Investment Strategy

Investment Strategy

Investment Strategy - Sep 29 2008

Investment Strategy - Sep 29 2008

Investment Strategy

Investment Strategy

INVESTMENT STRATEGY

Going by Friday's session, when the bulls managed to shrug off weak global indicators, chances of a sharp correction appear quite slim. In addition, FII inflows in the past couple of sessions have improved. This should be seen as good news as there were concerns that the P-Note restrictions could cap fresh investments from overseas funds. The slowdown in FII inflows but proved to be short lived. If the positive trend in FII inflows continues, the market will hold up even in the face of a savage fall across global markets.

In addition, the renewed warmth in relations between the Government and the Left would also add to the optimism. However, one should be careful as the advance from late August has been pretty shift. As a result, some consolidation is bound to happen. On the whole, things do not look that bad. One could resume buying at lower levels but the same should not be too aggressive. The fact that the Indian market did not fall quite as sharply as some of the regional peers augers well for the bulls. IT and cement counters may be in flavor for the coming week.

Gear up for some high octane action

A whole new world
Every turn a surprise
With new horizons to pursue
....let me share this whole new world with you

15k is finally here. For the moment, it cant get any bigger than this for the bulls. Though they stretched themselves for 146 days to move from 14K to 15K. With result season kicking off and RBI meeting later this month, the ride is sure to get bumpy.

Bulls are now in uncharted territory. Much will depend on the performance of tech companies as Infosys starts the earnings season on July 11. Earnings guidance would play an important role going ahead given the appreciation in the rupee. Any negative noises from Infosys and its fellow software firms could keep the bulls on the back foot. According to India Infoline estimates, results of the top 3 companies would be disappointing and in line with market expectations. Satyam and HCL Tech are expected to come out with relatively better numbers.

However, much of the tech stocks may already be factored in the prices. Therefore, any positive sounds could result in buying at these levels. We advise buying the Top 5 Companies post results with enhanced clarity on growth and profitability.

Banking stocks will continue to be in focus with inflation around 4% and likely to remain low for another couple of months banks have seen a window of opportunity in reducing select rates while keeping PLR at same level to align with the hawkish stance of RBI.

Merrill Lynch - Reliance Capital, Sasken Communications, Bank of India, Investment Strategy

Merrill Lynch - Reliance CapitalMerrill Lynch - Sasken CommunicationsMerrill Lynch - Bank of IndiaMerrill Lynch - Investment Strategy

TOP STORIES FOR THE WEEK

Inflation falls below 6%

Finally, there is some good news on inflation which should cheer up the Government and the Reserve Bank of India (RBI) ahead of the annual monetary and credit policy announcement on April 24. India's inflation, based on the Wholesale Price Index (WPI), tumbled to 5.74% in the week ended March 31 as against 6.39% in the previous week, the Commerce & Industry Ministry said on Friday. The final headline inflation reading for FY07, which is subject to a revision, is slightly above the RBI's annual target range of 5-5.5%. What's also heartening is that inflation was much below the average expectations of around 5.8%. The annual inflation rate was 3.98% during the corresponding week of the previous year. In the past few months, the Government has unleashed a slew of monetary tightening steps and slashed import duties on a number of essential products to reign in spiraling prices. The latest data should take some pressure of the policy makers though there are doubts whether the inflation will remain under 6% for long given the renewed upsurge in global commodity prices.

Infosys disappoints slightly

Infosys Technologies Ltd. has posted a consolidated net profit of Rs11.44bn for the fiscal fourth quarter ended March 31, 2007 as against Rs9.83bn in the quarter ended December 31, 2006. This translates into a sequential growth of 16.37%. Consolidated revenues for the fourth quarter are Rs37.72bn compared to Rs36.55bn in the previous quarter, reflecting a quarter on quarter growth of 3.2%. This was lower than the company's guidance of Rs37.9bn. Earnings Per Share (EPS) for the January-March quarter is at Rs20.30 versus Rs17.64 in the third quarter of the financial year 2006-07. Operating Profit Margin (OPM) slid by 100 points due to the impact of the rupee's appreciation versus the dollar and higher SG&A expenses.

