Friday, October 16, 2009

Market Khabar

Outperforming all global markets, Indian markets closed near several months high in the holiday-shortened week. On the BSE, the Sensex gained 2.65 per cent to sail past the psychological 17,000-mark ending the week at 17,135 and the Nifty on the NSE rose 2.5 per cent to close above 5,000-mark at 5,083.

A strong liquidity situation, improving economic data and expectations over strong second quarter res-ults could improve earnings. However, savvy market players are concerned over the way many companies are raising funds either through QIP route or IPO.

Valuations are turning expensive; investors should reshuffle portfolios, separate wheat from the chaff, in terms of good and bad stocks. The road ahead is further zig-zag than the recent rally would imply.

Negative global cues over the weekend may cast their shadow over the markets during the early part of next week. For the week ahead, chartists predict a trading band of 16,740 and 17,460 for the Sensex and 4,900-5,200 for the Nifty.

Supports for the week are at 16,960 and 16,820 on the BSE and 5,020 and 4,900 on the NSE. Cut short term long positions, if indices trade below 16,960 or 5,000 levels.
Experts advice the investors to avoid large positions and trade lightly. Investors need to be wary of getting burned by unsubstantiated takeover chatter. Mergers are starting to make a comeback as the economy and stock market show signs of life. But there is a dark side to the pick up in deals. Takeover rumours with little to no basis in fact have also returned. The GSK-Dr Reddy “takeover” is just one such example of investors getting their hopes up only to have them dashed. Sniff at inside information; it is usually bunk.

* Pidilite Industries manufactures various types of adhesives, sealants and specialty chemicals. Its brands — Fevicol and Dr Fixit — are the market leaders in their segments. Buoyant end user industry and lower raw material prices due to fall in crude oil prices spell good times for the company. Buy for a target price of Rs 250.
* PTL Enterprises or erstwhile Premier Tyres Ltd is a shell company of the Apollo Tyres group. The company owns valuable real estate at Ernakulam and a 500-bed superspecialty hospital in Gurgaon. The value of its assets is reported to be higher than the company’s present market cap. Buy for surprising gains.
* Midcap pharma major Ipca Labs is on the radar of savvy fund managers. It has a strong presence in the semi-regulated markets like Africa and Russia. The growth of its domestic formulation business is outperforming the industry’s growth. Buy for a target price of Rs 1,200.
* Jindal Stainless is the only Indian composite stainless steel plant, which manufactures stainless steel slabs, blooms, HR and CR coils. Sources indicate that it has finalised the restructuring of its huge debt and also report improvement in sales realisations. Buy for a short-term target of Rs 140.
* Select counters like Alkali Metals, NHPC, Nelco, KLG Systel, Sunil Hitech and Henkel India are witnessing keen buying interest. Stay invested and
buy on decline for further gains.

F & O
Spurred by FII inflows, open interest in the derivative segment crossed Rs 90,000 crore. Nifty futures trading at a steep discount of 14 points to spot and the rise in Nifty PCR to 1.36 indicate a build up of short positions in the Nifty. Option activity indicates strong support for the Nifty at 4,900-5,000 level and strong resistance at 5,100-5,200 level.

Among the stock futures, accumulation of longs was seen in Aban Offshore, IDFC, HDIL, ICICI Bank, Wipro, Yes Bank, Rolta, BEL and Jindal Saw counters. A short build up seen in select counters like Hero Honda, Tata Steel, Idea, Grasim, Unitech, Divi Labs and Tata Power. Punters tip Aban Offshore, JP Associates, IDFC and PTC for a price target of Rs 1,800, Rs 265, Rs 168 and Rs 95.

Traders can sell Tata Steel, HDFC, Maruti Suzuki, Tata Motors, Divi Labs and Hindalco Industries for a price target of Rs 465, Rs 2,575, Rs 1,560, Rs 545, Rs 525 and Rs 112. Buy Shree Renuka and Bajaj Hind for a price target of Rs 220 and Rs 200. A jump likely in United Spirits, APIL and Chambal Fertilisers to Rs 955, Rs 588 and Rs 65.
Flavour of the week ended were banking and IT counters. Expectations of better second quarter numbers saw many counters touching 52-week highs. Use discretion to buy selectively on declines.

Weakness in global prices may trigger selling in metal counters. Short term players advised to book profits. Industry watchers say worst is over for realty. Use sharp declines to buy DLF, HDIL and IBRL. Stock specific activity indicated ahead of second quarter earnings season. Avoid uncertainty. Stay out when the trend is in doubt.

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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