Amit Dalal of Amit Nalin Securities said that June is usually a good month for the markets and therefore one may see a nice platform being built for a rally in June. "But I would be wary of buying at higher levels in May or buying any higher levels from here because one can always have volatility which may against for the rest of the month also," he said.
Excerpts from CNBC-TV18’s exclusive interview with Amit Dalal:
Q: How are you feeling about how this week has shaped up and what this month might throw up for the market?
A: I think the market is doing exactly what I thought it would and that is on a complete positive correlation to the US markets. US markets have given us a real surprise move upwards and has sustained even with such high oil prices.
My guess is and I have a zero ability to forecast this - oil has gone up from USD 90 to USD 125. So, maybe the markets are seeing this as perhaps a top for the time being and hopefully the oil prices will show some relief on the downward trend in the next 15 days or so and that could be a positive for global markets.
Q: What did you make of the inflation figures this afternoon and how does it translate into the performance of banks as most people are talking about more CRR hikes, given the liquidity environment, would you look at banks now?
A: I think PSU banks perhaps have some value story that one can look at. They fall into very low P/E ratios in terms of inflation and therefore the yield curve adjustment that is being done on the stock and trade of banks, that is a complete mark to market story that continues. I would not be that concerned just looking at bank’s value in that because that is not going to change.
With regard to the number itself, I think that number is anyway hidden because we don’t allow oil prices to impact our petrol and diesel prices in India. So, if you add that, then I think we have a horrendously high inflation number.
Where banks are concerned, when credit and capital becomes scarce, that is the situation right now, they usually benefit because they are able to pass on higher interest to the borrower. So, given that situation, I think they are better off and maybe you might just see some improvement in NIMs in the first quarter.
Q: What about power. Through this week, there have been dribs and drabs of interest in Tata Power, Suzlon Energy some of the allied stories. Is some kind of interest coming back there you think?
A: I think so. I think they took a huge beating after Reliance Power issue and Reliance Power was the frontrunner for evaluing and the movement of power stocks and as we know Reliance Power has gone up in the last two weeks and even quite strong today. The power generation story remains very much intact. The need for power is known to all of us and the fact that the valuations of these stocks are little higher side because the utility stock is a question mark. But merchant power is a big story in the offing and therefore I would always remain positive in power. You have over valuation, under valuation as a part of the game but at least for next two-three years power generation stocks and companies will us good results.
Q: Would you buy anything from the metals space both ferrous and non-ferrous?
A: I think commodities are going continue to show us a positive strength throughout the year. I will name two stocks in which I have a vested inertest in Tata Steel and Sterlite Industries.
Q: One word on what people traditionally expect of May and whether in that sense you expect it to be different sort of month?
A: I think May has always been a weak month and if one considers a fact that we are still far away from our highs, the market has shown a correction in the beginning of the month too. I don’t think May is usually a month where one should expect the market to be very aggressively poised but June remains a good month and therefore we may see nice platform being built for a rally in June. But I would be wary of buying at higher levels in May or buying any higher levels from here because one can always have volatility which may against for the rest of the month also. But on the whole it depends a lot on how global markets do and how oil does.
Q: Is this still a stock pickers market you would think?
A: The volatility in the market is definitely not something to be comfortable about. If you take last Friday, we closed weak and this Friday we are closing strong. The week does not have anything to do with what we had or what we felt about the market some time ago. So we are going to have to get used to this; it is a trader’s market. It is a market that is overweighed with fundamental concerns. You have oil prices at very high levels. But if oil recedes, then globally markets will start seeing some relief. Equities have had almost a 5-months underperformance. So, there will be more allocation to equities. But I think a lot rests on what is going to happen in oil in the next few days.
Q: You would rather not stock pick but what would be the advice for at least an investor if not a trader?
A: I would definitely stock pick. I think when a market falls like we saw, the fact that commodities have done well and I had advocated buying commodities; commodities look like it’s in an up cycle. Technology and midcap technology stocks are plenty of them which are still going to be revalued upwards, one can definitely look over there.
But one has to be careful of overvaluation like in the capital goods sector or an infrastructure space where perhaps from whatever we hear, the inflation is causing a slowdown and government purchases are going to recede because of the high fiscal deficit that we have in front of us. So selectively, definitely there is a case to be made for a many stocks to remain invested in. at what level to buy, I think that’s stock specific here.
Disclosures: It is safe to assume that my clients & I may have an interest in the stocks/sectors discussed.
Source: Moneycontrol.com
Friday, May 16, 2008
Negatives factored in; markets to trend upwards
Girish Nadkarni, ED-Capital Markets of Avendus Advisors NSE Media Centre and Mitesh Thakkar, VP - Private Client Group of Edelweiss believe markets will trade with an upward bias in the following few days.
Nadkarni said the market is likely to be rangebound with a positive bias in the near-term. It has taken negatives in its stride and so will trade with an upward bias.
While Thakkar believes one can expect to see selling after bouncebacks. He said 5,310 is an important technical level, followed by 5,410 and then 5,480 would be a stretch target.
Excerpts fom CNBC-TV18's exclusive interview with Girish Nadkarni and Mitesh Thakkar:
Q: How are you feeling about what this month might throw up? When we stepped into the week there was skepticism and by the time we have wrapped it up there is strength on the screen?
Nadkarni: I think a large part of the strength essentially stems from the fact that the markets have been beaten down very quickly this month and there has been some amount of short covering in this last week. Having said that, the belief is that valuations of stocks have reached fairly interesting levels. Therefore while markets are likely to be rangebound on account of mixed news coming out, in the next couple of weeks, markets will trade with an upward bias largely because of the valuations being good and bouts of short covering at points of time. Also a lot of the negative news has already discounted by the markets. So unless there is some serious new negative news that comes out, I think inflation, high oil prices, high commodity prices issues, the market has already taken in its stride. So I guess the markets would trade tend to trade with a slightly upward bias.
Q: What did you make of this week’s performance and do you think some of it was because of the short covering cushion we had or is the market genuinely showing you trading momentum towards the upside?
