The Recovery Stocks Market Playbook: What's Next?

We continue to believe that March 9th likely marked the low of the banking crisis and perhaps the bear market. While we don't mean to beat a dead horse, our reasoning is that the combination of the Fed's actions, the fiscal stimulus package, the creation of the PPIP's, and the change made by FASB will wind up putting a dagger in the heart of the banking crisis. And in our humble opinion, with the end of the banking crisis comes the end of the need for the market to discount the potential for things to get worse in the economy.

Therefore, we feel it is probably best to start looking ahead. So, this weekend we thought we'd take a look back at history to see if we can't come up with a playbook for what to expect from the recovery phase in the stock market.

With any attempt to forecast the future comes the requisite caveats, the biggest of which is that we just don't have very many Bear markets featuring declines of more than 50% to draw from. Thus, our sample size could be considered a bit skinny from a statistical standpoint.

At the same time however, we will add that if we didn't think the exercise would be worthwhile, we wouldn't be wasting your time with it!

Is Buy and Hold Back?

For starters, we should point out that we don't believe that top stocks are about to embark on a secular bull market (think 1982 - 2000). No, the combination of the debt levels in the economy and the dueling crashes in stocks and real estate suggest to us that we may see a period of retrenchment and debt reduction among consumers. This period, which is likely to last many years, will feature more savings and less conspicuous consumption.

Therefore, we believe that we are likely in for a prolonged period of mini-bull markets and mini-bear markets while the economy recovers from the latest boom/bust phase (think 1965 - 1982). So, despite our proclamations that we've likely seen the worst of this phase of the bear market, we will not suggest that it's time to set it and forget it in the stock market.

In short, we are of the mind that the next several years will reward an actively managed approach to investing. There WILL be opportunities for profit, just as there have been over the past decade. However, let's not forget that the Lipper Large Cap Growth Fund Index was down more than -34% (-34.27% to be exact) for the ten years ending 12/31/2008. So, this is definitely not the time to return to the buy-and-hope approach.

Although we run the risk of belaboring this point, we want to make it clear that we are not purporting that everyone quit their jobs and begin spastically trading every wiggle and giggle in the stock market. But, we do think that investors will need to be more actively involved with their portfolios if they want to see growth over the next several years and that it wouldn't hurt to have a plan to play some defense every once in a while.

What's Next?

So, where are we now and where are we heading next? To begin with, we've not been shy about suggesting the current rally will wind up being more than just a bounce. And given the fundamental changes that are occurring right now, we feel pretty good about saying that we're currently in the process of exiting the bear phase and transitioning into a cyclical bull phase.

Looking back at history, the analysts at Ned Davis Research have identified five periods that can be used as a guide going forward. We'll call these moves mini-bulls that occurred within the context of a major bear market cycle.

First, let's look at the periods and the returns that were generated from these mini-bulls for the S&P 500:

Mini Bull Markets w/in Major Bear Cycles
Mini-Bull Period	% Return S&P 500
Nov 1929 - April 1930:	+45.8%
March 1938 - Nov 1938:	+62.1%
May 1970 - May 1971:	+51.2%
Dec 1974 - Sept 1976:	+65.9%
Oct 2002 - Oct 2007:	+101.5%

Source: Ned Davis Research

Using History As Our Guide

By doing some quick math, we can see that the average gain of these mini-bulls has been +65.3% (and for you stats aficionados out there, the median gain was +62.1%). Therefore, if - and this is a mighty big IF - the current rally does indeed become a mini-bull and IF the return falls within the historical average, we can expect the S&P 500 to climb somewhere north of 1100 before the bears begin to growl again.

The first point is that the S&P could gain another +33% or so from Friday's close if things go according to the playbook. And since hot stocks usually don't run in a straight line, it would appear that there is still time to find a way to profit from the move.

The next important part of the playbook is to attempt to identify the likely duration of a mini-bull move. And again, while our statistical sample size is small, it does help to look at what we might be able to expect going forward... remember, history doesn't repeat, but it often rhymes.

