Market 17 Jan 2011

Bugged by high inflation, poor industrial numbers and uncertainty over the ability of the government over policymaking in the Budget session, markets continued to trade on a weak note during the week-ended.

On the Bombay Stock Exchange, the Sensex shed 769 points closing at 18,860 and the Nifty ended 250 points lower at 5,655. It was a nightmarish week that left market players gasping and exposed the shallowness of the market.

Renewed FII selling, disappointment over Infosys’ results, petrol price hike and fears over a possible interest rate hike have spooked the market sentiment. Analysts expect markets to stabilise and perform better, if the earnings next week come up with positive surprises.

After the consent order of Reliance ADAG group companies, the next will be consent order to Reliance Industries, say sources. The impact of the consent orders is likely to be shortlived. It is pertinent to see that while the US stocks rose for a seventh straight week, the longest rally since May 2007, Indian markets had their worst weekly fall in more than eight months. As expected, domestic factors are weighing more on the markets than optimism prevailing in global markets.

For the week ahead, chartists predict a trading band between 5,380 and 5,850 for the Nifty, and 18,160 and 19,000 for the Sensex. Supports for the week are at 5,605, 5,540 and 5,380 for the Nifty and 18,700, 18,520 and 18260 for the Sensex. Cut all short-term position trades, if the Nifty closes below 5,605, the 200-day moving average of Nifty.

The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.

Futures & Options

Intra-day swings of 200 points in the Nifty reflect the heightened volatility in the markets. Alternate bouts of buying and selling have kept the traders on edge throughout the week ended.

Stock scan

Ahmednagar Forgings Ltd (AFL) of the Amtek group is the second largest manufacturer of forged automotive components, cold forged parts and high tensile fasteners in India. The company also manufactures components for non-auto sectors such as railways and specialty vehicles.

Within the industry, AFL has the highest operating profit margin. Analysts expect the company to report earnings of `24 per share for the current year. Buy on declines for a target price of `250 in the medium term.

Artson Engineering Ltd has reportedly bagged lar-ge orders in the last couple of months. With Tata Projects Ltd as strategic investor and co-promoter, the company is back on track, say company sources. With a good visibility of earnings, the stock is a good buy on declines for a price target of `125 in the medium term.

West Coast Paper Mills Ltd is one of the larger players in the paper industry. It manufactures writing, printing and packaging paper. After the completion of expansion, the production capacity is presently 3,20,000 tonnes per annum and the introduction of superior grade paper has improved operating margins of the company. Buy on declines for a price target of `150.

Sentiment indicators like put/call ratio, implied volatility, open interest and VIX indicate continued volatility in near term. Volumes in the option segment are on the rise reflecting traders’ fears over the dangerous volatility in the futures segment. Buy Nifty call option of 5,800-strike, if Nifty holds the 200-day moving average level.

* Renewed buying was seen in cement counters on the back of expectations of an improved off-take and an increase in retail prices in several parts of the country. Buy on declines ACC, Ultratech and Birla Corp.

* Mild sell-off was seen in technology counters after the announcement of Infy results. However, punters were seen accumulating TCS, Wipro and HCL Tech at lower levels. Surprising gains are likely.

* The weekend hike in petrol prices will not offset the losses made in diesel and LPG, assert oil marketing companies. Adopt sell on rallies strategy.

* Metal stocks lost sheen on heavy profit booking. Avoid for present and wait for the FPOs of Tata Steel and SAIL to be completed, say industry sources.

* Among the stock futures looking good in an otherwise uncertain market are Petronet LNG, Power Grid, Bharti, Adani Enterprises, Grasim, M&M, Jain Irrigation and Suzlon.

Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected. The key is not to get scared out of them.

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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BSE / NSE Review 7th Jan 2011

The key benchmark indices suffered a severe setback, sliding for the fourth day in a row, on rising fears of an interest rate hike by the central bank at a policy review scheduled later this month to cool inflation. The barometer index BSE Sensex and the 50-unit Nifty tumbled to their lowest level in three weeks. European and most Asian markets declined as caution prevailed ahead of the key US non-farm payrolls data later in the global day. The BSE 30-share Sensex was down 492.93 points or 2.44% to 19,691.81, off 518.81 points from the day's high and up 62.59 points from the day's low. The Sensex and the 50-unit S&P CNX Nifty fell below the psychological 20,000 and 6,000 levels, respectively.

The market breadth was weak. All the components from the 30-member Sensex pack declined. Today's decline was broad-based with all the 13 sectoral indices on the BSE edging lower. Shares from the auto, metal and IT pack were the worst hit in today's market meltdown. Index heavyweight Reliance Industries (RIL) and Bharti Airtel dropped. Infosys Technologies retreated from record high.

The market came off lows in early trade as Japanese and Chinese stocks recovered from early losses. The Sensex moved into the green from red. The market once again slipped into the red later. The market extended losses to touch fresh intra-day low in mid-morning trade. The market came off lows in early afternoon trade. Volatility was extended in afternoon trade. The market slumped to a fresh intraday low in mid-afternoon trade. Intense selling pressure gripped the bourses in late trade.

NSE's volatility index, India VIX, a gauge of traders' perception of near-term risks in the market based on options prices, surged to 20.82% from Thursday's (6 January 2011) close of 18.20%. India VIX is calculated based on the S&P CNX Nifty options prices. India VIX is a measure of the market's expectation of volatility over the next 30 calendar days.

The market sentiment was weak as data showing a surge in food inflation in late December 2010 rekindled fears of interest rate hike by the Reserve Bank of India (RBI). Food inflation accelerated to the highest level in more than a year in late December 2010. The food price index rose 18.32% and the fuel price index climbed 11.63% in the year to 25 December 2010. Annual food and fuel inflation stood at 14.44% and 11.63% respectively in the prior week. The primary articles price index was up 20.20% in the latest week, compared with an annual rise of 17.24% a week earlier. The data was unveiled during trading hours on Thursday, 6 January 2011.