For the year ended March 31, 2007, the IT major has reported a consolidated net profit of Rs38.56bn as against Rs24.58bn in the year ended March 31, 2006. Full-year consolidated revenues are at Rs138.93bn versus Rs95.21bn in the previous fiscal year. For the year 2006-07, EPS before exceptional item increased to Rs 69.11 from Rs 45.03 in the previous year; YoY growth was 53.5%. The net profit for the year ended March 31, 2007 included a reversal of tax provisions amounting to Rs1.24bn and Rs1.25bn, respectively. Excluding this reversal, the EPS for the quarter and year ended March 31, 2007 would have been Rs 18.10 and Rs 66.86.

The Board of Infosys has recommended a final dividend of Rs6.5 per share (130%) for FY07, totaling Rs3.71bn. Including the interim dividend of Rs 5 per share (100%) amounting to Rs2.78bn, the total dividend recommended for the year is Rs 11.50 per share (230%), amounting to Rs6.49bn. "Our revenues grew by around US$ 1bn this year," said Nandan M. Nilekani, CEO and Managing Director. "The global IT services industry continues to show strong growth with exciting opportunities, and Infosys is well positioned to take advantage of this."

MARKET MOOD

---

Bulls rise from ashes

Lights go out and I can't be saved
Tides that I tried to swim against
You've put me down upon my knees
Oh I beg, I beg and plead
Come out of things unsaid, shoot an apple of my head
Trouble that can't be named, tigers (bears) waiting to be tamed

In our last weekly newsletter we asked our readers to watch out for Friday the 13th. But, luckily the day has turned out to be fairly good one for the bulls despite Infosys reporting slightly disappointing Q4 results. The key indices continued their upward journey. Slowly, but slowly markets have risen from the dumps hit in February. Impressive industrial production data and lower inflation figures also aided the recovery.

Index heavyweights led from the front after being at the receiving end for the last 7-8 weeks. Also, mid-cap stocks participated in this week’s rally. Among the new listing ICRA hogged the limelight, as the stock gained Rs500 over the issue price of Rs330.

Capital Goods, Auto, IT, Metals and Banking stocks were the major gainers over the week. Cement stocks were again under a cloud after the first shipment arrived from Pakistan at a much lower prices.

Finally, the BSE Sensex advanced 4.1% or 528 points to close at 13384 and the NSE Nifty gained by over 4.4% or 165 points to close at 3917.

Metal stocks put in a stellar performance amid talk of a fresh price hike and expectations of better results. Tata Steel was in the limelight after the company announced a meet on April 17 to consider fund raising plans for the proposed US$12bn acquisition of UK-based Corus Group Plc. The BSE Metal index rose nearly by 8% during the week. Tata Steel rallied by over 10% to Rs511, JSW Steel jumped by over 11% to Rs553, SAIL surged over 9.5% to Rs125 and Essar Steel added 5% to Rs128.

Capital Goods stocks did well on the back of strong industrial output numbers. Siemens, ABB and BHEL were the star performers on the week. Siemens rose by over 7.5% to Rs1142, BHEL gained over 5% to Rs2479 and ABB advanced by over 4% to Rs3748.

IT shares outperformed the key indices, rising by over 5% after Infosys’ Q4 earnings and FY08 guidance met market expectations though it missed the topline guidance for Q4. Infosys advanced by over 4.5% to Rs2087, Satyam rose over 5.5% to Rs481, TCS climbed over 5% to Rs1262 and Wipro added 3% to Rs567.

Telecom stocks too joined the party on the back of strong monthly subscription numbers. Bharti Airtel added 1.7mn mobile users in March.

The scrip gained 4.7% to Rs781. MTNL was the top gainer. The scrip rose by over 7% to Rs158. Reliance Communication surged by over 6% to Rs421, VSNL advanced 4.8% to Rs421 and TTML added 3.8% to Rs21.

Value buying was seen in auto stocks after the recent hammering. The BSE Auto index gained 4.6% during the week. Tata Motors was up by over 5.5% to Rs26, M&M advanced 4.4% to Rs745, Maruti was up by 2% to Rs771 and Ashok Leyland added 5.7% to Rs37.

