Top five picks of the day and Heard on the Street : ET

Top five picks of the day

Top five picks of the day 21 Oct 2009, 0521 hrs IST

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Domestic shares closed 0.6% lower in see-saw trade on Tuesday, pulled down by Reliance Industries (RIL) on investor nervousness over the start of a court hearing in the energy giant’s dispute with Reliance Natural Resources (RNRL). The Supreme Court started hearing arguments in the case between RIL led by billionaire Mukesh Ambani , and RNRL, led by his younger brother Anil, over a deal to sell gas to the latter at below-market rates as per a family settlement. Check out top five picks of the day by Birendrakumar Singh,Technical Analyst, Religare Cap (Views expressed are personal. The chartist may have interest in some or all the stocks.)

Hexaware Technologies Ltd 21 Oct 2009, 0521 hrs IST

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Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History Recommendation:Buy Last Close: Rs 91.40 Target: Rs 105 Stop Loss: Rs 85 The stock has witnessed a strong breakout after crossing Rs 90, it has been moving in a consolidation for past eleven trading sessions. The breakout is accompanied by heavy volume and is likely to move up to Rs 105, maintain a stop loss of Rs 85.

LIC Housing Finance Ltd 21 Oct 2009, 0520 hrs IST

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Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History Recommendation:Buy Last Close: Rs 839.05 Target: Rs 890 Stop Loss: Rs 817 LIC Housing Finance has been moving in a narrow range for past three trading sessions, giving rise to a “Pennant” like pattern. It has witnessed a breakout of the “Pennant” while doing so it has also given a close above its all-time high. It is now likely to move up to 890 levels. It has a resistance at Rs 868 at which one can raise the stop loss to Rs 825 from Rs 817.

More on this < Top five picks of the day>

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Heard on the street

Heard on the street 21 Oct 2009, 0421 hrs IST, ET Bureau

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New releases, multiplex expansion lift K Sera Sera The stock price of K Sera Sera has gained close to 35% in the past one month alone. The buzz is that the company is betting big on some of its new releases that are in the pipeline. It has made an investment of close to Rs 100 crore in about 10 movies, out of which two will be released shortly. Some of its past blockbusters include Guru, Partner and Sarkar, among others. The stock, trading at its 52-week high, closed at Rs 21, down almost 2% from its previous close on huge volumes. Brokers say the firm is also planning to set up a chain of smaller version of multiplexes (having lower seating capacity) in tier-II cities in the next few months. The expansion would be part-funded with the money it recently raised in the GDR market. When contacted, a senior company official confirmed the developments, but refused to divulge details on the same. ISP licence buzz triggers selective buying in Zylog THERE’S a selective buying in Zylog Systems shares, following a buzz that the Chennai-based company has completed its Wi-Fi pilot project. It is expected to put in place about 4000 Wi5-enabled nodes against 250 currently installed in Chennai, within a year to make its entry in the ISP business. It has obtained a category-A internet service provider licence to operate in all DoT circles. Similar Wi-Fi services will be made available in Bengaluru, Delhi, Mumbai, Hyderabad and Kolkata. The stock closed at Rs 343, down almost 1.9% from its previous close, after gaining close to 5% in the past one month. The company may also lease its infrastructure and expand overseas, after complete services rollouts. When contacted, a senior company official declined to comment on the development. India Inc’s funds hunt a boon for small i-banks THE sharp surge in fund raising among India Inc, especially among the mid-tier Indian corporates, has proved to be a bonanza for small boutique investment banks. With M&A deals few and far between in the current environment, many of these boutique investment bankers are looking at innovative strategies to boost their business. For instance, in the event that a small or mid-sized company was to approach a boutique bank to do a QIP, these banks, which come in as advisors, turn to large domestic or foreign brokerages with the FII and FI connectivity to place the trade. These tie-ups are at best informal understanding where boutique banks are trying to lever on the brokerages distribution size and network. Contributed by Apurv Gupta & Deeptha Rajkumar