Finance Minister Pranab Mukherjee on Thursday, 6 January 2011, asked the state governments to remove supply chain bottlenecks at the earliest in the food sector to bring prices down quickly, even as food inflation accelerated to a one year high. Mukherjee also said a large part of the price rise is due to the widening gap between wholesale and retail prices in fruits, vegetables, milk and meat.

Foreign institutional investors (FIIs) sold shares worth a net Rs 213.80 crore on Thursday, 6 January 2011, which was higher than an outflow of Rs 92.40 crore on Wednesday, 5 January 2011.

FII inflow in January 2011 totaled Rs 1517.30 crore (till 6 January 2011). FIIs had bought equities worth Rs 2049.60 crore in December 2010. FII inflow in the calendar year 2010 totaled Rs 133266 crore. In dollar terms the net equity inflow in 2010 totaled $29.36 billion, compared to an inflow of $17.45 billion in 2009. The annual inflow in 2010 was at record level.

The BSE 30-share Sensex was down 492.93 points or 2.44% to 19,691.81, its lowest closing since 15 December 2010. The Sensex lost 555.52 points at the day's low of 19,629.22 in late trade. The index rose 25.88 points at the day's high of 20,210.62 in early trade.

The S&P CNX Nifty was down 143.65 points or 2.38% at 5,904.60, its lowest closing since 15 December 2010. The Nifty hit a low of 5,883.60 in late trade.

The market breadth, indicating the health of the market, was weak. On BSE, 2,396 shares declined while 621 shares rose. A total of 65 shares remained unchanged. The breadth had moved between positive and negative zone in early trade.

The BSE Mid-Cap index fell 2.49% and the BSE Small-Cap index declined 2.86%. Both these indices underperformed the Sensex.

The total turnover on BSE amounted to Rs 3486 crore compared with Rs 3571 crore on Thursday, 6 January 2011.

All the 13 sectoral indices on BSE edged lower. The BSE Metal index (down 4.03%), the BSE Consumer Durables index (down 3.18%), and the BSE Auto index (down 3.26%), underperformed the Sensex.

The BSE Capital Goods index (down 1.55%), the BSE Oil & Gas index (down 1.44%), and the Bankex (down 1.38%) outperformed the Sensex.

All the components from the 30-member Sensex pack edged lower. Bharti Airtel (down 3.89%), Reliance Infrastructure (down 4.42%), and ITC (down 4.03%), were among the leading losers.

Metal and mining stocks slumped after global commodity prices declined on Thursday, 6 January 2011. India's largest private sector aluminium maker by sales Hindalco Industries plunged 7.36% to Rs 232.30 and was the top loser from the Sensex pack. The stock dipped on profit booking after gaining 13.31% in the past one month till 6 January 2011.

Sterlite Industries (down 4.77%), Steel Authority of India (down 3.65%) and Sesa Goa (down 3.53%), declined.

India's largest private sector steel maker by sales Tata Steel lost 3.85%. The company during maker hours today said it has inked a joint venture (JV) agreement with Nippon Steel for setting up a Rs 2300 crore specialty steel-making line having a capacity of 60,000 tonnes per annum at Jamshedpur to cater to the domestic auto sector. Tata Steel will hold 51% stake and Nippon will hold 49% stake in the JV.

Index heavyweight Reliance Industries (RIL) declined 1.66% to Rs 1066 after gyrating between Rs 1087.60-Rs 1058.10 during the day. British oil explorer Hardy Oil and Gas on Wednesday said it abandoned a well in its key D9 exploration licence in India after failing to find gas in commercial quantities. Hardy holds a 10% participating interest in the licence, which is operated by RIL and is located on the east coast of India.

India's largest oil exploration firm by sales ONGC fell 1.79%. The stock extended Thursday's (6 January 2011) over 3% decline triggered by comments from chairman R S Sharma that the company's profitability in Q3 December 2010 may be hit due to higher subsidy pay out to refiners and higher global crude oil prices.

India's largest private sector bank by net profit ICICI Bank lost 1.33% to Rs 1039.05, off day's high of Rs 1077.10. The stock extended 8% decline in the prior four trading sessions.

India's largest private sector power utility firm by sales Reliance Infrastructure (RInfra) declined 4.42%. The company during market hours today said its promoters have invested Rs 2,095 crore in the company's shares, thereby raising their stake by about 5% to 48%. This equity capital infusion will substantially enhance RInfra's net worth to Rs 23125 crore ($ 5.1 billion) on consolidated basis, and provides for increased financial flexibility, the company said in a statement.

Auto stocks extended recent losses on worries higher interest rates and higher vehicle prices could dent demand for vehicles. India's largest tractor maker by sales Mahindra & Mahindra lost 4.40%, extending three-day 2.18% slide.

India's largest car maker by sales Maruti Suzuki India fell 1.96%, with the stock falling for the third straight day.

India's top truck maker by sales Tata Motors declined 6.12%, after the company's American depository receipts, or ADR slumped 3.07% to $28.14 on the New York Stock Exchange on Thursday, 6 January 2011. The stock extended its decline for the fourth straight day today.

India's second largest motorcycle maker by sales Bajaj Auto fell 1.29%, extending a four-day 13.84% slide. The slide was triggered sequential fall in sales in December 2010. The company reported 7.69% decline in total vehicle sales to 2.76 lakh units and motorcycle sales declined 8.3% to 2.43 lakh units in December 2010 over November 2010.

India's second largest software services exporter by sales Infosys declined 2.90% to Rs 3374.90. The stock retreated after striking a record high of Rs 3493.95 in intra-day trade today. Infosys unveils Q3 December 2010 results on 13 January 2011.

Source - CapitalMarket.com

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Moser Baer - Buy at 56

Technical Recommendation

We recommend a buy in the stock of Moser Baer India from a short-term perspective. It is evident from the charts that from June 2009 peak of Rs 114, the stock has been on a long-term downtrend. Medium-term downtrend that started in October peak of Rs 74 got arrested at its long-term support level of Rs 50 in late November. Triggered by positive divergence displayed in daily relative strength, the stock changed direction in early December. The stock emphatically broke through its long-term key resistance at Rs 60 by jumping 9 per cent accompanied with extraordinary volume on December 28. It has breached its 50-day moving average reinforcing bullish momentum. The 14-day relative strength index has entered the bullish zone from neutral region, whereas weekly RSI has firmly entered the neutral region from bearish zone. Daily moving average convergence divergence oscillator has signalled a buy. We are bullish on the stock. We anticipate the stock to move higher until it touches our price target of Rs 64.5 or Rs 66.5. Short-term traders can buy the stock while maintaining stop-loss at Rs 60.5.

