Take stock of your stocks

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Confusion, misconception and contradictions regarding the appl-icability of the General Anti-Avoidance Rules (GAAR) dominated and dictated the market mov-ements during the week ended.

After remaining weak for the major part of the week, markets rallied strongly on Friday on the back of assurances from the finance minister on GAAR to end on a positive note for the first time in six weeks.
Both the Sensex and the Nifty ended marginally higher at 17,404 and 5,296.

Caution was the watchword among market players. In the near-term, the focus of markets will be on the timing of fuel price hike, fourth quarter results and the RBI policy meet. Many market players feel that with lack of participation from domestic investors and markets becoming dependent on FII inflows, lack of clarity on P-notes, GAAR applicability, trying to bolster revenue by collecting taxes from Vodafone and others retrospectively from the finance ministry is like being “penny wise, pou-nd foolish”.

It was the biggest first quarter gain for the Dow and the S&P since 1998, the best for the Nasdaq since 1991. In the truncated week ahead the markets will be on watch for further developments on the GAAR issue, and global cues.

For the week ahead chartists predict a trading range of 17,050-17,800 for the Sensex and 5,170-5,450 for the Nifty. Imm-ediate supports for the indices are at 17,200 and 17,050 and 5,240 and 5,190.

The degree of one’s emotion varies inversely with one’s knowledge of the facts — the less you know the hotter you get about a stock. To guess is cheap. To guess wrongly in stock markets is very expensive.

Stock scan

* Infotech Enterprises provides cutting-edge en-gineering solutions, incl-uding product development, and life-cycle support, process, network and content engineering to organisations worldwide.

Despite adverse global economic scenario and highly volatile currency markets, the company has shown good improvement in operating margins in Q3. The stock has, of late, been witnessing renewed buying interest. Buy on dec-lines for a Rs 215 target pr-ice in the medium-term.

* Gateway Distriparks Ltd is the only logistics company in India with three verticals, which are synergetic and capable of being interlinked — container freight stations, inland container depots with rail movement of containers to major maritime ports and cold storage chain and logistics. the Q3 consolidated resu-lts reflect benefits of rail freight subsidiary and sharp impro-vement in profits on YOY basis. Buy on declines for a target of Rs 225 in medium-term.

* Balkrishna Industries is one of the world’s leading manufacturers of “off-highway tires” for specialty segments like earthmovers, all terrain vehicles.

Excellent Q3 results and good visibility of earnings make the stock good investment bet for portfolio. More than 90 per cent of production is exported to more than 120 countries. Buy on declines for a target price of Rs 400 in next few months.

F&O

Derivative expiry contributed to spurt in volumes and volatility in the week ended.
Rollovers were weak reflecting the cautious attitude of traders over FII reaction to the ongoing GAAR imbroglio.

Huge put writing at 5,000 & 5,100 strikes and call at 5,400 strike in Nifty indicates the possible trading band for Nifty in near term.

* If Q4 corporate earnings exceed investors very low expectations, expect bear squeeze and sharp upmove in select stocks.

* Defensives FMCG and Pharma were out performers for another we-ek. Range bound activity was seen in many sectors. Sector wise long build up was seen in banking, auto and telecom

* Rumours of hostile bid on infra company IVRCL is ‘sweet’ news for investors of firms whose valuations are depressed and warrant a better market price.

* Ahead of fuel price hike PSUs IOC, HPCL and BPCL may gain further. Among the stock futures looking good are Aditya Birla Nuvo, Maruti Suzuki, Kotak Bank, MRPL, Jubilant Food, Dr Reddy, DLF, Lupin and LIC Housing. Avoid shorts for present.

(C. Kutumba Rao is a Hyderabad-based stock market analyst. The views expressed and the recommendations made are those of the author. Readers are advised to consult their consultants before making any investments. This newspaper is not liable for decisions made on the basis of this column.)