Monday, September 21, 2009

Market Khabar 21 Sept 09

Buoyed by firm global cues and encouraging reports indicating revival in the economy markets improved to 16-month highs during the week ended.

On the Bombay Stock Exchange, the Sensex gained 477 points closing in the vicinity of 17,000 at 16,741 and the Nifty on the National Stock Exchange ended 146 points higher at 4,976. Market breadth was not positive on all days reflecting abundant caution at higher levels. It is interesting to note that for once while FIIs are on buying spree, domestic institutions were in profit booking mode.

Inflation turned positive signaling that era of cheap credit may be over in near term and triggering rally in banking counters. However, signals from the Reserve Bank of India and the finance minister not to hike interest rates and not to roll back stimulus measures till the economic recovery is on a strong footing kept the sentiment positive.

Advance tax numbers suggest good quarter two performance from companies. Expectations for a broad earnings recovery could prove disappointing and that could create more volatility in October. Key events to watch for in the coming week are F&O settlement and US Fed Meet musings. For the week ahead chartists predict trading range of 16,400-17,180 for the Sensex and 4,840-5,180 for the Nifty.

Supports for the week would be at 16,560 and 15,380 and 4,920 and 4,840. Expect resistance to indices at 16,960 and 17,180 and 5,050 and 5,160.

Be bearish only below 16,300 or 4,850 levels in indices on closing basis. Sharp selling not ruled out at psychological level of 17,000. Short term traders can stay on long side if Nifty trades steadily above 5,000 level.


* Renewed interest was se-en in many footwear stocks on expectations of sharp improvement in exports and festive sales. Relaxo Footw-ears is one of the largest manufacturers of hawai slippers. Competing with Chinese manufacturers, it bagg-ed large orders from the global retailing giants Tesco and Wal-Mart. Excellent Q1 results and book value of Rs 62 make the stock good buy for steady gains in medium term. Buy on declines for a target price of Rs 175.

* Jupiter Biosciences is the only company in the world to have integrated model from raw materials to finished dosage form in ‘peptides’ and has manufacturing presence for peptides in Europe and the US. It is reportedly doing placement at hefty premium to current price and also unlocking value of subsidiaries. Low market cap makes Jupiter vulnerable for a takeover bid. It may be recalled that Ranbaxy earlier had a ‘look’ at the company. Recent Biocon-Amilyn tie up and Neuland Labs foray into peptides has put this pharmaceutical segment in limelight. High B.V. of Rs 203 makes the stock good bet at current levels for target price of Rs 150.

* Hatsun Agro Products and Heritage Foods are dairy majors. Hatsun has developed unique model of ‘contract’ farmers for captive source of milk supply. Heritage has launched many private labels from jams to mineral water to leverage its brand value. Buy Hatsun Agro and Heritage for Rs 150 and Rs 250.

F & O

Mirroring the strong bullish undercurrent volumes were robust in the derivatives segment and open interest increased sharply to Rs 11,8000 crore. Signs of irrational exuberance are beginning to show up.
Sharp rise in Nifty OI PCR to 1.73 on the back of put writing at 4800 and 4900 levels indicates that short sellers are trapped for the moment. Sharp short covering rally not ruled out. VIX has fallen sharply to 26 indicating confidence of the market players over the ongoing rally. Among the sectors that witnessed long build up are auto, banking, cement and metal. Expectations over good festival sales pushed auto counters into fast track mode. Stay on plus side and add on declines. Led by SBI, state owned banks vaulted to new highs. Momentum is on the side of the sector. Buy on declines for further gains.

True to predictions correction in cement counters was short lived. Selective buying suggested for outperformance returns. Among the stock futures long build up was seen in BEL, GE Shipping, GMR Infra, Mphasis, Nagarjuna Construction, JP Associates, Ispat Inds, Reliance Power, Divi Labs, Suzlon, IFCI, Unitech and IBRL. Sharp rally indicated in realty counters DLF, Unitech and Indiabulls Real for target prices of Rs475, Rs130 and Rs300.

Expectedly Orchid hogged limelight. Buy on declines to Rs150 for target price of Rs200 in next few weeks. Ahead of Q2 results season IT stocks are again witnessing good accumulation. Spurt in Rolta, Mastek, Moser Baer, HCL Tech and TechMahindra not ruled out. Stock specific movement to continue till the onset of Q2 results season. Focus more on midcaps than frontline counters.

C. Kutumba Rao is a Hyderabad-based stock market analyst. The views expressed and the recommendations made are those of the author. Readers are strongly recommended to consult their financial advisors before making any financial investments. This newspaper is not liable for investment decisions made on the basis of recommendations in these columns.

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