Thakkar: This was a very important week as far as technicals are concerned. We had a good rally before last week’s decline wherein the markets went up from 4,700 to 5,300 on the upside and last week we saw good profit booking happening. This week also we started on a negative note. The markets were not very strong on Monday and we did see some selling happening on Wednesday again, but the important part was that the support of 4,950 held on very well and on Thursday and today we saw a very good trading upside, which occurred in the indices. The good part of this rally was that a lot of trading stocks - the stocks which I would call as flavour stocks, the breadth improved to a very big extent. A lot of stocks like fertiliser and sugar, sectoral flavours have come back into the market and that is the very important part. With last two days' moves behind us, we can definitely look towards some more kind of upside left in this market.
Q: The target that has been talked about now is 5,300 - is that what you would watch for as well on the Nifty?
Thakkar: What has happened is that when the indices fell after the decline in January, we saw a lot of bouncebacks and a lot of intermediate peaks being recorded. So I think that one of the prominent fixtures of this upmove would be that we would see a lot of selling coming in from various technical levels or various peaks, which have been recorded as a result of the bounceback. So yes, 5,310 is an important technical level, followed by 5,410 and then we are looking at 5,480 as the stretch target.
Q: Oil and gas was a big performer through today’s session, how are you feeling about that entire pocket with specific reference to the only one standalone E&P play we have?
Nadkarni: I think with respect to E&P companies it is a goldmine except that for ONGC the subsidies are really a cause of concern and with the price of oil going up the subsidy bill keeps mounting for ONGC as well as the refining companies, since the burden is passed on. I would think that it is difficult times for all these companies although they have gone up today, especially the refining companies. I think unless there is certainty on how the subsidy bill is going to be shared by the government in terms of bonds, I would think of staying out. However, what is bad for the refining companies would be good for E&P companies. There is one company in the private sector Cairn Energy, which is doing very well. It is also a good time for ancillary companies, which feed off the E&P sector and those are companies that one should look at when the oil prices are high and likely to remain firm.
Q: Anything from there that you like technically?
Thakkar: There was a lot of action in the oil sector this week and Cairn has been enjoying very good momentum. We have been slightly positive on the stock, because it made a new high, so technically that’s a good breakout and the price targets are yet to be achieved. We are looking at an upside of around Rs 318 to Rs 320 on the stock - that’s a good stock. ONGC in fact was the dampener this week. We saw good declines happening on Monday, Tuesday and Wednesday. Rs 930 to Rs 910 is a good support range so I would advice to cover up the short side, but there is still no cue for people to start taking long positions over there.
Q: Would you watch the whole rate sensitive area more carefully from hereon?
Nadkarni: I would think so. I don’t agree that this week’s inflation has come as more of a shock. The analysis in terms of weekly data tends to be very volatile. But we have tested some of these numbers in our research and we find that if you actually compare the inflation rates over a three-year period and look at the inflation this week over the inflation three years back and plot that graph, it has a very stable, steady growth upwards. Some of these inflation numbers therefore can be predicted to remain in a fairly narrow band of between 4-6% when you compare a three-year CAGR.
Therefore, we expect there will be bouts of volatility in the weekly inflation rates and numbers that keep coming because these are CAGRs over a one-year period. If one were to look at it over a three-year period, our expectation is that inflation will continue in that band, if you see this weekly volatility continuing for the next couple of months. So, inflation is an area that will remain and play out over the next three-four months.
While inflation may look very bad from a market and industry over a medium-term perspective, with respect to market movements, it does not always happen that bouts of high inflation are followed by declining markets. It has its impact on interest rate sensitive sectors like autos or two-wheelers and things like that. But for the rest of the market, where it is not so critically dependent on the interest rate, you may not necessarily see a bad market, following the weekly numbers that keep throwing up on the inflation side.
Markets have after four-five weeks reckoned that inflation is going to stay and are kind of resigned to the fact that this will be an issue over the next couple of months.
Q: There is a big run of strength for the metals: Hindalco and Nalco are up 14-15% for the week. Does it look like a temporary bounce or would you trade some of these?
Thakkar: No, the metals are very attractive. The aluminium pack looks very good. Nalco is very close to its previous high of Rs 528-530 and that is where some supply can come in.
But if you were to look at a slightly longer-term picture, they look very good. In fact, Hindalco has had a very good breakout during the week on the weekly charts and giving a very strong closing.
The aluminium chart looks strong. So, these commodity driven stocks, particularly Nalco and Hindalco, are in the middle of a good uptrend. Over the next few weeks, we see good appreciation in the prices of these stocks. Even SAIL, after declaring its results today, gave a very strong move and we are seeing a lot of supply come in on these stocks at price levels around Rs 185-187.
So, I am looking at 10% more upside in SAIL, at least on a trading basis, and we will then take it from there.
Q: Many analysts are putting these gains down to what the global markets have been doing and the fact that we have more or less been mirroring global strength. How likely are the chances that we go back to test the March lows or get even close to that figure?
Thakkar: It is a very important question. Whenever a rally starts, the technical angle to look at these kind of upmoves would be that you are having some kind of bounceback. That is how we started this entire upmove from 4,600-4,700 levels. You are looking at a target of around 5,200-5,300, which we have reasonably achieved.
If this week we would have broken below 4,950, I would have bet strongly on the shorts and expected that this decline, that started the previous week, would have continued and probably in a much more severe manner.
We are still not sure on the longer-term charts that we are out of this entire declining mode. But with strong upmoves, temporary relief is there and we still see some kind of upside left in the markets.
But in the long-term, we are still not sure and my sense is that we might come back after a period of time and if not test, at least go very close to those levels.
Q: While inflation has been working at 7.5% for many weeks now, what came in a bit of a rush was the weakness for the rupee. Do you think that took the equity market by surprise?
Nadkarni: I would think so. I don’t think anybody expected this weakness in the rupee to happen so soon. In almost two-three weeks or probably less than that, we have seen almost 5-6% decline in the rupee. This has taken most people by surprise including the industry.
It is also reflected in some of the valuations of IT stocks. They have got some amount of breather because of sentiment that the earnings will look up on the back of a falling rupee.
Q: What sort of targets are you working with both on the upper and lower side for the Nifty for next week?
