Nifty has closed higher 2nd week in a row and it gained 68 points to close at 5135. AUTO and PSU stocks were major gainers this week after robust sales numbers from all Auto companies and PSU stocks saw buying as we move into decision for Fuel price deregulation on Monday June 7. TELECOM stocks rose on value-buying support after various stake sale rumours in the sector – RCOM rose 14%, IDEA 11% while BHARTI was up 6%. METALS continued to lose this week as Steel Companies indicated price decrease in June – STERLITE fell 4.8%, JINDAL STEEL, TATA STEEL were among top losers. SUZLON fell the most 8% in Nifty after company announced Rights issue of 2:15 at Rs 63/share.GDP data was above expectations as Indian Economy grew by 7.4% during 2009-10 Vs 6.7% in 2008-09 but Agriculture growth has been lowest in 5 years at 0.2% because of weak rainy season last year. Better growth in Economy may make Central Bank tighten more and Deputy governor Subir Gokarn said RBI will not move away from the monetary policy tightening path and interest rates will rise in the coming months.
The government said on Friday all listed companies are required to maintain a minimum public float of 25 percent and existing listed companies having less than 25% public holding have to reach the stipulated level by an annual addition of not less than 5% to public holding and it can make many companies raise money through IPOs which may pressurize Secondary markets in the wake of global slowdown.
FII data shows negative signs as they sold Net Rs 9,436 crore in the month of May and they have turned net sellers after January as Eurozone troubles have made them take money out of India and Rupee depreciating more would pressurize only. Though GDP data was impressive Chief Statistician Pronab Sen said it may be difficult to achieve an 8.5% economic growth this fiscal as many uncertainties persist - the growth drivers continue to be weak; because consumer demand is not growing that fast, Sen added.
AUTO numbers were excellent for May and production & sales figures of five cement companies signal healthy demand from real estate and infrastructure sectors, although the impending monsoon is likely to put the brakes on cement usage in the near term. - A.C.C, GRASIM, JPASSOCIAT, ULTRATECH, SHREECEM can see more correction. SAIL has cut prices by Rs 1500/tonne this week and Copper, aluminum, zinc fell as metals extended their decline after Chinese manufacturing expanded at a slower pace in May, adding to signs that growth may moderate in the world’s biggest metals consumer and Metal stocks here show 15-20% more decline – TATA STEEL, STERLITE, BHUSANSTEEL would lead the fall when markets start correcting. The global sugar market will see a surplus of about 5 million tonnes this year, 30% more than previously expected, even as consumption rises, while India is unlikely to export any excess sugar soon, industry sources said – SUGAR stocks have shown outperformance in a weak market and they may continue if monsoon recedes somewhat.
The monsoon rains were 11% below normal in the week to June 2, the weather office said and if such news continues it would impact negatively. Food prices are still a concern as food price index rose 16.55% in the year to May 22; India's anxiety over erratic monsoon rains will become more acute as rising incomes and a growing population push up demand for farmed produce faster than supply, turning the nation into a major importer within 5 years.
Nifty has pulled back for the last 8 sessions and now 5170 which is 61.8% retracement of the whole fall is a crucial resistance. Nifty has formed support at 4960 and caution advised if that is broken. After this week Nifty has been able to close above all important averages which is a positive sign but volumes remain a concern and participation is missing while Adv-Dec stats are also not supportive. METALS, CEMENT, CAP GOODS would be weak sectors while SUGAR can pull back more. FERTILIZERS show signs of more short-term rally and UNIPHOS looks good too. It is advisable to remain stock-specific in this market as Index not showing a lot of strength and risk-reward not favourable for an investor.
Stocks looking good: APIL, UNIPHOS, DIVI LAB
Weak Stocks: ABAN, FORTIS, HOTEL LEELA
Supp 5070/4955/4840 Res 5175/5279/5349