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Current market rally raises optimism

This article was posted on Jul 30, 2009 and is filed under Market Outlook

MUMBAI – The recent market rally supported by quarterly earnings, liquidity and global cues is not yet considered as a bull-run but market men
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are advocating fresh buying as they see good days ahead. There will not be any crisis like situation barring a few corrections in the market.

On July 28, S&P CNX Nifty touched a high of 4,599 from a low of 3,918 on July 13. Unlike the post election rally which was based on sentiments without any fundamentals, the current rally seems to have spawned optimism among traders and brokers. According to provisional figures, on Thursday around 12.10 pm Nifty rollover was around 70 per cent. It signifies that traders expect good time ahead.

Further, Relative Strength Index is at 54.48 per cent as against the ideal RSI of 50 per cent. This means that the market is a little overbought. In post election rally, the RSI was above 70 per cent.

According to Alex Mathew, head – research, Geojit BNP Paribas, 4,394 is a very good support level for Nifty. “In another two trading days this level is expected to be touched. Irrespective of that, long terms investors should start buying taking advantage of market corrections.”

Dealers feel that market could correct by 5 per cent to the maximum possible extent. “Short term traders can go ahead with a stop loss, which should be equal to one-third of their targeted profit on any scrip. However, long term investors can get into market right now. They need not to be worried over day to day market movement,” said Rajesh Jain, Head – Research, SMC Global,

For example, JSW Steel, a largely recommended stock, touched a low of Rs.475 but is currently quoting at Rs.697. “Such short term movement hardly impacts a long term investor,” added Jain.
Fertilizer stocks are currently available at attractive valuations, with all stocks being traded at less than 10x PE. Rashtriya Chemicals & Fertilizers as well as Chambal Fertilizers & Chemicals are good bets, suggests Geojit’s Mathew who also advises PSU banking stocks like State Bank of India, Punjab National Bank and Bank of Baroda along with to Reliance Industries.

Some stocks as suggested by SMC’s Jain, wherein one can buy at the current levels with long term perspective are, SBI, Jaiprakash Associates, Tata Power, Power Finance Corporation, Polaris etc.

Meanwhile, market optimism has once again brought back penny stocks into the lime light. “Penny stocks supported by dependable promoters’ background, is worth buying. Going forward, one can expect very good returns from these stocks,” said Manish Innani, a NSE listed member and founder of Prayas Securities.

Geometric in the software space and MRF in auto ancillary space are two stocks with significant future potential, said Innani.

source: Economictimes

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