Smart Investor: Indian Stock Market Analysis

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Tuesday, April 21, 2009

Closing Bell 21 april 2009

The Indian bourses remained volatile during the previous two hours of trade on account of alternate bouts of buying and selling activity. While the stocks from the realty and FMCG sectors are leading the pack of gainers, select stocks from the banking and auto spaces are trading weak. The overall market breadth is negative with losers outnumbering gainers in the ratio of 1.1 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty indices are trading weak, down by around 60 points and 10 points respectively. The BSE-Midcap and BSE-Smallcap indices are also trading weak, down by 0.5% and 0.1% respectively. The rupee is trading at 50.31 to the dollar.

Engineering stocks are trading mixed. While L&T and Punj Lloyd are trading lower, Alfa Laval is trading higher. Punj Lloyd’s UK subsidiary Simon Carves (SCL) has received an unfavourable ruling in the adjudication process with Sabic UK Petrochemicals. SCL had received a contract in 2006 to design, construct and pre-commission a low density polyethylene plant in UK from Sabic UK Petrochemicals. However, Sabic terminated the contract prior to its agreed completion date. This propelled SCL to seek the views of an adjudicator on the grounds upon which the contract was terminated. SCL sought a restitution of £ 28.5 m, in respect to an advance payment bond and a performance bond called by Sabic. While the adjudication decision has not been in favor of SCL, the company will take the next stage of dispute resolution by putting the matter before the court.

Software stocks are trading mixed. While Wipro and Satyam are trading higher, Infosys is trading lower. As per the Central Statistical Organization (CSO), India’s IT sector is likely to register a single digit growth rate of around 9% in FY09. It may be noted that although the IT sector constitutes a small part of GDP, its contribution to the GDP growth rate is almost the same as the agricultural sector. The IT sector, which has grown at 25% in FY08, had a weight of around 4% in the GDP and contributed 1% to the GDP growth rate during the same period. The Nasscom, however, projects the IT sector to grow at around 12% in FY09.

After the weak start to the day’s trade, the Indian bourses gained ground during the previous two hours on account of an unexpected cut in repo and reverse repo rates by the RBI. It cut rates by 0.25% in its annual policy review. Stocks from the telecom, energy and FMCG sectors are trading firm. However, select engineering and banking stocks are trading weak. The overall market breadth is negative with losers outnumbering gainers in the ratio of 1.7 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty indices are trading weak, down by around 30 points and 10 points respectively. The BSE-Midcap and BSE-Smallcap indices are also trading weak, down by 0.6% and 0.4% respectively. The rupee is trading at 50.32 to the dollar.

Energy stocks are trading mixed. While GAIL and HPCL are trading firm, Gujarat Gas is trading weak. As per a leading business daily, GAIL has entered into an agreement to purchase gas worth US$ 600 m from Indus Gas. The gas would be purchased from Indus Gas’ SGL field in Rajasthan, which is expected to start production within a year. GAIL has committed to a pay or take arrangement for least 90% of the gas supply. The company will initially receive 7 million cubic feet per day. GAIL would supply it to the Ramgarh power plant in Rajasthan, for which it will lay a 100 km pipeline at an estimated cost of Rs 1 bn. This development strengthens the company’s portfolio of assured gas supply and will help increase its transmission revenues.

Banking stocks are trading weak led by Axis Bank and ICICI Bank. Axis Bank announced its quarter and year ended March 2009 results yesterday. The bank’s net interest income grew by 43% YoY during FY09. Its net interest margins grew by 10 basis points (0.1%) to 3.3% for FY09. Net profits grew by a whopping 70% YoY during FY09, aided by 61% YoY growth in other income. The net non-performing asset to advances remained stable at 0.4% at the end of the year. The bank also announced a key change in the management. Ms. Shikha Sharma will replace Dr. P.J. Nayak as the MD and CEO of the bank.

Thursday, February 26, 2009

Closing Bell 26-02-09

After opening the day on a weak note, the Indian indices languished in the red thereafter. However post the morning session, markets gained momentum as buying activity intensified. During the final hour of trade the markets managed rise above the dotted line and end the day on a positive note. The Sensex closed higher by around 50 points, while the Nifty closed higher by around 30 points. Stocks from the BSE Midcap index ended the day on a positive note, while stocks forming part of the BSE Smallcap index ended the day on a weak note. Further, stocks from the auto and energy space led the pack of gainers, while stocks from the banking and realty led the pack of losers. Rupee closed at 50.3 against the US dollar. The Asian markets ended on a mixed note today. The European indices are currently trading mixed.

Inflation for the week ending February 14 has further fallen to 3.36% as compared to 3.92% in the week ending February 7. The numbers are lower due to price cuts in fuel, primary articles and the manufactured goods. With inflation within the RBI’s comfort zone, the possibility of cut in key rates is high.

