Much has been said of the volatility and the nervousness that have gripped the stock markets in the past two months. Investors have to understand that in the current phase of the markets, with the election process on, the volatility will be a minor ache they will simply have to live with.

With the government residual stake sell-off and offer for sale in several public sector undertakings now complete, the divestment target of Rs 16,000 crore (Rs 160 billion) for FY 2004 has been met. Besides the PSU stake sell-off through initial public offerings in February and March 2004, the government had sold smaller stakes in Maruti Udyog, Jessop & Co and Hindustan Zinc during the year 2003.

The stock markets will continue to move through a corrective and volatile phase and a further downturn towards the 5400-5300 level should not be ruled out.

Beyond elections, buy for the long term

Historically the stock markets have done well in their run-up to the elections and even in the post election periods of 1989, 1991 and 1999. This time around, the market appears to have discounted a 'good' election, in the belief that the Bharatiya Janata Party-led National Democratic Alliance government will edge ahead and come to power.

However, if this is achieved through hectic horse-trading and ill-matched alliances, it could affect the reform process and its pace will slow down a bit.

Thus, the risk factor in the post-election scenario could continue. In our view, in a highly volatile market there will be very few stocks which are 'sound buys' with a short-term view.

The markets are expected to react further when listing for some of the PSU stocks takes place.

We have identified ten stocks -- post-PSU stocks listing -- which people should look for only from a medium-to-long-term investment horizon. Further, we would advise that these stocks be bought on further declines.

In the current basket, the safe and attractive buys would come from the old economy, particularly oil/refinery and energy sectors. We are not too bullish on the automobile and cement sectors, which had seen a run-up in recent months.

BHEL

Bharat Heavy Electricals Limited (BHEL) is the largest engineering and manufacturing enterprise in India in the energy related/infrastructure sector.

BHEL recently bagged the single largest contract from the Oil and Natural Gas Corporation to supply critical equipment used in oil exploration -- in the form of wellhead assemblies, Christmas-tree valves and gate valves. The projected offtake by ONGC will earn BHEL close to Rs 1,600 crore (Rs 1.6 billion) over the next three years. Almost half of these orders will have deemed export status.

From a technical analysis perspective, BHEL has been in a long-term uptrend ever since it bottomed out at the Rs 144.00 levels, during November 2002. BHEL continues to post new highs regularly and is in the midst of a strong bull grip.

Currently the scrip is in the Rs 580-600 price band and is higher than its long-time high of Rs 475.00 in 1997. BHEL offers excellent long-term investment opportunity once it declines further.

CONCOR (Container Corporation of India)

Container Corporation of India, a 63 per cent-owned subsidiary of the Indian Railways, is the sole domestic transporter of containerised goods by rail and holds a 31 per cent share of international cargo.

CONCOR commands an undisputed position 'as the sole-provider' of rail-hauls for containers and has a dedicated network of state-of-the-art terminals across the country to capture traffic at the production/consumption centres.

The key areas for growth in he coming year will be diversification of supply sources for wagons, wagon expansion, using high-speed wagons to cut costs in haulage charge and the firm undertone in the economy.

The commissioning of two new ports in Gujarat has expanded the scope for containerised movement of cargo, which will aid its overall business plan.

From a technical viewpoint, the CONCOR stock has posted a fresh all time high. The mechanical indicators do not reflect any signs of weakness (despite the sharp rise) indicating that the scrip has enough steam for further upside.

CONCOR - currently close to the Rs 750 level -- seems to have formed an intermediate bottom at the Rs 600 level making it a significant support level in times to come while any bigger dips could be used as a buying opportunity.

DREDGING CORPORATION OF INDIA (DCI):

The Dredging Corporation of India, set up in 1976, provides dredging services to the major ports of the country in India.

Dredging is the underwater excavation of various types of materials like rocks, boulders, cobbles, gravel, sand with the objective to create deeper water to improve navigation at various ports along the 5,700 km coastline of India.

DCI has the advantage of best quality equipment, expertise and experience in the country. The positives are that DCI is the 7th largest dredging company in the world with 80 million cubic mt. dredging capacity.

Maintenance dredging will be a perennial requirement for ports in India. Growth opportunities are now emerging through capital dredging from new ports and overseas contracts in south east Asia and the Middle East.

Over the decades, a protective government policy had aided DCI's position, wherein the nomination process allowed all ports to negotiate with the company directly rather than award contracts by competitive bidding. The policies may change in April next month, when existing guidelines expire.

