Monday, September 27, 2010

Market Analysis & Out look 27 Sept 2010

Emboldened by better than expected domestic economic data, flood of FII money and announcement of measures by the government to increase foreign capital inflows to the debt market bulls were seen partying hard during the week that ended.

Both the benchmark indices the Sensex and the Nifty closed above 20K and 6K at 20045 and 6018 with gain of 450 points and 133 points respectively. After lying low for better part of the week heightened activity was seen in midcap and smallcap stocks by weekend. Expect fireworks in many counters say market watchers.

Despite indices within the striking distance of lifetime highs, retail investor participation has been dismal till date reflecting skepticism over the rally. With FIIs calling the shots and many domestic companies vying with each other to raise capital; liquidity is driving the market for the present. Outstanding F&O positions, stubborn inflation, high trade and current account deficits continue to be causes for concern.

Developments on Ayodhya front, F&O expiry and monthly auto sales numbers may dictate the market course in the coming week. Weekend rally in US markets may see markets open higher at the start of the week. Irrational exuberance is not ruled out.

For the week ahead chartists predict trading range of 19800-20560 for the Sensex and 5910-6240 for the Nifty. Short term supports for the indices are at 19800 & 19580 and 5950 & 5880. Expect a bumpy ride as indices accelerate towards their life time highs.

Futures & Options
With indices moving past 20,000 and 6,000 levels, volumes in the derivative segment have soared to record levels. Average daily turnover was at `1,42,000 crore. Open interest is at all time high of `220000 crore. High put/call ratio clearly indicates that short covering by bears may result in explosive moves. Keep close watch on rollovers to spot winners. It is pertinent to recall that markets have corrected unexpectedly as and when number of stocks in F&O ban list crossed 10-mark.
* Dormant FMCG counters witnessed smart rally on reports price hikes and domestic consumption story. Hold positions in HLL, ITC and Colgate for further gains.
n Auto stocks are revving up ahead of the second quarter results. Buy on corrections Tata Motors, Maruti, M&M and Ashok Leyland. Rumours of buyback or open offer from Suzuki are doing the rounds in Maruti.
* From the pharma pack, Lupin, Ranbaxy and Sun Pharma look good for targets of `435, `625 and `2050 in next few weeks.
* Cement stocks are attracting buying on every decline. Fresh uptrend in ACC, Ultratech and India Cements not ruled out.
* Realty counters are becoming slowly resilient to corrections. Buy on declines DLF and Unitech.
* Reliance pack continues to be underperformer in the present rally.
* Stay overweight in banking, autos, pharma and capital goods sectors. Selective buying suggested in cement, FMCG and metal sectors. Breakout targets of `180, `450, `1500 and `235 for IDBI Bank, Federal Bank, LIC Housing and IDFC are tipped by company watchers.
* Among the side counters looking good are Aban Offshore, Crompton Greaves, KFA, GAIL, JSW Holdings, Nagarjuna Fertilisers, Exide Industries, RILPower and Pantaloon Retail.
* Big losers of the week ended in the markets are Financial Technologies, BEML and HCC may witness relief rally.

Stock scan

Good sales momentum from the residential projects and Jaipur SEZ has triggered renewed buying in Mahindra Lifespace. Buy on declines for target price of `575. Marico’s inorganic growth to expand international business has started paying good dividends. The launch of new products such as functional foods and hair creams by leveraging its flagship brands Parachute and Saffola and by repositioning of Kaya from ‘cure’ to ‘care’, the company is transforming itself from a single product company to a diversified FMCG player. Buy for a target price of `175 in medium term.

A strong order book with good near term earnings visibility and investment by Norwest Venture and Xander in the company’s subsidiary make Sadbhav Engineering good investment bet for target price of `2000 in next few months.

Andhra Petro, Savera Inds, Patel Airtemp and Greaves Cotton are in the buying list of savvy players.

Surge in volumes of Andhra Petroleum clearly spells target of `40 in short term. Ahead of bonus, strong buying indicated in Savera Industries. Patel Airtemp, a manufacturer of process equipment and engineering goods, is attracting good buying interest.

Infrastructure equipment division of Greaves Cotton likely to report strong growth.

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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