DETAILS OF THIS WEEK TRADING PICKS 25.2.08

Markets continued to remain highly unpredictable, moving erratically with global trends, dictating the near-term market trend. On the BSE the Sensex fell by 816 points to close at 17,349 and the Nifty on the NSE fell by 192 points to close at 5,111. Rising commodity prices and weak global cues continued to keep the sentiment negative.
Lack of volumes clearly shows investors apathy and aversion for equities at present. Despite expectations of an election oriented budget market men expect the finance minister to come out with a rational growth oriented budget. If ‘wishes' of investors and corporates are met positively a strong post-budget rally is not ruled out since there is low open interest position and no pre-budget build up.

After the talks of recession, fears of the US economy could be heading for a period of "stagflation" the unwanted combination of stagnant economic growth and destructive inflation - are bugging global markets.

Key events in the week ahead are the all important Union Budget and F&O settlement. Technically markets are in consolidation mode but may see breakout in either direction post-budget. Key levels on downside are 17,060 and 16,680 on the Sensex and 5,030 and 4,860 on the Nifty.

If indices trade below 17,000 and 5,000 regularly a retest of January lows in next few weeks can not be ruled out. For safe zone indices need to trade above 18,000 and 5,640 steadily. Avoid aggressive positions for now. Buying those stocks that are the most highly recommended by analysts according to the consensus recommendation score is a strategy that works well when the market is going up. However, when the market trades down, such stocks tend to perform horribly.

In fact, over the last bear market those most highly recommended by analysts actually fell 53 per cent. Do not follow another man's advice unless you know that he knows more than you do.

F&O segment M irroring the nervousness in the markets are the shrinking volumes in the derivatives segment. Average daily turnover has fallen to below Rs 40,000 crore. Inclusive of rollovers open interest has fallen to about Rs 75,000 crore.

Adopt strangle or straddle strategy on Nifty to take advantage of directional change in markets.

Note of caution is that options are trading very costly due to high volatility. Barring selective buying in technology, metals and pharma, nearly all the sectors witnessed good selling. Pharma counters Ranbaxy, Cipla and Sun Pharma are good defensive bets. Rising commodity prices globally have sparked buying interest in metal stocks. National Aluminium, Hindalco, Sterlite, SAIL and Tata Steel look good on every decline.

Liberal bonus of 3:5 by RPower to retail sharehold ers and good subscription to IPO of REC may trigger renewed interest in power stocks.

Select buying is indicated in Tata Power, REL and NTPC. Among the side counters looking good are Infoedge, BEL, Matrix Labs, Zee Entertainment, JP Associates, Jindal Saw, AIA Engg, Suzlon, United Spirits and Sesa Goa. Never change your position in the market without a good rea son. When you make a trade, let it be for some good reason or according to some definite rule; then do not get out without a definite indication of a change in trend. Avoid getting in and out of the market too often.

Cubex Tubings manufactures copper and copper alloy products-seamless tubes, bus bars, rods etc which find application in core industries of power generation, refineries, ship building, defence, railways etc. The company is almost debt free, having B.V. of Rs 49, trailing 12m EPS of Rs13.5 and has blue chip clients like Siemens, NTPC, GE Power, SAIL, Kirloskar Electric and others. After the recent correction the stock looks very good bet for medium-term target of Rs 150 at current levels. ¦ Sadbhav Engineering is one of the leading construction companies operating in the business verticals of construction of roads and highways, irrigation and mining operations. Apart from the huge order book of Rs 2,600 crore in roads, highways and irrigation works, the company has reportedly bagged large orders in mining operations from GHCL and GMDC. It is also setting up lignite based power plants for Ultratech and Neyveli in Gujarat. Bonus or stock split predicted in near-term. Buy on declines for steady gains in medium-term. ¦ Maintenance, repair and overhaul segment of the aviation industry is expected to grow at 10 to 12 per cent CAGR. Dynamatic Technologies and Taneja Aerospace are the two listed stocks in this segment. Biggies like Lufthansa in association with GMR, Boeing, ATR and others are also planning to set up MRO facilities. Dynamatic Tech is Asia's largest producer of hydraulic gear pumps and has division of airframe structures. Taneja has recently tied up with France's Sabena to develop MRO facility. Buy both the stocks on sharp decline for good returns in long-term. ¦ Select stocks in textiles and logistics sectors like Gokaldas Exports, Bombay Rayon, S. Kumars, Allcargo, Balmer Lawrie, Sical and Gateway Dist are attracting buying interest. Rumours of revised open offer are doing rounds in Gokaldas. Blackstone holds nearly 70 per cent of the equity. Punters tip price of Rs 300 in short-term. Post commissioning of their new facilities, Bombay Rayon and S. Kumars are expected to stitch good numbers in coming quarters. Buy on declines. Blackstone's interest in Allcargo shows the importance of logistics space. Stay invested in logistics stocks and use current weakness to buy.