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BSE / NSE weekly review 16 Dec 2010

SE Mid-Cap, Small-Cap indices outshine Sensex

The market edged higher in three out four trading sessions in a truncated week as investors sought bargains after a steep slide. Small and mid-cap stocks, which were hammered brutally on concerns over a regulatory crackdown on companies, outperformed the large-cap peers. The stock market remains closed on Friday, 17 December 2010, on account of Moharum.

The BSE Sensex rose 355.96 points or 1.82% to 19,864.85 in the week ended Thursday, 16 December 2010. The S&P CNX Nifty rose 91.40 points or 1.56% to 5,948.75. The BSE Mid-Cap index rose 2.19% and the BSE Small-Cap index rose 2.6%. Both these indices outperformed the Sensex.

The Reserve Bank of India (RBI) announced measures to ease liquidity in the banking system while keeping the key policy rates unchanged after a mid-quarter policy review on Thursday, 16 December 2010. The RBI reduced the statutory liquidity ratio (SLR) ofscheduled commercial banks (SCBs) from 25% of net demand and time liabilities (NDTL) to 24%, with effect from 18 December 2010. The central bank also said it will conduct open market operation (OMO) auctions for purchase of government securitiesfor an aggregate amount of Rs 48000 crore in the next one month. These two measures are expected to inject liquidity on an enduring basis of the order of Rs 48000 crore, the RBI said after the mid-quarter policy review.

The RBI said the underlying growth momentum of the Indian economy remains strong. Even as inflation has moderated, it remains significantly above the comfort level of the RBI, the RBI said in a statement. Moreover, risks to inflation remain on the upside, both from domestic demand and higher global commodity prices, the RBI said. There is, therefore, a need for continued vigilance on the inflation front against the build-up of demand side pressures. The RBI had earlier projected 5.5% inflation by March 2011.

A major challenge for the RBI in the recent period has been liquidity management. It is the RBI's endeavour to alleviate the liquidity pressure in a manner consistent with the monetary policy stance of containing inflation and anchoring inflationary expectations, the RBI statement said.

The RBI said its latest measures will release sizable primary liquidity into the system. These measures will reduce the liquidity deficit in the system close to the comfort zone of the Reserve Bank of India, it said. The liquidity easing measures will help stabilise interest rates in the overnight inter-bank market closer to the operative policy rate of the Reserve Bank of India, it said.

Meanwhile, corporate India has reportedly paid 15-20% higher tax for the third quarter of the current financial year. State Bank of India paid advance tax of Rs 1850 crore in Q3 December 2010 compared with Rs 1795 crore in Q3 December 2009. HDFC Bank paid Rs 750 crore versus Rs 400 crore, ICICI Bank paid Rs 450 crore versus Rs 301 crore. The tax outgo of HDFC saw a year-on year (y-o-y ) increase of 25% from Rs 320 crore to Rs 400 crore, Punjab National Bank paid Rs 640 crore versus Rs 618 crore, RIL paid Rs 1100 crore in Q3 December 2010 compared with Rs 830 crore in Q3 December 2009. TCS paid Rs 270 crore in Q3 December 2010 compared with Rs 177 crore in Q3 December 2009.

Hindalco Industries paid Rs 200 crore against Rs 148 crore. Tata Power Company paid Rs 58 crore versus Rs 81 crore. Larsen & Toubro paid Rs 270 crore, unchanged from previous year.

M&M paid Rs 236 crore versus Rs 195 crore, Tata Motors paid Rs 220 crore versus Rs 100 crore and Bajaj Auto paid Rs 370 crore in Q3 December 2010 compared with Rs 310 crore in Q3 December 2009. FMCG major Hindustan Lever paid Rs 225 crore, marking a yo-y increase of Rs 45 crore, an increase of over 25%. Petroleum major HPCL recorded a lower tax outgo, Rs 29 crore against Rs 48 crore, a 39% decline.

Trading for the week began on an upbeat note. The key benchmark indices on Monday, 13 December 2010, extended Friday (10 December 2010)'s 1.3% gains on firm global stocks. World markets rose after Beijing refrained from raising interest rates over the weekend. The BSE 30-share Sensex was up 182.89 points or 0.94% to 19,691.78. The S&P CNX Nifty was up 50.30 points or 0.86% to 5,907.65.

Buying demand in second half on waning fears of a near term interest rate hike helped the key benchmark indices log gains for the third running day on Tuesday, 14 December 2010. Firm Asian markets also boosted sentiment. The BSE 30-share Sensex was up 107.41 points or 0.55% to 19,799.19. The S&P CNX Nifty was up 36.45 points or 0.62% to 5,944.10.

The key benchmark indices drifted lower in choppy trade on Wednesday, 15 December 2010, snapping a three-day rally, as weak global stocks triggered profit taking. Concerns that a fuel price hike may stoke inflation pressures also weighed on investor sentiment. The BSE 30-share Sensex was down 151.42 points or 0.76% to 19,647.77. The S&P CNX Nifty was down 51.80 points or 0.87% to 5,892.30.

The key benchmark indices surged on Thursday, 16 December 2010, after the central bank announced measures to ease liquidity crunch in the banking system while keeping the key policy rates unchanged. Firm European stocks and higher US index futures also aided the rally in what was a highly volatile trading session. The BSE 30-share Sensex rose 217.08 points or 1.10% to 19,864.85. The S&P CNX Nifty rose 56.45 points or 0.96% to 5,948.75.

Among the 30 Sensex shares, 19 rose and the rest declined.

