After trading lower during the initial part of the week ended, markets rallied on Friday to end the week on a positive note.
On the BSE, the Sensex gained 243 points to close at 14,765 and the Nifty on the NSE logged 62 points to finish at 4,375.
Renewed interest was seen in midcap and smallcap stocks, both the CNX Midcap and the BSE Smallcap indices outperformed the benchmark indices rising 3.8 per cent and 3.3 per cent for the week.
Increase in weightage of ICICI Bank (2.8 per cent to seven per cent), L&T (3.3 per cent to 7.9 per cent) and Infosys (3.7 per cent to 7.4 per cent) in the Nifty after adoption of free float computation triggered buying in the counters from Index funds.
Forecast of below normal monsoon, ‘fresh’ selling by FIIs and weak global economic reports have turned market players cautious ahead of the Union Budget.
With many Cabinet ministers making all the right noises, investors’ expectations are at sky high over the Union Budget. But remember that markets rise on hope and correct on news. In the absence of any negative global cues, market direction to be dictated by economic survey and Railway Budget in the coming week.
For the week ahead, chartists predict trading range of 14,200-15,400 for the Sensex and 4,100-4,680 for the Nifty. Immediate supports for the indices are the ‘lows’ of Friday at 14,370 and 4,240. Below these levels, sharp decline to 13,800 and 4,050 is not ruled out.
Expect resistance to the indices at 14,960 and 15,280 for the Sensex and 4,460 and 4,580 for the Nifty. It is the time to get out of all the risky stocks and hold quality stocks; In the event of market reversal after the Budget, it becomes difficult to exit from speculative counters, warn savvy market players.
F & O
Brisk volumes were seen in the derivatives segment during the week ended. However, rollover of positions was only 74 per cent — the lowest since May 2005. Lowest rollover of only 55 per cent was seen in Nifty futures indicating abundant caution ahead of the Union Budget.
Option segment reveals aggressive put writing at 4,200 and call writing at 4,500, 4,600 strikes indicating strong support at 4,150-4,200 and stiff resistance at 4,500-4,550.
Use strangle or straddle strategies to take advantage of post-Budget volatility.
Choose the options carefully since premiums are high at present. The July series will be bearish below 4,200-level on closing basis.
Capital goods, infrastructure and power stocks witnessed good buying interest. Further gains indicated in Punj Lloyd, IVRCL, Lanco Infra, NCC and HCC.
Speculative build up seen in ‘road’ stocks after positive statements from the roads and highways minister, Mr Kamal Nath. Buy Noida Toll and IRB Infra for target prices of Rs 60 and Rs 200 in next few weeks.
Real estate stocks are back in demand on reports of modest revival in housing sector. Buy DLF, Unitech and HDIL at current levels for short term targets of Rs 375, Rs 110 and Rs 290. After the announcement of Unique ID project, IT analysts are bullish on domestic e-governance opportunities.
Selective buying suggested in the sector for good medium-term gains. Speculative build up in JP Associates, Suzlon, IFCI and Cairn may see stocks spike from current levels. Wild swings likely in Orchid Chemicals and Kingfisher counters say punters.
n Countdown has started for the Railway Budget. Stocks on the radar are BEML, Kalindee Rail, MIC Electronics, Kernex Micro, Titagarh Wagons, Texmaco and Stone India. Liberalised wagon investment scheme, replacement of old coaches with GenX suburban rail coaches and addition of new rakes will benefit coach and wagon manufacturers like BEML, Texmaco and Titagarh. Stone India is manufacturer of alternators, air brakes and regulators, while Kernex Micro is anti-collision device maker. Switch to power saving LED lighting devices and modern display systems will benefit MIC Electronics. Kalindee Rail specialises in rail tra-cks, signaling and telecommunications. Expansion of Delhi Metro and freight corridor project will benefit Kalindee Rail. Stay invested and buy on declines for near term gains.
n Here is a forecast of market movement on a combination of events:
Dream budget + good monsoons = 17000/18000; Good budget + Average monsoons = 13500/14500; Bad budget + Average monsoons = 10000/11000; Bad budget + below normal monsoons = 9500/10500.
n Sources indicate good results from Premier Explosives. Stay invested and add on declines for price target of Rs 60. Sree Rayalaseema Alkalies has corrected sharply after announcement of excellent results on reports of institutional selling. The stock is a good buy for a price target of Rs 30 in near term. Results of Zen Technologies are better than expectations and confirm the growth trajectory of the company. Buy on declines for steady long term gains. Low priced Ecoboard Inds (Rs 13) has declared dividend of 10 per cent offering good yield at current price. Aluflouride may declare dividend of 15 per cent say sources. Steady gains from current level likely.
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 : deccan chronicle