KYI: Santa missing, but here's expert tips for a merry Xmas

History has it that Santa gets it cheer to the Street each year. What is known as the phenomenon called the Santa Claus Rally usually makes it to the Indian markets each year, as investors look at valuations and they appear attractive at this point in time. However, the stocking at Dalal Street over the two days has been swinging on and off gifts for this Christmas.

Amid the seesaw sentiment in the market, as investors wonder if Santa missed us out this time around, Gaurav Dua, Head of Research, Sharekhan shares his expert calls on stock queries posted through Moneycontrol.com's initiative 'Know Your Investment' (KYI) to ensure you have a merry Christmas!

Below is the expert advice to all the questions you asked us on our Facebook page :

Deepak Mittal: Will there be a movement of 500-600 points in the Nifty, in coming months too? If so, which strategies do you recommend for F&O?

Dua: Ideally, derivative instruments should be used by retail investors for hedging purpose. This can be done by buying in the money/near the money puts and selling out of the money puts. This provides a kind of cover for your portfolio in falling markets at cost of 2-3%. Given the downtrend, other obvious bearish directional strategy is to buy puts with stop loss of 4,800-4,850 for the next month.

Surendra Patil: How high do you think can Nifty go before its next slide?

Dua: I am not a technical analyst but I think Nifty can retrace 50% of its recent fall and touch 4,800-4,825 levels.

Avik Mullick: Is this the perfect time to invest in market?

Dua: Yes, we are already at 11.8-12x one year forward earnings, perhaps 12.5x, if one takes into account further downgrade of earnings. Hence, this leaves a scope for 10-12% of downside in case of a breakdown from here. Historically, it is not possible to catch the exact bottom or accumulate the desired quantity of stock at risk bottom prices. Thus, serious investors can start deploying funds in a staggered manner.

However, the downside risk in individual stocks could be much higher and it is advisable to avoid buying in stocks with high debt-equity, high pledging of shares or ones with large forex exposure.

Sorbh Gupta: I had invested Rs 8,000 in HCL Infosystems at Rs 65 per stock. Today, it is at Rs 42-43. How do I trade this stock?

Dua: HCL Infosystems' growth outlook is challenging due to tough business environment and the PAT is expected to decline in FY12 as well. However, the valuations are quite supportive at 5x FY2011 earnings; price-book value of less than 0.5x and dividend yield of close to 9%. Thus, there is no need to panic and you could accumulate at lower levels with 12-18 months view.

Naveen Prabhu: Will DLF cross Rs 224 mark?

Dua: We have a cautious view on real estate sector and do not advise holding on to stocks with high debt equity ratio.

Pushkar Maniyar: What is your call on Tata Steel & Jai Corp ? I am holding 100 shares at Rs 550 and 200 shares at Rs 80, respectively.

Dua: Tata Steel is looking attractive after recent sharp correction. However, it is a high beta stock and could remain volatile in the current global environment. In this space, we have investments in Steel Authority of India (SAIL) as it is a cash rich company available at good valuations - discount to book value. Moreover, the proposed joint venture with POSCO would be a big positive in the long run.

Bhavesh Lachhiramani: What is your call on SBI and Infosys for long-term investment?

Dua: We are cautious on IT sector despite the benefits of rupee depreciation. However, we believe that TCS is a better stock to hold in the IT sector, as compared to Infosys. TCS has shown better growth in business volumes and has better growth outlook in the near-term. So, it is better to shift to TCS.

SBI can be accumulated in a staggered fashion with investment horizon of 12-18 months. However, among the public sector banks, we prefer Bank of Baroda due to better quality of assets and superior track record in the past few years.

Umakant B Nimkar: I am investing Rs 10,000 per month SIP in HDFC Prudence Fund, but I am loosing my investment. Should I exit?

Dua: HDFC Prudence is among top performing balanced funds. So, continue with your systematic investment plan. The correction in the markets actually helps your participate at lower levels and would improve your overall returns over the longer period of time. You could also invest in pure equity large cap schemes at the current level.

Paresh Zawar: I have 1000 shares of Shree Ashtavinayak at Rs 5. What do you think I should do - hold or sell? Also can you suggest some more good companies to invest in at this point of time?

Dua: In the movie production space, we track and prefer Eros International Media which has a much superior track record, healthy balance sheet and a strong pipeline of movies. For investment, you can shift to Eros Intl Media in the same space.

Kumar Vikas: How do you think one should trade Kwality Dairy ?

Dua: The erratic price movement does not give us any kind of comfort and is only meant for high risk speculators or trades.

Disclaimer: "Sharekhan Limited, analyst or the dependant of the analyst might be holding or having the position in the above scrips"