India's largest truck maker by sales Tata Motors spurted 8% to Rs 1347.95. It was the biggest Sensex gainer last week. Tata Motors' global vehicle sales, including Jaguar Land Rover, rose 6% to 79,959 units in November 2010 over November 2009. Jaguar and Land Rover sales jumped 22% to 22,957 units in November 2010 over November 2009. Jaguar sales for the month were 5,621 units, up by 30%, while Land Rover sales were 17,336 units, higher by 20%.

India's largest steel maker by sales Tata Steel flared up 6.59% to Rs 658.85. It was the second biggest Sensex gainer last week.

Anil Dhirubhai Ambani-group firm Reliance Infrastructure jumped 6.07% to Rs 828.5. It was the third biggest Sensex gainer last week.

Tata Consultancy Services (TCS) (up 6.05%), Sterlite Industries (up 4.65%), Infosys Technologies (up 4.60%), Wipro (up 4.40%), Hindalco Industries (up 4.24%) and Bharti Airtel (up 3.82%), were the other major Sensex gainers.

TCS jumped on reports the company paid higher advance tax of Rs 230 crore for Q3 December 2010 compared with Rs 177 crore paid for Q3 December 2009. Meanwhile, the company won a deal for implementing smart card based financial inclusion solution for state-run Indian Bank. The deal value is pegged at Rs 85 crore for three years.

India's largest copper maker by sales Sterlite Industries (India) rose after the Supreme Court on Monday, 13 December 2010, extended a stay on a lower court order askingSterlite Industries to close its copper smelter in Tuticorin, Tamil Nadu.

Index heavyweight Reliance Industries (RIL) rose 3.14% to Rs 1055.80. As per reports, the company has paid advance tax Rs 1100 crore in Q3 December 2010 compared with Rs 830 crore in Q3 December 2009.

India's largest two-wheeler maker by sales Hero Honda Motors tumbled 5.88% at Rs 1679.10. It was the biggest Sensex loser last week. The company announced after market hours on Thursday its board of directors approved a new licensing arrangement with Honda Motor Co, Japan concurrent with the Hero Group's proposed acquisition of Honda's 26% stake in Hero Honda Motors. This arrangement will ensure Hero Honda's growth and sustained competitiveness by giving it opportunity to develop its own R&D capabilities and exploit global export opportunities while Honda continues to provide new models. The board expressed confidence that this arrangement will provide a smooth and gradual transition to the new status of the company and additional avenues for growth.

Shares of auto makers fell on concerns a fuel price hike coupled with rise in auto prices from January 2011, might derail volume growth story. India's largest tractor maker by sales Mahindra & Mahindra slipped 5.79% to Rs 732.6. It was the second biggest Sensex loser. Among other auto sector stocks, Maruti Suzuki India (down 2.46%) and Bajaj Auto (down 2.44%), declined.

Steel maker Jindal Steel & Power fell 3.55% to Rs 670.9. It was the third biggest Sensex loser. ITC (down 1.23%), ICICI Bank (down 1.19%) and HDFC Bank (down 0.90%), were the other major Sensex losers.

Source : capitalmarket.com

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Market Outlook 6th Dec 2010

Buoyed by strong Q2 GDP number, fall in the headline inflation and positive global cues markets staged a strong comeback during the week ended after three weeks of losses. On the BSE the Sensex closed 830 points higher at 19,967 and the Nifty ended 241 points up at 5,993.

Renewed buying from FIIs kept the sentiment positive. However some sections of the broader market were badly battered after the exposure of a stock rigging scam by the market regulator SEBI. Global cues and liquidity flows hold the key for near term direction of markets. Rise in international crude oil prices to $88+ level may impact inflation again.

With upbeat macro economic numbers lending a hand for market recovery, the next big trigger for markets is Q3 advance tax numbers. Sustaining the present level will be difficult if there are disappointments in Q3 numbers. Barring any ‘surprising’ negative domestic political or global economic cues markets may trade in a tight range till the year end.

For the week ahead chartists predict trading range of 19,650-20,450 for the Sensex and 5,750-6,175 for the Nifty. Key supports for the indices are at 19,780 & 19,540 and 5,880 & 5,790. Immediate resistances are at 20,160 & 20,340 and 6,060 & 6,140. In the near future, in spite of short term volatility select large-caps and mid-caps will throw up good opportunities. Keep an eye on opportunities. Be greedy when others are fearful and fearful when others are greedy.

Futures & Options

Despite high volatility brisk trading volumes were seen in the derivative segment. Overall open interest jumped by `23000 crore or 20 per cent to `143000 crore suggesting revival in confidence among traders and fresh long build up of positions. Sharp fall in VIX is also indicative of return of normalcy. However, sharp trader’s advice caution and buying of put options as hedge for portfolios.

Banking and realty stocks which were battered recently on account of bribery scandal staged a strong rebound. ICICI Bank, Canara Bank, BOB and IDBI Bank from the larger ones and smaller banks like UCO Bank, Andhra Bank, DCB and InduSind Bank look good for near term gains. Buy on declines DLF, HDIL and IBRL. Good defensive buying seen in pharma and IT counters. Large cap IT stocks Infosys, TCS and Wipro are showing good resilience. Buy on dips. From the pharma pack, Cipla, Dr Reddy, Lupin and Ranbaxy look set for healthy gains.
Metal counters are witnessing good buying interest at lower levels. This is being attributed to weakness in dollar and also robust domestic demand. Ahead of MOIL listing NMDC may jump to `300+ levels say punters.

Oil & Gas space is attracting institutional buying. With FPO’s of IOC and ONGC on cards, oil stocks may continue to trade steadily in near term. Huge volatility in many of the midcaps in F&O segment has reportedly put many traders to loss. Swings of 5 to 25 per cent in counters like BGR Energy, Welspun and others showcase the present high level of “risk” in the segment. Trade lightly with strict trailing stop loss advice old-timers. Avoid hindsight error and unrealistic optimism.

Stock scan

International Travel House, an associate company of ITC Ltd is one of the largest complete travel management companies in India. The company has bagged some of the travel and tourism industry’s most coveted awards and recognitions.

ITHL is pursuing the niche segment of medical tourism and travel insurance aggressively. With revival in demand, both inbound and outbound traffic showing strong growth, the company is expected to report OPM of 30 per cent and EPS of `24 for the current year. Buy at current levels for target price of `375 in medium term.

