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WEEK AHEAD


Updated: Jul 14, 2009 at 23:30

www.GreatTipsIndia.com


WEEK AHEAD

Key benchmark indices are likely to extend gain as sentiment across the globe remains upbeat after the US Federal Reserve said the world's largest economy US may be emerging from a 20-month recession. However, selling by foreign funds may cap the upside.


NIFTY RANGE
4400-4700

CRUCIAL
SUPPORT 4470 & RESISTANCE 4670

APPROACH
Get quality stock at lower level

STRATEGY
Remain long till Nifty remain above 4470

MARKET TREND
Uncertain ahead of Natural Factor i.e. Monsoon

MARKET OUTLOOK
“Monsoon” - it could turnaround any minute or it could just deteriorate

SECTOR TO WATCH
PSU Banks & Capital Goods

FACTOR
Monsoon, Global Cues & Liquidity Inflow

IMPORTANT
One has to book some amount of profit in some of the companies where the valuations go high.



• TECHNICALLY:

Expect market to trade in range-bound. We would probably remain in the range of 4410 on the downside and somewhere around 4670 on the upside. This range at the upper end of the band probably would see some amount of profit booking coming in.

Nifty going to 4470 or 4410 next week. Next week again the cues are not going to be different. We still have lack of triggers as far as the upside is concerned. Next week is going to be a week in which probably we are going to see a fall, and may be by the middle of the next week, whatever the fall level is either 4470 or little below that to 4410, we should see the support buying emerging. From such a level, once again you should see a corrective upside in market afterwards.

• TRIGGER:

A) The end of the monsoon season, if the deficit gap probably narrow down then possibly markets would look up.

B) Outcome of the Reliance’s case possibly would once again allow the investors to look at the leaders favourably.

C) The amount of money which would flow into this country in subsequent period through initial public offerings and otherwise would once again bring in liquidity.

• FED DECISION:

The US Federal Reserve kept interest rates at near zero at its two-day meet that ended on 12 August 2009. The central bank in a statement said US economic activity was leveling out and the financial sector had continued to improve in the last few weeks. The Fed kept its benchmark federal funds rate at a 0-0.25% range and pledged to keep rates low 'for an extended period.

• IIP:

Back home, India's industrial production expanded 7.8% in June 2009, the fastest pace since February 2008, adding to signs that the economy has been spared from the worst of the global recession and is well on its way to a turnaround. Data released by the government on 12 August 2009, showed that industrial growth was higher than the 5.45% seen in June 2008.

• DRAFT DIRECT TAX CODE:

Meanwhile, a draft direct tax code released by the government on 12 August 2009, which proposes to reduce tax rates on individuals and corporates and scrapping of the Securities Transaction Tax (STT), has boosted sentiment.

• FII ACTIVITY:

On the flip side foreign funds, which were the key drivers of the recent rally, turned sellers in August 2009 after remaining net buyers in previous five months. FII outflow in August 2009 totaled Rs 522.90 crore (till 12 August 2009). FII inflow in calendar year 2009 totaled Rs 35,646.80 crore.

After being heavy net sellers of Rs 4545.30 crore in January 2009 and to the tune of Rs 2436.60 crore in February 2009, foreign fund turned net buyers in March 2009 when they bought shares worth Rs 530.30 crore. Their buying gathered steam in April 2009 when they pumped Rs 6508.20 crore. They continue their buying spree in May 2009 pouring Rs 20117.20 in equities. Foreign funds bought equities worth Rs 3830 crore in June 2009 and Rs 11066.30 crore in July 2009.

• MONSOON:

Also the monsoon situation remains grim with the country heading into the worst drought year over the last two decades. Monsoon was 56% below normal in week to 12 August 2009 and was 72% below normal in the soyabean growing central region in past one week, India Meteorological Department (IMD) said on 13 August 2009. Monsoon rains were 29% below normal during the period from 1 June 2009 to 12 August 2009.

The progress of monsoon is closely watched as more than two-thirds of the people live in villages and 60% of the farm land depends on the annual rains.

• IPO:

Meanwhile, there are concerns a glut of initial public offer may suck out liquidity from the secondary market. Among the companies likely to tap the primary market include Oil India, Coal India, Pipavav Shipyard, Indiablls Power, Usher Eco Power, MCX, Godrej Properties, ARSS Infrastructure Projects, Pride Hotels, Bharat Sanchar Nigam (BSNL), Great Eastern Energy, JSW Energy, Euro Multivision, and Radiant Info Systems

• INSTANEX FII INDEX:

Of the 15 components of the Instanex FII Index, 11 were up and four were down. The main gainers were ONGC (+7.03%; weight 4.78%), Bharti Airtel (+5.30%; weight 11.03%) and SBI

This week, the Instanex FII Index was up 1.08% at 323.96 and the Instanex DII 15 portfolio was up 1.80%. Nifty was up 2.20% and Sensex was up 1.66%. The other Instanex Owner Indexes were also up – the Instanex Retail 15 portfolio was up 1.69%, the Instanex Promoter 15 portfolio was up 1.46% and the Instanex Top 15 portfolio was up 1.14%. Asian markets were up as well – Straits Times was up 3.21%, Taiwan Weighted was up 2.92% and Hang Seng was up 2.54%. Of the 15 components of the Instanex FII Index, 11 were up and four were down. The main gainers were ONGC (+7.03%; weight 4.78%), Bharti Airtel (+5.30%; weight 11.03%) and SBI (+3.22%; weight 3.89%) and the main losers were HUL (-5.26%; weight 2.71%) and HDFC (-2.95%; weight 12.63%).