INVESTMENT STRATEGY

---

Results, inflation to drive sentiment

With the Infosys results out of the way and inflation softening, the market is poised for more gains. But bear in mind that the steep fall in inflation was largely due to a high base effect rather than the Government’s efforts. So, the pressure will continue on this front. The Government and the central bank will continue to be on guard and take steps accordingly. After Infosys its now going to be the turn of other IT giants like TCS and Wipro to deliver the goods next week. There will also be results from other non-IT firms. One should also give due consideration to the global issues like the US economic slowdown, oil prices, other commodity prices, etc. We will see spikes both ways as the market will remain choppy with a positive bias. FT, Indiabulls, TCS, HCL Tech, HDFC Bank, UTI Bank, Praj Industries, Aban Offshore, ACC, Biocon, MRF, Gujarat Ambuja, India Cements, Satyam, Wipro, Renuka Sugar and IDBI are among the major companies announcing their quarterly numbers next week.

DOMESTIC NEWS

---

Industrial production strong

The slew of monetary and fiscal tightening measures seem to have had little impact on the industrial activity in the country. This is something that the Government and the RBI would surely take note of. India's industrial production grew by 11% in February as against 8.8% in the same month last year, the Commerce & Industry Ministry said. This was slightly lower than January's upwardly revised growth rate of 11.4% (10.9%). Manufacturing output was up at 12.3% in February compared to 9.2% in the year-ago period, and a revised 12.1% annual growth rate in January. Mining output expanded by 6.3% in February versus 3.8% in the same month of last year. However, electricity was a drag, growing at just 3.3% as against 9.1% in February 2006. On a cumulative basis (April-February 2006-07), the Index of Industrial Production (IIP) expanded by 11.1% versus 8.1% in the year-ago period. As many as 15 out of the 17 industry groups showed a positive growth during the month compared to the corresponding month of the previous year. During the month, growth in Basic Goods, Capital Goods and Intermediate Goods was 10.4%, 18.2% and 13.7%, respectively. Consumer Durables and Consumer Non-durables recorded a growth of 1.6% and 9.7% respectively, with the overall growth in Consumer Goods being 7.6%.

Cabinet allows import of 1.5mn tons pulses

The Government continues its fire fighting efforts against rising prices. In a bid to boost local supplies and arrest spiraling prices, the Cabinet Committee on Economic Affairs (CCEA) decided to import of 1.5mn tons of pulses. NAFED, STC, MMTC and PEC will import 0.75mn tons of urad, tur, moong, masur and gram, and 0.75mn tons of yellow peas and other pulses. The announcement was made by Information & Broadcasting Minister Priya Ranjan Dasmunsi after the CCEA meeting in New Delhi. "This will hopefully stabilise prices of pulses," Dasmunsi said. The entire quantity is likely to be imported over 6-8 months, the I&B Minister said. The Government will subsidise losses incurred on import of pulses by the four public sector agencies up to a limit of 15%, Dasmunsi said. The Centre would consider further imports, if needed, he said. Meanwhile, Dasmunsi clarified that the CCEA did not take any decision on cutting edible oil import duty. Earlier, Rural Development Minister Raghuvansh Prasad had said that the Government had decided to cut the import duty on edible oils.

Car sales hit low gear

India's domestic passenger car sales grew by just 2.9% in March but for the year 2006-07 the automobile industry has set a new annual record, the Society of Indian Automobile Manufacturers (SIAM) said. Domestic passenger car sales stood at 114,195 units last month as against 110,978 units in the same month a year ago, data released today by the body of automakers showed. For the year ended March 31, 2007, car sales were up 22% at 1.076mn units, a new record. Maruti saw its March car sales rise by 7% at 55,623 units as against 51,951 units in the same month last year. Tata Motors posted a growth of 11.3% at 19,651 units compared to 17,655 units in the year-ago period. Industry analysts said the hardening of interest rates in the past few months could have hurt sales in March. Moreover, in March last year sales had surged on the back of a reduction in excise duty on compact cars. Meanwhile, motorcycle sales in March declined by 3.5%, as Bajaj Auto and TVS Motor sales declined, even as market leader Hero Honda managed to clock a growth of 6% from the same month last year, the SIAM data revealed.

GSM subscriber numbers impress again

The country's GSM-based mobile telephone operators added a record 6.1mn new subscribers in March, taking their total user base to 121.4mn, data released by the Cellular Operators' Association of India (COAI) shows. At the end of February, total GSM customers stood at 115.3mn. The March increase was the highest-ever monthly rise and was higher than the 4.9mn new user additions in February, the body representing the GSM service providers said in a statement released late on Wednesday. Bharti Airtel added 1.7mn customers in March, taking its total to 37.14mn. BSNL added 1.98mn new users, taking its user base to 27.43mn. Hutchison Essar added 1.1mn new customers, taking its total to 26.44mn. Idea Cellular added only 370,551 subscribers in March as against 568,051 mobile phone users added in February, boosting its user base to 14.01mn. MTNL added 167,992 mobile phone users to take its subscriber base at the end of March to 2.75mn.

