign or moving up ?
3.Reliance Petroleum will be subsequently merged into RIL(Just liek old man Dhirubhai did in 1990. Their was Reliance Petroleum too, which got merged into RIlL. Those Reliance Petro shareholders got lesser returns compared to benchmark SENSEX).

So kindly avoid this scrip. If Mr Tulsian was wise, he would have justified the earnings potential of Reliance Petroleumbut he hasn’t so it means he has vested interests.

Moneycontrol analysts predict the opportunities arising of drugs off the US patent regime. Even though the BSE Healthcare has underperformed compared to sensex, these analysts are bullish on the Indian pharma industry and calls it a darkhorse.

Dr Reddy’s and Ranbaxy are well geared to take advantage of an off patent regime that has started recently. Cipla is growing through tie-ups with global pharma companies.

In the outsourcing segment we like Nicholas Piramal, Jubilant Organosys, Shasun Chemicals, and Cadila Healthcare. We are also looking at some niche stories like Marksans Pharma and Hikal Chemicals.

We like Dr Reddy’s in the short-term and Ranbaxy and GSK Pharma for the long-term as they are good value buys.

Now small/retail Indian invetors can also ride the Indian realty boom. Highlights of Subrmanyams article as it appeared on Moneycontrol. SEBI has released gudieliness on Realty Mutual Funds.

Advantages to the investor
Reduction of Risk (single property vs. a portfolio of property)
Smaller amounts can be invested
Easy Redemption
Diversification

However for the savvy investor with good investible surplus, and a high risk appetite the returns from a direct investment in property could be higher. However such a savvy class is in the minority.

Disadvantages to the investor
1. Lack of transparency in deals.
2. Inadequate documentation of history of prices at which deals are struck.
3. Cash element.
4. Legal hassles.
5. Low professionalism.
6. Low regulation
7. Lesser liquidity especially as compared to equity markets
8. The industry could also be a victim of pricing manipulation or fraud
9. Lack of talent appropriate for this industry
10. High transaction costs.
11. Lack of uniformity of laws governing property across many States in India.

Also how will the NAV be calculated ? What are the basis for the same ? It is unclear until someone really hits the market.

NOTE: Till now HDFC & Kotak had realty funds which was only for the high networth individuals(Minimum Rs 5 crores investment was needed with a lockin period of 3 years or 7 years)

Indian market valuations which were fairly valued couple of weeks ago now seem to be overstretched. Indeed they are. Dr. Mark Mobius of Templeton investments is of the opinion that India is trading at a forward P/E of 20 while other emerging markets are at 13. Also note that their is no significant FII investment in the country. It is just Rs1418 crores for the month of June and Rs254 crores till date in July.

Indian Investors be carefull as their will be stock specific activity in the coming days. Book atleast 30% profits today if you have bought at 9000 levels. SELL now!!