Monday, January 11, 2010

Market Khabar 11 Jan 2010

The first week of 2010 started off nicely for the markets with indices closing near 22-month-high.
On the BSE, the Sensex ended 0.43 per cent or 75 points higher at 17,540 and the Nifty on the NSE inched up by 0.84 per cent or 44 points to 5,245. However, the real action was in midcap and smallcap stocks, both the BSE Midcap and smallcap indices moved up by 3.4 per cent and 4.1 per cent.

Strong FII buying and positive comments from the Prime Minister that India will return to 9-10 per cent growth rate kept the sentiment positive. Whether the market can sustain and bui-ld on last year’s gains will depend on corporate earnings, the government’s willingness to keep reforms on fast track and no negative surprises from global markets. Near-term direction of markets will depend on third quarter earnings season. For the week ahead, chartists predict a trading band of 17,160-18,000 for the Sensex and 5,080-5500 for the Nifty. Immediate supports exist at 17,320 and 17,080 and 5,160 and 5,080.
Expect resistance to the indices on upside at 17,740 and 17,960 and 5,330 and 5,420. The directional movement could be negative in short term, if the indices fall below 17,200 and 5,175. The movement of indices in narrow range clearly indicates that individual stocks would do better than the indices.

Knowing what stocks to avoid can be as important as knowing what to buy. No stock is perfect; every stock will have some drawback.

The January series has started on a quiet note marked by low volumes and low volatility. Sentiment indicators like implied volatility, put/call ratio, open interest and VIX indicate possible increase in volatility again.
Punters advice strangle strategy — Buy Nifty5300 strike call option and Nifty5200 strike put option to take advantage of directional breakout after the onset of results season.

A strong rupee triggered selling pressure in IT stocks. However, the results of Infosys will set the tone for the sector in the week ahead. Savvy players are buying into Wipro, OFSS, Tech Mahindra, Moser Baer and Mphasis. Buy Mphasis for a target price of Rs 825.

The profit booking in auto stocks likely to be short lived. Use sharp declines to accumulate Ashok Leyland and M&M. Metal and cement stocks are likely to continue their upward journey after a mild sell off.

Ahead of RBI’s credit policy review, heightened activity indicated in banking counters. Buy private banks like Axis Bank and Kotak Bank for short term gains. Realty stocks are beginning to show good strength. Hold Unitech, IBREL and DLF for gains.
Among the side counters, India Infoline, Petronet LNG, Sun TV, Nagarjuna Const. and HCC are good for a target of Rs 175, Rs 90, Rs 390, Rs 195 and Rs 185. Sebi’s plan to standardise lot sizes for F&O stocks would make it convenient for the traders to remember lot sizes and improve volumes in the derivative segment.

Mundra Port and SEZ runs India’s largest private port, whose cargo traffic is gro-wing at four times the speed of other major ports. The real trump card is the 100 sq km industrial zone, where Mundra is attracting factories such as Alstom-Bharat Forge JV for power equipment and others that will provide the port’s future traffic. Buy on declines for a target price of Rs 900 in next few months.

Escorts is tur-ning out to be a good turnaround candidate after it focused on tractor and construction machinery segments. To tap good opportunities from railways, the company has introduced four new railway products for coaches and wagons. Buy for a target price of Rs 225.

Minda Industries designs, develops and manufactures switches and batteries for 2/3/4 wheelers and off-road vehicles. It enjoys more than 70 per cent market share for switches in the two- and three-wheeler segment and is amongst the top few globally. Buy only on declines to Rs 240 for a target price of Rs 400.

Autoline Industries supplies sheet metal components, sub-assemblies and assemblies for large OEMs in the automobile industry. Buy for target price of Rs 200.

ZF Steering manufactures, and assembles mechanical steering gears, hydraulic power steering gears and other gear assemblies. A sharp increase in exports and a robust demand from domestic original equipment manufacturers (OEMs) augur well for the company. Buy for a long term target price of Rs 500.

Shrewd market players are accumulating BGR Energy, Sunil Hitech, Ramkrishna Forgings, Solectron EM and Indian Hume Pipes. Sharp gains indicated from current levels in next few months.

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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