Despite sharp profit booking on the last trading day, markets had a ‘green’ week after three ‘red’ weeks during the week ended. On the Bombay Stock Exchange (BSE), the Sensex ended 483 points higher at 18,211 and the Nifty on the National Stock Exchange (NSE) closed at 5,459 with 149 point gain.
Intraday falls of 550 points and 140 points of the Sensex and the Nifty on Friday clearly exposed the hollowness of the five-day pullback rally. However, the positive takeaway in the Friday trading session was the renewed buying from foreign institutional investors (FIIs).
As expected the revelations from the 2G spectrum scam probe has triggered sharp sell-offs in stocks of some business houses. The domino effect of Egypt is now clearly evident and may see international crude oil prices spike again warn globe watchers. With inflation expected to remain strong, analysts advise investors to stick to companies with cleaner balance sheets and low debt-to-equity ratios.
All eyes are now on the Budget Session of Parliament. The announcement of Joint Parliamentary Commission JPC on the 2G scam and announcement of badly needed reform measures may infuse positive sentiment for near term.
Key events to watch in the coming week are F&O settlement, Railway Budget and Economic Survey. Fasten seatbelts for a roller-coaster ride.
For the week ahead chartists predict trading band of 17,750-18,820 for the Sensex and 5,280-5,640 for the Nifty. Short term supports for the indices are at 18,040 and 17,800 and 5,380 and 5,260.
Expect strong resistance to the indices at last week highs. Failure to cross them before the Union Budget may see markets re-test their recent bottoms once again. Sniff at inside information; it is usually bunk. The big operators don’t talk about their operations.
FUTURES & OPTIONS
Ahead of the settlement week, robust trading volumes were seen in the derivatives segment. Sentiment indicators such as open interest, implied volatility, put/call ratio and VIX indicate that markets are not out of woods. Keep a watch on rollovers in stock futures to spot budget plays.
Chartists suggest buying in under owned and over sold stocks for possible post budget rally. Punters suggest strangle strategy in Nifty options (March series) to take advantage of directional breakout after budget.
As expected, banking and metal stocks led the pullback rally. A renewed buying interest was seen in banking stocks on the reports of improved credit demand. Buy on declines Axis Bank, Bank of Baroda, Federal Bank and IFCI. Firm price trends on London Metal Exchange (LME) indicate that corrections are opportunities to buy in metal stocks. Buy Tata Steel, Jindal Steel and Hindalco.
Defensive buying was seen in FMCG and pharma stocks. Buy on declines Hindustan Unilever, Godrej Consumer, Dr Reddy, Divi Labs and Sun Pharma. After the recent range bound trading selective buying suggested in auto, cement and IT stocks. Mahindra and Mahindra and Tata motors are good picks at lower levels.
Surprising move indicated by industry watchers in ACC, Ultratech and Amb-uja Cement. Accumulate in the present weakness frontline technology stocks.
The stocks of public sector units are likely to be back on the radar of funds after budget. Stay invested for the present. Among the midcap stock futures, BGR Energy, Bombay Dyeing, Biocon, Piramal Health, Shree Cements, Shipping Corporation India and SRF look good for near term. Be pliable at all times, but don’t overtrade.
STOCK SCAN
GEI Indus-trial Systems is one of the leading engineering and manufacturing companies dealing in heat transfer equipment with a major thrust in air-cooled heat exchangers and air cooled steam condensers.
Excellent third quarter results, robust order book and bright prospects of user industry make this “mini-Thermax” a good buy for a price target of Rs 275.
Despite prevailing pessimism towards infrastructure and construction sector, contrarians suggest buying in select counters such as J Kumar Infra projects Ltd (JKI).
This is one of the leading construction players of Western India. The company has order book of nearly Rs 1,300 crore in various skywalk, flyovers, roads, civil and irrigation projects.
With a book value of Rs 112 and trailing 12 month EPS of `24, the stock is good investment for target price of Rs 250 in medium term.
From the midcap pharma space, strong accumulation is seen in JB Chemicals and IPCA Labs. JB Chemicals Ltd manufactures a range of innovative specialty medicines for both domestic and international markets.
The company has 11 state of the art manufacturing plants (three US FDA approved and two DSTC approved). A steady growth and entry into new fast growing therapeutic segments like anti-diabetes, respiratory and CNS make the stock good bet for medium term.
IPCA Labs is one of the biggest manufacturers in the world of APIs Atenolol, Chloroquine Phosphate, Furosemide and Pyrantel salts. The stock is a good buy at current levels for steady gains.