A stable Congress-led government is here and it is likely to call the shots over the next five years.
Given this scenario where the new government is not hampered by the Left parties when it comes to taking big-ticket economic decisions, it is almost certain that India will be on the fast-track to reforms.
What does this mean for the markets? What does it mean for the investor?
How can you best make use of your money in these times? Is it mutual funds or equities you should look to? Just what should you do?
Well known investment advisor Ajit Dayal offered some valuable tips during a chat on rediff.com on Tuesday. Here is the transcript:
Ajit Dayal says, Thank you for attending. Lets try to make sense of what's happening around us.Ajit Dayal says, My concern over companies like DLF is they have huge land banks bought at prices which may not be publicly visible and the estimated selling price of the finished, constructed product may not be what they initially thought. Basically, the value of assets may not be as high as investors expect and the profitability from those assets may not be as great as investors expect. Not my preferred sector.
hardayal asked, I have invested at 14000 level in Top200, Birla Frontline. Should I continue to hold & average out the investment ?
Ajit Dayal answers, at 2009-05-19 15:39:39As you are aware I have set up the Quantum Mutual Fund. My money is lying in Quantum Long Term Equity Fund because I like to inevst in companies where I can trust the managements and where i like the businesses. Yes you should be buying mutual funds - how do i convice you to buy Quantum Long Term Equity Fund?
papoo asked, Sir, Sir purchased ongc@900 and ntpc @ 170. What is the future prospectus?
Ajit Dayal answers, There is underlying value in many PSU companies like ONGC. However, this value can only be unlocked if the governement and the bureaucracy does not interfere with the daily running of the companies. These stocks may not move for years but they can have a sharp upward movement if their CEOs are given true independence.
walun asked, Post election euphoria, do you think the market can sustain the level of 14000 since fundamentals has not changed, the economy is still down, jobs are being lost, 33% degrowth in exports, IT secotr which is heavily dependent on exports to US and EU and these economies not doing well, the markets can they go still further up even if India GDP grows at say 5 to 6%.
Ajit Dayal answers, India is not that dependent on exports. The fundamentals of India's economy are more influenced by domestic consumption. Yes, there are job losses in export linked areas so the rate of growth may not be the 8% that we have witnessed recently. I believe the markets can touch the 21,000 level by June 2010 on the back of a decent budget and an average monsoon.
skmishra asked, Which sector will be in force in future. Pl also advise the tips which will move when market moves.
Ajit Dayal answers, I do not give tips but many sectors will do well. Your best bet and my best tip is for you to log on to www.quantumamc.com and download the offer document of the Quantum Long Term Equity Fund or log on to Equityamster.com and get their research. Full disclosure I am a founder of both these companies.
raju asked, I've invested 10k for 3 yrs in aviva policy but now they say if I don't pay premium the amount will become 15k.... how to beat such cheats
Ajit Dayal answers, The distribution mechanism of insurance and mutual funds needs a dramatic overhaul. While I believe that people should earn their fees for advice, I am a strong disbeliever in wrong advice given by many agents and distributors to earn higher commissions. My request to you is to write to IRDA.
nitin asked, Mr dayal i have rs 10,000 i want to invest where should i.should i go for SIP or stock.if stock which.remember i have a vision of 3 yrs
Ajit Dayal answers, Three years may be a little too short for stock market investments. 5 years is preferred. Buy a mutual fund and at this level I would not want recommend an SIP but a one shot investment in a fund that is best suited for your risk tolerance.
sad asked, Hi can you tell me how much time this market will be stable,is there any possibility going down again to 11k or will it go up.plz shere ur view on the vcurrent market situation ,is it best time to sell or hold to mkt go up
Ajit Dayal answers, From the level of 14,000 in Sept 2008 the Indian markets fell to a level of 8,000 in October 2008 because Lehman Brothers of USA went bust. Between October 2008 and February 2009, the Indian market bounced around 8,000 and 10,000 levels three times. By March 2009 the Indian market broke through the 10,000 levels and was 12,137 before the election results were announced. i think we are in a new range of 14,000 to 16,000 till budget day - sometime in July. If the budget is good the market will head towards 18,000... if the budget is not so exciting the market will head towards 14,000. I do not believe the market can head towards the 10,000 to 12,000 range till there are some MAJOR political and social shocks.
akyyyy asked, Hi, i hv 325 RPL@158, 200 GVK@36, 100 GMR@135, 11 SBI@1700, 100 dena bank@48, 10 wipro@456, 10 TCS@950, 20 RIL @2400, 100 pet lng@58. Hows my investment?How much time before i see any returs??
