Robust economic data and positive global cues helped markets post gains for the second successive week. On the BSE, the Sensex gained 255 points closing at 17,117 and the Nifty on the NSE logged 69 points ending at 5,136.
Market breadth was broad based indicating heightened activity in midcap and smallcap stocks. Slowdown in FII sales and better than expected GDP data “aided” the ongoing rally.
The government’s move to compel companies to offer 25 per cent of their holding to the public has raised fears of “flow” of money from secondary markets to primary markets.
However, higher liquidity and “reduced” chances of manipulation may also improve valuations of some companies feel fund managers.
Markets may open weak on Monday on the back of weak global cues but may show “balance” by the end of the week. Worrisome news from abroad may continue to impact the markets significantly in the coming weeks.
Key economic data like IIP and inflation numbers and progress of the monsoon will be keenly watched. For the week ahead chartists predict trading band of 16,650-17,460 for the Sensex and 4,930-5,280 for the Nifty.
Immediate support for the indices are at 16,940 and 16,730 and 5,020 and 4,960. On the upside, 17,380 and 5,200 are key resistance points.
Stop loss for all longs should be at 4,960. For the moment it is a trader’s market not an investor’s one. 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.
Futures & Options
Mirroring the “mood” in the cash market volumes in the derivative segment were ‘soft’. Sentiment indicators like open interest, put/call ratio, implied volatility and VIX clearly reflect trader’s skepticism over the ongoing rally.
Pharma and FMCG stocks witnessed good defensive buying from funds. Dr Reddy, Divi Labs, Colgate, GSK Consumer, HUL and ITC look good for further gains. Impressive monthly sales numbers have triggered renewed buying in auto stocks. Use sharp corrections to buy M&M, Tata Motors, Ashok Leyland and Maruthi. True to predictions “contrarian” buying was seen in sugar stocks. Start accumulating selectively.
Driven by “recapitalisation” news smaller PSU banks like Andhra Bank, Syndicate Bank, Vijaya Bank, IOB and UCO Bank are attracting buyers on every decline. Buy on dips and hold for further gains. However mild profit booking in bigger banks is not ruled out. Trade both ways in bank counters. Among the stock futures side counters like Essar Oil, Dabur, EKC, Welspun Corp., Moser Baer, Patni, Zee Entertainment and Colgate look good for further gains. Looking slightly weak aare Aurobindo, Mphasis, Glenmark, Sun TV and Educomp.
Use rallies to sell. Forget the idea that speculation depends entirely upon luck, and guard against blind faith in the suggestions of other men. Speculation demands cool judgment, self reliance, courage, pliability and prudence.
Stock scan
Vishnu Chemicals has reported excellent growth numbers with turnover registering growth of 75 per cent. The company has also shown good turnaround performance. Sources indicate turnover of Rs340 crore in the current year with EPS of Rs15. Buy at current levels for target price of Rs125 in medium term.
Kallam Spinning Mills has posted excellent results beating market expectations. True to predictions the company has benefitted from the captive power plant and modernisation of the machinery. For the current year EPS may touch Rs14 and sources indicate increased dividend payout also. Buy on declines for a target price of Rs 70.
M&M Financial is attracting buying from savvy fund managers. Better than expected results and support from strong parent in expanding the operations foretell good future for the company. Conversion to “bank” is not ruled out in future. Buy the stock on declines for a target price of Rs 600.
Music major Saregama is back in limelight. Positive news flow on cards indicate company sources. Stay invested for target price of Rs 125.
KCP Sugars and Menon Bearings are tipped for short term gains by savvy market players.