TIA Article – 100317

Few Words on Market… TIA – Tamilnadu Investors Association

100317: We in our previous posting in January had mentioned: “Sensex will witness good support at 16550 and 15350 on the lower levels. If it is able to sustain above 17700 – 18000 for few days then we may attempt targeting 19300 to 20200 by end of this year” on 18/1/2010 Sensex hit a high of 17712.6 and closed at 17641.08 which was below the mentioned resistance level, then the budget fear that many tough measures may be taken by the finance minister grappled the market and the Sensex hit low at 15651.99 points.

We had earlier mentioned that there may be no major change in the budget. There was nothing stunning to speak about except the dramatic increase in the tax slabs for the individuals which will result in savings of Rs.1500 to Rs.4000 p.m. depending on the tax slabs of individual tax payers. The inflation is set to rise further on account of the fuel price hike. The recent figure of 9.89 as on 10/Feb does not include the effect of the fuel prices and hence next month we may see a higher figure. The Finance Minister has not laid down any major spending program in the budget and hence may ease the deficit which he also mentioned.

The budget did not have anything very negative from the markets perspective and hence we saw a small recovery in the markets after a lackluster trading in February and now as the budget has already been digested markets now waiting for the last quarter and the yearly results. The advance tax numbers are in line and positive for certain sectors. These factors have brought back Sensex near to the key resistance levels mentioned earlier. Unless we break them decisively we may fall back into the range. The next excuse for the markets to be in a range may be the onset of monsoon. Hence though the results may be superior investors may refrain from entering and may wait for the monsoon which now has higher importance on back of higher food prices and the resultant inflation.

The advance tax collection is up by 10.4% this year which shows the picture of the results the corporate India is likely to announce. The last IIP numbers show that almost all sectors except agriculture has grown and the services sector has grown at a slower pace which reflects that the consumption led demand is again picking up. India is least dependent on exports unlike it’s Asian peers and thus we are seeing lot of interest in the FDI area.

The divestment target of Rs.40000 crs mentioned by the finance minister looks achievable easily, if the shares are offered at fair value and with little discount to the retail investors so that there is a large distribution of shares and the after issue selling pressures may be eased. The huge target from the 3G auction looks little ambitious particularly when the telecos are already under tremendous pressures on account of the tariff war. This is the best time for absolute long term investors to enter into the sector as mergers and acquisitions cannot be ruled out in future and that would create value unlocking for the shareholders.

The proposal to infuse money into PSU banks saw them rally and hope readers got benefited as we have been bullish on the sector. Fresh banking licenses will again keep the banking sector on the momentum, this time including the private sector. RBI may not give licenses easily to fresh applicants but there are large NBFC’s which may buy into small private sector banks and enter the banking arena. Keep a close watch on the sector.

Another sector to be watched is the Education sector. With large spend allocation there would be activity here as well. Not many listed players are available in the secondary market. The recent proposal by the HRD to allow in foreign universities will also help the few listed companies.

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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