Monday, October 12, 2009

Market Outlook 12-16 October 2009

Ignoring good news such as positive global cues, liberal bonus issue from Reliance Industries and better-than-expected results from Infosys, markets tumbled from highs on heavy selling pressure during the week ended.
On the Bombay Stock Exchange (BSE), the Sensex plunged 492 points to close at 16,643 and the Nifty on the National Stock Exchange (NSE) fell by 138 points to 4,945.

Market breadth was negative during the most part of the week reflecting caution among market participants ahead of the “festival week.”

Telecom and IT scrips proved to be the biggest drag on the indices. FMCG and metal stocks were in demand on sustained buying interest. With several companies sucking liquidity by issuing QIP, IPO, GDR and other instruments, money flow to the secondary market is getting limited.

Simultaneously capital inflows have led to strengthening of rupee hitting hard the export-oriented companies. A result of one company does not change the overall outlook; keep track of broader markets to see whether the real recovery is in place.

For the week ahead, chartists predict a trading band of 16,060 and 16,970 for the Sensex and 4,780 and 5,100 for the Nifty.

Immediate supports for the indices are at 16,460 and 16,060 and 4,860 and 4,780. A close below 4,870 on the Nifty could see it plunge to 4680-level if the news flow dries up. Expect resistance to the indices at 16,880 and 17,160 and 4,980 and 5,040. You can be bullish only above 16,900 on the BSE or 5,020 on the NSE on closing basis. There is still enough scepticism about the recent rally and enough cash waiting to be invested at lower levels, feel analysts. You have to be just as willing to sell short as you are to buy.


* Shri Lakshmi Cotsyn is a diversified textile manufacturer with a product range from embroidery, quilting, fusible interlining and army products like camouflage fabric uniforms and bullet proof jackets. It has a fully-owned subsidiary for manufacturing bullet-proof armo-ured vehicles for armed for-ces and the police. The commissioning of new plants has made the firm an integr-ated textile player with div-ersified revenue mix. Buy for target price of Rs 150.
* TeleCanor is engaged in niche segments like mobile VAS, IVR-product solutions and payment gateways. Rec-ently the company has tied up with Buongiorno, one of the largest mobile entertainment and VAS firms. It has a huge chunk of land in Vis-akhapatnam near the petro corridor. Buy on declines.
* Henkel India is reportedly going to launch its international brands in cosmetics and toiletries. It is restructuring its operations like disposal of Kolkata factory and also beef up operations with the help of MNC parent. Buy at current levels.
n Gitanjali Gems is the largest integrated diamond jewellery retailer in India. It has 150 retail stores in the US by virtue of two acquisitions made last year. Adopting FMCG model to jewellery retailing, the company has grown from $300 million in 2005 to $1.2 billion in 2008. Restructuring of debt and improving economic environment spell good times for investors in the firm in the coming days. Buy for a target price of Rs 200.

F & O
Volumes were robust in both cash as well as the derivative segments. Overall open interest is presently close to Rs 1 lakh crore mark pointer of high speculative build up. Nifty PCR has fallen to 1.25 on higher addition of calls. A relief rally is not ruled out. VIX rose sharply to 30.25 reflecting concerns over sustainability of uptrend and bumpy road in near term. Accumulation of short positions seen in the counters of ACC, Bharti, Idea, Infosys, TCS, RIL, Unitech, Maruti and Tata Motors.

Unwinding of long positions seen in SBI, ICICI Bank, Reliance Infra, JP Associates, M&M, BHEL and L&T. Stocks showing positive bias are Century Textiles, Hotel Leela, IDBI Bank, HCC, GAIL, NCC, Neyveli, REC, Opto Circuits, Voltas, Welspun Guj and HDIL. These stocks are good for targets of Rs 525, Rs 45, Rs 145, Rs 155, Rs 420, Rs 190, Rs160, Rs 220, Rs 225, Rs 175, Rs 300 and Rs 385.

Industry experts feel that ‘bashing’ of telecom stocks on the basis of tariff wars is highly overdone. Gutsy traders can attempt buying in telecom counters Bharti, Reliance Communication, and Idea for short term ‘relief’ gains.
Metal stocks have been moving up on reports of weak dollar and expectations of higher demand.

However, valuations are stretched for near term view, avoid fresh exposure and book partial profits. Fears of rupee strength are again haunting IT stocks. Use sharp declines to buy and avoid aggressive shorts for present. Realty counters are attracting buyers at lower levels. Stay invested for further gains. Sugar, power, capital goods and pharma are likely to witness renewed buying interest.

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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