How the heavy weights became heavier

 

 

Year 2007 was more about chasing the index and less of stocks as the Sensex broke records, one after the other, and surpassed many milestones. In terms of numbers, the first half of the year was a complete lull, but as they say, it was certainly a ‘lull before the storm’. The wonder of it is, TSI recommends that even if you were to simply copy the top investment strategies of 2007, you would strike the proverbial gold in 2008.

First, a quick recap of the major milestones, before we find out which stocks set Dalal Street on fire. After touching the 15,000 mark on July 6, 2007, there was no stopping the Sensex as it broke records after records and on October 29, 2007 crossed the magical figure of 20,000. The index took only 10 trading days to gain 1,000 points after the index crossed the 19,000 mark on October 15. Since then things have not been good for stocks, index and the investor community as a whole; courtesy the financial turmoil in the United States.

Now let’s have a look at the stocks that catapulted the index from one skyscraper to the other. Considering the drastic change in share prices, Reliance Energy is one stock that tops the chart. From Rs 523 in January, 2007 to above Rs 1900 levels now, the stock has appreciated by almost 300%!!! That means if you had invested Rs 1 lakh in the beginning of this year, it would have fetched Rs 370,000 by the year end. One cannot ask for anything else!!!

Reliance Energy (REL)– an integrated private sector power utility company, promoters of which is Anil Ambani’s ADAG – is a company that specialises in generation, transmission, distribution, and trading of power. With the continued focus of the government on increased infrastructure spending, which includes power, the company is on a growth trajectory and is poised for astronomical growth in the time to come. Of late, the company has also bagged key power projects like the Sasan power project, Mumbai rail projects, Krishnapatnam power project and a few others. If you think that this is it, then REL has loads to offer. The company has decided to create a separate company from REL, by the name of Reliance Power Ltd., which will pursue various gas, coal and hydro power generation project in different parts of the country. The company is expected to hit capital markets very soon.

Next in the list is Larsen & Toubro from the capital goods segment. “L&T happens to be India’s largest publicly traded Engineering & Construction company. It is one of the leaders in the infrastructure sector,’’ said R.K. Gupta, who manages $100 million of stocks at Credit Capital Asset Management. The stock jumped from Rs 1459 in the beginning of this year to above Rs 4,000 levels; a cool 192% increase. Rs 1 lakh invested in January 2007 and at this time you would be sitting on a cash pile of Rs 292,000. In fact the entire capital goods segment has been firing on all four cylinders and propelled the Sensex in its last few laps from 17,000 to 20,000. Emkay Share & Stock Brokers has initiated coverage on Larsen & Toubro with ‘accumulate’ recommendation and target price of Rs 4,381, an upside of 7% from current levels.

The massive investment outlays by both the government and India Inc provide an investment climate that seems tailor-made to ensure L&T’s success. With L&T’s services and product offerings spanning the entire gamut of core infrastructure sectors, it is best suited to transform the available opportunity into orders, the brokerage house added. The company is right now aligning its various business units into six divisions and three subsidiaries, which will further unlock the hidden value, and as an when these companies list on the exchange it will give an opportunity for the Indian retail investors to be a part of its growth story. Keep that in mind for later!!!

Next in the list is another Reliance brigade company – Reliance Industries Limited. Just the increase in share prices of RIL in last five years has been a smashing 1,000%. In 2007, it has been a stupendous 120%. From your daughter’s/son’s marriage to meeting your daily expenses, RIL is no doubt a key ingredient of a happy life and secured life!

The business mix of RIL is a boon to investors, which includes, oil and gas exploration and production. The year 2007 has been particularly eventful for RIL, even as its oil and gas exploration & production arm has gone on to script amazing success stories. Now with a focus on inorganic growth, Mukesh Ambani has set his eyes on achieving global leadership, which is evident in RIL’s recent expansion plans and latest acquisitions. Reliance Petroleum Limited (RPL) the greenfield petro-refinery in a SEZ in Jamnagar, Gujarat (promoters of which are Reliance Industries and global oil giant Chevron) will ink a new chapter in the history of RIL and its stakeholders. RPL will be the world’s largest grassroots refinery. Even before commencing operations, RPL has set global benchmarks in project implementation and wealth maximisation (RPL stock jumped from Rs 60 in January this year to Rs 290 in November). Think long-term and think about the stock price when the refinery commences it's operations.

State Bank of India, was also among the best performers of 2007, as the stock returned 94%. The stock trading at Rs.1,254 in the beginning of 2007 is currently trading at Rs 2436. To simplify; had you invested a corpus of Rs 1 lakh in January 2007 would have swollen to Rs 1,94,000 by now. The stock got a push in the H2 2007, with the interest shown by the government, which is the largest shareholder about the capital raising plans. The government has Okayed a rights issue (shares issued to existing holders) of Rs 16,000 crore for SBI of the government would subscribe for Rs 10,000 crore. With a planned capital raising exercise and proposed banking liberalization in 2009, the stock has, and will continue to offer the opportunity for capital appreciation. Besides, the consolidation of PSU banks, advocated by the Finance Ministry, will also help benefit SBI, as other smaller and mid-sized banks will merge into it. In fact, the process has already been started with the merger of SBI associates with State Bank of India.

Well, these were some of the stocks that gave investors truckloads of money in 2007; TSI confirms with gumption that the strong fundamentals and sectors in which they operate these companies will continue to be a goldmine for retail investors in 2008 as well. Like we mentioned before, be an Einstein and you will never win a nobel prize. Be a Johny-come-lately, read TSI, all the green eyed dough would come your way without any sweat... but you might still not win the nobel prize :-) Well, that's the story for another day.