Src: Economictimes.Indiatimes.com

8 stks that were buzzing last week and how to trade them now

8 stks that were buzzing last week & how to trade them now

Bank Index advanced 8.3%, SBI zoomed 17.8%, ICICI Bank gained 6.5%. The Metal index surged 8%, Jindal Steel & Power rallied 16%, SAIL and Tata Steel surged 6.8% and 6.5% respectively. The top index gainers this week were Cairn India up 11.8%, TCS up 6.3% and RIL up 5.3%. However, telecom stocks like Reliance Comm and Bharti lost 6% and 5.3% this week respectively. Mehraboon Irani, VP-PMS, Centrum Broking, Technical Analyst, Sudarshan Sukhani and Dipan Mehta, Member, BSE/NSE discussed various stocks. They were bullish on Unitech, Torrent Power, Hindustan Unilever (HUL), Jindal Steel & Power, LIC Housing Finance and SBI while were bearish on Bharti Airtel. However, they had mixed views on Larsen and Toubro. Bharti Airtel Mehta told CNBC-TV18, "Telecom has been on underperformer over the past two-weeks or so since the news came out that Reliance itself was offering at very competitive rates for outgoing and on the whole we are seeing that there could be regulatory change as far as shifting from per minute to per second billing takes place. That could impact the profitability in the short to medium-term quite drastically and therefore my sense is that one should remain underweight on the sector. My specific advice would be to look at exiting out of Bharti Airtel and the other telecom stocks. But then again it could be at a trading bounce and need not necessarily be at this price.” Irani told CNBC-TV18, "The one space we are advising investors really exit is the telcom. It is not fair to state that Bharti is a great company – no doubt about it – but buy this stock if it gives you an opportunity. It has come down so sharply because this is not the way you look at stocks. The fact of the case is as far as telcom goes, according to me the story for the time being is certainly over. So, a bounce back here and there of 5-10% not ruling out but for an investor I don’t think this is the way one should be looking at stocks. One can definitely wait for a bounce back but learn to exit at higher levels. There are better opportunities elsewhere.” Sukhani told CNBC-TV18, "My sense is that telecom stocks are on the verge of bottoming out, which means Bharti Airtel may not be Rs 330 but it could be Rs 300 or Rs 290. That’s a different issue. For a long-term investor, this is the right time to go and invest in telecom stocks; I would say that on the basis of long-term views on the charts.” Unitech Sukhani told CNBC-TV18, "I don’t think Unitech is going to outperform the market. What we saw was a bounce in what is essentially a downtrend and my assumption is that if the market were to remain cheerful we could see Rs 140 or Rs 150. But at this point it looks very unlikely that Unitech would touch Rs 200 again.” Irani told CNBC-TV18, "I feel that when Unitech managed to raise funds for itself some month’s ago – the problems for Unitech were behind it. At that time we started liking the stock and we had a target of Rs 125 for it. At the present level it is more of a trading play but we don’t enter a stock for a 10-15% return at this particular level of the indices. For the last seven months the company has made bookings of nearly Rs 40 billion (Rs 4,000 crore) which is ahead of most estimates. They are also concentrating more on the affordable homes, which could bring down the rate per square feet with the company books it had. But all said and done according to me the stock could possibly definitely move at least 10-15% up from here. The problems for the entire real estate are going to continue for some more time to come.” Continued on the next page...

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Deadpresident Blog Updates:

Jindal Steel and Power

Clutch Auto

TTK Prestige

Diwali Picks - Oct 18 2009

Analjit Singh to hike stake in EIH: reports

Polaris Software

Bajaj Auto, Jindal SAW, Container Corporation, India Energy, Valuations

Infotech Enterprises, HCL Infosystems, Hexaware, Infotech Enterprises

FMCG Sector

Src: Deadpresident Blog

Bullish sentiment in new Samvat

Bullish sentiment in new Samvat

Brace for short-term correction.

