Mid Caps - 2010 Review

Vidya Bala

BL Research Bureau

Mid-cap stocks could not prove their mettle against their large-cap peers in 2010, if the performance of BSE Mid-cap index is taken in to account.

This index, with a universe of about 280 stocks, returned 12 per cent in 2010 (up to December 27), marginally lagging the bellwether Sensex, which managed about 15 per cent.

Mid-cap stars of the erstwhile rally such as Punj Lloyd, OnMobile Global and Educomp Solutions witnessed steep declines anywhere between 25-50 per cent this year.

However small-cap stocks as represented by the BSE Smallcap index surpassed broad market performance with 22 per cent return.

Late bloomers

Mid-caps are known to be late bloomers, typically gaining pace in the later part of a rally. In the 2007 rally for instance, the Mid-cap index convincingly outperformed its larger peer by over 20 percentage points. But mid-caps are yet to emulate this performance in the two years since the market recovery from March 2009 lows.

Delayed pick-up in earnings growth could be a key reason that can be attributed to the sluggish performance.

After a 12 per cent drop in their profits in the June quarter over a year ago, mid-cap companies expanded their earnings by a healthy 28 per cent in the latest, ended September quarter. The valuations offered to mid-cap stocks too suffered in the early part of the year as a result of poor earnings growth.

Price earnings multiple for the BSE Mid-cap index, for instance, was in the range of 17-18 times until June this year and moved to 20-22 times in October, after the results season.

Large-cap companies on the other hand have seen steady improvement in their profits; although clocking a more sedate 12 per cent growth in earnings in the September quarter over a year ago. Strong financial performance exhibited by large players such as Tata Motors, Hindalco and ITC helped the stock market performance of the bellwether stocks.

Sector tilt

Higher weights to outperforming sectors also played a part in the outperformance of the Sensex over mid-caps. With heavy weightage (as much as 40 per cent) given to outperforming sectors such as finance and IT, Sensex was a clear winner. Unfortunately, the Mid-cap index, despite its tilt towards the finance segment, was pulled down by the housing and construction space, which has the second highest weight in this index.

Corporate governance issues have also cast a shadow on this market-cap segment. The mid-cap index has in fact declined 12 per cent in less than two months now, after a series of negative bulletins such as corporate lending scams as well as allegations of promoter rigging stocks prices broke out. However if one looks at stock performance, a number of mid-cap stocks have been star performers in 2010.

Stocks such as Coromandel International, Tube Investments, Bajaj Finance and United Breweries attracted attention for doubling their stock prices over the last one year. In fact one half of the BSE mid-cap universe delivered returns of over 15 per cent year-to-date, even as a third of the universe sported declines. In contrast, the best stock in the large-cap universe, Tata Motors delivered 65 per cent over this period.

Valuation gap

The lacklustre performance of the mid-cap index has however meant that unlike the 2007 rally, when mid-caps narrowed the valuation gap with the Sensex; the BSE Mid-cap index' price earnings multiple at about 19 times now is well below the Sensex valuation of 23 times. If companies in the segment continue to do a repeat of their September quarter earnings, 2011 could provide scope for mid-cap companies to play catch-up.

Source : BusinessLine.in

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Yes Bank Buy on declines

YES Bank (Rs 298.8): In our review of YES Bank in January, we had written that the stock could decline to the zone between Rs 180 and Rs 200 where investors could buy the stock. The stock however bottomed at Rs 223 in February and went on to record a new life-time high at Rs 388 in November. A correction is currently in progress that has short-term support at Rs 275. Investors with a greater penchant for risk can buy at current levels with stop at Rs 270. Reversal from here can take the stock up to Rs 340 or Rs 380 in the days ahead.

Key medium-term support for the stock is at Rs 255 and investors can continue to hold the stock as long as it trades above this level. Breach of this support can drag the stock down to Rs 214 or Rs 173.

Source Businessline.com

OUR RECOMMENDATION :

The scrip is finding good support around 260 levels and is finding it difficult to go through 370 levels. This present excellent trading opportunity to buy around 280 levels and exit at 360 which gives you an upside of 35% holding period of 3-4 months

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Arvind Limited Buy on declines

Since the March 2009 low of Rs 10, the stock has been on long-term uptrend forming higher peaks and trough. Taking support from its long-term uptrend line around Rs 46, Arvind skyrocketed 30 per cent with good volumes last week.

