Shrugging away the surprise rate hike by the RBI and uncertain economic scenario of Euro zone, markets have posted seventh straight weekly gain.
On the BSE the Sensex ended 66 points higher at 17645 and the Nifty on the NSE logged 19 points to close at 5282. However, trading volumes have been disappointing reflecting lack of conviction among the market participants.
Strong FII inflows are being negated by flow of funds from the secondary market to the vibrant IPO market. Muted activity from domestic institutions has been a dampener for sentiment.
Barring any negative earnings surprises or weak global cues, markets are well placed for a strong rally in medium term. Monsoon forecast and inflation trends may dictate the trend of next couple of months. In short term for higher year end NAV, funds may “prop” up select counters feel punters.
For the week ahead chartists predict trading range of 17,340-18,200 for the Sensex and 5,120-5,440 for the Nifty.
Supports for the week are at 17,480 and 17,220 and 5,230 & 5,110. Cut short term longs if Nifty closes below 5,200.
Though the near term trend for the indices is up, expect choppy and volatile swings in the “results season”.
Long term earnings growth is what determines stock performance, but in the short term, a number of factors influence share price, including inflation, interest rates, index valuations, investor sentiment, FII inflows/outflows, and IPO activity.
Futures & Options
Despite being settlement week, subdued volumes were seen in the derivatives segment during the week ended. Lower rollover in the Nifty on the back of good gains in March series was disappointing and indicates that markets are close to short term highs. Extreme caution warranted at higher levels.
Rate sensitive sectors like auto, realty and banking have been subject to selling at higher levels. PSU banks are attracting good buying at lower levels on expectations that improvement in g-sec yields may see the banks post better earnings. Buy OBC, Andhra Bank, PNB and BOB for short term. HDFC, IDFC and ICICI Bank may move up further on institutional interest.
Expectedly capital goods counters are attracting good buying. Stay invested in Cummins, Siemens, APIL and Voltas for further gains. Improvement in gross refining margins has sparked activity in oil and gas space.
Further gains are indicated in Reliance Industries, Essar Oil, MRPL and Chennai Petro. Passage of the US Health Care Bill has triggered strong buying in pharma counters. Generic companies with MNC tie-ups are big beneficiaries say industry sources. Buy on declines Dr Reddy, Aurobindo and Ranbaxy.
Telecom stocks may see heightened action after announcement of 3G allotments. Buy on declines Bharti Telecom and Tata Communications. MTNL is expected to receive a very “big” refund from the IT Department. Punters tip surprise target of Rs88 for this routine underperformer.
Metal stocks are putting up a “resilient” performance. Use declines to buy Hindalco, JSW Steel and Tata Steel for the short term. Among the side counters, good support at lower levels may see Noida Toll, Welspun Guj., Hotel Leela and Sun TV, touch targets of Rs40, Rs320, Rs54, Rs460.
Stock scan
Wires and Fabriks is engaged in the business of manufacturing and marketing of technical fabrics. The company was first in India to manufacture Double and Triple layer Synthetic forming fabrics, and introduced a range of specialty paper making chemicals in partnership with leading international manufacturers. It also manufactures various types of Electro Discharge Machine wires for industrial applications. Buy at current levels for medium term target of Rs200.
After long hibernation Raymond Ltd has been witnessing good volumes on the bourses.
The company is the largest integrated manufacturer of worsted fabric in the world. It has many subsidiaries engaged in engineering, aviation and consumer goods .
Restructuring of operations and moves to unlock the value of huge land bank are underway say sources. Buy at current levels for target price of Rs350 in medium term.
Jubilant Organosys is an integrated pharmaceutical and life sciences company.
It is the largest Custom Research and Manufacturing Services player and a leading Drug Discovery and Development Solution provider out of India. It has global leadership position in Vitamin B3. Buy on declines for target price of Rs450 in next few months.
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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