Using the five cases illustrated above, we can see that the shortest mini-bull was the first one, which lasted 155 calendar days; while the longest one was that most recent, and lasted 1826 days. Since the 2002 - 2007 move was nearly three times as long as the other four, we'll toss it aside. Averaging out the remaining four mini-bull cases, we see that the mean duration was just under a year - or 343 calendar days. So, with the current move less than a month old, there is a good chance that there is still some time available to get on board.

However, it is vital to understand that the returns of these mini-bulls are definitely front-end weighted. In fact, during the first three months of the move, the S&P has gained an average of +22.6%, which has represented 41% of the total gain. Going out six months, the average gain has been +36.2%, which was just about 65% of the entire move. So, it is easy to see that the majority of the move tends to occur in the early part of the bull run.

The next part of the playbook involves the "retest." In looking at the bear market bottoms of the past, we find that the vast majority of the initial moves off the bottom are "given back" before the move higher begins in earnest. We call this the "second chance buy" and THIS is the opportunity that you don't want to miss.

So, given that we've had a very nice run of +24.5% in the S&P since March 9th, we should be on the lookout for a "second chance buy" to present itself. This would likely occur in response to something bad coming out of the woodwork. And given that earnings season is about to begin, a batch of crummy reports could provide the bears the ammunition needed for a pullback/retest.

What if we're wrong and this is not the start of a new mini-bull? Since we manage money based on what IS happening in the market, we will make an adjustment if best stocks head lower. And the good news is that at some point, the current bear WILL end, so our work on the recovery playbook isn't likely to go to waste.

5 best Sensex stocks for long term investment

Fundamentally sound stocks generally perform better in these troubled times. 5 good Sensex stocks are picked for those who prefer to invest in index large cap stocks. Long term investors should accumulate these stocks to get 60-80% returns in one year. Keep some cash to accumulate more on any unexpected fall.

5 best Sensex stocks for long term investment horizon:

1. Larsen and Toubro (L&T):
This is the best stock in Sensex for long term investors. L&T surprised analysts with their better than expected results. But stock still underperformed to bad market sentiment. As L&T entered into niche areas, margins will improve in the coming quarters. Upcoming demergers will improve L&T valuations in the coming quarters. Huge order book is another plus point. Announcement of bonus is a near term trigger after current turmoil.

CMP: 2,564. EPS: 74.3 P/E: 34.5
Expected EPS for FY2009: 105-110.

Ideal entry price: 2,350-2,400.
1 Year target: 3,600-3,800.
Best investment duration: 3 years to get wonderful returns from this giant.

2. ICICI Bank:
Real strength of ICICI Bank lies in their subsidiaries. ICICI securities IPO is a near term trigger.

CMP: 733. EPS: 37.3 P/E: 19.6
Expected EPS for FY09: 48-52.

Ideal entry price: 660-680.
1 year target: 1150-1,250.

3. State Bank of India (SBI):
Attractive valuations but unpredictable government interference.

CMP: 1,249. EPS: 106 P/E: 11.7
Expected EPS: 135-140.

Ideal entry price: 1050-1100.
1 year target: 2,000-2,200.
Best investment duration: 18-24 months.

4. Reliance Communications:
Another "Must buy" stock for long term investors if they don't overly paid for acquisitions. Reliance Infratel IPO is a short term trigger.

CMP: 491.6 EPS: 12.5 P/E: 39.2
Expected EPS for FY09: 25-28.

Ideal entry price: 470-480.
1 year target: 750-800.

5. Reliance Industries:
This stock holds enormous intrinsic value. Reliance will give good returns for patient shareholders who invested for long term. Kakinada gas will change fortunes of shareholders in short term. Invest in Reliance; believe in Ambani; forget about it.

CMP: 2,100 EPS: 138 P/E: 16

Ideal entry price: 1,800-1,900.
1 year target: 3,000-3,200.
Duration: Invest for 2-3 year to get complete benefits.

