Stock advice: stay away from IT stocks

IT stocks saw heavy buying for the last 2 days on account of cheap valuations. Unless you are an ultra-short term investor (<1week), it is better to stay away from IT stocks.

Why should you not buy IT stocks?

1. IT companies still have not experienced the real impact of America recession.

2. Fall in IT stock prices was due fall in dollar value which will further fall after another rate cut in March.

3. They will experience the real impact of downfall in American economy in the coming quarters when American companies reduce their IT spending.

4. IT companies are not taking any concrete steps to face American economy recession. They should reduce the salaries by 20-30% and trim their employee strength.

5. If IT companies will not prepare for recession, they will face another 2000-01.

Which is the best IT stock?
Satyam computers. Satyam is in better position to face dollar appreciation and American economy crisis. My opinion: 2008-09 financial year will become worst performance year for IT companies. Medium and long term investors should stay away IT stocks.

Banking and Infrastructure companies will outperform other sectors in the coming quarters.

Concentrate on Mid caps in volatile period

Indian markets will trade in volatile zone due to exponential growth in sectors like Construction, Engineering, Telecom and Banking while weak growth in IT, Textiles, Sugar and Auto sectors. Biggest worrying point is high growth sectors are trading at high valuations while low growth sectors will feel the heat for another 2-3 months. So concentrate on Individual stocks of high growth sectors which are trading at attractive valuations. Risk taking investors can try in sound stocks like Reliance Capital, Dr Reddys, Reliance Communications, GMR Infra and Reliance Energy.

Global cues: US markets are in volatile zone due to good earnings and bad subprime market.

Sector of the day: FMCG.

Stock of the day: Reliance Industries – Court verdict on gas.

Significant News:

1. Indian stocks will fall on account of weak earnings and high valuations – HSBC.
2. BSE Sensex will touch 16,000 by the end of this year – Citi group.
3. Bombay high court will give verdict on RIL gas today.
4. Moody assigned stable rating for Indian banks.

Rumour:

1. Entegra may come with rights issue in 2-3 months.

Stock advice:

1. Stock markets will continue to fall as most of the companies will fail to justify their valuations.
2. Prajay Engineers, Dr Reddys, HCL Tech are few stocks that will beat analysts’ expectations. Satyam is the dark horse.
3. NTPC is the safe bet for short and long term investors on account of massive investments and bonus rumours. Target for short term investors is Rs 180.
4. It may be difficult to expect exceptional returns from GMR Infra at this level.
5. KS Oils is counting on its massive gains ahead of stock split.
6. Praj Industries is struggling due to F&O ban ahead of bonus issue.
7. Deccan Aviation will touch 150 within 3-4 trading sessions.
8. Even though UTI Bank will announce good results, valuation are little bit stretched.
9. Dena bank may continue its upward journey.
10. CMC is the one of the rare stocks looking good in IT space on the back of to be announced results. Profit booking will be seen after results.

Positive stock news:

1. Unilever may be taken over by Colgate. Watch out HUL and Colgate.
2. Dabur foods will merge with Dabur India.
3. Megasoft bought Boston Communications for $65 million.
4. Cipla became the number 1 company in domestic retail market overcoming Ranbaxy.
5. Dr Reddys launched Glimmy MP1& MP2 diabetic drugs.
6. Bajaj auto finance will enter into truck business by October, 2007.
7. Chennai petro announced good results.
8. Country club announced wonderful results.
9. Sintex Industries announced 54% rise in net profit.

Negative stock news:

1. Infosys missed its guidance first time in 14 years due to rising rupee. It failed to estimate the rupee impact in March and gave wrong guidance to investors. Infosys lowered its guidance by 5-8%.
2. 14 public sector banks will lose around Rs 930 crore due to RBI guidelines on IFCI investments.
3. Bajaj Auto will announce disappointing results today and stock may lose once again.
4. S&P lowered Tata steel’s credit rating from BB to BBB.
5. iGate solutions posted disappointing results. More such news will come in this quarter.

