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Stocks: where to invest? Where you should not invest?


Stocks: where to invest? Where you should not invest?
Companies that had been on an acquisition spree on borrowed money are now facing debt issues as their stocks are also getting a beating at the share price since the companies are debt outlook deteriorates with weakening of the currency. Some of the big names in this list are, Bharti Airtel, Tata Motors, Tata Steel and Reliance Communications.

With foreign funds pulling out their investments and a strong import demand is hurting these companies. As these companies are not thoroughly hedged, there debt can be an issue of concern as investors get more worried about recession.


Ritesh Jain, investment head at Canara Robeco Mutual Fund was quoted by the Economic Times said that there will huge losses and hence there will be a negative surprise for these companies.

In general weak rupee is supposed to be beneficial for IT companies, but as dollar gains strength against other billing currencies, like euro and British pound sterling, will neutralize their 'export receivable earnings'.

He also said that the corporate earnings will slow down over the next three quarters. He also opined that companies will not only see a operating margins, but also in general decline in demand.

Domestic consumption is still high, despite a series of rate hikes. Global uncertainty and regulatory environment are now allowing capital formation needed for broad based growth of economy and to dampen inflationary pressures he said.

So what kind of company?

In such uncertain times its is a better option to invest in companies that can survive despite season or economic cycle. The better option would be to look at for companies with high free cash flows.

The conservative style of portfolio will do much better for investors. In fact all investors should hold approximately 10-15% of Gold in their portfolio.

Story first published: Monday, September 26, 2011, 14:01 [IST]
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