Dipan Mehta feels mkt upmove to continue, advices stks

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Dipan Mehta feels mkt upmove to continue, advices stks

Dipan Mehta, Member of the BSE and NSE sees some pickup taking place in the last few trading sessions of this calendar year. "The so-called Christmas rally is finally underway."

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It was a measured run-up on Dalal Street to a spirited high jump at the end of the day. After lying quiet for most of the session, the markets make a late burst to close at 2009 highs. The Nifty shut shop at 5,197, up 33 points while the Sensex closed at 17,360 up 129 points.

Dipan Mehta, Member of the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) sees some pickup taking place in the last few trading sessions of this calendar year. "The so-called Christmas rally is finally underway. Once the earlier highs have been pierced you will see a lot more traders and investor getting into the act and that could perhaps drag the indices up by maybe 2-3% easily."

For the time being Mehta convincingly feels that the market closing above 5,200 would attract a lot of fresh money or fresh buying which would ensure the market upmove continues.

There is a lot of cash waiting on the sidelines, waiting for a correction-a compression of valuation and for some marginal shift to be created, Mehta says, adding that the market is not providing an entry for those funds. Further, he adds, "The newsflow has been positive constantly-first it was the September quarter gross domestic product (GDP) numbers, thereafter you have a string of positive newsflow from the US economy and we had the Finance Minister come and say that next year growth would be about 8%. The positive newsflow is keeping the market afloat and not providing any opportunity for traders to enter in. Now that at least a couple of months have passed without the market having any decisive correction-that period seems to be over-maybe it is a good time to start deploying the cash."

2010 prediction

January is a different month with the usual earnings season as well as fresh allocations and everyone back from a holiday inching to do something so that could act as a prefect follow up situation for the market to scale even higher, says Mehta.

Liquidity, according to him, is the real reason why a lot of investors or fund managers are quite bullish. "Domestic liquidity could be the trigger for the markets to trade maybe 5-7% higher. One could look for the reasons when this liquidity comes in and that could be the earnings season. It could be consistently several days of positive FII numbers or it could be anything. Everyone needs to be prepared that we are going to go into a zone where stocks on paper will appear to be expensive and yet liquidity will keep on flowing in and that process will continue unless we have a situation like a minor accident or some problem emerging on the global side and till that time the party which has started from yesterday should continue well into at least first two-three weeks of January."

Sector/ stock review

Auto: Auto numbers have been holding pretty well and the sales and production numbers have come off pretty well too for the last two-three months, says Mehta. "Maybe this quarter too they may continue to surprise."

However, a lot of investors do remain underweight on that sector given the speed at which it has moved, he adds. "The numbers are slightly below expectations and the auto companies will be given that levy and there will be still enough appetite for these stocks. The biggest thing going in favour of autos at this point in time is that the commodity prices remain stable and some amount of pricing power is coming back and volumes have been fantastic on the back of low interest rates. There is an overall improvement in the consumer sentiment and in the labour market along with some of the other industries remaining at least status quo despite all the challenges which they have been facing."

Gujarat NRE Coke : The strength of the management and the performance for Gujarat NRE Coke has been quite volatile, says Mehta. "The management keeps talking about huge expansion plans and acquisitions and great deal of ambition but at the end of the day the numbers do not come through and some of them tend to disappoint on the street."

For Gujarat NRE Coke there could be volatility on account of movement and prices and the rupee dollar currency rate but for long term investors its not a stock worth keeping in the portfolio maybe part of core holdings as well, he says.

Sesa Goa : Sesa Goa could be interesting, says Mehta. "After the change of management which we have seen in the past two-three years, there is renewed aggression coming in the company. It has its own business and a lot of resources. Though there were difficulties in the scaling of operations but with the acquisition of the Dempo iron ore mines and looking at the overseas acquisitions expanding its domestic footprint-all of it augers well for Sesa Goa shareholders."

Also, he add, there is always this hope that maybe next year iron ore prices would see appreciation anywhere between a minimum of 15% to 30% on the higher side which could be extremely positive for Sesa Goa. "Also this will be sooner than later before the company actually takes up the plunge and sets up its own steel plants given that it is getting difficulty in fresh mining leases within India and its extremely cash rich so this is only a natural transition which will take place and that could be a trigger for the stock so per say positive on Sesa Goa."

ITI : Not impressed with the news on the stock, SP Tulsian of sptulsian.com says, "I have my apprehensions on two PSU stocks-ITI and HMT . I do not think that one can really see the turnaround happening. Even if I do not go into the past of the company with Rs 600 crore loss for FY09, if I see their performance for the first half, they clocked in a topline of Rs 1,900 crore and still had losses of Rs 200 crore because they are sitting on a debt to close to Rs 2,500 crore in spite of the order of Rs 6,500-7,000 crore from BSNL and MTNL . They have all been getting this kind of privilege or preference for the past couple of years. In spite of that if they have not been able to make use of that productively or profitability I doubt how they will be able to make use from hereon because this is mere a extension and the telecom ministry has been talking of revival."