Best stocks for day traders and investors:

1. HUL and Colgate.
2. Dabur India.
3. Geojit Financial services – with risk.
4. Pyramid Saimira – Good results.
5. Dr Reddys Labs – Momentum is strong.
6. Chennai Petro – Good results.

Results today:

1. Bajaj Auto, UTI Bank, Technocraft India, Reliance Infrastructure, Geojit Financial services and Pyramid Saimira.
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Please share your views and advice on Indian stocks.

Can Infosys save Stock market correction?

Infosys will announce Q1 results today against negative sentiment surrounding global markets. Can Infosys save Indian markets by giving positive guidance? US market Dow Zones lost 148 points against mortgage and earning concerns. Most of the Asian markets are trading in the negative zone and crude is moving above $73. Indian stocks are on the verge of a major correction due to these negative triggers. If Infosys gives positive guidance, markets will be saved from major correction (partially). If Infosys gives negative guidance, BSE Sensex will lose around 250-300 points.

Global cues: Negative sentiment surrounded global markets.

Sector of the day: IT Stocks.

Stock of the day: Infosys Technologies.

Rumour of the day:

1. Prajay Engineers Syndicate – Good results and Bonus rumours.
2. KS oils – safe bet for medium term. Stock split may up the stock.

Events of the day:

1. Infosys results. Infosys guidance more than results will change the fortunes of IT companies. My opinion is Infosys may miss the target. In the current financial year, rupee appreciated against dollar, Pound and Euro by 5-8%.

2. Rupee may touch 9-year high against dollar today.

3. Everonn IPO will end today. Allotment will be very low.

Positive stock news:

1. Tatas will pickup stake in DCB.
2. HDFC Bank posted 34% rise in net profit. It may bounce back.
3. Blackstone may pickup stake in Nagarjuna Construction.
4. Reliance Energy is on massive expansion plans.
5. PTC will pickup stake in Indian energy exchange.
6. IFC picked up 3.5% stake in Max healthcare.

Negative stock news:

1. Dublin high-court gave ruling in favour of Pfizer. Problem for Ranbaxy.
2. Suzlon will continue to fall on the back of negative news (IPO Money).

Best stocks for day traders and investors:

1. DCB:
2. Nagarjuna Construction.

Stock advice:

1. Stay away from markets. If Infosys gives positive guidance, take long positions in IT stocks.

Please share your opinion on my stock recommendations and give your stock ideas.

Stock markets again into volatile zone

BSE Sensex crossed 15000 mark on Friday and again rising fears of correction. In my opinion, markets move sideways until Wednesday (Infosys results) before falling/rising in a big way. Don’t take long positions in blue chips especially capital goods, IT and Banking. Concentrate on few sound stocks which are trading at low valuations before making major investments from Wednesday onwards. Pharma stocks like Ranbaxy and Dr Reddys are looking attractive in these volatile times.

Risk taking investors may bet on Ispat Industries. Teledata at last moved into BSE Midcap index. Momentum will be around stocks which will post wonderful or surprise results in the coming days like Dr Reddys, Reliance Communications etc. Praj Industries is in a precarious state before bonus date while KS Oils may give good returns in the medium term due to stock split. Major factor saving the markets from fall is liquidity in the markets.

Significant News: Asian markets are in buoyant mood. Will Indian markets follow them?

Stock of the day:

1. Roman Tarmat – This stock may list around Rs 225-250 and will cross Rs 300. Book profits around Rs 280-300.
2. Reliance Communications – Qualcomm deal.
3. Closely watch IFCI and PTC – Stake sale. F&O ban in IFCI.
4. MRPL – LOT OF POSITIVE NEWS.

Rumour of the day:

1. Tata may take stake in Praj Industries.
2. Mallya may acquire Spicejet.

Positive stock news:

1. Hindustan Zinc raises zinc prices by Rs 1200 and lead prices by Rs 1000.

2. Gujarat state petroleum discovered oil block.

3. Reliance energy-Sobha consortium is the successful bidder for Rs 6,400 crore business district project in Hyderabad.

4. MTNL will acquire Suntel in Sri Lanka.

5. Reliance Communication and Qualcomm buried their differences and will continue to work in cohesion.

6. Reliance retail will sell Cipla drugs. But outlook for Cipla is bad.

7. UP government will sell all government mills to private bidders. Tremendous boost to UP private sugar mills. More consolidation is on the cards.