Also Read Related Stories News Now - Sensex ends Muhurat Trading on a flat note - NTC strike enters sixth day - MCX lowers transaction fees - Textiles cos back in expansion mode; line up 9 projects - FIIs bring Rs 66k cr in Indian equities since last Diwali More

The market continued to find new legs as it made net gains on strong volumes. The Nifty rose to new 2009 highs and closed at 5,142 points for week-on-week gains of 3.98 per cent. The Sensex behaved similarly, rising to 4.08 per cent to close 17,322 points. The Defty jumped 4.75 per cent as the rupee shot up.

Volumes were good all week and extraordinarily high on Friday. (This analysis is being written pre-Diwali session, where trading is usually token). Advances outnumbered declines and a large number of stocks were heavily traded. FIIs remained big net buyers while domestic institutions sold through most of the week. The BSE 500 rose 4.26 per cent while the Nifty Junior rose 6.4 per cent.

Outlook: The market reconfirmed its bullish status and the new upside targets would be in the range of Nifty 5,300. However, there could be another short-term correction next week pulling prices back till around the 4,950-5,000 level. Positive FII attitude remains a critical driver.

Rationale: The sequence of higher highs confirms that both the bullish long-term and bullish intermediate trends remain intact. However, the intermediate trend is now 13-weeks old and could reverse anytime. The market is overbought in the short-term. A fall below 4,900 would signal intermediate trend reversal with a target of 4,750.

Counter-view: High volumes and a series of new 2009 highs in pivotal stocks implies the market could continue to head North for an un-definable time. Balanced against that, this last burst of trading may have been triggered by traders exiting positions. Normally Indian operators ease off around Diwali and domestic institutions are also net-sellers at the moment. Hence, the FII attitude is vital to market direction – if they sell heavily, there will be no counter-parties at current prices.

Bulls & bears: A large number of pivotal stocks hit new 2009 highs last weeks and most were backed by strong volume expansions. Metals, for example, made a comeback with Sterlite, Sesa Goa both doing very well. Banks as a sector jumped over nine per cent with leaders like SBI and ICICI Bank both hitting new highs. Real estate also bounced up. Outside these sectors, there were scattered winners such as PTC, GVKPIL, Cairn, etc. This sort of pattern suggests further gains but it also sets up a tempting scenario for profit-booking and almost by definition, the market is overbought, with many individual stocks being over-extended and far ahead of reliable supports. Use trailing stop-losses to lock in profits, if there is a sharp reversal.

MICRO TECHNICALS

Bharti Airtel
Current Price: Rs 326
Target Price: Rs 345

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The stock may have seen a selling climax due to the intensifying competition, which has led to a tariff war among existing service providers. The stock fell on sustained hammering from Rs 435. On Thursday-Friday, there was volume multiplication without a further fall. This suggests all potential selling has been absorbed. Keep a stop at Rs 315 and go long since it could bounce till Rs 345.

Indiabulls Real Estate
Current Price: Rs 290.95
Target Price: Rs 270

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The stock has run into resistance between Rs 290-300, which has remained despite very high volumes. On a correction, it could fall till Rs 270 or lower. Keep a stop at Rs 295 and go short. If it does break Rs 295 and closes above Rs 300, reverse and go long with a stop at Rs 290 and a target of Rs 320.

Power Trading Corp
Current Price: Rs 103.8
Target Price: Rs 115

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The stock has made an extraordinary breakout on a big volume expansion. The formation's target would be about Rs 115. Keep a stop at Rs 101 and go long. Book 50 per cent profit at Rs 110 and move the stop up to Rs 106.

Sesa Goa
Current Price: Rs 354.7
Target Price: Rs 380

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Sesa Goa’s stock is making a sequence of successive record highs. Because of this, it is impossible to calculate a reliable target, however projections of Rs 380 appear to be reasonable. Traders are advised to keep a trailing stop at Rs 345 and go long at the counter. Raise the stop by 10-units for every 10-unit rise in the share price.