Infosys, Bharti Airtel and Grasim are good stocks to get safe moderate returns in these difficult times. Fortunes of DLF and M&M will depend on inflation. Recent salary hikes may hit the balance sheets of companies like BHEL. Tata Steel is best underdog stock for FY09. We will get more clarity on these stocks in the next quarter results.

Equity investment should always be done cautiously. Though Financial markets (especially stocks trading) looks lucrative, if one fails to understand the finance, better you leave it to stock market experts (Mutual Funds, portfolio management etc.) Invest Wisely,Trade Cautiously !! Happy investing !!

Dalal Street magazine published a useful article on India's fastest growing Companies. It picked 25 Companies in each of 3 categories (large caps, mid caps and small caps) basing on their sales growth over the past 5 years. These companies constantly reported increase in sales from FY03 to FY08. But many of these companies (especially real estate players) may not maintain same sales growth in FY09. It is not ethical to write about all these companies as the issue is still on stands. But I am listing some of my favourite companies (along with rank) for reference. Please do your own research before investing in them.

India's fastest growing Companies:

A. Large Companies (sales of more than Rs 2,500 crore):

1. Videocon Industries: Dhoots are making strategic moves. Company paid higher advanced tax in September. When will this sleeping giant wake up in stock markets?

2. Bharti Airtel: Consistent performance but don't expect fireworks.

8. Sesa Goa: Slow down in China is a bad news over short term.

9. Thermax: Good performer.

15. HDFC Bank

20. NMDC Limited


B. Medium Companies (Sales of Rs 600 crore- 2,500 crore): Many of these companies are operating in niche space and strategically diversifying into emerging sectors.


5. ICSA India Limited: Steep correction due to FII selling.

9. Shriram EPC Limited: very good results.

12. Electrotherm: Largest electric vehicle maker.

13. Rohit Ferro-tech:

23. Subhash Projects and Management: Good long term play.


C. Small Companies (Sales less than Rs 600 crore): Many of these small caps have the ability to become mid caps and large caps over the next 3-5 years. Don't give too much importance to recent price correction. These shares are strictly meant for patient long term investors.

14. MIC Electronics

15. Tanla Solutions

20. Geodesic Information

21. Bartronics India

22. OnMobile Global

Note: These companies were selected by the magazine basing on their sales growth over the past 5 years. But past performance is not a guarantee for future performance. Rising costs, global meltdown and real estate crisis may affect the performance of some of the companies in the list. But it provides good insights over the performance of some of the best Indian companies.

Request to readers: Some readers are mailing me with ordinary requests like "what is stock market?" and innocent questions like "how to invest in stock markets?" etc. It is difficult to answer to these vague questions through blog or mail.

Significant news:

1. RBI cut CRR by 50 basis points to increase liquidity in the system. Although RBI stated it as a temporary measure, it is an aggressive timely measure by Reserve Bank of India. Interest rate sensitive stocks will react positively to this news.

2. SEBI removed restrictions on P-notes. This will have significant impact on the FII investments. Indian markets may react positively to these liquidity and sentiment boosting decisions. These steps may take BSE Sensex to above 13,000 levels if global conditions will not affect Indian markets. But global economic situation is gradually deteriorating from bad to worse.

Must read: Wonderful article on legendary acts of Warren Buffett and J.P. Morgan during extreme financial crisis. Buffett will be remembered forever for his daring acts like Morgan.

Financial note: Derivatives were invented as hedging instruments but many traders are using them as investment vehicles especially by investment banks which led to their downfall. According to some rumors, most of the hedge funds are also in trouble. If that is true, we will see big shocks in global stock markets. Global banks are trying hard to overcome this crisis by infusing liquidity into system (unlike in 1929). Will they succeed?

