Recent smallcap & midcap correction

Hemant Sir,

1.Which smallcaps will you invest in, If smallcap index breaks 5000 and 4870 and reaches lows of 2008…

2.If the index trades in 5000-5700 range, which stocks are good to get into now

Regards

Please find the price performance of most of the listed names since 8th of January ie peak of the BSE mid cap index.

This does not adjust for the corporate actions therefore the likes of orient paper have corrected 90%.

The list of top performers is also very interesting

Kindly go to the link to access the full list of stocks

https://docs.google.com/spreadsheet/lv?key=0Ar55s_sCPoredHVoVEE0TXhHQXRuZC15Ym94VFZMY3c&usp=sharing

Name 08/01/2013 Last price Change Mar cap
ORIENT PAPER & INDUSTRIES 80.25 7.5 -91% 153
RUSHIL DECOR LTD 344.5 49.2 -86% 71
GUJARAT SIDHEE CEMENT LTD 52.4 7.9 -85% 28
CORE EDUCATION & TECHNOLOGIE 320.45 49.9 -84% 561
DHANUS TECHNOLOGIES LTD 1.25 0.2 -84%
ARSHIYA INTERNATIONAL LIMITE 121.65 22.1 -82% 130
JINDAL COTEX LTD 88.75 16.8 -81% 76
BLUE CIRCLE SERVICES LTD 50.4 9.6 -81% 194
GRAVITA INDIA LTD 184.4 35.1 -81% 239
AQUA LOGISTICS LTD 15.7 3.1 -81% 91
SUDAR INDUSTRIES LTD 164.65 32.3 -80% 60
AANJANEYA LIFECARE LTD 742.3 155.7 -79% 216
CHROMATIC INDIA LTD 125.15 26.4 -79% 188
CREST ANIMATION STUDIOS LTD 16.7 3.7 -78% 8
ROYAL INDIA CORP LTD 127.1 28.5 -78% 66
ONELIFE CAPITAL ADVISORS LTD 747.6 169.9 -77% 227
TUNI TEXTILE MILLS LTD 90.8 21.5 -76% 280
PG ELECTROPLAST LTD 382.9 95.0 -75%
ESAAR INDIA LTD 61 15.6 -75% 127
TULIP TELECOM LTD 33.05 8.8 -74% 127
PUNJAB COMMUNICATIONS LTD 170.95 45.9 -73% 55
SHREE NATH COMMERCIAL & FIN 81 22.0 -73% 263
P M TELELINKS LTD 32.85 9.1 -72% 9
A2Z MAINTENANCE AND ENGINEER 59.6 16.6 -72% 123
CCL INTERNATIONAL LTD 133.75 38.7 -71% 371
COMMERCIAL ENGINEERS & BODY 92.65 27.5 -70% 151
GEMINI COMMUNICATIONS LTD 7.75 2.4 -70% 13
KGN INDUSTRIES LTD 15.7 4.9 -69% 110
JRI INDUSTRIES & INFRASTRUCT 58 18.3 -68% 49
ASAHI INDUSTRIES LTD 25.9 8.3 -68% 55
BILCARE LTD 224.15 73.1 -67% 172
BARTRONICS INDIA LTD 27.1 9.1 -67% 31
SPANCO LTD 29.15 10.0 -66% 28
AMAR REMEDIES LTD 45.2 15.7 -65% 41
MMTC LTD 637.6 227.5 -64% 22,750
DB REALTY LTD 161.15 57.7 -64% 1,404
PRITI MERCANTILE CO LTD 283.2 104.4 -63% 279
KGN ENTERPRISES LTD 372.95 139.5 -63% 285
POLYTEX INDIA LTD 252.3 94.6 -63% 128
GEODESIC LTD 25.35 9.5 -63% 86
PAREKH ALUMINEX LTD 262.4 99.3 -62% 128
EVERONN EDUCATION LTD 139.6 53.2 -62% 116
ABG INFRALOGISTICS LTD 118.1 45.5 -61% 54
SHRI LAKSHMI COTSYN LTD 74.85 29.1 -61% 82
SUJANA TOWERS LTD 6 2.4 -61% 122
