General/Performance update - 08 Jan 2008

Friends,

The markets seem to be taking a breather and I feel that it had all warmed up a little too much recently. There might be a correction due on the cards.

Crude Oil above $100 will hit us all very badly. I guess the fuel prices are going up in India, although the government is doing it's best to keep the rise low owing to the general elections.

Energy needs across the globe are going up much faster than the growth in supply. In fact the demand is much higher than the supply and thus driving the prices towards the roof. This is why you are noticing so much hum-drum around energy companies. The growing infrastructure in India will only widen the gap between supply and demand. Which means the energy sector will remain in favor for a few years to come. 

Performance Update
FORTIS Healthcare is on the run. GTL Infrastructure has already yielded more than 70%. ISPAT is taking a breather at 450% return. SUPREME Petrochem is having a breather as well at 54% return. UNITECH is at 92% return and KEC is picking up. MERCATOR is going strong. POWERGRID is stagnant at 150 levels.

Strategy ahead
As part of wise inestment strategy, all of us should know our personal targets. DO NOT sit on profits endlessly assuming that the stocks will keep going up endlessly. Review your portfolio every week/fortnight/month and book profits as you feel comfortable.

I personally attempt freeing up my capital as soon as the stock has given me more than 50% profits as that means the 50%-60%stocks remaining after freeing up my capital are at no cost to me.

I would be inclined to book partial profits (25%-40%) in Supreme Petrochem. Booking profits frees up money to invest in more lucrative opportunities.

Planning for Kids/Family members
When you realise a need for lumpsum money at a future date a few years ahead, the easiest trap in the Indian markets are insurance products that give you cashback. In turn these products invest the money in markets and other instruments to give the money promised but the return given to you is much lower than what you could make on your own.

A good option would be to regularly buy mutual funds. Assuming a INR 2000 investment per month for 20 years (20 x 12 x 2000 = 4,80,000), you could easily be sitting on over Rs. 1 Crore by that time. Can any of the Insurance products beat that? No, none that I know.

So go ahead and start making sense of Mutual Funds, as they are just the right thing for low risk investment with lucrative returns. 

I will attempt to post a note on the basics of mutual funds in future to help you understand their working.

Finally, just to re-iterate ** DO NOT sit on profits endlessly assuming that the stocks will keep going up endlessly **.

Cheers
Tarun