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Strategies & Market Trends : India Coffee House -- Ignore unavailable to you. Want to Upgrade?

To: Bala who wrote (4175)	4/30/1999 9:59:00 PM
From: Mohan Marette	Respond to of 12475

MARKETWATCH by Ashu Dutt (This for general information only and should be used as such.Investing withought doing your own research is risky for your financial health-Remember you heard it here first- Mohan) May 3rd – May 7th Look for spikes in specific stocks as the general market will remain in limbo at least till election dates are announced. I do believe merger activity is picking up. Brokers have been accumulating specific stocks before takeover offers are made officially. The week beginning May 3rd is crucial. I expect the markets to dip in the coming week as the election commission announces the dates for elections. I don't see the election happening till July at the earliest. SECTOR WATCH The Hotel Industry looks attractive at current levels. I believe hotel stocks have been hammered down too severely. Hotel occupancy rates are beginning to pick up as business travelers return and the impact should be visible by the second quarter of FYE 2000. The Cement Industry is beginning to perk up. Cement prices have begun to stabilize. No new capacity is being added in FYE 3/31/2000 and any present overcapacity is expected to be absorbed by an expected 15 percent increase in cement consumption. Start picking up cheap cement stocks to hold for 12 months. The two truck manufacturers Ashok Leyland and TELCO will benefit greatly by a burst in buying to catch up with pent up demand in the last 2 years. STOCK WATCH Ashok Leyland – BUY Sales of Commercial vehicles dropped about 12 percent for the year ended March 31, 1999 because buyers postponed their buying decisions due to a slowdown in the economy. Consider the following factors – a) In New Delhi, only commercial vehicles less than 15 years old are allowed. I believe the Supreme court will rule this for more cities within the next 2-3 months b) Demand for commercial vehicles this year is already shooting up due to a cutback in purchases for the last year. Demand growth will be at least 25% in the first quarter itself c) Tax rules allow for accelerated depreciation of newer vehicles to encourage truck owners to go in for new trucks (the rule came into affect about 2 months ago). The full affect of the above factors will be visible in Ashok Leyland's 1st quarter financial results. As an oligopoly (along with TELCO), Ashok Leyland is poised to register volume driven growth even as margins remain at prior year levels. Stock looks cheap below 30. Hotel Leela Venture Limited – BUY - Strong Earnings Growth & falling Capital Spending Stock Specific Investment Positives -The 220 room Luxury hotel in Goa has been operational for the first full year in FYE 3/31/99 (it was available for one 5 weeks in FYE 3/31/98). The impact on earnings from the Goa property will be visible in FYE 3/31/99 and beyond. A Five Star hotel in Bangalore will be operational by October 1999. Earnings impact will be felt in FYE 3/31/2000 Capital Expenditures are slowing down just as earnings ramp up from the Goa and Bangalore Properties. General Investment Positives – - A falling rupee will ramp up hotel Earnings - A renewed increase in international business travelers will increase hotel occupancy rates in FYE 3/31/2000 Stock looks good below 24 DIVIDEND PLAYS – Great Valuations and excellent dividend yields - Look at picking up these stocks as they declare dividends within the next 1 month. Since these shares are in depository form only, no hassles with paperwork and the dividend gets credited directly to your bank account. Oriental Bank of Commerce paid a dividend of 35% last year and I expect the dividend to be maintained given that their earnings for the first 3 quarters of FYE 3/31/99 were higher than the prior year. Current price at 26.50. Thats a return of 13% in about a month assuming OBC's price remains the same. The stock trades at a P/E of about 1. Chances of going lower are minimal. IDBI is at 28. The dividend last year was 45%. I expect the dividend to be maintained this year. With a P/E of just over 2, there is little downside th the stock. A 45% dividend will produce a return of over 16% in about a month. TRADING STRATEGY If you have the holding power, use a strategy that I have seen many investors doing very well with. Pick any of the very actively traded stocks like Reliance, TELCO, TISCO or SBI. Pick up about 500 shares in any or all of these shares at cheaper prices (i.e Reliance @ Rs. 120 or lower, TELCO at 130 or lower, TISCO at 72 or lower and SBI at 150 or lower). Then you can do one of the following: 1) Play on Intra Day or Intra Settlement moves – Sell the shares during a settlement at higher than acquisition prices. Buy them back if the price falls on the same day or within the same settlement. This way you have squared off your transaction within the same settlement (and paid the lower squaring off brokerage) and still have quality shares in your inventory. 2) Arbitrage between 2 exchanges: See if there is a price difference in 2 exchanges. For example, Reliance may be at Rs.125 on the NSE and 123 on the DSE. Sell on the NSE @ Rs. 125 and buy it back simultaneously on the DSE at 123. If that's the case why do you need to hold shares? Well the settlement cycles are different on the NSE & DSE. So if you sell on the NSE, the DSE may not deliver the shares to you on time to be delivered to the NSE. If you have the shares in your custody, you could deliver on the NSE and wait for the DSE to give you the shares. This way you replenish your inventory. DEPOSITORY WATCH Another 40 shares will be required to be delivered in depository beginning May 30th. This gives you a great arbitrage opportunity. Like in the shares that went into the depository before, share prices for these 40 shares should dip in the last settlement in which physical share delivery is allowed. That's because most investors will sell their physical shares and pick up depository shares in the very next settlement in depository form. So how does it help you? Well, buy shares at cheap rates in the last settlement before they go into the depository (that's when everyone is selling), register the shares in your name and send them to the depository for dematerialization. The whole process will take about 5-6 weeks. The risk is that by the time you get your shares registered and converted into the depository form, shares prices may have fallen IPO WATCH No IPOs expected this week. I would keep away from IPOs for a few months. Most recent IPOs have traded at big discounts to their issue price. The NSE is planning to introduce IPOs through your broker's trading terminal. What that means is that you can just send an e-mail to your broker and he will be able to buy the IPO for you on his terminal. You will not need to send any Application forms. The system should be operational around July this year. The IPO shares will be credited electronically to your Depository Account. BADLA WATCH Stock Purchase financing rates or Badla rates should remain in the range of 15%-20% for this Saturday. Excessive liqudity in the Banking system will keep badla rates lower. I expect Badla rates to spike up after the second week of May. The DSE, as usual should have higher badla rates of 20%-22% for this week. MUTUAL FUND WATCH I suggest the following 3 mutual funds – All allow NRIs to repariate funds:- ITC Threadneedle Top 200 Fund – 3 month Returns – 24.2% b>Kothari Pioneer Bluechip Fund – 3 month Returns – 48% Birla Advantage Fund – 3 month Returns – 108 % CURRENCY OUTLOOK The Rupee is not expected to cross the 43 rupee to the dollar levels. 8 out of 9 currency chiefs I have talked to maintain that the rupee will maintain current levels and may even appreciate as fund inflows ramp up after a new government is in place. Ashu Dutt is the Business & Financial Markets Anchor at Star News, India's 24 hour News channel and the CEO at Dutt Stock Broking Limited,a boutique brokerage house specializing in Fixed Income & Equity Research & Trade Execution for Institutional Clients, Private Client Money Management and Online Brokerage Services duttstock.com He is widely respected and quoted in media for his expertise and view on Financial markets and Personal Finance issues. Mr. Dutt is a C.P.A (Maryland) and holds an M.B.A. from Bernard M. Baruch College, New York and a B.B.A.(Summa Cum Laude) in Finance & Investments from Bernard M. Baruch College, New York. Views express in this note are Ashu Dutt's personal views.