Concerns over the regulatory crackdown on operators indulging in stock price manipulation, fallout of 2G spectrum scam and renewed selling from FIIs pulled down the markets during the week ended. On the BSE the Sensex closed 458 points lower at 19,509 and the Nifty on the NSE 135 points down at 5,857.
The fall in benchmark indices does not reflect the extent of damage the broader market has undergone. The midcap and smallcap indices crashed by 6 to 9 per cent. Last week’s massacre of midcaps and smallcaps has shaken investor confidence and has dealt a short term blow to the sentiment. Cascading effect of margin calls aggravated the damage further.
Silence of regulators over the many market rumours floated by speculators made things dicey for market participants. However the sharp correction presents an opportunity to pick up good quality stocks ahead of Q3 results. Strong IIP data helped markets recoup some of the losses on Friday. With global markets performing strongly, punters say worst is over and relief rally is on cards.
Avoid fresh shorts at current levels. Key events to watch in coming week are RBI policy meet, advance tax numbers and US Fed meet. For the week ahead chartists predict trading band of 19,100-19,960 for the Sensex and 5,650-6,080 for the Nifty. Short term supports are at 19,340 & 19,080 and 5,760 & 5,680. Indices would face resistance at 19,760 & 19,980 and 5,920 & 5,980. Despite the strong pull back on Friday, it would be premature to say that markets are out of woods.
Futures & Options
Expectedly derivative segment witnessed turbulent times with many stocks swinging like a yo-yo; and ‘rapid fire’ volumes in many stocks reflect the prevailing nervous sentiment. Low PCR indicates substantial covering of short positions.
Sharp cut in open interest of stock futures indicates that lot of excesses have been flushed out. Freak rally from current levels is not ruled out say punters. Buy call option of Nifty 6,000 strike for surprising gains. Banking, realty, consumer durable, healthcare, auto and PSU segments witnessed sharp cuts. Negative news flow continues to “bug” banking counters. Industry watchers say news flow is being overplayed. Start bottom fishing.
Modest buying interest was seen in capital goods counters after IIP numbers. Buy on declines BHEL, L&T and Punj Lloyd. IT stocks continued to exhibit good strength in an otherwise weak market. Buy on declines Infosys, TCS, Wipro and HCL Tech for decent returns in near term. Reports of easing of pricing pressures and improvement in demand triggered rally in cement counters. Hectic volumes in ACC are a pointer. Stay invested in cement stocks. Resilience in Reliance Inds is attributed good refining margins in Q3. Above `1,080, surprising target of `1,140 is not ruled out. Punters say RIL will ‘save’ the markets from falling in near term. Oil majors ONGC, IOC, BPCL and HPCL are likely to trade firm on release of subsidy and also permission to hike fuel prices. Metal stocks are swaying to dollar index movements. Chinese inflation data and LME price moves may keep the stocks range bound in near term. Sugar stocks are witnessing good buying interest at lower levels on reports of rise of global sugar futures to 30-month highs. Stay invested and add on declines.
Stock scan
Irrational exuberance has given way to irrational depre-ssion. Many midcaps and smallcaps have been hammered to 52-week low. Remember stock prices rarely trade at fair value, they are overvalued or undervalued.
Neyveli Lignite, Arshiya Intl, Henkel India, HBL Power, ITD Cementation, Pudumjee Inds MIC Electronics and Gitanjali Gems are some of the stocks on the radar of savvy fund manager. Recent takeover of Igarshi Motors by HBL Power augurs well for the company. Accumulate at current levels. Improvement in operational performance and good order book makes LED equipment major MIC Electronics attractive buy at current levels for target price of `50. Detergent MNC Henkel India has reported good turnaround performance in the last few quarters. Good value buy at present level. Despite meltdown of many infra counters ITD Cementation had been resilient in the last few months. Use the present correction to accumulate the stock for target price of `350 in medium term. Logistics major Arshiya Intl has recently commissioned India's first Free Trade Warehousing Zone and is an integrated logistics infrastructure solution provider. Buy at current levels for target price of `300.
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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