Buoyed by better-than-expected US data, markets across the globe had a positive week during the week ended. Ignoring the surge in food inflation and flood situation in many parts of the country, benchmark indices closed at a 32-month high.
On the BSE, the Sensex surged towards 19,000-levels closing at 18,800 gaining 579 points and the Nifty on the NSE ended 161 points higher at 5,640. The indices are now only 11 per cent below their all-time high. Market breadth continued to be positive with heightened activity in many midcap and smallcap counters. Stick to stocks that have stood the test of time.
Weekend IIP numbers were pleasant surprise with exceptional performance from capital goods sector. Despite the base effect, analysts feel that the economy is slowly inching towards high-growth path.
However, the faster-than-expected growth has also revived expectations of monetary tightening by RBI in its next review. Barring any surprises from the global front, advance tax numbers and expectations over second quarter numbers may determine near term direction of markets.
For the week ahead, chartists predict a trading range of 18,520 and 19,180 for the Sensex and 5,500 and 5,780 for the Nifty. Strong resistance can come at 18,960 and 19,100 and 5,685 and 5,740. Immediate supports are at 18,670 and 18,540 and 5,610 and 5,560. Stock markets are becoming more and more volatile. The stock market reacts to breaking news by shooting stock prices higher one day, then pounding them lower the next. So, be flexible.
FUTURES & OPTIONS
Mirroring the strong bullish undertone, robust volumes were seen in the derivative segment. Sentiment indicators like open interest, implied volatility, put/call ratio and VIX reflect a positive undercurrent. Open interest build up in the Nifty5700 strike opti-ons reflects bullish trend in the market currently.
Metal stocks are back in the limelight. Tata Steel, JSPL and Hindalco look good for targets of Rs 650, Rs 800 and Rs 210 in next few weeks. Capital goods stocks BHEL, L&T, Crompton Greaves, BGR Energy, Voltas and Cummins can touch targets of Rs 2,650, Rs 1,975, Rs 340, Rs 900, Rs 255 and Rs 800 in the near term.
US restrictions on outsourcing is unlikely to hurt IT majors significantly. Analysts feel that present sloganeering is only for election gains. Accumulate on declines good counters like Infosys, TCS, HCL Tech and Wipro. Disclosure of Satyam’s restated results may give fillip to stock price of Tech Mahindra.
Led by SBI, banking counters were on a roll. Further gains are likely in BOI, BOB, Corporation Bank, ICICI Bank, IDBI Bank, Kotak Bank, Federal Bank and PNB. Ride the boom in the sector with trailing stop loss.
Neglected sectors such as fertilisers, sugar and paper are getting a‘re-look’ from savvy punters. Stories of decontrol, price revisions are doing rounds. Adopt buy on rumour; sell on news strategy. Among the stocks looking good are Chambal Fertiliser, Dabur, Godrej Industries, HCC, IDFC, Noida Toll, Piramal Health, Opto Circuits, United Spirits and Onmobile.
A good trader need to have — A chronic inability to accept things at face value, to feel continuously unsettled, and to have humility.
STOCK SCAN
Micro Technologies Ltd is one of the leading electronic security devices company with product diversity in various segments as vehicle, premises, mobile, other assets and now diversified into energy, health and agriculture also. The company has been listed as one of the best under $1 billion firms by Forbes. Book value of `281, trailing 12 month EPS of `45 and high OPM of 39 per cent make the stock good buy for target price of `350 in medium term.
Mahindra Forgings Ltd, a M&M group company, is one of the finest and amongst the top three forging companies in India, with an installed capacity of 42,000 tonnes. It is the largest supplier of forged components like crankshafts and steering knuckles, commanding a 40 per cent market share. Buy on declines for a price target of `200.
Analysts predict turnaround results in second quarter from Heritage Foods. Reports of improvement in the operational performance of retail division and likely demerger of it are indicated by company insiders. Stay invested for further gains.
Apart from being the second largest phosphatic player in the country, Coromandel International has made impressive strides in specialty nutrients and crop protection chemicals. Buy on declines for a target price of `900 in medium term. Select midcap companies like Crew BOS, Rane Holdings, Greaves Cotton, TIL and Foods & Inns are witnessing good buying from savvy market players. Buy on declines for steady gains in medium term. Renewed buying is likely to be seen in Vishnu Chemicals, AP Petro and Pochiraju Industries. Stay invested for further gains.
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.