Monday, January 3, 2011

Market Khabar 03 Jan 2010

Stock markets signed off 2010 on a high note on the back of robust economic growth, record FII inflows and mild recovery in the recession-hit developed economies. On the Bombay Stock Exchange (BSE), the Sensex ended 435 points higher at 20,509 and the Nifty on the National Stock Exchange (NSE) ended 123 points up at 6,134.

The year 2010 was a year marked by uncertainty and volatility but for the year overall, the Sensex rose 17.43 per cent and the Nifty finished up 17.95 per cent. Investors are hoping to put some of the recent wild swings behind and expect the global recovery to prime the rally in 2011.

However, there are challenges like stubborn inflation, political stalemate pushing policy making into cold storage, flat earnings growth and unexpected sovereign defaults in Europe that could cause bumps in 2011. Rising international crude oil prices continue to be a cause of concern.

Pick stocks that can thrive in a high interest rate regime but are also beneficiaries of the strongest growth impulses in the economy. Near term direction of markets will be dictated by third quarter earnings, RBI’s steps to tackle inflation and the ability of political parties to find out a solution to the political jam ahead of the Budget session.

For the week ahead, chartists predict a trading band of 20,260 and 21,200 for the Sensex and 6,060 and 6,320 for the Nifty. Supports for the week are at 20,280 and 19,990 and 6,090 and 5,980. Indices can touch all time new highs if resistances at 20,625 and 20,870 and 6,170 and 6,260 are surpassed. Don’t trade on the basis of “tips”. In other words, “trade with the trend, not with your friend.” When in doubt, get out!

Despite markets reversing the two-month losing streak and Nifty futures logging 4.6 per cent gain during the month ended, market wide rollovers were significantly lower. Nifty OI was lesser by 14.75 per cent and stock futures saw a drop of 6.6 per cent. Buy Nifty 6,300-strike call option for surprising gains, suggest punters.

Sectors such as FMCG, fertiliser, sugar, construction, cement and capital goods have witnessed higher than average rollovers. Cautious trend in rollovers was seen in the IT and metal pack after their recent outperformance. Buying at lower levels was seen in the banking stocks. Buy smaller PSU banks for near term gains.

Ahead of quarterly numbers range bound trading at higher levels is indicated in IT stocks. Metal stocks are showing good resilience on the back of firm trends in global prices. Further gains are likely in Tata Steel, Sterlite and Hindalco.

Selective buying was seen pharma stocks. Buy on declines Ranbaxy, Lupin, Aurobindo and Sun Pharma. Infrastructure and power stocks are witnessing strong accumulation. Unexpected rally may push the stocks higher from current levels. As expected Reliance ADAG stocks are showing renewed buying interest. Stay invested in the group companies for further gains.

Among the side counters, BRFL, DCHL, MLL, Century Textiles, Suzlon, India Cements and IBRL may strengthen on speculative buying.

Savita Oil Technologies is one of the largest manufacturers and suppliers of industrial lubricants, waxes and other industrial consumables. After the recent expansion, the company is poised to become the largest supplier of transformer oil to power companies. With good promoters, a sound business model, a great dividend record and a scorching growth in net profit, the stock is good bet at current levels. Buy for a target price of `750 in medium term.

Jubilant Life Sciences is attracting steady buying from savvy fund managers. After the recent demerger of its agri and performance polymers divisions, Jubilant Life is proceeding aggressively in its competent area of CRAMS. Buy on declines for a target price of Rs 475 in an year’s time.

With global pharma majors turning attention towards India, strong domestic focused companies like Torrent Pharma are getting re-rated. Buy for target price of Rs 750 in medium term. The stock is accumulated by savvy fund managers.

PE players suggest a heightened interest in hospital stocks indicated in 2011. Aggressive expansion plans of hospital major Apollo Hospitals make it a good investment bet in the healthcare sector. The company has raised funds through qualified institutional placement (QIP) issue and is also investing in medical education.

Research-based API manufacturer Parabolic Drugs is expected to post strong CAGR. The company has recently received EU-GMP certification and is also expecting US FDA approval shortly. Buy on declines for target price of Rs 100.