Infosys (NSE) 2989.50 -316.70 (-9.58%)

What a day in history - two key people who have managed to do what no one else can dream have decided to make way for the younger generation. K Dinesh and Mohandas Pai move on after having built a legacy. While the markets gave a thumbs down to the stock, its important to note that this move has more to do with internal emotions and very little to do with business.

When individuals of this nature are associated with a company which has managed to have a dream run delivering consistent growth year after year, its a proud feeling of achievement which ticks along. Next in line would be the founder NRN, who would retire by August '11. The business remains unaffected by such changes - my own experience validates the quote "Org is always greater than the individual". I personally believe IT is a mature business now and hence you can not expect a 100% YOY returns out of a stock like Infosys. Infosys would continue to deliver 15-20% growth YOY in line with FMCG businesses. As it enters the big league to compete with global majors like IBM and Accenture, its important to be logical and conservative in terms of return expectations out of a stock like Infosys. Enter the stock if the expectation is 10-15% returns and if the view is long term.

Buy Power Grid

Power Grid Corporation of India 100.40 0.45 (0.45%)

PSU's historically have never been aggressive in the past and hence, the valuation they command compared to their private peers have always been on the lower side. Powergrid at current valuations is reasonable to accumulate. With a PE of 17.4 and dividend yield of 1.5%, its certainly a stock to accumulate in your portfolio.

Hold for long term with an expectation of 20-30% YOY growth.

Sell Orchid Chemicals

Orchid Chemicals 302.800.45 (0.15%)

Pharma stocks have given decent return in this run up. However, most of them look expensive at this point. Technically, stocks like Orchid chemicals, Wockhardt and Biocon look strong on the chart. However, it is prudent to exercise caution and sell part of your holdings in these stocks. Long term investors can however continue to hold their positions in Biocon.

Buy Repro India

Repro India 128.70 -0.65(-0.50%) NSE

Repro India is clearly showing bullish signs on charts and is a great buy at this point. Buy and hold for 3 months.

Fundamentally, it makes sense to accumulate stocks with good dividend yield and high book value. Repro with a P/B of 1.09 and dividend yield of 2.34% is a great pick at this point.

However, stay invested for a capped upside of 5-10% more on Sensex post which we should see another leg of fall.

Next crash in waiting!

Sensex 20445.04 +375.92

Nifty 6143.4 +113.45

Looking at historical PE charts, one can safely conclude that Nifty or Sensex is nearing its peak. It may take another year before a crash, but its bound to happen.

Current PE of Nifty is around 25.48 and the highest PE Nifty has ever commanded from 1999 is 28.47. It is to be noted that Nifty touched a PE of 27.3 on Jan 15, 2008 around the same time when I first predicted a crash. Current levels are more or less near to the peak. Will we see a downside anytime soon? Well, my sense is that Investors will continue to buy for some time before selling actually begins. However, current levels are certainly not conduisive for long term investment.

Invest for short term(3-6 months) and watch for critical levels explained.

Sensex Overvalued

Sensex 17472.56 +11.98

This is probably not the best of the times! With Sensex ruling at over 21 PE, this is certainly not the best time to invest. While one cannot rule out a 10-15% rise based on historical PE highs, BSE 100 stocks would certainly be under pressure.

Having said this, this is possibly one of the longest recessions. I've said earlier in my posts before that Sensex still has another leg of fall before the bull run begins. So, we should see the start of the last leg anytime soon.

Invest selectively in stocks at this point.

Market Update

S&P CNX Nifty 2984.35 +45.65(1.55%)
RIL 1532.20 +79.75(5.49%)

I mentioned earlier that Reliance Industries(RIL) which commands a significant weightage in Sensex/Nifty would drive/drag the markets further. Todays trade was interesting in this standpoint as Reliance closed 5.49% higher on the Nifty. This means a break of short term resistance of 1401 and 1451. Having broken the critical resistance levels, RIL would contribute to the rise of Sensex and Nifty. For Nifty, I suppose we may well break the resistance level of 3100 in the absense of any negative news.

Though it may sound bullish, I remain cautiously bearsish on both the Nifty and Sensex. Traders can certainly make use of market movements and capitalize on absence of global negatives. For investors, part-invest at these levels and choose your stocks with caution.