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Saturday, June 6, 2009

Week Ahead..

GreatTips www.GreatTipsIndia.com


Updated: June 05, 2009 at 23:15


WEEK AHEAD

Market still have some steam left to take the Nifty to 4800 levels ahead.

NIFTY RANGE:4400-4800 CRUCIAL SUPPORT:4470 CRUCIAL RESISTANCE:4660

STRATEGY: Investors to be very stock-specific in their approach.


Sectors to stay away from:

Shipping & Metal Stocks

How to approach mid-caps:

Many mid-caps were still away from their 2008 highs. Stocks have corrected by anywhere from 70% to 90%, but if you look at the quantum of appreciation that has taken place over the past two-three months, that certainly causes a bit of a concern and does raise a red flag.

There were still many companies in the mid-cap and small-cap companies that still traded at 0.5–0.6 times price-to-earnings (PE) ratio. The valuations are still out of whack. If you stretch the imagination a little bit and see what the real earning capabilities of these companies is, valuations are still quite attractive.

Corporate events could be the key to in their fundamentals. If a mid-cap company is able to raise a qualified institutional placement (QIP) or get some capital into the company either by the promoters or by the foreign institutional investors (FIIs), it will make a big difference to what profitability it can post.

· TECHNICALLY:

Possibility of the Nifty breaching 4200–4300 was slim as there was enough money in the market chasing performance. We have seen the global emerging markets allocation having upped the India exposure. In the pervious year, they were neutral to negative and now they have upped the India exposure.

It is seen that, it is a natural pause. We are not getting any correction at all and we are seeing a situation where for a few days there is a sideways movement and again there is a bump-up in stocks, if you observe the broader indices: the Nifty and the Sensex. It appears to be a sideways movement on the broader indices but the undercurrent is extremely strong.

Trade will remain range-bound next week with sectoral rotation on the cards as investors churn their portfolio. The market is currently in an overbought zone so we would like to maintain a cautious approach. The market is expected to trade in the 4400-4800 range.

Trade was dictated by the technical on Friday even as the global markets looked firm. Nifty had a resistance of 4620 which it managed to cross but traders used the opportunity to close long positions pulling the indices lower. Outlook for the market is positive till budget is out but time-to-time correction cannot be ruled out.
Key benchmark indices are likely to consolidate as some profit booking might emerge after witnessing a stupendous rally in the past thirteen weeks. However a lot would also depend on global cues, foreign funds flows and the progress of monsoon.

· GLOBAL EVENTS:
On the overseas front, investors will keenly await the US non-farm payrolls data for May, which will be announced later Friday. Weekly jobless claims data Thursday raised hopes that the jobs figures will not be as bad sparking a rally across global markets ahead of the declaration.

· PSUs IN ACTION:

There are about a dozen listed PSUs in which the government’s stake is between 90 and 99%. The dilution of stakes in such PSUs will be one of the major initiatives of the new disinvestment policy expected to be announced in the Union Budget for 2009-10 in the first week of July.

· SENTIMENTS:

However the broad sentiment on the stock Market is likely to remain firm following upgrade in earnings of India Inc as thumping victory of the Congress-led United Progressive Alliance (UPA) in the 15th Lok Sabha elections means political stability for the next five years.

· PRE-BUDGET RALLY:

Market may even see a pre-budget rally on hopes of accelerated economic reforms and pro-reforms announcements. Finance Minister Pranab Mukherjee will present the Union Budget on 3 July 2009 while Railway Minister Mamata Banerjee will present the Rail Budget on 1 July 2009. The Economic Survey will be held on 2 July 2009. The Union Budget 2009 attains significant importance in the wake of the global financial crisis. Despite the country being relatively unharmed compared to the West, the UPA government will have many tasks on its to-do list, which includes boosting growth and demand, continuing to maintain liquidity, balancing inflation and also containing the country's worrying fiscal situation.