It has decisively crossed its 21- and 50-day moving average positioned at Rs 50 and is hovering well above them.

Move above Rs 66.5 can lift the stock higher to Rs 80 and then Rs 85 in the medium-term.

Nevertheless, reversal from the resistance at Rs 66.5 will drag the stock down to Rs 55 or further down to Rs 50. Decline below Rs 42 will be a threat for the uptrend. — Yoganand D.

Source : Businessline.com

OUR RECOMMENDATION :

The scrip is finding good support around 50 levels and is finding it difficult to go through 70 levels. This present excellent trading opportunity to buy around 50 levels and exit at 65 which gives you an upside of 35% holding period of 3-4 months.

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JSW Steel Buy on dips

JSW Steel (Rs 1,164.3)

JSW Steel rebounded 11.5 per cent last week after taking support from its significant long-term support band between Rs 1,040 and Rs 1,050.

The stock, however, has been on a medium-term downtrend from its life-time high of Rs 1,400 that it marked on October 4.

The stock currently faces key longer-term resistance at Rs 1,200.

Inability to exceed beyond this level will result in the stock resuming its on-going medium-term downtrend and re-test the support band between Rs 1,040 and Rs 1,050.

Next support is at Rs 950. Strong move above Rs 1,250 will mitigate the downtrend and will pave way to Rs 1,300 or Rs 1,350 levels in the medium-term.

OUR RECOMMENDATION :

The scrip is finding good support around 960 levels and is finding it difficult to go through 1400 levels. This present excellent trading opportunity to buy around 1000 levels and exit at 1350 which gives you an upside of 35% holding period of 3-4 months.

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Dont settle abroad - work in India - Narayana Murthy

BANGALORE: Youngsters looking to settle abroad, especially the US, courtesy IT industry should opt for career growth within India which offers larger growth opportunities than anywhere else in the world, Infosys mentor N R Narayana Murthy said on Tuesday.

"Somehow our youngsters have all assumed the idea of joining this industry is to go to US, get there, get an H1B, convert it into green card and settle down there. I think it is a wrong solution, a wrong strategy," he said while addressing a summit here.

Murthy said one expects youngsters to get good salaries and good disposal of income in India, for which they have to get good quality jobs here. "But their objective cannot be to go and settle down in some other country, especially the US."

"This time you have a great opportunity to consolidate and by working in India, by becoming a good quality professional you will sustain the advantage we have created and will make growth in India a permanent rather than a temporary feature."

On wooing back Indian talent, Murthy said there was no need to increase their salaries by 50 times to ensure this. But their lives could be made easier by providing schools, making sure that power condition and commuting is reasonably all right.

"This is being done by many countries in the world. This is nothing new. This is not rocket science," he said, adding there must also be attempts to ensure that the facilities are enhanced. "I think all state governments must make an attempt to say we will allow as many English medium schools as required because if you do not do so, then the children will not be able to move from one state to another."

Job opportunities available to children who go to English medium schools generally are seen to be of a higher quality and is a reality whether one likes it or not, he said. To get these section back, the combination of financial income coupled with comfort of living in India and with the family should be higher than the financial income and discomfort living abroad, he said.

When asked what his priorities would be if his name was proposed for the President's post, Murthy said: "In a parliamentary democracy like India, President is a ceremonial post. That is the reality."

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Weekly Review BSE 500

It was another week marked by big swings in benchmark indices. Steep slides of 0.6 to 1 per cent on Tuesday and Wednesday were followed by a strong comeback on Thursday with a two per cent gain. The BSE Sensex and the NSE Nifty ended the week on a flat note, up 0.2 and 0.1 per cent respectively. The BSE Midcap and BSE Smallcap indices, however, outperformed the bellwethers, up 1.4 and 1 per cent respectively. The CNX 500, representing the broader market, was up 0.4 per cent for the week.

Among sector indices, the BSE Oil & Gas performed the best with a 2.7 per cent gain. Other performers were the BSE IT and PSU indices, both of which were up 1 per cent. The BSE Metals and Realty fared the worst, down 2.7 and 2.2 per cent respectively.

Moving on to individual stocks, Indiabulls Financial Services shot up 15 per cent on the backs of strong profit growth for the September 2010 quarter. Good results also pushed the stocks of Canara Bank and Tata Consultancy Services up 14 and 9 per cent respectively.

