Buoyed by positive global cues, changes in takeover code and good earnings from banking, auto component and capital goods sectors, Indian markets extended gains for the third straight week.
The BSE Sensex added 175 points and closed at 18,131. The Nifty rose 55 points ending at 5,449 — above 5,400-mark after 30 months. However, under-performance of midcap and smallcap indices reflects the underlying fears and scepticism of market players over the ongoing rally.
Strong FII inflows and positive economic news may see markets gaining momentum in coming days. To combat inflation, RBI is expected to hike repo and reverse repo rates by 25 basis points.
Weekend global cues such as results of stress tests of major European banks, rally in euro and better than expected results from Microsoft and others may ease investor worries about the strength of the global economy.
Important events for next week are RBI credit policy, first quarter results of RIL and F&O settlement.
For the week ahead chartists predict a trading band of 17,800 and 18,600 for the Sensex and 5,320 and 5,600 for the Nifty. The indices can face resistance at 18,340 and 18,560 and 5,490 and 5,560. Supports for the week are at 18,020 and 17,860 and 5,380 and 5,320.
Probability of short-covering rally propelling the indices closer to 19,000 and 5,700 levels is not ruled out in next few weeks discount fundamental outlook.
Futures & options
Robust volumes were seen in the derivatives segment. Open interest of the market has crossed Rs 1,70,000 crore. Nifty PCR has increased to 1.47 indicating addition of short positions. Good roll over of positions seen in many stock futures.
In August series, 5,600 call and 5,300 put have seen good addition indicating a higher trading range for the Nifty in the near term.
Spurred by Chinese rumours, metal stocks witnessed good buying interest. Buy on declines SAIL, Tata Steel, JSPL and JSW Steel. Non-ferrous counters Sterlite and Hindalco may seek higher levels on short covering.
Good buying was seen in capital goods stocks Crompton Greaves, BHEL and BEL. Stay invested and add on declines.
True to predictions, smaller PSU banks continued to attract buyers on every decline. Buy Allahabad Bank, UCO Bank, Syndicate Bank, Indian Bank and Dena Bank on declines.
Rumours of “surprise” bonus from SBI are doing rounds. Short covering in Bank Nifty may push it closer to 10,500 level. Telecom counters are witnessing heightened activity.
Further gains indicated in Idea, Bharti and Onmobile. After a minor correction, realty stocks will seek higher levels say punters. DLF, Unitech and HDIL are the favorites in the space.
Maruti results were a big disappointment. Drop in profits was due to higher royalty to Suzuki. Punters expect the stock to slide to Rs 1,250 level.
Among the side counters Alstom Projects, Dabur, HCC, Jain Irrigation and Sintex Inds look good for higher levels.
New entrants to F&O, Shriram Transport, Adani and NHPC witnessed heightened activity. Book profits at higher levels.
Stock scan
Astral Polytechnik primarily manufactures chlorinated poly vinyl chloride (CPVC)/PVC (lead free) pipes and fittings.
The company has launched innovative products like fire fighter pipes, soil waste rain water pipes and many more.
With many user industries preferring CPVC pipes over GI pipes, the company is expected to report strong growth in sales and net profit for next few quarters. Buy on declines for a price target of Rs 450. Camphor & Allied Products is the largest manufacturer of terpene chemicals and other specialty aroma chemicals, which find application in vast array of industries like flavours and fragrances, pharmaceuticals, soaps and cosmetics, paints and varnishes and many more. Book value of Rs 125 and an EPS of Rs 20 make the stock a good bet for a target price of Rs 225 in the medium term.
Shilp Gravures is pioneer and undisputed leader in electro-mechanical engraving, with a substantial share of the flexible packaging industry. The company’s client list includes In-dia’s most reputed na-mes in FMCG, liquor and cigarette segments. Buy at current levels for target price of Rs100. True to predictions, Andhra Petro has reported excellent turnaround performance.
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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