Thakkar: The upside targets remain 5,310 and 5,300 is a critical supply over here. If we are able to move above that, 5,410-5,420 is under the supply area. On the stretch side, we are looking at 5,480 as the technical target. On the downside, we probably will need to close below 5,000. 4,950 emerges as a big support range. There are going to be weekly averages being positioned over there. So, as long as we are above them, on a daily closing basis, we will keep bouncing back.
Q: A couple of large sized IPOs have got the go-ahead as well. Do you think the primary market is going to start opening up over the next few weeks?
Nadkarni: The sentiment is a little positive in the markets. If markets break the 18,000-18,500 levels and there is a rush of buying that happens, one will see the first of the IPOs or the big IPOs coming into the markets.
At this stage there doesn’t seem to be any significant change in the sentiment towards primary issues. But the markets have been trading in this band of 17,500-17,600 on the up and about 15,500 on the low side. It necessarily needs to break this trading band which may or may not happen in the next 1-2 months. Therefore, the issue of the new paper is critically dependent on market sentiment.
When that improves significantly, one will see the issue of new paper from some of these companies.
Source: Moneycontrol.com
Nadkarni said the market is likely to be rangebound with a positive bias in the near-term. It has taken negatives in its stride and so will trade with an upward bias.
While Thakkar believes one can expect to see selling after bouncebacks. He said 5,310 is an important technical level, followed by 5,410 and then 5,480 would be a stretch target.
Excerpts fom CNBC-TV18's exclusive interview with Girish Nadkarni and Mitesh Thakkar:
Q: How are you feeling about what this month might throw up? When we stepped into the week there was skepticism and by the time we have wrapped it up there is strength on the screen?
Nadkarni: I think a large part of the strength essentially stems from the fact that the markets have been beaten down very quickly this month and there has been some amount of short covering in this last week. Having said that, the belief is that valuations of stocks have reached fairly interesting levels. Therefore while markets are likely to be rangebound on account of mixed news coming out, in the next couple of weeks, markets will trade with an upward bias largely because of the valuations being good and bouts of short covering at points of time. Also a lot of the negative news has already discounted by the markets. So unless there is some serious new negative news that comes out, I think inflation, high oil prices, high commodity prices issues, the market has already taken in its stride. So I guess the markets would trade tend to trade with a slightly upward bias.
Q: What did you make of this week’s performance and do you think some of it was because of the short covering cushion we had or is the market genuinely showing you trading momentum towards the upside?
Thakkar: This was a very important week as far as technicals are concerned. We had a good rally before last week’s decline wherein the markets went up from 4,700 to 5,300 on the upside and last week we saw good profit booking happening. This week also we started on a negative note. The markets were not very strong on Monday and we did see some selling happening on Wednesday again, but the important part was that the support of 4,950 held on very well and on Thursday and today we saw a very good trading upside, which occurred in the indices. The good part of this rally was that a lot of trading stocks - the stocks which I would call as flavour stocks, the breadth improved to a very big extent. A lot of stocks like fertiliser and sugar, sectoral flavours have come back into the market and that is the very important part. With last two days' moves behind us, we can definitely look towards some more kind of upside left in this market.
Q: The target that has been talked about now is 5,300 - is that what you would watch for as well on the Nifty?
Thakkar: What has happened is that when the indices fell after the decline in January, we saw a lot of bouncebacks and a lot of intermediate peaks being recorded. So I think that one of the prominent fixtures of this upmove would be that we would see a lot of selling coming in from various technical levels or various peaks, which have been recorded as a result of the bounceback. So yes, 5,310 is an important technical level, followed by 5,410 and then we are looking at 5,480 as the stretch target.
Q: Oil and gas was a big performer through today’s session, how are you feeling about that entire pocket with specific reference to the only one standalone E&P play we have?
Nadkarni: I think with respect to E&P companies it is a goldmine except that for ONGC the subsidies are really a cause of concern and with the price of oil going up the subsidy bill keeps mounting for ONGC as well as the refining companies, since the burden is passed on. I would think that it is difficult times for all these companies although they have gone up today, especially the refining companies. I think unless there is certainty on how the subsidy bill is going to be shared by the government in terms of bonds, I would think of staying out. However, what is bad for the refining companies would be good for E&P companies. There is one company in the private sector Cairn Energy, which is doing very well. It is also a good time for ancillary companies, which feed off the E&P sector and those are companies that one should look at when the oil prices are high and likely to remain firm.
Q: Anything from there that you like technically?
Thakkar: There was a lot of action in the oil sector this week and Cairn has been enjoying very good momentum. We have been slightly positive on the stock, because it made a new high, so technically that’s a good breakout and the price targets are yet to be achieved. We are looking at an upside of around Rs 318 to Rs 320 on the stock - that’s a good stock. ONGC in fact was the dampener this week. We saw good declines happening on Monday, Tuesday and Wednesday. Rs 930 to Rs 910 is a good support range so I would advice to cover up the short side, but there is still no cue for people to start taking long positions over there.
Q: Would you watch the whole rate sensitive area more carefully from hereon?
Nadkarni: I would think so. I don’t agree that this week’s inflation has come as more of a shock. The analysis in terms of weekly data tends to be very volatile. But we have tested some of these numbers in our research and we find that if you actually compare the inflation rates over a three-year period and look at the inflation this week over the inflation three years back and plot that graph, it has a very stable, steady growth upwards. Some of these inflation numbers therefore can be predicted to remain in a fairly narrow band of between 4-6% when you compare a three-year CAGR.
Therefore, we expect there will be bouts of volatility in the weekly inflation rates and numbers that keep coming because these are CAGRs over a one-year period. If one were to look at it over a three-year period, our expectation is that inflation will continue in that band, if you see this weekly volatility continuing for the next couple of months. So, inflation is an area that will remain and play out over the next three-four months.
While inflation may look very bad from a market and industry over a medium-term perspective, with respect to market movements, it does not always happen that bouts of high inflation are followed by declining markets. It has its impact on interest rate sensitive sectors like autos or two-wheelers and things like that. But for the rest of the market, where it is not so critically dependent on the interest rate, you may not necessarily see a bad market, following the weekly numbers that keep throwing up on the inflation side.
