When should you buy stocks of Reliance Power?

Reliance Power stock has corrected very sharply in recent stock market crash and is quoting at it's lifetime low too. But still the odds for the stock are not positive yet. A stock trading firm has recommended to reduce the stock in it's recent stock research report.

Reliance Power has been downgraded to ‘reduce’ and the target stock price is reduced to Rs.69. All ADAG group stock have been hit badly in market crash and Reliance Power is no exception.

Some of the valid reasons the stock has been beaten down are

1. The company could not make much progress in the execution of certain projects and hence no value could be assigned to them. For example, krishnapatnam and Chitrangi power projects totaling 7.92 GW have been excluded from the stock valuation as there is no visibility in their execution timeline.
2. Other projects such as Sumatra Coal mines and CBM blocks have also been excluded from valuation as these projects are at its nascent stages of development.
3. The company has also to overcome challenges of coal supplies for 1.2 GW coal based power plants to be completed by December 2012.

The outlook on the stock may turn positive only when the company could report remarkable progress in project execution.Confidence may be back if the company could complete its tight scheduled 2400 MW Samalkot gas based power project in time (by December 2012) and operates it profitably.

When should you buy stocks of Reliance Power?
If the stock trades below Rs.70 price levels, it could be a good stock to buy for long term portfolio looking at the big size projects and being "power sector" player which is essential infrastructure element for future of India.

---------------------------------------------------------------------------------------------------------------------------

IPO Information - T D Power Systems

T D Power Systems (TDPS) is coming up with an Initial Public Offer in the IPO price band from Rs.256 to Rs.261 per share. Here is IPO information and some analysis to help you make decision if you should invest in IPO of this company or not.

Issue Open: August 24, 2011
Issue close: August 26, 2011
Price Band: Rs. 256 - Rs. 261 Per Equity Share
Minimum Bid Size: 25 Equity Shares
Face Value: Rs. 10 Per Equity Share
Issue Type: 100% Book Building
Maximum Subscription Amount for Retail Investor: Rs. 200000

Company
T D Power Systems (TDPS) is Bangalore based leading manufacturers of AC Generators with output capacity in the range of 1 MW to 52 MW for prime movers such as steam turbines, gas turbines, hydro turbines, wind turbines, diesel and gas engines. Along with AC Generators Company also executes Turbine Generator ("TG") island projects for steam turbine power plants with output capacity up to 52 MW using a Japanese turbine combined with their generator. Company is ISO 9001-2008 certified.

The consolidated order book is Rs. 1094.69 crore as end of June 30, 2011. The company proposes to use the net proceeds of the IPO for financing expansion of the existing manufacturing plant in Dabaspet, Bangalore, and for the construction of a project office in Bangalore. It also proposes to utilize part of the net proceeds to repay debt, fund working capital requirements and for other general corporate purposes.

IPO Grading / Rating
CARE has assigned an IPO Grade 4 to TD Power Systems IPO. This means as per CARE, company has 'Above Average Fundamentals'.

Valuation
The consolidated EPS for FY 2011 on post-issue equity of Rs. 33.24 (at lower IPO price band) and Rs. 33.07 (at upper IPO price band) works out to Rs. 17.1 thereby giving P/E of 15-15.3 times. Thermax is the closest comparable player in stock markets which is currently trading at 15.6 times FY2011 EPS.

Conclusion
T D Power Systems is a power sector player which makes it attractive as a business with huge scope of growth in future. The pricing of IPO looks okay and may witness some listing gains too for IPO investors. One may invest in IPO from longer term investment perspectives too.

---------------------------------------------------------------------------------------------------------------------------

IPO Analysis - SRS Limited

SRS Limited is coming up with Initial Public Offer (IPO) to raise between Rs.203 crores to 227.5 crores with IPO price band of Rs.58 to Rs.65 per share. Here is IPO analysis of SRS limited to help you make decision whether you should in IPO of this company or not.

Company
SRS Limited is in the business of Cinema Exhibition, Food & Beverages, Retail and Manufacturing & Retailing of Jewellery operations. As on today, SRS operates 23 SRS Value Bazaar retail stores, 15 food courts and 30 cinema screens in North India. The company also operates five jewellery retail and wholesale outlets and a jewellery manufacturing unit in Delhi.

