Sensex’s 40,000 Target; Grab Your Piece Of The Growth Story

Predicting the stock market on a daily basis is a task which requires a lot of analytical skills, expertise, patience and know-how of trends. However, certain unwarranted or unplanned incidents like Pakistans ceasefire violation along LOC, trigger certain knee-jerk reactions which could affect the Indian stock market either positively or negatively.

But not always, on certain days we just know the trajectory of the indices. 14th of March was one such day. With the massive victory scored by BJP during the recent state elections, it was given that the markets would open and close on a strong note.

As we write, the Sensex is sitting pretty at almost 500 points higher and looking all set to shoot even higher. If the market continues its rise at this rate, the Sensexs target of 40,000 will be realised much sooner than expected. And if we do, our subscribers can expect a lot more SELL stock calls from us.

The government is definitely going to be emboldened and we'll probably witness a lot many new reforms over the next couple of years. So since this is such a huge positive for our economy, we should all be busy buying equities, instead of selling them. Right?

So Why Take The Contrarian View?

Lets take an example: A company - ABC Ltd. has grown its earnings at an average rate of 20% YOY historically, and is appropriately valued to continuously grow at the same rate. But then, theres a sudden change in the management team and the new team promises to make ABC Ltd grow more than ever before and set a new growth rate of 30% YOY. Now, even if the new team is trustworthy, will you assume that it will start outperforming the previous team, and assign a higher value to the company straight away?

In general the majority of investors will not see any harm in this. After all, one of the easiest ways to make money in the stock market is to invest in a company which is breaking away from its past. These investors assume a higher-than-historical earnings growth rate and a higher multiple to reflect the new reality, and presto: You are sitting on good gains once the company grows as promised.

However, this is not how we help you make money through our stock recommendation services. With our services, it is safety first. Always.

The risk in investing in ABC Ltd is that the upside will be totally dependent on the expected growth of 30% YOY being met. If that doesn't happen, the stock of the company will come crashing down.

How Our Services Work:

We recommend you to invest in undervalued stocks of companies, these stocks represent companies which have good growth potential but haven't yet realised its value. We shortlist such companies and then we analyse even the minute details regarding the current policies, external and internal factors, we then go through the books and see if the accounting is solid and even ring up the board members or the directors in case we have an unanswered question. We figure out whether the historical growth rates of these companies have the capacity to be achieved by the company again. More than often, these companies deliver. And that means huge gains for our subscribers.

Kindly note that our original Sensex 40,000 target is not based on government reforms bumping up the earnings of companies. These reforms have had more to do with the profit margins of these companies going back to their historical trend. In fact, we feel that it is untimely to start betting your money on companies, hoping that the reforms will knock up their earnings.

Let other investors take stock prices of these companies higher. You should go ahead and help them by selling your holdings that you believe are fully priced in.

Since we started, we've been getting 86% of our calls right with this approach. For more details, click here @ Multibagger Stock Ideas or give a missed call on (022) 3946 4371.