KYI: Mkt puts a stellar show; expert picks star performers

And, as the upcoming week is the stress test for the market to reveal whether the rally has any real steam on the upside, Madhumita Ghosh, senior vice president - PMS and research at Unicon Financial Intermediaries, shares her expert call on various stocks queries posted through Moneycontrol.com's initiative 'Know Your Investment' (KYI).

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

Vijay Nikam, 29 years, Professor: I want to start trading in foreign currency and cap market, is it the right time to start?

Ghosh: Trading can be started with stop losses.

Mohit Gupta, 28, service: Is this a right time to invest in the market? I have some stocks, do I average them or should I wait?

Ghosh: One can start accumulating as valuations are attractive but investment should be gradual and will depend on the scrips that one is holding.

Sunil Kumar Goswami: What is the future of Bartronics ?

Ghosh: Bartronics is high working capital that will impact operating cash flows, going forward despite a healthy debt/equity ratio of 0.97x as of FY11. A big negative for the company is the deferment of the ‘Aap Ke Dwar’ project (a government-to-citizen project where Bartronics will provide kiosks for a variety of services a citizen would need from various government departments), where the company has already spent around Rs 190 crore. If the project is cancelled, there would be huge write offs and thus impact shareholder value negatively. We believe that the stock has priced in most of the negatives in the present downtrend. We recommend a hold on the stock for a price target of Rs 54.

Pardip Arora Pardip, 27, call center employee, part time broker: I want to know about Texmaco and Mahindra Satyam , what is the future target?

Ghosh: The company has demerged its rail and engineering division to Texmaco Rail and Engg (TREL) in November, 2010 and the non-core business of the company (TXM) would remain real estate which includes Delhi land at Kamlanagar of 21 acres, Kolkota land at Sankrail of 144 acres and Global Business Park, Gurgaon of 66,500 sq ft office space.

Since, this would be the first year of the company after demerger; it is not comparable with previous year data. Given the small size of its land bank, no material plan to do business at pan India level and higher cost of capital for real-estate companies, high risk investors should better stick with large cap companies within the sector.

Mahindra Satyam, after turbulent two years, the new management is has begun turning the company around to comparable industry level growth and improving margins from 3% in FY10 to 15%, currently. In view of company’s improving operational efficiency, robust employee addition for FY12, expansion in margins, return of old customers, increase in discretionary IT spending and efficient settlement of almost all major pending law suits, we remain bullish on Mahindra Satyam. We recommend a buy on this stock for a price target of Rs 90.

Bharani Dhar Reddy, 23, part-time investor: I have HDFC gold ETF, RIL and Coal India . What is the strategy going forward?

Ghosh: One should continue to hold all the three. For future, they should give very good returns. Gold ETFs  particularly should do well in the long term.

In line with market correction, RIL has fallen from year high of Rs 1125 to Rs 712 and trades at 12.5x on TTM earning. Recently, RIL has concluded deal worth USD 7 billion with BP which would enable them to access the later’s technology. Besides, the company aims to be debt free by FY14 and surplus cash would be invested (over long term) in insurance, telecom and retail business which would be the catalysts for the stock. Both from mid term to long term perspective, RIL is good opportunity to buy at current level in anyone’s portfolio.

Coal India should be accumulated as coal has a heavy demand from the power sector and is not available in plenty.

Satyam Prakash:  What about investing in PFC , IBSEC and Jet Airways ?

Ghosh: PFC is likely to benefit from India’s 12th Five-Year Plan (2012-17) target to add over 1,00,000 MW of power generation capacity, which require an estimated investment of Rs 4 trillion. Following IFC status, the company should be able to increase its lending by Rs 20,000-50,000 crore. However, to take advantage of that enhanced lending flexibility, company sought an approval from the RBI to raise USD 1 billion from ECB. At CMP stock trades at 1.1x its book value, one can invest in PFC from long term perspective for target price of Rs 178.

The group of IBSEC focuses on financial services, stock broking, real estate and power. The group has exited unsecured lendings, given up its insurance licence, almost exited its much-hyped retail venture, whittled down its exposure in a commodity exchange and has dropped its banking ambitions. With broking yields falling IBSEC in near future is likely to see some pressures on its margins & profitability. We have neutral rating on the stock at CMP (0.8x P/BV).

Jet International passenger growth remains a robust 20% with strong load factors at 80.5%. New routes to Johannesburg and Milan reported load factors at 70%. Strong demand season for international travel we believe the company can be an outperformer with the target price of Rs 350.However, fuel costs continue to remain the key concern for the company.

Sumit Roy: I have 150 shares of Gitanjal Gems at Rs 259. What should be my target for Diwali?

Ghosh: The company is strong and with the festival season it can move up to Rs 350  in case market remains  around 5,000 to 5,200 levels

Sandeep Dey: I want to make portfolio in the power sector. I am looking for long-term investments. Where should I start buying and what are the companies that I should look  for?

Ghosh: One can look into Transmission and EPC companies and power equipment. Companies in renewable energy could also be accumulated.

Power generation: CESC , Tata Power

Transmission: Power Grid , KEC

Power equipment: BHEL , Techpro

Renewable energy: Orient Green power , Suzlon

Power finance: REC

Amit Mehtani: How to select a blue-chip when all are reeling under pressure due to FII selling?

Ghosh: Selection of blue chip will be dependent on the following:

• Growth in earnings should be stable
• Strong balance sheet with high credit rating
• Good track record with strong corporate  governance
• Should be Outperforming the   sector growth
• Sustainable  business model
• Presently having higher domestic exposure
• PEG (price earnings to growth ) should be lower compared to sector
• Should have an edge to competition
• Market cap should be high

Anshuman Parasar: Is the worst over for auto, banking, realty, IT, infra stocks or is the Sensex headed towards 10000 by December 2011 ?

Ghosh: According to us, Sensex is not headed towards 10,000 as of today. We feel the risk reward ratio is in favour of interest rate sensitive sectors. However, one has to be selective in picking the stocks in banking (exposure to infra and realty should be less), infra (where quality of order book is good, have execution capability and PEG is lower compared to peers). One can avoid realty. Selective auto two wheelers can perform and fundamentally the downside in IT is limited.