After the slump triggered by the announcement of higher subsidy burden on the upstream oil companies and results of State Bank of India (SBI) in the early part of the week, markets pared some losses during the later part of the week on the back of surprising results from L&T. On the BSE the Sensex ended 205 points lower at 18,326 and the Nifty on the NSE closed 59 points down at 5,486. Market breadth and low volumes reflect the lack of interest among market participants. Failure of a couple of Initial Public Offers’s (IPO) is also indication of the low participation of the retail investors.
Expectedly the commodity markets continued to cast their shadow on the equities. Near term outlook remains uncertain at least till the next big trigger Monsoon starts playing out say market watchers.
Use short covering rallies to exit from the weaker stocks. Focus in the coming week will be on the F&O settlement, results from Tata Steel, Tata Motors, M&M, Coal India and others, movement of the dollar in international markets and news flow from Europe.
For the week ahead chartists predict trading range of 17,800-18,650 for the Sensex and 5,320-5,610 for the Nifty. Immediate resistances for the indices are at 18,450 and 18,590 and 5,530 and 5,580. On decline expect support at 18,160 and 17,800 and 5,440 and 5,330.
FUTURES & OPTIONS
Mirroring the range bound cash market; tepid volumes were seen in the derivative segment. Sentiment indicators like open interest, implied volatility, put/call ratio and VIX do not indicate a sharp move in either direction. Volatility is likely to be high on the eve of settlement with sporadic bouts of short coverings and sell-offs in individual stocks. Track rollovers for cues to June series.
SBI’s Q4 results came in sharply lower triggering sell off in banking stocks. Analysts suggest buying in SBI closer to Rs 2100 level. Select private banks HDFC Bank and ICICI Bank are exhibiting good strength. Surprise rally on cards in LIC Hsg and Reliance Capital say punters. L&T’s better than expected order inflow and positive guidance gave fillip to capital goods sector. Led by L&T, Crompton Greaves, Voltas and BHEL gained strength in an otherwise weak market. Stay invested and add on declines. Realty stocks turned weak again on worries that demand for residential and commercial property in Tier-1 cities is falling. Use relief rallies to cut positions. Selective buying was seen in frontline technology counters.
Buy on declines TCS and Wipro. Pharma stocks are attracting buyers on every fall. Buy Cipla, Lupin, Divi Labs and Aurobindo Pharma for near term gains. Sustained buying was seen in fertiliser counters. Stay invested in Chambal, Nag Fert and Tata Chemicals. Slight bump rally is likely in cement stocks. Among the side counters looking good are Aditya Birla Nuvo, Bhushan Steel, BGR Energy, CESC, Chambal, EKC, Raymond, Bombay Dyeing and Tulip Telecom.
STOCK SCAN
McNally Bharat Engine-ering Ltd provides turnkey solutions to core industries like power, steel and aluminium. The company’s business is divided among three broad divisions — products division, engineering turnkey business and infrastructure business. Steady growth and good order book make the stock good investment for medium term target of Rs 250. Arvind Ltd, one of the largest integrated textile, apparel and branded apparel player registered spectacular 230 per cent growth in consolidated net profit for the year ended.
The company is a leading producer of denim worldwide with clientele like Diesel, Lee, Wrangler, Calvin Klein, Gap, Hugo Boss and others. To unlock value of its huge land bank in Ahmedabad, the company has tied up with Tata Housing. Buy the largest life-style apparel company for price target of Rs 200 in long term.
Onward Technolo-gies Ltd a leading global provider of mechanical engineering design and IT services reported good results. Restructuring of operations initiated three years back have started paying dividend now. The company provides solutions in the automotive, agricultural, heavy industries, aerospace and BFSI verticals globally. Buy on declines for target price of Rs 75 in medium term. Some promoters are back on prowl to snare innocent investors attracted to commodity markets. Promoters of Northgate Technologies are back to their tricks with demerger of out of fancy internet subsidiary and merger of a agri commodities company. Brilliant Securities, now in the stable of some of the Northgate promoters is changing name to Stampede Capital Ltd.
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.