The stock of pharma player Biocon surged 11 per cent after the company signed a $350 million marketing deal with Pfizer to globally commercialise its biosimilar versions of insulin products. The stock Merck gained 11 per cent for the week after the company announced an interim dividend of Rs 95 per equity share.

Essar Oil's reporting of net profits for the September 2010 quarter against the losses previously, together with reports that the company was eyeing oil and gas blocks in Africa, led the stock to a 7 per cent gain for the week. A fall in promoter pledged shares of Alok Industries and a proposed merger of its subsidiary with itself sent the stock up 6 per cent for the week.

Commercial Engineers and Body Builders Co, which raised about Rs 153 crore, at an issue price of Rs 127, through an Initial Public Offering listed on Monday. The stock is now trading down 7 per cent from issue price, though it touched a high of Rs 144.8 on the BSE on listing day.

A quarter-on-quarter decline in net profits for the September 2010 quarter for Wipro sent the stock sliding 5 per cent in the week.

Similarly, steep declines in year-on-year September '10 net profits of CEAT led to a drop of 3 per cent in its stock price. The stock of Sesa Goa dropped 8 per cent on the backs of poor September quarter results and ONGC claiming pre-emptive rights on Cairn India's participating interests.

Source : Businessline

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Market Khabar 12 July 2010

Markets moved towards new short term highs on the back of positive global cues, reports about good monsoon and IMF’s optimistic forecast about the Indian economy.

On the BSE, the Sensex closed 373 points higher at 17,834 and the Nifty on the NSE ended with 115 points gain at 5,352. Nearly all the sectoral indices ended in green reflecting strong bullish undercurrent. Market breadth was good and heightened action was seen in many midcap and smallcap counters.

Talk of decontrolling the sugar sector and allowing FDI in the retail sector have raised hopes about the government putting reforms agenda on the fast track. Soft food inflation data, improved indirect tax collections and tweaking of exposure margins for stock derivatives by the Sebi had a positive impact on the sentiment. US markets had the best week in a year, sending out an all-is-well hint to other global markets.

Barring any negative news, markets may scale new highs in the week ahead. Key data to watch in the coming week are IIP numbers on Monday, Infosys results on Tuesday and wholesale price inflation data on Wednesday.

For the week ahead, chartists predict a trading band of 17,540 and 18,360 for the Sensex and 5,230 and 5,540 for the Nifty. Resistances for the week are at 17,970, 18,040 and 18,180 and 5,395, 5,460 and 5,540. Expect support to the indices at 17,660 and 17,480 for the Sensex and 5,300 and 5,240 for the Nifty.

Futures & Options

With the indices edging towards new highs, robust volumes were seen in the derivatives segment. Open interest is close to record levels at Rs 1,36,680 crore. Sentiment indicators like open interest, put/call ratio, implied volatility and VIX signal strong move on upside. Buy Nifty-5,500 strike call option, suggest punters.

Ahead of first quarter numbers, Infosys touched a 52-week high. Rupee depreciation may help IT companies report better Q1 numbers, say industry insiders. Buy Wipro, HCL Tech and Rolta. Mphasis, Tech Mahindra and Tulip IT may also move up on news flow.

A renewed buying interest was seen in realty stocks on the reports of visible signs of revival in the housing demand. Further gains indicated in DLF, Unitech, HDIL and IBRL.

Telecom stocks are back in the demand following an upgrade by Credit Suisse. Buy on declines Bharti and Idea. Telecom ancillary provider GTL is tipped for the price target of Rs 600 in next few fortnights.

From the banking pack, PNB, HDFC Bank, IDBI Bank, Bank of Baroda and Canara Bank look good for higher levels.

Stronger Euro and Chinese factor may trigger bounce back in metal counters.

After the recent issue of preferential warrants to promoters at Rs 1,210, JSW Steel is reportedly placing equity to a foreign investor at Rs 1,480. Buy at current levels for a target price of Rs 1,350 in the near term.

Reports of industry majors eyeing tolling business after the finalisation of new toll policy by the government has triggered buying in Noida Toll. Punters tip an unexpected target of Rs 55 in the next few months. Infra firms are expected to benefit on the financing front with the introduction of tax-free bonds.

