Tips for Trade: Avoid Steel stocks, buy banks
Amid uproar over the allocation of 155 coal acreages between 2004 and 2009 to some 100 companies, NDTV talks to chairman and managing director of NTPC, Arup Roy Choudhury about the scam and future plans of the power producer.
India’s benchmark indices ended in the red zone on Thursday. The BSE Sensex plunged 405 points or 2.3 per cent to end at 17,196. The broader Nifty index declined 136.50 points to close at 5,228.
On our show, Tips for Tomorrow, Ashutosh Sinha, Hemang Jani, Senior Vice President, Sharekhan and G Chokkalingam, ED & CIO, Centrum Wealth Management discuss the market performance of the day.
MARKETS CRACK UP! WHY?
Hemang Jani said that the negative news flow dragged markets down. “Moreover, the foreign institutional investors (FIIs) are not investing in markets and hence, flows have dried up in the last few days,” he said.
He expects the Nifty to trade between 5150-5200 levels. “Once 5100 is breached, the Nifty could reach 4900 levels on the downside,” he cautions.
G Chokkalingam, however, believes that today's market fall was not due to FIIs as he feels that they were net buyers till yesterday. “A sudden fall in the Nifty has more to do with market rumours,” he explained.
COAL AUCTION SCAM
In a shocking report on coal block allocations, the Comptroller Auditor General indicated that both PSU and private companies received undue benefits to the tune of Rs 10.6 lakh crore and government lost out by not auctioning coal. However, CAG later wrote to the Prime Minister’s Office (PMO) saying these were observations at a preliminary stage. It pointed out that the unintended benefit to the coal comapnies is not an equivalent loss to exchequer.
JSPL (-7.2 per cent) was the top Nifty loser. The stock came under the hammer on the back of the CAG report. Other steel and power companies also came under selling pressure. JSW Steel (-7.6 per cent), Reliance Power (-5.9 per cent) and Tata Steel (-4.8 per cent) ended with deep cuts. Only two stocks, Coal India (2.3 per cent) and Hero MotoCorp (1 per cent), closed with gains on the 50-stock Nifty index.
According to Jani, uncertainty prevailed in counters like JSPL and Coal India. He suggests avoiding Jindal Steel, Electrosteel Castings and NTPC due to news flow uncertainty.
Chokkalingam feels there is inherent bias in the analysis of the data.
GOLD LOAN: TIGHTER NORMS
Jani said that Manappuram Finance, Muthoot Finance will have now to raise more funds. “Exit Manappuram Finance, Muthoot Finance on any possible pull back,” he said.
On the other hand, Chokkalingam said that the central bank’s norms on gold loans are in the right direction.
BANK NIFTY
Jani likes ICICI Bank and Yes Bank.
Chokkalingam suggests buying Yes bank, Bank of Baroda, City Union bank and Karur Vysya bank.
VIEW ON RELIANCE INDUSTRIES
Market bellwether Reliance Industries (-4.1 per cent) slumped and added nearly 70 index points on the Sensex on the downside.
According to Jani, there is a lot of negative news flow and pressure on the stock. He doesn’t see any immediate gas price hike. “The stock will remain under pressure for some time,” he said.
Chokkalingam said that the stock fell due to bearish sentiment in the market. “All negatives are factored in this stock. I advise investors to buy the counter at current levels,” he suggests.