Tags:
Journalism of Courage
Pradip ShahAtilde;?While infotech stocks are very highly rated right now, I wouldn8217;t really put my money in them and for the common investor, it8217;s a definite no-no, since the risk-reward ratio is unacceptably skewed. There8217;s too much hype about infotech, and the valuations are way too high.
As far as I8217;m concerned, there are enough stocks today which are very under-valued, primarily because no fund manager8217;s got interested in them so far. These are the stocks that I8217;d put my money in. Research the stocks, and then invest in them. Sooner rather than later, investors will realise that they8217;re not getting their money8217;s worth in infotech stocks, and will then want to invest in other areas. That is when fund managers will start looking elsewhere 8212; right now, like lemmings, they8217;re all rushing into infotech stocks.
Many commodity product companies have performed very well this year, and there8217;s a definite turnaround. Again, with brokers not really interested in this so far, the valuations make for tremendous investment potential. And while banking stocks have begun to go up, you do have enough stocks which are still fairly low-priced. You also have lots of public sector stocks which are undervalued.
This is not to say that I8217;d concentrate on low-priced stocks on the assumption that they will go up! The point is that with some good research, there are a lot of good pickings to make, and that no one is doing this right now. The point is that just because stock is unfancied is no reason for not picking it. In fact, one of the things about the present stock rally is that the B1 and B2 are just about beginning to go up, to values which are commensurate with their potential. This is the trend which you need to catch.Even with the stock market boom, I8217;d still be careful about investing in mutual funds. The reason is simple. By their very nature, mutual funds tend to diversify their portfolios and so, at best, just about outperform the market by a bit. Individual investors such as I, on the other hand, have the option of specialising in particular stock or sectors, and will do better.
Property8217;s looking better with the prices falling a lot in the past few years, but is still not good as an investment. Real rates of interest in India are still too high for property to be a good investment.
Pradip Shah heads IndAsia Fund and set up India8217;s first credit rating agency