Stock scan

Ricoh India Ltd, a subsidiary of Japan-based Ricoh Co. Ltd, is a leading player in the area of imaging and document solutions; and networking input/output systems. It offers a wide range of digital copiers, multifunction printers and scanners. Sources indicate the possibility of parent company making Indian subsidiary a hub for exports and also the introduction of new equipment in India. Buy at current levels for target price of Rs 80 in medium term.

Auto ancillaries Steel Strips Wheels, JBM Auto, Sundaram Fasteners, Sundaram Clayton and others are attracting interest of savvy investors. Steel Strips Wheels is a leading manufacturer of automotive steel wheels and rims for OEMs of two wheelers and three wheelers. Its client list includes nearly all domestic majors and also prestigious international firms such as Audi, Renault, BMW, Kromag and Turk Tractor. Buy on declines for a target price of Rs 350.

JBM Auto, apart from supplying sheet metal components and welded sub assemblies for automotive companies, has a special purpose vehicle division manufacturing tippers, trailers, reefer vans, garbage compactors. Buy at current levels for target price of Rs 125.

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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Sensex to cross 19000 this year

Stock market benchmark Sensex may soar past the 19,000-point level this year, propelled by domestic factors like robust economic expansion and decent corporate earnings growth, the country's top brokerage and investment banking entity ICICI Securities has said.

The only negative headwinds the Indian market can witness could be due to negative cues from global markets, but investors willing to stay invested for at least 15-18 months will not be disappointed with their returns, I-Sec Managing Director and CEO Madhabi Puri-Buch told PTI.

"Markets are partly linked to real economy and the corporate earnings and then also partly to global liquidity... Real economy in India, as also the corporate earnings, will continue to grow and the growth is here to stay," Buch noted.

The I-Sec chief noted that even 15 per cent corporate earnings growth, which would be a reasonably low estimate as per the prevailing trends, would be sufficient to propel the Sensex past the 19,000 level and the surge could be much bigger if there are other positive triggers, such as those in the form of favourable global cues.

"However, we should be conscious of the fact that there could be some negative cues due to liquidity issues in the global economy," Buch said, but quickly added that any negative cues would only have a very short-term impact.

"It should not worry the investors who have at least 15-18 months of investment timeframe in their minds and those looking to stay invested for 3-5 years will certainly not be disappointed with the kind of returns they would get from Indian markets," she said.

Indian equities have been under pressure for the past few weeks, mostly because of the European financial crisis that has led to a sharp sell-off in markets across the world. However, global markets, including the US, rebounded sharply on Friday after clarity emerged about the US and Europe taking remedial actions for the deep crisis having engulfed the Western economies for about two years now.

Buch said that a volatile market is actually good for investors, as downslides actually give buying opportunities, as has been the case with recent fall in the market.

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Market Khabar 5 April 2010

Buoyed by positive global cues and expectations of strong earnings season, markets closed on an optimistic note for the fifth straight quarterly rise during the week ended.

On the BSE the Sensex gained 47 points to close at 17,693 and the Nifty on the NSE ended 9 points higher at 5,291. Market breadth was good indicating heightened activity in midcap and smallcap space.

FIIs continued to “pour” money into the markets, keeping the sentiment positive. Shrugging off a slowdown in manufacturing growth in March, markets have begun to focus on the earnings season. Near term direction of the markets to be dictated by monsoon prediction, earnings numbers and RBI credit policy.

Inflation continues to be cause of concern. With the revival of NAC, some analysts fear that “social” spending may go up again on political considerations. Barring unexpected negative news flow markets are likely to gain further steam in next few weeks.

Stay invested and use sharp corrections for buying. For the week ahead chartists predict trading range of 17,460-18,200 for the Sensex and 5,210-5,460 for the Nifty.

Immediate supports for the indices are at 17,560 and 17,400 and 5,240 and 5,180. Expect stiff resistance at 17,900 and 5,400 levels.

Analysts are sensing that a long run for stocks is nearing, after the statement of Mr Bill Gross, who manages the world’s biggest bond fund, who predicts that the bull run in fixed securities is nearing the end. Always check the big picture.

Futures & Options

Trading volumes continued to be subdued in the derivatives segment. Market players attribute this to lack of market dictating “triggers”.

With “weak” players cutting positions ahead of results season, institutions were seen “building” positions. Start of the new financial year may see higher participation from institutional players in the next few weeks.

Options data indicates likely upward move of 150-200 points in Nifty. Hold longs with trailing stop loss. Expectedly technology counters after losses during the early part of the week on reports of dollar weakness have made strong comeback.

