Sunday, November 07, 2010
It was fireworks on the eve of Diwali as bulls took the indices to a new closing high. For the week, the BSE Sensex and NSE Nifty zoomed over 4% each to close at new all time highs of 20,894 and 6288 respectively. Market players seemed to have digested the rate hike in key interest rates by the RBI. In addition, the latest dose of liquidity injection from the Federal Reserve in an attempt to lift the US economy out of a deep slumber was cheered by world markets. And of course, Coal India's listing turned out to be the icing on the cake for the local bourses.
The government on Sunday advised investors to stay put with Coal India (CIL) to multiply their fortunes and compared the strengths of the company with gold, which is considered the best long-term bet to create wealth.
The markets are likely to continue the upward march in the coming week given the positive breakout on the daily charts. The Nifty has immediate support at 6,300, which should be seen a key level for the markets to trade higher.
Broking firm PINC Money has recommended Reliance Communications as stock of the week with target price of Rs 215 - 220 in 2-3 months as against current market price (CMP) of Rs 182.
Following are Diwali Mahurat picks from different brokers:
Anagram Stock Broking, in its Diwali Mahurat trading note, has recommended 7 fundamental stocks where it remains positive over the next 6-12 months and also gives a technical perspective of 5 stocks where it expects good upside potential in the short term.
Investors with a two-year horizon can buy the shares of Allied Digital Services, a provider of IT infrastructure management and technical support outsourcing services.
Strong growth in its high-margin services business, a healthy domestic presence in the solutions segment and deal-wins from the US that continue to accrue from its acquisition of En Pointe Global, are key positives.
PowerGrid is the only transmission player that may enjoy a scarcity premium in this business. However, returns may be moderate, given the defensive nature of the stock.
Investors with a three-four year horizon can consider subscribing to the follow-on public offer of Power Grid Corporation. PowerGrid, the central transmission utility, wheels more than half the total power generated by power utilities in India.
Investors can continue to hold the Maruti Suzuki stock. At the current market price of Rs 1,514, it trades at a PE of 18 times its trailing 12-month earnings. Fresh exposures need not be considered at this point in time, as buoyant automobile sales and capacity de-bottlenecking notwithstanding, Maruti has found it difficult to transfer the topline growth to the bottomline in the first and second quarters.
Investors could consider picking up shares in pipe-maker Maharashtra Seamless whose valuation relative to peers looks attractive thanks to relatively higher margins, superior product mix and low debt. The stock trades at Rs 424, which discounts the trailing 12-month earnings by about nine times. It trades at a discount to peers such Jindal SAW and Welspun Corp.