MARKET WEEKLY UPDATE
- Sensex closes at 17,430, up 3.0%; Nifty closes at 5,278, up 3.0%.
- The highlight of the week has been Mr. Manmohan Singh taking charge of the finance portfolio and the ensuing talks of aggressively pushing through reforms.
- Meanwhile as crude oil prices have come off, OMCs cut petrol prices by Rs.3/litre.
- The Indian Meteorological Department (IMD) in its second stage forecast has retained its normal outlook for monsoon.
- Rupee rallied against the US dollar, ending at 55.6/dollar, versus 57.2/dollar last week.
MARKET OUT LOOK:
“Expect short term rally to continue”
- At the current level of 17,300, the Sensex trades at a PE of 15.7x FY12 earnings and 13.6x FY13E earnings estimate. At 13.6x, we trade below average valuations of 15.4x 1 year forward earnings.
- Recent events like Greek elections going in market’s favor having taken some risk off the table.
- Further, crude oil prices have come off significantly by over 25% to $90/barrel. With risks off the table, and crude coming off significantly we expect short term rally to continue.
Nominal Summary:
“Bulls took the lead”
- Nifty opened on a flat note and throughout the week was trading in the broad range of 5200-5100. However on Friday huge buying was witnessed and Nifty broke the mentioned resistance of 5200 and further made a high of 5286.Finally Nifty closed at 5278 with a gain of 2.38% on w-o-w basis. Cements, Pharma, Realty, Cap Good and Banking stocks outperformed the broader markets on w-o-w basis. Nifty Outlook: “Upside till 5400”
- On the daily chart Nifty broke the mentioned resistance of 5200, beside this Nifty is still trading above the short term averages. Oscillators still trading positive and nifty continues to form Higher Top and Higher Bottom. Above parameters clearly suggest strength in the markets and we maintain our upside target of 5378 and above that 5400.
- However downside Nifty has support in the range of 5147-5100.
Sectoral View:
“Stay with companies robust business models”
- RBI in its latest policy cut interest rates by 50 bps to provide a fillip to deteriorating growth environment.
- We expect pick-up in corporate capex and credit growth buoyed by further monetary easing.
- We would advise clients to play interest rate sensitive’s like Banks and Capital Goods (Yes Bank, City Union Bank and Larsen and Toubro) to capitalize on falling rates theme.
- At the same time consumption and agri stories (GSK Consumer, Bajaj Auto, Coromondal Fertiliser) would continue to do well.
- We recommend reducing exposure on global cyclical like Tata Steel as concerns from China slowdown intensify.