Sensex sluggish as political uncertainty weighs; FMCG firm

Moneycontrol Bureau

Key indices were sluggish in early trade Tuesday, as the ongoing political uncertainty continue to weigh on sentiment. On Monday, Samajwadi Party chief Mulayam Singh revived talk of the Third Front, which political experts say is an indirect indication of early elections.

The BSE Sensex was down 46 points at 18635, and the Nifty was down 10 points at 5623.

L&T Finance Holdings shares were up 2 percent, though it will be parent L&T which is merging its general insurance business with Future Generali.
Other key gainers at this hour included Cummins India, Wockhardt and Coal India, up between 1-2 percent.

Realty and oil & gas shares were under pressure, failing to build on Monday’s gains.

Shares of Indian Overseas Bank, Oriental Bank of Commerce and Syndicate Bank were down 2-3 percent after rationg agency Moody’s on Monday downgraded its Standalone Bank Financial Strength Rating (BFSR) for these banks, citing falling asset quality, pressure on profitability and capital generation.

Rahul Chadha of Mirae Asset Global says his fund house continues to remain cautious on the market near term, largely as political uncertainty could aggravate the ongoing slowdown. He is recommending that investors should put their money in defensive stocks in the short term. Chadha is bullish on pharmaceutical and IT stocks. He recommends buying cement stocks at lower levels. Chadha says there could be further upsides in oil marketing companies if the government is able to hike diesel prices.

But brokerage house Morgan Stanley feels the pessimism could be overdone.

"As usual when share prices are falling, the positives take a back seat – but it is worth pointing out that valuations are attractive, the growth cycle is at an inflexion point, and that bad sentiment is a good contra-indicator for stock returns. We stick to our portfolio approach of large-cap cyclicals," the brokerage said in a note to clients.

Sidharth Bhamre of Angel Broking says the Nifty could slip to 5570 in the next couple of sessions and then recover to around 5600 levels.
He is bearish on HDFC Bank, and recommends a short sell with a price target of Rs 577. Bhamre says some strong hands have created short positions in HDFC Bank in the last couple of sessions. He is bearish also on UltraTech Cement and recommends short selling it with a price target of 1715, as he expects the support level of 1840-1850 to be breached.

Technical analyst Sukhani is highly bearish on realty stocks and sees stocks like DLF and Unitech sliding sharply in the coming sessions.