Concerns about China clamping down on inflation, Irish debt crises and unexpected political ‘tension’ over the telecom scam pummeled markets last week. On the BSE the Sensex closed 345 points lower at 19,585 and the Nifty on the NSE ended at 5,890 shedding 108 points. Crashing for the second consecutive week, the Nifty lost 422 points and the Sensex shed 1420 points from their Diwali highs. Sporadic selling from FIIs, tense political situation and rumors of resignation of the Prime Minister have dampened investor sentiment.
Good news like fall in food inflation and sharp growth in tax collections have been ignored by the markets. On the global front, the US-China spat over the Yuan policy shows that “currency war” is more of a political than an economic condition. Currency realignments can be painful as seen in the past.
Expect high volatility during next week also due to F&O settlement and ongoing political drama. However avoid fresh shorts at current level, as a relief rally may be on the cards. Use rallies to exit from weak stocks. For the week ahead chartists predict trading range of 19, 140-20,120 for the Sensex and 5,720-6,080. Resistances for the week are at 19,800, 19,980 or 20,120 and 5,960, 6,040 or6,120. Short term supports are at 19,320 and 5,820.
In the near term the indices may not head anywhere, but by keeping eyes open savvy investors can latch onto opportunities that markets give.
FUTURES & OPTIONS
Frenzied trading was seen in the derivative segment during the week ended. Average daily turnover was close to Rs 2 lakh crore.
Sentiment indicators like put/call ratio, open interest, implied volatility and VIX indicate turbulent two way trading pattern in near term. Punters tip: buy Nifty 6000 strike call option for ‘chance’ gains. Banking and financial stocks fell sharply on profit booking and also on concerns of exposure to MFI sector.
After the recent correction IDBI Bank, BOB, UCO Bank, Shriram Transport and M&M Financial look good for medium term. Fears over monetary tightening after the recent RBI norms ‘squeezed’ realty counters. Contrarians say bad days are over for the sector and advice buying with medium term perspective.
Metal stocks have shown good resilience during last weeks sell off. Buy Tata Steel, Hindalco and Sesa Goa for short term. Defensive sectors FMCG and Pharma were the preferred ones in an otherwise uncertain weak market. Further gains are likely in Dr Reddy, Lupin, Cipla, Dabur and HLL.
Ahead of the FPO of SCI and IPO of MOIL, PSU stocks may exhibit good resilience. Buy NMDC and REC for target price of Rs 320 and Rs 390 in near term. Bump up likely in Power Grid on short covering. RADAG stocks were “butchered” after reports of involvement of Reliance Comm in the 2G scam have surfaced. Gutsy traders can attempt buying in Reliance Infra and Reliance Power.
STOCK SCAN
Plethico Pharmaceuticals Ltd is a an emerging healthcarecompany with strong emphasis on the herbal and nutraceuticals segments. Despite none too enthusiastic Q2 results, volumes in the counter have shot up significantly recently. Sources indicate that positive news is on cards and consolidated turnover of the company will cross `1500 crore in the current year. Buy for target price of `475 in medium term.
Indian Metal & Ferro All-oys Ltd is India’s lar-gest, fully integrated producer of ferro alloys with 157 MVA installed furnace capacity, a 108 MW coal based captive power plant and extensive chrome ore mining tracts.
Q2 results show improvement in operational performance. Investments by large mutual funds like Reliance are indicative of the bright prospects for the company. Buy for target price of Rs 1000 in medium term. Blue Star Ltd is India’s largest central air conditioning company with annual turnover close to Rs 3000 crore. Lack luster Q resu-lts have been attributed due to delay in execution of some projects.
Analysts feel that the company is good play on rising infrastructure spending—in airports, hot-els, hospitals, construction etc. Buy in the current weakness for long term target of Rs 750.
Cerebra Integrated Technologies Ltd apart from LPO business, medical transcription and electronic products like energy meters, GPS tracking modules, precision weighing scales; operates in the niche segment of electronic waste management.
Bright pros-pects of electronic waste management segment andfirst mover advantage make the company good bet for medium term investment.