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Updated: Mar 05, 2010 at 22:00
WEEK AHEAD [08-03-10 To 13-03-10]
Market may consolidate; industrial production data eyed
Indian stocks may eye global cues in the absence of major domestic triggers as market enters a consolidation phase after a strong post-budget rally. Recent global economic data was mixed. Sovereign debt problems in the euro zone continue to haunt global markets.
NIFTY RANGE 4850-5250
CRUCIAL SUPPORT 4960 & RESISTANCE 5180
APPROACH Take it stock by stock rather than get swayed by daily movement in the key indices
STRATEGY Be Sector Specific
MARKET TREND Markets look set to test the January highs for sure
MARKET OUTLOOK Momentum looks pretty good
FACTOR Global Cues & IIP Data
IMPORTANT Weigh your risk-reward ratio well while dealing with this space
· GENERAL VIEW:
The general view on the street is that we probably will retest or even cross the 5300 mark. The momentum looks pretty good. What we are getting is not even a correction after a good run up. It is just a sideways consolidation where the Nifty is not even correcting by 50-70 points on an intraday basis but just a dip of around 20-40 points. The indicators remain very healthy, we might take a day or two maybe to get pass this level of 5150-5180, but overall 5300 looks very feasible in this expiry.
· TECHNICALLY:
Nifty is trading near its resistance level of 5120 levels. A breach above this level can see 5180 in the coming sessions. However on the downside, 5020 which is the 50-& 100-DMA convergence acts as solid support, below which 4960 the neckline of the Inverted Head & shoulder level will be the strong support.
We feel after the consolidation and correction over the last few weeks, the markets look set to test the January highs for sure. There is a very interesting dichotomy between inflationary and interest rate concerns and obviously growth that continues to surprise us on the upside. We are clearly poised at an interesting point and are more likely than not too see higher levels. It seems that investor should utilize every opportunity of weakness in the market to build a portfolio for mid to longer-term.
· RISK-REWARD-RATIO:
The bulls are turning optimistic and will most likely resume their shopping spree as healthy global cues remain the inspiring trigger. It's time to get realistic and not really pessimistic as the Budget-inspired rally in recent days do not make valuations too compelling. Take it stock by stock rather than get swayed by daily movement in the key indices. Small-cap and Mid-cap stocks may extend the current rally. But, weigh your risk-reward ratio well while dealing with this space.
· POST BUDGET:
The government's commitment towards reducing fiscal deficit, a thrust on infrastructure development, and plan to speed up disinvestment in the Union Budget for 2010-2011 has boosted market sentiment. Higher disposable income at the hands of individuals after the finance minister raised the tax slabs in the budget also opens up the possibility of some funds entering the market through the mutual funds route which augurs well for the secondary market.
· KEY ECOMIC DATA:
Meanwhile, the economic data to watch out for next week will be the IIP report. We expect robust growth in industrial production. Growth in services sector too appears to be on a firm wicket. The only missing piece from the jigsaw puzzle is agriculture, which is suffering due to a poor monsoon. In this context, southwest monsoon will assume significance. Another bad monsoon could put paid to any hopes of returning to the high growth path and might disrupt the Government's finances too. In the near-term though, the market might advance if the momentum in FII inflows persists. Valuations are not cheap and external headwinds still threaten to derail the fragile global recovery. Look for opportunities at a more opportune time.
The Budget-day rally managed to extend for a couple of more sessions before the bulls ran out of steam. This was mainly to profit taking and partly due to lingering global concerns. What also weighed on the sentiment was an imminent spike expected in inflation on the back of a hike in petrol and diesel prices. However, the Government seemed to be convinced that higher fuel prices won't have that much of an impact on headline inflation. But, even without the fuel price hike, monthly inflation could touch the double digit mark in a few weeks. The latest monthly inflation numbers will be released in the middle of this month.
· GLOBAL SITUATION:
What we are seeing increasingly whether it was with the Dubai problem or with the Greece problem, while there is a short-term overhang that comes in, we think the propensity to find quick solutions and move on seems to be coming back into the market and that primarily because we think the overall global picture remains to be fairly stable. Even if the Western markets are not running up because the economies are not running up, but we think they are still at least stable, they have arrested the fall, they have come back into marginal growth. But right now it is clearly the interesting interplay between the BRIC (Brazil, Russia, India & China) and the PIGS (Portugal, Italy, Greece & Spain) as they call it. So we think we will have global trends that will impact short-term movements, but we don’t think they will have bigger impacts on that.
· LIQUIDITY:
However, with a spate of new and follow-on offerings to flood the market over the next few months, liquidity will be a major concern. The government has estimated Rs 40000 crore from disinvestment for FY 2010-11. In the Union Budget on 26 February 2010 the government said it would raise Rs 25,958 crore through disinvestment in the fiscal to March 2010. Of this, it has already raised Rs 13,592 crore through divesting minority stakes in NHPC, Oil India, NTPC and REC.
· IPO:
The follow on public offer (FPO) of NMDC is scheduled to open for subscription on Wednesday, 10 March 2010. The pricing for the disinvestment of 8.38% stake in NMDC will be decided on Monday, 8 March 2010 by an empowered group of ministers headed by finance minister Pranab Mukherjee. Retail investors have largely shunned stake sales by the government in recent weeks in NTPC and REC. As per reports, the floor price for the NMDC IPO could be set at Rs 300, or 29% below the prevailing market price of Rs 420, allowing the government to raise about Rs 9,000 crore.
