Markets were volatile throughout the week-ended due to the European crisis putting the global economic recovery at risk.
On the BSE, the Sensex dropped 549 points and the Nifty on the NSE shed 162 points to end the week at 16,446 and 4,931 respectively. Volatility indices — fear gauge — across the world have shot up to new short-term highs reflecting investor anxiety. Selling was seen across the board and nearly all the sectoral indices closed in the red. FII selling and weak rupee, which had seen the worst fall in 15 years, also acted as dampener.
According to analysts, the clearance of Wall Street reform bills — supposedly the most comprehensive regulation of the finance industry since the Great Depression — by the US Senate will have a huge impact on the emerging market flows.
Truce between the world’s richest siblings — Mukesh Ambani and Anil Ambani — agreeing to scrap all existing non-competition agreements between their business groups and to negotiate the gas deal may prove to be the biggest trigger for the markets.
With indices trading below 200-day moving averages, a corrective move to cross them is not ruled out. For the week ahead, chartists predict a trading band of 16,200 and 17,000 for the Sensex and 4,840 and 5,100 for the Nifty.
Resistances for the week are at 16,740 and 16,960 and 4,990 and 5,070. Last week’s lows of the indices at 16,187 and 4,842 may act as major support levels.
Futures & Options
Robust volumes were seen in the derivative segment. It is pertinent to note that the weekly volume also increased the most since second week of March. Trend change, however, is the worry plaguing traders mind. Buy Nifty5000 call option of June series for unexpected returns tip savvy punters. Watch rollovers of stock futures to spot winners for new series. Expectedly Reliance stocks will hog limelight on the back of harmony between the Ambani brothers. Buy RCom, Reliance Infra and Reliance Capital from ADAG pack for relief gains. Buy RIL for surprising gains in the medium-term with a stop loss at Rs 940. A short term target of Rs 1,100 is not ruled out.
After the recent slide infrastructure and metal stocks look good for corrective gains. Buy Lanco Infra, JP Associates, HCC, Tata Steel and SAIL for targets of Rs 62, Rs 132, Rs 130, Rs 540 and Rs 215.
Despite disappointment at the contours of the Abbott-Piramal deal, industry sources say that the deal will help in improving the valuations of other companies. Use corrections to buy and stay overweight in pharma sector.
Savvy long term players have begun nibbling telecom counters. With 3G auction process over, valuations of the battered telecom stocks are looking attractive. Buy Bharti and Idea at current levels for medium term. Banking and capital goods counters may remain range bound in near term.
Stock futures looking attractive are M&M, Tata Motors, IFCI, REC, PTC, Biocon and Maruti. Sharp down moves in counters like Educomp, Aban Offshore and others have unnerved punters. Place stops at technical danger points always on all trades in such wild counters.
Piramal Glass is among the top three flacconage (glass bottle) manufacturers in the world supplying to pharmaceutical, cosmetics and perfumery, specialty food and beverages and decoration industries. Restructuring of operations coupled with improved realisations helped the company post excellent turnaround performance. With the promoter group Piramal flush with cash from Abbott deal, market players expect them to concentrate more on Piramal Glass. Buy on declines for price target of Rs 175 in medium term.
Ramco Industries is one of the best performing, highly efficient producers of fibre cement sheets in India. It has pioneered and introduced the innovative calcium silicate board — a versatile building interior product — in India. The company holds investments in the group companies, presently valued at Rs 400 crores giving an enterprise value of Rs 880 crore to the company. At current price levels, the market capitalisation is only Rs 550 crore, making Ramco a good investment bet for the medium term.
Solar Industries is one of the largest comprehensive explosives and explosive initiating devices manufacturers in the country. With the superior quality of its products, the company has garnered good market share in southeast Asia, Middle East and some African countries.
Results of many smallcap and midcap textile companies are better than expectations. Re-rating and a renewed interest is clearly evident in several stocks.
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.