The DCI public issue, through the sale of 20 per cent government stake, was oversubscribed 17.9 times though retail participation was disappointing. The cut-off issue price for the offering was at Rs 400.

The DCI stock has already reacted at the markets, falling over 9 per cent from Rs 600 to Rs 540 levels in recent weeks.

Dredging Corp. posted average results for its fourth quarter FY 2004 period, with a 12.8 per cent dip in net profit to Rs 49.39 crore (Rs 493.9 million) against Rs 56.64 crore (Rs 566.4 million).

Annual figures were marginally better with net profit for the year ending March 31, 2004 at Rs 163.86 crore (Rs 1.638 billion) against Rs 161.82 crore (Rs 1.618 billion).

The scrip is in a long-term uptrend but there could be some more medium-term pressure due to the volatility and turbulence in the market itself. Any significant correction can be used as an investment opportunity.

GAIL (Gas Authority of India)

India's principal gas transmission and marketing company, Gas Authority of India, was set up in 1984 to create gas sector infrastructure. GAIL is the owner and operator of India's largest gas transmission networks (4,600 km pipelines) and the world's longest exclusive LPG pipeline (1,269 km).

The PSU will play a key role in the ambitious Rs 20,000 crore (Rs 200 billion) National Gas Grid project, having completed the engineering and cadastral survey for 7,030 kilometres.

The survey is a pre-requisite to obtain right of use (RoU) certificates which will allow GAIL to start work on the project.

The recent GAIL public issue was oversubscribed 9.28 times, in the backdrop of a strong response to the ONGC issue. The price of the offering has been fixed at Rs 195. The scrip is still ruling firm when almost all other oil and gas stocks have fallen. This is due to the strong response to its own public issue as well as that of ONGC.

From a technical viewpoint, GAIL still appears strong. The GAIL stock peaked at an all time high of Rs 312.80 during the week ended January 9, 2004 and gave a downward key reversal to enter a corrective phase. The stock declined from this level to consolidate slightly below the Rs 200 level and is currently in a corrective recovery phase at the Rs 214 levels.

The upside for the stock remains slightly limited but keeping in mind the positive picture on the long charts, a deeper correction could make it a safe investment bet for the long term.

GAIL's financial results were strong, with a 13.4 per cent rise in net profit at Rs 638.98 crore (Rs 6.389 billion) for the quarter ended March 31, 2004 against Rs 563.13 crore (Rs 5.631 billion) year-on-year. Total income was up from Rs 3,198.95 crore (Rs 31.989 billion) to Rs 3,464.71 crore (Rs 34.647 billion) in the same period.

ONGC (Oil & Natural Gas Commission)

The Oil and Natural Gas Corporation is the largest oil and gas company is India in terms of production and reserves. It contributes 77 per cent of India's crude oil production and 81 per cent of natural gas production and enjoys huge sales to domestic refining companies.

ONGC's revenues are set to grow sharply over the next 5-8 years. ONGC is set to spend over Rs 4,500 crore (Rs 45 billion) over the next three years to explore new oil fields. A portion of this will be spent to improve the recovery factor in oil exploration for old oil fields.

ONGC's revenues are sensitive to the volatility in global oil prices. Crude oil price had touched the highest level in the last 13 years, with prices for April delivery contract quoted at $38.8 per barrel at the New York Mercantile Exchange and Brent prices at over $33/barrel.

Stock prices of ONGC, Chennai Petroleum, IBP Ltd and IOC fell sharply last week in reaction to the higher global oil prices.

The ONGC stock has risen sharply over the past 3-5 months, touching its all-time high of Rs 995 during January 2004. The stock gave a downward key reversal from here and declined to take support on the Rs 665 level to bounce back above the Rs 830 levels.

Our analysis shows that the upside for ONGC remains slightly limited but keeping in mind the positive picture, the stock would be a safe long-term buy on a sharp decline.

The government's offer for sale of its 10 per cent stake in ONGC, to raise over Rs 10,000 crore (Rs 100 billion), received a huge response with the issue being subscribed in the first 10 minutes. The issue was oversubscribed nearly six times with the price for the retail investor, post book-building, fixed at Rs 712.

RELIANCE ENERGY (formerly BSES)

Reliance Energy is a $620 million company involved in power generation and distribution in Mumbai. The company has a 51 per cent stake in two distribution circles of Delhi. Reliance Industries is the key promoter of the company.

