If you are looking at 30 to 40 per cent returns in a fortnight's time you need to just forget the bluechip stocks and chase companies with high debt. The bluechip stocks are never going to give you returns like that and they have never in the past. Let us tell you what is happening in the low priced stocks, which are now seeing phenomenal returns on hopes that they will sell assets and bring down debts.
RCOM - Returns of 200% in 14 days
This stock which was trading near Rs 11.30 on December 11, has rallied 200 per cent in just a fortnight's time. The stock has largely gained momentum following the decision on debt restructuring. The company plans to reduce its debt in a planned manner and ha already decided on sale of some of its assets to Reliance Jio.
The shares are now quoting at Rs 37 and nobody knows, how far the stock can move. Investors may now want to be careful before investing.
Jaiprakash Associates - 50% returns in a month
This is another stock that has rallied. The shares which were around Rs 17 on Dec 14, have now jumped to near Rs 26. Again, gains of near 50 per cent in the last fortnight or so. The company like RCOM has plans to prune down its debt. The target set by the company is a debt of Rs 6,000 crores in the next one year.
It has already sold cement assets to Ultratech for a staggering Rs 16,500 crores to bring down debt.
The rally in Jaiprakash Associates may largely have been fuelled by a rub-off impact from RCOM, where there are hopes that highly leveraged companies maybe able to prune down debts by selling their assets.
This is another debt ridden company, which has seen a stupendous rally. The good thing for IVRCL is that it does not have huge debts like RCOM and Jaiprakash Associates, but, debt of around Rs 8,500 crores. The company recently sold some of its road assets to cut debts.
If the company continues to sell its assets, it could bring down debt further. The stock which was trading at Rs 4.90 a week back has hit levels of Rs 6. Again, a near 25 per cent rally in a week's time.
The rally continues in several other high debt companies like GVK power and GMR Infra. The latter's shares have jumped from Rs 16.90, a fortnight ago to Rs 21. GVK Power has now almost trading at a new 2-week high.
If some of these stocks manage to seriously sell assets and get out of debts, there could be much more gains. However, it is very difficult to say, how the revenue stream could be impacted if assets are sold.
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