The retail and consumers story of company that includes cinema exhibition, retail stores, food courts and jewellery retail stores looks attractive in first sight and makes impression as if company is just waiting for IPO investments to take off!

History!
But look closely to a few details unearthed by V S Fernando, an IPO Analyst from India Aarthik Research team that shows you a completely different picture about promoters and their modus operandi. For example, the group has more than 3 dozen companies under it's umbrella. SRS limited would be buying jewellery from it's own another company. SEBI had debarred the same promoters and their old company Manu Finlease Ltd. for five years from accessing capital markets in 2002. This was later reduced to 1 year and 1 month by Supreme Court. Read all the story of promoters and their history with few facts here.

Conclusion
Looking at the sheer history of promoters mentioned in above linked article, at least I would not buy IPO of SRS limited. You may take your own investment decision.

You may want to read:
When should you buy stocks in current market turmoil?
Stock markets crashing – what to do?
Why should you buy gold now?

---------------------------------------------------------------------------------------------------------------------------

When should you buy stocks in current market turmoil?

American stock markets are plunging everyday with high volatility. Yesterday (Aug. 19th) again DOW Jones plunged 173 points or 1.6%. I came across one theory while researching and reading on stock markets that I thought must be shared with IndianStocksNews.com readers. Here it is.

Free fall in global stock markets
We are witnessing a free fall in global stock markets with investors vanishing from stock markets. In such volatility, what is that we can expect in near future in global stock markets and Indian stock markets?

While researching on stocks history and looking at stock chart patterns, I came across American stock market charts. I also read a few things from some analysts who had studied the chart I was looking at and what they were saying was quite interesting and scary too!



Above chart shows American stock market index Dow Jones from Year 1900 till 1950. Checkout the great fall of stock markets between 1930 and 1932. Then the rise of markets in 1936 and 1937, followed by big falls in 1938, rise and bigger fall in 1940-41. This entire pattern is spread across almost 10-11 years before resuming another bull market in history.

Whats ahead?
Now look at the below stock chart of Down Jones for past few years, especially from 2008 when global recession started till 2011, till date. The stock chart seems to be following similar pattern of what was experienced in above chart way back in 1930s. The great fall in 2008, rise in past 3 years till 2011 and then again the resume of downtrend.



In context of Indian stock markets, where can this go? BSE SENSEX is trading today at PE multiple of 12.5. In past, whenever stock markets have tumbled, SENSEX has traded at lowest PE of 11. So to see the SENSEX trading at P/E of 11, it will have to go below 14,500 levels. Now, will SENSEX go there? It will if American and global stocks plunge further in next few weeks/months. But what I believe is, if SENSEX trades below 15,500 levels, most of the stocks would be at very attractive valuations and long term investors should buy stocks in small chunks for sure if world economy does not enters double dip recession which we would come to know about in next few weeks.

Read: Stock markets crashing – what to do?

Currency problem and Gold Price
The rise we had seen in past 3 years was mainly due to economic packages declared by Federal government in US and other countries which was nothing but artificial boosting economy by borrowing and printing money or reducing taxes. But when money is borrowed, you have to return it at one point of time to lender. US is unable to do it. So are the other governments and it is clearly visible from whats happening in Europe. And when you print money, inflation starts skyrocketing that is what exactly happening in USA and other countries. Currency starts losing it's value and your money can buy lesser and lesser day by day, in other words, everything becomes costlier.

And this is one of the reasons why Gold price is increasing everyday. As all currencies start losing it's value (buying power), how can you protect purchasing power of your money? Buying safe assets like gold, silver, maybe land etc.. Buy gold in small quantity to protect some of your wealth as currency problem is going to take years before all problems are solved and Gold would surely make new records in coming time.

Read: Why should you buy gold now?

---------------------------------------------------------------------------------------------------------------------------

Stock markets crashing – what to do?

As an HDFC Mutual Fund investor, I recently received a message of advice from CIO of HDFC asset management company. I liked the message in which he has said “It is always darkest before dawn“. Here is the original message for the benefit of all Indian Stocks News readers.

HDFC CIO Message on Investing in Crisis 2011

The bottom line of the message:
“ Good returns materialize over time on investments made at cheap valuations (meaning low PEs) and PEs are more likely to be low when the news flow is adverse.”