• VALUATION v/s LIQUIDITY:

Clearly, the markets are in a state of confusion. On one hand the macro looks quite bleak and it is becoming bleaker. The IIP numbers are backward looking, they are only reporting what has already happened and not taking into account what is likely to happen in future. Valuations for the most part looks fully priced if not somewhat stretched and yet the fund flow is still pushing the market up.

So there is a kind of battle between valuations versus liquidity and at this stage it is difficult to take a real call in terms of direction except to say that the upside while it is possible from here because of the sheer flow of liquidity cannot be too much higher than where we are already.

• STRATEGY:

One will get quality stocks at lower levels when you want to buy. At higher levels, one would have to play very selectively. One has to book some amount of profit in some of the companies where the valuations go high.


STOCKS FOR THE WEEK:


I : Oil and Natural Gas Corporation
SCRIPT CODE: BSE: 500312 | NSE: ONGC | ISIN: INE213A01011


CMP : 1220


RECOMMENDATION: “BUY”

STOP LOSS: 1150 – [Weekly Closing Basis]

TARGET: 1275-1350


High 52 Wk 1,230.00
Low 52 Wk 538.15

Market Cap 260,985.23 * EPS (TTM) 64.44 * P/E 18.94 * P/C 10.09
* Book Value 405.56 * Price/Book 3.01 Div(%) 320.00 Div
Yield(%) 2.62
Market
Lot 1.00 Face Value 10.00 Industry
P/E 17.35
* As per latest stand alone adjusted profit after extra-ordinary items.


Remark: ONGC is the kind of stock which makes step wise upwards moves. It tends to go in a range for a while and steps into a new level. It’s continuing on its long-term uptrend, and doesn’t decline very much. It is a good portfolio stock as it cushions the portfolio during declines and continues to give good returns also.


II : Aban Offshore
SCRIPT CODE: BSE: 523204 | NSE: ABAN | ISIN: INE421A01028

CMP : 1175


RECOMMENDATION: “BUY”

STOP LOSS: 1100 – [Weekly Closing Basis]

TARGET: 1250-1400


High 52 Wk 2,507.00
Low 52 Wk 221.40


Market Cap 4,433.08 * EPS (TTM) 69.72 * P/E 16.82 * P/C 12.29
* Book Value 254.61 * Price/Book 4.61 Div(%) 180.00 Div
Yield(%) 0.31
Market Lot 1.00 Face Value 2.00 Industry
P/E 17.35
* As per latest stand alone adjusted profit after extra-ordinary items.


Remark: Rs 1240 around, there is a strong resistance. But if I were to see the charts on an annualized basis or a weekly basis, this chart is getting better by the day. This is a script, which is highly volatile, so this is for people who are not fainthearted. But the fact remains that the chart patterns are getting stronger. Once it crosses Rs 1240 knowing the way it moves, this can go on the near-term much more.


III: Bharat Heavy Electricals
SCRIPT CODE: BSE: 500103 | NSE: BHEL | ISIN: INE257A01018


CMP : 2200


RECOMMENDATION: “BUY”

STOP LOSS: 2100 – [Weekly Closing Basis]

TARGET: 2275-2350


High 52 Wk 2,400.00
Low 52 Wk 981.00


Market Cap 107,758.04 * EPS (TTM) 65.87 * P/E 33.42 * P/C 30.28
* Book
Value 284.21 * Price/Book 7.75 Div(%) 152.50 Div
Yield(%) 0.69
Market
Lot 1.00 Face Value 10.00 Industry
P/E 27.81
* As per latest stand alone adjusted profit after extra-ordinary items.


Remark: Capital goods have done well, BHEL has corrected well enough from Rs 2400 to Rs 2100. It’s now got support around Rs 2100 and this could have a rally back to Rs 2275 to about 2350.


IN – A – NUTSHEL:

The markets may now enter a consolidation phase over the medium-term. IPO and M&A activities are going to absorb a lot of cash. Valuations across Asia are not too expensive but I see limited upside potential after the strong rally.




THE WEEK THAT WAS

Bulls overcome drought, Swine Flu jitters

For the week, the BSE 30-share Sensex added 1.7% and NSE Nifty added 2.2% during the week.