Markets have after four-five weeks reckoned that inflation is going to stay and are kind of resigned to the fact that this will be an issue over the next couple of months.
Q: There is a big run of strength for the metals: Hindalco and Nalco are up 14-15% for the week. Does it look like a temporary bounce or would you trade some of these?
Thakkar: No, the metals are very attractive. The aluminium pack looks very good. Nalco is very close to its previous high of Rs 528-530 and that is where some supply can come in.
But if you were to look at a slightly longer-term picture, they look very good. In fact, Hindalco has had a very good breakout during the week on the weekly charts and giving a very strong closing.
The aluminium chart looks strong. So, these commodity driven stocks, particularly Nalco and Hindalco, are in the middle of a good uptrend. Over the next few weeks, we see good appreciation in the prices of these stocks. Even SAIL, after declaring its results today, gave a very strong move and we are seeing a lot of supply come in on these stocks at price levels around Rs 185-187.
So, I am looking at 10% more upside in SAIL, at least on a trading basis, and we will then take it from there.
Q: Many analysts are putting these gains down to what the global markets have been doing and the fact that we have more or less been mirroring global strength. How likely are the chances that we go back to test the March lows or get even close to that figure?
Thakkar: It is a very important question. Whenever a rally starts, the technical angle to look at these kind of upmoves would be that you are having some kind of bounceback. That is how we started this entire upmove from 4,600-4,700 levels. You are looking at a target of around 5,200-5,300, which we have reasonably achieved.
If this week we would have broken below 4,950, I would have bet strongly on the shorts and expected that this decline, that started the previous week, would have continued and probably in a much more severe manner.
We are still not sure on the longer-term charts that we are out of this entire declining mode. But with strong upmoves, temporary relief is there and we still see some kind of upside left in the markets.
But in the long-term, we are still not sure and my sense is that we might come back after a period of time and if not test, at least go very close to those levels.
Q: While inflation has been working at 7.5% for many weeks now, what came in a bit of a rush was the weakness for the rupee. Do you think that took the equity market by surprise?
Nadkarni: I would think so. I don’t think anybody expected this weakness in the rupee to happen so soon. In almost two-three weeks or probably less than that, we have seen almost 5-6% decline in the rupee. This has taken most people by surprise including the industry.
It is also reflected in some of the valuations of IT stocks. They have got some amount of breather because of sentiment that the earnings will look up on the back of a falling rupee.
Q: What sort of targets are you working with both on the upper and lower side for the Nifty for next week?
Thakkar: The upside targets remain 5,310 and 5,300 is a critical supply over here. If we are able to move above that, 5,410-5,420 is under the supply area. On the stretch side, we are looking at 5,480 as the technical target. On the downside, we probably will need to close below 5,000. 4,950 emerges as a big support range. There are going to be weekly averages being positioned over there. So, as long as we are above them, on a daily closing basis, we will keep bouncing back.
Q: A couple of large sized IPOs have got the go-ahead as well. Do you think the primary market is going to start opening up over the next few weeks?
Nadkarni: The sentiment is a little positive in the markets. If markets break the 18,000-18,500 levels and there is a rush of buying that happens, one will see the first of the IPOs or the big IPOs coming into the markets.
At this stage there doesn’t seem to be any significant change in the sentiment towards primary issues. But the markets have been trading in this band of 17,500-17,600 on the up and about 15,500 on the low side. It necessarily needs to break this trading band which may or may not happen in the next 1-2 months. Therefore, the issue of the new paper is critically dependent on market sentiment.
When that improves significantly, one will see the issue of new paper from some of these companies.
Source: Moneycontrol.com
Wednesday, May 14, 2008
Rupee breaches 42.5/$; will touch 43 in short-term
Rupee has breached 42.50. Experts believe, in the absence of any intervention in the markets, it's very difficult for rupee to appreciate. In the next few sessions, rupee is likely to continue to weaken.
Subramaniam Sharma of Greenback Forex said he saw it coming. "It was on the cards this morning because the rupee closed on a weak note yesterday. Crude prices were also looking up around USD 126/bbl and it was very clearly an indication that the rupee may slide further," he said.
He expects RBI to take some action against this steady downfall.
While Agum Gupta, Head - Forex, Standard Chartered Bank thinks 43 is not very far away for the rupee. "We are already at Rs 42.50 and the way we have been moving 40 to 50 paise a day, has become pretty easy. So I don’t see why Rs 43 can be considered to be too far away," he said.
In fact, Sundeep Bhandari of Standard Chartered Bank is also of the view that 43 is conceivable for the rupee. He said, "It looks like the rupee is headfirst towards the 43 level, I would not relate to 44. The sentiment appears to be one way, inflation, oil prices, exporters holding back, flows are flat and the current account deficit, so the sentiment is very negative and in the absence of any support certainly it could weaken further."
All experts agree that this downhill trend that the rupee has adopted is creating a lot of negative sentiment in the market.
In the longer-term, Bhandari sees the rupee coming back to 42.5 levels by September. "I think we are going to see considerable volatility over the next weeks, perhaps months, on the rupee."
Bhandari's advice to importers is to hold on because, "If one can wait a month, the rupee will get a bit cheaper, but the index in the few session is likely to weaken. So towards June-end and July, we can see rupee at 41.50-41.70 levels."
It seems that there might have been some position unwinding in the market. Ashit Parekh of IndusInd Bank said, "I think the speed at which we have seen weakening of the rupee has taken everybody by surprise. After a break of 42.25-42.30 this morning, it just went straight upto 42.60-42.65 levels. I think for the next few days 42.75-42.80 even touching 43 level is definitely on the cards."
He thinks the only way rupee can get stronger again is through intervention by the RBI, or a sudden overnight correction in the oil market.
Both Bhandari and Parekh sense that exporters have been lying low. "Quite a lot of them probably have already booked part of their exposure at 41.50. They just need to wait on the sidelines till the buying subsides and then start booking in exports," said Parekh.
Bhandari explains, "I think the exporters are holding back and they sense that the rupee is going to weaken further, hence they are holding back."
Source: Moneycontrol.com
Subramaniam Sharma of Greenback Forex said he saw it coming. "It was on the cards this morning because the rupee closed on a weak note yesterday. Crude prices were also looking up around USD 126/bbl and it was very clearly an indication that the rupee may slide further," he said.
