Equity benchmarks rallied on Monday, with the Sensex now having risen close to 1,000 points from the low seen on Friday before last. Dealers said hopes of increased money flows into equities because of the recent weakness in commodity prices, as well as improvement in India’s macroeconomic fundamentals, were driving the uptrend, brokers said.
Sudarshan Sukhani of s2analytics.com indicates that long positions were the need-of-the -hour in a market of this sort. "At this point, it is a trading market. The morning's suggestion of staying long remains. If you are not long now, then you could buy at 5,600 calls or futures. Take only part of your position now and take the other part whenever there is a correction. Don't try to attempt and call a top. I don't think it is an investors' market. Stay with the market on a trading basis. You never know where it will go."
On whether the market pullback will continue well above 5,800, Anand Tandon of JRG Securities sees no particular reason why the market should surge ahead. "There is no particular reason for stocks to go up in a hurry and companies performing well are already overpriced."
SP Tulsian of sptulsian.com suggests a strategy for Wipro and the level the stock is estimated to stabilise. "Wipro is the weakest amongst IT stocks where an adverse kind of perception has started to build. There is no reason for the stocks to really go up and I do not think today's levels represent the true value as the stock should have been settled at around Rs 350. Among IT stocks in the May series, I would prefer to go long on Infosys at about Rs 2,250."
Tulsian is positive on the outcome of Cabinet Committee on Investment meeting to consider several proposals including the NELP (New Exploration Licensing Policy) for the oil and gas sector, scheduled later in the day. "The overall scenario in the oil and gas sector is favourable and the sector has the capacity to absorb investment of about USD 20 billion over the next two to three years. This would help contain the current account deficit and prove to be boost for companies like Cairn India, Reliance Industries and upstream PSUs like ONGC."
Of the entire pack ADAG (Anil Dhirubhai Ambani Group) stocks that have started to move, Tulsian zeroes-in on Reliance Communications (RComm) which is up 10 percent. "Investors should hold onto RComm for a level of about Rs 98 which I expect in the week or so. At Rs 98 investors could either hold on or book profits."
Tulsian currently recommends a buy on Unitech with a price target of Rs 30 with a stop loss of Rs 28.75. "This could be followed by a short call on IndusInd Bank whose FY12-FY13 EPS at Rs 22 and the share is ruling at a PE multiple of Rs 21 and a price-to -book of 3.30. I have a target of Rs 460 with a stop loss of Rs 467.50."
Tulsian is positive view on the real estate sector. "Excluding Housing Development and Infrastructure (HDIL), other stocks like Anant Raj Industries, Prestige Estates, Brigade Enterprise, Peninsula Land, Indiabulls Real Estate and DLF look very good and allow for a positional view thanks to initiatives by these companies to aggressively launch new projects, increased focus on the project completion deadlines and reduce prices."
The market analyst is also pleased with Ultratech Cement's results.” A profit-after-tax (PAT) of Rs 726 crore on marginally lower sales indicates better margins. This indicates that a similar kind of results could be expected from ACC and Ambuja. I won't be surprised to see Ultratech Cement moving up by Rs 100 in the next 2-to-3 days.”
HDFC Bank and M&M Financial Services are to announce their results on Tuesday. Tulsian expects the M&M Financials stock to post an upmove after the announcement of results. "But I am not positive on HDFC Bank. The stock could touch Rs 710-715 after which there could be some profit-booking."
Tulsian expects the Hindustan Zinc's results to be positive. "The corrections in the stock were caused by fall in silver prices. On a core PE multiple of about 10 on the EPS of Rs 1.50 from the silver segment, the share corrected by Rs 15. So I do not think that there will be any disappointment."
The week has assumed importance due to a lot big-ticket earnings in the banking sector scheduled to be announced. There is much debate regarding expectations from the Axis Bank results after the huge run-up that that stock has already seen. "I don’t think private-sector banks could go wrong. I expect the profit and loss (P&L) to be spick-and-span," adds Anand Tandon.