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Await Q4 results
GURU SPEAK
By G. S. Roongta
The unexpected sharp rally that started three weeks ago, continued its upward march on Monday, 4 April 2011, as the BSE Sensex gained 1.5% or 281.34 points to close at 19701.73 and the CNX Nifty advanced by 82.40 points to close at 5908.45. This rise was attributed to the short sellers who rushed to cover up their short positions that they had carried forward in the F&O segment on the expiry of the March 2011 contracts expected the market to react having rallied by over 1500 points on the Sensex or 700 points in Nifty Futures.
But their expectations were belied as the market continued to be in a bull grip backed by strong FII buying. The FIIs continued to be the frontrunners in their net buying position with hectic buying of Rs.1500 crore on 29 March 2011, Rs.1043 crore on 30 March 2011, Rs.4088 crore on 4 April 2011 and Rs.1562.70 crore on 5 April 2011 thereby turning their net sales position exceeding Rs.10,000 crore within two weeks till 5 April 2011. Their interest in the Indian markets will continue to be robust as they expect better returns on the back of strong economic growth with the GDP hitting 9% and FY11 corporate earnings expected to grow by 20%.
On the back of the FII buying support, the Sensex hit a high of 19770 on Tuesday, 5 April 2011, followed by a new high at 19811 on Wednesday, 6 April 2011 after its fall in intra-day trades. The Nifty touched 5928 on 5 April 2011 and 5945 on 6 April 2011 but could not sustain at higher levels. This led the Sensex to slip into the red on both the days to 19687 and 19612 respectively. But the Nifty was up marginally by 2 points at 5910 on 5 April 2011 but declined by 18 points the next day to end at 5892.
Thus the Sensex after rallying 1500 points in just 8 trading sessions appears to be in a mood of partial profit booking at this level as the short covering is almost over on account of hectic buying by the bears. The Sensex at 20K and the Nifty at 6K will prove to be range bound before the impact of the Q4FY11 results becomes visible. However, stock specific action will continue at least in mid cap and small cap stocks that were the worst affected in the recent consolidation phase from the beginning of 2011 to mid-March 2011.
Cement:
Higher dispatches in Q4 and price hike by over Rs.30 per bag in the past few weeks will boost the bottomlines of cement companies henceforth. Since demand has also started picking up, the outlook of the cement industry has turned positive and a growth of 8-10% can be expected in 2011-12.
The share prices of ACC, Ambuja Cement and Shree Cement have gained by over 20% in the last few weeks while second rung stocks like JK Lakshmi Cement, JK Cement, JP Associates, etc. are on the verge of an upmove soon after Q4 results
are made public. JK Lakshmi Cement recommended in this column several times is highly underpriced around Rs.54 compared to its peers and given its strong fundamentals. It commands an attractive P/E multiple of 5 as against the industry average of 10-12.
Elecon Engineering:
This stock was heavily beaten in the last 3-4 months from a high of Rs.115 to as low as Rs.64-65 two weeks back despite robust earnings in FY11. The stock hit a high of Rs.78 on Friday, 8 April 2011 and is on its way to recover its lost ground before the Q4 results to touch Rs.80+. The company has robust order book position and its turnover is set to cross Rs.1000 crore with a corresponding rise in its bottomline. It has recently won an order of Rs.180 crore from NMDC.
For the 9-month period of FY11, its net profit was up at Rs.64 crore from Rs.39 crore in the previous corresponding period but the share price fell from Rs.115 to as low as Rs.64 in the first week of April 2011, which was really very surprising. It has a modest equity capital of just Rs.18.57 crore.
