W-Street pares loses, D-Street to trade in a range

Wall Street pared huge loss on thursday after a slew of wek economic reports hit the wire. We were expecting this from quite some time. US Markets are due for a 3-4 pct upmove only to go down later. We are expecting S&P to hit 950 levels which is a 6 pct down move from here.

Indian markets are hit by global economic jitters minus which we might have taken off. But given the high voltage drama on global bourses we might need to forget the word "break out" for this month. But the base is building up for a multi year bull run.

As mentioned in our earlier coloumns Power sector is showing immense strength and this is just the start. Airlines is one another dark horse sector and so is EPC space. We like few infrastructure companies too. But we would like to avoid Realty, Banking, IT, Auto, Metals atleast for some more time.

Oil & Gas, Retail textiles, Alternative Energy are likely to continue the bull run along with midcaps. Better to stay from buying Index options as Nifty is trading in a tight band in the last one week and looks to continue the same for some more time

Tricky global market conditions to weigh on D-Street

There is not much to rejoice from yesterday's rally on D-Street while the upmove definitely made a point that every downs(l)ide in the market is bought into. It is an extremely tricky global market situation where in the major indices are ready for a rocky ride after cracking through the support levels on the down side. We expect another 10 pct downside in the US Market atleast.

Given the condition it is advisable for a retail investor to only think about the longer term picture while investing in Indian equities. Short term the enviornment is not condusive for investing. Lot of midcap stories are generating interest in the investing community. Our checks with major brokerage houses revealed that despite the markets are buoyant, the retail participation in the cash segment is a reason to worry about while F&O segment is witnessing heavy volumes. While the midcap momentum suggests hectic operator activity there is no rush from the domestic retail inestor. This can be interpreted both ways

1. Domestic retail investors generally tend to catch the bus before the last one or two stops (+ve for the market)

2. Some times a domestic investor is smart enough and he sits out when in doubt and this can be considered one such situation.

We expect a massive rally to kick in August and it is time for one to focus on growth stories.

Entertainment stocks jumped on the reports that FDI in DTH space will be hiked to 74%. We feel this month should be the last oppurtunity for investors to accumulate Indian equities and it might be too early for the same. Watch out for some more downside in the first fortnight and pick your stocks.

World sneezes, US catches cold

Its a reversal of all sorts and US markets gapped down on global cues and then consumer confidence numbers hit the street with a bang pushing the indices
down. As mentioned in our earlier analysis this S&P might not be able to save the support levels. We see the next support for S&P at around 950-960 levels which is another 10 pct downside from current levels.

Indian markets cannot just move up when the world is crippled with issues. We are not expecting any rally this month. Infact a break below 5200 might make the Nifty test 5000 levels and then 4800 (a little tough to get here).

Midcaps are ruling the roast and it is better to stick with the quality names in the space or might be playing a waiting game is a good idea. Agri theme is building up on D-Street and ohhh, Boy watch Insecticides India. This stock gained nearly 500 percent in the last one year that too with volumes. Goldman sachs entered the stock around Rs 180 levels for its clients. United Phosphorous is one another stock we are bullish on. Aries agro is another stock to watch out for but the volumes are pretty low.

Power, Textile Retail, Agri based (not bullish on agri commdities though) are the sectors to watch out for in the next one year. It is undoubtedly one of the most uncertain period with excellent gains in the last 14 months or so but Indian markets are poised to outperform the globe and most likely to decouple the rest of the world but definitely not this month with another negative news in the form of rate hike looming.

Powering up !!

Power stocks ruled the roast on D-Street yesterday while Oil companies continued to boost indices. US Economic data is still a dampener while
India seems to neglect the negatives.

We like the power space from the next 2 year perspective. With lot of reforms and many plants ready to commence operations Power stocks are ready to
move up big time. Reliance Power, Adani Power, India Bulls Power and Govt owned NHPC and NTPC are likely gainers in this space. We like one BSE listed
power stock and betting 400-500 pct gains in the next 3 years.

We like textile sector especially the retail space. Arvind is our dark horse here while Brandhouse started looking little expensive. Autos, Banks had their
share of the last one year rally along with IT. Consumer durables like Whirlpool moved up big time. Followers of India Bears might remember 3 years before
we recommended Whirlpool at around Rs 50 levels. Time for the next of rally but from a different space. Realty might still lag for the next 6 months or so.

Midcap space is getting hotter. We sincerely advice to check the company credentials before jumping the gun

Global uncertainities to weigh on Indian markets

Uncertainity is still the biggest hangover for Indian equities in the near term. US Economic data starting trending downwards thanks to end of tax benefits for housing sector, which drives major part of the US Economy.

Chinese currency de-pegging rally faded early in the week and US Markets are on the verge of break down again. Having vividly followed US Markets over 2 years S&P has put up a strong support level at 1040 and this time the raid would make it attempt number 4 for bears and in all means it will break the support level this time.

We expect the bad news to continue on the economic front in the US in the short tmer.

Oil price de-regulation is a big booster for oil marketing companies especially HPCL, BPCL and other oil marketing companies. Quoting a leading financial daily's article on KP regarding accumulation of HPCL shares way before the news adds strength to their version.

Sky is the limit for oil companies and watch out for IOC, Oil India, ONGC and Essar Oil in this space.

Coming to Inflation weekend price hike will add one notch to the Inflation and this would certainly Mr.Subba Roa on his toes with reference to interest rate hike.
While Mr.Singh's comments at G-20 doesn't suggest a rate hike, Mr. Subba Rao is keen to raise rates and is said to be pressurized by the government to hang on for some more time.

Mumbai realty companies should show strength, given the exhuberant land prices but the overall realty scenario is holding off the stocks. Oil deregulation is a big negative for Autos, Banks and Realty in the descending order.

While operators appear to be back on track with small caps moving, one should get into quality names to ride the next rally. We expect the next leg of rally to start in August and might span for few years with minor breaks.

Fasten your seat belts and get ready for the take off !!!!

Europe jitters pull down global equities

European jitters re-appeared again much to the dismay of investors. Stocks across the globe started the slide again. Indian markets are poised for a rally but given the global conditions markets postpone the same.

Domestic consumption can be considered as one of the key drivers of Indian economic growth. Midcap stocks are outperforming the indices and we expect the same to continue for some more time.

Realty should be avoided for the time being. Infra stocks like Nagarjuna Constructions are trading in a new band and so are stocks like United Phosporous and Bombay Rayon Fashions. But the actual momentum is lacking in the market despite of midcap winners.

We believe Euro issues might keep the liquidity at bay atleast for the short term. It is time to slowly build a portfolio for a longer term

Consolidation before the next run

US Markets closed flat after a volatile session yesterday. New home sales dropped 32.7 percent from a month earlier to 300,000 in May, raising the prospect of an economic recovery slowdown. We expect the economic data to take a toll on the US Markets.

Indian markets are exhibiting excellent strength when compared with its global peers. We see a decoupling sooner but we expect another phase of consolidation. Midcaps along with small caps are looking to run again.

We are bullish on Power and Textiles in the next 2 year period especially power sector is ready to go miles as many plants are in the commisioning phase.
The rupee strengthened on optimism fund inflows would increase as overseas investors step up purchases of the nation’s assets to benefit from India’s economic growth.

We expected the mamouth rally to start in August. But it appears Indian markets might take off a little early. Stay invested and add on downsides.