8. Bharti Airtel ranked third in the Business week list of top 100 companies in share holder returns.

9. Kamadhaenu Ispat posted 339% increase in net profit.

Negative stock news:

1. Telecom companies will struggle as ARPU are at Rs 200 mark.

Negative triggers:

1. Inflation rise will spoil party. Interest rate hike will haunt markets again.

Stock advice:

1. Dr Reddys and Ranbaxy will surprise analysts with their fantastic results. These are the safe stocks in volatile markets.

2. Bet on Biocon. This may appreciate another 10% in this month.

3. Stay away from Cipla. Invest in this stock at Rs 185-190 level.

4. Reliance Energy will post wonderful results compared to Tata Power.

5. Capital goods stocks are poised for minor correction due to extreme rise in the past few sessions.

6. Infosys guidance on Wednesday will trigger a major collapse or rise until then markets will be volatile.

7. Subscribe to Everonn IPO. You will get 100% returns on the listing day itself.

8. Don’t neglect Aurobindo Pharma, Lupin and Ipca Labs. They are sound stocks for medium term investors.

9. Closely follow MRPL, India Foils and Birla power.

Stocks for July :

1. Power trading corporation - safe stock for medium term investors.
Target – 90-95.

2. IFCI-safe stock for long term investors.
Target – 70-75.

3. Ranbaxy – excellent results.
Target – 400-420 (medium term).

4. Reliance Communication – Wonderful results. Buy on dips.
Target – 580.

5. Praj Industries – Bonus. High risk stock.

6. HCL Tech – surprise results.

7. Paper stocks like TNPL and BILT.

Best stocks for day traders:

1. Reliance Communications.
CMP: 550.
Target: 563 and 576.
Stop Loss: 541.

2. Roman Tarmat.
Issue price: Rs 175.
Target: 275-300.

3. Hindustan zinc.
CMP: 716.
Target: 725 and 734.
Stop Loss: 709.

4. GSPL.
CMP: 55.6.
Target: 56.8 and 58.
Stop Loss: 54.

5. Reliance Energy.

6. MTNL.
CMP: 163.4
Target: 167 and 170.
Stop Loss: 160.

7. UP Sugar stocks.

Why markets will fall in the coming sessions?

1. Q1 results of most sectors will disappoint the investors and cannot justify their high PE values.

2. Except capital goods, power and some other stocks, most companies will announce decrease in their earnings.

3. Rise in inflation will have major impact on the interest rate decision. Rise in crude price will lead to rise in petrol and diesel prices by Indian oil marketing companies which will again leads to further rise in inflation.

4. Rupee will continue to rise – Exports will continue to decline.

Please share your views on my stock recommendations and share your views on your favourite stocks.

Action will confine to select stocks

Stock markets successfully sustained yesterday’s melt down and bounce back with the help of FII buying in some stocks. Irrespective of market moments, these stocks will continue to gain today. Inflation will be around 4%. If inflation falls below 4%, banking stocks will rally in the afternoon session. IT stocks will fare badly on account of poor results and Infosys guidance.

Positive triggers:

1. FIIs started buying in select stock. So you have to follow stock specific trading/investing.
2. Tyre industry may surprise analysts with their results even though auto sector is down. Closely watch Ceat and Apollo tyres.

Stock of the day:

IFCI. It will open around 63 and may touch Rs 65-66.

Positive stock news:

1. Mastek ranked among the top 50 global outsourcing firms.
2. Indoco Remedies got approval from Brazilian FDA approval for its Goa plant.
3. Aptech and NIIT are in expansion mood in Vietnam.
4. Wipro consumer care bought Unza.
5. Nestle India is in acquisition mood.
6. Sony tie-up with Balaji Tele for content.
7. Bajaj auto set up 5 strategic units.

