Spooked by global worries and weak macro economic data, markets ‘cracked’ during the week ended registering highest weekly losses in six months. On the BSE the Sensex plunged by 848 points to 20,157 and the Nifty on the NSE dropped by 236 points to 6,072. It was bloodbath across the board and all the sectoral indices ended negative.
Potential tightening of China’s monetary policy, concerns about sovereign debt crises from Euro zone and worries about global economy triggered some selling from FIIs. Weak IIP data for second successive month triggered fears over ‘growth’ story. Flow of funds from secondary markets to primary market was evident in the subscription to Powergrid FPO.
The latest round of concerns is being used as ‘reason’ to book profits on the back of strong gains made since September, say market players. Investors need to watch carefully global economic concerns and also the effect of Seoul summit consensus of G-20 “to refrain from competitive devaluation of currencies”.
For the week ahead chartists predict trading range of 19,700-20,500 for the Sensex and 5,820-6,240 for the Nifty. Strong support for indices is evident at levels of 20K, 19,850 & 19,700 and 6K, 5880 & 5750. Initiate fresh positions only if indices close above 20,500 and 6,175 with volume action. The fall in the markets is not likely to last long. Do not initiate shorts at lower levels. Don’t try to pick the top and bottom of the market.
Futures & Options
Mirroring the ‘mild’ panic in underlying cash market, derivative segment witnessed high volatility on massive unwinding of positions by some section of market players. Selling by FIIs whole week in index futures was a big dampener. Sell off in Nifty futures suggests short build up. Any bounce in next week should be used to trim positions.
Option activity indicates trading range of 5,800-6,200 for Nifty in near term. Lower than expected Q2 numbers from SBI sparked selling in banking counters. Further weakness in select stocks is not ruled out in near term. Use sharp corrections to accumulate for long term. Realty stocks continued to face selling pressure on the back of higher provisioning norms by RBI. Avoid for present.
Resurgence in dollar may trigger mild buying in IT stocks feel observers. Buying suggested in TCS and Infosys. Expectedly 3i Infotech is moving into strong hands. Buy for target price of `90. Defensive buying seen in FMCG and select pharma stocks. Show of strength by HLL is indicative of re-rating of the stock. Buy on declines. Dr Reddy Labs and Aurobindo look good for near term gains.
Use rallies to exit from Ranbaxy and Divi Labs. After showing good strength during the early part of last week, metal stocks lost ‘shine’ in the sell off. Punters suggest buying at lower levels in Tata Steel and Hindalco. Among the side counters looking good after correction are DCHL, IDBI Bank, Patni Computers, Idea, Bombay Dyeing, Max, Bata and Financial Technologies. Use corrections in textile counters Alok and S Kumar to buy. Never get out of the market just because you have lost patience or get into the market because you are anxious from waiting.
True to predictions, Andhra Petrochemicals Ltd and India Glycols Ltd have reported excellent turnaround performances. India Glycols Ltd is a leading company that manufactures green technology based bulk, specialty and performance chemicals and natural gums, spirits, industrial gases, sugar and nutraceuticals. Prices of glycols have improved from a low of $544 to $1050 per tonne in the recent quarter and are expected to rule at higher levels for next few quarters. Apart from chemicals, India Glycols has significant presence in the natural active pharmaceuticals, a spirits division that manufactures IMFL and owns Shakumbari Sugar with crushing capacity of 7,500 TCD and cogeneration power plant of 25.5 MW. Buy at current levels for target price of `350 in medium term. Andhra Petrochemicals’ oxo-alcohols facility in Visakhapatnam is the only producer of oxo alcohols in India and accounts for nearly 40 per cent of the market. It produces isobutanol, 2-ethylhexanol and n-butanol which are used in plasticizers, resins, pesticides, pharmaceuticals, printing inks, varnishes, rubber chemicals etc. Product prices have reportedly improved by 30-40 per cent in the past few months auguring well for the company which has completed the modernization cum optimization of the expanded plant. For the first six months turnover is up by 100 per cent and net profit zoomed by 1,400 per cent reflecting the changed fortunes of the company. Share holding patterns of last few quarters indicate that promoters are increasing their stake by market purchases. Buy at current levels for target price of `60 in medium term.
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 : DC
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