Sensex: Outlook 2011

Sensex: Outlook 2011

The Sensex was volatile in the first nine months of 2010 and threatened to violate the 16,000-support, twice in February and then in May. But such a breakdown was averted on both occasions and the mood turned gung-ho, once it broke past the 18,500-hurdle, to take it very close to its previous life-time high of 21,208.

Long-term trend

As we stand at the threshold of a new decade and a New Year, the long-term charts have never looked this exciting. We are not talking about the next 12 months. It is a given fact that the year ahead will be choppy. It is the next 10 years that could see multi-fold appreciation in the benchmark.

It is fairly obvious that following a long-drawn bear market between 1992 and 2001, a fresh bull market is now in progress. Wave 1 of this bull market ended at the January 2008 peak of 21,207. The 2008 crash was the second wave that ended at 8,047 in March 2009. The third wave of this bull market is now in progress.

At the commencement of 2010, the rally from 8,047 had not progressed sufficiently to enable us to judge if it was the B wave of the second wave, or the commencement of the third wave upward. In simple terms, we expected the bear market to have legs that could make it drag on for a few more years. But a strong move above 18,500 and the index nearing its previous peak indicates that we are in a fresh leg upward of the long-term uptrend.

The targets for the third wave that is in progress from 8,047 trough are 39,337, 58,743 and hold your breath, 90,160. This wave can terminate at either of these targets and our preference veers towards the second. Extrapolation of the move that began from 1980 low also gives us a Sensex target in the 6-digit.

And the time when these can be achieved…Wave 1 took six years and three months. Wave three can be at least as long or 1.618 of wave 1. That gives us mid- 2015 or mid-2019. That is, the next decade is going to be good for Indian equities. The long-term outlook will be roiled only if the Sensex goes on to close below 13,000. If corrections halt above 16,000, that would reinforce the positive long-term view for the index.

2011:

There will, however, be plenty of corrections, both shallow and sharp, that will provide buying opportunities within this uptrend. One such correction is in progress that can keep the Sensex in the range between 19,000 and 21,500 in the early part of 2011. Our preferred trajectory for the year ahead is that the index breaks above the upper boundary at 21,500 in the first half of the year to reach 22,846, 25,177 or 28,950. The Sensex can trade in a higher range with the lower boundary at 20,000 after it achieves either of the afore-mentioned targets.

If the Sensex turns tail and breaches 19,000, it will receive strong support between 18,000 and 18,500. The next halt for the index would be at 16,000. Our preferred range for the year is between 18,000 and 25,000. The upper limit is 28,950 and lower is 16,000.

Tata nano's Sales jump

Nano leads Tata's 28% Dec sales jump

Tata Motors will focus on putting its passenger car and utility-vehicle business on the fast track in 2011-12, according to top industry sources.

December ended on a happy note with sales closer to the 20,000 units, up 28 per cent from last year's levels. While the Indica and the Indigo range sold clocked 5,923 and 5,234 units apiece, the big news was the Nano sales hitting 5,784 units.

Nano revival

The Rs 1-lakh car, as it is better known, has had a rough journey for some months now, with sales plunging to 509 units last month. However, company sources constantly maintained that this was only a blip on the horizon.

The recent slew of retail initiatives have helped the Nano's cause, but from Tata Motors' point of view, the car's potential still has not been realised in a country where the penetration levels of automobiles is barely 10 for a thousand people.

“Here's India's cheapest car that has still not reached out to its potential market yet."

The company is now gearing to put a Nano roadmap in place, which will focus on selling it aggressively in smaller towns.

This could take the form of exclusive kiosks and the like, where the car will not share the spotlight with other Tata models.

Internally, the company is believed to be of the view that the Nano can comfortably clock 10,000 units a month, going up to twice that number in 2012-13.

This optimism is based on the fact that a diesel version is due this year, which could just do the trick in boosting sales.

Tata's are primarily in the business of diesel, which is evident in the Indica and Indigo models.

"Once the 700cc diesel Nano hits the roads, it will grab the fancy of the market."

For some time now, the company has not given enough attention to its UV business and numbers fell alarmingly in the process. If December is an indication at 2,765 units, a turnaround strategy could be on the anvil.

The Sumo and the Safari have lost out to competitors over the months, but now with the Aria part of the product portfolio, Tata Motors should begin putting its house in order all over again.

“It is not the easiest of tasks for a company with such a diverse product range to ensure that all click simultaneously. However, there is a serious intent to give a fillip to cars and UVs."

The biggest comfort level is that the bread-and-butter commercial vehicle business is doing well. Likewise, Jaguar and Land Rover have been posting good numbers and contribute to nearly 60 per cent of Tata Motors' bottomline.