On the back of global rally in equities, Indian markets registered strong gains for the third successive week. Recording its fourth highest ever weekly point wise gains, the Sensex on the BSE surged 1,081 points to end above 10,000-level at 10,048 and the NSE Nifty spurted by 302 points to close comfortably above 3,000-level at 3,109.
However, the rally was not broad based and was mostly confined to large caps. A spurt in trading volumes with no corresponding rise in delivery volumes indicates little investment buying and more speculative activity.
Short covering on the account of F&O expiry, heavy buying by FIIs, enc-ouraging statements from the Prime Minister on economic revival and positive global cues were the catalysts for the rally.
Negatives like ballooning fiscal deficit, uncertainty over election outcome and deceleration in corporate earnings have been ignored. With election results only due in the middle of May, but fourth quarter earnings season starting from mid-April, analysts warn market players to fasten seat belts for a roller coaster ride in next few weeks.
For the week ahead, char-tists predict a trading band of 9,660-10,480 for the Sensex and 2,920-3,240 for the Nifty. Resistances for indi-ces for the week would be at 10,280 and 10,460 and 3,140 and 3,240.
Supports for the week would be at 9,820 and 9,660 and 2,990 and 2,920.
With Indian markets tracking US market indices faithfully, punters may note that twice during last week S&P500 topped the 800-level, only to make a retreat. A breach of 10,000-level and 3,000-level on the Sensex and the Nifty on downside may trigger fresh weakness.
Critical levels for the Nifty are 3,150 on upside and 2,900 on lower side.
* With crude oil prices showing upward momentum again, offshore oilfield services companies are back in limelight. However the recent spike in oil prices was more on account of speculation than demand, feel observers. On home front, order book for companies providing offshore oilfield services may remain robust with ONGC encouraged by the government plays the national oil security card and increases its exploration activity.
At current valuations, Great Offshore and Garware Offshore look good bets for a medium-term. High debt levels of Aban Offshore and Jindal Drilling are negatives. Wait for restructuring to invest in these counters.
* Reports of increase in demand for metals and commodities and rally in base metal prices boosted sentiment in the sector. Data indicates growth of 3.6 per cent in finished steel output and 8.3 per cent in cement for February indicating a nascent recovery in economic activity. Hold long positions in Tata Steel, SAIL, Sterlite, JSW Steel, ACC, Ambuja and India Cements with an adequate stop loss for gains in the near-term. After the recent rise, mild correction is not ruled out, use declines to buy.
* Savvy funds were seen accumulating Glodyne Tec-hno, Simplex Infra, Balmer Lawrie and Indotech Transformers. Glodyne is one of the few software players to ‘exceed’ expectations. With a good order book, it is expected to report EPS of Rs 35. Buy at current levels.
Last week’s rally was supported by robust volumes in the derivatives segment ind-icating significant increase in participation levels. Market-wide rollover stood at nearly 80 per cent, significantly above the three-mo-nth average of 74 per cent.
Cumulative FII positions as a percentage of the total gross market position rose sharply to 39.5 per cent.
India VIX after sharply falling to 27 per cent during the middle of the week rose sharply on Friday to 37 per cent indicating a sharp correction in the week ahead.
Heavy call writing at 3,100 and 3,200 strikes indicate that Nifty could face a strong resistance in this band. Experts feel that after sharp movements seen during last fortnight, markets could witness a consolidation and a mild correction in the near-term.
Stay invested in counters RIL, RCom, Sterlite, ICICI Bank, Tata Steel and Cairn with a stop loss at Rs 1,465, Rs 165, Rs 350, Rs 350, Rs 210 and Rs 180. After the ‘lead’ given by large caps, midcaps could outperform ahead of results. Buy on declines Punj Lloyd, BEML, JP Associates, Jet Airways, ABG Shipyard, Idea, Sesa Goa, Century, RNRL, United Spirits, Hindustan Zinc, EKC and United Phosphorus. Exit/short on rallies weak counters like Sterling Bio, Crompton, Siemens and Unitech.
Despite rebound, the outlook for banking stocks looks cloudy for near term. Book profits at higher levels. Fertiliser and sugar stocks look good at current levels. Buy Chambal, NFCL, Shree Renuka and Triveni at current levels. After the smart run in main stream auto counters, auto ancillaries are back in the buy list. Bharat Forge and Amtek look good for some more gains. Power and telecom counters look set for rally from present levels. Use declines to accumulate.
C. Kutumba Rao is a Hyderabad-based stock market analyst. The views expressed and the recommendations made are those of the author. Readers are strongly recommended to consult their financial advisors before making any financial investments. This newspaper is not liable for investment decisions made on the basis of recommendations in these columns.
Source : deccanchronicle