Thursday, March 12, 2009

Share Analysis 12-03-09


Tech Mahindra Ltd has informed BSE that in line with the process set out by the Board of Satyam Computer Services Ltd, Tech Mahindra registered its interest in participating in the bidding process. Once the Company receives the REP and other information it will evaluate and conclude on next steps.

Spice Group, L&T, Tech Mahindra, Fujitsu and the Hinduja Group are trying to acquire Satyam Computer Services.  BM, which was reported to have shown some interest earlier, has pulled out of the race now.

These are tough days for realty and infrastructure stocks.  But some sharp upmove is on the cards over the next 3 - 6 months for some good stocks from these sectors.  It is advisable to stay cautious and consider fresh exposure in only those with a good track record and strong order book.   Once the economy shows some signs of a recovery, these stocks are likely to bounce back into the reckoning and move up sharply.

Though Asian and European markets are under pressure, Indian stocks have surged higher today on bargain hunting and short-covering.  However, a sustained upmove is highly unlikely in the near run. Investors with an aversion to risk can book at least partial profits at rallies.  One with a willingness and affordability to hold stocks for a long term can continue to stay invested and even pick up quality stocks at dips.

Maruti Suzuki (Rs 688) can be picked up at sharp declines if one is looking at long term.  Over a short run, the stock can move on to Rs 720 - 730. Traders can book some profits there and consider a re-entry at declines.

Tata Motors and Mahindra & Mahindra can also give solid returns over a short to medium run. Long term investors can look at buying the stock at declines. FIIs, after pumping in funds relentlessly for nearly five years from 2002, have been pulling out almost without a break for more than a year now. 

Redemption pressure back home and heavy losses posted by financial powerhouses prompted them to pull out from emerging markets.  Though domestic mutual funds have been picking up some stakes, the inflow has proved to be grossly insufficient.  Unless these two set of investors get back to the ring and step up buying, it is going to be extremely difficult for the market to wriggle out of trouble.  With inflation dropping down sharply again and with no signs of a significant surge in manufacturing growth, there may be another round of rate cut in the near future. 
The market may see a few sharp rallies over the next few weeks but there may not be a sustained upmove for at least 3 - 4 quarters.

Investors willing to wait 3 to 4 years for solid returns can keep picking up quality stocks like L&T, Infosys, SBI, BHEL, TCS, BEL, Tata Steel and Maruti Suzuki at declines.

State Bank of India may remain a bit slippery in the near run, but investors looking at long term can stay invesed in it.  One can pick up more of this stock at declines. Among HDFC Bank and ICICI Bank, the former looks a safer bet.  UCO Bank, Canara Bank, Bank of India, Bank of Baroda and Yes Bank can be picked up in a staggered way.

Hindalco, Sterlite Industries and Nalco can be bought for long term.  The demand for metals is likely to pick up fairly strongly over the next 6 - 12 months.  One can consider taking a small exposure now and increase it later at declines.

There are expectations that demand for new homes will pick up sometime past the second or third quarter of next fiscal.  By that time, hopefully, infrasturcture projects will also gather some momentum.  Investors willing to wait for a year or two for good returns, can consider going long in cement stocks. ACC, Ambuja Cements, Ultratech and India Cements can give fairly strong returns over a long run.

HDFC (Rs 1285) is a good stock to own.The stock can see some weakness in the near run and drift down to around Rs 1125 or even lower.Investors looking at long term can pick up more of this stock in case of sharp declines from current levels. A stop loss can be placed around Rs 1100.
Nagarjuna Construction Company has secured three new orders aggregating Rs 263 crore.The stock, traded around Rs 40.50 at present, can be retained with a stop loss near Rs 30.The stock had hit a high of Rs 255 exactly a year ago. It posted its 52-week low last week when it tumbled to Rs 34.25.

Investors with a long term plan can go in for Punj Lloyd (Rs 71).  A modest exposure can be taken now. One can increase exposure at declines. A stop loss can be placed near Rs 60.

The market opened on a buoyant note this morning.  The Sensex shot up to 8375.55 after opening with a positive gap of around 115 points at 8274.78. At 8341.63, the barometer is up with a big gain of 181.23 points or 2.22% at present. The Nifty is up 1.84% or 67.25 points at 2620.40.  Bank, metal, FMCG, IT, oil and capital goods stocks have risen sharply in opening trade.

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