Steel and banking positive, auto weak

MARKET WATCH

The shares of steel companies are likely to post further gains next week, taking heart from remarks that the country will be able to sustain a 9 per cent economic growth rate despite the global jitters.

Prime Minister Manmohan Singh said that India will be able to sustain 9 per cent growth although it is not fully insulated from the global economic slowdown.

Steel stocks are also likely to surge on hopes of budgetary sops. The steel companies are battling high input costs as sea freight rates and prices of iron ore, coking coal and ferro alloys surge.

Banking: Looks strong
The banks are likely to trade in the positive territory next week despite many banks cutting their lending rates. A cut in lending rates is seen as negative for banks as it has a bearing on their interest income.

However, banks' decisions to cut lending rates were triggered by decline in the cost of deposits in the current quarter, analysts said.

State Bank of India, the country's largest lender, reduced its benchmark prime lending rate by 25 bps to 12.5 per cent on Monday, which prompted a series of banks, including private sector Axis Bank, to cut lending rates.

The other factor that led the banks to cut rates, according to analysts, was Reserve Bank of India's decision to keep key policy rates unchanged at the third quarter review of its monetary and credit policy for 2007-08 (April-March) on January 29.

IT: Flat
The information technology heavyweights are likely to be flat next week amid uncertainties on what the Union Budget has in store for the sector and lingering worries over a slowdown in the US.

Analysts said IT companies may see a slowdown in first two quarters of 2008-09 (April-March) on lower demand from US, which contributes 55-60 per cent of their revenues.

Infosys Technologies' earnings guidance for 2008-09 will give a direction to the investors, analysts said. It has reduced its exposure to the US market to 62.3 per cent from 80 per cent.

The shares of TCS are likely to see a negative trend next week, with a strong resistance at Rs 823, said Imtiyaz Qureshi, technical analyst, India Capital Markets.

Satyam is likely to trade in the range of Rs 412-461 next week and HCL will become attractive only above 286, Qureshi added.

Auto: Weak
Automobile counters are seen weak next week, albeit with some muted gains, in line with the broad market indices. The sentiment would continue to be down as sales are not expected to revive in the Jan-Mar quarter," analysts said.

Hit hard by higher interest rates and reluctance of finance companies to support sales in rural areas, particularly in northern India, the domestic bike market is facing a recession, with the numbers going down by as much as 12.4 per cent in the April-January period.