Auto stocks ended the day on a positive note led by Tata Motors, Ashok Leyland and Bajaj Auto. The stock of Tata Motors ended the day on a positive note on news of it announcing the official launch date of the much awaited ‘Nano’. As per a leading business daily, the Rs 100,000 car is to be officially launched on 23rd March. Subsequently, the car is expected to be displayed in stores from the first week of April and bookings are expected to begin thereafter. The booking process and other details will be announced on 23rd March. As per a statement by the company, it is making arrangements for the widest possible network to book the car. In addition, the company also launched a new car recently. It is called the ‘Xenon XT’, which is a lifestyle pickup truck. In addition, the company also has other launches lined up including a utility vehicle, which would be on a brand new platform.

The job situation in international markets seems to be worsening. As per a leading business daily, about 20,000 Indians have returned home after losing their jobs overseas due to the global economic crisis.

The management of Piramal Healthcare has clarified the news item reported in the business daily regarding French major Sanofi-Aventis offering the highest price to buy a substantial stake in Piramal Healthcare. However, as per the management, it has no intention to dilute current ownership levels.

The Union Cabinet has today approved a hike in the dearness allowance by 6%. The new rate of 22% will be applicable from January this year. This is likely benefit 5 m employees and nearly 4 m pensioners. The additional spending would amount to Rs 60 bn. It may be noted that this would further impact government’s deficit which has already mounted on account of various stimulus packages announced recently.

Though the markets continued to trade in the negative territory during the previous two hours of trade, they managed to shed some of their earlier losses. Stocks from the pharma, banking and energy sectors are leading the pack of losers, while select stocks from the auto, telecom and software sectors are trading higher. The overall decline to advance ratio is poised at 1.5 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty are trading lower, down by almost 35 points and 6 points respectively. The BSE-Midcap and BSE-Smallcap indices are trading flat. The rupee is trading at 50.27 to the dollar.

Media stocks are trading mixed. Zee Entertainment, Sun TV and Dish TV are trading higher, while Network 18 and NDTV are trading lower. As per a leading business daily, the Telecom Regulatory Authority of India (TRAI) has recommended that broadcasters should not be allowed to control more than 20% equity stake in any distribution platform and vice versa. Platforms include cable, DTH, headend in the sky (HITS) and mobile TV.

Companies which already have such cross-media control have been given three years to restructure their operations. It may be noted that many large media players like Sun TV and the Zee group would have to restructure their operations as they have presence in both the segments. While the recommendation is not yet binding, it will have a negative impact on cross-media broadcasters. In fact, the broadcasters have been trying to build economies of scale through their distribution presence in the face of fragmented viewership patterns.

Software stocks are trading mixed. TCS and Infosys are trading higher, while Wipro is trading lower. TCS has received a contract from Singapore Airlines to provide IT services for three years. It may be noted that TCS was finalised after a fresh round of selection from prospective vendors. TCS has been providing IT services to Singapore Airlines for the past twelve years. In fact, TCS and Singapore Airlines had set up a joint venture company in the early 90’s, which was later acquired and integrated into TCS in 2006. The travel and transportation sector contributed around 4% of the total revenues of TCS in FY08 and is emerging as a key business vertical. As such, retention of Singapore Airlines bodes well for the company.

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Indian Stock Market Review 26-02-09

Amid mixed global cues, the market opened on a weak note and had a prolonged spell in the negative terrain today.

Hectic short-covering due to expiry of February series derivative contracts lifted the market into the positive zone during the final hour. The Sensex, which tumbled to a low of 8788.32 in morning trade, ended the day at 8962.22 (provisional) with a gain of 59.66 points or 0.67%. The Sensex rose to a high of 8998.31 during the fag end of the session. The Nifty closed at 2789.55, up 0.98% or 27.05 points.

Auto, oil, FMCG and IT stocks rallied sharply in afternoon trade. Stock specific action was seen in metal, power, pharma and capital goods sectors. Bank stocks remained weak. Realty stocks bounced back after a weak spell. Midcap and smallcap stocks found support hard to come by.

Tata Motors shot up by nearly 8%.

Grasim, Maruti, ONGC, RComm, NTPC, Sterlite and RIL closed with impressive gains.

Infosys, BHEL, HUL, Bharti and ITC also finished on a positive note.

Unitech, Hero Honda, GAIL, Tata Comm, Cairn India and SAIL moved up sharply.

Ranbaxy plunged by over 18%.

PNB, Reliance Capital, BPCL, Ambuja Cements, Siemens, RPower and RPL ended with sharp losses.

The market breadth was negative right through the day.

ABB (Rs 371) is likely to give good returns over a medium or long term. Investors holding the stock can stay invested. The company's order book is quite healthy. Small quantities can be added at sharp declines from current levels.

Dabur India (Rs 91) can be retained with a stop loss at Rs 75. The stock has more support at Rs 60 - 65 levels. But for a sharp upmove to happen, the stock has to move on to Rs 110 and trade firm for a few sessions.

Piramal Healthcare Ltd has clarified that the Promoter has no intention to dilute current ownership levels. The Company continues to maintain its policy on not commenting on market speculation. The clarification from the company is with reference to a news item appearing in leading financial daily about a stake sale.

Marico (Rs 56) can be picked for medium term. One can take a modest exposure now and increase holding at declines. stop loss can be placed at Rs 46. Returns from Hindustan Unilever (Rs 250) may not be significant in the short run. However, the downside risk for the stock is somewhat limited from here. One looking at long term can pick up this stock at declines.

