Weekly Close: Beware! this is a 'Bull' Market !!!

Markets continue to be unstoppable..and an interesting part is that its the FIIs who are buying and domestic Institutions who are sellers. Clearly, there is no insider who knows what is going on.. We mentioned last week that this rally was drven by liquidity. Even we have been overwhelmed by the huge flows witnessed. There are many who say .. " See i told you . Markets will hit 17000 many months ago.. and SBI will do 2000 levels of Reliance will do 2500 and so on so forth".. The fact of the matter remains, that it has happened for the turn of events globally. Its a dynamic system and India is integrated. Clearly the two events consisting of UKs guarantee for Northern Rock was one and the large Fed cut another which set the stage which could offset a recession. Please note that this is what the market is hoping that there will be no recession. The market also prices in the possibility that demand in Asia will be the engine of growth. Thus moneyflows have been strongly flowing into India which along with China is expected to do well. Asia has had it really good this quarter in terms of the market performance. Indian Mutual funds have failed to realise the seriousness of this event in the face of political uncertainty and also the same old stuff of "High crude prices", possible higher inflation and high interest cost eating into growth which will only be disappointing.

 

Of course there is euphoria as well and there are many who expect a CRR cut / SLR cut. In our earlier note we argued that clearly thats not on cards.. given the flush of liquidity. We however do believe that an excuse is building up for a rate cut and that is in a way to soften the rupee. This we believe will not happen before October 30th. The banks are scaling highs on hopes of rate cuts over the weekend. We would be surprised if they did happen.

 

It was the FNO expiry week and markets left al the short positions high and dry. it took just 6 trading sessions for the Sensex to cross 17k and with aplomb. Not to be left behind Nifty created its own level and charged upto 5000. The much wanted consolidation leave alone correction is just not coming in.

 

HDFC cut the interest on home loans and some other banks followed. SBI has not cut rates as ICICI introduced car loan on floating interest rate. Autos did see some recovery for the week.. but more likely to be driven by anticipated good numbers for the month which will be reported next week.

 

We had Greenply which was a flyer this week. The plywood company has been a 4 bagger since our research on it. The company has been expanding and benefits of that are being seen in the bottomline. Demand for Plywood, Laminates and Vineers is seen 18 months post the housing boom and thats been felt. The company now has a particle board plant. Its best to know more from our research note.. Do read

 

We had research on Titan on its performance. This company has been on a roll. The companys jewellery business has been doing well . The valuations may not appear attractive.. but we believe that there is more steam in this one. and the brand is unbeatable. The prescription eyewear will add value we believe.

 

We had another research note on Kesoram. This is a cement and tyre company. Both sectors have been doing well. More clarity on succession has brought in the buyers. We are positive here. Look for more gains in this one though the tyre business is where there could be some pressure with higher rubber and crude prices.

 

We had new research on Phoenix lamps. a company which we covered much earlier. The company has had a change in ownership. The demand for CFL is exploding and this company is well placed with the largest capacities in that space. Certainly there seems to be value here. However there is lack of clarity on the threat from LED lamps and there are organisations installing those and others who are getting ready to manufacture them.

 

Apart from our own research we had notes on downgrades and upgrades on Educomp, Colgate, Peronet LNG.. And its all there to read !
Technically Speaking: Sensex seems overbot but important to remember that overbot preiods can last over a long period of time and the momentum may carry it further. Near term consolidation could be expected..as there seems to be some level of MACD divergence in the 60 minutes charts. and thats some hope for the bears sitting with short positions. But all in all.. its best to avoid short positions. 16530 will be the stoploss for long positions and thats a bit far. Nearer stoploss is 17030.

 

Fundamentally Speaking: Fundamentals have been relegated to the background with the huge liquidity flows. We can probably say that Markets are getting into a nrew range of valuations and stocks will start trading there henceforth unless there is a major accident. Clearly this is a Bull Market. There is value in many mid caps and many of them are headed towards becoming large caps. The way ahead is to focus on growth and value.. and stay invested. Many of our stocks are doing well and that you will find in our recommendations of our research. Its not easy to get in when you believe that the run up has happened. The way to address that is get into stocks where there is still value.