Shanthi Gears:
The automobile industry is booming and prospects in FY12 appear bright as evident by the performance of stocks like Tata Motors, Maruti Suzuki and M&M, which can be expected to move up further. Since auto ancillaries are a part and parcel of the automotive industry, there is no reason for auto ancillary stocks to lag behind. Shanthi Gears, which came out with excellent performed till Q3FY11 with net profit up by 67% at Rs.18.34 crore from Rs.11.01 crore in the previous corresponding period is expected to perform even better in Q4FY11. Its share price, which had hit Rs.55+ a few months back has no justification to currently trade below Rs.40. The stock is usre to cross its recent high very son and may hit a new 52-week high of around Rs.60 after its Q4 results are declared.
There are many stocks from the mid caps and small caps that provide excellent opportunity at current levels like Shanthi Gears, Elecon Engineering, Arvind Ltd, Sarda Energy, etc. Readers are well aware that two weeks ago we had strongly recommended Arvind Ltd at Rs.56, which has risen to Rs.72.80 on Wednesday, 6 April 2011, giving a decent gain of 30% within two weeks.
Similarly, SRF Ltd, Sarda Energy, GSFC, Clutch Auto were recommended and have gone up smartly but investors may have overlooked their growth negatively influenced as they were by sagging market prices and weak guidelines presented in the print media or negative outlook presented by the business channels. This column, as anyone can check with the back issues, has always maintained that the Sensex below 18K and the Nifty below 5K are unlikely to be breached decisively despite all bear pressures.
From Tuesday, 5 April 2011, the market turned extremely range bound with no major changes on either side indicating that the excessive outstanding positions of both the bulls and bears have been squared up at this juncture and both are waiting for the Q4 results to decide their future course of action. But despite the market being range bound attracting profit booking at higher levels, the advance-decline ratio is extremely positive. Similarly, volume is also quite good in cash segment with Rs.3500 crore on the BSE and Rs.8000-10,000 crore on the NSE on the back of FII buying.
However, the trend changed from Wednesday, 6 April 2011, as the benchmarks lost each successive day to close the week at Sensex 19451.45 or Nifty 5842. Although profit booking was expected this week, the negative movements for the last three days leads to cautious optimism till the Q4 results start pouring in.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Await Q4 results
GURU SPEAK
By G. S. Roongta
The unexpected sharp rally that started three weeks ago, continued its upward march on Monday, 4 April 2011, as the BSE Sensex gained 1.5% or 281.34 points to close at 19701.73 and the CNX Nifty advanced by 82.40 points to close at 5908.45. This rise was attributed to the short sellers who rushed to cover up their short positions that they had carried forward in the F&O segment on the expiry of the March 2011 contracts expected the market to react having rallied by over 1500 points on the Sensex or 700 points in Nifty Futures.
But their expectations were belied as the market continued to be in a bull grip backed by strong FII buying. The FIIs continued to be the frontrunners in their net buying position with hectic buying of Rs.1500 crore on 29 March 2011, Rs.1043 crore on 30 March 2011, Rs.4088 crore on 4 April 2011 and Rs.1562.70 crore on 5 April 2011 thereby turning their net sales position exceeding Rs.10,000 crore within two weeks till 5 April 2011. Their interest in the Indian markets will continue to be robust as they expect better returns on the back of strong economic growth with the GDP hitting 9% and FY11 corporate earnings expected to grow by 20%.
On the back of the FII buying support, the Sensex hit a high of 19770 on Tuesday, 5 April 2011, followed by a new high at 19811 on Wednesday, 6 April 2011 after its fall in intra-day trades. The Nifty touched 5928 on 5 April 2011 and 5945 on 6 April 2011 but could not sustain at higher levels. This led the Sensex to slip into the red on both the days to 19687 and 19612 respectively. But the Nifty was up marginally by 2 points at 5910 on 5 April 2011 but declined by 18 points the next day to end at 5892.
Thus the Sensex after rallying 1500 points in just 8 trading sessions appears to be in a mood of partial profit booking at this level as the short covering is almost over on account of hectic buying by the bears. The Sensex at 20K and the Nifty at 6K will prove to be range bound before the impact of the Q4FY11 results becomes visible. However, stock specific action will continue at least in mid cap and small cap stocks that were the worst affected in the recent consolidation phase from the beginning of 2011 to mid-March 2011.