Agro Tech Foods Ltd affiliated to ConAgra Foods of USA, one of the world’s largest food companies is engaged in the business of marketing food and food ingredients.
Some of the leading brands include Sundrop, Act II, Rath, Healthy World etc. Recently the company has sold its vanaspati brand Rath to Cargill India for an undisclosed sum and intends to focus on value-added high margin products. Buy on declines for target price of `550 in medium term.

Many midcap and smallcap stocks have fallen anywhere between 10 per cent to 50 per cent in the recent meltdown. While some have fallen on account of links to operators, others have corrected only on ‘panic’ selling. Ahead of Q3 results, select counters like Vishnu Chemicals, Savera Inds, Arcotech and others recommended in this column look good buys at current levels. Start bottom fishing in smallcap and midcap counters.

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.

Source : DC

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BSE and NSE Weekly Review 4 Nov 2010

Dalal Street witnessed a festive boost last week. The market surged on US Federal Reserve's decision to buy $600 billion in government bonds to stimulate the US economy, robust corporate earnings and on sustained buying by foreign funds.

The stock market remains closed on Friday, 5 November 2010, on account of Diwali. But, there will be a special one hour Muhurat trading session on that day between 18:00 IST To 19:00 IST, to mark the begging of the Samavat Year 2067.

The BSE Sensex surged 861.23 points or 4.29% to 20,893.57 in the week. The S&P CNX Nifty soared 264.1 points or 4.38% to 6,281.80. The BSE Mid-Cap index rose 3.61% and the BSE Small-Cap index rose 2.66%. Both these indices underperformed the Sensex.

Foreign funds have made heavy purchases of Indian stocks this year. Net equity inflows in 2010 now stands at a record $26.75 billion, above last year's $17.45 billion. US Federal Reserve's asset purchase programme would further boost the fund flows into emerging markets, such as India, and provide a further impetus to the rally.

While global liquidity remains ample, a section of the market is worried that a strong equity issuance pipeline over the next six months will soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 80000 crore from equity and debt issue over the next three to six months. State-run Power Grid Corp, Steel Authority of India and Indian Oil Corp are some of the companies that are planning large share sales in coming months.

India's Chief Economic Adviser to the Finance Ministry Kaushik Basu on Thursday, 4 November 2010, said India needs all its options to handle a surge and volatility in inflows.

Boosting the sentiment, the seasonally adjusted HSBC Purchasing Managers' Index (PMI) -- a headline index designed to measure the overall health of the manufacturing sector -- was at 57.2 in October 2010, rising from September's reading of 55.1. Moreover, the strengthening of business conditions regained the momentum lost in September. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease.

For investors, another good news last week was the listing of Coal India, which had raised about $3.5 billion in the country's largest-ever IPO. The world's largest coal miner, which made its stock market debut on Thursday, 4 November 2010 found a place among the top 5 companies in market capitalisation.

Another news that encouraged investors was that the Reserve Bank of India (RBI) on Tuesday, 2 November 2010, signaled a pause in its policy tightening drive that began in October 2009. The RBI at its second quarterly monetary policy review on Tuesday, 2 November 2010, hiked its lending and borrowing rates by a quarter point each, as expected, to tackle inflationary pressures. The RBI raised its repurchase or repo rate (at which it lends money to bank) to 6.25%, while increasing the reverse repurchase or reverse repo rate to 5.25%. It left the cash reserve ratio (the amount of deposits that commercial banks are required to keep with the RBI) unchanged at 6%. RBI Governor D Subbarao said that some controls on debt flows will be maintained.

The central bank imposed stringent norms on housing loans by commercial banks such as increasing the risk weights, higher provisioning for teaser rate loans, among others. At present, there is no regulatory ceiling on the loan to value (LTV) ratio in respect of banks' housing loan exposures. In order to prevent excessive leveraging, RBI has proposed that the LTV ratio in respect of housing loans hereafter should not exceed 80%.

The RBI said it will continue to closely monitor both global and domestic macroeconomic conditions. "We will take action as warranted with a view to mitigating any potentially disruptive effects of lumpy and volatile capital flows and sharp movements in domestic liquidity conditions, consistent with the broad objectives of price and output stability", the policy statement said.

Trading for the week started on a buoyant note. The BSE 30-share Sensex jumped 323.29 points or 1.51% to 20,355.63 on Monday, 1 November 2010, as the latest data showing surge in manufacturing activity in October 2010, good Q2 September 2010 results, and firm global stocks boosted investor sentiments. The 50-unit S&P CNX Nifty was up 99.85 points or 1.66% to 6,117.55.

The key benchmark indices were little changed at close after undergoing intraday volatility on Tuesday, 2 November 2010. The BSE 30-share Sensex was down 9.94 points or 0.05% to 20,345.69. The S&P CNX Nifty was up 1.45 points or 0.02% to 6,119.

Banking, metal and PSU shares led modest gains on the domestic bourses on Wednesday, 3 November 2010, a day after the central bank on Tuesday, 2 November 2010, signaled a pause in its policy tightening drive that began in October 2009. Good Q2 September 2010 results and sustained buying by foreign funds underpinned sentiments. The BSE 30-share Sensex was up 120.05 points or 0.59% to 20,465.74. The S&P CNX Nifty was up 41.50 points or 0.68% to 6,160.50.

The Key benchmark indices surged to their highest level in nearly 34 months on Thursday, 4 November 2010, as stocks rose across the globe after the US Federal Reserve's decision to buy $600 billion in government bonds to stimulate the US economy. A rally in Coal India shares on its debut on the bourses, good Q2 September 2010 results, sustained buying by foreign funds, and data showing easing food inflation in late October 2010, underpinned sentiment. The BSE 30-share Sensex rose 427.83 points or 2.09% to 20,893.57. The S&P CNX Nifty rose 121.30 points or 1.97% to 6,281.80.