He expects RBI to take some action against this steady downfall.
While Agum Gupta, Head - Forex, Standard Chartered Bank thinks 43 is not very far away for the rupee. "We are already at Rs 42.50 and the way we have been moving 40 to 50 paise a day, has become pretty easy. So I don’t see why Rs 43 can be considered to be too far away," he said.
In fact, Sundeep Bhandari of Standard Chartered Bank is also of the view that 43 is conceivable for the rupee. He said, "It looks like the rupee is headfirst towards the 43 level, I would not relate to 44. The sentiment appears to be one way, inflation, oil prices, exporters holding back, flows are flat and the current account deficit, so the sentiment is very negative and in the absence of any support certainly it could weaken further."
All experts agree that this downhill trend that the rupee has adopted is creating a lot of negative sentiment in the market.
In the longer-term, Bhandari sees the rupee coming back to 42.5 levels by September. "I think we are going to see considerable volatility over the next weeks, perhaps months, on the rupee."
Bhandari's advice to importers is to hold on because, "If one can wait a month, the rupee will get a bit cheaper, but the index in the few session is likely to weaken. So towards June-end and July, we can see rupee at 41.50-41.70 levels."
It seems that there might have been some position unwinding in the market. Ashit Parekh of IndusInd Bank said, "I think the speed at which we have seen weakening of the rupee has taken everybody by surprise. After a break of 42.25-42.30 this morning, it just went straight upto 42.60-42.65 levels. I think for the next few days 42.75-42.80 even touching 43 level is definitely on the cards."
He thinks the only way rupee can get stronger again is through intervention by the RBI, or a sudden overnight correction in the oil market.
Both Bhandari and Parekh sense that exporters have been lying low. "Quite a lot of them probably have already booked part of their exposure at 41.50. They just need to wait on the sidelines till the buying subsides and then start booking in exports," said Parekh.
Bhandari explains, "I think the exporters are holding back and they sense that the rupee is going to weaken further, hence they are holding back."
Source: Moneycontrol.com
Markets may trade rangebound around 4,900-5,300
The markets put on an impressive show of strength. The indices were a bit sluggish off the blocks, but strong buying interest in stocks across sectors powered the markets higher. The Nifty closed at 5,012 up 54 points, while the Sensex shut shop at 16,978 up 225 points.
Technical Analyst Ashwani Gujral said the Nifty is trading a narrow range of 4,900-5,100. "The takeaway here is that there is several factors which are against and in favour of the market. One had bad IIP numbers, and oil prices going through the roof, but inspite of a lot of bad news, 4,900 is holding up. My guess is that we will probably break the 4,900 level, collect enough shorts out there, and only then we will be able to go past 5,100. Till then, we will trade rangebound."
Investors should keep their commitments light, he said.
Rajesh Jain, Director and CEO, Pranav Securities, said there is a bit of a political overhang on the markets given the fact that Karnataka elections are underway and the results could have some sort of bearing on the fortunes of the Congress and what its constituents could offer in terms of continued support. "Commitments are slowing down as there will be tremendous volatility should the political boat be shaken. To that extent, despite good corporate numbers and in the absence of news flows other than monsoon over the next 15 days, people are not going ahead with all their buy orders."
He finds the markets fairly stable. "We have not seen the return of panic even though the market has slipped from 5,250 levels all the way down to 4,900 levels, which is a good sign. Despite all the bad news, 4,900 has held and to that extent it will continue to give confidence to investors who are venturing out to buy on a long-term investment basis. That will keep the underpinning of the market fairly stable, if not very strong. The Nifty is likely to trade rangebound around 4,900-5,300 in May."
Jain feels this is not the time for profit taking or portfolio unwinding of long-term investments. "This is a market where you really look for the right levels to buy all the stocks that you wanting to hold and you couldn't dream of buying them because the markets had gone pass 6,000 mark on the Nifty or the 20,000 mark on the Sensex. This is a market where you really try and get your bargains cheap."
Jacqueline Aldhous, Head – Research, Crosby Forsyth Research said there is a lot of uncertainty in the markets and people are wary of entering it. “There is still a lot of nervousness and uncertainty. People are still very wary about diving in. Inflation is a problem and oil is a problem in emerging markets,” she said.
Source: Moneycontrol.com
Technical Analyst Ashwani Gujral said the Nifty is trading a narrow range of 4,900-5,100. "The takeaway here is that there is several factors which are against and in favour of the market. One had bad IIP numbers, and oil prices going through the roof, but inspite of a lot of bad news, 4,900 is holding up. My guess is that we will probably break the 4,900 level, collect enough shorts out there, and only then we will be able to go past 5,100. Till then, we will trade rangebound."
Investors should keep their commitments light, he said.
Rajesh Jain, Director and CEO, Pranav Securities, said there is a bit of a political overhang on the markets given the fact that Karnataka elections are underway and the results could have some sort of bearing on the fortunes of the Congress and what its constituents could offer in terms of continued support. "Commitments are slowing down as there will be tremendous volatility should the political boat be shaken. To that extent, despite good corporate numbers and in the absence of news flows other than monsoon over the next 15 days, people are not going ahead with all their buy orders."
He finds the markets fairly stable. "We have not seen the return of panic even though the market has slipped from 5,250 levels all the way down to 4,900 levels, which is a good sign. Despite all the bad news, 4,900 has held and to that extent it will continue to give confidence to investors who are venturing out to buy on a long-term investment basis. That will keep the underpinning of the market fairly stable, if not very strong. The Nifty is likely to trade rangebound around 4,900-5,300 in May."
Jain feels this is not the time for profit taking or portfolio unwinding of long-term investments. "This is a market where you really look for the right levels to buy all the stocks that you wanting to hold and you couldn't dream of buying them because the markets had gone pass 6,000 mark on the Nifty or the 20,000 mark on the Sensex. This is a market where you really try and get your bargains cheap."
Jacqueline Aldhous, Head – Research, Crosby Forsyth Research said there is a lot of uncertainty in the markets and people are wary of entering it. “There is still a lot of nervousness and uncertainty. People are still very wary about diving in. Inflation is a problem and oil is a problem in emerging markets,” she said.