SENSEX & NIFTY TRADING LEVELS AND F & O PICKS & EQUITY PICKS FOR THIS WEEK

GLOBAL MARKETS LOOKING WEEK

TREND DECIDING WEEK BCOZ OF F & O SETTLEMENT ON 28TH AND UNION BUDGET ON 29TH OF THIS MONTH

MAJOR SUPPORT FOR THE SENSEX IS 16800

MAJOR SUPPORT FOR THE NIFTY IS 5000 , ANY CLOSE BELOW THIS LEVEL MAY TAKE TO LOWER LEVELS OF JANUARY

F & O PICKS :-

HOTEL LEELA : CMP 50 TARGET 70

CIPLA : CMP 194 TARGET 240

BEML : CMP 1124 TARGET 1300

EQUITY PICKS: -

CUBEX TUBINGS: CMP 68 TARGET 125

GOKALDAS EXPORTS:CMP 235 TARGET 350

DETAILS OF THIS WEEK TRADING CALLS

I t was a week of mild recovery for the markets. Recovering from a weak start, the markets rallied strongly from midweek on positive news flow like lower inflation data, the PM's statements that Indian economy will sustain its 9 per cent growth rate and mixed global cues. On the Bombay Stock Exchange the Sensex gained 650 points to close at 18,115 and the Nifty on the National Stock Exchange moved up by 183 points to end at 5,303.
Market breadth turned positive reflecting the change in sentiment. However, volumes continued to be low indicating lack of confidence. Things cannot get any worse from present levels feel market men.

Renewed buying by FIIs after a long hibernation, gave steam for the pullback rally. Anil Ambani's move to reduce the cost of acquisition for shareholders of Reliance Power by bonus issue may improve the sentiment and also set a new benchmark in corporate governance.

It is pertinent to note that despite the failure of recent IPOs new fund offerings from mutual funds have received excellent subscription reflecting investors shift to safety.

Market players expect the FM to give a positive growth budget addressing both domestic and global concerns.

Fears of fallout from the US markets are not ruled out in the event of escalation of bond insurers' problems. Pre-budget rally may see the indices attempting to cross 19,000 and 5,800 levels in near term.

Expect strong resistance to the Sensex at 18,660 and 19,000 and for the Nifty at 5,545 and 5,820. Key levels of support for the indices are at 17,800 and 5,060.

Stay invested for present. Hope for the best, but expect the worst. Being braced for disaster - by diversifying and by learning market history - can help keep you from panicking. Every good investment performs badly some of the time. Intelligent investors stick around until the bad turns back to good.

F&O segment D espiteoverall derivative improvement in the sentiment volumes in the segment continued to be sluggish. FII's were seen covering their Nifty short positions and doing shopping in select stocks. Buy Nifty 5,400 call option for surprising gains, tip punters. Crucial support level for Nifty futures is at 5,150. Sentiment indicators like open interest, implied volatility and put/call ratio indicate continued volatility with positive bias.

Leadership for the rally is being provided by biggies like RIL, BHEL, Reliance Capital and Tata Steel.

Banks and realty stocks led by the State Bank of India and Unitech have begun to show comeback signs. Rebound in infrastructure stocks was seen with GMR Infra leading from the front. After the recent correction sugar stocks are back in reckoning offering good trading moves.

Technology and select pharma counters are witnessing good accumulation. Among the stock futures looking good for upside gains are Tata Steel, Gail, Hindalco, M&M, Ranbaxy, JP Associates, Balrampur, Hotel Leela and ITC.

Punters tip IDBI and IFCI for price targets of Rs 145 and Rs 85 in the near-term. Among the side counters showing interesting patterns are Bombay Rayon, AIA Engg, Ballarpur and Crompton Greaves.

Momentum counters led by R-Pack may trigger volumes game again. Buy on declines Reliance Capital, Reliance Communication, RNRL and Reliance Petroleum.

Further gains not ruled out in fertiliser counters. Stay invested in NFCL and Chambal Fert. The past is not prologue. On stock market, what goes up must come down, and what goes way up usually comes down with a sickening crunch. Never buy a stock or mutual fund because it has been going up. Intelligent investors buy low and sell high, not the other way around.

Select cash group counters like Man Inds, Haldyn Glass, KLG Systel, PTC, Whirlpool, Indus Fila, Sandur Manganese and ECE Inds are witnessing good buying from savvy market players and funds. Excellent order book and buoyant user industry spells good times for Man Inds. Haldyn Glass is expanding its range of pharma packing in tune with changing needs. Buy on declines.

MNC major Whirlpool is reportedly making its Indian outfit outsourcing hub for exports to other Asian nations. Turnaround of operations indicated. Add on declines.

KLG Systel and Indus Fila are attracting good buying interest at lower levels. Savvy punters were seen accumulating mining company Sandur Manganese. Something is cooking say observers. ¦ One dark horse recom mendation doing the rounds is Shloka Infotech. It belongs to Yash Birla group and the name of the company is being changed to Birla Shloka Edutech. The company is reportedly expanding in a big way in the online education segment. Punters tip target of Rs 75 in coming months. ¦ Huge subscription to Reliance Natural Resources Fund (Rs 5,660 crore) has put the spotlight on mining and natural resource dependent companies. Companies reportedly on the radar of the funds are Sarda Energy, Electrosteel Castings, Usha Martin, Sesa Goa, Gujarat NRE Coke, Jai Balaji Industries, Ferro Alloy Corp, Ashapura Minechem and Kalyani Steel. Keep a watch on investments made by RNRF to spot winners.