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The Sensex opened with a huge significant positive gap of 300 points at 10,931 in line with other Asian markets amid the backdrop of the US elections.
The index touched a high of 10,945, and soon began to pare gains.
Sensex finally ended down over 500 points.
In such jittery times, what strategy should you adopt? Which stocks to buy, sell and hold?
In an hour-long chat on rediff.com, stock market expert Pranav Sanghavi, replied to many such readers' queries. Here is the transcript: PRANAV SANGHAVI says, Good afternoon and welcome to the chat. Let's begin.
riyas asked, Hi pranav, By loot at the rallies in the market for the past 5 days, can we assume that we are out of trouble. OR Is this only a bear and short covering rally? Please advice. What is your suggestion to the investors. Can they buy quality stocks now? Thanks.
PRANAV SANGHAVI answers, at 2008-11-05 15:35:22I don't think we are fully out of the bear market. We could surely see a higher low being made in the short term. The US Elections euphoria may not last long and we could see the markets tumbling again. When markets are very close to the previous lows would be a good time to start buying again in small quantities. FGor short term traders this could be a good chance to book profits on long trades made during the lows.
daya asked, Hi sir, Will the market touch a new bottom in the coming months? How the interest rate cut by the banks across the world will ease the market situation?
PRANAV SANGHAVI answers, It very well could. It would be better for the market to make a higher bottom than the previous low then consolidate and move up. This way the market will be able to sustain any upward rally thereafter.
chawla asked, Is this the right time to buy the reality shares like DLF, Unitec for 1 to 2 years outlook?
PRANAV SANGHAVI answers, I would not touch the realty sector immediately. I think some more downside is possible for the stocks as the property markets correct at a much slower rate than the stock markets and our stock markets have been correcting for a period of around 6 months. I would wait for another 6 months before getting into the real estate stocks.
karan asked, Hi Pranav, What is your take on HCC. Is this company going to benefit for the setting up nuclear plant in the future?
PRANAV SANGHAVI answers, I would not buyt the stock right now in the hope that it will set up a nuclear plant in the future which will benefit the comapny then. As a lot of its revenues are related to the infrastructure and reaty sector I owuld wait for a while before entering the stock.
SRB asked, When the steel prices are expected to rally in the commodity market? I have 40 TISCO at 502. Shall i hold or average at around 200. Thanks
PRANAV SANGHAVI answers, I think globally the commodity sector is on a downlslide. I don't think in the short term till the recessionary phase of global economies turns around will you see steel at new highs. As for Tisco you can surely average at current levels albiet with a view to hold for atleast 2 years.
saurab asked, Please suggest, what are the industries we can look at for 1 - 2 years outlook.? what are the sectors look week with the same time frame. Thank you.
PRANAV SANGHAVI answers, Rather going sector specific I would look at quality frontline index stocks which are giving a net income growth of over 15% over the last three years. They will be a good buy with a hold for 2 years.
Mohan asked, After watching ups and downs, today I have decided that the market can go up now onwards. I have started buying share fm 2day. I bought 200 shares of Suzlon Power @ 60. Please suggest me whether to hold or sell. I want to buy some good stocks. pl suggest which is at lowest and can grow at good levels.
PRANAV SANGHAVI answers, I would have rather bought when markets were near the 8,000 levels. Suzlon has been hammered badly. It still is quoting at a very high PE multiple as compared to the average of most other stocks. I would not get very bullish on the stock in the short term.
ARUL asked, Hi Pranav now obama has been new president of usa . what would be the status of outsourcing companies. there wil be any impact
PRANAV SANGHAVI answers, There is a perceived scare of Outsourcing companies based out of India and other emerging markets losing their business as Obama has promised to create new jobs in the technology industry. But I don't think there will be a material impact in India as we are too deeply entrenched into the market and Obama will not be able to pull the plug on the outsourcing companies over night. In another statement he has also said that he cannot ignore China and India so I think the impact will be marginal on IT companies.
venkatesh asked, What would be best price for Reliance industries, Reliance Communications and L&T? I would like add these three stocks to my portfolio. Please suggest me best price for these stock?
