>INFOGRAM (ANAGRAM)

Gains are capped!!!!

DIVESTMENT BACK IN RECKONING

The newly elected Government is planning to revive the divestment process. Many divestment stocks are rising rapidly on bourses. Instead of selling majority holdings or completely privatizing, the current thinking is to sell small amount of stocks.

Government is thinking with a short term goal of gamering resources but will not fundamentally change the picture. Neither ownership or management of these companies will change in any major way. If government were to privatize them that will infuse fresh managerial talent and new ideas to make these resources much more profitable. If they sell in large chunk, the price they will receieve will be substantially higher than what they will get for a small stake sells.

RISE IN MARKETS: TOO FAST TOO SOON.

In less than three months time. almost half of the BSE 500 stocks have returned more than 50% to its holders. 21% have risen more than 75% and almost 10% stocks have risen more than 100% from its recent lows in March.

99% of the stocks listed on BSE exchange are above 50 day moving average. 95% of the stocks are 200 day moving average. The kind of bullishness is difficult to sustain in such economically challenging times.

India's market capitalization has risen more than 75% in a short span of three months.

Our Market cap to GDP ratio has gone up by more than 66% during time and now reaching fair value level of 1.

This suggest stocks have risen quite rapidly. Now, in order to sustain such rapid moves in the markets, the fundamentals have to turn and improve drastically in next 6 months. If economic data does not improve to that extend, we may be setting ourselves for a negative surprises.

This led us to believe that gains from here are going to be capped at best. Investors will do follow trailing stop loss methodology to protect their precious gains.

BUY GOLD AS AN INSURANCE

It's always been easy to participate in the gold market and there are three options available in India. First, buying physical gold coins, bars and jewellery and store it somewhere safe. Secondly, to trade futures gold on Commodity Exchange. And thirdly buying a Gold ETF on NSE.

All the ingredients are in place for a big run in gold.

To see full report: INFORGRAM