Negative stock news:

1. NPAs of ICICI Bank rose to 118% in retail segment. This is a real worry ahead of listing.
2. Bank of England hiked interest rates to 5.75%. ECB unchanged interest rates.

Stock advice:

1. Stay away from IT stocks for another 1 month. Bad results and rising rupee and salaries will cripple this sector in the coming days. Satyam may be the lone winner in Q1. Rolta India is a good long term bet.

2. Book profits partially in textile sectors. Government sops may not save this industry from collapse.

3. Khaitan electrical and Asian electronics announced wonderful results. Closely follow them.

4. Lupin may bounce back today on the acquisition talk.

Stock picks for day traders:

1. IFCI: Results and stake sale.
2. Bajaj Auto-Restructuring.
3. Balaji Tele- Sony ties up.
4. Mastek-World ranking.
5. ICICI Bank FPO may face pressure.
6. L&T may continue to march.

Note: I have 30% of my holdings in IFCI. I bought them at an average price of Rs 52.

Indian stock markets are in a precarious zone

Indian stock markets lost some points from their all time highs yesterday. In the past, Markets moved downwards from their highs due to profit booking by investors. But this time, bullish sentiment is prevailing in the sentiment. Most of the global markets are trading in the positive zone. US markets recovered from bearish zone after several flat sessions. Crude price above $71 is a real concern.

Market movements: Markets will open on positive note but may not sustain those levels. Profit booking will be seen in select counters. Stock specific trading will continue.

Significant news:

1. Exports slowed down to 18% in May compared to 23% in April.
2. CRISIL downgraded economic growth to 8.4% while NCAER predicted 8.3% economic growth. CII reduced projection for economic growth to 8.5%.

Positive stock news:

1. Leela group will sell garment business to Bombay Rayon.
2. Titan is entering into branded eyewear segment.
3. Maruti and Mahindra announced good sales.
4. Lanco Infra building world’s tallest residential complex in Hyderabad.
5. Tata Tele will hive off tower business.
6. Himatsingka Seide Acquires 80% stake in Divatex Home Fashions.

Negative stock news:

1. Steel companies reduced flat steel prices by 500-1,000 per tonne.
2. Oil companies rise ATF prices by 2.86%. Airlines will hike fuel surcharge.
3. Airlines will hike fuel surcharge by Rs 50.
4. Hero Honda June sales down by 8%.
5. Financial Technologies posted 28.33% rise in net profit.
6. Dish TV will break even by 2009.

Stock advice:

1. IT companies will announce 10% drop in their earnings in Q1 results. Long term investors should enter into IT stocks after results season. They will post better than expected Q2 earnings.
2. Satyam is only the only major IT company that will announce good results in Q1.
3. Aurobindo Pharma may regain some lost points if markets are positive.
4. Withdrawal of tax subsidy by Chinese authorities for their tyre exporters will help Indian tyre companies.
5. Gujarat Alkalies will continue its march upwards.
6. BSNL re-bidding withdrawn. Accumulate ITI shares.
7. Stay away from Pharma majors- Teva case and ban on 100 drugs.
8. Stay away from Britannia due to competitive bid from Kraft foods.

Stocks for day traders:

1. IFCI and RPL.
2. Lanco Infra.
3. Bombay Rayon- Results and Hotel Leela garment business.
4. Nicco corporation- stake sale.
5. Hotel Leela
6. Gujarat Alkalies.
7. Sell Hero Honda.
8. Subhash Projects.
9. Titan Industries.

Note: I have holdings in IFCI and Hotel Leela.

Indian stock Markets will make new highs

Indian share markets will open on positive note with selective buying in specific sectors like Real Estate, Sugar, Telecom and Financial sectors. Auto stocks will see heavy selling in their counters. Market indices will make new highs but may see some profit booking in the late session. Rising crude rate and mixed signals from Global markets are the only concerns.

Stock of the week: IFCI. Target is Rs 63-65.