Industry sources indicate strong numbers and “positive” guidance for next few quarters. Buy on declines TCS, Infosys, Wipro and HCL Technologies. Metal and cement stocks were back in demand on reports of robust demand despite recent price increases.

Stay invested and add on declines SAIL, Tata Steel, Sterlite, ACC and Ambuja Cements. Increase in fuel prices on migration to Euro IV compliance norms had “sobering” effect on auto stocks.

However, robust March sales numbers of auto majors indicate that bull run will continue. Stay invested and use declines to buy Ashok Leyland, M&M and Tata Motors.

Firm crude prices and revival in exploration activity in USA may see ONGC, Cairn and Aban Offshore gain strength. Ahead of credit policy banking stocks may trade in a tight range.

Sale of equity by promoters of Mundra Port is reportedly for subscribing to rights issue of another group company Adani Enterprises. Buy in the current weakness Mundra Port for four figure target in next couple of months.

Stock scan

The Supreme Court is expected to pronounce its verdict on the case between Mukesh Ambani-led RIL and Anil Ambani-led RNRL in the next few weeks. Analysts are already studying the possible impact of the verdict. Punters advise “play” in the Ambani stocks through the “options” route to minimise losses and maximise returns.

IFGL Refractories Ltd is engaged in the manufacture of specialised refractories and requisite operating systems for the steel industry. The company has manufacturing facilities in Brazil, China, UK, USA, Taiwan and India. Sources indicate that turnaround performance of last quarter is likely to be repeated in Q4 also. Buy on declines for price target of Rs100 in medium term. Good buying interest seen in Max (I), FDC and Indoco Remedies. Max India has business interests in insurance, healthcare, clinical research and packaging films. Value buy at current levels.

Good brand equity makes “Electral” manufacturer FDC a good buy on declines for three figure target in short term. Heightened interest in the midcap pharma has put Indoco Remedies also in limelight. Buy on declines.

Volume action indicates healthy developments on cards in Secunderabad Healthcare Ltd. Punters tip a target of Rs 45 in the medium term. Vikas Granaries, a manufacturer of single super phosphate fertilizers is tipped for Rs 50 in short term. A strong performance in the last quarter by Standard Industries has seen punters target the stock in recent times. Possible target of Rs75 on cards.

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.

Source : deccan.com

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BSE aiming 18000

Moving towards 18,000

Sensex (17,692)

There was a flutter of excitement last Monday as Sensex and Nifty scaled their former 2010 highs. But the benchmarks were not allowed to steady themselves at those peaks as a bout of profit booking swept them lower. Since readings from the economy, both local and external, continue to be robust, the Indian benchmarks could accomplish the feat of closing at a new 2010 high in the upcoming weeks; following in the footsteps of their global peers, some of whom have even moved on to new life-time highs.

Volumes were good in both cash as well as derivative segment last week as mid and small-cap stocks moved back in to the thick of the action. Trading interest too remains high and the open interest has already moved above Rs 1 lakh crore. FIIs too remained net buyers, aiding the positive sentiment on the bourses.

We discussed the long and intermediate-term outlook in our last column. Sensex is once again closing in on the intermediate-term resistance zone between 17,800 and 18,200 and investors ought to stay watchful as long as the index does not record an emphatic close beyond 18,500.

The medium-term trend for the index is sideways within the wide range between 14,000 and 18,000. The current up-move from February 8 trough appears to be the third leg of a flat that has the targets of 17,074, 17,954 and then 18,830. If we consider the minor counts of the up-move from 15,651, we get the more modest targets of 17,900 and 18,200.

There is a confluence of targets in the zone between 17,800 and 18,200 and the index appears on the verge of moving in to this zone. The ten-week rate of change oscillator moving above the zero line and the relative strength index at 62 point towards the medium-term trend continuing. However, it needs to be remembered that there is a strong negative divergence in both these oscillator charts.

To put it in simpler terms, there is a strong likelihood of the index moving towards 18,000. Investors with short-term perspective can ride this up-trend with suitable stop losses while long-term investors can wait to see the sustainability of this uptrend before committing fresh funds.

The index could be choppy in a narrow range between 17,500 and 17,800 for a few more sessions before breaking higher to 17,944 or 18,225. This view will be negated on a close below 17,500 and that will pave the way for decline to 17,500 or 17,337 in the near term.