ICICI Bank
Current Price: Rs 959
Target Price: Rs 1,010

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The stock had a breakout to a 2009 high on strong volume expansion. It is difficult to calculate a target since anywhere between Rs 970 and Rs 1,010 is possible and there is no recent price history. Keep a stop at Rs 945 and go long. Raise the stop 10-units on every 10-unit rise.

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Analysts' corner 19-OCT-09 Tata Power Company (TPC) has obtained open-access approvals to distribute electricity to suburban Mumbai thereby, enhancing its distribution strengths and enabling higher ROEs.

Markets at a glance 19-OCT-09 Postive cues from the global markets and a strong IIP boosted domestic sentiments and helped recoup losses of the previous week.

Expiry effect in overbought market 19-OCT-09 The cash market generated extraordinary volumes and saw net gains while the derivatives market displayed bullish sentiments and signs of decent carryover.

Bullish sentiment in new Samvat 19-OCT-09 Brace for short-term correction.

Revival in demand 19-OCT-09 While September quarter results of HDFC look good and an upswing in credit demand is visible, its stock already captures most of the positives.

'World's 5th largest in transmission in 3 years' 19-OCT-09 Crompton Greaves, a leading player in the domestic and international power transmission and distribution (T&D) market, believes there is huge potential for growth in India.

The worst is behind 19-OCT-09 HDFC Bank and Axis Bank delivered another quarter of robust profit growth that was in line with expectations and was partly helped by other income.

Focussed on the big picture 19-OCT-09 Winning in the markets requires that you take tough calls and stick with it despite the volatile conditions, believes Harsha Upadhyaya.

Costly fares 19-OCT-09 The ongoing fare war and the launch of wireless services by new players will only worsen the profitability of mobile service providers.

Big gains for Smart Portfolios 19-OCT-09 For the first time in Smart Portfolios 2009, fund managers outperformed the benchmark in terms of returns.

India down but not out 19-OCT-09 China beats India in investment stakes, believes Morgan Stanley.

Gold extends decline 19-OCT-09 The prospects for the yellow metal don’t look good in the short term.

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Market has great run in '09, but '92 was better
Bull's Eye: JSW Steel, Polaris Software, NHPC, HDFC Bank
Top A-Group gainers in Samvat 2065



Src: Economictimes, Business-standard

Stock and Market view and Mahurat Picks

'No meaningful correction before another rapid rise'
16 Oct 2009, 0609 hrs IST

Markets will remain far above the lows of October and March last, says Rakesh Jhunjhulwala. Experts' recommendations | Gainers in Samvat '65 | Mid-cap stocks

Heard on the Street
16 Oct 2009, 0301 hrs IST

If one looks at the advertisement of a power company that recently came out with an IPO, you could hardly miss the text highlighting Application Supported by Blocked Amount (ASBA).

Stock picks for Mahurat trading
15 Oct 2009, 1430 hrs IST

Anand Rathi Securities has handpicked long term positive stocks for token buying during Muhurat trading. Angel Broking: Top 5 stocks | Top 10 Diwali Stocks

Buy IVRCL Infrastructure for target of Rs 438: India Infoline
15 Oct 2009, 1203 hrs IST

India Infoline has advised to buy IVRCL Infrastructure for target of Rs 438.

Buy Bharat Forge for target of Rs 310: India Infoline
15 Oct 2009, 1201 hrs IST

India Infoline has advised high risk traders to buy Bharat Forge for target of Rs 310.

Buy Punj Lloyd for target of Rs 360: Nirmal Bang
15 Oct 2009, 1109 hrs IST

Nirmal Bang has advised traders to buy Punj Lloyd for target of Rs 360.

Buy GMR Infra with stoploss of Rs 69: Nirmal Bang
15 Oct 2009, 1104 hrs IST

Nirmal Bang has advised traders to buy GMR Infra with stoploss of Rs 69.