Ajit Dayal answers, That's a lot of stocks you have been trading in - or investing in. I do not have any views on where stocks can be in the short term. But in the long run, stocks we buy in the Quantum Long Term Equity Fund tend to be in businesses that we like over multiple economic cycles (all the stocks you own are in good businesses) and we like to own stocks where we can trust the management (many of the stocks you own would fail this test - can you guess which stocks I am referring to?!).
Lallan asked, I am politician and I have sent 25000 Crore to my Swiss Account, how can I get it back with safe investment
Ajit Dayal answers, There are many ways to bring your hard earned money from all the corruption and deals that you have done. One easy way is to tell your Swiss bank to remit the money to your foreign bank account in India. Of course the problem with that is that you will attract all the smart smooth-talking private client wealth managers and they will reach your house before your money from your secret numbered Swiss bank acocunt gets to you. Which means that before you can even touch your money it will have vanished in fees and bad advice. The other way of bringing your money back to India is to tell your Swiss banker to buy you P-Notes and use your hard earned money to punt in the Indian stock markets. The risk there is that you will end up buying stocks of your friends who also have Swiss bank accounts and knowing how intelligent they are (just like you) they will fund ways to use your money to siphon it into their own Swiss bank accounts. By the way, pl do not invest in Quantum Long Term Equity Fund because you will fail our KYC norms. Best wishes.
Ghajni asked, i want to invest 5 lac for 5 years..please suggest where shall I invest ?
Ajit Dayal answers, It depends on how old you are and when you need the money, but my general advice is to keep six months, 12 months, or 18 months of the money you need to live every month in safe places (deposit with HDFC, PSU Bank or maybe Quantum Liquid Fund) and then invest 80% of the balance in equity mutual funds or direct equity stocks and 20% in gold ETFs like Quantum Gold Fund.
Mohan asked, I have investments in ICICI. Will it be ok for next two years.
Ajit Dayal answers, ICICI is a fairly aggressive bank that has, in the past built a business based on maximizing market share. That scares me. Bankers are not supposed to go around the company boasting how many accounts and clients they have. A banker's job is to ensure that they have collected money which they had lent out. I am not sure whether ICICI Bank is reformed now - like a teenage child that matures and gets more steady. I would prefer putting my money in a relatively more stable financial company like HDFC.
Lulu asked, when market will reach to 30k ?
Ajit Dayal answers, You really must be a BIG BULL. Or you are well connected with the other gentlemen who has 25,000 cr in his swiss bank account. Investing in stocks is for the long term but as you drive along the road you look for certain milestones which are not too far away. As of now I can visualise the milestones leading towards a 21,000 index and when I get to see the milestones for a 30,000 index, I will certainly write about it. By the way, I hope yo uare referring to a 30,000 index on the Sensex and not the Nifty because if you are referring to the Nifty, then Delhi door hai!
Sridhar asked, How to monitor DII and FII investments in share market online?
Ajit Dayal answers, You can get the information on the Sebi website - sebi.gov.in
pankaj asked, is it right time to make new investment
Ajit Dayal answers, Yes it is. On a 12 mnth view there is a chance that you can earn 50% and it is possible that your investment could lose -10%. So i think it makes sense to put money to work because of the lower potential loss and the higher potential profit.
rajendra asked, dear sir i have 200 share @218/-Of Suzlon & 200 of India bulls financial services@292/- should i sold or hold ???
