Helped by the truce between the Ambani brothers, short covering and global relief rally, markets staged a smart comeback during the week-ended. On the BSE, the Sensex ended 417 points higher at 16,863 and the Nifty on the NSE gained 135 points to close at 5,067. However, market breadth was mixed mirroring the uncertainty
and fears of the market players over the near-term direction of markets. RBI moves to ease liquidity helped to allay fears over liquidity crunch due to payment for license fees for 3G spectrum and advance tax payments. Timely arrival and progress of monsoon can be a short-term game changer.
Downgrade of Spain’s debt indicates that Europe’s economic woes will continue to be a cause of worry for global markets. Despite clear signs of recovery in US economy, Dow Jones shed nearly eight per cent, its worst May since 1940 reflecting fears over sovereign debt crises in Euro zone. Near term direction of the markets will be dictated by global cues.
For the week ahead, chartists predict a trading band of 16,480-17,240 for the Sensex and 4,840-5,200 for the Nifty. Expect levels of 16,720, 16,540 and 16,280 on the Sensex; and 4,980, 4,910 and 4,860 to serve as support levels on the downside. Key resistances are at 16,980 and 17,150 and 5,120 and 5,170. Buy only on dips, and traders are cautioned to keep last week lows as stop loss for long positions. Indices could remain in a broad sideways band for next couple of weeks.
Futures & Options
Volumes touched record levels in the derivatives segment reflecting heightened speculative activity. Despite the high volatility, open interest is still heavy at over Rs 1,00,000 crore. High put/call ratio after the rollover clearly implies that short sellers have carried positions to new series. Avoid aggressive longs and be willing to short if support levels are broken.
Mild pullback rallies were seen in realty, oil and gas, IT and power sectors. Rally in IT stocks is attributed to rupee weakness against dollar. However sources indicate possible contagion effect of Euro crises. Stick to frontline counters. RIL and ONGC have lent good support to the indices during the week-ended. Trade both ways in the counters.
Muted rally in realty is likely to be short lived one. Use rallies to exit from weak counters.
Banking counters will be range bound. Use declines to accumulate PSU banks. Short term up move likely in ICICI Bank and Kotak Bank.
In the FMCG space, HUL and ITC look good for further gains. Sugar stocks are showing signs of come back. Further gains could be seen in Shree Renuka, Bajaj Hindustan and Triveni.
Pharma counters are attracting buying on every decline. Hyderabad trio Aurobindo, Divi Labs and Dr Reddy look set to give healthy returns.
After the recent sharp correction, infrastructure counters are again on the radar of savvy funds. Buy HCC, JP Associates, IVRCL and NCC for 10 to 15 per cent short term upmove. Stock futures looking good for week ahead on technical considerations are Andhra Bank, Biocon, ICICI Bank, Jindal Saw, JSPL, LIC Hou-sing, Pantaloon, Ranbaxy, Suzlon and Sun Pharma.
Stock scan
Tamilnadu Newsprint and Papers is the largest bagasse based paper maker. Fourth quarter results reflect the benefits of the mill expansion increasing the capacity to four lakh tones per year. Book value of Rs 106 and near five per cent dividend yield at its CMP makes it good bet for a target for Rs 175.
Poddar Developers, formerly known as Wearology Ltd, is a diversified company with business interests in organic farming, organic textiles and real estate development. The demand for its organic products and near completion of a major realty project has triggered buying in the counter from sources close to company. Buy on declines for target price of Rs 150.
Henkel India, the subsidiary of German major Henkel AG, operates in business areas of laundry, home care, cosmetics, toiletries and haircare. Sources indicate that the German parent is contemplating to buy out major Indian shareholders such as the Muthiah group at a significant premium to current price and also integrate its adhesives business in India. Buy on declines for a target price of Rs 90.
Salzer Electronics desi-gns and manufactures cam operated rotary switc-hes and toraidal transformers. It has marketing tie-up with majors like L&T and Crompton Greaves, in which L&T Capital has 26 per cent equity, has shown good results. So buy for a target price of Rs 150.