Cement maker ACC was the top Sensex gainer last week. The stock spurted 10.60% to Rs 1088.55. ACC's cement shipments rose 13.6% to 1.92 million tonnes in October 2010 over October 2009. The company, in which Swiss cement maker Holcim holds about 46%, said production in October 2010 rose 15.8% to 1.98 million tonnes from 1.71 million tonnes a year ago.

India's largest commercial bank by branch network State Bank of India soared 9% to Rs 3434.90. It was the second biggest Sensex gainer.

Aluminium maker Hindalco Industries climbed 7.51% to Rs 226.3. It was the third biggest Sensex gainer.

Larsen & Toubro (up 7.39%), Sterlite Industries (up 7.17%), HDFC (up 7.06%), Jaiprakash Associates (up 6.65%) and Tata Motors (up 6.35%), were the other major Sensex gainers.

India's largest car maker by sales Maruti Suzuki India fell 2.88% to Rs 1506.55. The stock was the top Sensex losers last week. A well-known foreign brokerage downgraded the stock to neutral from outperform, following a strong run-up in the stock price over the past few months.

Net profit of Maruti Suzuki India rose 4.95% to Rs 598.24 crore on 26.79% rise in net sales to Rs 8977.37 crore in Q2 September 2010 over Q2 September 2009. Maruti said its margins were under pressure during the quarter due to high commodity prices, foreign exchange fluctuations and also higher royalty payment to the parent Suzuki Motor Corp.

Royalty charges spiked due the increase in sales of K-series engine models and amendments in the various royalty agreements the company has entered with Suzuki Motor Corporation, resulting in additional royalty expense.

India's largest motorcycle maker by sales Hero Honda Motor declined 1.36% to Rs 1840.45. The stock was the second biggest Sensex loser last week. Hero Honda Motors' net profit declined 15.33% to Rs 505.60 crore on 11.66% rise in net sales to Rs 4511.29 crore in Q2 September 2010 over Q2 September 2009. The fall in net profit was mainly due to spiraling input costs. The company attributed the fall in bottom line to an increase in costs of raw materials such as steel and aluminium, and expenses linked to upgradation of products to Bharat Stage III norms. The company expects rising raw-material costs to continue impacting future profits.

The firm posted its quarterly sales of 12.85 lakh bikes and scooters, the highest in its history. But higher raw material costs, that rose 22% to Rs 3,385 crore against Rs 2,768 crore in the previous year, eroded virtually all the gains from higher sales.

Drug maker Cipla fell 0.82% to Rs 349.35. The stock was the third biggest Sensex losers last week.

State-run NTPC declined 0.13% to Rs 194.7. The stock was the fourth biggest Sensex losers last week.

India's largest private sector company by market capitalisation Reliance Industries rose 0.82% to Rs 1104.75. The company's net profit rose 27.80% to Rs 4923 crore on 22.69% rise in net sales to Rs 57,479.00 crore in Q2 September 2010 over Q2 September 2009.

RIL's gross refining margin (GRM) for quarter was at US$7.9 per barrel as against US$ 6/bbl in the corresponding period of the previous year. RIL's sophisticated refinery has the ability to process low-quality grades of crude, which are relatively cheap, and produce high-quality products that meet the tough specifications of all developed markets. Agarwal said RIL's gross refining margins could reach $9-10 per barrel, which it clocked in 2006-07.

RIL has also gained from the Asian demand for petroleum products. Agarwal said that the company was looking at exporting gasoline and diesel to the US and Europe as well.

A large pent up demand in its initial public offer (IPO) sent shares of Coal India (CIL) surging on its debut on the secondary equity market on Thursday, 4 November 2010. The stock settled at Rs 342.35 on BSE, a 39.73% premium over the IPO price of Rs 245. Retail investors have more to cheer as they got shares in the Coal India IPO at 5% discount to the IPO price.

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Market Khabar / Outlook for 4th Oct 2010

Buoyed by the non-controversial judgment on Ayodhya, FII inflows and expectations over second quarter results, markets moved closer to their life-time peak seen last in 2008 during the week ended.

On the Bombay Stock Exchange (BSE), the Sensex gained 400 points closing at 20,445 and the Nifty on the NSE ended 125 points higher at 6,143. With bulls firmly in control, midcap and small cap counters have begun dancing. It is pertinent to recall that markets have corrected usually after five or six quarterly gains. However this time momentum may propel markets to far higher levels than expected before correcting, say market players.

Weakness of the dollar has added impetus to equities and commodities. Impending Coal India IPO and the flurry of activity in the primary market may impact liquidity, fear observers.

Ahead of second quarter numbers stock specific activity is indicated. Barring negative cues from abroad, markets look good for few more weeks.

For the week ahead, chartists predict a trading range of 19,960 and 20,880 for the Sensex and 5,980 and 6,270 for the Nifty.

Crossover of resistances at 20,800 and 6,250 levels with volumes may see the benchmark indices test their life time peaks. Supports for the week exist at 20,220 and 20,040 and 6,070 and 6,010.

Buy good standard stocks that have stood the test of time.

Futures & Options

Exuberant volumes in the derivatives segment reflect strong bullish undertone in the markets. The October series has started with second highest ever at more than `1,33,000 crore. Fall in Nifty open interest and rise in open interest of stock futures shows the changing trade preferences of market players. More wild moves like the one seen in Orchid are not ruled out. Put/call ratio at 1.36 clearly indicates that many ‘shorts’ still exist.
* F&O rollover data indicates that defensive sectors FMCG and pharma are ‘preferred’ ones now. ITC, HLL and Titan look good for further gains. Biocon, Cipla and Piramal Healthcare may touch `400, `355 and `555.
* Metal stocks continued to shine on the back of weakness in dollar. Further gains indicated in Hindalco, Tata Steel and SAIL. As expected strong buying interest was seen in power equipment and capital goods stocks. Stay invested in the sectors and add on declines.
* After a slight wobble, IT counters are witnessing good accumulation ahead of their Q2 numbers. Infosys, TCS and HCL Tech from frontline and Firstsource and Rolta from second rung look good.
* Improvement in retail prices and expected changes in policy have triggered buying in sugar stocks. Buy on declines Shree Renuka, Triveni and Balrampur Chini. Punters are targeting cash group sugar counters.
* Selective buying was seen in infra stocks. Buy LITL, NCC and Punj Lloyd for target prices of `85, `185 and `150.
* True to their form auto stocks continued to be on fast track. Hold positions. Savvy traders are accumulating cement scrips. Contrarians tip targets of `140, `1,060 and `155 for India Cements, ACC and Ambuja Cements.
* Stock specific activity indicated in GE Shipping, Welspun Guj and Zee. GE Shipping may rally to `375 shortly, say insiders.

