Monday, October 4, 2010

Market Khabar / Outlook for 4th Oct 2010

Buoyed by the non-controversial judgment on Ayodhya, FII inflows and expectations over second quarter results, markets moved closer to their life-time peak seen last in 2008 during the week ended.

On the Bombay Stock Exchange (BSE), the Sensex gained 400 points closing at 20,445 and the Nifty on the NSE ended 125 points higher at 6,143. With bulls firmly in control, midcap and small cap counters have begun dancing. It is pertinent to recall that markets have corrected usually after five or six quarterly gains. However this time momentum may propel markets to far higher levels than expected before correcting, say market players.

Weakness of the dollar has added impetus to equities and commodities. Impending Coal India IPO and the flurry of activity in the primary market may impact liquidity, fear observers.

Ahead of second quarter numbers stock specific activity is indicated. Barring negative cues from abroad, markets look good for few more weeks.

For the week ahead, chartists predict a trading range of 19,960 and 20,880 for the Sensex and 5,980 and 6,270 for the Nifty.

Crossover of resistances at 20,800 and 6,250 levels with volumes may see the benchmark indices test their life time peaks. Supports for the week exist at 20,220 and 20,040 and 6,070 and 6,010.

Buy good standard stocks that have stood the test of time.

Futures & Options

Exuberant volumes in the derivatives segment reflect strong bullish undertone in the markets. The October series has started with second highest ever at more than `1,33,000 crore. Fall in Nifty open interest and rise in open interest of stock futures shows the changing trade preferences of market players. More wild moves like the one seen in Orchid are not ruled out. Put/call ratio at 1.36 clearly indicates that many ‘shorts’ still exist.
* F&O rollover data indicates that defensive sectors FMCG and pharma are ‘preferred’ ones now. ITC, HLL and Titan look good for further gains. Biocon, Cipla and Piramal Healthcare may touch `400, `355 and `555.
* Metal stocks continued to shine on the back of weakness in dollar. Further gains indicated in Hindalco, Tata Steel and SAIL. As expected strong buying interest was seen in power equipment and capital goods stocks. Stay invested in the sectors and add on declines.
* After a slight wobble, IT counters are witnessing good accumulation ahead of their Q2 numbers. Infosys, TCS and HCL Tech from frontline and Firstsource and Rolta from second rung look good.
* Improvement in retail prices and expected changes in policy have triggered buying in sugar stocks. Buy on declines Shree Renuka, Triveni and Balrampur Chini. Punters are targeting cash group sugar counters.
* Selective buying was seen in infra stocks. Buy LITL, NCC and Punj Lloyd for target prices of `85, `185 and `150.
* True to their form auto stocks continued to be on fast track. Hold positions. Savvy traders are accumulating cement scrips. Contrarians tip targets of `140, `1,060 and `155 for India Cements, ACC and Ambuja Cements.
* Stock specific activity indicated in GE Shipping, Welspun Guj and Zee. GE Shipping may rally to `375 shortly, say insiders.

Stock scan

Neuland Labs is focused on the manufacture of APIs, contract research and contract manufacturing. The company has recently completed expansion of its facilities and has also diversified into peptides. It is also one of the first Indian API manufacturers to get PMDA approval of Japan. Good news on cards. Buy for a target price of `200 in medium term.

Tera Software has reportedly bagged large e-governance orders. Sources indicate that the company will be one of the beneficiaries of unique ID project. Strong buying in the counter indicates likely target of `90 in near term.

Fund managers are touting Indusind Bank as the next HDFC Bank in making. Successful completion of its recent QIP issue at `234.55 and rating upgrade by ICRA are indicators of makeover of the bank. With the QIP in progress, the bank is well capitalised and likely to witness aggressive growth in next few quarters. Buy for a target price of `400 in medium term.

Kamat Hotels engaged in the business of hospitality and allied businesses has firmly established four brands The Orchid, VITS, Gadh Hotels and Lotus Resorts. Its turnaround has put the counter under spotlight. Buy for short term target of `225.

Elder Pharma is one of the leading players in pharmaceutical formulations. Flush with funds after its QIP, it has acquired NeutraHealth, a UK-based supplier of nutrients and vitamins. Buy at current levels for target price of `550 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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