Deficit monsoon and H1N1 virus (Swine Flu) were ignored as the market welcomed upbeat IIP data and the draft of the new Direct Tax Code, especially the scrapping of the STT. On the global front, things are much brighter than they have been for a while now. The Fed says that economic activity in the US is leveling out. As expected, the US central bank has left key rates unchanged. Among the concerns, US retail sales unexpectedly fell in July. The recovery in American labour and housing markets too remain fragile.

Finally, the BSE 30-share Sensex added 1.7% and NSE Nifty added 2.2% during the week.

The BSE Sensex hit an intra-week high of 15,545 and low of 14,701 while, the NSE Nifty hit an intra-week high of 4,619 and low of 4,358.

The top gainers:

The top gainers in the Sensex were Ranbaxy Labs (up 13.8%), Tata Motors (up 12.7%), DLF (up 7.7%), ONGC (up 7.1%) and Hindalco (up 6.9%).

The Top Losers:

The top losers in the Sensex were Hindustan Unilever (down 4.7%), ACC (down 4.5%), Ambuja Cements (down 4.2%), Grasim Industries (down 3.2%) and NTPC (down 3%).

Index Gainers:

Ranbaxy was up 13.5%, Tata Mot was up 12.5%, HCL Tech was up 10.5%

Index Losers:

M&M was down 5.5%, HUL was down 5%, ACC was down 4.8%

Sectors Gainers:

BSE Metal Index up 5%; Hindalco up 7%, Sterlite up 5.5%, Tata Steel up 3%

BSE Oil & Gas Index up 3.3%; ONGC up 7%, Cairn India up 4.5%, RIL up 2%

Midcap gainers:

HOEC up 28%, Jagran Prakashan, Bank of Raj up 17%

Small-cap gainers:

FCS Software up 50%, Uttam Galva up 46%, Natco Pharma up 38%

Small-cap gainers:

Kohinoor Foods up 34%, LT Overseas up 31%, Dharani Sugar up 25%

Small-cap gainers:

NIIT Tech, Sasken up 21%, NDTV up 20%, Aptech up 17%



Read Disclosures & Disclaimers at:

www.GreatTipsIndia.com

DLF - Latest Price Update
Current Price	301	Day's High	309.4
Change	8.1	Day's Low	300.1
% Change	2.62	Prev. Close	309.1
BHEL - Latest Price Update
Current Price	2440	Day's High	2461.75
Change	21.9	Day's Low	2420
% Change	0.89	Prev. Close	2461.9
HINDALCO - Latest Price Update
Current Price	159.8	Day's High	162.9
Change	1.2	Day's Low	159.55
% Change	0.75	Prev. Close	161
ACC - Latest Price Update
Current Price	827.35	Day's High	849.5
Change	13.55	Day's Low	827.1
% Change	1.61	Prev. Close	840.9
CAIRN - Latest Price Update
Current Price	333.05	Day's High	338.95
Change	-1.15	Day's Low	331.2
% Change	-0.34	Prev. Close	334.2
NTPC - Latest Price Update
Current Price	198	Day's High	200
Change	1.5	Day's Low	198
% Change	0.75	Prev. Close	199.5
LT - Latest Price Update
Current Price	1793	Day's High	1844.95
Change	24.95	Day's Low	1791.1
% Change	1.37	Prev. Close	1817.95
ONGC - Latest Price Update
Current Price	1238	Day's High	1249.6
Change	-8.55	Day's Low	1220.65
% Change	-0.69	Prev. Close	1246.55
NDTV - Latest Price Update
Current Price	104.1	Day's High	107.7
Change	0.1	Day's Low	102.65
% Change	0.1	Prev. Close	104.2
RANBAXY - Latest Price Update
Current Price	449.9	Day's High	455.65
Change	7.95	Day's Low	441
% Change	1.8	Prev. Close	441.95
HDFC - Latest Price Update
Current Price	2984	Day's High	3000.1
Change	7.1	Day's Low	2954
% Change	0.24	Prev. Close	2976.9
ABAN - Latest Price Update
Current Price	864.6	Day's High	889.8
Change	13.55	Day's Low	864.6
% Change	1.54	Prev. Close	878.15
SASKEN - Latest Price Update
Current Price	200	Day's High	202.5
Change	0.3	Day's Low	197.05
% Change	0.15	Prev. Close	199.7
GRASIM - Latest Price Update
Current Price	1833	Day's High	1874.7
Change	16.5	Day's Low	1825.1
% Change	0.89	Prev. Close	1849.5
TAKE - Latest Price Update
Current Price	31.9	Day's High	33.2
Change	1.8	Day's Low	30.1
% Change	5.98	Prev. Close	30.1
JAGRAN - Latest Price Update
Current Price	121	Day's High	125.75
Change	0.05	Day's Low	118.3
% Change	0.04	Prev. Close	121.05