What should you do?
Looking at all the negative developments on front of global economy, Indian Stock Markets are entering into very lucrative and attractive stock valuation zone. The fact that SENSEX, at 16800 levels is trading at 13 PE (1 year forward) highlights the attractive valuations.

With today’s fall in SENSEX at 16469 and the fall that we may witness today i.e. on 19th August due to steep fall in American stock markets today would take it to even more attractive stock valuations.

I strongly believe one may buy stocks in small chunks if SENSEX goes below 16000 levels as it would be real value investing for long term investment portfolio.

---------------------------------------------------------------------------------------------------------------------------

Rakesh Jhunjhunwala - The Market Makers Video Part 1

The Market Makers - Rakesh Jhunjhunwala - Part 1. Interview of famous investor, stock broker & trader, Rakesh Jhunjhunwala.




Watch : Rakesh Jhunjhunwala - The Market Makers Video Part 2

---------------------------------------------------------------------------------------------------------------------------

Rakesh Jhunjhunwala - The Market Makers Video Part 2

The Market Makers - Rakesh Jhunjhunwala - Part 2. Interview of famous investor, stock broker & trader, Rakesh Jhunjhunwala.




Watch : Rakesh Jhunjhunwala - The Market Makers Video Part 1

---------------------------------------------------------------------------------------------------------------------------

Why should you buy gold now?

It is not a news anymore that Gold price is breaking new record highs everyday. While researching and reading as part of my "food for thought" habit, I came across this excellent article on internet written after thorough research. I thought this is the stuff I must share with IndianStocksNews.com readers.

As it is rightly said, Every sensible investor should have gold in his portfolio, be it physical or thru GOLD ETF. So I have it. But with increasing financial instability globally is making Gold climb the price charts everyday, I decided to research if I should add more Gold to my portfolio at this point of time or not when Gold is already at it's peak?

I came across one article, published by Dr. Ron Paul who is a Republican member of American Congress from Texas, America. He has explained very beautifully, IN YEAR 2006, why Gold prices would increase in coming years, due to deeds of American government. And why American economy will collapse soon. Mind it, he has written all this in year 2006 when Gold was $600 per ounce. Today Gold price is $1800 per ounce.

Read the article by Dr. Paul Allen here.

My thoughts
After 5 years of this article published in 2006, Gold is at $1800 per ounce. 3 times what it was in 2006 in just 5 years. Mostly due to the reasons stated in above mentioned article.

And now America has lost it's credit rating from AAA to AA+. American economy went in recession, housing sector collapsed. Debt has climbed to mountains and for which America has no money to repay it. What is America going to do to keep the show running? Print more money, that will further devalue the dollar and it will further make gold expensive.

I have decided to put more money into Gold, not to make investment gains but to protect the purchasing power of it. Of course I expect it to give me more returns than fixed deposits too.

What do you think? Feel free to share your opinion using comment form below.

---------------------------------------------------------------------------------------------------------------------------

L&T Finance Holdings lists 4% below IPO - Should you buy now?

L&T Finance Holdings IPO listed in stock exchanges debuted to close the first day trading at Rs 49.95. That's a loss of nearly 4% as compared to issue price of Rs 52.

I had mentioned in my post L&T Finance Holdings IPO Analysis that the listing gains for this IPO may not be very good and high.

If we look at the analysis from stock broking firm ICICI Direct,"At current stock price of Rs.50, the stock trades at 1.5x FY13E Book Value. L&T Finance Holdings have investments in subsidiaries to the total of Rs 1.5 per share. Better margins and strong return ratios would allow the stock to trade at 1.8x FY13E BV arriving which is around Rs.56.

It has also sold a 4% stake to Capital International Group at Rs.55 per share. In other words, the stock below Rs.50 is certainly available at good valuations and one may buy stocks of L&T FH below Rs.50 for long term investment portfolio.

---------------------------------------------------------------------------------------------------------------------------

IPO Analysis - Brooks Laboratories Ltd

Brooks Laboratories Ltd is coming up with an Initial Public Offer (IPO) to raise RS.63 crores for expansion plans.

