Old economy stocks display firm trend

Sanjiv Shankaran

THE average badla rate for the market was around 13 per cent, up by 0.50 percentage points in relation to the previous week.

The aggregate badla/carry forward turnover was Rs 2,974 crore, higher by Rs 251 crore vis-a-vis the previous settlement's badla session.

The increase in overall carry forward turnover over a few weeks, matched by a general increase in the ALBM sessions conducted on NSE, suggests that the undertone is relatively firm. Other technical indicators such as the ratio of advances to declines also suggest that the undertone has seen a turn for the better over the last few weeks.

What the last week's trading pattern confirmed was that there was increased interest in stocks that are generally classified as old economy stocks. `Old is gold' seems to be the new mantra as cement stocks, capital goods and automobile stocks displayed a firm trend.

The uptrend has definitely been triggered by the old economy stocks and in a backdrop that hasn't seen far too many encouraging signs for economic growth. The uptrend may be an indicator that economic growth may record relatively high rates in the medium-term or it may just be a move away from the heavy exposure to technology stocks that institutional investors seem to have built.

Coming to technology stocks, there seems to be a clear markdown in their valuation. It doesn't seem likely that their valuation will increase in the near-term.

Cement has been the big story over the last few weeks. It may well be time turn sceptical in cement counters. The fundamentals have not shown dramatic improvement and the rally seemed to have been triggered primarily by the reports of cement companies forming a cartel and thereby reaping the benefit of higher price.

A cartel seems to be a fragile platform for a sustained rise in the stock, therefore, investors may avoid exposure to the sector for the time being.

If cement may not be quite the flavour of the week, banks may come back into the limelight. A couple of bank stocks witnessed increased buying and may be in for a firm trend over a few days. Bank of Baroda and Corporation Bank were the favourites among traders.

Among the other noteworthy stocks in the badla session were Bajaj Auto, Apollo Tyres and Bausch & Lomb. There was increased interest in the counters. Al the three may provide opportunities for gains over the next few days.

ICICI Bank may see upward movement on the heels of the proposed merger.