Image courtesy: Bloomberg.
Worrying sign: Credit crisis is gradually spreading to European markets. Biggest banks of Belgium and Germany were rescued by Governments. You will hear more bankruptcy news from England and Spain banks in the coming days. Unless all major economies and central banks take aggressive coordinated measures, this credit crisis will take the economies of United States and Europe into deep depression. If China will decide to sell its foreign reserves, American economy will go into depression within 1 week of its selloff. That's the severity of this crisis. You may never experience this range of economic crisis in your life time. After the current turmoil, some positive reforms will happen in the global economy which augur well for long term financial growth.

Effect on India: Indian IT companies will be severely tested in the coming days. According to current situation, Europe will go into deep crisis within 1-2 months. Bailout measures by American and European Governments are not yielding desired results. So diversification by export companies will not help them in these times due to global crisis.

Advice to long term investors: If you are a long term investor, current crisis will test your patience levels. Please do not take any panic decisions. Things will return to normal after the current turmoil. You will get exceptional returns if you can invest in stock markets for 24-30 months.

Futures Options Trading Strategy Ahead Of Election Results

The eagerly eyed US stress test results came in line with the Street's expectations and did not have any negative surprises. This has proved to be a positive for the stock markets across the globe. On the whole, the global equity markets may see further upside in the near term.

However, for the Indian markets, uncertainty over the parliamentary elections is a major cause of concern from a very short term point of view, except if the Third Front comes in power. The Indian stock market is passing through tremendous pressure in the form of election results, which will be announced on May 16.

Karvy Stock Broking advises players to use derivatives tools to avoid loosing from high volatility. "Long-term investors with holdings in cash markets can use put options to partially hedge their portfolios for a limited period and remove the hedge once clarity emerges about the new government and its policies. Also, investors can buy call options which would enable them to participate in the rally, but limit the downside to a great extent," the brokerage advises.

"Overall, the Nifty is likely to be highly volatile within the broad range of 3500-3800-4000 levels during the week. Long positions can be assumed in the stock from energy, metals, construction, capital goods and BFSI sectors from lower levels. Short positions can be assumed in telecom, software and cement sectors," said a report of Karvy Stock broking.

Derivatives strategy:

Reliance:
Buy one lot of Reliance May futures at Rs 1898-1902 and buy one lot of May Rs 1890 put price 78-82; Break even point: Rs 1980; timeframe: 8-10 days.

The positive developments like the commencement of production of oil & gas from the KG basin and signing the gas supply agreements have boosted the positive developments for the stock. The waning economic recession has triggered an increase in demand for petroleum products across the globe and led to sharp rise in crude oil prices which is a positive development for the company in the near term.

In the F&O segment, the stock open interest increased marginally to 67.14 lakh shares in the near month. Call options open interest has increased to 15 lakh shares, whereas put options open interest has increased to 9.15 lakh shares. Overall, the stock is likely to trade on a moderately bullish note in the next few trading sessions, but the downsides should be protected considering the volatility in the markets. Hence, we recommend a protective put strategy in this scenario.

Tata Steel
Buy one lot of Tata Steel May futures at Rs 280-284 & buy one lot of May Rs 280 at put price18-22; Break even point: Rs 300; timeframe: 6-8 days.

The stock witnessed heavy buying interest on expectations of a rebound in demand for metals amid signs of easing economic recession. Anticipating higher demand for base metals on the back of rising metal prices has led to a sharp rally in domestic metal stocks.

In the F&O segment, the near-month open interest has decreased marginally to 1.27 crore shares. Call options' open interest has increased to 50 lakh shares, whereas the open interest of put options has increased to 32.82 lakh shares. Overall, the stock is likely to trade on a bullish note for the next few trading sessions. Hence, we recommend a protective-put strategy in this scenario

Good Indian Stocks To Buy - Research report from Nomura Securities

Japanese equity research firm, Nomura Securities, picked 5 Titans and 6 Heroes among Indian Companies which will have better growth prospects.

Analysis: Nomura report on Indian Companies
Nomura released "Titans- Heroes- Mortals" report on Asian Companies which will give an idea about the future growth prospects of the Indian Companies.

