Since the intraday bottom of 3534, the Sensex has moved up 300 points in an eight-day positive streak that is unprecedented even during the last three month’s rally. Earlier, foreign institutional investors led the rally but now even the domestic mutual funds have turned buyers.
The big movers last week were a bunch of economy-related stocks in cement, automobiles and metals. Grasim, ACC, Larsen & Toubro, Gujarat Ambuja, Tata Engineering and Locomotive Company and Tata Iron and Steel Company moved up ferociously, on the back of great results. Other stocks shot up on expectations of good performance in the coming quarters.
Also, companies that have not done well were not sold off. Cement companies have done surprisingly well in the June quarter, even though they had little pricing power. Steel companies, as I have mentioned several times in the past one year, are minting money.
In a surprise move late last week, Bajaj Auto and Hero Honda zoomed, though their April to June quarter results have not been much to cheer about. Zee was up on expectations that its subscription revenues will be higher due to the implementation of Conditional Access System. It may well be. For the first time, Zee’s advertisement revenues were lower than the subscription revenue. The way the stock market is moving up and the momentum building up through the popular media, a target of 4100 seems achievable. Unless, of course, we have a sudden negative event on the horizon that India is famous for springing on the bulls. Could it be the Ayodhya issue and a call for early elections'
This week, the Sensex high of 3835 made last week would be a key level to watch. The market has retreated from its level twice on Thursday and once on Friday. If we move higher than 3900, eventually 4100 is possible. On the other hand, from around 2904 in late April, we now have had bull run in the market that has lasted 950 points spanning more than three months. Market repeats patterns as well as changes cycles. If we head higher from here without much correction, it will be something quite unprecedented.
As for stocks, steel stocks would be worth buying after each correction or pause. The best bets remain Steel Authority of India Limited, Jindal Steel and Power and, of course, Tisco. This is one sector that looks set for good times, while many stocks in that sector look cheap.
Among other smaller companies Rain Calcining is worth watching. It has turned around and will do well. Most importantly, it is a low double-digit stock and that is an important factor during a bull run.