Nifty (5,290.5)

Nifty moved to a new yearly high of 5,329 last Monday before declining to the intra-week low of 5,235.

The short-term trend in this index continues to be up. Formation of higher trough last week signals the possibility of another move higher to 5,323 or 5,378 in the days ahead.

Traders can buy on declines with stop at 5,200. However, breach of this level will imply that the index could decline to 5,187 or 5,080. Swing traders can hold their long positions as long as the index trades above 5,080.

The medium-term view for Nifty is sideways. But the index could push its upper boundary a little to 5,380 or 5,466. Equity benchmarks held close to their recent highs and closed the week with gains. CBOE volatility index closed the week about 2 per cent lower though it is off its recent lows implying that traders continue to feel sanguine. Commodities such as crude and base metals surged higher while dollar declined.

This sent commodity stocks soaring helping Brazil's Bovespa and Mexico's IPC to a new 21-month high.

US stocks were buoyed by strong unemployment data that took Dow to a new 18-month high. Minor counts of the move from February 5 low in the Dow imply that there is another upsurge pending in this index to 11,121 or 11,284. This view will be negated only on a close below 10,800.

Asian stocks had a strong week and breakout is observed in charts of many of the benchmarks such as the KLSE Composite Index, Hang Seng, Nikkei, Shanghai Composite and Thailand's SET. — Lokeshwarri S.K.

Source : Businessline

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Will you buy IT stocks now ??

Will you buy IT Stocks ?

In the past one year, the rupee has appreciated by 11% from levels of over 50/dollar to under 45 currently. Every 1% of rupee appreciation has a negative impact on the net profit of software companies by roughly 1.6%. How have software stocks performed in the past year? They have risen by 135% on an average, as measured by the CNX IT index.
Why is it, then, that information technology (IT) stocks corrected by around 5% in the first three trading sessions of this week after the rupee appreciated from 45.6 last week to 44.9 this week? The accompanying chart shows that the rupee has appreciated gradually through the past year, but this is the first time IT stocks have been affected. How is this time different?

The simple answer is that valuations of IT stocks have become quite stretched. For much of the past year, the earnings of IT companies were being upgraded because of an improvement in the demand environment. Besides, valuations had fallen to rather low levels in the aftermath of the financial crisis. As a result, the rupee appreciation didn’t matter much.

Large IT stocks now trade at 24-25 times fiscal 2010 earnings, and are already factoring in strong earnings growth. In this context, an appreciating rupee could play spoilsport on analysts’ earnings estimates. And it’s not just the 1.5% appreciation in the past week that investors are worried about. The concern is that the upward movement in the rupee is likely to continue, as currency strategists at Standard Chartered Plc have pointed out.

Of course, companies can increase their forex hedges and protect against the anticipated rise in the rupee. But this factor will now play on investor sentiment, especially at current valuations. According to a recent report by Kotak Institutional Equities, “Technology stocks look fairly valued and may find it hard to do well in the face of a stronger rupee.” As an example, Infosys Technologies Ltd trades at an fiscal 2011 price-earnings multiple of 21.5 times based on Kotak’s estimates, even though annual earnings growth estimate between fiscal 2011 and 2013 is lower at 18.6%.

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Indian Stock Markets BSE, NSE Weekly review 19 Mar 2010

Over the week, the Indian markets outperformed its US and Asian peers. Sentiment got a boost after Standard & Poor upgraded India’s outlook to stable from negative. In addition, the US Federal Reserve re-iterated its promise to keep interest rates exceptionally low for the extended period. The index heavyweight Reliance Industries was the star performer leading from the front, the stock shot up nearly 7% during the week. Also, foreign institutions continued to remain net buyers, they were net buyers to the tune of Rs37.78bn in the last five days. However, while the DIIs were net sellers to the tune of Rs7.54bn. Finally, The BSE Sensex and NSE Nifty added 2.5% each to close at 17,578 and 5,263 respectively.

The BSE Sensex hit an intra-week high of 17,601 and low of 17,061 while, the NSE Nifty hit an intra-week high of 5,269 and low of 5,101.

The top gainers: The top gainers in the Sensex were Reliance Industries (up 6.9%), Hindalco (up 6.4%), Tata Steel (up 6%), Cipla (up 5.5%) and Hindustan Unilever (up 4.4%).