TRAI urges infra sharing to reduce rollout cost

With the telecom sector set to grow exponentially, the Telecom Regulatory Authority of India (TRAI) asked wireless telecom operators to share passive, active and back haul infrastructure to cut the cost of expansion. License conditions should be amended to allow mobile phone service providers to use each other's equipment, including relay towers and antennas, the telecom regulator said in its proposals to the DoT. No sharing of spectrum at access network side is permitted, it said. The exponential growth in wireless telecom services calls for massive investment in infrastructure, TRAI said. The country would require about 3.3 lakh towers by 2010 against the present 1 lakh towers, TRAI said. Apart from huge investments needed, the time taken to roll out wireless services could be a major bottleneck in the achievement of 500mn subscribers by 2010, TRAI said. Even if the target is achieved it will only be about 50% of the tele-density with major gaps in the rural areas, it said.

Pak cement shipment hits Indian shore

Ten days after the Government scrapped the Countervailing Duty (CVD) and Special Additional Duty (SAD) on portland cement, the country received its first batch of imported cement from neighbouring Pakistan. Agency reports said a 200-ton consignment of cement has landed in Mumbai from Pakistan last weekend. The landed cost of the imported cement is US$70 per ton or Rs155 per 50 kg considering an exchange rate of Rs44 for one dollar. The bad news is that prices in Pakistan have climbed to US$75 per ton (Rs165 per 50 kg bag) after the dispatch of the first shipment and could go up further in anticipation of rising demand from India. But, what is debatable is what is the actual quantity of excess capacity in Pakistan, and how much can be exported to India. Also, what will happen if prices of cement keep rising in Pakistan.

Jet-Air Sahara deal takes off again

After 10 months of public spat over a failed deal last year, Jet Airways India Ltd. agreed to acquire Sahara Airlines for Rs19.5bn. Jet has already paid Rs5bn as part of the previous deal. It will pay Rs4bn before April 20 while the balance Rs5.5bn is payable in four interest free annual equal installments commencing on or before March 30, 2008. At the current interest rate, the Net Present Value (NPV) of the lumpsum price is in the vicinity of Rs12bn. But, despite the 40% discount that Naresh Goyal managed to get on a new deal, industry analysts still view this as an expensive transaction. Plus, Sahara Airlines doesn't really bring in any substantial benefits for Jet in terms of assets, as all its aircraft are leased. The only real gains for Jet are the landing slots and parking bays allotted to Sahara Airlines at key airports across the country. The industry is likely to benefit as Sahara Airlines had of late turned desperate and was giving huge discounts on tickets. It had also converted its planes into a single economy class configuration. The industry will also gain from consolidation as lesser players will mean less competition, better efficiency and reduced losses, though ticket fares may not fall much.

ICRA skyrockets on debut

Shares of ICRA Ltd., a local credit rating agency partly owned by Moody's Investors Service, surged on the first day of trading on Friday. The stock more than doubled in a broad market rally. ICRA opened at Rs525 on the Bombay Stock Exchange (BSE) as against the issue price of Rs330, translating into a premium of 59%. It touched a high of Rs880.10 and finished at Rs797.60 with traded volume of 12.43mn shares. The company entered capital market with an Initial Public Offering (IPO) of 2,581,100 shares of Rs 10 each, through a 100% book building process. The issue was subscribed 75 times.
Moody's has a 29% stake in ICRA. The balance stake is held by leading financial institutions and banks like SBI, LIC, IFCI etc. About 26% of ICRA was sold by current shareholders, and significant portion of it was from IFCI. The objects of the offer were to achieve the benefits of listing on the stock exchanges and provide liquidity to existing shareholders and employees. Book running lead managers to the issue are SBI Capital Markets & Kotak Mahindra Capital and registrar is Intime Spectrum Registry.

