Markets were a bit volatile this month, with some concerns over the economic growth, but finally finished marginally positive. The government continues to tighten interest rates in an effort to slow down excesses in the system. For example, with economic growth so strong, a bag of Cement is being sold at Rs 220 / bag compared with Rs 150 / bag a year back. Such high pricing is more because of stronger demand than supply, rather than cost pressures. To build a new capacity takes longer now because the engineering companies are too busy to delivery new capacities within 16 months. Such pressures are best corrected by slowing down growth and waiting for some capacities to catch up.

Despite the markets being strong, we are seeing several companies at attractive valuation. Some of the companies are available at valuation that was last seen in 2003. This polarization in the market seems surprising and likely to correct in the coming months.

Overall markets continued to reach new highs this month. Market movement in recent times has been led by a few select large stocks in telecom and banking. About 60% of the A group stocks are trading at prices well below previous highs reached in May 2006, despite the Nifty trading about 7% higher than its May 06 levels. The broader market is lagging the larger stocks, with the BSE Midcap Indices trailing the Nifty by over 8%.

Our portfolio lagged the market this month, despite Plastiblend’s stock doing quite well. The company announced its intention to expand capacity by over 70% and expects its growth rate to be in excess of 30% over the next couple of years. Some of the larger holdings were weak this month and we expect stock price movement to catch up with the broader market over the coming weeks.

Interestingly, despite the market trading at over 18X earnings, the average stock in the portfolio is trading at almost a 60% discount to the market. Many of the companies are also growing well and business conditions for these companies are favorable.  Overall, one can be optimistic over the coming months.

We are also migrating to a new fully automated accounting system that would enable us to generate reports instantaneously and make the accounting process far more efficient. We are in the test phase now and I expect to start sending the monthly reports in a different format from next month.

A critical milestone was reached this month for the markets, with the Sensex reaching an all time high of 13,000. On the other hand, the broader market, including the large cap oriented Nifty has not performed in line. Markets have been led by strong earnings growth, lower fear of inflation. Oil price correction globally has helped improve business confidence.

Our portfolio has been performing in line with the Sensex for the month and the year. Results for the half for companies have broadly been ahead of expectation. Even value oriented companies like Plastiblend grew by over 35%. We are also seeing some good value in the market despite the Sensex at new highs.

Next few months seems optimistic from a growth perspective and availability of reasonable value in the market. Apart from the threat of any major slow down in US (which can have an impact on Indian markets), one can have reasonable confidence in portfolio performance over the coming months.

Markets continued on an uptrend during the current month. Overall concern over high inflation and interest rate has subsided on the back of reducing commodity prices. Globally, stock markets have been on an uptrend and Indian markets also reflected this buoyancy.

Portfolio performance was assisted by performance of Kesoram, which has moved almost 60% over the past 2 months. Underlying economic growth indicators suggest that the strong corporate earnings growth environment will continue through the current year. In this scenario, valuation of some of the stocks is looking very attractive.

After 3 months of weakness, equity markets rebounded sharply this month, led by strong earnings growth in the last quarter. Corporate earnings growth continued to be very strong and increase in interest rates is yet to have an impact on overall growth.

Mid tier companies have also participated in the current rebound and overall portfolio performance has been healthy.

After a 3 month period of correction, markets seems to be showing visible signs of consolidating. It seems likely that this phase may continue for some more time. On the positive side, corporate earnings were very good during the last quarter. Many of the companies in the portfolio have been coming out with good results. Concerns over inflation has weaned a bit.

Valuation of select stocks is looking attractive. The current phase seems like a good period to invest selectively.

Overall markets corrected sharply during the beginning of the month with the Sensex falling all the way down to under 9000 and then rebounded sharply towards the end of the month closing with a small positive performance for the month. On the other hand, the broader market saw an even severe fall and is yet to rebound back fully.

Fall in stock markets in India and across the world has been triggered off by concern over inflation. In a period of high inflation, regulators normally would be forced to increase interest rates. In India, we have seen housing loan go up from 7.5% to 9.5% over the past 2-3 months. One of the objectives of this is to slow down growth rates and the excesses that are happening in the system. In an environment where the real economy is growing at over 8%, it is better to clamp down on excesses at regular period in the interest of longer term stable growth. Government seems to have taken a good step to cool off the real estate excesses. Many of the concerns due to which the markets fell are still present. Markets seem to have rebounded in the assumption that the worst is over, but the impact of the increased interest rates are yet to find its way into the economy.

With markets at current levels, the only real concern is if the economy slows down from the 8% growth levels. At least as of now, that does not seem to be a major worry.

We are starting to see some very attractive valuation. There are several good quality companies with dividend yields over 4%. The sudden move up over the past few days have decreased the number of very attractive opportunities. It seems likely that the markets would be range bound and consolidate over the next few months before any major move.