Source: Moneycontrol.com
Tuesday, May 13, 2008
Buy Dwarikesh Sugar, tgt Rs 95
PINC has maintained buy rating on Dwarikesh Sugar Industries with target price of Rs 95 in its May 13, 2008 report. "Dwarikesh Sugar Industries Ltd.’s (DSIL) net sales surged by 36% YoY to Rs866 million in Q2FY08. Commissioning of Dwarikesh Dham unit (7,500 TCD and 24 MW saleable cogen) and 24 MW cogen unit at Dwarikesh Puram were the key reasons for the sales growth. Sugar volumes rose by 27% to 37.5k mt whereas realisations were down by 2% YoY and up by 4% QoQ to Rs13.8k/mt. The other key development was the commissioning of its 24 MW each cogen plants at Dwarikesh Dham and Dwarikesh Puram in Feb’08, which were postponed on account of delays in installing evacuation lines from power plants to the state grid. The future profitability of the company will come primarily from its 56 MW (saleable) cogen power plants. This, coupled with firm sugar prices is likely to boost the company’s margins and improve its cash flows. Hence, we maintain our ‘BUY’ recommendation with a price target of Rs 95 (as against our earlier target of Rs 130) on an investment perspective of one year" according to PINC report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
Buy Kotak Mahindra Bank
Edelweiss has maintained its buy rating on Kotak Mahindra Bank in its May 12, 2008 research report. "Kotak Mahindra Bank (KMB)’s Q4FY08 results reflect a mix of the non-conducive capital market environment and unfavorable treasury/forex operations, being partially offset by continued traction in the commercial and investment banking (IB) businesses. Consolidated PAT (excluding life insurance) declined 37% Q-o-Q (34% growth Y-o-Y) to INR 2.4 billion (in-line with estimates). Profitability (standalone) declined 32% Q-o-Q, despite 12% Q-o-Q growth in NII, due to lower treasury income and provisions for MTM losses. Sharp correction in the equity markets led to a plunge in the profits of the broking and asset management businesses; however, IB reported better–than-expected profits of INR 254 million."
"Our revised consolidated EPS (excluding insurance) now stands at INR 31.9 for FY09E and INR 39.1 for FY10E. The stock is trading at 15x FY10E earnings and 2.3x FY10E book. Our SOTP fair value for the stock, based on FY10 estimates, is Rs 1003 per share. We maintain our ‘BUY’ recommendation," says Edelweiss.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
"Our revised consolidated EPS (excluding insurance) now stands at INR 31.9 for FY09E and INR 39.1 for FY10E. The stock is trading at 15x FY10E earnings and 2.3x FY10E book. Our SOTP fair value for the stock, based on FY10 estimates, is Rs 1003 per share. We maintain our ‘BUY’ recommendation," says Edelweiss.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Moneycontrol.com
Markets likely to re-test Jan lows
Jyoti Vaswani, Assistant Director, Fund Management, Aviva Life, said the markets are in a consolidation phase. "A correction was overdue after the rally."
He feels there is a possibility that markets will re-test its January lows. "There are negative cues from the economic data, lack of confidence among investors, IIP slowdown, and high crude prices. Investors are not rushing in to buy, and fundamentals do not look very positive."
Sushil Kedia, Head-Institutional Equities, K&A Securities, said there has been a sector rotation. "The market has not found clear sector moves."
He feels the markets will remain choppy for the next 3-4 days. "The Nifty is likely to be trade rangebound between 4,600 and 5,300 for the rest of May. The markets may bottom in few days and can provide buying opportunities for investors."
Excerpts from CNBC-TV18’s exclusive interview with Jyoti Vaswani and Sushil Kedia:
Q: What have you made of the way this month has started? Where do you think we will end up by the end of this series?
Vaswani: Markets are in a consolidation phase and we had seen the peak of 21,000 some time in January. Obviously, the valuations have got really stretched at a point in time. So, a correction was overdue. Given that the markets have now stabilized, the market should consolidate in the medium-term. That is healthy also for the markets because a one-way upward rally with valuations getting to unreasonable levels is always a more dangerous situation to be in.
Q: How wide a range would you give the market? How high are the chances that it actually goes back to test the lows we have seen earlier this year?
Vaswani: I would not like to get into numbers. But there is a possibility that the previous lows of this year could be retested, given the fact that the data that is coming out is not really very healthy.
Though there has been some moderation in the group numbers, inflation data is a cause of concern and the global risks that are currently prevalent in the world markets. Given this scenario, it would be possible that the market could re-test the lows of this calendar year.
I would still say that the markets would consolidate with these levels probably for quite some time.
Q: What do you think is going to drag this market back to the lows we saw earlier this year? Is it the way the currency has been moving, the big crude shock that we have had to deal with or is there a lack of cash commitment right now-domestic or foreign?
Vaswani: There is a lack of confidence in the marketplace, essentially arising from the factors mentioned. Crude prices are testing new highs and obviously that is putting pressure. You also have the currency, which is actually depreciating, and this would have an impact on our current account deficits. India is perhaps one of the few emerging markets, where there is a current account deficit. It could affect the flows that come into India, in the short-term. So, there is a possibility of a moderation in capital flows.
All these factors are obviously playing on the minds of players and probably the investment that is coming in at a slow pace. I don’t think people are really rushing in to buy given that the fundamentals are not so favourable at this point in time.
Q: What is the domestic money doing? We keep hearing the converging reports about what the mutual fund cash levels are at. How deeply deployed is the cash amongst the domestic fraternity?
Vaswani: The flow, as far as the insurance industry is concerned, has been very robust. We have seen practically 100% growth in the AUM, in the last financial year, which is a very good growth. Even now, post the March quarter, which is obviously the best quarter for the insurance industry, we have seen very good flows coming in.
Some of the insurance companies might be sitting on a little bit of cash. But most of the times, the money is deployed into the markets. So, the cash levels may not be as high as may be perceived.
Q: Have you made any tactical changes, by way of sectoral preferences?
Vaswani: Earnings have been in line with expectations. Perhaps, the surprise has been from the banking sector where the expectation was perhaps of worse numbers than what actually came in.