IPO of the week: Everonn-Best stock for listing gains and Long term. Even though HDIL priced attractively, real estate sector may be in down trend at the time of listing.

Sector of the week: Real Estate due to DLF listing. DLF may not cross Rs 600 on listing. Book profits and exit.

Most significant news:

1. US federal reserve did not hike interest rates.

2. We will try to bring down the inflation to 3% - RBI.

3. DLF listing date is July 5.

4. BSE SENSEX may touch 50,000 by 2018- Morgan Stanley. Foreign investors are waiting for correction to enter into Indian stocks for long term.

Positive stock news:

1. IFCI board will announce stake sale in July 6 board meeting. There is enormous value left in this stock. Don’t book profits immediately.

2. Bank of Baroda sold 0.9% stake in NSE to Citi group at 2,282/share.

3. Tricom India announced wonderful results. Good stock for medium term.

4. Kernex Microsystems announced stock split and bonus.

5. Aurobindo Pharma announced 108% rise in net profit.

6. Tata steel will sell aluminium business of Corus.

7. GMR Infra announced 1:5 stock split.

8. CMC and Tata Technologies may merge with TCS but not Tata Elixi.

9. Emami posted good results and 63% increase in net profit.

10. Reliance Communications tied up with PBTL for international roaming.

11. Moser Baer will take price war to even new titles.

12. Wipro will buy Unza of Singapore.

13. Simplex Infrastructure bagged $11.1 million contract and rise in 29% profits.

14. Biocon will announce overseas listing by the end of next year. Long term investors should closely watch this stock to invest on dips.

15. Telecom companies may announce good subscriber numbers for the month of June.

16. Liberty shoes will dilute its stake in subsidiary to raise funds.

17. ICICI Bank approved $200 million loan to Videocon for acquisitions.

Negative stock news:

1. IPCL Q4 results are disappointing.

2. Bajaj Auto sales were down in June by 12%. Auto stocks will continue to feel the heat.

3. Infosys bidding is a speculation- Capgemini.

4. Tata steel lost bidding battle for Vietnam steel companies.

5. Dr Reddys is the lone Indian company in the SEC list of terrorist link companies.

6. Jewellery companies will be hit by US orders of withdrawal of concessions. Titan Industries will see selling pressure.

Stock advice:

1. Sugar stocks will continue to rise due to change in the fortunes of sugar prices. Keep trailing stop losses.

2. As I said in earlier posts, Investors at last recognised the true potential of GMR infra. You may exit the counter after another 15% rise and re-enter into wonderful stock on dips.

3. Financial stocks like IFCI, IDBI, IDFC, TFCI and PFC will continue to gain in the coming days. But you may get exceptional returns in IDBI and IDFC.

4. I suggested EID Parry for long term investors 10 days back. It already gave 10% returns within 10 days.

5. Capital goods index is at all time high. We may see some selling in this sector in July in spite of orders.

6. Medium term investors can enter into HUL –They will announce wonderful results and dividend. Bonus gossips are spreading.

7. Hinduja TMT will see some positive news within a short term. Risk taking investors can bet on this stock for short term.

8. You can accumulate Cairn India and RPL for long term.

9. Deepak fertilizers will give 10% returns in July due to monsoons and gas supply news.

10. Ranbaxy and Cipla may continue their positive momentum on Monday and Tuesday.

11. Global players want to buy some stake in Jet Lite. Buy Jet Airways on dips for short term gains.

Value stocks for long term investors: Best stocks in correction time.

1. Wire and Wireless.
2. Dish TV.
3. Cheviot.
4. RSWM and Welspun.
5. Raymonds- strictly long term.

Stock picks for medium-short term:

1. HDFC.
2. TCS-Results will not be as disappointing as analysts are thinking.
3. Kernex Microsystems-High risk and high returns.
4. Hindustan Lever.
5. Eastern Silks.

