October 2, 2007

The Reliance effect

update : Oct 09
well, the euphoria has increased even more since i posted, which was just a few days back. Reliance and a few other stocks like L&T are the new dotcoms of 2007. I am getting a sense of deja-vu ..can see a replay of 2000 here, alteast the initial part. Soon we will have people justifying the current run-up saying how it is 'different' this time.
Personally, in this bi-polar market i can see quite a few undervalued stocks and would prefer to concentrate on them than get pulled into this frenzy.

The S&P CNX nifty (NSE index) has risen by around 13.2 % in the last one month with the main move happening after the fed rate cut on 18th. The funny thing is that all reliance stocks have shot up since then.

The following is the increase in the price of these stocks in the last one month

RIL – reliance industries – 20.5%
Reliance energy – 75%
RNRL – 115%
Reliance communication – 13.1%
Reliance Chemotex – 147%
RPL – 41%

So I guess anything with the name reliance is in a bull market. The industry does not matter, only the management should be with reliance.

I cannot figure out what is happening. There seems to be two markets now. One is in a bull phase consisting of reliance stocks and a few others, with the rest of the market more or less even. So my approach is to stay away from the overvalued stuff and hold or buy what seems undervalued. Ofcourse i am not into momentum trading, so this approach may not work for those who are into that.

Disclosure – I hold RIL and REL. So I have one portion of my portfolio galloping whereas the rest is barely moving.

3 comments:

Mumbai Journo said...

isn't DCMSHRIRAMCONSOLIDATED majorly undervalued? the company just earned more than Rs 800 crores after selling land to DLF, but the scrip is still quoting slightly above 52 week lows

Anonymous said...

reliance chemotex..interesting to see that in the list. I believe he has absolutely no connection with either of the ambani brothers :0(

Rohit Chauhan said...

did not know that reliance chemotex is not owned by the ambanis, which makes it even more interesting that any stock with reliance name in it is increasing