PRANAV SANGHAVI answers, No one will be able to accurately give you a bottom of the stocks for you to get in. I would recommend the strategy that I've been saying in the past few chats which is to buy 5% of what you intend buying on every major dip on the indices. If the SENSEX goes below 9000 then you could buy 10% on every dip.
venkatesh asked, Hi Pranav, When this bear market phase will end?
PRANAV SANGHAVI answers, I think we have witnessed nearly 6to8 months of pain. We should be prepared for another year to year and a half. It could be shorter as almost all the Central Governments around the world are taking major corrective steps to avoid a depression or recession in their countries and this includes the US governments, European governments and the emerging markets like India too.
venkatesh asked, Yesterday I exist from the market with huge loss. Please suggest me when shall I re-enter the market?
PRANAV SANGHAVI answers, You could look at reentering once the SENSX go below the 9000 levels.
roh asked, what range is good for retail invester to start buying ?
PRANAV SANGHAVI answers, I would say between 7500 and 9000 is a decent range for someone to get in with a 2 year outlook.
ved asked, hi pranav..i had bought sbi magnum tax relief MF 2 years back..wht are chances of making profit after 1 year when i am able to sell it ..
PRANAV SANGHAVI answers, Most of the stocks are trading well below the 2007 levels. I think you would have to wait a little bit more than a year to see some decent profit.
hinduja asked, Is it the right time to buy Indiabulls securities for the purpose of averaging? Kindly advice.
PRANAV SANGHAVI answers, They have given decent results considering the meltdown of the financial markets world over that we have witnessed over the last 6 months. I would look at the stock but at lower levels.
Mann asked, Hi Pranav,I am Holding Essar oil,IDFC,NTPC,POWERGRID,RPL,HINDALCO,SESAGOA,RNRL,MLL,JP ASSOCIATE,UNITECH,IFCI,GVKPIL,GMR INFRA.I want to know should i sell or add more on these scripts.I can Wait for at least 3Yrs From Now. Tks.
PRANAV SANGHAVI answers, I think most of the stocks you mention will give decent returns over a 3 year period barring may be RNRL, JP Assoc, IFCI etc. THe others you could surely hold and even average at lower levels if you have free cash to invest.
manish asked, do you think markets have bottomed out?
PRANAV SANGHAVI answers, I dont think so. The markets will surley correct again. This upward swing looks more like a bear market rally than a complete receovery. I still think we are very much in a bear phase. Till global economies start posting growth even marginal on their GDP's we should not get very euphoric.
NitinDeole asked, I have L & T shares baught at current level of 870. Will I need to avarege it or the stock will move up again?
PRANAV SANGHAVI answers, You could have surely averaged a few trading sessions back when it was trading at far lower levels of 700-750. Over a longer term I am pretty sure that L&T will give decent returns from these levels.
ROsh asked, Do u think Reliance Industries will touch new lows in coming days? Will it be a good choice to accumulate Reliance @ 800 levels.
PRANAV SANGHAVI answers, As I had mentioned in the previous chat Reliance is an extremely index heavy and sensitive stock. If you juxtapose the RIL chart along with the SENSEX chart you will see very simillar patterns. So if you think RIL can correct by over 30% then we would see the index also correct over 30%. But to answer your question yes that would be a good level to accumalate if it goes to that level.
narender asked, When would be the best time to invest now?
PRANAV SANGHAVI answers, When the markets correct again.
Nitin asked, What is the expected level of Reliance Industries in future?
PRANAV SANGHAVI answers, I think over a longer term of say 1 to 2 years the stock should do well and when the markets recover RIL will lead the recovery as it is closely linmked to the index movement due to its weightage.
narender asked, Would it be good idea to invest borrowed money into the stock market.
PRANAV SANGHAVI answers, Considering the volatile nature of the markets currently and also the rising interest rates I don't think it would be prudent to invest with borrowed funds.
Sulu asked, Hi Pranav, I am interested in buying Praj Ind,HCC,Bartronics,Visa steel.Should I wait?
