Buy before the Union Budget of 2010-11

Looking at the way the Indian Markets have been correcting over the past few weeks, it now seems like a good idea for Position Traders to go long on selected scrips. No one knows where the bottom is but one thing is for sure - Markets are heavily over-sold. Analysts are saying that we might see the Nifty correct to 4500 before we can see 5500 mark. I somehow doubt that. I feel whatever correction Nifty has to see will happen in the coming week itself. In other words Nifty should see some it's maximum correction in this run till Thursday but I don't think it would reach 4500 at all. I feel if Nifty corrects further Monday onwards it should bottom out between 4650-4700 at the most. So if the Finance Minister presents a Budget similar to the one he presented last year or even if there is a bit of tightening here and there; I think Markets would recover heavily and there would be a sharp upward rally. Everyone's been selling in apprehension of the worse and hence they're all sitting on cash now. The folks who have been selling till now need to buy back their sold off positions. Thus I doubt Markets would fall any further post Budget on Friday. Infact I think the Markets are waiting for the Budget to actually bounce back to earlier levels. Now my point is that even if the Markets fell it would not matter much to a Position Trader since he would have bought selective shares during the pre-budget trading sessions at dirt cheap prices. Some of these good stocks are trading at almost around their 52 week lows. It's just a matter of time that these would bounce back to higher levels as soon as the overall markets get into a bull-run. So even if the markets were to fall post budget the prices of these shares wont fall so much. I have been tracking a few of these shares for sometime now. I feel one can look at the following shares which could be added to one's portfolio with a medium to long term view as my top 5 Pre-Budget picks:
  1. Reliance Communications: This scrip closed at just about Rs. 30/- above it's 52 week low price at Rs. 161.95 on Friday. It touched an intraday low of Rs. 160 on Friday. One one the reasons for me to favor this scrip is because it's CMP is Rs. 90 less than it's Book Value which is Rs. 250.43. It's definitely a strong buy with a long term view. One should start to accumulate current market prices and continue to collect at further dips. 
  2. Reliance Industries: One of my all time favorite stock is currently trading at a throwaway price. I feel post split Reliance is always a good buy at any price below Rs. 1000/-. Again from a long term investor point of view one can follow the same approach as suggested in case of Reliance Communications. One can continue to buy on dips. Having said that I doubt it Reliance would be able to breach Rs. 950/- anywhere in the short term so one can easily keep increasing long position in this counter.
  3. Bharti Airtel: I have been tracking this company for a long time and I can definitely suggest medium to long term investors to take positions in this counter. At around Rs. 270 it is looking dirt cheap for a company like Airtel. One needs to remember that the 52 week low is Rs. 269.35 so one can safely assume that Rs. 270 is a strong support level. And even if Rs. 269 gets broken it wont go below Rs. 255-250 levels. Even if it does see such low levels it gives the opportunity to the investor to take up new positions thereby averaging the total price.
  4. Aban Offshore: Another very good company and definitely a high beta stock. This scrip is a very good buy at any price below Rs. 1100/-. I think one should follow a SIP policy on this counter. Pick up small quantities as and when the price falls. This will enable to the investor to maintain an excellent average price and at the same time have a strong position as well. I think one should keep buying this scrip at every fall of Rs. 50 till sub 1000 level is reached. I don't think it will breach Rs.950 in short term. 
  5. Larsen: This is one of the few stocks which closed in green last Friday. A very strong company with one bad quarter means reason and opportunity to buy in my books. I strongly feel that a Position Trader could easily go long in this counter even at current prices in small quantities and wait for the price to fall below Rs.1400/-. Any price below Rs. 1400 is a great price to buy this company. I think one can keep an eye open for Rs. 1390. It's a very good price to accumulate sufficient quantities of this scrip.
P.S. Please refer to the Disclaimer at the bottom of this page before making any investment decision. Further, kindly consult an investment advisor before taking any fresh exposure to the above mentioned scrips.


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