Issue Open: August 16, 2011
Issue close: August 18, 2011
Price Band: Rs. 90 - Rs. 100 Per Equity Share
Minimum Bid Size: 60 Equity Shares
Face Value: Rs. 10 Per Equity Share
Issue Type: 100% Book Building
Maximum Subscription Amount for Retail Investor: Rs. 200000

Brooks Laboratories Ltd was incorporated in 2002 and is in the business of Pharmaceutical Contract Research & Manufacturing. Company manufactures wide range of products catering to critical care segment in Parental Section like Beta Lactam, Cephalosporin & General Dry powder Injectables, Ampoules and Liquid vials, Dry Syrups and Tablets etc.

Brooks laboratories plans to set up a new manufacturing unit in Panoli, Gujarat for manufacturing various pharmaceuticals formulations to the tune of Rs 51.8 crore. It needs Rs 5 crore for long-term working capital.

IPO Grading / Rating:
ICRA has assigned an IPO Grade 2 to Brooks Laboratories IPO. This means as per ICRA, company has 'Below Average Fundamentals'.

Looking at the ICRA rating of Below average fundamentals, it is certainly not advisable to buy IPO in current volatile stock markets. If the L&T IPO with very good valuations can enter stock markets at 4% lower price than it's IPO price, companies with not so strong fundamentals would hardly have any chances of gains.

It would be better to see the listing and performance in secondary market, fundamentals after listing and then decide on investing in it.

---------------------------------------------------------------------------------------------------------------------------

Where is your patriotism?

Whole India and of course you and me being Indian, would be celebrating our Independence day on coming Monday. But are you and me really Independent today? Especially considering the state in which we are today? Is this the same Independent country freedom fighters had fought for? Did freedom fighters expected each and every politician in this country to be corrupt?

Do you know that freedom fighters wanted to get rid of British rulers as British were interested only in grabbing money from India and take it back to “Great Britain”.

Okay. So what are our current set of politicians doing? Aren’t they looting India and taking that money out to Swiss banks and European countries? Aren’t they suppressing voice of people talking against corruption? Can you say today’s Politicians are not corrupt? Can you really? If you say yes, you must be either politician yourself or may be your family member is!

Same is the case of most of the government departments. Freedom fighters were fighting with British police and other systems to get rid of them. Why? To allow Indians to come in those departments and loot India? Ask any IAS/IPS officer aspirant today and what’s his answer in reality? To make money. What were British officers doing? Making money. Where is the difference?

Baba Ramdev and protestors were bashed by police in midnight. Didn’t those visuals remind British raj? Are you and me really independent? Chidambaram, Kapil Sibbal and congress led government threatens Anna Hazare team to not to protest in Delhi, playing politics by not allowing the venue for protests. Isn’t it at lower levels than what British use to do? Are you such an idiot (not 3 idiots way, a real idiot) to not to understand the reality or the government wants us to believe them since they are rulers and what they do is only correct?

All parliamentarians come together when the issue is about doubling their salaries and perks and expenses but when it comes to fight issues like corruption, how can they kill their milking cow? You must be kidding when you expect politicians and babus to act against corruption.

Look at the incidents of land grabbing by government in Uttar Pradesh, Maharashtra (Greater Noida, Maval, Jaitapur). When the poor farmers protested in peace, police literally and brutally fired bullets at unarmed protestors and killed them. Are you really independent?

Just think about the situation of corruption in India and Indian politics/system. If you/your family member are part of this system and are corrupt, shame on you. Change before your next generation spits on your face for spreading corruption.
Where is your patriotism? Have you already planned to go on a trip on this long weekend? Have you planned to watch Anna Hazare’s protests on news channel eating chips and drinking cold drinks instead of getting on road in protests against corruption?

I am not saying support Anna Hazare but all I am saying is “do not support corruption”. Show your patriotism. Show the bastard “servants of people” their real place. Make India corruption free. Leave a corruption free India for your next generation. Do not lose your rights to protest peacefully against corruption. That’s what Mahatma Gandhi had done to get rid of British rulers. Unfortunately, the congress party has been leader of this corrupt Indian politics with Mahatma Gandhi’s photo in each of their offices.

In short, do not lose your freedom. Show your patriotism. Build new India. We need to get rid of bastard corrupt “servants of people”. Wake up India. Wake up.

---------------------------------------------------------------------------------------------------------------------------

IPO Analysis - Tree House Education and Accessories

Tree House Education and Accessories is coming with an Initial Public Offer (IPO). Let's see if you should buy IPO of this company.

