NMDC

The stock of NMDC made a 52-week low on Jan. 15, 2016 and, in the  process, has opened up possibilities of further fall/correction. While the  current low of Rs.85.55 is a decadal low for the stock, it is very  difficult to predict at what  price level the stock will bottom-out in the  future. My guess is that the next low can be somewhere between Rs.75 &  Rs.80. Though the fundamental for the stock will weaken in the next 3-4  quarters due to low growth in domestic steel sector (plagued by Chinese  imports), the low equity & zero-debt status will make this PSU Navaratna a  case for bargain hunting in view of it's high dividend payout (52.90% in FY  2014) giving a dividend yield of ~ 10% based on the 52-week closing low for  the stock. Moreover, as the govt. has high stake in NMDC (80%), it will  bank on NMDC for higher dividend payouts to shore up its Budget revenue  this year as the disinvestment programme has gone for a toss. With markets  tending to get more volatile and capital appreciation from investments getting more elusive, this stock will be an ideal investment for a value  investor due to assured (tax free) dividend income which will be higher  than the highest FD offered by any bank, private or public. And, not to  forget the capital appreciation which will accrue in the future. Looking at  it from several angles, the stock of NMDC is a safe investment in a market  which is riddled with uncertainties and falling like 9 pins (and more seems

 to be in the offing). We have now entered that phase of the investment  cycle where we need to look at asset allocation more closely  and  proactively rebalance one's portfolio.