Nifty bottom seen at 4200; auto, infotech look good: IFCI
From there we see the bottom around 4200, which will develop as a strong base for the next upmove.
By: Vinay Pandit
MUMBAI: We continue to advise caution for the Nifty, which we believe has started correcting and will do so at least up to a level of 4400. From there we see the bottom around 4200, which will develop as a strong base for the next upmove. (Watch)
Moving away from technicals, fundamentally we still believe that infotech and capital goods will outperform. However, the auto sector cannot be ignored since it is one sector which has come out of the recession in the true sense. The rural backed demand cannot be ignored now that Rabi season has turned out to be positive. A good Kharif in 2010 will only add to the party for the auto sector companies primarily Maruti Suzuki, M&M, Bajaj Auto, Hero Honda and smaller players like VST Tillers.
Dampeners will be visible in the form of excise duty rollbacks and interest rate hikes in the next 6 months (driven by CRR hike by RBI). However, the impact will be relatively small to dampen the recovery in the sector as a whole. Competition will get tougher cramping the already crowding market further with more and more players looking to play the 1 billion people consumption market namely India.
4QFY10 will continue to be good for auto space as maximum people defer their auto purchase to the last quarter for deriving maximum depreciation benefit. The same will hold true for insurance companies mopping up high APE collections (Annualised Premium Equivalent) and new business premium.
We advise using the current correction to build up positions in the auto sector, infotech sector and engineering capital goods space.
(The author is Vice President, Head of Research, IFCI Financial Services)
MUMBAI: We continue to advise caution for the Nifty, which we believe has started correcting and will do so at least up to a level of 4400. From there we see the bottom around 4200, which will develop as a strong base for the next upmove. (Watch)
Moving away from technicals, fundamentally we still believe that infotech and capital goods will outperform. However, the auto sector cannot be ignored since it is one sector which has come out of the recession in the true sense. The rural backed demand cannot be ignored now that Rabi season has turned out to be positive. A good Kharif in 2010 will only add to the party for the auto sector companies primarily Maruti Suzuki, M&M, Bajaj Auto, Hero Honda and smaller players like VST Tillers.
Dampeners will be visible in the form of excise duty rollbacks and interest rate hikes in the next 6 months (driven by CRR hike by RBI). However, the impact will be relatively small to dampen the recovery in the sector as a whole. Competition will get tougher cramping the already crowding market further with more and more players looking to play the 1 billion people consumption market namely India.
4QFY10 will continue to be good for auto space as maximum people defer their auto purchase to the last quarter for deriving maximum depreciation benefit. The same will hold true for insurance companies mopping up high APE collections (Annualised Premium Equivalent) and new business premium.
We advise using the current correction to build up positions in the auto sector, infotech sector and engineering capital goods space.
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(The author is Vice President, Head of Research, IFCI Financial Services)
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