Cheer up

After a very tight consolidation much action is expected this week

Cheer up

After a very tight consolidation much action is expected this week

The markets after losing over 4% each on two consecutive weeks took a breather and consolidated this time around.
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The BSE Sensex gained 147.09 points or 0.77% to close at 19,007.53 points.The NSE Nifty gained 41.95 points 0.74% to close at 5,696.50 points. The broader indices like the BSE100, BSE200 and BSE500 saw gains of 0.78%, 0.70% and 0.58% respectively.

The BSE midcap and BSE smallcap were losers with losses of 0.44% and 0.53% respectively. Banking results for Q3 have been good and led the rally during the week. The BSE Bankex index gained 498.37 points or 4.04% to close at 12,348.97 points.

EVENTFUL

The week ahead starting today is eventful and action packed with trading holiday midweek on Wednesday, 26 January for Republic day. A day earlier the RBI meets to announce its credit policy where the consensus is a 25 basis point hike in CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio).
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The continued high inflation is making some people believe that there may be a 50 basis point hike as well, but this number is in a minority.

On Thursday, 27 January the futures for January would expire. For all it is worth the Fed meets in the US on the 27th as well. In the current month the NSE Nifty which closed December futures at 6,101.85 points is still 405.35 points or 6.64% down.

This is a big difference and there will be a conscientious effort to narrow the gap made in the next three remaining days for expiry.

CONCERN

Foreign institutional investors continue to be sellers and the only positive news here is that there amount of selling seems to have reduced. Turnover at the exchanges continue to be a cause for concern. Petrol prices were raised during the week and the cascading effect this has on inflation would be noticed and felt in the following week.

EXPANSION

There is one IPO opening during the week. Omkar Speciality Chemicals Limited is tapping the capital markets with an issue of 81 lakh shares in a price band of Rs 95-98. The company is in the manufacturing of speciality chemicals, which are used, in the pharmaceutical industry.

The company plans to increase its capacity almost four fold from the present 900 tons per annum to 3,650 tons.The expansion time would be about 18-20 months and post expansion one would expect the present turnover in the first six months ended September 2010 to move to Rs 450 crores plus per annum in financial year 2014-15.
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The company has been growing at a compounded annual growth rate of over 35% and should grow at a minimum of the same going forward. The company's net margins are around 9.8% and would improve with size and larger capacity in future. I believe investing in this company will be rewarding in the short term and in the long run.

During the previous week C.Mahendra Exports Limited listed and closed with a gain of 6%. The FPO (Follow-on Public Offer) of Tata Steel was oversubscribed about six times but the employee quota was under subscribed with a mere 6% being subscribed. The retail category was subscribed 1.6 times.

The reason for the poor subscription in the retail category was the insufficient difference between the market price and the FPO price.

UPWARD BIAS

Coming to the markets in the current week, it appears the markets have an upward bias. The RBI policy will be a key for the markets and could provide the upward trigger that the markets need.

The BSE Sensex has support at 18,958 points, then at 18.801 points and finally at 18,414 points. It has resistance at 19.195 points, then at 19,577 points, then at 19,755 point and finally at 19,985 points.

The NSE Nifty has support at 5,674 points, then at 5,631 points and finally at 5,507 points. It has resistance at 5,755 points, then at 5,875 points, then at 5,907 points and finally at 5,988 points.

Wishing all readers on the occasion of India's Republic day.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website https://ak57.in
Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever.
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All matter published here isu00a0 for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions.
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Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.

Market radar good show

Last week actually was in favour of the bulls with the markets reclaiming 5700 levels on the back of better quarterly earnings and a minor slip in the food inflation.

Even though there are concerns that China may raise interest rates very soon to rein in on the high flying inflation as economic growth showed strength. Our markets are awaiting the RBI policy meet scheduled next week, which see RBI raising interest rates even if the food inflation came down from 16.91% to 15.52%.
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In the upcoming RBI meet we may see around 0.25% to 0.50% hike in interest rates but investors must keep an eye on RBI's take on CRR and SLR. The rate sensitive sectors showed mixed trend last week with realty and banking making volatile moves.

However rates hike will be negative for the rate sensitive sector stocks in the short term but there is always a possibility of reversing the hike if the government could achieve its fiscal year 2011 inflation target of around 5.5%.

Nifty may trade in a tight rage of 5750 - 5614, if Nifty moves above or below then it may move to the next orbit of 5908 -5348.u00a0 A major trend may emerge only after RBI's policy review meeting, which is slated to be held on 25 January 2011.

The FIIs have remained net sellers last week as growing economies like India and China are fighting hard to tame the food prices in the country and also green shoots of recovery is seen in the US with the jobless claims declining and better industrial growth.

Quarterly numbers of IT major TCS beat the market estimates and gave strength to the markets along with HDFC and Axis Bank. Banking Nifty is looking firm and it has immediate target at 11140, if it moves above then one can expect more up trend.u00a0

Support for the Bank Nifty would be at 10600; a move below this level will terminate the uptrend.u00a0 Banking stocks like Canara Bank, Orient Bank of Commerce and Bank of India can be bought in small quantities.

In the general categoryu00a0 TCS, HCL Tech and Reliance Communications can be bought at around Rs. 1165, Rs. 485 and Rs 134 respectively for a medium term.

In the Asian front, Chinese GDP rose to 9.8% against 9.6% while the Industrial production rose to 13.5% from 13.3%. Also we saw jump in Chinese retail sales which rose to 19.1% against 18.7% increasing favourable atmosphere for an immediate rate hike. The US initial jobless claims declined to 404000 from 441000 and the existing home sales rose to 5.28 million from 4.7 million.

Commodity prices slipped as dollar gained strength against main currencies. Also the fear of a rate hike in China, the largest consumer, is further making the upside for the commodities especially metals a bit difficult.
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Recent economic data showed that US crude inventories have increased to 2.6 million from -2.2 million which actually brought the crude price below $90. Gold price fell for the third week on improving world economies causing slump in holdings. Coffee and rubber prices topped on the back of supply concerns in major producing countries as floods in these nations are affecting the output.

On the precious metal segment, both gold and silver came off from highs, and some more pressure can continue, for gold $ 1337 and $ 1322 are good levels for entry.u00a0

For silver $ 27.05 and $ 26.18 are the support levels.u00a0 While analysing the technical charts, silver has more strength than gold.u00a0 The base metal prices are expected to remain weak due to Chinese monetary tightening measures.

Copper, Aluminum and Zinc prices are expected to decline in the short term and can negatively impact the producer stocks like Sterlite, Hindalco and Hind Zinc. This opportunity can be utilized to buy these stocks at every decline, because long-term outlook of these stocks are still bright.

Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear Market Strategies published by Tata McGraw Hill. He is also the technical and derivatives research head of Geojit BNP Paribas Financial Services Ltd.

The author may have a vested interest in investments he has recommended. Feel free to e-mail him at alex@geojit.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange and the Bombay Stock Exchange

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here isu00a0 for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions.
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Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.