After a weak start during the early part of the week, markets staged a strong rebound in the latter part to close on an optimistic note. The Sensex gained nearly one per cent to close at 17,065 points and the Nifty remained almost unchanged at 5,119 points on the account of many Nifty stocks going ex-dividend.
Markets are interestingly poised with possibilities of a strong breakout in either upward or downward direction. With scepticism “high” over the ongoing rally, sharp short covering rally is not ruled out ahead of the F&O settlement in the next fortnight.
Strong IIP numbers, better than expected collection from BWA spectrum auction, good monsoon and positive global economic cues have turned the sentiment positive and allayed fears of traders.
Keep updated on the markets across the world and follow the trend. Barring any unexpected negative global cues, the ongoing rally may gain further steam. For the week ahead, chartists predict a trading band of 16,690 and 17,460 for the Sensex and 4,940 and 5,320 for the Nifty. Immediate supports for the indices are at 16,840
and 16,680 and 5040 and 4960.
Over the short term, the behaviour of the market is based on enthusiasm, fear, rumors and news. Over the long term though, it is mainly company earnings that determine whether a stock’s price will go up, down or sideways.
***
Futures & options
Despite the improvement in sentiment, volumes were tepid in the derivatives segment. Open interest continued to surge and is now over Rs1.3 lakh crore. High put/call ratio indicates build-up in short positions. Gutsy traders can attempt straddle or strangle strategy to take advantage of change in market direction.
With the entry of Reliance Industries Ltd into broad band services, the telecom sector looks set for yet another shake up.
Stock specific action indicated. Analysts expect a renewed buying in the capital goods sector. Buy on every dip L&T, BHEL and Siemens. Contrarians with a medium-term horizon can start accumulating Punj Lloyd and Suzlon from the current levels. From the power space, NLC, BGR Energy and JP Power Ventures may witness heightened action.
Auto sector continues to be the favoured sector for buying on every decline. Monthly sales numbers clearly indicate that happy times for auto companies are likely to last for more time than expected.
Capital infusion by the government is expected to give a fillip to public sector bank stocks. Price action indicated in the five PSBs — Bank of Maharashtra, Central Bank of India, IDBI Bank, UCO Bank and UBI.
From the private bank space accumulate ICICI Bank, Kotak Bank and Axis Bank.Clear signs of bottom formations seen in infrastructure stocks. Buy JP Associates, NCC, LITL, GMR Infra, HCC and IVRCL at current levels for both short term and medium term gains.
Stocks looking good for short term long positions are ACC, BHEL, Biocon, HDFC, JSPL, RIL, Reliance Capital, Reliance Infra, Siemens, Tech Mahindra, Cipla and Ranbaxy. Pull back gains likely in Mphasis, GVKPIL and GMDC. Given the way the stock market has been behaving lately or I should say misbehaving, traders need to be cautious and trade lightly.
***
Stock scan
Fenoplast Ltd is a manufacturer of PVC leather cloth, non toxic rigid PVC film used for blister packaging in pharmaceutical industry and soft PVC films for stationary and other applications.
The company has recently added new lines of production and is expected to post strong performance in next few quarters.
Its market cap is just one-fifth of its asset base. The stock is witnessing quiet accumulation from sources close to the management. Buy at current levels for a price target of Rs 90 in medium term.
Emami Ltd is a leading player in the personal and healthcare consumer products based on ayurvedic formulation. It has reported good results reflecting success of its inorganic growth strategy.
Post acquisition of Zandu Pharma, a century old household name in India; and M. Bhattacharya, the largest homeopathy company in India, Emami is well placed to grow at a rapid pace of 40 per cent CAGR. Buy on declines for a target price of Rs 1,000.
Jyothy Labs, the manufacturer of Ujala-liquid fabric whitener, is reportedly expanding its laundry services to new territories in coming months.
Buy at current levels for steady gains in medium term.