DETAILS OF TRADING PICKS FOR THIS WEEK

F rom the beginning of last week the markets across the globe are experiencing the stock market version of a perfect Tsunami, where everything seems to be going wrong at the same time. On the BSE the Sensex fell by 652 points to end at 18,362 and the Nifty on the NSE lost 422 points to close at 5,383. However, the losses on the indices do not reflect the volatile intraday swings of over 1,000 points on the Sensex and 500 points on the Nifty during the course of the week.

Market breadth was extremely weak with several midcap and smallcap stocks locked at downward circuit filter. After scaling new highs during the early part of the new year Ignoring and overlooking negative developments like subprime, rising crude oil prices, fear on a US recession, weakening IIP numbers and the domestic political wrangles within the UPA, the markets displayed false sense of ‘decoupling' and ‘insulation' to scale new highs.

With reality now catching up, markets have ‘crashed', say observers. Barring fresh negative news flow markets may consolidate at current levels with positive bias in the week ahead. Refunds of Future and RPL IPO's may ease liquidity situation.

Key events to watch in the coming week will be the US Fed meet, RBI policy meeting and F&O settlement.

Chartists predict wide trading bands of 17,240 to 19,300 for the Sensex and 4,920 to 5,900 on the Nifty. The indices touched what might have been intermediate term bottoms during the week ended and they may retouch it over the next few weeks.

Key support levels on downside are 17,800 and 17,400 on the Sensex and 5,120 and 4,900 on the Nifty. Do not try to outguess short-term fluctuations. Very few investors can do it consistently enough to beat the market over the long term. The stock market may seem more risky and scary, but now is a good time to add depressed shares to your portfolio. The outlook is not as bad as many investors fear, spread your risk and keep your investment plan on track.

F&O segment M irroring thederivatives turmoil in the markets open interest in the segment crashed to Rs 85,000 crore. Trading volumes and rollover of positions got affected due to margin pressures and deep mark to market differences in several counters.

Traded turnover on both exchanges fell sharply to Rs 57,000 crore, almost half the daily volumes seen regularly. High implied volatility of puts and calls indicate volatile trading pattern.

F&O settlement without any major hiccups and rollover positions may dictate short term direction. Avoid large positions and trade lightly till markets stabilise. Brutal and savage selling was seen across the board.

Many counters witnessed manic intraday swings of over 40 per cent, fallout of excessive speculation. Highs recorded on Fridays rally are key levels to watch. Stocks failing to cross the highs may see attracting selling again. Contemplate shorts if indices fail to sustain above 18,800 and 5,560 levels.

Technology and FMCG sectors showed good resilience. Buy Infosys, Satyam and ITC on declines for target prices of Rs 1,850, Rs 475 and Rs 250 in next few weeks.

TechMahindra, Mphasis, Redington, 3i Infotech and Tulip look good for short term. Banking stocks look good for accumulation at current levels. Results of many PSU banks are better than expectations. Use sharp declines for buying. Among the private banks Axis Bank and Kotak Bank are good buys at lower levels.

Ranbaxy, Orchid, Divi Labs and Matrix have come out with decent numbers. Buying is suggested at current levels. Use the current sharp correction in sugar stocks like Shree Renuka Sugars, Bajaj Hindustan and Triveni for accumulation.

Specific stocks looking good at lower levels are APIL, Educomp, Bharat Electronics, Welspun Gujarat, Praj Inds, Havells, Biocon and JP Associates. Diversification is less important in a bull market when a rising tide lifts nearly all boats. But when stocks are falling, some groups really get pummelled while others hold up surprisingly well.

The key is reacting to extremes in stock prices, not to the market's short term direction.
Select recent picks looking good after the recent wave of selling are Jayant Agro Organics, Hind Dorr Oliver, Cubex Tubings, Intense Technologies and Radico Khaitan. Radico Khaitan is one of larger players in liquor industry owning important brands like 8PM. Heineken buy of S&N's stake in UB likely to improve valuations of liquor stocks. Accumulate at current levels for good medium term returns. Jayant Agro has approved placement of equity to a global major at Rs 105. Stay invested and buy at current levels for steady returns. Cubex Tubings got listed recently on the NSE also. The stock is available at a low P/E of just 5. Buy at current levels. Intense has won recently MTN Irancell project from MTN group an established market leader in West Asia and African telecom space. Many more orders are in offing. Buy at current levels. Results of Hind Dorr Oliver are reportedly very good. Accumulate at current levels. ¦ After the recent carnage select midcaps looking good for medium term are Exide Inds, Jain Irrigation, Sintex Inds and Amara Raja. Falling lead prices and growing auto sector spells good tidings for battery majors like Exide and Amara Raja. Results have also been very good. Exide has embedded value of its insurance division. Buy the stocks at current levels. Jain Irrigation is one of the major beneficiaries of Govt's initiatives to improve agricultural productivity. The company is leading supplier of micro irrigation equipment and second largest globally.