· FII:
The Indian market would act as a safe heaven for foreign investors as the state of the economy remains quite encouraging. The recent economic data showed surge in manufacturing and services activity in the month of February and rise in exports for the third consecutive month in January 2010.
The government will announce the industrial output data for the month of January 2010 on Friday, 12 March 2010. The data is expected to be robust after the infrastructure sector output which accounts for 26% of the industrial output showed a growth of 9.4% in January 2010 from a year earlier. Industrial output grew 16.8% in December 2009.
· ADVANCE TAX NOs:
The fourth and the last installment of advance tax by India Inc due on 15 March 2010 will give a broad indication of fourth quarter earnings.
· INFLATION:
Meanwhile, the recent hike in petrol and diesel prices will further increase headline inflation. Higher inflation will put further pressure on interest rates which in turn may impact corporate and consumer confidence. Food prices will be keenly watched in coming weeks for the second and third round impacts of the fuel price rise. Market men see a 25 basis points hike in the repo and reverse repo rates each by the RBI at the April 2010 policy review.
Food price index rose 17.87% in the 12 months to 20 February 2010, faster than the annual rise of 17.58% in the previous week, government data released on 4 March 2010 showed. Food inflation data in the 12 months to 27 February 2010 will be announced on Thursday, 11 March 2010 followed by a inflation figure for the month of February 2010 on 15 March 2010.
IN-A-NUTSHEL:
Expect a few days of correction, maybe a 100-200 points cut on the Nifty. Thereafter, expect market trying to test its earlier highs, maybe as early as end of this month or early next month. There is a better chance of it happening early next month because liquidity may get tight towards March end. But with the easing of liquidity, you may see markets scaling to earlier highs and maybe even testing it. We see higher opportunities for trading as well as investment in mid-cap stocks going forward.
THE WEEK THAT WAS
Budget boost...Sensex, Nifty add 3.4% each
The BSE Sensex went past the 17,000 levels during the week however ended below the crucial level. On the other hand, the NSE Nifty also breached the 5100 mark but ended at 5089.
Colour and festivities continued during the Holi-day truncated week as the euphoria post-budget took the indices to over two-month highs. An improvement for India's merchandise exports for the third consecutive month spurred the sentiments of traders on Dalal Street. Continuous buying by foreign institutions and robust monthly auto and cement numbers added reasons for the Street to rejoice.
Finally, the BSE Sensex added 3.4% to end at 16,994 and NSE Nifty surged 3.4% to end at 5,089.
- The BSE IT Index (up 1.1%) - The BSE Healthcare Index (up 2.8%) - The BSE Banking Index (up 3.8%) - The BSE Auto Index (up 5.3%) - The BSE Oil & Gas Index (up 2%) - The BSE Capital Goods Index (up 3%) - The Realty Sector (up 7%) - The Metals sector (up 7.1%)
· MEMORIES OF THE WEEK:
Special Stories:
¤ Indian economy to grow by 8% in FY11: PM ¤ Apr-Feb direct tax collections up 7.5% YoY ¤ Hike in fuel duties...Govt backs FM to the hilt ¤ Salary for India Inc. to increase by 10.6%: Hewitt Study
Domestic News:
¤ Food inflation hovers around 18% ¤ India's January exports up 11.5% YoY ¤ Service sector growth fastest in 17 months: survey ¤ Services make up 56% of India’s US$1.2 trillion economy. ¤ Base rate to kick in from July 1: RBI ¤ NMDC FPO to be priced at discount: reports ¤ DQ Entertainment to enter capital market on March 8 ¤ ONGC finds oil in northeastern Syria ¤ Private banks hike rates on auto, home loans ¤ ANZ to re-enter India after 10 yrs: report ¤ Maruti Suzuki records highest ever monthly sales ¤ M&M February sales up 35% ¤ Tata Motors Feb sales surge by 58% YoY ¤ Moody's reviews Tata Motors' B3 rating for possible upgrade ¤ Hero Honda Feb sales up 16% YoY ¤ Bajaj Auto February sales surge 80% ¤ Vedanta raises US$805mn from convertible bonds ¤ Zicom to sell 2 units to Schneider India ¤ Strides Arcolab to acquire a plant in Campos for US$75mn ¤ Fame India rises on reports Inox to hike open offer price ¤ Hindustan Dorr buys UK's DavyMarkham ¤ Elgi acquires France based Belair ¤ Edserv Soft acquires Smartlearn WebTV ¤ Suzlon US arm to install 728MW of renewable energy in 2010 ¤ Suzlon wins 52.5MW order from GSPL ¤ Sulzer India hits record high on delisting news ¤ 123greeetings parent to tap capital market for expansion ¤ CRISIL IPO grade 4/5 assigned to the IPO of Persistent Systems Ltd ¤ Bajaj Corp files application for IPO: report ¤ ARSS Infra makes strong debut
Global News:
¤ Greece raises €5bn from 10-yr bonds ¤ China aims for 8% GDP growth in 2010: Wen Jiabao ¤ BOE leaves key rate steady ¤ ECB too keeps rates steady ¤ Australian economic growth accelerates ¤ Japanese steel firms agree to 55% rise in coal prices ¤ US auto sales...Ford outpaces GM ¤ Now GM hit by recall menace
Have a Great & Profitable Week Ahead……………….
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