The interesting thing in this market market correction is that many stocks are at 52 week lows and many are near 52 week highs. The stocks that did not participate in the Sept-Oct rally are falling as rapidly as stocks that rose 30-50% and now correcting.
Banking stocks, which led the recent rally, are down with profit booking, but once the market stabilizes and starts moving up, they can move up again by 25-30% in the coming months. Among large banks, ICICI Bank looks good with 1 year target 1500, which is 35% upside from current levels. City Union Bank has posted good results, and is our top pick in smaller banks, and it can gain 50% over next 12 months. Continue reading Indian Stock Market Analysis -21Nov2010→
This week, FIIs have sold their long positions significantly in Futures and Options. And they have written (sold) call options for Nifty 6100 and 6200, which means the Nifty Index will find it difficult to cross these levels in the short-term. The real support for this market is between 5450-5550, which was the level from where the rally started. An intermediate support is at 5800-5820, from where a short-covering pullback can happen for 100-200 points up to reach 5950. But if the selling pressure remains strong, then 5500 levels are possible.
Reliance Communications (RCom) is in a problem with its alleged involvement in the 2G spectrum scam. RCom is already undervalued but this latest problem can put pressure on the stock. This past week saw 10% drop in RCom’s stock, and based on new facts that came to light in last 2-3 days, we have reduced our holding in RCom. Its possible that RCom can fall another 10% from current levels to around Rs 130-135.
Thankfully, many other good stocks have also fallen 10% in the week, giving us an ideal shifting opportunity. Our top picks to make the shift are: BHEL and Tata Motors at current prices. Both these stocks are likely to continue delivering good profits and have no regulatory overhangs like in RCom. Once the air around RCom clears, then we will reconsider entering this stock.