Showing good resilience against uncertain global cues markets closed near their 30-month highs. On the BSE the Sensex closed 235 points higher at 18,402 and the Nifty on the NSE added 79 points to close above the psychological level of 5,500 at 5,531.
Market breadth continued to be good with frenetic activity in several midcap and smallcap stocks. Good monsoon, easing food inflation and strong FII inflows kept the sentiment positive. Delay in rollout of GST and DTC may have modest impact on markets feel analysts.
Recent gains in high priced IPO’s like Jubilant Foods, SKS Micro, Bajaj Corp and others in too short a time frame show build up of “bubble” in some pockets of the market. Repetition of Newton’s Law not ruled out.
It is interesting to observe that during the week ended while China, India, Brazil, Sri Lanka and other emerging markets recorded hefty gains; France, UK, Germany and US markets ended with losses after some downbeat economic reports triggered fears of “double dip” recession.
Decoupling theory is back in limelight. Though macro economic data is improving, key risk for Indian market is from ‘foreign’ fear market players. Chartists predict trading band of 18,120-18,790 for the Sensex and 5,410-5,680 for the Nifty. Supports for the week are at 18,240 and 18,040 and 5,480 and 5,420. Expect resistance to indices at 18,520 and 18,620 and 5,580 and 5,660. Short term outlook will turn negative if indices trade below 18,200 and 5,420 levels.
FUTURES & OPTIONS
Ahead of the settlement week derivatives segment witnessed robust volumes. Turnover has crossed Rs1 lakh crore on three trading sessions reflecting rise in speculative activity.
Open interest is close to Rs 2 lakh inclusive of rollovers. Sentiment indicators like implied volatility, open interest, put/call ratio and VIX indicate volatile finish to the current series. Renewed buying interest was seen in FMCG and pharma stocks.
Aurobindo Pharma, Ranbaxy and Lupin look good for more gains. Buy Lupin cum split for “good” ex-split gains. Dabur, Marico and ITC are good bets for steady gains from current levels.
Banking and capital goods extended their recent gains on momentum buying. Slight “tiredness” seen in banking stocks after their recent “spectacular” run. Buy on dips. Likely clearance of Nuclear Liability Bill sparked buying in L&T, Siemens, APIL and BHEL.
Stay invested for present. Range bound activity was seen in IT, metals and realty. Metals look set to stage a strong comeback. Buy on declines Tata Steel, Hindalco and SAIL.
Stay invested in DLF, Unitech and IBREL. Underlying land valuations make Century and Bombay Dyeing good buys on declines. Mild selling was seen in power and telecom counters. After recent correction infra counters IVRCL, NCC, JP Associates and HCC look good for relief rally. Good accumulation seen in cement counters. Use corrections to buy ACC, Ambuja, Ultratech and Samruddhi. Among the side counters Financial Technologies, Noida Toll, BEL, Exide Inds, look good for short term gains.
STOCK SCAN
Sathavahana Ispat Ltd is engaged in the manufacturing of pig iron and metallurgical coke with cogeneration power. Pig iron is the basic raw material for foundry and engineering industries for making castings and engineering components.
With the significant growth in the main user industries like automobiles and construction, pig iron prices are moving upwards again. Despite modest decline in turnover, integration of operations helped the company post 107 per cent increase in net profit in Q1.
UK-based Stemcor, world’s largest steel trading firm had invested at Rs 60 per share for nearly 15 per cent stake and is reportedly not averse to hiking its stake in the company. Buy at current levels for target price of Rs 85 in the short term.
After long consolidation heightened activity seen in Vishnu Chemicals and Brigade Enterprises. Vishnu Chemicals manufactures chromium and other specialty chemicals used in pharmaceutical, pigments, dyes, metallurgy, tanning, adhesives and animal feed industries.
Turnaround Q1 performance has triggered strong buying interest in the counter. Buy for target price of Rs 150 in near term. Brigade Enterprises is one of the leading property developers from Bengaluru.
Restructuring of debt and reports of unlocking of value from the subsidiary Brigade Hospitality Services Ltd has put the company in limelight. Spurt in volumes indicates “interested” buying. Buy for target price of Rs 200 in the coming months. Indian Hume Pipes, Lupin, Apollo Hospitals, KCP and Dhanuka Agri are all trading cum split. Buy on declines.
C. Kutumba Rao is a Hyderabad-based stock market analyst. The views expressed and the recommendations made are those of the author. Readers are strongly recommended to consult their financial advisors before making any financial investments. This newspaper is not liable for investment decisions made on the basis of recommendations in these columns.