Though markets started off the week-ended with strong gains, they witnessed some extremely volatile sessions due to uncertainty surrounding the bailout package for Europe’s economic woes.
On the Bombay Stock Exchange (BSE), the Sensex ended 225 points higher at 16,995 and the Nifty on the NSE closed with 75 points gain at 5,094. Despite logging smart gains during the week-ended, markets were nervous over the Euro-zone worries. Lower than expected IIP and double-digit headline inflation numbers proved to be a dampener.
Fears of a repeat of 2008 are bugging market players. However, barring huge liquidity crisis triggered by FII selling as seen during the last “crash”, Indian markets may remain resilient.
Significant global correction will definitely have an impact on domestic equities. For the week ahead, chartists predict a trading range of 4,950 and 5240 for the Nifty and 16,560 and 17,360 for the Sensex.
Testing of recent lows by the indices is not ruled out. Key supports are at 200-day moving average and 61 per cent retracement levels.
Support zones of 16,700 and 16,800 for the Sensex and 4,950 and 5,000 for the Nifty are critical for spotting “change” in trend. Initiate fresh buying only if indices cross last week highs with the decent volume.
The market is most dangerous when it looks best; it is most inviting when it looks worst. Buy good standard stocks that have stood the test of time.
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Futures & Options
Robust volumes were seen in the derivatives segment on heightened speculation. Sentiment indicators such as open interest, implied volatility, put/call ratio and VIX indicate continued volatility in the near term. The roller-coaster ride in the markets during the week-ended have unnerved many investors. Avoid large positions for present and trade on both sides to take advantage of volatility.
Disappointing numbers of SBI have triggered a sell off in the counter. However, weakness is likely to be short-lived and sharp rebound from lower levels cannot be ruled out. Use the present correction to pick up good PSU banking counters. Capital goods counters are appearing weak and tired. Use rallies to book profits.
Post Supreme Court judgment, Reliance ADAG stocks are attracting sellers on every rise. However, punters predict a surprise rally in Reliance Infra and Reliance Power. So, it is advisable to trade with a tight stop loss.
Defensive buying is indicated in pharma and technology counters. Stay invested in DRL, Lupin, Aurobindo and Divi Labs for further gains. Frontline IT counters may attract buyers at lower level.
Announcement of big ticket infrastructure initiative by the government is positive for the larger infrastructure players. Buy at current levels shares of companies such as HCC, GMR Infra, IVRCL and NCC.
Among the side counters looking good for short-term are Adani Enterprises, Hotel Leela, Cummins (I), Oracle Financial, Tata Tea, Titan Ind, and Sun TV.
Consider shorting counters like Sesa Goa, Reliance Industries, Tata Motors, Ashok Leyland, SBI, Cairn India and Tata Steel on every bounce.
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Stock scan
Lakshmi Energy and Foods has reported healthy results for the quarter ended on the back of improved product mix and mitigated demand risk by diversification into Pusa rice and power.
With concerns of FCI offtake subsiding and launch of retail operations, sources said the firm is on revival track.
Buy at current levels for a price target of Rs 180.
Development Credit Bank Ltd is back in the reckoning after a good turnaround performance in the last quarter.
Learning from earlier mistakes, the bank has restructured its loan portfolio and has been reduced NPAs significantly.
Reports about large funds evincing interest in the bank are doing rounds. Savvy players terming DCB as the next InduSind.
Buy on declines for price target of Rs75 in medium term.
Greaves Cotton Ltd is one of the leading engineering companies.
It manufactures equipments for power generation, agro, infrastructure and light engines sectors.
The company also markets high technology systems for marine, aviation and electronic applications. Key clientele include companies like M&M, Tata Motors, Piaggio and others. Buy for a target price of Rs 500.
Stocks such as Astral Poly Technik, Coromandel International are on the radar of savvy fund managers.
Punters tip a target price of Rs 300 for Astral Poly Technik. With growth outlook bright in fertiliser and agrochemicals.