When is the right time to sell stocks?

In this issue:
» India's edge in industrial production
» Promotion of gold coins gathers steam
» FIIs continued to be enthused about India
» A change in fortunes for Indian IT

Do you know the most common reason why companies fail? Well, we guess it might have to do with debt. Either they don't get it when required or they take on so much that when demand for their product falls, they find it hard to repay it and hence, fall into a debt trap getting out of which could take years. Thus, if the most imperfect stock has the qualities we just described, it is obvious that the most perfect stock would have qualities, which are exactly the opposite. A perfect stock would be the one where the underlying company has neither taken debt for years nor has it raised equity but has still grown its net profits at a pretty decent rate and has also continued to pay handsome dividends. If one draws a circle around such stocks and considers a long-term period of say 8-10 years, we are pretty sure that these stocks would have outperformed most stocks that are listed on the bourses.

Of course, one has to buy such stocks at prices that are reasonable enough. And when should we sell them? Well, if the stock continues to do well and keeps growing its profits as well as dividends, the idea of selling it should not even enter one's mind. This is because all the returns that the investor is expecting from the stock could be met from dividends itself.

There has been considerable optimism about India and China breaking away from the developed nations in terms of reporting decent growth even when growth for the global economy is expected to be tepid in 2009 as well as 2010. And the latest figures released with respect to industrial production probably lend credence to this buoyancy. As today's chart of the day shows, with respect to growth in industrial production in August 2009, India and China are far ahead of the US, Europe and its BRIC peers. While China's industrial production grew by 12% YoY, for India that number stood at 10%. For India, this comes as a relief, especially at a time when monsoons have played truant and have hampered growth in agriculture. Thus, if industrial production sustains its growth momentum in the coming months as well, achieving a 6% growth for the fiscal may not be as difficult as originally envisaged.


Goldman Sachs' famous BRIC report showed a large chunk of Indian population in the group that they called 'aspirers'. But India Inc is not leaving any stone unturned to cater to not just the aspirers but also the ones that can barely afford to 'aspire'.

It took close to 300 engineers around four years to develop the iconic Tata Nano. Indian engineers today are doing a lot more of the 'out of the box' thinking to tap one the largest untapped markets. The idea is to go beyond the 'sachet revolution' of the 1980s when Unilever and other consumer-goods companies realized they could sell lots more of their shampoo, toothpaste and snacks just by selling them in tiny packets. This time, Indian engineers are reinventing products to cut costs and reach the hundreds of millions of people who live on less than $2 a day. The market is so lucrative that not just start ups but also well established conglomerates have set up new business divisions with focused attention on low cost products. The Tata Group is certainly leading this pack. And while profit margins may be slim, companies are counting on higher volume to compensate. Many also hope to tap into other poor markets in Asia and Africa eventually.