Buy and hold Essar Oil for target of Rs 185-210: Nirmal Bang
15 Oct 2009, 1054 hrs IST

Nirmal Bang has advised traders to buy and hold Essar Oil for target of Rs 185-210.

Buy and hold Cairn India for target of Rs 295-320: Nirmal Bang
15 Oct 2009, 1053 hrs IST

Nirmal Bang has advised traders to buy and hold Cairn India for target of Rs 295-320.

Buy Bharat Forge for target of Rs 320: Angel
15 Oct 2009, 1051 hrs IST

Angel Broking has suggested traders to buy Bharat Forge for target of Rs 320.

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Mahurat Picks 2009

CCL Products India

Indiabulls Power IPO subscribed 22 times

Plethico Pharma

Trent

Wealth Report - Oct 15 2009

United Spirits

Glenmark Pharma, GVK Power, Mastek, Shiv-Vani Oil

India's Fastest Growing Small Companies 2009

Src: Economictimes, Deadpresident blog

EconomicTimes Updates

Gainers in Samvat '65

Last year around this time, when brokers and investors gathered at the Bombay Stock Exchange to flag off Samvat 2065 — a year in the Hindu calendar — the mood was morose. Global markets were going through one of their most turbulent periods and a recovery seemed a distant prospect, then.

A year later, as market participants assemble to welcome Samvat 2066 on Muharat trading day on Saturday, they would be a relieved lot. With key indices having risen 110% over the last seven months, Indian shares are now just 20% away from their record highs touched in early 2008. READ FULL STORY

Click NEXT to see the top A-Group gainers in Samvat 2065

Market's ready to give a rousing welcome to Samvat 2066 16 Oct 2009, 0342 hrs IST, ET Bureau

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MUMBAI: Last year around this time, when brokers and investors gathered at the Bombay Stock Exchange to flag off Samvat 2065 — a year in the Hindu calendar — the mood was morose. Global markets were going through one of their most turbulent periods and a recovery seemed a distant prospect, then. A year later, as market participants assemble to welcome Samvat 2066 on Muharat trading day on Saturday, they would be a relieved lot. With key indices having risen 110% over the last seven months, Indian shares are now just 20% away from their record highs touched in early 2008. Despite all the optimism around, driven by initial signs of recovery in the Indian economy and stability in global financial markets, concerns over the endurance of this rally remain. Market participants fear the market may choke on an overdose of liquidity, which has been fuelling stock prices in the past few months. “Though liquidity has rescued global markets and companies, it has driven stock prices to higher-than-expected levels and, now, will result in higher volatility in earnings and PE (price to earnings) too,” said Anand Shah, head — equities, Canara Robeco Asset Management. “We should not assume that the kind of liquidity that we are seeing now would remain and the reversal of liquidity could lead to a fall that is much-more than needed,” he added. Central Banks world-wide, including India, have started signalling the possibility of tightening of monetary policy early next year on fears that excess money supply may spark rapid price jumps of commodities and goods. Brokers said the hike in rates could result in some foreign investors liquidating their equity portfolios in emerging markets, including India, that have been created by borrowing at near-zero interest rates in the US. A hike in interest rates in the US would result in dollar rising against the rupee, resulting in the value of their Indian holdings eroding. Foreign institutions have pumped in close to $13 billion since early March, when the markets resumed their ascent after the tumultuous 14 months from January 2008. This, coupled, with domestic institutional inflows have driven Sensex’s valuation to close to 18 times 2009-10 and 15 times 2010-11 estimated earnings, considered steep in comparison with other markets. “Large liquidity flows into the Indian market from global and domestic funds has resulted in steep increase in stock prices, without commensurate increase in earnings,” said Sanjeev Prasad and Sunita Baldawa of Kotak Securities in a report. “We recommend investors to prepare for a likely correction in the Indian market over the next few months,” they added. Market participants are estimating a correction of 8-10% in benchmark indices and a bigger fall in the mid- and small-cap shares. A possible fall should be used to buy shares that will benefit from the likely revival in India’s and global economic growth, they said. “Indian equities continue to be vulnerable to a sell-off in global equities, or a sudden spike-up in crude oil prices. However, we believe that investors should use such volatility to buy Indian shares since the growth outlook for the next 12-18 months remains firm and is still not priced into equities,” said Amitava Neogi, ED of Morgan Stanley Private Wealth Management. Enam Securities, in a recent report, said: “Any corrections should be used to build core holdings in long-term scalar sectors linked to consumption (retail), infra (power), savings (insurance), & global suppliers (resources and IT).”

