Market breaches 18,000 mark

The Indian stock markets extended their gains during the week, amidst sessions marked by volatility, with the Sensex and Nifty ending higher by 1% each. BSE mid-cap and small-cap indices after many weeks underperformed their large-cap counterparts, with BSE mid-cap ending higher by 0.5% and BSE small-cap ending almost flat. The market traded in a narrow range during the week but finally managed to close above the psychological mark of 18,000 on the BSE index, thereby boosting investor sentiment. Factors such as the ongoing earnings season, positive sentiments from Chinese markets and mixed cues from European and US markets weighed on investors' sentiment during the week. On the sectoral front, most of the indices ended in green, with the BSE metals and BSE capital goods indices gaining the maximum of 4.1% and 2.1%, respectively.

BSE Metals
The BSE metal index gained 4.1% over the previous week, outperforming the Sensex by 3.1%. While Tata Steel, SAIL and Jindal Steel were up by 5.3%, 4.2% and 2.5%, respectively, as steel prices are expected to firm up in the coming months, JSW Steel was up 8.8% on media reports that the announcement of stake sale to JFE may conclude next week. Sesa Goa also witnessed an appreciation of 6.3% during the week as it reported strong quarterly numbers, but NMDC was down 1.8% due to the ongoing Naxal issue in the Dantewada region. On the non-ferrous front, Hindalco led the appreciation by 5.3% followed by Sterlite Ind, Hindustan Zinc and Nalco gaining 4.7%, 1.8% and 0.1%, respectively, as metal prices at the LME rebounded. Our top picks in the sector are Tata Steel, JSW Steel, Hindalco, Sterlite and Hindustan Zinc.

RBI Policy Preview: In the coming Monetary Policy, the RBI’s priority would be to focus on controlling inflation using monetary policy tools. We expect the RBI to hike repo and reverse repo rates by 25bp each to 5.75% and 4.25%, respectively. However, considering the current liquidity situation, we do not expect a CRR hike in the coming policy.

Bajaj Auto - 1QFY2011 Result Update: Bajaj Auto (BAL) posted strong set of numbers for 1QFY2011. The company's top line was in line with our expectations, while bottom line was above our estimates because of higher other income. High growth was also aided by higher operating leverage and robust volume growth in the domestic as well as export markets. Capacity constraints, however, restricted volume growth to a certain extent. We recommend Accumulate on BAL with a Target Price of Rs2,762.

HDFC Bank -1QFY2011 Result Update: HDFC Bank reported net profit growth of 33.9% yoy and a decline of 3% sequentially to Rs812cr, close to our estimate of Rs806cr. A strong pick-up in advances and improvement in asset quality were the key highlights of the result. We recommend Buy on the stock.

Markets extend gains

The Indian stock markets extended their gains during the week with the Sensex and Nifty ending higher by 0.7% and 0.8%, respectively. BSE mid-cap and small-cap indices continued their outperformance to the largecap counterparts, further extending their gains during the week by 1.1% and 1.9%, respectively. The market opened the week on a positive note, crossing the psychological mark of 18,000 on BSE index but mostly traded in a narrow range during the week. Factors such as mixed global cues, lower-than-expected growth in industrial production in May 2010 and weak monsoon reports (24% below normal) weighed on investors' sentiment during the week. On the sectoral front, the performance was mixed, as there were equal number of sectors gaining and losing, with the BSE Realty and BSE Bankex indices gaining the maximum of 6% and 3%, respectively.

Real Estate index gains 6% during the week

The Real Estate index gained 6.0% for the week, outperforming the Sensex, which was marginally up by 0.7%. Top gainers in the real estate space were Parsvnath (up 10.3%), Unitech (up 9.1%), Omaxe (up 8.9%), DLF (up 8%) and HDIL (up 5.8%). A speculation about the likelihood of government relaxing the three-year lock-in period for repatriation of foreign direct investment in the realty sector led to the rally. This, coupled with the fact that the sector has underperformed the benchmark indices in the recent past, aided the positive sentiment.

Kesoram Industries - Initiating Coverage: The company’s cement and tyre businesses are currently trading at attractive valuations coupled with being at a substantial discount to its peers and replacement costs. The cement business is valued at a EV/tonne of US $65 which is at a considerable discount to the replacement costs of US$80/tonne. This gives an implied enterprise valuation of Rs1.4cr/tpd to the tyre business , which is at 35-63% discount to the peers. We Initiate Coverage on the stock with a Buy recommendation and Target Price of Rs437.

Infosys -1QFY2011 Result Update: In rupee terms, Infosys top-line grew 4.3% qoq to Rs6,198cr backed by 7.6% qoq volumes growth, while the blended pricing was lower by 1.6% qoq. However, on account of the annual wage hike, EBIT margins fell by 178bp qoq to 28.3%, while the PAT declined by 7.0%.We maintain our Accumulate rating on the stock, with a Target Price of Rs2,900.

Axis Bank- 1QFY2011 Result Update : The Bank registered net profit growth of 32.0% on a yoy basis to Rs742cr, which is better than our estimate of Rs710cr mainly on account of the better-than-estimated net interest income (NII). Strong operating performance with stable asset quality was the key positive of the result. We maintain our Accumulate rating on the stock with a Target Price of Rs1,477.

Where to invest your hard-earned money?

There are many investment options which are available in the market today. But, first you need to understand how to start investing and what to invest in.
Shares:
Shares are a type of security that represents the ownership in a company. Shares are traded in stock markets. Stock investment is a good long-term investment option as the returns on stocks over a long time horizon are generally higher than most other investment avenues. However, along with the possibility of greater returns comes greater risk. In India, stocks are traded on BSE and NSE. Sensex and Nifty are two popular indices which depict the stock market in India.
Mutual funds:
A mutual fund allows a group of people to pool their money together and have it professionally managed, in keeping with a predetermined investment objective. Mutual Funds are popular because of its cost-efficiency, risk-diversification, professional management and sound regulation. You can invest as little as Rs 100 per month in a mutual fund.
Bonds:
Bonds are fixed income instruments which are issued for the purpose of raising capital. Both private entities, such as companies, financial institutions, and the central or state government and other government institutions use this instrument as a means of garnering funds. Bonds issued by the Government carry the lowest level of risk but could deliver fair returns.
Deposits:
Investing in bank or post-office deposits is a very common way of securing surplus funds. These instruments are at the lowest end of the risk-return spectrum.
Real estate:
With the ever-increasing cost of land, real estate has emerged as a profitable investment proposition.
Gold:
The ‘yellow metal’ is a preferred investment option, particularly when markets are volatile. Today, beyond physical gold, a number of products like gold futures and gold exchange traded funds, which derive their value from the price of gold, are available for investment.