>> Monday, December 8, 2008
The markets commenced the last week on a subdued note against the backdrop of weak global cues and not so encouraging domestic economic data. For the first time in five years, India's export growth slipped into the negative in October as key developed markets are now well and truly in the midst of a recession. The manufacturing output too shrank as tightened credit conditions and the global financial crisis dented demand growth.
Mid-week a, sharp recovery in the US markets and news of the likely announcement of a booster package for the domestic economy by the Committee on Economic Crisis (including a special Infrastructure Fund), measures for Auto, Textile, Power, and export oriented sectors, lifted market sentiments on the penultimate day of the week.
Further, inflation in India eased to 8.4% and rate cuts were undertaken by the European Central Bank by 75 basis points to 2.50% and Bank of England by 100 bps to 2%, leading to expectations of a rate cut back home. This added to the positive sentiments and led to buying interest in stocks from the Real Estate, Infrastructure and Banking space. The key Indian indices shot up 5% each but lost steam on the last trading day due to profit booking on index heavy weights.
Oil Marketing Companies (OMCs) were under selling pressure as the Government cut the price of petrol by Rs 5 per litre and diesel by Rs 2 per litre while Media stocks continued to remain in the limelight. Dr.Reddy’s Lab was in the news as it won a contract to supply seven products to AOK, one of the largest insurers in Germany while Tata Motors surged on the back of a likely excise duty cut on commercial vehicles.
For now, regulators across the globe continue with their fight against the one of the worst financial crisis.
RBI on Saturday announced a one percentage point cut in the repo and reverse repo rates, in a clear signal to ease interest rates. Besides, the apex bank also pumped in Rs 11,000 crore in Small Industries Development Bank of India and National Housing Bank and this may lead to some relief at real estate counters.
A slew of other measures are expected to be announced to stimulate the economy, at the RBI press conference on Sunday (deferred by one day as per media reports). The expected measures include a Rs 2000-crore export package, relaxation in external commercial borrowings norms and Rs 15,000-crore budgetary support for infrastructure. The political weather remains inclement and is unlikely to have any serious impact.
With the market having already discounted most of this, the Indian indices may not witnesses serious buying. Volatility is also likely to remain high amidst the current financial crisis and announcement of IIP numbers in the truncated week ahead. Nevertheless, for long term investors we would again reiterate that this meltdown presents a decent buying opportunity, although one has to take care to invest in quality stocks, and ideally in a staggered manner.
Stocks to look out for are -
All banking Stocks (SBI , ICICI, HDFC ) - As RBI has now cut Repo rate and Reverse Repo Rate so these stocks will surely benefit.
Suzlon is another stock to look out for as it is looking one of the most beaten out stocks now.
Unitech is one I am found of a good buy now in 21 - 23 range.
LNT looks strong.
Next week onwards we may also update How to trade NIFTY on weekly basis.