Sharekhan Valueline for June 2006
Take volatility in your stride
The market has been swinging like a pendulum and slipping a couple of hundred points every other day for the past few weeks. The benchmark index, the Sensex, has now come down from its high of 12,671 touched on May 11, 2006 to 10,400 levels on large-scale selling, mainly by foreign institutional investors (FIIs). It is most likely that the controversial circular of the Central Board for Direct Taxes merely precipitated the selling spree. Meaning it was bound to happen some time since the market had risen at an unsustainable pace. Of course the market has also been affected by the meltdown in the global commodity and equity markets due to the unwinding of positions by speculators over concerns of inflation in the USA and Japan. But in the ensuing panic most of us seem to have forgotten what we invested in to begin with. Think about it. We invested in the growth story of this country and that story is still intact.
Sharekhan top picks
On May 5, 2006 we had recommended the best 12 of our Stock Ideas as Sharekhan Top Picks. With mayhem ruling the market all through May, our top picks have more or less performed in line with the broader market. As on June 2, 2006 this basket of stocks has given a negative return of 16.8% compared with a negative return of 16% given by the Sensex constituents (ie if one were to buy one share of each of the Sensex constituents) over the same period. Even though the market has witnessed a sharp correction, we believe that the underlying story of robust fundamentals and the resultant strong earnings growth remains intact. Hence we believe that the correction presents a great opportunity to capitalise on the Indian story and add good stocks to your portfolio. However, selectivity remains the key.
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