Weekly Outlook for Indian Stock Markets - 13th April to 17th April 2009

Just few encouraging statements from US financial space and stock markets rallied as if nothing happened... The global markets, including Dalal Street have rallied almost 30% in last two months.

But the real test is just about to begin when the renewed optimism will be tested against the actual financial results due to be announced this month. US companies will see their first quarter results of this financial year, whilst, Indian companies will announce their annual results for 2007-08. These results will determine the financial health of the companies.

The changes in accounting standards in USA might also help companies in displaying healthier balance sheet than what it is actually at the moment. It is widely speculated that comanies may be allowed to defer the notional losses on the open liabilities / assets that they are carrying on the balance sheet for next few months.

Hence, on the backdrop of these events, we might see increase in volatility in the global week in the coming week(s). The coming week will see 1st quarter results announcements by GE (17th), Citi Group (17th), Intel (14th), Johnson and Johnson (14th) in US. The good and bad of these results will have an impact on the markets.

Similarly, in India, Infosys is due to announce the results on Wednesday (15th). The results will give an indication on how badly IT sector has been hit by the problems in US. Also, its guidance for the coming quarter / year will determine the prospects of IT sector in the coming quarters.

Hero Honda will announce its annual result on Friday and it is expected to announce the healthy results for this year. This company has been exception in Auto sector, due to its presence in robust rural sector.

The just concluded week has been a good one for us as well. Most of our stocks views have gone well. On Friday, SCI, Dish TV, have hit their target levels. The long term target for Jain Irrigation System has also hit its target price. Few new stock views are given below:

Scrip Name - Buy / Sell - Recommended Price - Target Price - Stop Loss Price
JP Hydro - Sell - 41.45 - 37 - 44.65
Yes Bank - Buy - 62 - 71 - 53
Meghmani Organics - Buy - 8.75 - 9.85 - 7.6
Jet Airways - Sell - 224 - 203 - 241.5
ABB - Sell - 463 - 438 - 480
Amtek Auto - Buy - 93 - 103 - 83
CESC - Buy - 248 - 264 - 229
GTL Infra - Sell - 31.3 - 29.55 - 32.55
IRB - Buy - 103.5 - 113.5 - 97

Few Options strategies for the coming week are as follows:
1. Sell Ashok Leyland 20 Call and Buy 22.5 Call - this is a bear spread strategy which is taken with a view that Ashok Leyland may trip on profit-booking this week.

2. Sell GVKPIL 27.5 Call and Buy 30 Call - this is again a bear spread strategy which is taken with a view that this stock may come down on account of profit booking.

3. Sell ICICI Bank 380 Put and 430 Call - this strategy is taken with a view that stock may move within a range in the coming days. This will be short term strategy in which one can move out, once you get 4-5 Rs. per pair. One can move out with loss if scrip able to cross 450 mark on downside / 350 Rs. on downside.

Wishing you a great trading week ahead!!!

Weekly Outlook for Indian Stock Markets - 16th to 20th March 2009

The power of the powerful can be judged from one of the events occured last week. Just one statement by Citibank CEO Vikram Pandit stating that Citibank is profitable for last two months brought a rally in the stock markets worldwide.

Does it indicate the end of the problem that US or the entire world is facing? No, it only indicates that future might not be as bad as the present. The main culprit behind the current situation are the financial institutions based in USA. When one of these institutions have shown profits, it brings along the hope in the world fraternity that things may be coming into normal. But we must not forget that these are only hopes. Whether these contain some substance is yet to be seen.

Skeptical experts still see pain in the economy. The optimism in the economy is at all-time low throughout the world. The jobs have been lost, companies have been reeling under the pressure of over-leverage, consumers in any part of the world have been cutting their spendings and concentrating more on savings which has further stranded the global trade and hence health of the economies.

Another cause of concern is the worsening situation in Eastern Europe countries. Recent IMF report suggested that these countries are facing serious debt and have asked for immediate help from International Monetary Fund (IMF).

Anyways, lets come back to the coming week. The coming week may carry the momentum in the first part of the week, which can push the Indian bourses to previous support levels. Nifty may again attempt to breach 2800 which can provide tough resistance. This level would indicate whether the given rally has some substance or not.

One can buy 2700 Nifty Put along with 2750 Nifty Call. This would cost the premium of 95 Rs, which could be maximum loss of around 5000 Rs per pair. If Nifty actually breaches 2800 levels, then it would go up to 2900 and this would bring the profits of atleast 5000 Rs. On the contrary, if Nifty fails to cross 2800, then we may see Nifty again attempt to go below 2600 and it may bring the profit of around 4000 Rs.

Few stock specific strategies for the coming week are given below:

Scrip - Buy / Sell - Target Price - Stop Loss Price
Indotech Transformers - Buy - 310 - 279
Kalindee Rail Nirmaan - Buy - 100 - 80
South Indian Bank - Buy - 50 - 42
Cummins India - Buy - 165 - 146
Hind Dorr Oliver - Buy - 38 - 31
Akruti City - Sell - 1025 - 1255 (One can also attempt to buy Akruti Options Put for 1100 for Rs. 10.)
LITL - Sell - 125 - 115
Jindal Irrigation Systems - Buy - 375 - 330

Wishing you a great week ahead!!!

Weekly Outlook for Indian Stock Markets - 24th to 28th November, 2008

The sub-prime crisis is no less than Tsunami. It has swept every country, every continent, every company that dared to touch, left alone those who attempt to ride it.

The early victims were the financial institutions who were directly involved in the mortgages business in US. Then came those financial institutions across Europe and Asia who bought boxes of exotic sub-prime mortgages, pasted with AAA credit ratings on them.