UTV unveils recast plans

UTV Software Communications Ltd. announced that it was breaking itself up into three separate units - Movie, Broadcasting and New Media. UTV Broadcasting Ltd., a wholly-owned subsidiary, will look after the broadcasting initiatives. It will include GenX Ltd. - the youth subsidiary which houses the Brand Bindass, and its related channels and businesses relating to the youth activity including Web, Gaming, Events, etc. V&S Broadcasting Ltd. will launch and run Variety, Entertainment and Speciality Channels. UTV UK Ltd., a 100% subsidiary, will house all of UTV's New Media initiatives including its animation (UTV Toons), Post Production and SFX (UTV Post) as well as the recent controlling investment in Ignition UK (Console Gaming) and India Games (Mobile and Online Gaming). UTV said it will transfer all film production business to a wholly owned subsidiary and seek a listing on any overseas stock exchange, possibly the AIM of the London Stock Exchange. The Ronnie Screwvala-promoted company will come out with an IPO or issue fresh shares in the overseas subsidiary to one or more private investors, not exceeding 25% of the shareholding.

GLOBAL NEWS

---

Global economy still going strong

The global economy looks all set for continued robust growth in 2007 and 2008 despite a downturn in the US, according to a new IMF forecast. Global economic growth is expected to moderate to 4.9% in 2007 and 2008, after hitting 5.4% in 2006, the IMF says in its latest World Economic Outlook. While the US economy has slowed more than was expected earlier, spillovers have been limited, growth around the world looks well sustained, and inflation risks have moderated, the IMF says. The risks to the growth outlook are less threatening than the September 2006 World Economic Outlook, but are still tilted to the downside, the IMF feels. Particular uncertainties include the potential for a sharper slowdown in the US; the risk of a retrenchment from risky assets; the risk that inflation pressures could revive as output gaps continue to close, particularly if oil prices spike and the low probability but high cost risk of a disorderly unwinding of large global imbalances.

BOJ, ECB leave key rates unchanged

As expected, the Bank of Japan (BOJ) left its benchmark interest rate unchanged for the second month running as the world's second-biggest economy is still grappling with years of declining prices or deflation. Weakness in the US, Japan's largest trading partner, could also have influenced the BOJ's move. Central Bank Governor Toshihiko Fukui and his policy colleagues voted unanimously to hold the key overnight lending rate at 0.5%, the lowest among major economies. The decision was widely expected by economists. The BOJ raised its key policy rate to 0.5% from 0.25% in February, saying that the Japanese economy was on track for a steady growth and that prices will rise at a modest pace. Analysts say the BOJ could put off a rate hike till it gathers enough clues about the health of the Japanese economy as well as that of the US economy, the world's largest. That may mean no increase in interest rate at least in the next few months.

No rate cuts yet as inflation still looming: Fed

Ben S. Bernanke and Co. are not quite as prepared to tart cutting rates as they still see inflation as a danger despite clear signs of a slowdown in the world's largest economy. In its last policy meeting, Federal Reserve policy makers maintained that further rate hikes may be necessary in the event of inflation picking up, even as they altered the statement to give themselves more flexibility. "Further policy firming might prove necessary to foster lower inflation," the Fed said in minutes of the Federal Open Market Committee's (FOMC) March 20-21 meeting released this week. "But in light of the increased uncertainty about the outlook for both growth and inflation, the committee also agreed that the statement should no longer cite only the possibility of further firming," the FOMC said. At the end of its meeting, the FOMC kept the benchmark fed funds rate unchanged at 5.25%, the sixth straight meeting with no change in rates.

No headway in WTO talks

The world's six major economies agreed to speed up the beleaguered WTO trade talks and sign a new multilateral trade agreement by the end of the year. Ministers from Brazil, EU, India, US, Australia and Japan, the so-called G6, met in New Delhi to try and arrive at some consensus in the crucial areas of agriculture and industrial goods and services. The Doha round of negotiations to reduce the barriers to trade has missed several deadlines owing to differences among the WTO members, mostly on farm subsidies, but also on market access for industrial goods and services. The WTO negotiations all but faltered last year over the continuing differences, particularly in agriculture. But, the Doha round of trade talks were relaunched at the end of January. The New Delhi meeting is the first time they have sat at the same table to negotiate since last July. The key is how far the US and the EU are prepared to go in cutting farm subsidies and how far developing nations like India and Brazil will allow access to their markets in agriculture and industrial products.