HOUSING DEVELOPMENT & INFRAS 118.2 46.5 -61% 1,948
SHIV-VANI OIL & GAS EXPLORAT 104.75 41.4 -60% 192
INVENTURE GROWTH & SECURITIE 13.75 5.5 -60% 46
UNITED BREWERIES HOLDINGS LT 104.95 42.0 -60% 281
IVRCL LTD 46.45 19.0 -59% 507
PRAKASH CONSTROWELL LTD 18.75 7.9 -58% 99
EDUCOMP SOLUTIONS LTD 149.75 62.9 -58% 604
SANTOWIN CORP LTD 2.92 1.2 -58% 1
PARABOLIC DRUGS LTD 13.75 5.8 -58% 36
HORIZON INFRASTRUCTURE LTD 223.2 94.6 -58% 102
RAMKY INFRASTRUCTURE LTD 127.85 54.2 -58% 310
INDIA TOURISM DEVELOPMENT 1680.95 717.3 -57% 6,152
MARG LTD 49.3 21.1 -57% 80
DION GLOBAL SOLUTIONS LTD 43.1 18.5 -57% 60
TITAGARH WAGONS LTD 372.95 160.6 -57% 322
GOKUL REFOILS & SOLVENT LTD 45.1 19.9 -56% 262
ISMT LTD 23.15 10.2 -56% 149
OPTO CIRCUITS INDIA LTD 111.15 49.5 -55% 1,199
PRADIP OVERSEAS LTD 17.21 7.7 -55% 37
DQ ENTERTAINMENT INTL LTD 19.95 9.1 -55% 72
ASTRAZENECA PHARMA INDIA LTD 1404.35 639.1 -54% 1,598
DECCAN CHRONICLE HLDGS LTD 6.65 3.1 -54% 74
WELSPUN CORP LTD 107.85 49.8 -54% 1,134
AUTOLINE INDUSTRIES LTD 144.2 66.6 -54% 81
SHASUN PHARMACEUTICALS LTD 137 63.4 -54% 349
GLODYNE TECHNOSERVE LTD 27.5 12.8 -54% 57
VMS INDUSTRIES LTD 36.85 17.2 -53% 28
TRANSGENE BIOTEK LTD 4.35 2.1 -53% 13
HINDUSTAN DORR-OLIVER LTD 26.35 12.5 -53% 90
ALLIED DIGITAL SERVICES LTD 21.35 10.1 -53% 47
INDIA STEEL WORKS LTD 4.61 2.2 -52% 51
VERITAS INDIA LTD 52.35 25.0 -52% 61
ACTION CONSTRUCTION EQUIPMEN 23.85 11.5 -52% 113
ORBIT CORPORATION LTD 56.95 27.4 -52% 312
HINDUSTAN OIL EXPLORATION CO 105.7 51.0 -52% 665
WELSPUN PROJECTS LTD 22.8 11.2 -51% 45
ORISSA SPONGE IRON & STEEL 142 69.8 -51% 188
STERLING BIOTECH LTD 7.55 3.8 -50% 100
SHRISTI INFRA DVLP CORP LTD 192.85 96.0 -50% 213
PREMIER LTD 142.2 70.9 -50% 215
SHREE ASHTAVINAYAK CINEVISIO 2.6 1.3 -50% 107
KS OILS LTD 4.35 2.2 -49% 94
PENINSULA LAND LTD 77.05 39.6 -49% 1,106
APW PRESIDENT SYSTEMS LTD 193.95 100.0 -48% 60
PLETHICO PHARMACEUTICALS LTD 309.3 159.7 -48% 544
MANAPPURAM FINANCE LTD 45.1 23.6 -48% 813
BEML LTD 284.05 148.5 -48% 618
MADHUCON PROJECTS LTD 40.75 21.4 -48% 158
PETRON ENGINEERING CONST LTD 137.4 72.4 -47%
TIMEX GROUP INDIA LTD 25.15 13.3 -47% 134
ELANTAS BECK INDIA LTD 1180.25 624.7 -47% 495
BHARATI SHIPYARD LTD 71.05 37.8 -47% 1,196
GOKALDAS EXPORTS LTD 69.5 37.0 -47% 127
BF UTILITIES LTD 374.8 200.4 -47% 755
ANKIT METAL & POWER LTD 25.15 13.5 -46% 129
WEST COAST PAPER MILLS LTD 109.5 58.8 -46% 263
SREI INFRASTRUCTURE FINANCE 48.15 25.9 -46% 1,303
ARSS INFRASTRUCTURE PROJECTS 52.45 28.3 -46% 42
VISAGAR FINANCIAL SERVICES L 4.42 2.4 -46% 8
GAMMON INDIA LTD 41.8 22.7 -46% 308