Stock scan

Neuland Labs is focused on the manufacture of APIs, contract research and contract manufacturing. The company has recently completed expansion of its facilities and has also diversified into peptides. It is also one of the first Indian API manufacturers to get PMDA approval of Japan. Good news on cards. Buy for a target price of `200 in medium term.

Tera Software has reportedly bagged large e-governance orders. Sources indicate that the company will be one of the beneficiaries of unique ID project. Strong buying in the counter indicates likely target of `90 in near term.

Fund managers are touting Indusind Bank as the next HDFC Bank in making. Successful completion of its recent QIP issue at `234.55 and rating upgrade by ICRA are indicators of makeover of the bank. With the QIP in progress, the bank is well capitalised and likely to witness aggressive growth in next few quarters. Buy for a target price of `400 in medium term.

Kamat Hotels engaged in the business of hospitality and allied businesses has firmly established four brands The Orchid, VITS, Gadh Hotels and Lotus Resorts. Its turnaround has put the counter under spotlight. Buy for short term target of `225.

Elder Pharma is one of the leading players in pharmaceutical formulations. Flush with funds after its QIP, it has acquired NeutraHealth, a UK-based supplier of nutrients and vitamins. Buy at current levels for target price of `550 in next few months.

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.com

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Weekly Analysis 29 Sept 2010

It was a super September indeed with indices racing closer to previous highs. While the long wait over the Ayodhya dispute ended with the Allahabad High Court declaring a split but pragmatic verdict. On the street, the verdict was very clear, Bullishness reigned supreme. A broad-based rally on Friday closed the indices around 2% higher. Being the F&O expiry week, volatility was at its peak especially on Thursday.

Sensex intra-week high of 20,475 and low of 19,864

Nifty intra-week high of 6,153 and low of 5,963

Sensex top gainers: The top gainers in the Sensex were Hindalco (up 6.9%), DLF (up 6.3%), Tata Steel (up 6%), BHEL (up 5.4%) and NTPC (up 4.8%).

Sensex top Losers: The top losers in the Sensex were Ambuja Cements (down 2.9%), ONGC (down 2.2%), Hindustan Unilever (down 1.7%), Reliance Capital (down 1.4%) and ACC (down 1%).

The BSE IT Index (up 2.1%): The top gainers in the IT sector were Wipro (up 3.3%), TCS (up 3.2%), HCL Tech (up 2.2%), Oracle Financial (up 1.7%) and Infosys (up 1.7%).

The top losers in the IT sector were Mahindra Satyam (down 8.9%), Patni Computer (down 3.9%), Mphasis (down 3.2%) and Financial Tech (down 2.9%).

The BSE Consumer Index: The top gainers in the Consumer Durables sector were Videocon Industries (up 7.8%), Blue Star (up 0.5%) and Samtel Color (up 0.4%).

The top losers were Mirc Electronics (down 4.3%), Whirlpool (down 1.5%) and Titan (down 1.1%).

The BSE Healthcare Index (up 2.2%): The top gainers in the Pharma space were Orchid Chem (up 28.3%), Wockhardt (up 13%), Cadila Healthcare (up 8.7%), Glenmark Pharma (up 8.4%) and Suven Life Science (up 8.1%).

The top losers were Emami Limited (down 4.1%), Fresenius Kabi (down 2.7%), Marksans Pharma (down 2.5%), Morepen Labs (down 1.5%) and Divi Labs (down 1.3%).

The BSE Banking Index (up 2.4%):The top gainers in the banking space were Yes Bank (up 6%), Bank Of India (up 5.7%), Oriental Bank of Commerce (up 5.5%), Axis Bank (up 4.5%) and SBI (up 4.2%).

The BSE Auto Index (up 2.6%):The top gainers in the auto space were Eicher Motors (up 9.8%), Bajaj Auto (up 6.8%), Tata Motors (up 3.8%), Hindustan Motors (up 3.7%) and M&M (up 3.6%).

The top losers were Hero Honda (down 0.8%), Swaraj Mazda (down 0.2%) and Maruti Suzuki (down 0.1%).

The BSE Oil & Gas Index (down 0.4%):The top losers in the oil & gas space were HPCL (down 5.2%), IOC (down 4.5%), BPCL (down 4.3%), Jindal Drilling (down 3.3%) and Great Offshore (down 2.5%).

The top gainers were Shiv-Vani Oil (up 4.2%), Cairn India (up 2.8%), Chennai Petroleum (up 2.4%) and Reliance Industries (up 0.6%).

The BSE Capital Goods Index (up 3.7%):The top gainers in the Capital Goods space were Alstom Projects (up 8.8%), Siemens India (up 6.1%), BHEL (up 5.4%), ABB (up 5.1%) and Elgi Equipments (up 4.7%).

The top losers were Jyoti Structures (down 2.1%), Skf India (down 1.9%), Praj Industries (down 1.8%), Dredging Corp (down 1.7%) and Ingersoll Rand (down 1.1%).

The Cement Sector: The top gainers in the cement sector were Birla Corp (up 8.7%), Ultratech Cement (up 6.1%), Binani Indus (up 4.8%), Mangalam Cement (up 4.7%) and Grasim Inds (up 2.6%)

The top losers in the cement sector were Dalmia Cement (down 22.5%), Madras Cements (down 2.7%), Prism Cement (down 2.6%) and ACC (down 1%).

The Telecom Sector: The top losers in the telecom space were Gemini Comm (down 9.6%), Himachal Futuristic (down 8.9%), Idea Cellular (down 4.9%), Tata Communication (down 4.4%) and WWIL (down 4.1%).