Jaiprakash Associates (Rs 67) may struggle to make a sharp upmove in the near term. One looking at a 12 - 15 month span can go in for the stock at Rs 60 - 63 levels. Those holding the stock can continue to do so with a stop loss near Rs 47.

Bank stocks are trading weak today. However, investors holding key bank stocks with a long term plan can continue to hold them. Exposure can be increased in a staggered way in SBI, Bank of Baroda, Bank of India, Federal Bank, Indian Bank, PNB and Union Bank of India.

Infosys Technologies (Rs 1233) can move on to Rs 1265 - 1275 shortly. Traders with a good appetite for risk can try this IT stock now with a stop loss at Rs 1218.

Reliance Communications (Rs 157) can rise to Rs 163 this afternoon. Intra-day traders can buy this stock now with a stop loss at Rs 153. Those looking at medium to long term can stay invested with a stop loss at Rs 145.

Investors looking for some strong gains over a short run, can go in for Maruti Suzuki. The stock (Rs 672) is near a strong resistance level now. A move to Rs 730 looks very likely in the near term.

Reliance Industries (Rs 1271) can be bought at sharp declines. Long term investors can hold the stock with a stop loss near Rs 1100.

Cipla (Rs 188) can give modest returns over a 3 - 6 month period. One can buy the stock now or at slight declines.

Long term investors can have a stop loss near Rs 145.

Reliance Communications (Rs 156) can rise to Rs 160 - 162 where it can face some resistance. A fall to Rs 153 and a pronounced weakness there can result in the stock sliding down to Rs 148 this afternoon.

Ultratech Cement (Rs 449) can be retained for long term. However, fresh buying can be considered at sharp declines from current levels. Long term players can have a stop loss near Rs 320.

HDFC (Rs 1205) has hit a new 52-week low of Rs 1193.30 today. The stock is likely to drift lower in the near term.

Still, long term investors can continue to hold the stock and pick up more of it in small quantities at declines.

One can stay invested in Balrampur Chini (Rs 48.50). The stock can give moderate to sharp returns over a short to medium run. For now, a stop loss can be placed at Rs 35 - 37 levels.

Crompton Greaves (Rs 125) can be retained for long term. In the short run, the stock can exhibit weakness and can drift down to Rs 110 levels. Long term investors can increase exposure at those levels.

Tata Steel (Rs 160.70) can move up sharply if it makes a decisive breakout at Rs 163. The stock has support at Rs 158 and weakness there can result in a fall to Rs 153 or even Rs 150.

Infosys Technologies (Rs 1217) will have to rise to Rs 1225 and trade firm to give a strong buy signal for intra-day. The stock has support at Rs 1205 and a pronounced weakness there can result in a fall to 1190 or even lower.

Tata Consultancy Services has announced that Singapore Airlines has extended its contract with the company. As per the extension, TCS will provide IT services for three years for a suite of applications used by Singapore Airlines Group of Companies.

Educomp Solutions (Rs 1507) is not for investors with little or no appetite for risk. Short term traders can look to sell the stock at Rs 1580 - 1600 and buy back later at Rs 1450 or slightly lower.

Nifty (2737) has some support at 2730. Weakness around that level can result in a fall to 2710 or even lower levels. A strong breakout at 2755 can lift the index back into the positive territory.

NTPC (Rs 180) is likely to face some strong resistance at Rs 190 levels. In the short run, the stock can weaken to Rs 165 or even lower. Long term investors can hold the stock and pick up more of it at sharp declines from current levels.

Punj Lloyd (Rs 82) can give fairly solid returns over a long run. The stock can move on to Rs 90 where short term traders can make an exit. They can re-enter the counter later at declines.

SAIL (Rs 74.65) can be picked up at declines. The stock is likely to face strong resistance at Rs 90 - 95 level where one can make an exit.

Investors with a short or medium term view can hold M&M (cmp Rs 319) with a stop loss at Rs 270. The stock will have to move on to Rs 390 and trade firm for a few sessions to give a strong buy signal.

Maruti Suzuki (Rs 649) can move up sharply in the near run. The stock can find some resistant at Rs 675 - 685 levels where one can look at booking some profits.

GMR Infrastructure (Rs 75) can be accumulated in a staggered way. Investors with a long term plan can have a stop loss near Rs 45, around its 52-week low.

Ranbaxy Laboratories (Rs 180) is likely to remain quite slippery in the near run.

Investors who have no appetite for risk would do well to stay away from the counter for now.

Stay invested in Tata Motors (Rs 142). The stock may see a few weak spells in the near run and can even drop down to Rs 130. Dips can be used to add quantities.

Ambuja Cements (Rs 68) looks good as a medium to long term bet. Though a fall from current levels is not ruled out, one who can afford to hold the stock need not worry and instead, increase exposure at sharp declines.

L&T has bagged new orders worth Rs 1162 crore in Buildings & Factories Segment. The orders are from the Andhra Pradesh Rajiv Swagruha Corporation, KCP Limited and Lafarge India Private Limited. One with a long term plan can continue to hold L&T (Rs 623) and look to buy more at declines.