mallikarjun,

first of all please drop the “sir”. i am also a student of the market just like you and many others here.

regarding your questions, if smallcap index were to break the 5000 levels and head towards 2008 lows, then nothing will be safe to invest in. i would then let the index reach there and start to show signs of some bottoming before we could think of what to buy.

if the index settles down in the range here, then i would look at all the quality smallcaps which have been reporting consistent results but have been beaten down because of non-fundamental reasons. i believe we could see oppurtunities in different stocks in different times rather than all of them together. e.g. is what happened to wimplast today. we need to look out for such oppurtunities and use them rather than waiting for absolute bottom. market is in capitulation phase in smallcaps and such capitulations could go on for months but when it does get over, it throws out once in a decade-like oppurtunities like in 2008.

Did anybody look at Engineers India Limited? A company with zero debt, 4% yield, high ROCE(50% almost) and 20%+ growth. It has almost 1700 crore cash in BS. It has a great name in oil sector as a consultant.

The investment cycle and PSU tags seems to be major deterrent at this juncture. Am I missing something?

Dear Raj,

As per an article in Mint quoted by equity master “EILhas decided to cancel a Rs 3,000 m worth of order awarded to a Ferna’s construction company forIOC Paradip refinery. It has also recommended the cancellation of another Rs 18,000 m contract awarded to the same company for a petrochemical complex of ONGC Petro additions Ltd (OPaL). The total contract value is a whopping Rs 21,000 m. Compare this to the order book of Rs 38,743 m at the end of December 2012 and one would understand the financial implication of the cancellation of the orders.The reason why EIL has recommended the cancellation is on the allegations that Ferna got these orders on the back of a fake certificate. It has written to the Central Vigilance Commission as well as the attorney general’s opinion on the contracts. Following their response the company had decided to help the CBI in its investigations on the first contract. It also recommended the cancellations of the two contracts”.

If I am correct they had 2200 crores of cash as of end march 2012. By end of march this should rise to around 2500 crores. that is like half of the market cap of 5079 crores in cash.

Compelling bargain if one is convinced about the recovery of Indian capex cycle.

"EILhas forIOC orders.The

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Thanks Saji for the details. This looks a little scary when I came across the following article.

http://www.indianexpress.com/news/eil-engineer-was-helping-cbi-probe-fake-papers-for-two-oil-projects/1088398/

Thanku Hemant bhaiya

Presently reading BEATING THE STREET by Peter Lynch. Here is what he says:

“Bargains are the holy grail of a true stock picker. The fact that 10-30 percent of our net worth is lost in a market sell-off is of little consequence. We see the latest correction not as a disaster but as an opportunity to acquire more shares at low prices. This is how great fortunes are made overtime.”

Hi Hemant,

Any updates after the recent bounce back in mid and small caps? How does the charts look now? Are there any clear messages in the chart? is this a trend reversal or just a blip in the downtrend?

Your views are valuable for small investors without any technical skills like me!

Thanks,

Balaji.

Hitesh bhai, your views are valuable too. Please give your comments.

Regards,

Balaji.

hi balaji,

script seems to be playing as expected with the awaited bounceback playing out now. the two lines in the sand for me are 5000 on the downside or 6700 on the upside for the smallcap index. until one or the other is broken, smallcaps may remain rangebound. in the bounceback many individual stocks shouldretrace 50-61.8% of the recent fall. until 5000-6700 range is broken there are no definite clues either side.

Hi Hemant,

Thanks so much for the immediate response as always.

Regards,

Balaji.

shouldretrace

I personally dont have much idea about market direction, but have been following vivek patil’s technical write up on icicidirect.com and till now he seems to have got things right. He further predicts a bear market lasting some 12-14 months from the time markets made a top. That should see the bear market carrying on till march 14. I guess even if that were to happen, there would be pockets of outperformance by various stocks based on their fundamentals and that should be our focus area.

Looking at broad macro picture to correlate with this impending and predicted correction I think political uncertainty, some bad news on Korea front or maybe US or Europe front may play spoilsport for Indian markets. The FII guys have been enthusiastically pumping money to no avail. Markets still seem to be very weak inspite of FIIs being aggressive buyers. I would fear to see the scenario once they turn sellers. If and when that happens nobody knows.

For us the formula remains simple. To buy what companies about which we know and have maximum conviction and be prepared to buy more on dips.

1 Like

SEBI has recently introduced the new norms categorizing almost 2200 stocks as illiquid. As per the rules, trading in these stocks will happen via CAll Auction system every hour.

We feel the above rules are disastrous and without any specific logic. In trying to curb manipulation, they have almost killed the liquidity in these stocks. This things hurts the investor sentiment in a big way and makes genuine investing even tougher.

I have raised the problems by writing emails to the SEBI etc -https://dl.dropbox.com/u/9346528/SEBI%20Call%20Auction%20system%20for%20illiquid%20stocks.docx

Would request members to also take up this issue and write email to SEBI -chairman@sebi.gov.in and have our voices heard.

Ayush

PS: Moneylife has also actively taken up this issue

1 Like

You have covered the points very nicely Ayush. Will it be ok to send the same content to SEBI with just the sender name changed ?

Regards

Raja

commodities are seeing selloffs across the board with brent oil trading close to 100 levels now. this is turning macros a lot in india’s favour. if government continues with reforms and RBI shows some sort of inclination towards growth as well, we could see good times soon.

@Raj - Yes, you may forward the same matter

Ayush,

Your word doc is good. Covered most of the points. But you suggested, having just only 1 hr auction cycle everyday and rest as normal trade. My point is instead of putting the onus on the company to bring more traders on its stocks(daily trades > 50 or so) and daily transaction volume > 10000 why not SEBI focus on value of stocks traded daily ? A 10rs stock even if it crosses 50 trades & 10000 volume per day, still operator only need Rs.1 lakh to manipulate it. But a 200 rs share even if it trades only 9999 volume & 49 trade per day, an operator need 19.9 lakhs to manipulate it. So it will be difficult to manipulate a 200rs share than a 10rs share. So we need to stress the value of trades per day rather than the volume of trades per day to declare a scrip as illiquid. But Iam okay with hourly auction cycle for the whole day,provided it is based on values not on volumes. Don’t you agree…? Unfortunately Iam also affected by this rather bizzare rule.

Hi Srinivasan,

Yes, value should be considered, if they want to keep this rule. But even in that case, the order book shouldn’t be cancelled and re-build every hour.

Ayush