PRANAV SANGHAVI answers, I think you should surely wait and also consider better quality stocks than those you mention barring Praj.
sanjay asked, Reliance power whether to buy or sell? I have 340 shares on alltment
PRANAV SANGHAVI answers, I would surely not hold the stock for a period of three years to see some plants on ground. With the recent meltdown of the markets there are many profit making, dividend paying companies whose stocks are trading well below either book values or below PE of 5.
mhreddy asked, I have chambal fertilsers 1300 @ 65 and RNRL @ 92 and Adlabs 225 @ 525 What is your advice
PRANAV SANGHAVI answers, I would book losses in Chambal if this rally continues and get into a better quality stock like Guj Alkalies trading a bit higher. I would surely exit the other stocks and look at quality stocks like L&T which have got beaten down and have a steady flow of thier orders and look to grow their bottom line also handsomely over the next two years.
Tikku asked, Sir, I purchased 70 shares of ongc @ 750 at IPO. Whether to hold or sell?
PRANAV SANGHAVI answers, ONGC is a oil based stock and the crude prices strongly affect the movement of the stock. Also the government makes ONGC puts the burnden of the oil subsidies on ONGC's head. Despite all that they have a strong balance sheet and you could hold on with a long term outlook.
Rajeev asked, Wats ur take on Banking and Real Estate stocks?
PRANAV SANGHAVI answers, The government is doing its best to ease up liquidity in the market and even has cut Repo rates. But in the short term for them to drastically reduce interest rates is also not possible which is restricting sufficient credit offtake. Therefore in the short term the Banking sector may not perform but in the long term our PSU banks are in a great balance sheet position to out perform the markets.
kannan asked, I have RELPET 1500 @ 217 and RNRL 850 @ 134 PLEASE advice
PRANAV SANGHAVI answers, RELPET you will have to hold for some time as in the short term I don't see the stock making new highs. RNRL you will have to wait till the legal battle with RIL is resolved.
Bulled asked, There is too much of hype about RPL & nano (Tata motors). where will these be in next 3-6 months.
PRANAV SANGHAVI answers, TELCO is burdened with a good amout of debt due to its overseas aquisitiotns. With the recessionary scenario globally I think they will have a tough time in the short term in the near future. Beyond 2-3 year you could see better times for the stock. Even its recent Rights issue had to be subscribed majorly by the promoters and the underwriter.
shailendra asked, when will the market be stable. After two days up in this week, it felt down again by more than 500 points today
PRANAV SANGHAVI answers, In the short term the markets look to remain volatile. Till global economies settle down it will be difficultt for our markets also to settle down. I think in the short term we could continue to see the volatility.
prakad asked, which shares are good for short term say 6 months
PRANAV SANGHAVI answers, I would look at stocks like L&T, SBI, IDFC, Guj. Alkali, Sesa, RIL etc. but only on a downturn and when the markets go below the 9000 levels and not currently when they may breach the 11000 mark.
venkat asked, Hello Sir: I have purchased 60 shares of Aditya Birla Nuvo @ 790. Similarly i have 50 of Satyam @ 393. Is it worth holding it or should i exit the stock and invest in others? Thanks!
PRANAV SANGHAVI answers, Both stocks are fundamentally strong and could be surely held with a long term outlook.
chaman asked, hi pranav, What will be effect on IT industry due to Obama's selection?
PRANAV SANGHAVI answers, I have answered a simillar query earlier please refer.
ppp asked, what do you say about this quote?"What worries me most about the Current Financial Crisis is that if one of my Cheques is returned stamped "insufficient funds", I won't know whether That refers to mine ............ ..or the bank's!"????
PRANAV SANGHAVI answers, That is the state of the global banks especially the ones based in the USA and who have heavily invested in the Mortgage markets. Indian banks on the other hand have less than 1% exposure to US mortgage markets and are relatively untouched by the weakness that the global banks are facing. They have excellent balance sheets with NPA's near their all time lows.
Rachit asked, Hi Pranav, One More question: DLF Ltd. 100 437.3 Sesa Goa (A) 150 143.25 Suzlon Energy Ltd. 250 71.6 Orient Paper 500 34.99 JM Financials 350 38.41 Alok Industries Ltd. 300 32.68 Should I average this portfolio for Medium Term or I can keep it like this only. Thanks, Rachit
PRANAV SANGHAVI answers, From the stocks you mention I like most of the stocks barring Alok, Orient and Suzlon. All the rest can be held with a long term outlook. You could even average a few of them at lower levels but with a view to hold for 1 to 2 years.
PRANAV SANGHAVI says, Well its time for me to leave. Bye for now.