Monday, January 10, 2011

Stick with the bottom up approach in 2011

Indian stock markets have corrected more than 5% in 2011 and individual stock have seen correction in the range of 10-15%. This market correction has made some of the stocks very attractive.

The rise of indian market in 2009 and 2010 is certainly a reason for SENSEX and NIFTY to take a breather in 2011 and hence a broad based call on stocks based on markets might not be a good idea. Instead one can look at the sectors or stocks which have not performed inline with the markets in 2009 and 2010. For example MIDCAP IT basket, Shipping were lagards of 2009 and 2010. If the globe is expected to do well in 2011 then good quality companies in both of the above sectors should do well.

Good quality stock in the MIDCAP IT segment are still trading at a PE range of 6-12 which is tremendously cheap given the cash generating and high ROC nature of the business. Some of the name like POLARIS Softwares, MPHASIS, ZENSAR Technologies, NIIT TECH are trading at rediculously low valuations in absoulte terms and should give decent returns from current levels in 6-12 Months. Names like GE Shipping under the shipping sector looks atttractive at the current valuation.

In a nutshell if one doesen't get panicked by the volatility in the market and focus on individual story one can still make decent return in this market. But the mantra is to keep the temparament cool and look at this market correction as opportunity.

Happy Investing!!.

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