Other Related articles:

Experts' recommendations |

Samvat 2065: Sensex gives 100% returns against gold's 34%, silver's 73%
Infosys pips Bharti in M-cap race to rank 7th most valuable company

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Mid-cap stocks

5 mid-cap stocks: Here’s your middle path to prosperity 16 Oct 2009, 0425 hrs IST

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ET Bureau It’s that time of the year again when many investors rejig their portfolio and take position on their favourite stocks. With most of the blue chips having turned expensive, the only option for most investors is the mid-cap sector. We at ET Intelligence Group bring you a list of 5 mid-cap stocks that could make your next Diwali brighter. But, as always, make sure you’ve done the due diligence before placing your bets on these.

Tata Teleservices (Maharashtra) Ltd 16 Oct 2009, 0425 hrs IST

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Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History TTML, which has recently joined hands with Japan’s NTT Docomo, is the Rs 2,000-crore Tata Group company that provides telecom services in the circles of Mumbai and Maharashtra, including Goa. TTML has reported net loss in each of the past six years. However, the picture is likely to change soon. The company is aggressively adding new subscribers and has topped the 10-million mark, following its innovative pricing methods. Higher users would improve network efficiency, thereby reducing cost per user. The company has undertaken necessary capex in the last few years. TTML has reduced the level of net loss in the last three quarters. It is likely to post quarterly profit by the March 2010 quarter.

Indian Hotels Company Ltd 16 Oct 2009, 0425 hrs IST

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Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History Indian Hotels (IHCL), which has underperformed the markets, is currently trading below its book value. This appears pretty cheap as it has always traded between 1.4 and 5 times the book value in the last five years. The last few bad quarters indicate that the scrip is trading 28 times its past 12 months earnings. The hospitality industry is now going through a tough phase. However, being the industry leader, IHCL could well be the first one to move up once the tide turns. The Commonwealth Games being held in Delhi next year can be one major trigger for the industry, apart from the global economic revival.

Supreme Industries Ltd 16 Oct 2009, 0425 hrs IST

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Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History Supreme Industries, India’s leading plastic goods manufacturers, has always enjoyed a healthy history of profit growth, cashflows and dividends. Its decision to exit unprofitable businesses, coupled with rising domestic demand for plastics and a likely glut situation in polymers, are likely to keep its profit growth strong in the coming quarters. At the same time, the company has constructed a commercial complex at Andheri with 2.5-lakh square feet of saleable area at a cost of Rs 115 crore. The sale proceeds from this property will boost the company’s bottomline for the next few quarters. The scrip at Rs 363 values the company just 8.6 times its earnings for trailing 12 months, much cheaper compared to its peers.

For more about this: <Mid-cap stocks>

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Src:Economictimes.Indiatimes.com

Which hidden jewels will Ashish Chugh buy this Diwali?

Which hidden jewels will Ashish Chugh buy this Diwali?

Ashish Chugh, Invesment Analyst and Author of Hidden Gems is bullish on Visaka Industries and Deccan Gold Mines.

On Visaka Industries

Related News:
• See what other experts are saying about markets
• See what FIIs are saying about the markets
• See what Udayan Mukherjee is saying about the markets

Visaka Industries is basically a play on rural infrastructure. This company manufactures cement asbestos sheets and also reinforced cement boards. The company also has a textile division. It has got six manufacturing plants for making asbestos products and two manufacturing plant for garments.