Cement:
Higher dispatches in Q4 and price hike by over Rs.30 per bag in the past few weeks will boost the bottomlines of cement companies henceforth. Since demand has also started picking up, the outlook of the cement industry has turned positive and a growth of 8-10% can be expected in 2011-12.
The share prices of ACC, Ambuja Cement and Shree Cement have gained by over 20% in the last few weeks while second rung stocks like JK Lakshmi Cement, JK Cement, JP Associates, etc. are on the verge of an upmove soon after Q4 results
are made public. JK Lakshmi Cement recommended in this column several times is highly underpriced around Rs.54 compared to its peers and given its strong fundamentals. It commands an attractive P/E multiple of 5 as against the industry average of 10-12.
Elecon Engineering:
This stock was heavily beaten in the last 3-4 months from a high of Rs.115 to as low as Rs.64-65 two weeks back despite robust earnings in FY11. The stock hit a high of Rs.78 on Friday, 8 April 2011 and is on its way to recover its lost ground before the Q4 results to touch Rs.80+. The company has robust order book position and its turnover is set to cross Rs.1000 crore with a corresponding rise in its bottomline. It has recently won an order of Rs.180 crore from NMDC.
For the 9-month period of FY11, its net profit was up at Rs.64 crore from Rs.39 crore in the previous corresponding period but the share price fell from Rs.115 to as low as Rs.64 in the first week of April 2011, which was really very surprising. It has a modest equity capital of just Rs.18.57 crore.
Shanthi Gears:
The automobile industry is booming and prospects in FY12 appear bright as evident by the performance of stocks like Tata Motors, Maruti Suzuki and M&M, which can be expected to move up further. Since auto ancillaries are a part and parcel of the automotive industry, there is no reason for auto ancillary stocks to lag behind. Shanthi Gears, which came out with excellent performed till Q3FY11 with net profit up by 67% at Rs.18.34 crore from Rs.11.01 crore in the previous corresponding period is expected to perform even better in Q4FY11. Its share price, which had hit Rs.55+ a few months back has no justification to currently trade below Rs.40. The stock is usre to cross its recent high very son and may hit a new 52-week high of around Rs.60 after its Q4 results are declared.
There are many stocks from the mid caps and small caps that provide excellent opportunity at current levels like Shanthi Gears, Elecon Engineering, Arvind Ltd, Sarda Energy, etc. Readers are well aware that two weeks ago we had strongly recommended Arvind Ltd at Rs.56, which has risen to Rs.72.80 on Wednesday, 6 April 2011, giving a decent gain of 30% within two weeks.
Similarly, SRF Ltd, Sarda Energy, GSFC, Clutch Auto were recommended and have gone up smartly but investors may have overlooked their growth negatively influenced as they were by sagging market prices and weak guidelines presented in the print media or negative outlook presented by the business channels. This column, as anyone can check with the back issues, has always maintained that the Sensex below 18K and the Nifty below 5K are unlikely to be breached decisively despite all bear pressures.
From Tuesday, 5 April 2011, the market turned extremely range bound with no major changes on either side indicating that the excessive outstanding positions of both the bulls and bears have been squared up at this juncture and both are waiting for the Q4 results to decide their future course of action. But despite the market being range bound attracting profit booking at higher levels, the advance-decline ratio is extremely positive. Similarly, volume is also quite good in cash segment with Rs.3500 crore on the BSE and Rs.8000-10,000 crore on the NSE on the back of FII buying.
However, the trend changed from Wednesday, 6 April 2011, as the benchmarks lost each successive day to close the week at Sensex 19451.45 or Nifty 5842. Although profit booking was expected this week, the negative movements for the last three days leads to cautious optimism till the Q4 results start pouring in.
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