Hit & Run or Hold & Hold

It’s the nature of the markets – people sell due to negative news, price of concerned shares fall and no sooner the shares fall, smart investors start computing the maximum arbitrary extent to which the share will fall say due to bad sentiments [ ex: LIC Hosing Finance Ltd, Welspun Corp ] or due to future reduction in top line/bottom line growth [ ex: SBI ] and then they start buying at lower levels hoping against hope that the share price does not fall and keep falling further.

In the last several weeks/days, we have seen many shares slide a lot like SKS Microfinance, Money Matters, LIC Housing Finance and Welspun Corp. Today, SBI fell by Rs.118.45 to rest at Rs.2952.85. That’s a drop of around 16 percent from its 52 week high of Rs.3515/per share [ 8 Nov 2010 ]

SKS Microfinance which peaked at Rs. 1491.50 on 28 September 2010, reached a low of Rs.640/share and today it rested at Rs.710.05. Welspun Corp. which was hammered on Friday 3 December 2010 by Rs.58.80 to close at Rs.160.30. And after the company clarified that its basic business model is no way affected by the SEBI allegations, Welspun Corp rose today smartly by Rs.10.15 to close at Rs.170.45/share

Today, some news relating to SBI hiking its Deposit rates broke out and the share price broke down too. State Bank of India (SBI) has revised the deposit rates by 50-150 basis points (bps) in various maturities, effective from December 07, 2010. The revised interest rates for domestic term deposits are below Rs 1 crore. Deposits for the period of 555 days have been increased from 7.50% to 8.50%. For the period of 1000 days, deposit rate has been raised from 7.75% to 8.50%. Further, for the period of 8 years and upto 10 years, the rate has been increased from 7.75% to 8.75%.

In Nov 2010, out of 21 operating days, SBI was quoting above Rs.3000 for 14 days. In the current month, the share has been again quoting above the Rs.3000 mark except today when it went downhill by 3.86 per cent /Rs.118.45/share.

Now without going into techno-funda details of a bank which needs no introduction, just consider this :SBI has a Book Value of Rs.1123, a PE of 19.21, does annual topline of around Rs.85000 crores plus and oozes out annual Profits of around Rs.9000 crores plus.

In case SBI slides by another 6 to 9 per cent from current levels, then do consider taking a position in SBI and look forward to earning decent Swing Profit from this bet. And, in case the SBI does fall after taking position, don’t sell in panic – it will rise for sure just like the SUN. sooner than later.

The same philosophy may be used for taking a position in Welspun Corp Ltd.

In short, after the storm, there is always the calm - so think calmly, take some calibrated risk and go for stocks that have the potential to make good money in the short run.

So, friends SBI and Welspun Corp – both are a hit and run strategy behind which is embedded a Hold and Hold Strategy too! Isn’t that cool as cool.

Happy Investing !