It was completely disappointing day for the markets, which lost its positive momentum in late trade and ended at day's low due to oil stocks, which were the main draggers at the end of the day followed by technology, telecom, capital goods and auto stocks. The Sensex ended down 380 points and Nifty 120 points from day's high

Vijay Bhambwani of BSPLIndia.com and S Ranganathan of LKP Shares are positive on Cairn India and Shanthi Gears respectively.

Bhambwani on Hindalco and Nalco:

You need to get your cues from the commodity markets. Base metals are clearly showing signs of consolidation, but upmoves are meeting with overhead supply and unless you see aluminum and copper prices actually going up on the domestic as well as the international commodity exchanges, I don’t see Hindalco and Nalco sustain any upmove. Upsides are likely to encounter the overhead supply both on Hindalco and Nalco.

Bhambwani on Orchid Chemicals:

Technically, I would like to stay away from Orchid at this point in time till we see stability return on the counter, which is moving sideways. The traders are yet to make up their mind which way to trade at this point in time and one wouldn’t want to get involved in a stock that’s yet to take a directional call.

Bhambwani on Cairn India:

Cairn is likely to emerge as a leader in this sector and even though the markets tend to be low, Cairn would continue to move up more so in tandem with international prices of crude oil in commodity exchanges. What you are seeing is the pulling off of crude by almost USD 3/bbl from the absolute top, that’s why Cairn is down at most Rs 20-25 today. So Rs 242 to Rs 250 is the band where Cairn will see a lot of re-emergence of buying momentum as well as the short coverings

Ranganathan on Shanthi Gears:

Shanthi Gears in the midcap engineering segment is a quality supplier of industrial gears and gearboxes to a variety of industrialists. Primarily they make customized products, which go into customized applications, which includes applications like marine and aerospace. The fact of the matter is that the company over the last couple of years has been able to witness 25% growth on its topline as well as bottomline. We expect the company to end FY08 with revenues of close Rs 250 crore and EBITDA margins should be at least 35% that is the EBITDA margins levels that we have observed in the last couple of years. We expect the company to maintain those margins.

Going forward again for the current year we expect topline to be around Rs 300 crore and maintaining the same margins what it does- it translates into cash earnings of about 10 and actual earnings of about 6.5, which effectively means that you are getting quality engineering company at one-year forward multiples of 10. As far as the target is concerned, we believe that a price of about Rs 85 should be achievable going forward.

Ranganathan on midcaps:

If you look at the current earnings season, which has just gone by we have observed that even during the fall there has been a lot of value buying in some of the private sector banks as well as some of the frontline IT. But if you take into account some of the cost pressures in the midcaps, although some of the results are yet to come in, we have seen pressures across several industries in fact actually going down to impact the gross margins of several companies and specifically in relation to the manufacturing sector. So that is the space, which has seen lot of selling pressure particularly capital goods and some of the autos and so on. We would like to wait for some more of the results especially the transformer segment and some of the high-profile companies belonging to the Tata Group before really commenting on this. But having said that, midcaps as a segment has not really participated in the bounce that we have seen. That is largely because the segment has seen a lot of cost pressure.      

Ranganathan on IT and defensive stocks:

As of now if you see the market has been taking cover in IT, defensives if you take for instance, the FMCG the valuations don’t really permit investors to really hide behind FMCG. So the fact of the matter is that at 17,000 levels the market is looking to consolidate because some of the stocks are not really attractive on the valuation side, especially when you consider and you put dynamics to the current cost structure into your business model.

Bhambwani's disclosure: It is safe to assume that my clients & I may have an interest in the stocks/sectors discussed

Ranganathan's disclosure: Since we regularly track the company our clients would have a beneficial interest in the stock.