Stocks for day traders:

1. IFCI-Stake sale.
2. Aurobindo Pharma – Wonderful results.
3. RNRL and Tata Tele.
4. IDBI-Stake in IFCI.
5. Tricom India- Good results.
6. Renuka sugars and other sugar stocks – Positive momentum.
7. Unitech, Parsvanath and Sobha.
8. Ranbaxy and Cipla - with risk.
9. Sell IPCL.
10. Sell Bajaj Auto.
11. Sell Titan and Gitanjali Gems.
12. Sell HPCL and BPCL- Crude is above $70.

Why markets will crash in July?

Investors are in euphoric mood due to unexpected rise in the past 2 days. But future is looking bleak due to negative triggers. Except some sectors, most companies will announce disappointing results. It will be difficult for RBI to keep rupee value above 41 against dollar. If RBI will not hike interest rates, inflation will again move northwards. Crude price is another worry.

My advice: Some good stocks are at or near 1 year low. Take long positions in those stocks. Don’t take long positions in the sunrise stocks, most of them are near 52-week high. If markets undergo correction, they will suffer heavily. Sit on cash and buy on dips.

Please share your views on my analysis.

Correction will continue in Indian stock markets

In the recent days, Indian stock markets bounced back after every fall since March. But this time, correction will continue according to global sentiment along with profit booking and panic selling. There are no significant positive triggers to propel markets into next territory. US and European markets fell yesterday due to interest rate hike and rising inflation concerns. Except China, all Asian markets are trading in negative zone.

Major Concern: If Nifty breaks 4090 final support, this correction will go a long way. If Nifty gets enough support at 4140 level, Day traders can play with favourites like IFCI, RNRL, RPL etc.

Market movement: Bearish/Heavy crash. Today session will give a clue about future direction.
Stock of the Day: Ispat Industries. Take long term position in this stock. Take medium-long position in Idea if it falls below 118.

Sector of the Day: IT Stocks if rupee continues to be weaken.

Stock Advice:

1. If rupee continues to fall, IT stocks may recover to boost the market sentiment.
2. Accumulate money to invest in good stocks when they will be available at attractive prices.
3. Invest in DLF IPO to get good returns. Markets will be in bull phase at the time of DLF listing.
4. Exit from rupee and penny stocks. There will be no buyers when this Bull Run is over.
5. Closely follow ITC, Tyre stocks, you will get good price to invest by the end of June.

Significant news:

1. There are signs of overheating in Indian economy – C. Rangarajan.

Positive stock news:

1. UTV is in consultation with ABC News to launch a business channel.
2. IT industry would require 5 lakh people within the next 5 years.
3. 3-G Mobile services will be announced by the end of this month and Spectrum sharing by the end of this year. Positive news for Mobile operators.
4. Indian real estate will get $6 billion FDI in the coming years.
5. Ashok Leyland will not cut production like Tata Motors.
6. Aviation sector may get boost due to liberalisation in FDI. Aviation stocks are good medium-long term bets.

Negative stock news:

1. Russia banned Indian food imports. Stay away from rice exporters.
2. European central bank hiked interest rate. Will RBI follow?
3. NTPC is not giving any bonus issue.
4. 2-wheelers reduced output due to weak sales. More correction is due in Hero Honda, Bajaj Auto and TVS Motors.

Best stocks for Indian traders:

Advice: It is better to stay away from markets and watch out the unfolded action from sidelines.

1. Cambridge Solutions:
CMP: 127
Target: 129 AND 132.
Stop Loss: 125

2. Ispat Industries: Wonderful results.
CMP: 15.2
Target: 16.4

3. Alstom Projects: Project order.
CMP: 569
Target: 582
Stop loss: 556

4. Geojit Financial services: Best stock pick for short-medium term investors.
CMP: 41.4
Target: 44 and 47
Stop loss: 38

5. Strides Arcolab: It received 2 more NDA approvals from US FDA.

6. Suzlon Energy:

7. MTNL: It may bounce back. It emerged as top bidder for Suntel.
CMP: 160
Target: 164.8
Stop loss: 155

8. AIA Engineering: Results are to be announced today.

Stocks to watch out:

1. UTV.
2. ONGC.
3. Idea.
4. ITC.

Please share your analysis and views on my stock recommendations and also share your stock picks.