Monday, July 12, 2010

Market Khabar 12 July 2010

Markets moved towards new short term highs on the back of positive global cues, reports about good monsoon and IMF’s optimistic forecast about the Indian economy.

On the BSE, the Sensex closed 373 points higher at 17,834 and the Nifty on the NSE ended with 115 points gain at 5,352. Nearly all the sectoral indices ended in green reflecting strong bullish undercurrent. Market breadth was good and heightened action was seen in many midcap and smallcap counters.

Talk of decontrolling the sugar sector and allowing FDI in the retail sector have raised hopes about the government putting reforms agenda on the fast track. Soft food inflation data, improved indirect tax collections and tweaking of exposure margins for stock derivatives by the Sebi had a positive impact on the sentiment. US markets had the best week in a year, sending out an all-is-well hint to other global markets.

Barring any negative news, markets may scale new highs in the week ahead. Key data to watch in the coming week are IIP numbers on Monday, Infosys results on Tuesday and wholesale price inflation data on Wednesday.

For the week ahead, chartists predict a trading band of 17,540 and 18,360 for the Sensex and 5,230 and 5,540 for the Nifty. Resistances for the week are at 17,970, 18,040 and 18,180 and 5,395, 5,460 and 5,540. Expect support to the indices at 17,660 and 17,480 for the Sensex and 5,300 and 5,240 for the Nifty.

Futures & Options

With the indices edging towards new highs, robust volumes were seen in the derivatives segment. Open interest is close to record levels at Rs 1,36,680 crore. Sentiment indicators like open interest, put/call ratio, implied volatility and VIX signal strong move on upside. Buy Nifty-5,500 strike call option, suggest punters.

Ahead of first quarter numbers, Infosys touched a 52-week high. Rupee depreciation may help IT companies report better Q1 numbers, say industry insiders. Buy Wipro, HCL Tech and Rolta. Mphasis, Tech Mahindra and Tulip IT may also move up on news flow.

A renewed buying interest was seen in realty stocks on the reports of visible signs of revival in the housing demand. Further gains indicated in DLF, Unitech, HDIL and IBRL.

Telecom stocks are back in the demand following an upgrade by Credit Suisse. Buy on declines Bharti and Idea. Telecom ancillary provider GTL is tipped for the price target of Rs 600 in next few fortnights.

From the banking pack, PNB, HDFC Bank, IDBI Bank, Bank of Baroda and Canara Bank look good for higher levels.

Stronger Euro and Chinese factor may trigger bounce back in metal counters.

After the recent issue of preferential warrants to promoters at Rs 1,210, JSW Steel is reportedly placing equity to a foreign investor at Rs 1,480. Buy at current levels for a target price of Rs 1,350 in the near term.

Reports of industry majors eyeing tolling business after the finalisation of new toll policy by the government has triggered buying in Noida Toll. Punters tip an unexpected target of Rs 55 in the next few months. Infra firms are expected to benefit on the financing front with the introduction of tax-free bonds.

Stock scan

Ricoh India Ltd, a subsidiary of Japan-based Ricoh Co. Ltd, is a leading player in the area of imaging and document solutions; and networking input/output systems. It offers a wide range of digital copiers, multifunction printers and scanners. Sources indicate the possibility of parent company making Indian subsidiary a hub for exports and also the introduction of new equipment in India. Buy at current levels for target price of Rs 80 in medium term.

Auto ancillaries Steel Strips Wheels, JBM Auto, Sundaram Fasteners, Sundaram Clayton and others are attracting interest of savvy investors. Steel Strips Wheels is a leading manufacturer of automotive steel wheels and rims for OEMs of two wheelers and three wheelers. Its client list includes nearly all domestic majors and also prestigious international firms such as Audi, Renault, BMW, Kromag and Turk Tractor. Buy on declines for a target price of Rs 350.

JBM Auto, apart from supplying sheet metal components and welded sub assemblies for automotive companies, has a special purpose vehicle division manufacturing tippers, trailers, reefer vans, garbage compactors. Buy at current levels for target price of Rs 125.

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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