Stock Market is not a 'Casino' - Invest wisely

The unwarranted euphoria in the markets sometimes makes gullible investors think that they can become rich overnite. It takes only one bad session for the markets to take these investors back to 'Ground Reality'. To make things worse, our media plays the villians role to perfection. Electronic media is very often guilty of 'Playing to the gallery', that is serving the interests of the day traders or speculators only. Friday, the 18th January 2008 was one such day in the history of Indian Stock Market. News headlines like "Steepest weekly loss for the sensex", "Investors lose wealth by a whopping Rs.5,00,000 crore", are more than enough to spoil your party. Many investors start to sell their blue chips in such a scenario. Dear investors please do not play the stock market like a casino.

I had time and again cautioned on this blog, about the weakness in the markets and the impending fall. There were enough reasons to beleive that above 21,000 sensex levels were not sustainable currently:

• The US slowdown and the Sub Prime crises.
• Fall in IIP (Index for Industrial Production) numbers for Nov 2007.
• Competitiveness of Indian exports, and the woes dues to the rising Rupee.
• Liquidty outflow due to the Mega issues, specially Reliance Power.
• Negative FII inflows in January 2008.

All these factors have contributed to the sudden dip in the markets. I had noted earlier, markets to fall atleast to the level of BSE sensex 19000-19200, and the BSE sensex has closed at 19013 on 18th January 2008. Now, is this the time to buy? Ironically the same analysts who were so upbeat on the markets till yesterday have turned into "Doomsayers" overnight.

Let me assure you, dear investors, there is no need to panic. Rather this is an opportunity to buy good stocks for long term. The market may yet fall further by around 5%, but it will bounce back sooner than later, because the economy is growing reasonably well, and the valuations of most stocks are now at reasonable levels. It is advisable to buy your favourite stocks in small lots, rather than putting all your money in one go.

As promised, here are a few good sectors/ stocks for the future:

India's infrastructure growth story is intact, rather than focussing on unreasonably priced power, infrastucture, real estate stocks you may focus on the sectors that power the infrastructure growth, like Cement and Metals;

Cement: Demand and supply gap is not likely to be bridged in the next 2-3 quarters, the profitability of cement companies will continue to grow exponentially. Preferred stocks; ACC (Rs.865), India Cement (Rs.252).

Metals: Prices of ferrous metals are likely to be stable in the long run, large players sre on the lookout for buying/ strategically allying with iron ore suppliers. Investment is advisable in these blue chips for decent gains in the long run: TATA STEEL (Rs.782), SAIL (Rs.234). Among non ferrous metals these stocks look attractive: Hindalco (Rs.185), Sterlite (Rs.880).

Contrarian Buys: Selective investment for long run may be considered in IT Majors and Pharma Sectors, because the downside from here is very limited in these sectors. A bounce back can occur anytime before budget. Investment can be considered in INFOSYS (Rs.1464), TCS (Rs.904).

"Happy Investing".