Mkt may rally 100-150 points before tiring out: Udayan

It is a vastly more cheerful morning today. Yesterday seemed to have been a bit of a turnaround day for the market. First came general anti-avoidance rules (GAAR) then the inflation numbers or the other way around, but both acted in favour of the market. We suddenly saw a very tired looking market in the morning spring back to life and close above 6,000.

Tata Consultancy Services (TCS) did not do much to hurt sentiment later in the evening. So, we are all okay this morning as we start trade with traders once again rubbing their hands at the prospect of the Nifty staying and getting further away from that 6,000 mark.
There were quite a few triggers yesterday. First, the inflation numbers sort of cemented hopes of an interest rate cut from the Reserve Bank of India (RBI) on the January 29. Now, it is no longer a discussion on the street on whether it will move. What is being discussed is whether it will be 25 bps or 50 bps. So, I think that’s one part of the story, though the consumer price index (CPI) numbers were not very encouraging and GAAR, was anyway always going to happen.
I think the street knew it, but gave the market excuse to move higher. The fact that there was confirmation from the finance ministry yesterday, so the market which was looking very listless and tired suddenly found reasons to perk up and close above 6,000.
I guess there must have been a bit of a short covering as well yesterday. Due to the evidence of what happened on Friday, some traders would have gone short and once again the market has come back. Whether it is a breakout or not, I think we will need follow-up over the next couple of days for the Nifty to get back to 6,050 plus kind of levels for the bulls to once again trade the momentum on the way up and take charge of the market.
However, it is possible that what happened yesterday might just be egging the market on for a one last dash before this intermediate rally sort of tops out. There was a suggestion or a feeling that the market was beginning to tire and top out, but after yesterday, the talk on the street would be that there could just be another 100-150 points left on the way up before this market tires up atleast in this leg of the rally.
TCS' results helped the market sentiment. When a big stock moves 17 percent post-earnings, the mood changes a little bit. That was the disappointment on Friday that despite earnings season kicking off well with a surprise from Infosys, the market did not pick it up. Yesterday, however, in a sense made amends, atleast in a limited sense. Today we will see whether the market can move higher from hereon and get past 6050.
This is a congestion zone where it has been getting stuck the last couple of times. So today’s close would be particularly important. On TCS, I think numbers are par for the course. I have seen a lot of brokerage upgrades come in on TCS and for the sector. It was a steady quarter, it was a typical TCS quarter, stable, no shocks on the way down and that is what they have been delivering for the last 10 quarters. So, I do not see what happened with their 1.5 percent volume growth that suddenly most analysts woke up and said now we need to upgrade the sector.
I think it is rather a case of analysts who have been caught out by being too bearish and circumspect on the sector and they are now waking up to the fact that stock prices could run away. They would be holding their market performer and underweight calls and I think they are trying to balance that, rather than anything which TCS blew the lights out of yesterday.
I do not see any major reaction on the TCS stock. It has already gone up about 5 percent over the last couple of days. It is trading at 17 PE. This year is going to be better and they will deliver Rs 80 next year. The stock could go up to something like an 18 PE, but 18 PE would take the stock only Rs 100 higher from here, that is 7-8 percent. Would one play a stock for a 7 percent upside over six to nine months? I do not think so. So, I do not see any major cause for excitement for TCS. There should not be any downtick of course, so stable, steady but valuations have probably captured most of the good news.