BUY What has NOT Fallen

After hitting its year highs in November, the markets have corrected by almost 8% with the Mid-Cap index falling over by 10% and above.

The key reasons behind this fall could be:

• Concerns regarding sovereign default in Europe
• Rising inflation and a tightening monetary condition in China
• Corruption charges on government agencies which brings down the attractiveness of India as an investment destination, and
• Sell of in the mid-cap space because of SEBI's allegation on many companies for insider trading

A lot of people whom I know including even market participants asked me to suggest them few stocks that were beaten down in the down turn. Then someone also suggested me as to why should you bother about the stocks which have fallen and BUY them just because they are cheap and why not focus on very few stock in the mid-cap space which despite this turmoil have not corrected.

The Idea I am trying to say is that "There is no Smoke Without Fire" there has to be some reason because of which most of the mid-caps had fallen and so why not focus on the good quality ones which stood firm in the sell off or on the ones in which you see absolutely no reason for a sell off, but have still fallen in the markets. Picking the latter one requires more analytical and reasoning skills compared to the former.

So to hunt for some good stocks I took NSE Mid-Cap index as my sample base and out of 100 stocks there are only 10 stocks which have not fallen from there highs of early November and of them some of the really good ones which I believe have a good business, good track record of operational performance and strong management areand should be given a thought are Indraprastha Gas, Glenmark Pharma, Exide Industries, Educomp Solutions and Areva T&D.

Its just like when you go to see a horse race you never bet on the loosing horse but on the winning one and so I believe the same logic should be applied in the Equity Space and the looser should not be chased as they will be the first ones to be hammered in the next leg of mid-cap selling.