Ajit Dayal answers, If you bought them 3 months ago, you are a very lucky man. If you bought them 18 months ago, you must be very tired from lack of sleep. You shoudl make investments in companies that allow you to sleep well at night.
Kunal asked, Hi, as market is going up frm last couple of days,should one invest in stocks, mutual funds or still continue investing in debt? can gold be considered as investment at this time? Thanks.
Ajit Dayal answers, I had refered to this earlier in a previous response. The simple asset allocation model is a mixture of gold, equity (directly in stocks or via mutual funds) and fixed income bank deposits. You should ALWAYS have investments in these three asset classes.
Apurv asked, Is equity safe for investment right now??
Ajit Dayal answers, Nothing is safe. There is risk in everything one does in life. Buying equity shares - either individual stocks directly based on equitymaster research or investing in Quantum Long Term Equity Fund - is also risky. They key is to understand the risk and to "price" the risk correctly when trying to estimate your potential gain or potential loss from such an investment. But yes it is a good time to buy into the stock market.
sagar asked, Hi Ajit, is it still good time to invest in stocks are did we miss it when it was in 8K's? Also please let us know which MF's are best for a first time investor?
Ajit Dayal answers, The increase from 8,000 to 14,000 has "cost" you a 75% because you were not invested. As i have said in other responses i believe the market will rise another 50% from here to 21,000 by June 2010. Imagine you have reached Churchgate station and the train has started moving and is leaving the platform area. Would you wish to jump on it to get to the next station? Or would you rather wait for the next train? You need to decide based on your approach and attitude towards risk.
bhawar asked, is investing in goldbees monthly basis in NSE advisable?
Ajit Dayal answers, Investing in gold is a good idea. Though I wish you would consider investing in the Quantum Gold Fund. Given that the global central banks are still printing large amounts of money this should result in inflation and, as asset prices increase, the price of gold could surge to US$ 1,500 per ounce which is about 60% more than today's level.
Aditya asked, Hi Ajith, Im Aditya From Bangalore.For a 1-3 year term, can you suggest me few good stocks from Power,Telecom,Banking ?
Ajit Dayal answers, My best advice to you is to look at the research reports on www.equitymaster.com and then figure out which risk return profile suits you best.
vinod asked, hello sirji i want to invest my entire amount earned that is toto of rs 1cr but have zero knowledge of investment can u please help me in details where to invest and how much return to expect with in a period of 5 yrs
Ajit Dayal answers, Since you are a first time investor and since you have Rs 1 cr to invest may I suggest you contact Sailesh at sailesh@personalfn.com since he can build a wonderfully simple investment plan for you. And this invitation is open to anyone else on the webchat. By the way, I am the founder of Personalfn.com.
raju6754 asked, What is your suggestion on REAL state stocs?
Ajit Dayal answers, The real estate market is in an excess built and over capacity mode across the country. Many people with great political connections used foreign money to buy raw land; used their connections to convert this useless land into valuable zoned land. They then sold this at a huge profit. They used these profits to buy more land at higher prices and hoped to play the same game. However, in most cities their there is too much construction and excess supply of apartments, homes and office space at available prices which people cannot afford to buy or rent. These real estate companies have used money from the public banks to bail them out of their problems. While the banks - under guidance from the government - can give more loans to the developers to keep them afloat, consumers still cannot afford the high priced product. Therefore real estate developers will have to sell their available square feet at lower prices (there is no shortage of buyers at lower prices) and this reduction in selling price will hurt their profit margin. This is the logic why I do not really like real estate stocks. However, the money power of real estate developers is very tempting to most politicians and this money power may bail out these stuck real estate developers and their battered share prices.
Ajit Dayal says, Well, all of this took 60 minutes and thank you for hearing what I had to say - you can get your dose of sensible views on the news from The 5 Minute WrapUp (a free daily e-letter from Equitymaster). You can sign up for the same here - http://www.equitymaster.com/5minwrapup/5min.asp?regsrc=26
Sign up for The Honest Truth and usher yourself into the world of smart investing. Act Now! It's FREE! Click here.
