THEmarkets have again proved that it is the market which is always correct and nothing else. Before the correction, making money in the market became very simple and one did not require the guidance of any expert. Whatever you bought in the morning, it invariably gave you a return of 3 5 per cent by the evening. As much as 70 per cent of the stocks, especially in the mid and small cap space, were logged on to the upper circuit.
The investors were blatantly ignoring the fundamental principles of investing. Greed was so dominant that the difference between investment and speculation too became blurred. It has once again been proved that nothing but sentiment domi nates the market. The markets continued to ignore all negatives be it the US sub prime crisis and possible slowdown, increasing rate of domestic inflation, rising crude prices, slowing GDP and corporate growth rates, fluid political scenario, happenings in Pakistan, and so on.
The present lull should
therefore be effectively uti
lized by small investors to
accumulate good stocks in a
staggered manner. Any fur
ther sharp dip in the market
should be seen as a great
buying opportunity to reap
decent returns
This was happening because of the market’s bullish sentiment. Everything possible was done and said to justify that bullish sentiment such as the decoupling theory with the Indian economy being different from others, our robust growth rate, healthy domestic demand, and fair amount of funds with domestic financial institutions and retail investors, and so on. Whatever could not be justified by funda mentals was justified by prevailing liquidity. It is, in fact, the sentiment that interprets a particular event as per its liking. When it is bullish, it may afford to ignore even happenings such as US sub prime crisis. But when it is negative it can blow a small happening like an isolated case of bird flu elsewhere in the world out of proportion.
It is precisely the sentiment which accounts for 80 per cent, the rest may not account for even 20 per cent. That is the reason that an event like the Fed rate cut was interpreted in exactly opposite and extreme ways. The earlier one was thought to bring in a lot of liquidity to emerg ing markets like India, giving our markets a push by a few thousand points. The last Fed cut of 75 basis points within a week’s time has been said to be an admission of a deeper malaise prevailing in the US which can have its ramifications in other parts of the world.
ONCE again, it shows that the domi nant sentiment takes away our sense of judgement due to sheer euphoria or panic. Earlier, stocks available at infinite PE with no fundamentals to support were lapped up by investors as if there was no tomorrow. Now, due to sheer panic, the best of stocks is not given a look by investors. Sentiment appears to have led to evaporation of all liquid ity from the markets.
But one thing is different this time. My interaction with a number of investors suggests that investors might have been gripped with fear but they have not lost hope. I feel this is a positive sign for our markets and for our investors as well. They have been persistently asking me if they could buy stocks that have fallen the most.
And my answer to this is a big “Yes”. Though the markets may take some more time to come to their senses and there can be a few more bouts of selling by FIIs to compensate for their losses elsewhere in the world, the final picture is clearly in favour of emerging markets like India. FIIs, after this turmoil, will have to return to India in a big way. It is just a matter of time. The present lull should there fore be effectively utilized by small investors to accumulate good stocks in a staggered manner. Any further sharp dip in the market should be seen as a great buying opportuni ty to reap decent returns.
Lok Housing and
Constructions
(CMPRs 213)
NCORPORATED in 1986, Lok Housing and Constructions Limited (LHCL) is the flag ship company of the Mumbai-based Lok group and is among the very few construc tion companies in India to have instituted six sigma quality systems for operational excellence, timely delivery and seamless execution of largescale projects. LHCL has a land bank of a whopping 1,222 acres across Mumbai, Pune and Bangalore with develop ment potential of 62.5 million sq ft. Most of the land was acquired long ago at very low cost. In order to consolidate and emerge as a bigger player, the group recently merged Lok Shelter (involved in urban rehabilitation and reconstruction projects), Lok Global (involved in diverse infrastructure projects) and Lok Holding (a key vehicle to acquire land) with LHCL.
The company’s equity has increased to Rs 42.88 crore against Rs 11.70 crore due to merger of group companies / warrant conver sion. Promoter holding got increased to 51 per cent against 23 per cent last year. To fund its upcoming projects, the company is look ing to raise over Rs 800 crore through QIB/FCCB/GDR/private placement in future. Accordingly, it made a preferential allotment of 762,200 shares to Bennett Coleman & Co. at Rs 197 per share and 50 lakh warrants to promoters at Rs 354 per share. The scrip hit a new 52 weeks’ high of Rs 390 on January 1, 2008 but collapsed 50 per cent in the recent upheaval in the stock market. It is supposed to be an excellent buy at current price