The Top Losers: The top losers in the Sensex were ONGC (down 2.6%), Maruti Suzuki (down 2.3%), ACC (down 2.1%), HDFC (down 0.8%) and BHEL (down 0.2%).

The BSE IT Index (up 3.3%): The top gainers in the IT sector were Financial Tech (up 4.1%), HCL Tech (up 3.7%), Infosys (up 3.7%), TCS (up 3%) and Wipro (up 2.3%).

The top losers were Mahindra Satyam (down 1.7%) and Mphasis (down 0.1%).

The BSE Consumer Index: The top gainers in the consumer durables sector were Su-Raj Diamonds (up 4.4%), Mirc Electronics (up 2.7%), Whirlpool (up 2.5%), Titan (up 1.1%), Videocon Industries (up 1.1%).

The BSE Healthcare Index (up 2.7%): The top gainers in the Pharma space were Dr Reddy's Labs (up 6.8%), Strides Arcolab (up 6.6%), Cipla (up 5.5%), IPCA Labs (up 4.8%) and Suven Life Science (up 4.8%).

The top losers were Wockhardt (down 3.9%), Piramal Healthcare (down 3.7%), Aurobindo Pharma (down 3.5%), Panacea Biotec (down 3.4%) and Fresenius Kabi (down 3.1%).

The BSE Banking Index (up 1%): The top gainers in the banking space were Union Bank of India (up 4.9%), PNB (up 4.3%), ICICI Bank (up 2.1%), OBC (up 1.5%) and HDFC Bank (up 1%).

The top losers were IOB (down 4.5%), Karnataka Bank (down 4.4%), Bank of India (down 4%), Kotak Mahindra Bank (down 3.8%) and Federal Bank (down 2.9%).

The BSE Auto Index (up 0.7%): The top gainers in the auto space were Ashok Leyland (up 6.5%), Tata Motors (up 3%), Hero Honda (up 2.6%), Swaraj Mazda (up 1.4%) and Bajaj Auto (up 1.2%).

The top losers were M&M (down 5.9%), Hindustan Motors (down 2.9%) and Maruti Suzuki (down 2.3%).

The BSE Oil & Gas Index (up 3.5%): The top gainers in the oil & gas space were Chennai Petroleum (up 8.7%), Reliance Industries (up 6.9%), Cairn India (up 3.1%), Shiv-Vani Oil (up 1.5%) and Jindal Drilling (up 0.4%).

The top losers were HPCL (down 3.2%), Essar Oil (down 2.9%), Great Offshore (down 2.8%), ONGC (down 2.6%) and GSPL (down 1.9%).

The BSE Capital Goods Index (up 1.4%): The top gainers in the Capital Goods space were Bharat Electronics (up 6.4%), Dredging Corp (up 6.4%), Greaves Cotton (up 6.1%), HEG Ltd (up 4%) and Ingersoll Rand (up 3.7%).

The top losers were Kirloskar Bros (down 25%), Carborundum Universal (down 3.9%),Jyoti Structures (down 2.7%), ABB (down 2.6%) and Aban Offshore (down 1.9%).

The Cement Sector: The top losers in the cement sector were Prism Cement (down 8.2%), ACC (down 2.1%), Madras Cements (down 2%), Shree Cement (down 1.7%) and JK Cements (down 1.5%).

The top gainers were India Cements (up 5.9%), Dalmia Cement (up 3.7%), Ultratech Cement (up 1.4%) and Grasim Inds (up 0.8%).

The Telecom Sector: The top gainers in the telecom space were Idea Cellular (up 14.2%), Shyam Telecom (up 10.7%), RCom (up 6.6%), Tata Teleservices (up 6%) and Bharti Airtel (up 4.3%).

The top losers were Gemini Comm (down 10.1%), Himachal Futuristic (down 3.6%), WWIL (down 2.9%).

The Realty Sector (down 1.4%): The top losers in the Realty space were Anant Raj Indus (down 4.9%), Peninsula Land (down 2.6%), Ansal Props (down 2.6%), Parsvnath (down 1.9%) and HDIL (down 1.5%).

The top gainers were Mahindra Lifespace (up 2.8%), Sobha Developers (up 1%) and DLF (up 0.7%).

The Metals sector (up 3.6%): The top gainers in the metals sector were Tata Steel (up 6%), SAIL (up 5.6%), JSW Steel (up 5.4%), Adhunik Metaliks (up 5%) and Tata Sponge (up 4.5%).