Blog readers should treat it as another aid in their research to pick good companies but not as an investment advice. In stock markets, entering at right price is also important along with picking a great stock. I am bullish on IVRCL Infra and Glenmark but am waiting for right price.

Research firm followed the Graham and Dodd approach of value investing in picking Titans and Heroes. Company released similar report on China (7 titans and 12 heroes), Korea (2 titans and 2 heroes only), Malaysia (2 titnas and 2 heroes), Singapore (7 titans and 3 heroes) and Taiwan (7 titans and 2 heroes) Companies.

Nomura views on economy and stocks:

1. Asia is in a best position than America but few companies tend to have control over their own destiny and equities will perform relatively badly against bonds.

2. There have been no signs of a turnaround during the past quarter in purchasing management indices or export orders to suggest that Asian equity markets will sustain a rally on the back of changing growth expectations. Companies appear to be locked in a classic inventory build-up, since the demand shock did not allow them to adjust their production schedules quickly enough. Moreover, working capital requirements have tightened and trade finance remains difficult to obtain for exporters.

3. We entered the second half of 2008 with an Overweight stance on China and India, since both countries had low export-to-GDP ratios and were prime beneficiaries of falling commodity prices.

4. We continue to have a bias in the short term toward value, since we can still find financial assets trading below intrinsic value or creditworthiness, such as convertible bonds. We would look to re-weight growth stocks as 4Q08F earnings are released and as companies guide down expectations further during 1Q09F.

5. Our favoured sector is infrastructure.

My view: India is in best position to take the leadership position in economy but lack of great political leadership and corruption are our main problems. India needs a visionary leader to steer us through the current troubled waters.

Titans-Heroes-Mortals report:

Titans: Best Indian Companies in their sectors and will use the current opportunity to strengthen their position in their segment.

1. Reliance Industries : I have some doubts over the company performance over short term.

2. Larsen and Toubro: I already said enough about this Company.

3. NTPC: Good stock but what about stock market returns.

4. Hindustan Unilever: Good sales but what about valuations.

5. Sun Pharma : Best Pharma stock and will continue to announce bumper results in the coming quarters.

Heroes: Future stars- favorite stocks for growth investors.

1. Tata Power: Positive growth prospects but I have some doubts on financial front.

2. Maruti Suzuki: More clarity is needed.

3. IVRCL Infra : Rare infra company which is not facing any financial troubles. IVRCL is a must buy when markets correct in the coming months.

4. Marico: Good Company but I always try to accumulate growth stars.

5. Piramal Healthcare: Company is making strategic moves but take time.

6. Glenmark: Company will outperform other Pharma stocks if market conditions improve. This is a must buy when market corrects to reasonable levels.

Mortals: Never become leaders

1. Unitech

2. TVS Motors

Stock market news:

1. Indraprastha Gas Limited (IGL) will continue to enjoy monopoly in the National Capital Region (NCR).

2. Cement stocks will be in limelight for some more days due to better than expected results estimates.

3. Tata Communications is the dark horse, according to many analysts.

4. Hats off to Narendra Modi for announcing new industrial policy for Gujarat. We need such concrete measures at centre to face current slow down.

5. I am positive on growth prospects of Mundra Port but current valuations are not sustainable.

6. Best auto companies by sales are Hyundai in 4-wheelers and Yamaha in 2-wheelers. Unfortunately, both Companies are not listed in the Indian stock markets.

GDP estimates by Goldman Sachs:

1. GDP growth in 2007-08 was at: 9% and expected to cross 10% in 2008-09 (at that time).

2. (Now) GDP growth estimate in 2008-09: 6.7%. My estimate is 6.2-6.5%. Fiscal deficit is expected to touch 6-8% of GDP in this financial year. Just imagine what will happen to our economy if the money from the stimulus packages will not be used in a proper way. Do you know why these politicians prefer real estate and infrastructure? Not to build India but to build their coffers in the election year which is very easy for them in these 2 sectors?