The numbers for the banking segment and financials came much better than expected. So, to that extent, there has been a slight change in our allocations. But apart from that, results have been in line with expectations. We have not really changed much, in terms of our sectoral allocations post the numbers.
Q: How has the week started off? What is the best way for a Nifty trader to approach such a volatile market?
Kedia: It has perhaps been a rewarding trade for a minority of day traders. The Nifty may remain choppy like this for another 3-4 days and should be avoided for the remainder of this week.
As it pulls lower from here, 4,870 is one level that may or may not break. Then, you have 4,670, all the way down to 4,600.
So, perhaps rather than looking at price, one should take a break away from the Nifty for the next 3-4 days and see where a sustainable reversal should build up and only then there should be a trade there. It is already quite late on the short side of Nifty here.
Q: What is your sense of what this series might throw up? Is there a greater chance that we will get towards that 5,150-5,200 mark or is there a bigger chance that we actually go down to test the lows that we had in March?
Kedia: 4,600 to 5,300 should be the range for the remainder part of this series. As of now, it has been going down. Over the next three days, a reversal can come. After that, the speed it will take up and the number of days it takes to race back to 5,300 is difficult for me to say right away. But broadly speaking, that remains the range.
Q: How are you viewing oil and gas as a space?
Vaswani: That is a sector that is going through a very bad patch, in terms of the oil marketing companies. There is an election year and the prices may not go up to reflect the increase in crude prices.
Obviously, both the upstream and the downstream companies are going to bear the brunt. In that sector, it is beyond their control. They are trying their best and lobbying with the government to reduce the burden on them.
But it doesn’t look like the government is going to be listening to them too much given the fact that inflation is high and this is an election year. So, that space is going to continue to have some problems, going forward.
Q: What do you see on the charts of stocks like Cairn and ONGC?
Kedia: Cairn opened with a large gap up at Rs 306 today. Yesterday, it was closing at about Rs 300 but it opened 2% higher. This large gap up opening and sustained selling through the day is a very potent reversal signal.
Around Rs 306-309 was in any case a make or a break level because there were no previous yardsticks to make a comparison.
ONGC has been having a sort of rising wedge, within which it is getting closer to the lower boundary. Around Rs 940 is where the lower boundary will be. It looks difficult that it is going to be breaking that right away in this descent. Post this Rs 940, another bounceback to Rs 1,100 and from there a re-sustained fall should come on Wednesday.
Q: Where is the relative resilience in the Sensex or the Nifty right now? If you had to pick a pocket that might actually insulate this market from falling too much, what do you think that might be?
Kedia: We have witnessed a slowing down of the sector rotations. The sector rotations have really not been there and individual stocks have been finding their own reversal days. The market has been really bereft of any broad sweeping themes with which fundamental trades could be found.
Over the next three-four days, as and when the final reversal comes, SBI, which has been far larger underperformer for quite sometime may see a sustained reversal. It can provide a fillip, while the other larger stocks are languishing.
So, it’s still early days. Let us wait for three-four days and see where the new leadership for the new rally will come. Chances are it can be MTNL where there is a buy trade tomorrow and SBI might accumulate over the next two-three days with a patience to be able to withstand Rs 70-80 worth of drawdowns, which is really good for cash portfolio investors.
The other stocks are just rotating around. So, maybe the refineries have been really deeply oversold. There is so much of noise about the oil price hike.
Perhaps, the market has already been sensing that and has sold them down quite deeply. So, it may not be an appealing idea to go and invest in refineries. They might produce that bounceback. In that, the Nifty may not really fall as much as in the sort of downside volatility still persisting in some other stocks.
Q: The IIP numbers looked quite disappointing. Are you changing the way you are looking at capital goods as a space now?
Kedia: I am not too concerned about the capital goods sector because the long-term growth story for the sector is intact. Their order books are very robust.
Due to some capacity constraints, the numbers reported by some large capital goods companies were slightly below expectations. But that’s going to reverse and you will see the numbers coming back on track because the order books are very strong. We really don’t foresee any problems on that front and believe that capital investment into the country is continuing. We don’t see an issue on that front as of now.
Q: Would you recommend any sort of positional trade for someone who wants to play the series?
Kedia: My worry is only in the direction of the next 2-3 days. By Thursday or Friday, the markets would have perhaps made a real tradable bottom from which many opportunities might emanate. Some might emanate even earlier than that.
Capital goods as a sector is one which is looking to add to the Nifty on the higher side when this reversal comes. So, it’s just a matter of biding your patience for the next 2-3 days and perhaps start looking for building positional trades again.
Source: Moneycontrol.com
He feels there is a possibility that markets will re-test its January lows. "There are negative cues from the economic data, lack of confidence among investors, IIP slowdown, and high crude prices. Investors are not rushing in to buy, and fundamentals do not look very positive."
Sushil Kedia, Head-Institutional Equities, K&A Securities, said there has been a sector rotation. "The market has not found clear sector moves."
He feels the markets will remain choppy for the next 3-4 days. "The Nifty is likely to be trade rangebound between 4,600 and 5,300 for the rest of May. The markets may bottom in few days and can provide buying opportunities for investors."
Excerpts from CNBC-TV18’s exclusive interview with Jyoti Vaswani and Sushil Kedia:
Q: What have you made of the way this month has started? Where do you think we will end up by the end of this series?
Vaswani: Markets are in a consolidation phase and we had seen the peak of 21,000 some time in January. Obviously, the valuations have got really stretched at a point in time. So, a correction was overdue. Given that the markets have now stabilized, the market should consolidate in the medium-term. That is healthy also for the markets because a one-way upward rally with valuations getting to unreasonable levels is always a more dangerous situation to be in.
Q: How wide a range would you give the market? How high are the chances that it actually goes back to test the lows we have seen earlier this year?
Vaswani: I would not like to get into numbers. But there is a possibility that the previous lows of this year could be retested, given the fact that the data that is coming out is not really very healthy.
Though there has been some moderation in the group numbers, inflation data is a cause of concern and the global risks that are currently prevalent in the world markets. Given this scenario, it would be possible that the market could re-test the lows of this calendar year.
