Market Voices 9th June 2009

Shrugging off a listless start and none too encouraging global cues, the bulls went on a rampage and lifted the market to a buoyant close today.

Buying was highly stock and sector specific in morning trade, but stocks across the board rallied higher as the session progressed. Expectations from Union Budget and hopes of a global economic recovery drove up stock prices today.

The Sensex ended 461.08 points or 3.14% up at 15,127. The Nifty closed at 4559.10, up 129.20 points or 2.92%.

Realty, information technology, metal and capital goods stocks were among the top gainers. There were strong gains for several FMCG, bank, telecom pharma and PSU stocks as well.

After remaining subdued for a long time, power and auto stocks rallied higher. Midcaps attracted attention. Smallcaps took time to settle down and were seen edging higher towards the closing minutes.

DLF shot up by over 10%. JP Associates gained around 9%. RComm, L&T, M&M, Ranbaxy, Tata Steel, Tata Power, TCS, ACC, Hindalco, RIL, Wipro and SBI gained 3% - 7.5%.

Infosys, ITC, Maruti, HUL, ONGC and Reliance Infra also signed off on a high note. HCL Technologies closed stronger by around 12.5%. Unitech, Idea Cellular, ABB, Axis Bank, SAIL, Suzlon, RPower, RPL, Reliance Capital, Ambuja Cements, Hero Honda, Siemens and Nalco also closed on a firm note today.

One can go long in TCS (Rs 785) even at current levels. Though some weak spells are likely in the near run, investors with a long term view need not worry about such falls. Instead, exposure can be increased at sharp dips. Other IT majors Infosys, Wipro, Tech Mahindra and Oracle too look set for more upside.

After pulling out heavily last calendar year, FIIs have been picking up stocks almost consistently since March this year. Inflow from FIIs in the current calendar year has already reached close to Rs 24,000 crore. In the first few days of this month, FIIs have invested close to Rs 2,600 crore.

Ramsarup Industries has commenced production of its 500 TPD DRI plant in West Bengal, and Waste Heat Recovery Boiler in Kharagpur. The plant, set up using German Outokumpu technology, will generate 20 MW of power along with gas generated from the blast furnace. The unit is likely to give the company a revue of Rs 4 crore per month.

Rising crude oil prices and reports that the government may defer a proposal to decontrol fuel prices have pushed shares of oil marketing companies down into the red. IOC, BPCL and HPCL have declined sharply on selling pressure and more downside is not ruled out in the very near term.

Amid hopes the worst is over for the U.S. economy and the banking system in that country, investors are lining up to buy software stocks once again. Most of the big players in the IT space have moved up sharply on strong buying support today. Though a further rise is not ruled out in the near run, some profit taking is likely over the next few days. Sharp declines can be used to increase exposure to these counters.

Bajaj Hindusthan plans to import around 1 lakh MT of raw sugar for processing at its sugar plants during the forthcoming sugar season 2009-2010. In this regard, it has executed contracts for raw sugar cargo aggregating to 91,000 MT. The stock is traded at Rs 196 at present.

Cairn India (Rs 241) can be retained for long term. The stock has support at Rs 200 levels and one can place a stop loss near that mark.
On the upside, the stock can rise to Rs 265 where it is likely to face some resistance. A decisive breakout there can result in a surge to Rs 300 or even higher.

Investors looking at medium term can try UCO Bank, Indian Overseas Bank, Indian Bank and Syndicate Bank for some smart gains. One can also buy Bank of India, BOB and Canara Bank at declines for medium to long run.

Four Soft Ltd has signed a contract with Flyjac Logistics Pvt Ltd (Flyjac), Mumbai, for implementation of its purchase order management software - 4S ePOMS - across Flyjac's multiple locations and its agents located around the globe. Flyjac is an existing client of Four Soft and is one of the largest logistics company in India, with offices and agents across the world.

Infotech Enterprises Ltd has signed a multi year contract with in Control Tech (iTEC) of Malaysia to implement an Enterprise GIS Information System for Tenga Nasional Berhad, the largest Electric Utility in Malaysia. The smallcap IT stock is currently trading at Rs 174, up nearly 4% over its previous closing price. The stock had hit a low of Rs 68 in mid March this year.

Though a few strong rounds of corrections are likely in the near term, the market is also likely to see a some good rallies ahead of Union Budget. Investors holding positions in quality stocks with a long term view can stay invested and look to buy more at sharp declines. Those with a short term view, can book at least partial profits at sharp rallies.

Areva T&D India is fast consolidating its leadership in the 765 kv domain in the country. The company, which has been winning orders quite consistently, has recently won four orders worth approximately Rs 350 crores to supply four extra high voltage 765 kv substations to Power Grid Corporation. One holding the stock (cmp Rs 344) can stay invested for long term and look at increasing exposure at sharp falls.

10:00 AM: Trading got off to a cautious start on the major Indian bourses this morning amid weak global cues.

Market Outlook

The market is expected to open on a weak note on negative global cues. However, some buying is likely at lower levels on expectations of some positive measures from the forthcoming Union Budget. A moderate to high degree of volatility is in the offing.

Sector Watch

With the Apex bank set to bring about more transparency by standardising the way banks calculate their PLRs and barring them from lending below their respective PLRs, some action is likely in the banking space today.

Realty stocks may find the going tough once again. However, some modest buying is not ruled out at lower levels at select counters.

Metals may find support at declines and regain a bit of lost ground. Select pharma and IT stocks may edge higher.

Scrip Watch

Jet Airways is planning to reduce capacity by another 10% and redeploy excess aircraft to select international routes that are showing signs of recovery in order to tackle a difficult slowdown that has seen passenger traffic declining. Last week, the company had said that it had already cut capacity by a fifth in the domestic market and was planning to prune it further.

Automobile stock Ashok Leyland may have a tough ride following the company's commercial vehicle sales dropping down by nearly 65% in May this year. The company had reported a decline of 67.90% in total domestic sales of medium and heavy commercial vehicles at 1,643 units from 5,119 units in the same month last year.

Macro and Market Factors

The Wall Street ended flat yesterday despite a strong comeback from lower levels. Asian markets are mostly trading in the red on profit taking. Back home, the bears, who had sent stock prices crashing down yesterday afternoon, are likely to fancy their chances again thanks to weak global markets.