INVESTMENT STRATEGY

Watch out for Friday the 13th

With the results season kicking off from next week and the undertone still weak, investors should be careful. The trend is likely to remain lackluster ahead of the Infosys results on April 13. Software firms are likely to be impacted by the rupee's surge against the dollar. A lot will hinge on the guidance given by the IT major, as TCS doesn't provide any outlook. Till then, the market may remain range bound and choppy depending on the global cues. We maintain our stance that there is more downside risk to the market than upside given the string of monetary tightening measures in a short span of time. Also, global factors like the health of the US economy, Chinese' Government's efforts to engineer a smooth landing and the "carry trades" will continue to play a role in our markets. Oil is another factor one has to keep an eye on. Though the bulls managed to fight their way back this week after a depressing start, all's still not well. The current volatility is here to stay, at least for the next couple of months. Against this background, being selective and keeping cash handy could pay rich dividends.

INVESTMENT STRATEGY

Another mayhem on the cards

It could well be just another Manic Monday. The focus would have been speculation on the results. But the Reserve Bank of India has chosen to deal a nasty blow to the bourses with its tightening measures. In yet another move to curb inflation, the Reserve Bank of India (RBI) on Friday announced that it was raising the repurchase rate (repo rate) by 25 basis points and would hike the Cash Reserve Ratio (CRR) by 50 basis points in two stages. The central bank has increased the repo rate, a key short-term lending rate, from 7.5% to 7.75% with immediate effect. As panic sets in, quality stocks will be available at lower prices. Investors can hope to make some purchases at lower levels. Movement of the rupee, crude oil price and global market movements will play on the investors mind. The truncated week could see some wild swings beginning with a crash on Monday morning. In case you don't have the appetite for choppiness, stay light and watch the show from the sidelines.

INVESTMENT STRATEGY

Short-n-sweet week!

Is the worst over for the bulls? Are we out of the woods? These and many similar questions must be going through the mind of investors. After weeks of turmoil in global markets, suddenly everything appears calm. Global markets are trading firm again and US Federal Reserve has indicated it is no longer biased toward higher borrowing costs.

If domestically, cement companies reach an amicable solution with the Government on prices, we may see another week of gains. However, inflation still remains a worry. Again, expect inflation to cool in the coming month due to the base effect. For the near term, the revival in inflows from the FIIs might provide some support. The market could see some added volatility ahead of the expiry. Moreover, Tuesday markets are closed. So the shortened session could see bigger swings. Expectations are mutual funds will try and see that the NAVs are propped up for the year end. In short, expect some gains for the coming week. And booking profits at higher levels in your holding stocks should see you comfortably before the results set in.

INVESTMENT STRATEGY

Bulls seek positive triggers

Despite over 15% fall from the all time highs, the market is struggling to gather some momentum, as investors are still reluctant to resume their shopping spree. Valuations are still quite high compared to other emerging markets. FIIs continue to be net sellers. Mutual Funds too are sitting tight. Retail investors are the worst hit among all category of investors. The mood of the market can be gauged from the fact that new listings are getting hammered unless it is a fundamentally strong company like MindTree or an Idea Cellular. Companies are finding it tough to get the IPOs subscribed. The undertone remains fairly weak and the trend will take time to turn around. Globally, many key economies such as US, Japan and China are facing some sticky issues. Liquidity too has dried up considerably. Emerging markets are witnessing heavy outflows. Risk appetite, which had soared in the last 2-3 years, has suddenly nose dived. There is more bad news in the air than good news. Investors are so rattled that no good news is good enough to revive the sentiment. Next week too doesn't look rosy. The market direction will continue to hinge on global trends, liquidity flows and inflation numbers. There are more chances of the market falling than rising. Even if the bulls do manage to rally for a day or two, its highly doubtful whether they can keep up the momentum for a long time. Talks of a downturn in the US housing market, concerns over the overheated Chinese economy and upcoming policy meetings of Bank of Japan and the Federal Reserve will keep the bulls on tenterhooks. We are in for yet another choppy week. Investors should tread cautiously and lock-in some profits at every rise.

INVESTMENT STRATEGY

Volatility with negative bias

At the end of all the ups and downs of the Sensex, which swung by 800 points during the week, not much has changed as far as the indices are concerned. A closer look at the sectoral front shows that bulls may have shed quite some weight, especially the cement sector. In the latest development, cement makers have agreed to hold prices even if input prices rises over a period of year.

