A Question of Answers - Mail replies

I am holding Tata Motors at an average price of Rs.815. Do you see any recovery possible in near term?

Kudos to Tata Motors for making the world most luxurious car brand come under the Indian portfolio. Having said that tata's have surely got a brand image but only to harm it's bottomline. The acquisition is a difficult to be turnaround with the terms and conditions these acquisition has been negotiated on. I would wait for atleast 3 quarters to see how things move on the integration front. As of now we have a Sell on tata motors. Their domestic brands are as well losing market share to hyundai, maruti etc.

I would rather bet on Mahindra and Mahindra in automobile sector for a term of 2 years. This brand is gaining good global presence. Again with high inflation rate and a possible rate increase the outlook of automobile sector looks very gloomy at this point.

Your views on Abhishek Industries and vesuvius India?

Both are one of the few market leaders in the business they operate in.

On Abhishek Industries

I would say Invest in this stocks if you have patience and also believe in the company. Abhishek is definitely one of my favorites. The company as such has seen a strong topline growth of around 20 to 30% y-o-y. The bottomline has been dented mainly due to high interest cost and depreciation due to the huge capex the company is undergoing.

Two negatives to the companies

1) Rupee appreciation and a possible US recession
2) High interest rate would adversely affect its bottomline due to its huge debt leverage.

I would advise investors to use any fall from the current level as an opportunity to enter into Abhishek and take advantage of its aggressive capex returns.

On Vesuvius India

Vesuvius India is one of the largest manufacturers of refractories which is used in the steel Industry. With huge capacity expansion in the domestic steel sector the order book is expected to remain strong for Vesuvius. Moreover Vesuvius is almost doubling its unshaped refractories capacity and this is expected to be done by FY09. Add on to this the company is debt free which makes it a nice hedge to the rising inflation and interest cost. The stock at current market price of Rs. 208/- trades at around 13 times it's trailing 12 months EPS of 16 which provides a room for around 30% return in and around a year.

I have been following your blog continuously and you have been having a bearish view of the market for almost 6 months now. With most of the stocks correcting more than 40% has your view changed on the Indian Markets?

The global outlook still looks negative with the US seems to be already in a recessionary phase. As of Indian markets are concerned I would be cautious and go for stock specific buying. I would look for undervalued stocks with strong fundamentals. I will still hold some amount of Cash in hand for the worst.

With the Inflation rate touching 7% and a possible rate hike in place it is advised to Invest in companies with fewer debt in place at the same time having good business model to sustain with.

Thanks for your recommendation on Neyveli Lignite, I made a hefty profit on that stock. At the same time I had brought JK Lakshmi Cement on your recommendation and it is down almost 40% from my purchase price. What is your view on that?

I am still holding JK Lakshmi cement and positive on this stock from a term of 18 to 24 months. True the correction has really hurt the stock to a larger extent but the business fundamentals still look solid.

You seem to be too much positive on Orchid Chemical. After the promoter sale their holding has come down to almost 14% now. Do you not see that as a negative sign?

I don't think so. The promoters of Infosys are holding only 16% in the company. This does not make Infosys a non promoter friendly company. Still as I reiterated earlier there has been some negative news on Ochid and to add on to this lot of liquidity has been floating on the market. I feel time will heel the Investors negative bias on the company and Orhcid will regain it's lost glory.