Issue Open: August 10, 2011
Issue close: August 12, 2011
Price Band: Rs. 135 - Rs. 153 Per Equity Share
Minimum Bid: 40 Equity Shares
Face Value: Rs. 10 Per Equity Share
Issue Type: 100% Book Building
Maximum Subscription Amount for Retail Investor: Rs. 200000

Incorporated in 2006, Tree House Education is one of the leading educational services providers in India. As per CRISIL report, they operate the largest number of self-operated pre-schools in India. They have 177 pre-schools under the brand name of "Tree House" across 23 cities in India.

Tree House provide a wide variety of educational services to K-12 schools which includes designing curriculum and providing teaching aids, supplying methods for imparting education, organizing extra-curricular activities for students and teacher training.

The pre-school market is just at beginning stage in India. This company can take advantage as an established player of huge market in India which is highly unorganized.

At the offer price bands, the issue is available at P/E of 38.6x- 43.7x its FY12E EPS of Rs 3.5 on post diluted equity. It is much higher than average.

IPO Grading / Rating:
CRISIL has assigned an IPO Grade 3 to Tree House Education IPO. This means as per CRISIL, company has 'Average Fundamentals'.

It is not an comfortable offer for IPO investors and company is not leaving anything on table for investors. In current market turmoil, it could be risky to buy any such expensive IPO.

But it is an IPO in education space which is highly favorable by investors and may attract retail investors. I would never invest my money in such expensive IPO. If you want to take a chance,do it at lower band of IPO price.

---------------------------------------------------------------------------------------------------------------------------

European and US stock markets crash today...again

Just after a day of relief, worldwide stock markets have started the downward journey again. Dow Jones has fallen more than 500 points today. The reason? European bank crisis is spreading. Watch out for Indian Stock Markets too.

The Dow Jones industrials were down more than 530 points before the close today. Gold has hit December delivery at $1,801 an ounce. This is first time that Gold has crossed $1,800.

The two main concerns were crashing European and especially French bank stocks. The other major concern, weak American economy.

The French banking stocks crashed on worries that there are deep problems within French banking system. French government has proposed to consider new tax increases, spending cuts and other budget measures for deficit reduction.

These developments and crashing European/American stock markets would certainly further destabilize Indian Stock Markets. It would be advisable for long term investors to not to buy stocks at this moment and be in wait and watch mode. Certainly there would be buying opportunities when they can buy good stocks at reasonable valuations.

---------------------------------------------------------------------------------------------------------------------------

US Markets sink today...Watch for Indian Stocks

US markets started it's week on very very weak notes today! Huge selling in US stocks. All because of S&P's downgrade of US credit ranking on Friday.

Here are the numbers of fall. It's not fall but sinking. More than 5.5%, 6.6% and almost 7% in a day for indices.

Dow Jones -634.76 (-5.55%)

S&P 500 -79.92 (-6.66%)

Nasdaq -174.72 (-6.90%)

So what would you expect from Indian stock markets today? Do I need to say anything? Would we see 16,000 that I had talked about in last post?

Though Indian Stock Markets have already tank on Monday, reaction of another 300- 400 points in SENSEX on downside is inevitable.

Read the post: Downgrade of US credit rating - Whats ahead for Indian stock markets

---------------------------------------------------------------------------------------------------------------------------

Downgrade of US credit rating - Whats ahead for Indian stock markets

BSE SENSEX has nosedived by 5% in past one week, thanks to shaken world stock markets in fears of US sovereign debt and S&P’s downgrade of US credit. On Friday, S&P’s has finally downgraded the US credit rating from AAA to AA+. So what’s going to happen in Indian stock markets when they open on Monday morning? Let’s try to guess it..

S&P has downgraded US credit rating form AAA to AA+. First time in history, US credit rating has been downgraded. US as a country has definitely been shaken by this S&P’s move.

S&P's managing director John Chambers says on Sunday that there is a one in three chance of a further US credit rating downgrade over the next six months to two years. "We have a negative outlook ... from six months to 24 months and if the fiscal position of the US deteriorates further or if the political gridlock becomes more entrenched, then that could lead to a downgrade. The outlook indicates at least a one in three chance of a downgrade over that period."

World has certainly been shaken inside out and it clearly visible by early trades in Asian stock markets which are bleeding in RED.

