Know Your Investment: Expert takes 'stock' of your stocks!

ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets

This weeks moneycontrol.com's initiative, 'Know Your Investment' with Anita Gandhi, institutional head cum whole time director, Arihant Capital Market, brings you answers to the queries you asked us on our Facebook page last week.

Vishal Jain: Will the current rally end soon or continue up to 22,000?

A: Current economic conditions do not imply a one way rally. Over a period of time, a fall in interest rates and improvement in fiscal deficit are required for sustainable rally in the market.

Saikat Das: What will be the future of Manappuram and Muthoot Finance ?

A: Muthoot Finance posted good set of numbers for Q3FY12, with strong loan growth and stable asset quality. In the case of Manappuram, the quarter witnessed continued business growth momentum on the back of robust disbursements and large branch network.
 
However, the regulatory hurdles continue to remain for these gold finance businesses making them high-risk-high-return stories. Expect the stocks to remain under pressure. Though they serve a good bet for the medium to long-term considering their high return ratios any change in banking regulations related to gold loans can damage the business model of NBFCs. Proposed securitisation guidelines from the RBI can impact the NBFC funding profile which in turn may lead to increase in borrowing costs.

Further, increasing competition from banks would lead to margin reduction for these companies given that NBFCs charge higher interest rates vis-a-vis banks. Concentration of portfolio for these companies adds to the risk. For instance, Muthoot derives almost 98% of its revenues from its gold loan business.

Anshul Mahajan: What about Karuturi Global . Will it go up?

A: Generally this stock moves up towards Valentine Day as its revenue from the sale of roses increases. But since it's a company having a global presence, one must look at it from an overall perspective.

Neeta Maingi: I have some ADAG stocks. Should I hold or say goodbye to ADAG?

A; All the businesses have very good potential. But, all of them have risen substantially in the last one month, so some profit taking is advisable for short-term investors.

Mitali Mohite: What is your outlook on SBI and Reliance Industries ?

A: Both are good from a long-term perspective. SBI results will have an impact on the price. RIL's share buyback reflects confidence of management in the Company.

CA Mansi Arora: What will be the future of Telecom companies like RComm ?

A: In general, we believe that the sun has set on the telecom growth story that we saw in the early part of the first decade of the millennia. A saturated market, difficulty in increasing call rates, declining ARPUs (average revenue per user) and a very high-value 3G auction which straddled the already debt-ridden telcos with even more debt, makes it difficult for us to see any major upside in the telecom companies.

With respect to Rcomm, the company suffers from higher debt burden. The company for the present has arranged for the payment of USD 1.18 million FCCB due on March 1 from Chinese lenders which has given a short-term fillip to the company's stock. We, however, remain cautious about the company's growth prospects. The company's numerous failed attempts to sell its tower business is another area for concern.

Priyanka Deshpande: Which stocks should I buy now for the long-term?

A: The market moved up sharply in the beginning of calendar year 2012 with lower market participation. So it is recommended to buy stocks on the decline. Bajaj Auto in the two-wheeler space, M&M in the four-wheeler space, BOB in banking, Polaris & KPIT Cummins in midcap I-T, Godawari Power & Ispat Ltd in midcap metal companies can be purchased at lower levels.

Kunal Kothari: I have SRF at Rs 250. Should I hold, buy more or sell?

A: SRF has high dividend yield of more than 5%. It has Return on Capital (RoC) employed of 33%. The company has its board meeting on February 13 for an announcement of interim dividend and results. It is currently trading at PE of less than 4 and its business is doing well. All this suggests a hold on the stock.

Padma Venkatraman: Considering Tata Steel has had a bad quarter and China demand for metal is also not looking good, what should I do with the stock? What is your outlook?

A: Tata steel reported consolidated turnover of Rs 33,103 crore against Rs 29,089 crore last year. Consolidated deliveries came marginally lower at 5.84 million tonne against 5.9 million tonne last year, largely on account of lower volumes from South East operations.

Consolidated EBITDA per tonne during the quarter came in at USD 62 per tonne against the estimate of USD 10 per tonne. Notably, the company took inventory write down of Rs 741.7 crore that effectively gets translated into profit and loss account as expenses. Jamshedpur expansion (2.9 million tonne) is expected go on stream by FY12-end.

The company is looking at an additional volume of 1 million tonne from that capacity. Full year guidance for domestic operation would be 7.6 million tonne. We are positive on the company. Every dip in the price should be taken as an opportunity to buy. Only if Europe faces a deep recession can it be a cause for concern.

Harsha Jethmalani: Unitech or DLF , which is a better bet from a long-term perspective?

A: Between the two, DLF is better as it's a pure real estate play and is showing signs of improvement in the profitability. In terms of PE, DLF is expensive compared to Unitech.

Pal Rajkhowa: What will be your target for HUL now?

A: With strong support at Rs 370, the stock has upward potential of Rs 416 and Rs 440. It needs to break Rs 410 with good volumes.

Shaheen Mansuri: Will Jet Airways cross Rs 400 in the near-term?

A: It has possibility of first pullback to Rs 280, but has an upside potential of Rs 440 in the near-term.

Nachiket Kelkar: FMCG stocks have given stellar returns over one-year amid uncertainties in the overall market. Now that the market seems to be picking up, will FMCG stocks remain the flavour of the season? Would it still be wise to invest in FMCG?

A: Most of the FMCG stocks are trading in the PE range of 25 to 30.  These are not cheap valuations in the economy which is slowing. Proctor & Gamble announced loss of Rs.335 crore which was reported recently, they made loss due to very high advertisement expenses, which indicates that some global giants are taking losses in our markets to capture market share. This also indicates pressure for the segment.  It will be advisable to buy stocks on dips.