Monday, March 22, 2010

Market Khabar 22 March 2010

Markets posted gains for the sixth straight week on the back of firm global trends, good advance tax numbers for fourth quarter and S&P upgrade of sovereign rating.

On the BSE, the Sensex gained 412 points to close at 17,578 and the Nifty on the NSE rose by 126 points to end at 4,263. However, broader markets witnessed hesitant mood and only select midcap and smallcap stocks were participant to action. Despite positive macro economic numbers and aggressive buying from FIIs, markets have not moved into fast-track mode. Dullness in secondary markets has been attributed to vibrant primary market and flow of domestic institutional funds to FPOs of PSUs.

Weekend announcement of a hike in repo and reverse repo rates by RBI may see markets open lower on Monday. The timing of the move ahead of the announc-ement of credit policy in next few weeks clearly shows the RBI’s intent to fight inflation. Market players feel that the quantum of rise in rates is very small, and advise buying good stocks in the corrective phase. Key events to watch in the coming week are F&O settlement and global developments from Euro zone.

For the week ahead, chartists predict a trading band of 17,050-17,950 for the Sensex and 5,110-5380 for the Nifty. Immediate supports for the indices exist at 17,260 and 17,090 and 5,180 and 5,010. Expectedly plenty of resistance was seen to the indices closer to recent highs of 7,790 and 5,310. Buy good standard stocks that stood test of time.

Ahead of the settlement week, robust volumes were seen in the derivatives segment. Sentiment indicators such as open interest at record levels, high put/call ratio, implied volatility and VIX indicate that volatility may stage comeback. Keep a close watch on rollovers after the initial knee jerk reaction to RBI policy move.

With frontline counters RIL, ICICI Bank, Bharti and Infosys providing posting gains in the recent recovery, a correction in these counters may turn short-term trend weak.

RBI moves to control potential inflationary spiral through rate hikes without sacrificing growth are expected to benefit PSU banks.

Begin accumulating PSU bank counters on every decline for outperforming returns. Rate hike may trigger selling in rate sensitive sectors such as auto and realty. However, avoid aggressive shorts and use sharp declines for buying frontline counters in the sectors. Punters feel that a rate hike has been factored partially already.

The bidding process for 3G spectrum has spiced up the telecom sector. Stay invested for near term gains in Bharti, RCom and Idea. Ahead of fourth quarter results, good buying is seen in IT stocks on expectations of strong performance. Buy on declines frontline counters such as Infosys, TCS, HCL Tech and Wipro.

Among the counters looking good for short-term are BEL, Bajaj Hindustan, Dr Reddy’s, Welspun Gujarat, Cummins, United Spirits, PowerGrid, Cairn, MTNL, Chambal and Apollo Tyres. IT refund expected to boost fourth quarter earnings of MTNL.

With the new teams for next IPL season auctioned at steep valuations, punters expect heightened action in IPL counters India Cements and DCHL. Sharp movement likely in airline counters Jet Airways and KFA. Investigate each stock thoroughly before deciding to buy it.

Clariant Chemicals (India) Ltd is one of India’s leading specialty chemicals companies and is the number one player in pigments, textile chemicals, leather chemicals and diketene based agro intermediates. Despite tough times for the user industries, the chemical manufacturer has performed well during the year ended to earn Rs 47 per share. Buy this stock at current levels for a target price of Rs 800.

Deepak Fertilisers and Petrochemicals Corp Ltd is one of the largest manufacturers of industrial chemicals with presence in chemicals, agribusiness and specialty retailing. It is the only producer of IPA in the country and has recently expanded TAN capacity to global scale. Buy for a medium-term price target of Rs 125.

Rapid ramp up in mining operations and short-term triggers from subsidiary OMML and scheduled capacity increase make Adhunik Metaliks a good bet at current levels.

Sandur is engaged in the business of mining manganese and iron ore, producing sponge iron, project consultancy and supervision. Firm trends in ore prices have put the counter back in limelight. Buy the company’s stock on declines for a four-figure price target in the near term.

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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