Reforms, global cues may guide markets this week


Buoyed by lesser than expected current account deficit and the revision in gas prices, markets recouped most of their recent losses to close the week ended on a optimistic note.
On the BSE, the Sensex closed 622 points higher at 19,396 and the Nifty on the NSE ended at 5,842 with 175 points gain. However the rally was confined to large cap stocks, while the BSE small cap index closed 1.3 per cent lower reflecting small investors apathy towards stocks.
Stocks wrapped up the first quarter of this financial year the Sensex and the Nifty recording gains of around two to three per cent, despite a challenging month.
The VIX which reflects fear and greed has had a wild run in the past few weeks. As expected, the slide of rupee against dollar dominated the headlines. Analysts expect some more key reform measures from the government to ‘attract’ foreign inflows.
Key data to watch for in the coming week are June manufacturing and services PMI numbers, jobless data from the US and Eurozone and ECB meet on interest rates. For the week ahead, chartists predict trading range of 18,900-19,800 for the Sensex and 5,685-6,000 for the Nifty. Immediate supports for the indices are at 19,150 and 18,950 and 5,775 and 5,710.
Futures and options
Mirroring the spike in the volumes of cash segment, the derivatives segment witnessed a sharp jump in speculative volumes. Derivative turnover crossed Rs 3 lakh crore on the day of settlement. Short covering and renewed buying interest from lower levels have scripted the reversal in trend.
* A pullback rally likely in metals, capital goods and realty counters.
* Track monthly sales numbers of auto and cement firms for cues on their performance.
* Ahead of Q1 results, IT counters may witness renewed buying interest.
* After the reforms binge in the energy sector, analysts expect the government to give impetus to the infrastructure sector.
* Despite attractive valuations, PSU banks are not attracting good buying on concerns over asset quality. Scan Q1 results to pick and choose good quality bank counters.
* Stocks looking good are Aurobindo Pharma, Ambuja Cement, Bajaj Auto, Cipla, Crompton Greaves, GSPL, GAIL, Hexaware, Kotak Bank, L&T, ONGC, Tata Power, RIL and Reliance Infra.
Stock scan
* Indo Borax and Chemicals’ plant employs continuous process and is fully capable of generating its own power requirements. It also enjoys the approval of US FDA for manufacturing pharma grade of boric acid. With consolidated EPS of `32 and book value of `172, the stock is good buy for price target of `175 in medium term.
* After the recent correction, Astra Microwave is attracting renewed buying interest. Sources indicate open market buying and an offer from L&T in near term. Buy for short term target of `55.
* The results of CCL Products were in line with the expectations and has announced the date of meeting for stock split. Buy on declines for gains in medium term.
* Sources indicate positive corporate announcement from Neuland Labs. Accumulate at current levels.
* Time Technoplast has become the first and only one to receive PESO approval for its composite cylinders. Worldwide composite cylinders are replacing metal cylinders for LPG distribution. Good potential for its new products and steady performance make it a good buy at current levels.
(C. Kutumba Rao is a Hyderabad-based stock market analyst. The recommendations made are those of the author. This newspaper is not liable for decisions made on the basis of this column.)

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