IT pack set to be centre of attention this week

• These results would clarify to a great extent the status of IT with regards to client engagements, order traction and also the margins, which have been under pressure over the last few quarters
• Dow Jones lost in 2 sessions and gained in one. The remaining 2 sessions saw Dow Jones remaining volatile, but at the end closing flat

Awaiting Next Triggers

• Markets in India and the US trying to find a direction for themselves
• This week, there would be another attempt to find the same
• Hopefully results begin to unfold for Dec qtr

The markets in January 4-10 period under review were wild, volatile and seemed to be wondering which way to go. At the end of trading for five sessions, in which they gained in four sessions and lost in one, they were a mixed bag and ended with gains. BSE Sensex gained 301.11 points or 0.42 per cent to close at 71,657.71 points, while Nifty was up 101.35 points or 0.47 per cent to close at 21,618.70 points. The markets on Tuesday had gained sharply and had recovered the sharp losses they suffered on Monday. However, by the end of Tuesday, they had given up on the intraday gains and closed positive, but nothing great to talk about. This clearly shows that markets are waiting for quarterly results to decide the trend.

Dow Jones lost in two sessions and gained in one. The remaining two sessions saw Dow Jones remaining volatile, but at the end closing flat. At the end of the period, Dow was down 189.88 points or 0.50 per cent to close at 37,525.16 points.

One is getting more and more convinced that markets are getting ready to break down, at least in the short term. The fact that levels in 21,750-21,850 range are getting tough for markets to surmount is convincing me that if markets are to move up, they first need to correct themselves and retrace some of the ground claimed. Further markets need to spend some time at these elevated levels before they make a fresh breakout with targets set at higher than 22,000 level. There is an IPO from Medi Assist Healthcare Services Ltd, which is tapping the capital markets with its offer for sale of 2,80,28,168 equity shares in a price band of Rs397-418. The issue would open on Monday (January 15) and close on Wednesday (January 17). The issue would garner between Rs1,127 crore and Rs1,171 crore.

The company is a third party TPA in the health insurance space. It is the market leader and has between 53-55 per cent of the market in this space. It reported revenues of Rs504.93 crore for the year ended March 23 with a PAT margin of 14.54 per cent. The reported PAT was Rs75.30 crore and the fully diluted EPS Rs10.65. The PE band is 36.66 to 38.60 times. Being a market leader and the first of its kind in the category, the issue would set a benchmark going forward. With fragmented ownership thereafter, not sure whether other players would list from this field. The issue seems tough to understand and justify the valuations being asked in what is entirely an offer for sale issue.

Coming to the markets in the January 11-17 period, they would begin with three IT results from TCS, Infosys and Wipro being declared on the same day. These results would clarify to a great extent the status of IT with regards to client engagements, order traction and also the margins which have been under pressure over the last few quarters. Expect IT to be the centre of attention on Friday with the only uncertainty being the direction in which IT stocks trade. They will also throw light on the entire IT pack as well.Markets in India and the US are trying to find a direction for themselves. So far, they have failed to find it. Probably this week would be another attempt to find the same. Hopefully markets will be wiser and results begin to unfold for the October-December quarter.

The strategy would be simple for the period ahead. Trade the markets and look to find trends. Buy on sharp dips and sell on strong rallies. There will be plenty of intra-day opportunities available and try to encash them. As far as new investments are concerned, they could be deferred for the time being. Trade cautiously.