TIA Article – 091219

Few Words on Market – Tamilnadu Investors Association – TIA

091219: We wish you all a very happy and profitable year ahead. The New Year is going to begin with a change in the timings the markets open. Indian stock markets would be opening at 9 am from 4/1/2010 from the present 9.55 am for reasons which we are not able to understand!

Last issue we had mentioned that the market would find first support at 16200 and the Sensex touched low of 16210.44 on 27/11/09 and further we had mentioned that the first resistance comes at 17460 and Sensex touched a high of 17351.71 on 11/12/09 and is in a correction mode again. The market past one month has been trading almost within our expected range. One may see the range as a consolidation phase before a big breakout on the either side takes place. We feel it would mostly be on the higher side and may test the levels which were mentioned last month.

The recent trend in the IIP numbers and the GDP numbers point towards the recovery the economy is seeing, but the situation on the inflation still looks grim with food price inflation just being out of control of the government. The interest rates are at the lowest and one of the measures the RBI can take is hiking rates. The market is expecting a hike very soon and that’s one of the reasons for the Sensex to turn back from the mentioned resistance areas. Bank stocks have taken a hit and many of them have again started looking interesting. Investors can take a call on these stocks and also can expect consolidation in the sector over next two to three years.

The Dubai situation almost created a panic in global markets and the confidence is back with Abu Dhabi coming to its rescue. The event may delay the price recovery and stabilization in the realty markets which people were expecting in middle of 2009. In India also the home builders have realised and even the customers have realized that small houses are easy to buy and more easy is to get them funded. The realty companies have stabilized only after the recent data pointed that budget houses are finding takers. These houses are purchased to be used unlike larger ones which are bought and kept locked to be resold again expecting a price increase. Gone are those days!

The advance tax numbers again points towards the positive sentiments in the corporate world. There has been a rise in the advance tax paid by most of the large companies which after the December quarter results are announced may translate into EPS for various indices and can bring down the overall PE of the Sensex. We are almost in the holiday season as far as the FII’s are concerned and hence no wonder we are seeing a range bound market. Market will soon start factoring in on what can be expected out of the budget which UPA-2 would announce. As usual many stories would be built by the media on the budget.

The recent trend in dollar has reversed and is on a recovery mode. It may not last for more than three to six months and may again start declining against the Rupee. Such movements would bring in more FII monies into the system.

Breaking 18000 for Sensex has now become crucial to re-enter the bull phase. US markets are doing well with major indices like Dow on a steady path with much more lesser volatility than Indian markets. The Dow is trading at around 10300 and breaking 11250 becomes crucial for it for a long term up move. Lead indicators in the US again point towards that the recovery is happening. Mark Mobius in his recent interview was categorical that US should see a recovery in 2010 and this recovery would help emerging markets.

We continue to be bullish on Banks, PSU banks particularly, Infra Stocks and Capital Goods, Health Sector, would be away from FMCG stocks at current scenario. Any dip to 16200 and 15500 on Sensex should be used as a buying opportunity by investors.

Disclosure:- It is safe to assume that the author may have interest in the sectors recommended in this news letter. Seeking personal advice from your Financial Advisor is recommended before acting on any of the substance given herein. The numbers, figures, etc., presented may have been taken from various sources.

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