Monday, October 26, 2009

Market Khabar 26 Oct 2009

After closing Samvat 2065 on a “high” note, markets started the first week of new Samvat 2066 on a jittery note dampening the festive spirits.

On the Bombay Stock Exchange (BSE), the Sensex closed 515 points lower at 16,810 and the Nifty on the National Stock Exchange (NSE) fell by 145 points to settle below 5,000-mark at 4,997.

Renewed selling from FIIs and the reports of unwinding of Galleon and Lehman positions has dampened the sentiment. Weak global cues coupled with news flow like RIL’s “empty” gas well, the rise in inflation index and none too enthusiastic results from capital goods majors triggered short term negative trend. Promoters’ “greed” in raising funds is increasing supply of commercial ‘paper’ and resulting in drying up of liquidity in secondary markets.
Key events in the week ahead are F&O settlement and RBI’s midyear credit policy. Market players do not expect any changes in key rates but are more “interested” in “comments” of central bank over economy. Next week will also see last batch of Q2 results signaling heightened stock specific volatility.

For the week ahead, chartists predict a trading band of 16,340 and 17,200 for the Sensex and 4,820 and 5,180 for the Nifty. Supports for the indices are at 16,650 and 16,420 and 4,920 and 4,840.
Expect resistance to the indices at 17,050 and 17,190 and 5,060 and 5,140. Be bullish only above 17,150 or 5,100 on closing basis. Nifty closing below 4,860 may see markets trade range bound on weak note for next few weeks.
When expectations are too high, it results in overtrading underfinanced positions, and high levels of greed and fear-making objective decision making impossible.

* Brahmaputra Infra is reportedly blessed by politicians and has bagged large infra projects in north India. Order book has swelled to over Rs 1,200 crore. Excellent Q2 results and expected annualised EPS of Rs25 make it good bet at current levels. Buy at current levels for a target price of Rs 175 in medium term. . * Nectar Lifesciences is one of the largest manufacturers of cephalosp-orin range of products and has recently diversified into phytochemicals (it has grabbed 25 per cent global market share in mint derivatives) and hard gelatin capsules. It is also a preferred CRAMS player for leading pharmaceutical companies. Buy for a target price of Rs 45.
* Vinati Organics is the world’s largest producer of IBB (prime raw material for manufacture of Ibuprofen, a vital bulk drug) and one of the few and second largest manufacturer of ATBS in the world. Excellent Q2 results indicate annualised EPS of over Rs 40. Buy on declines for a target price of Rs 450.
* Honeywell is a leading provider of integrated automation and software solutions for infrastructure, petrochemicals, automobiles, hospitality and mining sectors. Sources indicate buyback offer for delisting or liberal bonus issue in next few months.

F & O
Ahead of F&O settlement, robust volumes were seen in the derivatives segment. Open interest is at the “uncomfortable” level of Rs 1,12,000 crore. Other sentiment indicators like put/call ratio, implied volatility and VIX indicate “rough” times.
Avoid large positions and trade lightly. Among stock futures, short build up seen in ACC, BHEL, Grasim, RIL, RCom, Tata Motors, Unitech, Hero Honda, Punj Lloyd and GAIL. Good long build up was seen in GSPL, PTC, IDBI, Polaris, Bajaj Hindustan, Hindalco, Hind Zinc and IDFC.

FMCG and IT stocks were the “flavour” of the week ended. ITC, Colgate and Dabur look good for further gains. Add on declines. Midcap IT counters like Polaris, Mphasis, Rolta and Patni may see upside on short covering till expiry. Hold positions in frontline IT biggies for further gains. With copper prices touching multi month highs, non-ferrous counters Sterlite and Hindalco may log gains. JSPL looks good for four figure target.

DCHL, Welspun, Cummins and LIC Housing look good for near term gains.
Reform measure making states to bear the burden of difference between “advis-ed prices” and the Centre’s rate is a “relief” for sugar mills. Buy on declines Shree Renuka, Bajaj Hindustan and Triveni.

Ahead of RBI credit policy, banking stocks witnessed selling at higher levels. Use sharp declines to buy PSU banks. Barring M&M and Ashok Leyland auto counters are losing “speed” and are showing signs of fatigue. Trade cautiously. Don’t try to outguess the market. Buy in a selling market, when nob-ody wants stock. Sell in a buying market when everybody wants stock.

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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