Markets await trigger from inflation numbers, RBI rates

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With no major news flow, markets moved in a narrow trading band and remained lacklustre throughout the week ended.

On the BSE, the Sensex shed 107 points closing at 18,268 and the Nifty ended 30 points lower at 5,486.

Lethargic low volumes clearly reflected the lack of conviction among the market participants. However, a heightened stock-centric activity was seen in the midcap and smallcap segment.

A weak IIP data, rise in food inflation and renewed FII selling affected market sentiment. Many attribute the present disinterest in stock markets to the slew of corruption scandals, policy uncertainty, rising interest rates and concerns in other parts of the global economy.

The present inflation is not a monetary phenomenon but supply driven one and that RBI in its policy meeting should take dynamic steps to curb it, feel some observers.

With sentiment decidedly turning pessimistic in the United States and other global markets, next week’s economic data from the US and China will be crucial for the direction of world markets, say analysts.

On home front, all eyes will be on the inflation data on June 14, advance tax numbers of Q1 and RBI’s policy statement on June 16.

For the week ahead, chartists predict a trading range of 17,850 and 18,600 for the Sensex and 5,350 and 5,600 for the Nifty.

Immediate supports for the indices are at 18,120 and 17,940 and 5,430 and 5,360.

Expect resistance on upside at 18,420 and 18,580 and 5,530 and 5,580. In investing, it’s what you avoid that’s as important as what you actually do.

Identifying likely losers is every bit as important as picking the winners.

Futures & Options

Sub-par volumes were seen in the derivatives segment. Risk appetite was low among both investors and traders. Rising volumes in the options segment is the testimony for this.

Adopt strangle strategy by buying call option of Nifty 5,600 strike and put option of 5,400 strike to take advantage of directional breakout. Autos, construction, banking and financial, metals and real estate sectors are facing headwinds and attracting selling on rallies. Punters need to be cautious on these sectors. FMCG, pharma and IT look good defensive bets.

Ahead of Q1 numbers, modest buying is likely in the IT counters Infosys, TCS and Wipro. Heightened interest indicated in TechMahindra, Polaris and OFSS.

News driven activity likely in sugar sector. Sources indicate relaxation in export norms. Buy on declines Shree Renuka and Triveni. FMCG counters are attracting buying on every decline.

Accumulate HLL, Godrej and ITC on every fall. Delay in taking decision on fuel price hike is rising concerns over the near term future of the PSU oil majors.

Contrarian buying suggested in Indian Oil Corp, HPCL, MRPL and BPCL at lower levels. Weakness in auto counters may last longer than expected feel industry observers. Sell on rallies Tata motors, M&M and Maruti Suzuki.

Metals are also looking weak on global concerns. Use bounces to exit from weaker counters. Among the side counters looking good are Havells, Onmobile Global, Asian Paints, HOEC, CESC, Century Textiles, Pantaloon Retail, Indraprastha Gas Ltd, Hindustan Constructions Company and Karnataka Bank.

Flexibility is the only sensible response to volatile markets and stocks with generous trading ranges.

Don’t be afraid to buy and sell a stock, because if you sell something, you can always buy back.

Stock scan

Repro India Ltd is a provider of content, print and fulfillment solutions to publishers, corporates, education institutions and governments.

The company serves customers across four continents and has been awarded Capexil Export Award for being India’s leading books exporter for three years in a row.

Steady performance in the past several quarters and good visibility for the sector makes the company good buy for medium term. Buy for price target of Rs 200.

Tube Investments of India Ltd, part of the Murugappa Group is a diversified company with products in the consumer, auto and infrastructure segments.

The company is a market lea-der in most of its businesses — 50 per cent share of the precision tube market and a 64 per cent share of the car door frame market. Buy on declines for target price of Rs 200 in medium term.

Apollo Hospital Enterprises Ltd is dominant player in healthcare services. It manages 5,356 owned beds and 2,588 managed beds. Apart from hospitals, it has strong presence in pharmacies, insurance and medical education.

Buy on declines for target price of Rs 750.

Low profile Suryachakra Power Corporation is re-inventing itself to become a bio-energy major.

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 website is not liable for investment decisions made on the basis of recommendations in these columns.