Analysts are upbeat about the company's future, based on recent developments surrounding the privatisation programme of other state electricity boards and the reform process in the power sector as a whole. Reliance Energy, alongside other power distribution companies, would stand to gain substantially in coming years.

The Reliance Group has decided to infuse equity capital -- Rs 39 crore (Rs 390 million) -- into Reliance Energy. Financial strength aside, Reliance Energy is embarking on a Rs 2,000 crore (Rs 200 billion) investment plan over the next five years, through its own investments and investments made by its subsidiary companies. The board has just approved raising of securities in the international markets.

The Reliance Energy stock -- at Rs 724 levels currently -- has outperformed the market by around 40 per cent in the past four months. However, from a fundamental and technical analysis point of view, we feel that the stock will emerge as a strong long-term buy.

Over the short-to-medium term there could be consolidation and a correction from current levels. A sharp dip in the stock should be seen as an opportunity to enter the stock.

Reliance Energy posted strong results with a 314 per cent rise in net profit to Rs 103.79 crore (Rs 1.037 billion) for Q4 FY 2004, against Rs 25.07 crore (Rs 250.7 million) year-on-year. Total income was up from Rs 646.87 crore (Rs 6.468 billion) to Rs 876.56 crore (Rs 8.765 billion) in the same period.

SATYAM COMPUTERS

Over the short-term, Satyam Computers may experience some risk, with margins likely to be under pressure. However over the medium-to-long term, the company is likely to maintain the strong volume growth momentum.

Demand for its services will continue to remain high and businesses like package implementation business, enterprise application integration and engineering design services will see greater growth.

The outsourcing debate will continue and may impact sentiment in the short-term, though a clearer picture would be visible only towards the close of the year. Satyam's BPO subsidiary Nipuna has still to contribute significantly to Satyam's topline or bottomline, and its success in the BPO business is important from a long-term perspective.

Margins are likely to remain under pressure, despite steady billing rates, but analysts expect the revenues to grow by 31 per cent and earnings by 23 per cent in FY 2005.

From a technical perspective, the stock may witness a short-bounce back in the coming week. However an entry into the stock should be made only on declines, with a long-term investment horizon.

TISCO

Tisco, the single largest integrated steel producer in the private sector, has ambitious plans to increase its current capacity from 4 mt per annum to 15 mt per annum over the next six years.

The company has also decided to make some changes in raw material processes to improve the realisation factor and productivity of iron ore fines.

Tisco recently raised Rs 100 crore (Rs 1 billion) through non-convertible debentures. The funds from the issue will be used for general corporate purposes including capital expenditure and retirement of high-cost debt.

Tisco plans to improve its product mix further and has increased the share of branded products, besides recording higher volumes and cost effectiveness.

The issue of concern could be firm raw material prices. Steel prices are expected to remain strong through first half 2004 due to strong demand from China and the United States. The consumption at the domestic markets is also on the rise.

The Tisco stock has seen a correction in recent months and from a fundamental and technical point of view, looks good for the long-term. It should however be bought only on a further decline.

TATA CHEMICALS

Tata Chemicals is one of India's leading manufacturers of inorganic chemicals and fertilisers. It owns and operates the largest and most integrated inorganic chemical complex in India.

The fertiliser sector has been a laggard at the stock markets and several fund managers and analysts remain skeptical of its growth potential. We feel that necessary changes are being made and latest government policies will be progressive and encourage the efficient and large players.

Consolidation through merger and acquisitions and PSU divestment will provide growth opportunities in this sector. Tata Chemicals will be one of the biggest beneficiaries of any favorable change in government policy on fertilizers due to its location advantage and high efficiency.

The recent merger of Hind Lever Chemicals with Tata Chemicals will improve the market reach and product profile for Tata Chemicals. Domestic demand for products is expected to grow at 5-6 per cent per annum.

The Tata Chemicals stocks has been in a corrective mode and from a technical viewpoint, should be bought on minor declines.

VOLTAS

Voltas is India's premier air-conditioning and engineering services provider. The Tata Group company offers engineering services for a wide spectrum of industries in areas such as heating, ventilation and air-conditioning, refrigeration and climate control.

The outlook for the company has improved in the backdrop of aggressive restructuring of operations. There has been divestment of non-core businesses and reduction in staff, besides financial restructuring.

The company has shifted from low-margin white goods to high-growth project-oriented business. The electromechanical projects business would benefit from the construction booms in the Middle East and Far East.

Its financial performance over the next few quarters will improve. Earnings growth figures could be revised further and the stock should be bought on minor declines.