True to the predictions, the Union Budget’s failure to meet the expectations of investors triggered a sharp slide in the markets during the week ended. Registering the biggest weekly fall since October 2008, the Sensex on the BSE ended at an eight week low of 13,504, a fall of 1,409 points. On the NSE, the Nifty shed 420 points to close at 4,004. A renewed selling from Foreign Institutional Investors and erratic progress of the monsoon kept the market sentiment negative.
Markets ignored positives like inclusive growth triggers in the Budget, IMF’s revised growth forecast for India and better-than-expected IIP numbers.
A positive start to first quarter earnings season given by Infosys too failed to enthuse the market players. Parleys at G8 summit in Italty indicate that econom-ies across the globe are “on the cusp of stabilisation” and predict steady revival by 2010.
Star gazers feel that the impact of eclipses on the markets is not ruled out and advice caution during the period.
For the week ahead, chartists predict wide trading range of 12,800-14,000 for the Sensex and 3,650-4,250 for the Nifty. Expect resistance to the indices at 13,780 and 14,140 for the Sensex and 4,130 and 4,260 for the Nifty. Supports for the week are at 13,300 and 12,840 and 3,920 and 3,780.
Markets are in oversold zone and any positive ann-ouncements on policy front which have been ignored in the Budget could trigger hectic short-covering.
The market is most dangerous when it looks best; it is most inviting when it looks worst. Don’t try to pick the top and bottom of the market. Buy good standard stocks that have stood the test of time.
* Logistics companies Gati Ltd, GDL, Allcargo Logistics and Arshiya International are back on the radar of savvy fund managers. Latest MF portfolios reveal inclusion of Allcargo in many funds. Buy on declines for steady gains in medium term. GDL is expected to announce stake sale in its railway container arm. Buy the stock for a target price of Rs150 in medium term. The acquisition of Kausar, a leading refrigerated cargo firm has given Gati Ltd foothold in cold chain business. The company is expe-cted to announce restructuring of its debt of over Rs 300 crore. Buy at current levels for a long term target of Rs 90.
* Sharon Bio Medicine, Sterlite Technologies, BEML and Gitanjali Gems are tipped for steady gains in the medium term. Sharon Bio Medicine is expected to announce a successful breakthrough in its CRAMS operations. Buy at current levels for surprising gains. Excise duty exemption on branded jewellery to benefit Gitanjali Gems. It has recently acquired Mobile-NXT chain of stores and is renaming them as “Hoop” to sell jewellery. Sterlite Tech is reaping benefits of expanded capacities and is expected to report excellent Q1 numbers.
F & O
Spooked by lack luster Budget, market players were seen ‘cutting’ positions in the derivative segment. Nifty futures also slipped into a sharp discount against the spot. Sharp fall in the last hour of trading on Friday has unnerved many short term traders. Aggressive call writing at 4,100-level and put writing at 3,800-level foretells trading band of 3,800-4,200 for the Nifty in the near term. Initiate long positions if the Nifty sustains above 4,100-level on closing basis. Sentiment indicators do not indicate any sharp rebound, but suggest reduced volatility in the near term.
Unwinding of long positions was seen in Ashok Leyland, Nagarjuna Fertilisers, Chambal Fertilisers, Bajaj Hindustan, HDIL, IVRCL, HCC and many others. Short build-up was seen in Reliance Inds, Reliance Infra, SBI, HDFC, L&T, JP Associates and IDFC.
Worried over the government’s borrowing program to bridge deficit, funds were seen selling bank counters. Avoid bank stocks for the near term and use sharp declines to buy for the long term. Power and sugar stocks also witnessed heavy selling. Use the correction to accumulate good stocks.
Fizz in FMCG counters is unlikely to last for long. Book profits on bulges at current levels. Automobile counters are witnessing selective buying on expectations of positive surprises in Q1 results. Tata Motors could positively surprise due to funds from Nano bookings. Buy on declines for unexpected sharp gains.
Metals and real estate companies are likely to report very weak yoy results in Q1. Use rallies to exit and initiate shorts at higher levels.
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.