Diwali forecasting: for upcoming one year

From past two years I preferred to pick Hexaware for yearly investment. Even in the last Diwali it was at 65 and it hit a high at 140. That is history now and now I need to plot some views for up coming 12 months. Before you turn very optimistic and start plotting rosy picture I must tell you that up coming 12 months will not be same as mass is thinking. I am not only upgrading few stocks but I make few down grades too.

Unitech : Downgraded in Diwali 2010 @ 90/ it hit 18.

Suzlon : Downgraded in Diwali 2009 @ 99/ it hit 15.

KFA : Downgrade in Diwali 2010 @ 70/ it hit 5.

Challenges for next one year:-

1. Depreciating INR – If I need to remember past six months then I will remember mostly because of currency revaluation. This is most challenging environment. I can forecast for further weakness in INR and I am expecting it to hit 58. You can surely deny my levels but you cannot deny it as a factor.
2. IIP Data – From past 12 months, I was not relaxed with even single data. You can say that those are bottoming out but tell me if you have seen any single revival. I feel that those may see further dip. Government is not making any meaningful efforts. Please do not tell me about FDI. Have we got even single dollar yet? Think on this Diwali day. Can we say that Indian economy is on its way of slowing down?
3. Inflation – It was a concern for me from past 12 months and it is still giving me stress. Who know it better than RBI governor? I can confidently say that those will not top out in upcoming 3 months.
4. Bank rates – We kept on betting on rate cut. Market expected this too many times but it has not come. I am strongly hoping something in next 6 months. I must warn you that it can never be a single parameter for buy on equity. I am seriously very concerned about rising NPA in banking companies.

There are few positive developments too. One such is money flow which has really shocked me through out the year. Indian market has attracted huge – huge money flow. It was global in nature but in past one week it turns out as India specific story. FDI issue was taken as initiative towards reform by market men. Market is hoping more and more. The optimism is driving force for stock price. That is the prime reason that in spite of all odd stocks moved higher.

It is very clear that I will be cautious for coming few months. I am advising you to pick one such stock which has great fundamental (based on latest quarterly result) and available on good price.

Name is CIPLA

It is currently trading at 390. Use any dip, do not hesitate even to buy in fall.

MCDOWELL N (United Spirit) – I was heavily bullish on this stock in the year 2005 to 2007. Now, looking on fresh development, this stock is the one which investors need to avoid. I am not critically downgrading to sell but charts and fundamental are saying – NO BUY. Do not ask me why as I never able to explain many things in advance.

Regards,

Praveen Kumar