The Realty Sector (up 5%): The top gainers in the real estate space were Unitech (up 10.2%), DLF (up 6.3%), Mahindra Lifespace (up 6.2%), Ansal Props (up 5.5%) and Anant Raj Indus (up 5.4%).

The top losers were Akruti City (down 1.7%) and Omaxe (down 0.3%).

The Metals sector (up 5.2%):The top gainers in the metals sector were SAIL (up 8.5%), JSW Steel (up 7.4%), Tata Steel (up 6%), Tata Sponge (up 5.7%) and Jindal Steel (up 5.5%).

The top losers were Adhunik Metaliks (down 1.4%), Sunflag Iron (down 0.8%), Lloyds Metals (down 0.5%).

Source IIFL

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BSE / NSE Analysis 27 Sept 2010

The all-time peaks of January 2008 appear within striking distance. Even global markets seem to be resilient. A flood of FII money, and stronger than expected domestic economic data have made India among the best performers. Liquidity deluge has propelled both Sensex and Nifty higher by 2.3% each during the week.

Sensex intra-week high of 20,106 and low of 19,445

Nifty intra-week high of 6,037and low of 5,885

Sensex top gainers: The top gainers in the Sensex were Hindustan Unilever (up 11.8%), HDFC (up 7.2%), Ranbaxy Labs (up 6.8%), Hero Honda Motor (up 6.8%) and Maruti Suzuki (up 6.7%).

Sensex top Losers: The top losers in the Sensex were Reliance Industries (down 2.5%), Grasim Inds (down 2.4%).

BSE FMCG index (up 5.2%): The FMCG index was the top gainer among the BSE sectoral indices. The major gainers were, Hindustan Unilever (up 11.4%) and ITC (up 5.3%).

The BSE IT Index (up 2.1%):The top gainers in the IT sector were Mahindra Satyam (up 9%), Wipro (up 6.4%), Infosys (up 2.7%), TCS (up 2%) and Mphasis (up 1.9%).

The top losers were Financial Tech (down 13.9%) and Patni Computer (down 0.9%).

The BSE Consumer Index: The top gainers in the Consumer Durables sector were Mirc Electronics (up 9.9%) and Blue Star (up 5.4%), Titan (up 4.5%).

The top losers were Whirlpool (down 4.8%), Videocon Industries (down 0.5%) and Su-Raj Diamonds (down 0.2%).

The BSE Healthcare Index (up 2.2%):The top gainers in the Pharma space were Glaxosmithkline (up 8%), Ranbaxy Labs (up 6.8%), Emami Limited (up 5.5%), IPCA Labs (up 4.7%) and Lupin (up 3.6%).

The top losers were Strides Arcolab (down 3.2%), Morepen Labs (down 2.2%), Panacea Biotec (down 2.1%), Aurobindo Pharma (down 1.7%) and Natco Pharma (down 1.6%).

The BSE Banking Index (up 1.1%):The top gainers in the banking space were Karnataka Bank (up 4.6%), HDFC Bank (up 3.9%), Federal Bank (up 3.5%), Union Bank of India (up 2.3%) and Yes Bank (up 2.3%)

The top losers were OBC (down 3.8%), IOB (down 2.7%), Allahabad Bank (down 2.4%), Andhra Bank (down 1.6%) and Bank of India (down 0.4%).

The BSE Auto Index (up 2.4%):The top gainers in the auto space were Hero Honda (up 6.8%), Maruti Suzuki (up 6.7%), Tata Motors (up 3.6%), M&M (up 1.6%) and Swaraj Mazda (up 1.1%).

The top losers were Eicher Motors (down 4.6%), Hindustan Motors (down 3.4%) and Ashok Leyland (down 2.4%).

The BSE Oil & Gas Index (down 0.8%): The top losers in the oil & gas space were Gujarat NRE Coke (down 4%), Cairn India (down 3.8%), Reliance Industries (down 2.5%), Hindustan Oil (down 2.4%) and Shiv-Vani Oil (down 2.1%).

The top gainers were GSPL (up 3.2%), BPCL (up 3.1%), ONGC (up 2.9%), Jindal Drilling (up 2.4%) and IOC (up 2.1%).

The BSE Capital Goods Index (up 2%):The top gainers in the Capital Goods space were Gammon India (up 9.1%), Siemens India (up 4.4%), ABB (up 4.1%), Aban Offshore (up 3.2%) and Usha Martin (up 2.9%).

The top losers were Bharat Electronics (down 4%), Kirloskar Brother (down 2.9%), HEG (down 2.8%), Carborundum Univ (down 2.7%) and Alfa Laval (down 2.6%).

The Cement Sector: The top gainers in the cement sector were Madras Cements (up 3.3%), India Cements (up 2.4%), ACC (up 1.7%), Prism Cement (up 1.4%) and Shree Cement (up 0.4%).

The Telecom Sector: The top gainers in the telecom space were Himachal Futuristic (up 10.8%), Gemini Comm (up 8.3%), WWIL (up 2.8%), Bharti Airtel (up 2.6%) and RCom (up 1.7%).

The top losers were Tata Communication (down 3.5%), Shyam Telecom (down 2.8%), TTML (down 2.1%) and MTNL (down 0.1%).

The Realty Sector (down 0.5%): The top losers were HDIL (down 4%), Unitech (down 2.7%), Ansal Props (down 2.2%) and Mahindra Lifespace (down 1.1%).

The top gainers in the real estate space were Omaxe (up 4%), DLF (up 3.6%), Sobha Developers (up 3.3%), Parsvnath (up 1.7%) and Anant Raj Indus (up 1.1%).

The Metals sector (up 1%): The top gainers in the metals sector were Jindal Stainless (up 16.5%), Tata Steel (up 4.2%), Bhuwalka Steel (up 3.8%), SAIL (up 2.1%) and Bhushan Steel (up 2.1%).

The top losers were Sunflag Iron (down 4.3%), Ispat Industries (down 4%), Jindal Steel (down 2.1%), Tata Sponge (down 1.7%) and Tata Metaliks (down 1.6%)

Source IIFL.com

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