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| INVESTING: Paras Adenwala |
| Business Standard / Mumbai Oct 22, 2009, 00:16 IST |
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What sense do you make of the upcoming real estate initial public offers? There is a lot of hype around them. The shares of many real estate companies that came up with public issues in the past are trading below their offer prices. What is the outlook for the sector?
Most companies in the sector were saddled with huge debt and unsold inventories due to the recent slowdown in the economy. With growth returning, the financial markets have improved and real estate prices are on an upswing. These developments augur well for most real estate companies and they have begun to unload inventories at better prices. This cash flow, coupled with fresh equity issuances, is being used to deleverage balance sheets. Fresh equity issues are being finely calibrated with the sentiment in equity markets. Needless to mention, the outlook is promising for the sector if you have an investment horizon of more than one year. However, investors would do well to be discerning while choosing companies in the sector. Companies that have a wide reach, are present across sub-segments, have a good track record, have a healthy balance sheet and have a management stake in excess of 51 per cent could be considered for investment.
I want to trade in exchange-traded funds (ETFs) that track Sensex and Nifty. My strategy will be to accumulate units when markets correct and sell when they reach my targets. I want to know whether it makes more sense to trade in ETFs of Sensex (index of 30 companies) or Nifty (of 50 companies). Between the two, which one would be less volatile?
The more broad-based the index is, the lesser is the volatility. Higher the volume, the lower is the spread. The choice, therefore, is Nifty.
Can you give me a few parameters that I can look at before buying a stock? I don’t have any background in finance and want to avoid calculations. Suggest some parameters that are easily available in newspapers’ stock pages or websites. Also, tell me how to look at them.
Just as a doctor helps cure ailments, a fund manager helps an investor invest profitably in equity markets. It is strongly recommended that investors trust their hard-earned savings to professional fund managers. Stock markets are not for amateurs. Fund managers with mutual funds and portfolio management outfits have delivered attractive returns over the long term. In case an investor believes in passive investing, buying the index or an index fund is recommended.
Does it make sense to invest in mid-cap IT companies right now? I understand that with the recovery in the US market, these companies will benefit. I have also read that there are possibilities of these companies getting acquired. If yes, what should be the period for which I should hold these stocks?
Most Indian IT companies get a large part of their revenues from developed economies, more importantly, the financial sector in these economies. The financial crisis took a toll on several reputed and marquee names in these economies. Consequently, the IT sector felt the pinch. With restoration of some stability in these economies in general and the financial sector in particular, we are witnessing initial signs of improving visibility. With valuation differential between large- and mid-caps ranging between 400 basis points (bps) to 700 bps, some mid-cap companies with robust business models can be invested into with a one-year perspective. However, the weakness in the dollar could play spoilsport for the sector.
Paras Adenwala, Managing Director & Principal Portfolio Manager, Capital Portfolio Advisors.
Send your queries at yourmoney@bsmail.in
Disclaimer: The author may have interest in stocks that belong to the sectors discussed.
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