Markets remained buoyant during the week ended on the back of global liquidity flows, advance tax numbers and general positive sentiment. They had also ignored the hawkish monetary policy of Reserve bank.
The Sensex closed at 19,594 with a gain of 794 points and the Nifty ended 245 points higher at 5,885. Market breadth reveals out-performance by frontline stocks and subdued activity in midcap and smallcap stocks.
Weekend action in broader market indicates that the coming week may witness heightened activity in midcap and smallcap counters.
According to market players, all-time highs for indices are not ruled out before Diwali. Analysts say that the present exuberance in stock markets is not irrational and justified by fundamentals. FII inflows, economic growth story and corporate earnings performance are the reasons touted for the rally. Changes in WPI suggest that the government is keen on passing on changes in global crude oil prices or foodgrain procurement prices to consumers. Inflation continues to bother RBI and bankers do not rule out another hike in November. Barring any political turmoil ignited by Ayodhya verdict or unexpected weakness in global markets, markets may seek higher levels in the near term. For the week ahead, chartists predict a trading range of 19,360 and 20,130 for the Sensex and 5,760 and 6,040 for the Nifty. Expect the indices to take a pause before crossing 20,000 and 6,000 levels. Supports for the week are at 19,440 and 19,280 and 5,830 and 5,760.
Futures & Options
Mirroring the strong bullish undertone, robust volumes were seen in the derivative segment. Open interest continues to soar with punters building positions in stock futures. Option activity indicates strong support for Nifty between 5,750 and 5,825 band and resistance closer to the 6,000-level. All the sectoral indices ended in the green on a weekly basis reflecting the spread of the rally. Apart from the banking and oil and gas counters, sustained buying was seen in consumer durables, realty and healthcare stocks. Despite strong momentum in the banking sector, traders are advised caution at higher levels. From the pharma pack, Lupin, Ranbaxy Labs, Dr Reddy’s Labs and Sun Pharma may touch new highs. Stay invested for present. Renewed buying interest was seen in telecom and cement stocks. Buy on declines Bharti and Idea.
Reports of cartelisation and price hikes have given fillip to the cement counters. Buy on declines ACC, Shree Cements, Ultratech and Birla Corp for contrarian gains.
Dollar weakness prompted buying in metal and mining stocks. Tata Steel, National Aluminum, Bhushan Steel and Sesa Goa may touch Rs 640, Rs 450, Rs 2,300 and Rs 350 in the near term.
Comeback rally in RIL may witness mild setback due to the government’s reluctance to increase the price of KG Basin gas. Use correction for buying only. From power stocks, CESC and Ril Power may see a renewed buying interest. Among the side counters, Dabur, Biocon, Aditya Birla Nuvo, Ril Capital, Essar Oil, Suzlon, Adani Enterprises, Everest Kanto, and Godrej Inds looks good.
Stock scan
Albert David Ltd belonging to the Kothari group is the manufacturer of pharmaceutical formulations, infusion solutions, herbal products, bulk drugs and disposable syringes and needles. The company has tied up with the world’s largest manufacturer of amino acids, Ajinomoto Co. Inc. of Japan and has received the approval of US FDA for DMF of bulk drugs tolbutamide and chlorpropamide. An approved WHO supplier, the company exports to more than 20 countries. A book value of Rs 110 and trailing EPS of Rs 20 make the stock a good bet for the target price of Rs 225 in the medium term.
Hinduja Foundries Ltd is the largest automobile jobbing foundry in the country with a production capacity of 1,43,000 tonnes of grey iron casting and 3,000 tonnes of aluminum gravity die-casting. In India, one vehicle out of three in India is fitted with HFL made cylinder block casting. With a strong revival in the demand for castings on the back of a dramatic turnaround in auto sector and expansion of its Hyderabad and Sriperumbudur plants, the company is well placed to report a good performance in coming quarters. Buy on declines for a price target of Rs 250.
Savvy market players are accumulating Vishnu Chemicals, Parekh Aluminex, Essar Shipping Ports, Elder Pharma, Bilcare and Artson Engineering. True to predictions breakout gains are seen in Vishnu Chemicals. A target price of Rs 175 on cards. Parekh Aluminex is the largest manufacturer of aluminum foil products used for packaging. Recent completion of expansion has trebled the capacity. Buy on declines for a target of Rs 600.
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.com
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