EXPECTEDLY FEARS over impact of “Obama Talk”, monetary tightening in China, jitters over RBI policy measures have triggered heavy selling in the markets during the week ended.

On the BSE the Sensex tumbled by 502 points to close at 16,358 and the Nifty on the NSE shed 154 points to end at 4,882. Heavy selling from FIIs kept the sentiment negative. Global cues like spillover impact of economic woes of some European nations, reversal of dollar carry trade and volatility in dollar may impact FII mood. High global liquidity had sustained the equity markets for over two months till mid-January. Keep track of Davos ‘noises’ to tract global economic scenario. Aptly stated by the RBI Governor, withdrawal of stimulus packages will be as difficult as coming out of “Chakravyuh”. Do not expect a smooth pre-Budget rally as the atmosphere is turning “cloudy”. For the week ahead analysts predict broad trading range of 15,900-16,700 for the Sensex and 4,750-5,050 for the Nifty. Close below last week lows may see the indices slide to 15,300 and 4,600 levels. Short term traders are advised to treat 4,750 on Nifty as stop loss level. Expect resistance for the corrective upmove at 16,580 and 16,800 and 4,960 and 5,050 levels. In the short term, the behaviour of the market is based on enthusiasm and fear. Over the long term, though, it is the company earnings that determine the stock’s price.*** Futures & OptionsMIRRORING THE nervousness in the underlying cash segment, overall rollover in the derivative segment stood at 83 per cent, lower than the last three months average of 85 per cent. However, the open interest at Rs 85,000 crore at the beginning of a new series is highest since January’08. It is pertinent to note that Nifty short rollover at 77 per cent is also higher than last three months average of 73 per cent. Option activity clearly shows heavy call writing at 4,900 and 5,000 levels indicating strong resistance to Nifty at these levels in coming days. Markets look highly oversold, a sharp pullback not ruled out in near term. Post RBI credit policy, realty and bank stocks witnessed good short covering and look good for further gains in coming days. Buy at lower levels DLF, Unitech and HDIL in realty space. Among the PSU banks OBC, BOB, Allahabad Bank, Syndicate Bank and Andhra Bank look good. Axis Bank and ICICI Bank may see the start of new upmove. Reports that China would further cool down its economy and fall in prices of metals at LME strongly impacted metal stocks. Use the current weakness to buy select counters like NALCO, SAIL, Tata Steel and JSW Steel at lower levels for short term. BHEL, Crompton Greaves, Punj Lloyd and Cummins are set to recoup some of their recent losses. Select pharma counters may witness renewed buying as defensive bets. A good stock may go up even when the market is going down, while a dud stock can go down even when the market is booming.*** stock scanThree turnaround textile counters Bannari Amman Spinning, RSWM and BSL Ltd look good at current levels for promising returns. Bannari Amman Spinning Mills is the only company in the country manufacturing “quick dry-polyester fleece material with a ‘surface dry’ feature” used for diapers and has very good technical textile division producing a range of specialty products. Buy for target price of Rs200 in medium term. RSWM is one of the largest producers and exporters of polyester viscose blended yarn in the country. The company’s denim and 46 MW captive power plants have commenced operation. The Q3 results reflect the enhanced profitability. Buy for target price of Rs 200 over the next few months. BSL Ltd has an integrated textile unit making polyester/viscose blended fabrics, wool and blended fabrics, premium fabrics and trevira wool fabric. The stock looks stable and is a definite “Buy” for target price of Rs 45. Results of HBL Power were on expected lines indicating “powerful” move in coming days. Buy at current levels for target price of Rs60. Hitachi Home & Life Solutions has reported excellent turnaround results for Q3. Buy on every decline for target price of Rs225 in medium term. With results season coming to an end, investors would do well to reshuffle portfolio and remove the duds and load it with companies with good reliable cash flow.

By C. Kutumba Rao