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Tuesday, February 09, 2010

Bull-bear slugfest may continue


A bland smile is like a green light at an intersection, it feels good when you get one, but you forget it the moment you're past it.

We now have statistical evidence to substantiate that the green shoots in India have blossomed further. FY10 GDP is set to grow 7.2%, says the Government. This figure is subject to revision, which hopefully will be on the higher side. In fact, the RBI sees a 7.5% growth in FY10 GDP. Apart from the subdued credit growth and tepid tax receipts (partly owing to fiscal stimulus) most other economic indicators have improved substantially. This suggests that India has weathered the global financial storm well and needs to sustain the momentum.

The ball is now in the Finance Minister’s court. In that context, Feb. 26 will be a crucial day. Pranab Mukherjee is likely to take a calibrated approach to unwinding the fiscal stimulus. He has his task cut out on the fiscal front. So, we expect him to articulate strategy to return to the path of fiscal prudence. Any deviation from this will be disappointing. The key would be to keep expectations low before the Budget.

Today we expect a flat opening due to indecisive global cues. The Dow Jones has closed below 10,000. Stocks in Europe finished higher. Asia is pretty much mixed. Derivative indicators are pointing to further weakness. Technically, 4700 could give near-term support to the Nifty while resistance might kick in at 4800. The 200 DMA of 4640 will continue to be a crucial level to watch. The broad range for the Nifty remains at 4700-4900 for now. Relentless FII selling is a big handicap for the bulls in the near term.

Our sense is that the market will be sideways and choppy amid continued uncertainty over the health of the global economy and prospects for the Indian economy in FY11. Monsoon will be another big variable that could potentially influence the market's direction going forward. There is also some risk as far as Government policy is concerned as it tries to execute an effective 'exit' strategy from the unprecedented fiscal stimulus.

Volatile markets ended with modest gains on Monday. After starting off at day’s low, markets pulled back smartly in the second half led by gains in the index heavyweights Bharti Airtel, Infosys, ONGC and L&T. Sentiment further got a fillip after European markets started off with smart gains.

The BSE Sensex ended up 20 points at 15,935 after touching a high of 16,061 and a low of 15,651. The Nifty ended flat at 4,760.

Equity markets in Asia ended in the red. The Nikkei in Japan was down 1%, while Australia's S&P/ASX ended flat. The Shanghai SE Composite ended flat and Hang Seng index in Hong Kong was down 0.6%.

In Europe, stocks were trading higher. The DAX in Germany was up 0.7% and the CAC 40 index in France was up 0.9%. The FTSE in the UK was up 0.6%.

Coming back to India, among the BSE sectoral indices, the BSE Capital Goods index was the top gainer, adding 0.6%, followed by Teck index that was up 0.5% and BSE Banking index was up 0.4%. The BSE Mid-Cap and BSE Small-Cap index ended almost unchanged.

Among the 30-components of Sensex 16 ended in the positive terrain and 14 ended in the red. Bharti, Infosys, ONGC, L&T and SBI were among the top gainers. On the other hand, major losers were Tata Steel, Hindalco, TCS and Wipro.

Outside the frontline indices, the big losers in the broader market were Gujarat NRE Coke, REC, Spice Comm and REI Agro. On the other hand, gainers included Chambal Fert, LITL, P&G and Dabur India.

Jubilant Foodworks, running the fast food chain under the Dominos pizza brand ended the day with delicious gains registering 66% rise as against its issue price of Rs145.

The price band of IPO, through which the company expects to raise up to Rs3.29bn, was fixed between Rs135 to Rs145 per equity. The issue closed on January 20.

The company had entered the capital market with an issue size of 2.26crore equity shares of Rs10 each. At the upper end of price band, the offer is valued worth Rs3.29bn.

The company had already roped in several anchor investors that includes Reliance MF, SBI MF, Blackrock, Canara Robeco MF and Fidelity for a total investment of Rs443mn under its pre-IPO placement.

The company earlier reported a surge in Oct-Dec net profit to Rs113.7mn, compared with Rs17.7m a year ago. Its total income grew to Rs1.17bnn from Rs780.3m for the quarter.

The firm also plans to open 65-70 new stores in the current fiscal, of which it has opened 55 as of Dec 31, 2009.

Shares of Madhucon Projects surged by over 3% to end at Rs161 after the company announced that it secured 75MW Hydro Power project from Uttarakhand Jal Vidyut Nigam Limited, Government of Uttarakhand. The scrip opened at Rs160 it touched an intra-day high of Rs167 and a low of Rs157 and recorded volumes of over 82,000 shares on BSE.

Shares of Sobha Developers ended lower by 3.5% at Rs256. The company had nearly 4.1% equity shares changed hands in a single transaction. The transaction was at an average price of Rs265 per share on the BSE. The scrip opened at Rs266 it touched an intra-day high of Rs277 and a low of Rs254 and recorded volumes of over 4.6mn shares on BSE.

Shares of Taneja Aerospace shot up by over 16% to end at Rs48 after ~234,030 equity shares, or 0.9% of its equity, changed hands in seven blocks on the BSE. The trading volume surged over 6x the three-month daily average.

The scrip opened at Rs42 it touched an intra-day high of Rs49 and a low of Rs41.7 and recorded volumes of over 2.2mn shares on BSE.