If you take a look at the financials of the company. FY09, the sales of the company were about Rs 575 crore, profit after tax of about Rs 36 crore. This was after paying a tax of about Rs 20 crore. EPS for FY09 was about Rs 23.

If you look at the first quarter sales are up by about 10% to about Rs 190 crore. Profit after tax for the June quarter is about Rs 26 crore as against Rs 36 crore for the full year last year. Tax payment for this quarter is about Rs 12.5 crore.

For FY10 we expect the company to do a profit close to Rs 55 crore which would mean an EPS of about Rs 35. This is the stock which has got a good potential going ahead, it is catering to a growth market and at the same time the stocks is available at sensible valuations. It is available at a price to earning multiple of about 3.5 going on FY10 earnings.

If you see the dividend track record of the company, this company has got an uninterrupted track record of dividend payment for the past 12-13 years. Last year they paid about 40% dividend. So dividend yield at the current price is also about 3.5 to 4%.

So you have a stock with the market cap of about Rs 200 crore. Cash profits for FY10 are expected to be around Rs 70-75 crore. So you are getting a business to market cap to cash ratio of less than three years which is under valuation. Dividend yield is also pretty good at about 3.5-4%.

On Deccan Gold Mines

Deccan Gold Mines is the first private sector gold mining company and rather the only gold mining company listed on the Indian stock exchanges. The company has got blocks spread across four states. The total area of the blocks is more than 10,000 sq kilometers.

Talking of gold mining business gold mining company has to pass through three stages before they can commercially start mining gold. The first stage is called reconnaissance permit where they seek the approval of the authorities to do exploratory activities on say 200-300 sq kilometer of the block. Second stage is prospecting license wherein they short list about 25 sq kilometer or 30 sq kilometer out of the total area where they would like to do the further exploratory studies and the third stage is called mining lease where in they short list about half a sq kilometer or one sq kilometer where they would actually like to drill and take gold out or rather rock out and then refine it and produce gold.

The company has filed application for about six blocks for mining license. As per the management the actually mining of the company is expected to start in the last quarter of FY10-11 which is January to March of FY11 and if you look at the valuations of this company as of now the company has got zero revenues. It has a market cap of Rs 200 crore but going by what the management has been saying that. Management says that they are able to derive about 4 tonne of gold per annum assuming on a conservative basis that they are able to do only 2 tonne and taking a price of about Rs 15,000 per ten grams this would translate into revenues of about Rs 300 crore. Typically internationally the gold exploration cost is about USD 350-400 per ounce which in this case will translate into Rs 5000-5500 per ten grams. Assuming initial expenses to be high we still believe that on a conservative basis the operating profit of the company could be in the region of 40-50% which means on a revenue of about Rs 300 crore the company can do about Rs 120-150 crore of operating profit so as of now there are no profits but market cap is only Rs 200 crore which is less than 2 years of the companies operating profit. The valuation is low mainly because of two reasons. One is the uncertainties involved in the business and also the uncertainties with regard to the regulatory clearances for this company. The second relates to the psychology of the investor. Most people do not want to buy these companies now when the production is still one, one and a half years away. Everybody thinks that they are going to buy the company as soon as the company is going to start production but people will realize that smart money would already have accumulated the stock at lower levels.

I am not advocating buying the stock just now at upper circuits. I would not advise doing that but I think one can keep an eye on the stock. I would ideally believe that Rs 25-30 levels would be a good level to get into the stock but one can chose to do staggered purchases for this stock. Rather than thinking that they will buy everything when the production starts, start accumulating at this point of time. I would like to say that this is the one for a very high risk investor because of the uncertainties involved in the business and also somebody with a time frame of about 3-5 years.

Disclosure: I have investments in Deccan Gold Mines but have no investment positions or trading positions in Visaka Industries.

Src: Moneycontrol.com