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Sunday, February 01, 2009
TEAM STOCK RESEARCHERS
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Dear Friends,
The benchmark indices Nifty moved up 7.31% in the truncated week that followed India’s Republic day. The rise was on account of the expected third Fiscal stimulus package by the Government of India. I personally don’t expect any kind of stimulus packages before the presentation of the interim budget on 16th of February 2009. We are in the midst of a Pre Budget rally (Relief rally) in the markets. In recent years it has been one of the most unattractive pre-budget up move. Almost every year since the beginning of the Bull Run we have seen the emergence of a pre budget rally in select Agro and Industrial sectors primarily fertilizer, Sugar and Textiles. Fertilizer is on a consolidation mode with an impending move on either side. Any rise will see liquidation of position by trapped investors.
We are at the verge of the earnings season with almost all the companies having reported their earnings. I believe that the biggest disappointment of the quarter lies in Pharma companies. After having under performed the broader indices in the Bull Run the stocks continue the same pattern in the bear market. We might see some of the pharmaceutical companies getting rerated in coming days.
I sense an opportunity of moneymaking in IPO of 2007-2008.Many of these companies have good management background and reserves more then there current market capitalization. At the same time there are a good number of Fly By Night companies in the list along with companies whose management has not kept there promises. The million $ question that comes up in ones mind is How to pick the correct management. I personally believe that there is always more then one parameter before one begins stock picking but the most important one is scrutiny of IPO utilization statement by the management.
Any company that raises funds via QIP,IPO,Rights,Preferrential allotment makes a quarterly disclosure on the use of IPO proceeds. For example refer the disclosures of Brigade enterprises with its recent quarterly announcement. The current market cap of the company is 370 crs. Company had raised over 700 crs via its IPO in December 2007. Refer the disclosures in the recent corporate announcements Company has spent 254 crs vs 47 crs that was projected at the time of Ipo on Land bank. Akruti city is another case in point. The free float of the FNO stock is less then 500000 shares.(less then 1% of its equity base). Citigroup, which has been so negative on the Indian real estate market, still holds more then 1% stake in the company. The recent results of Akruti prove that either Market knows what markets men don’t know or operators are very strong.
Coming to Nifty the recent up move from the lows of 2662 maintains the structure of a contracting triangle in Nifty EOD charts. For the emergence of the contracting triangle one has to follow EOD data from the lows of 24th October to the high of 4th November. The Rsi is not in overbought or oversold zones as of now. I believe that in coming week we will react to the thought process of the markets on the quarterly results. Joker in the quarterly pack should be Information Technology sector, the only consistent earnings driver.
Happy Trading!
Nifty support- 2771,2714
Nifty resistance-2929,2963
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WEEKLY CALLS ON GRASIM,AUROBINDO PHARMA,CROMPTON GREAVES,BEML HITS TARGETS.BOMBAY DYEING EXITED AT COST AND BAJAJ AUTO HITS SL.
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