Market Outlook 12-10-2009

Nifty and Sensex shed around 3% for the week as higher levels attracted selling on account of profit taking as well as general selling. Markets ignored better than expected numbers from Infosys as well as surprise bonus issue from RIL. Even the positive global cues failed in helping the sentiments. Telecom and IT proved to be the biggest drag on the indices as both these sectors suffered heavy losses. Telecom stocks were downgraded as price war intensified and all the major players witnessed a sell off. Bharti and Rcom lost more than 1/5th of their market cap. IT index was down more than 7% as IT heavyweights struggled to sustain higher levels. BSE Auto index also was a loser as it declined by more than 2% and here again market ignored positive monthly numbers by all Auto majors. Maruti lost more than 10% while Tata Motors shed around 6% over this period. FMCG was the biggest gainer as BSE FMCG index gained around 7%. HUL, ITC and Colgate gained around 7-8%. Mid caps did better than the large caps, as mid cap index was almost neutral. Nifty is struggling to stay above 5000 and sustained selling pressure is seen above 5000. For the first time during the current rally since March, 2009 market seems to be ignoring positive news and in fact these positive news are being utilized to shed long positions. Autos and IT have played a big role in taking the market to around 5000 and 17000 and both sectors are struggling to sustain higher levels. In fact the biggest losers apart from Telecom majors were Maruti, Wipro, TCS and Infosys. So, some signs of tiredness are there as even RIL continues to struggle. FMCG, Pharma and Capital Goods are positive sectors and have in fact neutralized some of the impact of telecom and IT. We believe that while index might stay range bound as market forces exert pressure, stock specific moves could dominate the proceedings for next couple of weeks. Stocks that are showing positive bias are Bhel, Century Textiles, Ind Hotels, ITC, Colgate, JSPL, Divis Lab, Gail, HCC, Hotel Leela, IDBI (above 131), Ind Bank (above 172), Nagarjuna Constructions, Neyvelli, ONGC (above 1230), Opto circuits, REC, Tata Steel, Voltas and Welspun Guj. Nifty is delicately poised around current levels as sustained trade below 4920 could take it lower to around 4850-60. Close below 4870 could open up lower targets of around 4650. On the higher side 5025-45 is providing stiff resistance.