Bugged by high inflation, poor industrial numbers and uncertainty over the ability of the government over policymaking in the Budget session, markets continued to trade on a weak note during the week-ended.
On the Bombay Stock Exchange, the Sensex shed 769 points closing at 18,860 and the Nifty ended 250 points lower at 5,655. It was a nightmarish week that left market players gasping and exposed the shallowness of the market.
Renewed FII selling, disappointment over Infosys’ results, petrol price hike and fears over a possible interest rate hike have spooked the market sentiment. Analysts expect markets to stabilise and perform better, if the earnings next week come up with positive surprises.
After the consent order of Reliance ADAG group companies, the next will be consent order to Reliance Industries, say sources. The impact of the consent orders is likely to be shortlived. It is pertinent to see that while the US stocks rose for a seventh straight week, the longest rally since May 2007, Indian markets had their worst weekly fall in more than eight months. As expected, domestic factors are weighing more on the markets than optimism prevailing in global markets.
For the week ahead, chartists predict a trading band between 5,380 and 5,850 for the Nifty, and 18,160 and 19,000 for the Sensex. Supports for the week are at 5,605, 5,540 and 5,380 for the Nifty and 18,700, 18,520 and 18260 for the Sensex. Cut all short-term position trades, if the Nifty closes below 5,605, the 200-day moving average of Nifty.
The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.
Futures & Options
Intra-day swings of 200 points in the Nifty reflect the heightened volatility in the markets. Alternate bouts of buying and selling have kept the traders on edge throughout the week ended.
Ahmednagar Forgings Ltd (AFL) of the Amtek group is the second largest manufacturer of forged automotive components, cold forged parts and high tensile fasteners in India. The company also manufactures components for non-auto sectors such as railways and specialty vehicles.
Within the industry, AFL has the highest operating profit margin. Analysts expect the company to report earnings of `24 per share for the current year. Buy on declines for a target price of `250 in the medium term.
Artson Engineering Ltd has reportedly bagged lar-ge orders in the last couple of months. With Tata Projects Ltd as strategic investor and co-promoter, the company is back on track, say company sources. With a good visibility of earnings, the stock is a good buy on declines for a price target of `125 in the medium term.
West Coast Paper Mills Ltd is one of the larger players in the paper industry. It manufactures writing, printing and packaging paper. After the completion of expansion, the production capacity is presently 3,20,000 tonnes per annum and the introduction of superior grade paper has improved operating margins of the company. Buy on declines for a price target of `150.
Sentiment indicators like put/call ratio, implied volatility, open interest and VIX indicate continued volatility in near term. Volumes in the option segment are on the rise reflecting traders’ fears over the dangerous volatility in the futures segment. Buy Nifty call option of 5,800-strike, if Nifty holds the 200-day moving average level.
* Renewed buying was seen in cement counters on the back of expectations of an improved off-take and an increase in retail prices in several parts of the country. Buy on declines ACC, Ultratech and Birla Corp.
* Mild sell-off was seen in technology counters after the announcement of Infy results. However, punters were seen accumulating TCS, Wipro and HCL Tech at lower levels. Surprising gains are likely.
* The weekend hike in petrol prices will not offset the losses made in diesel and LPG, assert oil marketing companies. Adopt sell on rallies strategy.
* Metal stocks lost sheen on heavy profit booking. Avoid for present and wait for the FPOs of Tata Steel and SAIL to be completed, say industry sources.
* Among the stock futures looking good in an otherwise uncertain market are Petronet LNG, Power Grid, Bharti, Adani Enterprises, Grasim, M&M, Jain Irrigation and Suzlon.
Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected. The key is not to get scared out of them.
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.
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