3. GDP growth estimate in 2009-10: 5.8%. My estimate is around 5%.

Special mention: Hats off to Brokers for successfully creating a "feel good atmosphere" in a gloomy economy. Politicians need to learn some tricks from these stock brokers.

Long Iron Condor Option Trade

We have structured a trade that results in tying up $1,270 in margin capacity for 13 trading days. This money will not actually be borrowed (thus, there will be no interest expense on it) unless a loss is incurred. Initially, there will be no change in margin borrowing capability because this type of trade is known as "net credit", that is you end up with more cash in your account than you had before you entered into it. The maximum potential gain is $734.14. The maximum potential loss is $1,270, which would begin to be taken out of margin as it was incurred.

The transaction resulted in 4 trades being placed, each covering 10 contracts. The trades are all for Wells Fargo & Company, expiring on May 16th, 2009.

Part 1:

• Buy $24.00 Call. Option Symbol: FHUEX. Total Cost: $0.40
• Sell (Write) $22.50 Call. Option Symbol: WFCEX. Total Premium Earned: $0.80
• Total Net Premium Earned: $0.40

Part 2:

• Buy $16 Put. SYMBOL: WFCQF. Total Cost: $0.80
• Sell (Write) $18 Put. SYMBOL: WFCQK. Total Premium Earned: $1.38
• Total Net Premium Earned: $0.58

Grand Total Net Premium Earned Between Both Transactions: $0.98.

However, the order was placed on only ten (10) contracts so the commissions on the four-part deal were much higher than they would be on, say, 500 contracts. Thus, the actual net premium earned was substantially lower as trading costs cut into the profit, coming in at $0.73 per share - not $0.98 per share (more precisely, $734.14 for 10 contracts). The following analysis is based upon the $0.73 per share figures for that reason.

What This Trade Did - Summary

This type of trade, a Long Iron Condor, generates cash income if a stock stays within a predefined trading range. In the case of this particular transaction, the break-even range is $17.27 to $23.23 per share. That is, if the stock never left those areas, you would be no worse off than you had been before entering into the transaction. Anything above or below those figures will cause a maximum potential loss of between $0.77 and $1.27 per share no matter how high or low the stock price fluctuates.

Detailed Analysis

The biggest potential loss is the $2.00 spread on the puts (the calls only have a $1.50 spread). Subtracting out the $0.73 per share we made, it looks like the biggest potential loss on the downside is $1.27 and on the upside is $0.77.

Scenario 1: The Stock Trades In A Narrow Range

• If the stock trades between $18.00 per share and $22.50 per share, we get to keep the entire $0.73 per share net premium.

Scenario 2: The Stock Falls

• If the stock trades between $17.27 and $18.00 we will be between break-even and some profit.
• If the stock trades below $17.27 and $16.00 we lose money - $1.27 per share, to be exact, which is our maximum potential loss.
• If the stock trades below $16.00 we are still capped at our maximum potential loss of $1.27 because we own a $16 put that gives us the right to sell the stock at that price. If it were to fall to $8 per share, we could simply buy the stock then immediately exercise the put to recapture the difference. This is even true if the stock were to go to $0 per share.

Scenario 3: The Stock Rises

• If the stock trades between $22.50 and $23.23 we will be between break-even and some profit.
• If the stock trades between $23.23 and $24.00 we lose money but our losses are capped at a maximum loss of $0.76 per share.
• If the stock trades above $24.00 we are still capped at our maximum potential loss because we own a $24 call that gives us the right to buy the stock at that price, effectively limiting the $22.50 calls we sold.

