January Rally: A bear market rally or a new Bull market?

Last week, Greece's crucial international bailout was put on hold, by its partners in the 17-nation eurozone. For the week, Nifty and all the Asian market were up by a percent, while after the Greece’s bail-out put on hold late Friday, the European and the US market closed nearly 1% down for the day and half to 2 % down for the week.

Greece is presently at the hands of conflict between 3 parties:

First, the Greece public who will have to undergo financial hardships once the austerity plan gets in place

Secondly, the Greece politicians with differing views and

Thirdly, ECB, Germany and France together, who want Greece fiscal situation to get better before they take any plan of action ahead.

The Greece issue would continue to be an overhang this week.

Coming to Indian Markets, Since January, Market has been on a sharp upturn. Risk-On trade has been happening all across the global markets. Net inflow in equities by FII since January 2012 has been to the tune of Rs 18700Cr.

One question that is coming into the minds of all the market participants is whether this is a bear market rally or a new bull run has started.

For this question to be answered, one will have to wait for another quarter or so and see whether there are any signs of margin expansion of Indian corporate going forward.

Whether capital formation starts happening in economy in terms of infrastructure development and

What would be the current Fiscal Deficit in the current financial year.

While most of the Sensex companies’ Q3 results declared, we see that Sensex Eps that was expected to be 1105 for Fy 12 now stands revised to 1100. A week earlier, this expectation had risen upto 1109.

Coming to specific companies’ Quarterly results declared last week,

Cement majors, ACC and Ambuja cement declared stellar set of numbers. They are now trading above our Fair Value Estimates and hence we have rated the stocks as neutral.

Metal majors Tata Steel and Hindalco posted poor results. Tata steel results in particular were very dismal due to its poor Europe operations. Though for FY13, we estimate domestic ramp up in production by Tata Steel while in short term , Europe perception might impact the share price movement.

Dena Bank reported better than expectation results. Net Interest income grew by 16% and profit after tax grew by 21% on yoy basis. Dena Bank has gone up by more than 80% since our recommendation and the present results justify this run up. The stock is presently trading at 0.8 times its Fy 12E BV. We still maintain a positive outlook on Dena bank from long term perspective.  However in the short term the prices may face turbulence if any financial sector threat emerges or the broad market outlook becomes negative.

Wish you a good trading and investment week ahead.

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