The Government has made its intention clear to push for reforms and pursue the disinvestment agenda, which was met with stiff opposition in the UPA's previous stint when the Left parties were members for a major part of the five-year tenure. The Congress party had in its manifesto released before polls promised to go ahead with disinvestment while retaining a majority holding in the state-run companies. Disinvestment programme was earlier put on backburner due to stiff opposition from the Left front.

Also the passage of the Bill to amend the Insurance Act, 1938 is likely to be touched upon in the full Budget likely to be announced in the first week of July 2009. Apart from raising the foreign investment ceiling to 49%, from 26% at present, the Bill had proposed to do away with the stipulation on Indian promoters having to mandatorily sell a part of their holdings after 10 years of operation.

· PRESIDENTS ADDRESS:

While addressing to a joint session of both houses on 4 June 2009 President Pratibha Patil disclosing the agenda of the UPA coalition government said that the government would aim to revive economic growth with higher investments in sectors such as infrastructure, while adhering to fiscal prudence. Patil said steps would be taken to encourage foreign investment inflows, list share of state-run firms and infuse more capital in banks. The government's immediate priority must be to focus on management of the economy that will counter the effect of the global slowdown, she added.

Patil said the new regime will develop a roadmap for listing public sector units, co-ordinate with other countries to bring back illegal money stashed in secret bank accounts, recapitalise public sector banks, and bring in the pension reforms bill.

On the economic front, the government's immediate focus would be on sectors that are adversely hit, especially small and medium enterprises, exports, textiles, commercial vehicles, infrastructure and housing.

· ECONOMIC REFORMS:

Finance Minister Pranab Mukherjee on 26 May 2009 said that a sustained stimulus to economic growth is possible by next round of reforms. He said reviving growth momentum is a top priority for the government adding that fiscal prudence will also be kept in mind.

Mukherjee said the government will stick to fiscal deficit target of 5.5% of GDP in the current financial year that ends on March 2010 (FY 2010). He said the government is committed to fiscal consolidation in 2-3 years. The minister said he would be able to announce the full-budget for FY 2010 by the first week of July 2009 and try to get it approved by 31 July 2009. He said the common man will be the focus of the government policy.

· INSTITUTIONAL ACTION:

Foreign institutional investors (FII) were the key drivers of the recent solid surge. After being heavy net sellers of Rs 4250.30 crore in January 2009 and to the tune of Rs 2707 crore in February 2009, foreign fund selling eased in March 2009, when they tuned net sellers of only Rs 1.1 crore. Their buying gathered steam in April 2009 when they pumped Rs 7384.50 crore. They continue their buying spree in May 2009 pouring Rs 20,606.80 in equities. Their inflow in calendar year 2009 stood at Rs 21,818.80 crore till 3 June 2009. Meanwhile, mutual funds, which are sitting on a large cash pile, are also likely to buy on dips.

· MONSOON:

Meanwhile annual monsoon rains may further advance to more parts during the next 48 hours, India Meteorological Department (IMD), said on its website late on Thursday, 4 June 2009. Monsoon rains, which hit the country's mainland on 23 May 2009 ahead of its normal schedule of 1 June 2009, encountered a weak phase in the last week of May 2009.

The IMD on 17 April 2009 forecast a near normal monsoon this year saying rainfall in the June-September 2009 monsoon season is expected to be 96% of the long-term average. The outlook is among the nation's most widely watched indicator as monsoon rains are a major influence on output of key crops, economic activity and also affects sentiment in the country's financial markets.

· RESULTS:

Jaiprakash Associates, Divi's Laboratories, Indiabulls Financial Services, Sadbhav Engineering, CESC will unveil their March 2009 quarterly earnings in the forthcoming week. Aggregate results of 2157 firms showed net profit rose 27.90% on 0.7% rise in sales in q4 march 2009 over q4 march 2008.

IN-A-NUTSHEL:

The outlook still remains optimistic, but caution should be maintained at higher levels as huge profit booking cannot be ruled out. Nifty faces very strong resistance at 4660, which happens to be the top of Aug 12, 2008 from where markets witnessed a significant downfall. What we believe at this current juncture is that the upside is very limited and one should play along with trend with limited profile. The Nifty will remain in the range of 4400-4800.


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