Why This Trade Is Attractive Relative To Other Techniques

The major advantage of a Long Iron Condor trade is that it requires far less capital than alternative techniques. For instance, to generate $734.14 gain writing covered calls, an investor would need to purchase 420 shares of Wells Fargo common stock at the current market price of $19.61. This would require a net $7,502.06 in capital tied up either by reducing cash or tapping margin borrowing ($8,236.20 before commissions to purchase the stock less the $734.14 generated by writing the covered calls). Additionally, the investor is left with complete downside risk so the maximum theoretical loss in this case is $7,502.06. Of course, if the company is healthy, they could simply wait for the share price to recover or continue to write covered calls, constantly lowering their cost basis on the stock. That isn't possible in the Long Iron Condor; if the trade turns unprofitable, that's it - you start over with a new one because the options cease to exist upon expiration. With the Long Iron Condor, in contrast, you'd tie up virtually no money to generate the same potential maximum gain. You could instead use the $7,502.06 to invest in shares of long-term holdings, bonds, cash, or whatever else fit your portfolio needs.

There are other risks in a Long Iron Condor trade. If a stock fluctuates into an exercisable strike range during the period before expiration, it is possible for you to get "assigned". That is, the calls you write or the puts you sold could require you to sell stock you don't own in that moment or buy stock according to the put agreement before the Long Iron Condor trade works out on its own. In such a case, of course, you could simply turn around and restructure the trade at a small gain or loss depending upon the details. You have no control over when your options will get assigned - it's a random process organized by the options clearing house. Of course, this risk can be reduced (and the option income you earn lowered, obviously) by providing an even broader range for the Condor trade by selecting calls and puts that are even more out of the money. Our trade, for instance, was based upon $18 puts and $22.50 calls written. You could have instead opted for a lower put and a higher call.

The bottom line: If you believe that a stock will trade within a range and have a specific figure with which you are willing to speculate knowing precisely the maximum amount you could lose on one trade, a Long Iron Condor could allow you to earn the same profit without tying up much, if any, of your capital.

 

Best Large Cap, Mid Cap & Small Cap Stocks To Buy From Sugar Sector For Investing

Analyst recommendations from various stock brokerage houses based on detailed stock analysis. These stock reports provide a high level view on individual stock based upon overall sector guidance.

LARGE CAP STOCKS

Shree Renuka Sugars
CMP: Rs 114
On account of high sugar prices and the company's decision to import raw sugar we remain bullish on the company. Revenues from the sugar segment rose 84.4% to Rs 293.9 crore. SRSL, which possesses sugar refineries with a total capacity of 4,000 TPD in Karnataka and the port of Haldia, respectively, is well positioned to benefit from the alteration of import policy of sugar.It is also benefitted from price discrepency in the global and domestic market.

Balrampur Chini Mills
CMP: Rs 78
Net sales for the six months ended March 2009 increased to Rs 786.6 crore against Rs 742.3 crore last year. Net profit rose 79.1% to Rs 117.5 crore. The lower recovery rates have resulted in lower production of about 14.2 MT for the year 2009 in the country.

With consumption pegged at 23 MT a favourable demand supply scenario for the sugar industry has emerged, wherein a surge in sugar prices is imminent, which will increase the revenues of the company.

MID CAP STOCK

EID Parry
CMP: Rs 191
EID Parry belong to the Murrugappa group and is one of the largest producers of sugars in India. It manufactures and markets Bio-Pesticides and Neutraceuticals apart from sugar.

The company had exceptional income of Rs 7,46 crore on sale of stake in joint venture company Parryware Roca Pvt Ltd and Rs 51.2 crore from sale in Parry Monsanto Seeds Pvt Ltd in the last year. We expect the revenue to increase at a CAGR of 22% to Rs 970 crore in FY10.

SMALL CAP STOCKS

Dhampur Sugar Mills
CMP: Rs 44
DSM sells a wide range of products ― refined sugar and plantation white sugar, power, ethanol, other chemicals. With a stock of 1.35 lakh tons at the end of Q1-FY'09 we expect DSM to crush up to a maximum of 2.8 million tons this fiscal by operating for 115 days.

DSM sells refined sugar under the brand - Dhampure. It has a power capacity of 145mw with an exportable surplus of 80 mw.