I would still say that the markets would consolidate with these levels probably for quite some time.
Q: What do you think is going to drag this market back to the lows we saw earlier this year? Is it the way the currency has been moving, the big crude shock that we have had to deal with or is there a lack of cash commitment right now-domestic or foreign?
Vaswani: There is a lack of confidence in the marketplace, essentially arising from the factors mentioned. Crude prices are testing new highs and obviously that is putting pressure. You also have the currency, which is actually depreciating, and this would have an impact on our current account deficits. India is perhaps one of the few emerging markets, where there is a current account deficit. It could affect the flows that come into India, in the short-term. So, there is a possibility of a moderation in capital flows.
All these factors are obviously playing on the minds of players and probably the investment that is coming in at a slow pace. I don’t think people are really rushing in to buy given that the fundamentals are not so favourable at this point in time.
Q: What is the domestic money doing? We keep hearing the converging reports about what the mutual fund cash levels are at. How deeply deployed is the cash amongst the domestic fraternity?
Vaswani: The flow, as far as the insurance industry is concerned, has been very robust. We have seen practically 100% growth in the AUM, in the last financial year, which is a very good growth. Even now, post the March quarter, which is obviously the best quarter for the insurance industry, we have seen very good flows coming in.
Some of the insurance companies might be sitting on a little bit of cash. But most of the times, the money is deployed into the markets. So, the cash levels may not be as high as may be perceived.
Q: Have you made any tactical changes, by way of sectoral preferences?
Vaswani: Earnings have been in line with expectations. Perhaps, the surprise has been from the banking sector where the expectation was perhaps of worse numbers than what actually came in.
The numbers for the banking segment and financials came much better than expected. So, to that extent, there has been a slight change in our allocations. But apart from that, results have been in line with expectations. We have not really changed much, in terms of our sectoral allocations post the numbers.
Q: How has the week started off? What is the best way for a Nifty trader to approach such a volatile market?
Kedia: It has perhaps been a rewarding trade for a minority of day traders. The Nifty may remain choppy like this for another 3-4 days and should be avoided for the remainder of this week.
As it pulls lower from here, 4,870 is one level that may or may not break. Then, you have 4,670, all the way down to 4,600.
So, perhaps rather than looking at price, one should take a break away from the Nifty for the next 3-4 days and see where a sustainable reversal should build up and only then there should be a trade there. It is already quite late on the short side of Nifty here.
Q: What is your sense of what this series might throw up? Is there a greater chance that we will get towards that 5,150-5,200 mark or is there a bigger chance that we actually go down to test the lows that we had in March?
Kedia: 4,600 to 5,300 should be the range for the remainder part of this series. As of now, it has been going down. Over the next three days, a reversal can come. After that, the speed it will take up and the number of days it takes to race back to 5,300 is difficult for me to say right away. But broadly speaking, that remains the range.
Q: How are you viewing oil and gas as a space?
Vaswani: That is a sector that is going through a very bad patch, in terms of the oil marketing companies. There is an election year and the prices may not go up to reflect the increase in crude prices.
Obviously, both the upstream and the downstream companies are going to bear the brunt. In that sector, it is beyond their control. They are trying their best and lobbying with the government to reduce the burden on them.
But it doesn’t look like the government is going to be listening to them too much given the fact that inflation is high and this is an election year. So, that space is going to continue to have some problems, going forward.
Q: What do you see on the charts of stocks like Cairn and ONGC?
Kedia: Cairn opened with a large gap up at Rs 306 today. Yesterday, it was closing at about Rs 300 but it opened 2% higher. This large gap up opening and sustained selling through the day is a very potent reversal signal.
Around Rs 306-309 was in any case a make or a break level because there were no previous yardsticks to make a comparison.
ONGC has been having a sort of rising wedge, within which it is getting closer to the lower boundary. Around Rs 940 is where the lower boundary will be. It looks difficult that it is going to be breaking that right away in this descent. Post this Rs 940, another bounceback to Rs 1,100 and from there a re-sustained fall should come on Wednesday.
Q: Where is the relative resilience in the Sensex or the Nifty right now? If you had to pick a pocket that might actually insulate this market from falling too much, what do you think that might be?
Kedia: We have witnessed a slowing down of the sector rotations. The sector rotations have really not been there and individual stocks have been finding their own reversal days. The market has been really bereft of any broad sweeping themes with which fundamental trades could be found.
Over the next three-four days, as and when the final reversal comes, SBI, which has been far larger underperformer for quite sometime may see a sustained reversal. It can provide a fillip, while the other larger stocks are languishing.
So, it’s still early days. Let us wait for three-four days and see where the new leadership for the new rally will come. Chances are it can be MTNL where there is a buy trade tomorrow and SBI might accumulate over the next two-three days with a patience to be able to withstand Rs 70-80 worth of drawdowns, which is really good for cash portfolio investors.
The other stocks are just rotating around. So, maybe the refineries have been really deeply oversold. There is so much of noise about the oil price hike.
Perhaps, the market has already been sensing that and has sold them down quite deeply. So, it may not be an appealing idea to go and invest in refineries. They might produce that bounceback. In that, the Nifty may not really fall as much as in the sort of downside volatility still persisting in some other stocks.
Q: The IIP numbers looked quite disappointing. Are you changing the way you are looking at capital goods as a space now?
Kedia: I am not too concerned about the capital goods sector because the long-term growth story for the sector is intact. Their order books are very robust.
Due to some capacity constraints, the numbers reported by some large capital goods companies were slightly below expectations. But that’s going to reverse and you will see the numbers coming back on track because the order books are very strong. We really don’t foresee any problems on that front and believe that capital investment into the country is continuing. We don’t see an issue on that front as of now.
Q: Would you recommend any sort of positional trade for someone who wants to play the series?
Kedia: My worry is only in the direction of the next 2-3 days. By Thursday or Friday, the markets would have perhaps made a real tradable bottom from which many opportunities might emanate. Some might emanate even earlier than that.
Capital goods as a sector is one which is looking to add to the Nifty on the higher side when this reversal comes. So, it’s just a matter of biding your patience for the next 2-3 days and perhaps start looking for building positional trades again.
Source: Moneycontrol.com
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