And now, this tsunami is taking its toll on almost every sector- linked directly or indirectly with it. It seems the next on the target is Auto Industry. GM bankruptcy news is getting louder with each passing day. Ford is feared to follow soon as well. If these two companies go bankrupt, it will be a huge setback for the US economy and for the world as well.

Amidst such gloomy atmosphere, there are some positive news as well. Warren Buffet, the world’s greatest investor, has shown his faith in US economy. His company, Berkshire Hathaway, has bought stakes in various companies. The ongoing financial crisis has brought together every economy across West and East together to tacke it. Also, there are talks about making stringent guidelines and regulations which will be common across all countries and hence, in the long term will build a road path for global free trade.

Isn’t “Bright Day come after a Dark Night??”

Inflation close to RBI comfort levels
RBI, in its Aug Monetary policy, had talked about 5-6% inflation by March-end. The current financial crisis has helped RBI in this regard. The global slowdown, which pulled down the crude prices, has helped in cooling off the inflation. Good Kharif crop has also helped in taming the food product prices across country.

The provisional figures for Inflation for the first week of November came at 8.98%, down by almost 2% from the preceding week. This will now encourage RBI to shift its priority to growth. It is now expected to cut both CRR and Reverse Repo rates in the coming weeks to stimulate the growth.

But consistent FII outflows are a concern ...
The FIIs have been consistently pulling out money from the equities. After the October mayhem which saw indices tumbling more than 40%, November has so far sober. The selling continues but intensity is much less. Nonetheless, it remains a concern, since FIIs are still net sellers for this month as well. Thus, markets are expected to remain range-bound this month as well. At every rise, we may see FIIs selling to take cash out from equities.

And that will put pressure on Re ...
Rupee has been under severe pressure for last few months due to consistent FII outflows from the markets. RBI, at its end, is trying its best to stem the Re depreciation. It has cut the CRR rates by 250 bps, cut reverse repo rates, reduce SLR to 24%, which has released more than 1 lakh crores rupees into the financial system, yet the pressure on Re remains intact.

Long-term story is still buoyant
India’s concerns are largely external. The problems in global economy have restricted the tremendous inflows which it was enjoying until last year. Fiscal Deficit, which rose for the first two quarters on account of high crude prices, are now expected to reduce for the remaining quarters since crude has fallen down considerably since then.

The concern regarding high growth will remain, till the time global economic conditions revive. Yet, our economy is expected to grow by 5-6%, as compared to negative growth rates expected in Europe and US.

Stocks at attractive valuations...
The price-earnings ratio for Sensex companies has reached single-digits, which makes them a compelling buy for long-term. IT companies like Infosys, TCS, Wipro, Mphasis are at long-term buying levels.

Another sector that can be bought is the telecom sector. Telecom companies like Bharti, Idea, RCOM have high cash reserves ratios, which enables them continue with high CAPEX plans. Also, the sector is continue to enjoy favor among consumers as they move into rural pockets of India, which is seeing a bit of revival on the back of good monsoons and loan waiver this year.

But the coming week may see another meltdown...
The coming week is expected to see another meltdown, on account of concerns regarding GM bankruptcy. Another negative trigger could be lack of strong steps taken during G-20 nation summit, called upon in Washington to discuss the ongoing financial crisis.

If no concrete decisions come this week, then we might see another round of selling coming into the markets worldwide.

And providing opportunities to buy quality stocks...
As discussed above, IT stocks like Infosys, Wipro, Mphasis can be bought at every correction. Similarly, telecom stocks like Bharti, RCOM, Idea can also be accumulated. A mid-cap stock, worth mentioning, is Karuturi Networks. The stock has fallen down to Rs. 7 from Rs. 23 in September. Yet the stock has seen FII shareholding increased to 37% from 34% a quarter back.

An interesting trading strategy is to buy 2500 Put and 3000 Calls. The accumulated premium will be around 150 and has the potential to give you more, once it takes a definite turn.

Wishing you a great week of investing!!!

Indian Stock Market - Weekly update 13th - 17th August, 2007

Last week has been extra-ordinary for the markets. Aftre the initial meltdown, markets seems to have recovered, till Thursday afternoon, when BNP Paribas sub-prime mortgage woes came into surface.

This acted as a trigger that took global indices to another low. It seems that markets have catched the sub-prime mortgage fever that may take another few weeks or months to recover.

One of the major concerns pertaining to this fall is the "uncertainity" - uncertainity on how deep the issue of sub-prime mortgage is and how many banks / financial insttutions have burnt their fingers in it?

Thus, it seems unlikely that markets will go up steadily this week. Though, some amount of short-covering is seen, which is common after such volatility. Long term and medium term investors can still wait as more correction can be seen in the markets. Intraday Traders need to
track local and global events quite carefully since every name dragging into sub-prime mortgage woes will trigger a fresh correction in the market. Hence, caution is the word one must remember. Till the time, the cloud of uncertainity about sub-prime clears a bit, the market expected to remain volatile.

Below are some of the upside and downside factors that are expected this week:

Upside
1) The current side last week may result in a bit of short-covering this week around.
2) The money from Middle-east, is yet to enter into Indian markets. Thus, this correction may result in some of this money coming in.
3) RBI annoucement that Indian Banks and FInancial Institutions are laregly unaffected from sub-prime woes
4) Hawkish stance by Fed and European banks on this issue.
5) Rate cut by Fed to infuse fresh liquidty into the equities.

Downside
1) Fresh names of banks and financial institutions coming into sub-pprime trap
2) yen appreciation against dollor will eject more liquidity from stock market.
3) Rupee appreciation against doller will invite more volatility in the stock market
4) Sub-prime turn out to be a global disease
5) fear of Global Recession due to US economy slowdown.

Wish you a very happy investing this week!!!!!