Investment for Rest half (2012)

Wrt to my last Article, It has been a good climb with the graphs of pharma/healthcare companies still not peaking and yet have more to come. Its Irony, but thanks to Rupee depreciating and this sector leaving stone upturned for  the opportunity to spread domestically and internationally. It is nothing but an experience to learn, on how even in bad times for the overall market, a sector can perform exceptionally good. Look at lupin, Sun Pharma, Ranbaxy (20-30% up, still 10-15% more to come). Except a few disappointments like Dr. Reddy's and also GlaxoSmith (3-7% up).

But what's next?? Surely not Airlines/Telecom for a while, with the battles going on. Monsoon does not favor FMCG. The chase cuts down to IT, Pharma, Auto, banking/finance, Energy, metal or Commodities. Edible commodities like sugar, cotton  have already picked up 10-12% due to foreseeing demand/supply gap(reason being poor monsoon), but still have chance of another 15-17% upside. Festival time for next 3 months indicate precious/semi-precious commodities will pick up pace but how much (Since they are already on there all time peak), another 5-10%  and festive season is good for Auto sector, but the inflation and growing cost will put a break on buying so it can experience 10-15% upside. In IT sector, one needs to be selective, yet the returns will not be same as pharma has shown till now. Energy Sector with most of the PSU's stalled under the weight of subsidiaries. Metal needs to pick up in terms of demand. Banking being marred by NPA's in PSU banks and competitive margins in private banks, also inflation puts yet another hindrance, positive single digit upside expected.    

Steps taken by RBI about Nose diving Rupee

Huge demand for dollars due to rising imports, and shrinking inflows from foreign investors due to sluggish growth, high inflation, widening current account and fiscal deficits and policy stalemate are key factors for the slide in the rupee.

To slow down the depreciating rupee, the RBI had in the recently taken a couple of measures like raising interest rate on NRI deposits in foreign currency to promote inflows, discouraging outflow of foreign currency by instructing exporters to sell 50% of their retained foreign exchange earnings.

Also in the past, RBI had said forward contracts once cancelled cannot be re-booked and that the forward market should only be used for genuine hedges. This drove speculators out of the currency market. RBI also curbed banks’ open exposure to the currency market and set limits for them.

What RBI can do further!

Impose a cash Margin (10-25%) on forwards. This will reduce speculation to a significant extent and will give access to market for actual trade.

RBI could directly propose oil companies to buy dollars directly from the central bank or it could purchase oil bonds.

Reduce the limit of dollars for people going abroad.

Further tariff or restriction on gold import, So that the greenback stays and is not being traded in huge volumes.

Rebates to support more exports, this in turn will improve dollar liquidity. 

Pharmacy/ Healthcare - Sector to invest in 2012

With the crisis deepening and strengthening due to European situation, Currency depreciation, Inflation and Political instability, India's Stock market doesn't seems to be the right place to park money and multiply. But not all sectors will be suffering due to the current situation. Pharmaceuticals sector is a no-stop train, although it gets sluggish due to global factors. Rupee depreciating will boost the sector as 40-45% is exported. Primarily, Lupin in Pharma looks strong without too many hiccups compared to it's counterparts in the sector. Also, Apollo Hospital after a GDR with Mauritus based Healthcare looks strong and promising. Sun Pharma looks in a better position as they have zero hedging policy against dollar. Ranbaxy after the FDA settlement needs to cover up losses.