But American leaders and economists are not hugely concerned due to S&P’s downgrading as they are sure that US will not get into double dip recession. US would certainly recover soon to walk on growth path, it’s just that it may take some more time.

I think Indian stock markets today would open in red, with a gap on lower side but may try to recover in the day. On the longer side, Indian stock markets may remain volatile for at least may be couple of months. Also, we may see some earnings downgrading and so sell off in Indian stocks in near term that could take SENSEX and Nifty downwards. how much? We can only guess. Maybe 16000? or even lower?

But I guess Indian stock markets will soon be near it’s bottom and that most of the stocks are available at good to attractive valuations levels. Though India has got it's own set of problems to deal with in terms of rising inflation, political concerns and investments hurt due to corruption woes. These things and government's response to them would matter in near future much more for sure.

Small investors like you and me don’t need to rush in this carnage and make long term investing decisions in hurry. One should wait for some time, find good stocks to buy and start buying stocks in small quantities at every dip for long term portfolio. Keep visiting IndianStocksNews.com in next few weeks as I would be posting analysis of some good small cap, mid cap and large cap stocks to buy for long term.

---------------------------------------------------------------------------------------------------------------------------

DOW Plunges 512 Points on Thursday

Dow nosedived 512 points today as American stock markets witnessed it’s biggest fall since the stock market crash of 2008 since people are wary of global economy.


The stimulus in US seems to be just not working and that the US economy is heading back into recession.

People are basically fearing for global economic slowdown again due to recent economic weak data. Jobless claims on Thursday morning showed large number of American are unemployed and that unemployment rate is not going to reduce anytime soon from 9.2%.

Investors on Wall Street are waiting for Friday’s jobs report. Japan's government has stepped in to weaken the yen, and the European Central Bank has decided to re-enter the European bond markets for the first time since March 2011.

All the three major indexes plunged more than 4% today and entered into 'correction' territory which is defined as a 10% drop from recent highs. The Dow, Nasdaq and S&P 500 are down more than 10% from their mid-July highs now.

The market’s fear gauge was indicating 30.5 which is high degree of fear!
Looking at these developments, where do you think Indian stock markets on Friday would head? Southwards is the only answer comes to my mind. And if they follow the same path of 4%, we could see the SENSEX around 17000 mark today!

---------------------------------------------------------------------------------------------------------------------------

Small Cap Stock Story - Tulip Star Hotels

This small cap stock has almost doubled in past 3 weeks. I really do not have any clue whether one should buy stocks of this company. But I would like to share the story I read and you are invited to make and share your judgments.

Tulip Star is different kind of small cap stock story. They are in battle with another company over a Juhu Centaur Hotel. Juhu Centaur hotel is a six acre property at prime and affluent location in Juhu in Mumbai.

Tulip Star is fighting a case with Siddhivinayak Realties. Tulip Start has almost won this case as they have recently got the arbitration award for Juhu Centaur Hotel against Siddhivinayak realties.

Juhu Centaur Hotel is owned by V Hotels Private Limited. Tulip Star holds 50% stake in V Hotels.

As per the arbitration award, they have to shell out and pay Rs. 73 crores to Siddhivinayak Realties. After this payment, V hotels can sell the property as they want on their terms and conditions.

This property could have almost 15 lak square feet of developable area. The valuations for this property can go well over Rs. 3000 crores.

Shareholding pattern of Tulip Star
Promoters hold 57%. In this, COX & KINGS holds 30.4%. Also, 33% belongs to associates close to promoters. So 57 + 33 i.e. 90% of the floating stock is not in public domain. What remains is 10% with general public.

Stock Valuation
At current stock price, market cap of Tulip Star is just Rs. 106 crore. Now, the company, with 50% stake in V Hotels, owns the Rs. 3000 crores property with their share of Rs. 1500 crores.

Tulip Star has 21 crores in debt. At the same time, it has lent 37 crores to V Hotels. This makes it a debt free company.

So the company like Tulip Star that has net value of at least 1500 crores could have the market cap somewhere close to at least 20% of it’s net value. That is 300 crores. So there is tremendous scope for company’s current market cap of 70 crores to grow in near future.

I would like to know your opinion on this one. You are invited to share your thoughts using comment form below.

---------------------------------------------------------------------------------------------------------------------------