Time to hope for best, prepare for worst
This time, like all times, is a very good one, if we but know what to do with it.
After a fairly eventful week, the bulls will look to consolidate their hold on the market. With the results and the RBI policy meetings out of the way, the only near-term trigger is the budget for FY08. Even here, nothing much is expected in terms of reforms, as the UPA regime is still hamstrung by political compulsions. At best, what we can say is that the budget probably won't have any bad news. Chidambaram will be more than happy to maintain status quo.
At the same time we do have a few worries on our hands. The sudden spike in oil prices is one. NYMEX crude futures is quoting at $59.07 per barrel in extended trading in Asia. Plus, inflation has crossed 6% yet again and is giving the Government and the central nightmares. Further tightening measures are not ruled out in the future. High valuation is another concern. A lot of penny stocks have started shooting up once again. For many this is a sign that the market is overheated. In fact, the Economist of the UK feels the Indian economy itself is overheated.
Meanwhile, according to a Wall Street Journal report, metal trading hedge fund Red Kite's $1-billion fund lost 20% in the year to January 24. Following this report, zinc, copper and aluminium plunged. Some pressure on metals cannot be ruled out.
Indications from the F&O segment are not encouraging either. The Nifty February Futures are trading at a discount to the spot Nifty. Also, the Put Call Ratio (PCR) is high at 1.7. But, if you are a long-term investor, who is willing to hold stocks for more than a year, you should stay invested. Those who have missed out on the rally and plan an entry may also check in at lower levels for long-term gains.
For the day, we expect a cautious to lower opening and a volatile day. The stock specific action will continue. We could have a traditional pre-budget rally but post the event (or should we say non-event), there may be some cooling. We had a decent start to the year in January, the upside from here will hinge on FII inflows. On Friday, we saw huge buying from foreign funds. This trend has to sustain if the market has to rise substantially from the current level.
Keep an eye on Siemens as the German parent is keen on hiking its stake in the Indian arm. Kalyani Steels is eyeing acquisitions in the domestic market. Xpro India could get a boost from the sale of land at Kandivali in Mumbai. KPIT Cummins is likely to announce a major order from overseas. Indiabulls Financial Services is going to be among the stocks to watch out for. The company will go through another restructuring. This time it is spinning off the broking outfit. Also, steel titan Lakshmi Mittal is eyeing a higher stake in the company, according to reports. One can also buy RPG Cables.
S.Kumars Nationwide Ltd. might see some action. The company's Board has approved the demerger of the retail business. The Board has also approved swap ratio of one share of the new company for every five shares held.
Valecha Engineering has gained 27% in a month. The company's Board will meet today to consider organic or inorganic growth opportunities in India or overseas.
TCS is likely to rise as it has signed a five-year agreement with the Mumbai International Airport.
The IPOs of Indian Bank, SMS Pharma, C&C Construction will open for subscription today.
FIIs were net buyers of Rs9.47bn (provisional) in the cash segment on Friday. In the F&O segment, they were net buyers of Rs6.66bn. However, on Feb. 2, FIIs were net sellers to the tune of Rs4.7bn. Mutual Funds were net buyers on the same day at Rs1.08bn.
Major Bulk Deals:
Deutsche Securities has bought Balmer Lawrie; T. Rowe Price has picked up BF Utilities; Crown Capital and CLSA have purchased Champagne Indage while ABN AMRO MF has sold the stock; ICICI Prudential MF has bought Cummins India; CLSA has picked up Denso India while Templeton MF has sold the scrip; ABN AMRO Bank has sold Escorts; Goldman Sachs and Citigroup have bought Gitanjali Gems; Deutsche Securities has purchased GVK Power and IOL Broadband; Crown Capital has bought Radico Khaitan; UBS has picked up Swan Mills and SBI MF has picked up Zicom.
Insider Trades:
Dabur India Ltd: PD Narang, Group Director has sold in open market 199800 equity shares of Dabur India Ltd on 24th January, 2007.
Market Volumes:
The turnover on NSE was up by 27.7% to Rs102.6bn. The BSE Capital Good index was the major gainer and gained 2.46%. BSE Technology index (up 2.04%), BSE Consumer Durable index (up 1.90%) and BSE Pharma index (up 0.92%) were among the other gainers. However, BSE PSU index lost 0.82%.
Volume Toppers:
SAIL, TTML, Nagarjuna Fertilizers, Reliance Communications, Tata Steel, XL Telecom, Aftek, Indiabulls, Escorts, Gujarat Ambuja, Hindalco, Satyam, Cairn, IVRCL, ITC and Indian Hotels.
Upper Circuit Filters:
Heritage Foods, Shri Adhikari Brothers, Goldstone Technology, Fedders Lloyd, Aurionpro Solutions, Electro therm, Ganesh Housing, HOV Services, IOL Broadband, Taneja Aerospace and Tanla.
Delivery Delight:
Aditya Birla Nuvo, Amtek Auto, Arvind Mills, Bajaj Auto, BEML, Bharat Forge, Blue Star, Bombay Rayon Fashions, CEAT, Cipla, Cummins, D S Kulkarni, Dr Reddy's, Gitanjali Gems, Gujarat Ambuja, HDFC Bank, Hindalco, HDFC, Infotech Enterprises, ITC, JP Associates, Jyoti Structures, Prism Cement, Radico Khaitan, SCI and Wipro.
Brokers Recommendations:
Royal Orchid Hotels – Buy from Emkay with target of Rs243
ABB – Buy from Citigroup with target of Rs4400.
Long Term Investment:
Maruti
Major News Headlines:
ACC Jan Cement sales at 1.64mn Tons against 1.65mn tons
Gujarat Ambuja net sales at Rs 13.29bn (up 72%), profit at Rs3.38bn (up 288%)
Gujarat Ambuja to pay Re0.8 per share as dividend
India's Inflation rate was 6.11% in week ended Jan 20 against expectation of 6.8%
Aurobindo Pharma gets US approval to sell Cefprozil Oral Suspension
GMR Industries wins bid for Sugar factory in Karnataka
Tata Chemicals to form 50:50 JV with Total Produce Plc
NTPC and Railways to build a 1,000MW thermal power plant in Bihar
Gujarat Gas to consider stock split on February 23, 2007
Steel Stripes to raise FII Investment limit to 35%
Emco Board to mull strategic investment on Feb 7