EARNINGS SEASON KICK OFF TODAY WITH INFOSYS!

Before the Q4 nos. for a FY are released the Sensex EPS for the financial year always remains an estimate.The annualized EPS projected by Fund Houses and Institutions never grossly misses the actual numbers released but the weightage of the actual numbers cannot be underestimated. Moreover, the companies will provide the complete financials as opposed to the provisional ones they release every quarter.

The Sensex EPS for FY10 is expected to freeze around 830 Rs factoring a 17% Y-o-Y  rise in core earnings 30% rise in revenues.The sectors which shall significantly contribute to the same are Oil & Gas, Real Estate, Auto, Metals, Engineering & Capital Goods, Power and Cement. BFSI & IT are expected to contribute marginally.

Telecom and Pharma are expected to register a modest dip Y-o-Y.

FUTURE EARNINGS OUTLOOK FOR THE SENSEX 

In FY11 the Sensex EPS is projected to grow @ 28% to INR 1,064 ( which gives us a P/E multiple of  16.7 odd as per yesterdays close ) and in FY12 @ 18.3% to INR 1,259. 

If the above nos. are achieved 18000 mark shall be a blip on the radar and the talks of 19000 will be the hot topic.

TECHNICAL OUTLOOK.

The Dow at 11000 odd levels which is a 61.8% retracement of the entire fall is a worrying factor. Such levels are difficult to cross in the first attempt and its evident from the fact that Dow has hovered at 11000 levels last week but did not manage to close above it. The slight correction from these levels shall not be a surprise given that the indicators are showing negative divergence.

The Short term outlook on the Nifty remains bullish till we sustain 5300 on closing basis. My bias is upwards and an attempt at 5500 is what I am betting on.( 18000 cross on the Sensex )

WHAT TO BUY IF THE MARKET CORRECTS (The valuations seem pretty expensive at 17800! )

I have been mentioning Shipping Stocks for a long time and we have successfully traded GE Shipping a number of times in last 6 months. And I re-iterate my stand on Shipping Stocks.

As long as the Market does not behave in an erratic manner, expect GE Shipping to sustain 280. The targets are placed at 370-450.Mercator Lines can beat the returns of GE Shipping in absolute terms but it tends to react more that GE Shipping when correction sets in. One can play the stock as per their risk appetite.

Divis Lab is another stock to buy on dips for a target of 900. 

Have a great trading day,

Regards,

Rahul T.

PS : Udayan, if you are reading this, please comment. :)