Ugar Sugar Works
CMP: Rs 21
It is the flagship company of the Shirgaokar Group of Companies. It is a pioneer of sugar production in the state of Karnataka with a crushing capacity of 10,000 TCD, 75 KLPD distillery and 45MW of co-generation.

It derives more than 60% of its revenues from sugar, 30% from distillery and related products and 10% revenues from power. We expect co-generation from the Jewargi unit to significantly improve profitability from FY10 onwards.
Source: EconomicTimes

Buying Stocks For 2009 - Top Stocks To Buy Now

As uncertainties prevail and a revival expected only post second quarter of 2009, looking at current stock market situation it will pay to buy stocks of large cap companies with a proven track record, high earnings visibility, low leverage, good book value and low debt. Buying stocks with strong promoter holdings looking at recent Satyam fiasco could be one one of the considerations for stock buying.

Stock trades at cheap brokerage fees and buying stocks online or online stock trading have made trading stocks very frequent practice for normal investor, they should understnad that stocks mentioned here are for long term investing and will be fruitful if they hold for longer time durations.

In the aftermath of economic slowdown and fall in markets, and also uncertainty over the next few quarters, it is advisable to play safe and practice stock buying of large companies with a consistent track-record. Stock trades are best to be avoided for retail investor. Online stock trading have made it very easy for retail investors to trade stocks very frequently. It is complete no-no in current stock market situation.

Sandeep Shenoy, strategist, Pinc Research says, "Companies with integrated operations, strong balance sheets, low leverage or ability to complete financial closure for capex, and low working capital requirements are preferred."

Beyond that, interest rate sensitive sectors are finding favour. Says Srivastava, "We are favourably inclined towards rate-sensitive sectors like banking, auto or even in real-estate on a selective basis. But, as the market is expected to be range bound, a trading strategy could prove helpful."

Defensive plays like FMCG and utilities, too, figure among the preferred lot even as there is already some amount of premium built in their valuations, due to the stability they provide. Additionally, users of commodities are expected to outperform. Says Manish Sonthalia, senior VP Research & Strategy, Motilal Oswal Securities, "Now, the consumption side, like auto (two wheelers) will get more importance. Among other preferred sectors are FMCG and telecom." Commodity user industries like construction, which may get a fillip on account of increased infrastructure spending, also figure in the list, although there are some issues pertaining to funding of projects.

Checkout:
Best stocks to buy in Indian telecom sector...
Best FMCG Companies - Stocks to Buy in 2009
How to buy stocks ? Buy stocks with confidence (Good book value and low debt stocks)

The laggards in 2009 will be commodities (metals), capital goods (due to order slowdown), real estate and IT (weak demand).

With respect to return expectations from the market (Sensex), it ranges 10-12 per cent on the conservative side to as much as 35 per cent, by December 2009.

Regarding investment worthy companies, The Smart Investor looked at the BSE 500 (94 per cent of total market capitalisation) and excluded companies with high debt levels or weak financials. Only those with a proven track record, good earnings visibility, strong cash flows and ability to raise debt were considered, as they will be in a better position to withstand tough times. Notably, many of them are leaders in their respective businesses, and their stocks capable of delivering 18-20 per cent returns over the next one year.

Have a look at these best large cap stocks to buy in 2009.

Tata Power - Got the power to be best
Sun Pharmaceutical - Best stock in Pharmaceutical sector
State Bank of India (SBI) - Elephant in Banking sector
Reliance Industries (RIL) - Best safe investment
IVRCL Infrastructures - Good stock with strong order book
ITC - Best stock in cigarettes business - Major in FMCG Too
Hero Honda - Best stock to invest in two wheeler auto industry
HDFC - Best stock to invest in Banking sector
Bharti Airtel - Best stock in telecom for definite investment returns
Apollo Hospitals - Good large cap stock in Healthcare

Investment worthy stocks- Best stocks to buy in 2009



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Other investment worthy stocks to buy in 2009