We could well see lower levels being tested though upward spikes like the ones witnessed on Thursday may confuse markets even more. For day traders the volatility seems unfavorable. For investors who have a medium to long term horizon, heavyweights are available at better prices. The weekend development regarding Reliance's merger with IPCL and the ratios declared could see some action on these counters. Not that Reliance needs any particular reason to swing either way. Further correction in the coming week could see 3650 levels on the Nifty being tested. RBI on the other hand is taking steps to ensure that credit growth in speculative segments remains under control. Reports say the central bank has asked banks to furnish details of borrowers who have taken multiple housing loans.

Invest if you have the money. Trade if you have the risk appetite. Relax if you are a long term investor.

INVESTMENT STRATEGY

Red Holi...Sun outage to cast a shadow

Bright colors, water balloons and melodious songs are the ingredients of perfect Holi. For the market participants, the color red is all around. Holi marks the beginning of summer season and so water balloons are burst to beat the heat. But indices seem to be cooling more than most players expect it to. And don't be surprised if doomsday prophets come and talk of levels below 11,000. That may seem a bit exaggerated now. But a few bad days are enough to reduce the Sensex by over a thousand points.

We hear that many market participants had hoarded shares expecting FIIs would lap them up post budget. However, the sentiment turned extremely negative and these 'players' were forced to let go. But then, the blood bath, could have more to do with the turbulent global cues rather than much-hyped Union Budget. The latest development in US regarding regarding case of biggest insider-trading since 1980’s may also cast it dark shadow on markets in India. Talking about shadows, sun outage will begin from next week, which sets in boredom to say the least. So, one should stay cautious and guarded as trading at this juncture is fraught with a lot of risks. With Budget out of the way, more will now depend on the Advance tax numbers by the corporates, to guide the markets further along with the overseas markets.

INVESTMENT STRATEGY

Don’t budge before the budget!

The budget evolved from a management tool into an obstacle to management.

Going by the markets performance this week, it appears that the budget has evolved from a market mover to a market obstacle. How else can one explain one of the worst weekly falls in the seven months. The bulls who have been hammered for four days in a row will hope for some relief on Monday. Any lack of buying at open will prompt further margin calls and accelerate the slide on Monday. And don’t be surprised if Monday turns out to be another Manic Monday. The big event, which many will later like to term as a non-event is the budget. No bad news would be the good news here. We have been advising to stay light ahead of the budget. With this week’s fall and another fall expected before the budget, you could pick up your favorite stocks, which definitely offer better value compared to the recent weeks. And again, avoid the small packs as the exit options are less. Bulls can hope for some salvation from heavyweights like Reliance. The Reliance board is meeting on Saturday to review the decision taken by the board to raise US$2bn. Granules is another counter where some action is expected. Nirlon could once again come in the limelight as the company will discuss development of an IT park in Goregaon.

INVESTMENT STRATEGY

F&O first, budget later

Bulls managed to stage a recovery after a disastrous start to the week. Timing the market is a tough game. The best you can do is remain extra cautious at climbs and keep your stop losses in place. It is desirable to reduce the number of stocks in your portfolio so that you can keep a closer track of the movement and development in these counters. The coming week will see more volatility as we approach the expiry of derivatives segment for the month of February. After a 300-point rally on Friday, people on the street are taking about 15k levels before the budget. With so much bullishness around, investors need to be extra cautious. Stay less leveraged so that you can weather any temporary storm in the market.

INVESTMENT STRATEGY

Don't fall in love with stocks

Forfeit the game, before somebody else
Takes you out of the frame....
The pace is too fast, you just won't last

After hitting an all time high of 14723.88 during the week, the Sensex lost some steam by Friday. Rising inflation and the usual profit booking were responsible for the brakes on the bulls. Despite Friday's fall, the markets managed to post its seventh week of gains indicating that India Growth Story is still intact. However, for the short term, wild swings are expected with a flat to lower bias. The recent rally has indeed been backed by strong liquidity both from local funds and foreign players. For the coming week, we may continue to see sector specific activity as we run up to the Budget. Valentine's Day has seen new peaks in the past, not to mention the crashes after that. Remember not to fall too much in love with the stocks. Interestingly, the month of February has always seen the Sensex hitting record highs. It has already hit a peak this time with benchmark Sensex surging past the 14,700 mark to touch a lifetime high of 14,723.88. However, the road ahead won't be easy for the bulls as they have to deal with the uncertainty of the policy changes, developments and reforms in the upcoming Budget. Stay more in cash and for anything in the world, don't be over-leveraged.

