|Trading volumes still below peak|
|Market Khabar by C. Kutumba Rao|
Lack of volumes clearly shows investors apathy and aversion for equities at present. Despite expectations of an election oriented budget market men expect the finance minister to come out with a rational growth oriented budget. If 'wishes' of investors and corporates are met positively a strong post-budget rally is not ruled out since there is low open interest position and no pre-budget build up.
After the talks of recession, fears of the US economy could be heading for a period of "stagflation" —the unwanted combination of stagnant economic growth and destructive inflation — are bugging global markets.
Key events in the week ahead are the all important Union Budget and F&O settlement. Technically markets are in consolidation mode but may see breakout in either direction post-budget. Key levels on downside are 17,060 and 16,680 on the Sensex and 5,030 and 4,860 on the Nifty.
If indices trade below 17,000 and 5,000 regularly a retest of January lows in next few weeks can not be ruled out. For safe zone indices need to trade above 18,000 and 5,640 steadily. Avoid aggressive positions for now. Buying those stocks that are the most highly recommended by analysts according to the consensus recommendation score is a strategy that works well when the market is going up. However, when the market trades down, such stocks tend to perform horribly.
In fact, over the last bear market those most highly recommended by analysts actually fell 53 per cent. Do not follow another man's advice unless you know that he knows more than you do.
Mirroring the nervousness in the markets are the shrinking volumes in the derivatives segment. Average daily turnover has fallen to below Rs 40,000 crore. Inclusive of rollovers open interest has fallen to about Rs 75,000 crore. Adopt strangle or straddle strategy on Nifty to take advantage of directional change in markets.
Note of caution is that options are trading very costly due to high volatility. Barring selective buying in technology, metals and pharma, nearly all the sectors witnessed good selling. Pharma counters Ranbaxy, Cipla and Sun Pharma are good defensive bets. Rising commodity prices globally have sparked buying interest in metal stocks. National Aluminium, Hindalco, Sterlite, SAIL and Tata Steel look good on every decline.
Liberal bonus of 3:5 by RPower to retail shareholders and good subscription to IPO of REC may trigger renewed interest in power stocks.
Select buying is indicated in Tata Power, REL and NTPC. Among the side counters looking good are Infoedge, BEL, Matrix Labs, Zee Entertainment, JP Associates, Jindal Saw, AIA Engg, Suzlon, United Spirits and Sesa Goa. Never change your position in the market without a good reason. When you make a trade, let it be for some good reason or according to some definite rule; then do not get out without a definite indication of a change in trend. Avoid getting in and out of the market too often.
* Cubex Tubings manufactures copper and copper alloy products-seamless tubes, bus bars, rods etc which find application in core industries of power generation, refineries, ship building, defence, railways etc. The company is almost debt free, having B.V. of Rs 49, trailing 12m EPS of Rs13.5 and has blue chip clients like Siemens, NTPC, GE Power, SAIL, Kirloskar Electric and others. After the recent correction the stock looks very good bet for medium-term target of Rs 150 at current levels.
* Sadbhav Engineering is one of the leading construction companies operating in the business verticals of construction of roads and highways, irrigation and mining operations. Apart from the huge order book of Rs 2,600 crore in roads, highways and irrigation works, the company has reportedly bagged large orders in mining operations from GHCL and GMDC. It is also setting up lignite based power plants for Ultratech and Neyveli in Gujarat. Bonus or stock split predicted in near-term. Buy on declines for steady gains in medium-term.
* Maintenance, repair and overhaul segment of the aviation industry is expected to grow at 10 to 12 per cent CAGR. Dynamatic Technologies and Taneja Aerospace are the two listed stocks in this segment. Biggies like Lufthansa in association with GMR, Boeing, ATR and others are also planning to set up MRO facilities. Dynamatic Tech is Asia's largest producer of hydraulic gear pumps and has division of airframe structures. Taneja has recently tied up with France's Sabena to develop MRO facility. Buy both the stocks on sharp decline for good returns in long-term.
* Select stocks in textiles and logistics sectors like Gokaldas Exports, Bombay Rayon, S. Kumars, Allcargo, Balmer Lawrie, Sical and Gateway Dist are attracting buying interest. Rumours of revised open offer are doing rounds in Gokaldas. Blackstone holds nearly 70 per cent of the equity. Punters tip price of Rs 300 in short-term. Post commissioning of their new facilities, Bombay Rayon and S. Kumars are expected to stitch good numbers in coming quarters. Buy on declines. Blackstone's interest in Allcargo shows the importance of logistics space. Stay invested in logistics stocks and use current weakness to buy.