Wednesday, December 29, 2010

Market Khabar 27 Dec 2010

Amidst dull trading ahead of year-end holidays, markets eked out gains for second successive week moving in a tight range. On the BSE, the Sensex ended 209 points higher at 20,074 and the Nifty on the NSE closed with 63 points gain at 6,012. The advan-ce/decline ratio during the course of the week reflects return of some stability to the broader market.

Absence of many FIIs and big market players due to holidays dampened volumes considerably. High inflation environment, rising international crude prices threatening to bulge fiscal deficit and stalemate in political consensus are impacting the sentiment.

For financial year 2011, three improbable factors — the viability of US QE2, financially decoupling of emerging markets from Western markets and the rise of Indian stock market in a high inflation environment — hold key for market direction. Analysts feel that if at least two factors do not work out, stock markets will be very volatile with a downward bias.

Key events that may impact trading in the coming week are Chinese rate hike, steps by the government to combat inflation, a probable fuel price hike and F&O settlement.

For the week ahead, chartists predict a trading band between 19,780 and 20,340 for the Sensex and 5,870 and 6,160 for the Nifty.
Supports for the week are at 19,880 and 19,740 for the Sensex and 5,940 and 5,870 for the Nifty. Indices may face resistance at 20,180 and 20,320 and 6,090 and 6,140. Cut short term longs if indices close below 19,850 or 5,950 levels.

Futures & Options

Reflecting a holiday undercurrent in the cash segment, trading volumes were low in the derivative segment on the lack of interest. Rollovers were also subdued with traders adopting a wait-and-watch attitude. An increase in PCR indicates a steady build-up of short positions. Avoid large positions and trade lightly till volumes improve, say savvy punters.

On the back of strong gains in London Metal Exchange, metal stocks hogged limelight. Non-ferrous counters like Hindalco and Sterlite witnessed a good buying interest. Mild correction is not ruled out in the coming week due to a rate hike by China.

Positive data from the United States, robust hiring numbers and expectations over third quarter numbers boosted technology stocks. Hold positions in frontline counters for further gains. The sale of a controlling stake in Patni Computers may give a fillip to the M&A activity in the sector and improve valuations of midcap IT stocks.

A weekend rally in Reliance ADAG stocks has caught traders off-guard. Wild rumours like a big bang announcement about restructuring of the group and possible offer of stake in Reliance Communications to brother Mukesh were doing rounds. Further gains are likely in Reliance Infra, Reliance Capital and Reliance Power.

Steady accumulation is seen in telecom counters. Buy on declines Bharti and Idea.

Introduction of sugar futures after nearly 18 months on commodity exchanges, relaxation in export norms and firm retail prices may see sugar stocks gain traction from current levels. Sources indicate surge in FMCG sales. Stay invested in FMCG counters for Q3 gains. Stock futures looking good for next series are Alok Inds, FSL, Essar Oil, TechMahindra, Sesa Goa, Idea and NMDC.

Stock scan

A slew of insider trading reports have battered stocks of midcap and smallcap companies, hurting investor’s confidence since the beginning of December. Some good midcaps and smallcaps which have corrected 20 per cent to 40 per cent from their November highs and offer an attractive entry point at current levels are Deepak Fertilisers, Nava Bharat Ventures, Jindal SAW, Marg, Pipavav Shipyard, Vardhaman Textiles, Prism Cement, OnMobile, Pantaloon Retail, VIP Inds, Bajaj Electricals and IRB Infra. Replace emotions with analysis, knowledge and common sense while making investment decisions. Contrarians are accumulating realty counters. Many private equity players are reportedly finding the cash strapped real estate counters good bet for next year.

Phoenix Mills with its successful High Street Phoenix and upcoming Market City projects in tier-1 cities offers a unique play on Indian consumption story. Sum of the parts valuation of `300 makes the stock good bet for medium term at current levels.

Worst is over for BF Utilities, a Kalyani group company engaged in infrastructure business and executing BMIC (Bengaluru-Mysore Infrastructure Corridor). With institutional players like JP Morgan and others evincing interest to invest in the company, analysts feel true valuation of the company will unfold in next few quarters. Buy for long term target of `1600.

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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