Bank stocks may rise, IT looks stable

Market Watch

Information technology shares are seen moving in a range of 5 per cent of current levels taking positive signal from Cognizant Technology Solutions "aggressive" guidance for 2008. The technology counter, reeling under pressure from the US economic slowdown, will likely be steady during the week even as the broader equity market is seen volatile, dealers said.

The Nasdaq-listed IT outsourcing firm on Thursday said it expects a 38 per cent growth in revenue and 30-32 per cent rise in profit in 2008. Analysts had earlier said an above 35 per cent expected rise in revenue would help Indian IT counters rise between 10 per cent and 20 per cent over few weeks.

The market seems rife with talk of large deals, and as such the business outlook in the near term for the sector seems intact, analysts said. This week brokerage UBS published a report hinting at HCL Technologies bagging a $500 million deal from BT.

Banking stocks may rise slightly next week as attractive valuations are likely to lure investors, said analysts. However, any big upside may be capped as overall market sentiment remains cautious, analysts said.

Since Monday, Bombay Stock Exchange's 30-share Sensex fell 4.3 per cent and National Stock Exchange's 50-stock Nifty was down 3.7 per cent. "Some stocks have been very badly beaten down, like ICICI. I feel they should bounce back next week," said Hatim Broachwala, banking analyst, Khandwala Securities Ltd.

The main reason for fall in ICICI Bank shares is holding company plan getting postponed, Broachwala said. Earlier this month, the bank scrapped the deals entered with investors who had intended to pick up stake in the bank's proposed holding company ICICI Financial Services Ltd.

ICICI Bank is expected to see an upside next week, as investors will now consider the value of the individual subsidiaries locked in. The frontline state-run bank shares may also rally next week. IDBI Capital's Bhat expects some upside in mid-cap stocks like Corporation Bank, Oriental Bank of Commerce, Syndicate Bank as they are trading at low book values.

Shares of pharmaceutical companies will continue their slide next week, with Sun Pharmaceuticals being an exception, dealers said. Sun Pharma looks good with resistance at Rs 1,150-1,170 next week, said Nitin Kunte, technical advisor at Angel Stock Broking.

All other major pharma shares are seen sideways next week with a negative bias. Cipla has support at Rs 180 and resistance at Rs 200 while GlaxoSmithKline Pharmaceuticals has support at Rs 875-900 and resistance at Rs 950-975, Kunte said. Dr Reddy's Laboratories continues to look weak.

Support for the stock is seen at Rs 500 and resistance at Rs 550.