Markets continued to witness indecisive movements without any clear direction during the week ended. A weak Q4 GDP numbers, jitters over the developments in 2G scams, slowdown in the auto sales and negative global cues dampened the sentiment. A renewed buying from FIIs, good start for monsoon and lower food inflation numbers were the positives.
On the BSE, the Sensex closed 110 points higher at 18,326 and the Nifty on the NSE ended 41 points up at 5,517. The market breadth and volumes reflect lack of conviction and interest among the market participants. Corruption ‘noise’ level may begin to impact governance say observers. Markets may gyrate to the progress of monsoon and global cues in the near term. It is pertinent to know that the US Dow is on its longest weekly losing streak since July 2004. The rating agency Moody’s has warned that possible downgrade of Japan and the US is not ruled out.
The concerns over sovereign debt problems in the Eurozone, anemic growth and job data triggering expectations over QE3 from the US Fed and developments in MENA zone will continue to impact global equity markets in near term. The domestic news flow for which markets can react in the next few days are EGOM decision on the fuel price hike on June 9, April IIP data on June 10, May inflation numbers on June 14 and Reserve Bank of India’s policy meeting on June 16.
For the week ahead chartists predict trading range of 17,950-18,700 for the Sensex and 5,360-5,640 for the Nifty. Immediate supports for the indices are at 18,120 and 17,950 and 5,440 and 5,330.
FUTURES & OPTIONS
Expectedly derivative segment continued to witness fall in volumes reflecting trader’s unwillingness to add positions in the present volatile range bound market. The technical oscillators are in neutral zone, but things can change very fast in favour of either direction. FMCG stocks were the flavour of the week. Expectations of robust rural demand and rumors of M&A activity among global players gave fillip to the stocks.
Add on declines HLL, ITC and Godrej Industries. RIL’s AGM failed to enthuse shareholders. Further weakness from current levels is not ruled out. PSU oil marketing majors may attract buying ahead of fuel price hike. Buy IOC, BPCL and HPCL for near term gains. Mild buying was seen in the capital goods counters after the turnaround performance of Punj Lloyd. Good accumulation was seen in technology stocks.
Analysts feel that after the recent internal restructuring and leadership recalibration Infosys and Wipro may report rejuvenated performances in next few quarters. Use declines to add TCS, HCL Tech and Polaris. Fertiliser stocks are witnessing quiet buying in anticipation of a rational policy announcement in next few weeks. Predictably auto stocks turned weak after monthly sales numbers indicated lower growth in demand. Accumulate at lower levels Hero Honda and Bajaj Auto. Select pharma stocks witnessed good buying interest. Buy on declines Cipla, Divi Labs and Lupin. Some of the stock futures looking good are Ambuja Cement, Cipla, Chambal Fert, Dabur, Exide Inds, ITC, InduSind Bank, MRPL, Power Grid, Reliance Capital, Reliance Infra, United Phosphorus and Zee Enter.
Before taking a position, determine exactly where the stock you are watching, or the general market, stands.
STOCK SCAN
Diamond Power Infrastructure Ltd is one of the fast expanding power transmission and distribution company. The company has recently commissioned its 48,000 tonne transmission tower manufacturing facility and has also tied up with Utkal Galvanizers for execution of turnkey projects in the extra high voltage (EHV) segment. Last QIP to institutional investors was done at Rs 203.80. Good performance and visibility of earnings in next few quarters make the stock good bet for medium term price target of Rs 275.
Ramky Infrastructure Ltd is a diversified construction company focused in the areas of civil, environmental and waste management infrastructure. The company’s business model revolves around capital efficiency in both its EPC and developer business. In contrast to other infrastructure companies, Ramky has reported good results and its order book shows strong revenue visibility. Buy on declines for price target of Rs 425 in medium term. Cholamandalam Investment & Finance Ltd belonging to Murugappa group is a pan-Indian composite financial services provider. After the debacle in personal loan segment, the company has shifted focus on its core business of vehicle financing and has reported good turnaround performance. The company has cleaned up its loan book by providing for losses from personal loans division and is expected to report strong FY12 result. Buy in the current weakness for target price of Rs 300.