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Market Khabar 3 March 2010

After moving in a narrow range for the most part of the week, markets gave a thumbs up to Budget and ended on an optimistic note during the week ended.

On the BSE, the Sensex added 1.5 per cent to close at 16,430 and the Nifty on the NSE gained 1.6 per cent to end at 4,922. Volumes remained robust through the week and spiked sharply higher in the budget session. Intraday cut in the gains at the fag end of the budget day has been attributed to some “devils” in the fine print of the budget. Sceptics warn that vision statements like higher GDP curve of 10 per cent and deficit curve of four per cent are for the consumption of FIIs. However, optimists say that market is unlikely to face any unpleasant policy changes in medium term since the government needs a buoyant stock market to meet its disinvestment targets. Any rollback of proposals like fuel price hike may dampen the sentiment. Despite no negatives in the Budget, excessive exuberance is not warranted, caution old timers.

Focus of the markets will now shift to upcoming credit policy, Q4 earnings season and monsoon predictions. For the week ahead, chartists predict trading range of 16,060-16,840 for the Sensex and 4,780-5,060 for the Nifty.

Expect strong resistance to the indices at 16,660 and 16,800 and 4,990 and 5,060. Immediate supports for the indices are at 16,280 and 15,940 and 4,860 and 4,780. With the Budget out of the way, it is back to watching global markets. The search for next Greece is already on; stay tuned for unexpected nasty surprises.

Futures & Options

Despite being settlement week and laced with the Budget, robust trading volumes were seen in the derivative segment. Overall rollover of 84 per cent as against three months average of 85 per cent was seen.

Sentiment indicators like open interest, put/call ratio, implied volatility and VIX indicate heightened volatility in near-term. Option activity in Nifty clearly indicates strong resistance at 5,000-5,100 and good support between 4,700-4,800 levels.

Recapitalisation proposals in the Budget are positive for PSU banks such as IDBI, Union Bank, Syndicate Bank, Dena Bank and other banks with tier-1 ratio of less than eight per cent. Use present weakness to accumulate bank stocks for the medium term. Higher allocations for construction and infrastructure spell good times for large infra players such as HCC, GVK Power, Lanco Infra and others. Stay invested for present. Avoid cement, IT and FMCG for present till the budget dust settles down.

Use sharp corrections to buy IT majors like Infosys, Wipro and TCS. Impacts of budget proposals on auto and auto components to be neutral say industry experts. With recall issues plaguing auto companies across the world, range bound activity indicated in auto counters in near term.

Ahead of 3G auctions, telecom stocks may rebo-und from current levels. Gutsy traders can buy Bharti, Idea and Tata Communications at current levels. Metal stocks are back in limelight on reports of firm international trends and domestic demand. Buy on declines Tata Steel, SAIL, Hindalco, Nalco and Sterlite. Announcement of split of Nalco divisions likely in near term, say sources.

Stock scan

At a time when the repercussions of recent global financial crises are still being felt and the attendant focus on shoring up the capital base of existing players with tighter supervision is there, budget proposals regarding new banking licenses to private sector including non-banking finance companies have been a big ‘surprise’ to the sector. Among those with ambitions of setting up a bank are ADAG Group (Reliance Capital), Tatas (Tata Capital), Aditya Birla Group and the TVS Group (Sundaram Finance). From the new age NBFCs like IndiaBulls, Religare and Edelweiss may also be inte-rested. Keep close watch on the sector.
Green budget has put focus on the stocks of renewable energy sector. Clean energy cess on coal and reduced duties for equipment required for setting up solar photovoltaic and wind energy units clearly reflect the renewed focus on the sector to tackle climate change. Stocks like Suzlon Energy, Moser Baer, Websol Energy and many smaller firms, which are moving into the sector may hog limelight in coming months. Fly by night promoters may use the same old game of ‘name change’ marking entry into this sunrise sector and exploit the market fancy for the sector. Discriminate between good and bad.
Food processing sector has been offered a slew of concessions in the budget. With agriculture retail business going organised with the entry of big players like ITC, Bharti, Reliance and smaller ones like REI Agro, the sector is poised for big take off. Keep watch on companies that may provide capital goods for the sector and also on agri stocks like Jain Irrigation and others.

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.

Source DC

Bought to you by

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Ravina Consulting

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Near Hoodi Circle, Whitefield

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Talk / SMS 08105737966

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