India Stocks Outlook: Choppy next week; bias dn on inflation worry
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B. Karthick
Jun 14, 2008, 3:57:19 AM6/14/08
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India Stocks Outlook: Choppy next week; bias dn on inflation worry
Saturday, Jun 14
Key share indices are likely to remain choppy next week on
alternate bouts of buying and selling amid uncertain market direction.
The bias is likely to remain weak, as inflation concerns continue
to dent
sentiment.
India's headline inflation is likely to rise to double digits in
the week
to Jun 7, as it factors in the government's fuel price hike decision
taken
Jun 4.
Crude is the single largest worry for the market right now. We
expect
crude to remain around $130-135 a barrel and that will continue to add
to
inflationary pressures.
Select Infrastructure stocks like Bharat Heavy Electricals, and
defensive counters like information technology and pharmaceutical
companies
are likely to attract buying from domestic funds.
Friday, Sensex ended at 15189.62, down 60.58 points, or 0.4% from
Thursday.
Nifty closed at 4517.10, down 22.25 points, or 0.5%.
India VIX or volatility index rose 5% from the previous session.
We are cautiously optimistic on the market after Nifty has managed
to close above the 4500-mark for three consecutive sessions.
However, we believes Nifty is likely to fall further to 4280,
though the
support of 4400 seems to hold in the near-term.
Nifty will have a lot of difficulty crossing 4750.
Bank shares are likely to see some more downside, despite trading
at
attractive valuations, on fears Reserve Bank of India will again raise
rates
or perhaps cash reserve ratio in its July policy meet to contain
inflation.
However, We recommend buying some public sector banks.
Real estate shares are best avoided as they are likely to
fall 10-15% more even from their current lows.
The real estate sector is a high beta sector, and most realty
shares have
hit new 52-week lows this week, in line with the fall in the broader
market.
DLF could actually come down around 100 rupees from current levels.
So
it is not an advisable time to enter the realty sector yet.
Auto shares are also seen down next week as volumes are likely to
take a
hit after the government Friday increased excise duty on utility
vehicles by
15,000 rupees per unit and 20,000 rupees per unit for over 1,500cc
and
2,000cc, respectively.
The duty is also applicable to large cars.
Reliance Communications may see some downside after Reliance
Industries
Thursday informed the MTN Group board that it has a right of first
refusal of
any majority stake sale in Reliance Communications.
Among gainers, GAIL (India) could see some upside as the company
will
consider a bonus issue on Jun 23.
Companies such as JSW Steel, Uttam Galva, and Essar Steel are
likely to
benefit after the government Friday exempted flat steel products from
the 15%
export duty.
Shares of steel companies are not likely to see any significant
impact on
hike in export duty on long products to 15% from 10%.
The hike is very much expected, and Indian companies anyways don't
export much of long products.
End
B.Karthick,
Research Analyst.
Saturday, Jun 14
Key share indices are likely to remain choppy next week on
alternate bouts of buying and selling amid uncertain market direction.
The bias is likely to remain weak, as inflation concerns continue
to dent
sentiment.
India's headline inflation is likely to rise to double digits in
the week
to Jun 7, as it factors in the government's fuel price hike decision
taken
Jun 4.
Crude is the single largest worry for the market right now. We
expect
crude to remain around $130-135 a barrel and that will continue to add
to
inflationary pressures.
Select Infrastructure stocks like Bharat Heavy Electricals, and
defensive counters like information technology and pharmaceutical
companies
are likely to attract buying from domestic funds.
Friday, Sensex ended at 15189.62, down 60.58 points, or 0.4% from
Thursday.
Nifty closed at 4517.10, down 22.25 points, or 0.5%.
India VIX or volatility index rose 5% from the previous session.
We are cautiously optimistic on the market after Nifty has managed
to close above the 4500-mark for three consecutive sessions.
However, we believes Nifty is likely to fall further to 4280,
though the
support of 4400 seems to hold in the near-term.
Nifty will have a lot of difficulty crossing 4750.
Bank shares are likely to see some more downside, despite trading
at
attractive valuations, on fears Reserve Bank of India will again raise
rates
or perhaps cash reserve ratio in its July policy meet to contain
inflation.
However, We recommend buying some public sector banks.
Real estate shares are best avoided as they are likely to
fall 10-15% more even from their current lows.
The real estate sector is a high beta sector, and most realty
shares have
hit new 52-week lows this week, in line with the fall in the broader
market.
DLF could actually come down around 100 rupees from current levels.
So
it is not an advisable time to enter the realty sector yet.
Auto shares are also seen down next week as volumes are likely to
take a
hit after the government Friday increased excise duty on utility
vehicles by
15,000 rupees per unit and 20,000 rupees per unit for over 1,500cc
and
2,000cc, respectively.
The duty is also applicable to large cars.
Reliance Communications may see some downside after Reliance
Industries
Thursday informed the MTN Group board that it has a right of first
refusal of
any majority stake sale in Reliance Communications.
Among gainers, GAIL (India) could see some upside as the company
will
consider a bonus issue on Jun 23.
Companies such as JSW Steel, Uttam Galva, and Essar Steel are
likely to
benefit after the government Friday exempted flat steel products from
the 15%
export duty.
Shares of steel companies are not likely to see any significant
impact on
hike in export duty on long products to 15% from 10%.
The hike is very much expected, and Indian companies anyways don't
export much of long products.
End
B.Karthick,
Research Analyst.
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