INVESTMENT STRATEGY

Bulls may remain in control

After a fairly volatile month, looks like the market may have kicked off the much-awaited pre-budget rally. The Sensex gained 4.5% in January after a listless December. The rise last month came without much support from the FIIs, who have been pretty slow in the first month of the new year. However, if Friday's session is any indication, the outlook for overseas portfolio investment appears bright. S&P's decision to upgrade India to investment grade should also help attract more money into India. However, one must be always careful as the indices are in unchartered territory and there's always danger of a correction though any fall is unlikely to be too severe. Still, it pays to be on a safer side. Also, with the results out of the way, the market may turn rangebound and choppy in the near term. The medium to long-term outlook remains bullish. Although stock specific activity will continue, the market is expected to witness some consolidate at higher levels. Although, we would like to believe that the undertone for the market is upbeat, one must not get sentimental. The market has risen smartly in last couple of sessions. So, some profit booking is not ruled out. Investors should stick to a stock centric approach.

INVESTMENT STRATEGY

Market may remain choppy

...If you never try then you'll never know
How long do I have to climb
Up on the side of this mountain of mine

The bulls seem to be unstoppable. Records are being broken, mountains are being conquered. The corporate numbers, which have been extremely good have helped the Sensex to remain comfortably atop the 14k mark. With many key results out of the way, investors must be wondering where do we go from here? How long will the indices climb?

Well, for the near term, consolidation will continue for a while. The market may remain choppy and stock specific at the moment, investors should remain alert at all times for any unforeseen event(s). Inflation concerns have started to have its bearing as well. RBI's monetary meeting later this month will also remain on the minds of investors. A lot will depend on expectations from the budget. But all said and done, the markets have the habit of charting its own course and will throw its share of surprises. It no longer relies pre-set triggers for movement.

Colgate, Dr Reddy's, India Cements, J&K Bank, Kotak Mahindra Bank, Maruti, Polaris, Yes Bank, Adlabs, BEML, ZEE, Cipla, Glenmark, Bombay Dyeing, BHEL, Century Textile and M&M are among the major companies, which will announce its quarterly numbers

INVESTMENT STRATEGY

Kite season…indices on a high

Wish you a happy Makar Sankranti.

Makar Sankranti is a day when the glorious Sun-God begins its ascendancy and entry into the Northern Hemisphere. Right enough, the bulls seem to flying with the indices to new highs. The earnings season has got off to a bright start with Infosys registering relatively moderate results in Q3 FY07, which were just in line with expectations. How long the bulls can hold on to the winds of change remain to be seen, especially in the coming weeks. India's industrial production expanded at the fastest pace in 11 years in November. Production at factories, utilities and mines rose 14.4% from a year earlier, the fastest since September 1995 and new banking law are just some of the positive news boosting the sentiments on D-street. With major chunk of biggies yet to announce their quarterly report card one should cautiously ride the bullish run in the market. Don’t be carried away and get sucked into the rally. Also, the flow of the foreign money and the pace of it will be watched closely ahead of the budget.

The week ahead will see the likes of Reliance Industries, TCS, Wipro, HCL Tech, Bajaj Auto, Infotech Enterprises, Bharat Bijlee, REL, Siemens India, Satyam Computers and Jet Airways declaring their quarterly numbers, so activity will remain centered around the news flow. There are some uncertainties like rising inflation and hardening of rates in the near term, which may put some brakes on the raging bulls. Among the smaller stocks, which could see action, are KS Oil, Zenith Computer and Rama Pulp.

INVESTMENT STRATEGY

In force for Infosys

The choppy movement, especially during the last two days shows that the bulls are taking a cautious stand. Infosys is slated to announce its earnings on January 11. A lot of expectations are built into the stock prices. Any negative surprise in the results could trigger a correction. Stay extremely cautious as the markets are close to their current peaks. IT stocks should continue to be the center of attraction in anticipation of stellar results. HDFC Bank, Hind Zinc, JP Associates, UTI Bank, BASF India and iGate are among the major companies announcing their quarterly numbers in the coming