Sensex may not cross or hold 20K levels

The markets kicked off the week on a strong note. Boosted by positive global cues, the indices surged ahead and closed with handy gains. Nifty closed at 5,732 up 123 points, while Sensex shut shop at 19,248 up 395 points.

Markets closed the day with handsome gains on heavy buying seen in scrips across sectors. It was a good of trade for most of the equity markets across globe. Asia had a strong session today, barring Shanghai Comp most of the Asia closed in green. Europe was also trading in positive terrain.

HDFC Bank, Tata Steel, SAIL, Bharti Airtel, Unitech, HDFC, TCS, ONGC, Reliance Energy are among the top gainers. Deccan Aviation, Voltas, IndusInd Bank were among the strong midcap stocks.

Technolgy stocks have bounced back today and were among the top gainers.

Dipan Mehta, Member, BSE & NSE feels that some FII money may have been coming into the Indian markets. He said, “Markets are always right and although there is skepticism, the screen clearly shows the 400-point rally. Today I think some of the FII money may have been coming into the market. We have been seeing consistent negative flows over the past almost three weeks or so. But today, maybe slightly different, given the fact that a lot of largecap stocks have rallied on the back of decent volumes. So that is one part of the reason. Some amount of short covering as well as build up on the futures side and fresh long positions also could be responsible for this kind of a rally that we have seen.”

He further added that there may be some flows coming in from retail investors and domestic investors. “At the same time I think the retail investors who are pegged down by some other worries in the global markets and with some of the concerns easing, there maybe a surge of flows coming in from retail investors and domestic investors as well because we are seeing a lot of the action in some of the side counters and the cash group, the B group shares as well. Question is whether the market is scaled to go beyond 20,000 and holds those gains. I do not think that is a possibility,” he said.

Deepak Mohoni Of Trendwatch (India) says that he would hold on to positions because there is global rally building up, apparently on the word that the pre-Christmas sales in the US have been very good. “So if there is a global rally that you certainly don’t want to argue against, and as far as 20,000 is concerned, that is only 3.5%-4% from here. So that is not really formidable target in percentage terms. So I think its okay to be optimistic, at least in the short-term.”

Source: Moneycontrol.com

Watch out for these hidden gems!

CNBC-TV18 has analysed over 4,000 small and midcap companies to find some hidden gems. These are companies with low PE, high dividend yield, price to book value of less than 1, positive cash flows, EPS and good profit growth.

All these parameters have been looked at together and some companies have been shortlisted from those 4,000 odd companies. The analysis has excluded export-oriented companies, IT companies, trading companies, investment and holding companies. It is looking at a pure manufacturing play.

One such pick is Alps Industries, which is from the textile sector. The price to earnings of Alps Industries is about 5.5 times currently and the industry PE for that sector is about 18 times. It is a low PE sector, but the segment in which Alps is working in has a PE of about 18 times. The price to book value of this company is about 0.6 times. Analysts said that even if you are buying this company for the book, you are getting it cheaper at this point. The book value per share is around Rs 90 per share and dividend yield is around 1.5%.

For those who believe in the long-term play, dividend yield is one factor. The Sensex has a dividend yield of less than 1%. The stock has an EPS of around 10 and cash EPS of around Rs 13. This is a company from the small and midcap space, but there is huge institutional demand in this segment. Morgan Stanley, SBI, GIC and Bank of New York cumulatively hold over 25%. If you buy on the institutional side, this is a story to look out for.

Sales growth is up about 65% and PAT growth is up about 27%. Its 52-week performance is such that it has underperformed the Sensex by about 70%. The textile sector is a low margin business and the government has started to offer sops like the Technology Upgradation Fund, which is coming up, and rupee appreciation is hurting that sector a bit.

The other hidden gem is from the food-processing sector and the stock is KRBL. Its PE is about 6.4 times and the industry PE is about 20 times. The price to book value is about 0.6 times. The book value per share is about Rs 130 and dividend yield is about 2.3. EPS is about 13.5 and cash EPS is about 23%. There is big institutional activity on this counter. SBI, LIC, Deutsche Bank and Reliance Commodities hold about 18% in this stock. Sales growth is about 26% and PAT growth is about 55% in this company. The food-processing sector is growing, as organized retail come into the foray.

Analysts are of the view that these companies will see some action. Historically, these companies have not seen any momentum. These institutional players look at all these parameters. In the absolute short term, these companies may underperform, but in the long-run there can be outperformance.

Source: Moneycontrol.com

Stick to midcap stocks, feel experts

It started as a good day for markets but the frontliners failed to hold their gains at the higher levels and ended near the lowest point of the day. The rally in the midcaps and smallcaps continued and the market breadth was significantly positive. Nifty closed flat at 5,908, while Sensex shut shop at 19,633 down 65 points.

Analysts believe that it is better to stick to the midcap index and also some of the leading frontline highly liquid counters rather than get into counters which have just about started seeing explosive volumes because volumes can dry up as fast as they have spurted up.

Ajay Srivastava of Dimensions Consulting believes a basic shift has taken place in terms of the demand and supply in the midcaps and smallcaps space. He said there is a lot of liquidity in the stocks. As an investor one should ideally allocate 20-25%, not more than that of the portfolio to midcap and smallcap, he explains. “The critical element is that whenever there is a correction, in the liquid stocks, in the mainline stocks, you can sell out. Here, there is no exit for months.” he adds.

So, he said, people must be very clear that they will have to hold these stocks for longer periods and volatility is very high. Therefore, he advises, not to allocate more than 20-25% to these stocks, irrespective of the returns of 30-35%.

Dipan Mehta, Member Of BSE & NSE feels that clearly there is a changing complexion of the investors in the market and the liquidity flows over the past couple of months was from institutions and the FIIs which were driving these stocks over here and "therefore we saw the kind of outperformance in the large cap stocks and the index stocks but over the past about 15-20 trading sessions, we have seen the emergence of the Indian retail investors category into the market and that’s the reason why we are seeing so much of action and pick up in volume in some of the midcap and the smallcap stocks".

Experts feel that there are typical stocks which are quite illiquid and even with the small dose of capital coming into these counters, they have fantastic moves, which is seen over the past few days.

Source: MoneyControl.com