Unnerved by the slew of negative news, markets closed sharply lower during the week ended. Both the benchmark indices the Sensex and the Nifty ended 2 per cent lower at 17,870 and 5,366. The RBI’s hawkish monetary policy stance, renewed FII selling and sharp cut of 8 per cent in the stock price of RIL have turned the sentiment negative. A modest decline in international crude oil prices, good progress of monsoon and ‘decent’ advance tax numbers failed to cheer the markets.
The failure to carry out necessary economic reforms by the Government, rising number of scams, increasing cost of capital due to rising interest rates and sluggish progress of important infrastructure projects are ‘dimming’ foreign investors say analysts. It is important for the Government to take urgent steps to keep India growth story alive among global investors. The markets are likely to remain range bound till the next session of parliament with downward bias. Stick to stock specific trading method advice market strategists. Key developments in the coming week that may impact markets are arrival of consensus over bailout of Greece, US Fed meet, US Q1 GDP numbers and macro economic numbers on home front.
For the week ahead chartists predict trading range of 17,600-18,200 for the Sensex and 5,225-5,500 for the Nifty. Upward move of indices will face resistance at 18,050 and 18,180 and 5,450 and 5,500. One way to win in the market is to avoid doing what most others are doing. When in doubt about what to do in the market, do nothing.
FUTURES & OPTIONS
The week ended witnessed sporadic bouts of brisk trading in the derivatives segment. The turnover crossed Rs 1,00,000 crore mark again. Build up of short positions was seen after the breach of 5,400 level. However, with the put/call ratio hovering below 1, a short term rally spurred by short covering is not ruled out. Option activity indicates strong support for Nifty at 5,300.
Aggressive selling was seen in the technology, oil and gas and rate sensitive-auto and banking counters. The CAG report of RIL inflating KG Basin development cost and fears of stern Sebi consent order over insider trading charges triggered selling in RIL. Punters expect the stock to find bottom at Rs 760-780 level. Technology stocks slumped on renewed concerns over impact of slowdown in US and rumors of immigration cases being slapped on some companies.
Contrarian buying suggested in Infosys and TCS ahead of Q1 results. Expectedly auto, banking and realty stocks remained range bound with downward bias. Accumulate ‘strong’ counters in the ongoing correction. With possibility of sugar inventory getting spoiled by the high moisture weather in the monsoon season, industry sources expect the Government to relax export quotas. Mild rally likely in sugar counters. Heightened activity seen in ‘brand’ and ‘demerger’ counters. Value unlocking from Reid and Taylor likely in S Kumar Nationwide. Punters indicate target of Rs 80. Clear signals of Century Textiles putting its paper division on block has triggered volumes. Further gains not ruled out.
Among the stock futures looking good are Godrej Inds, Tulip Telecom, Bharti Telecom, Axis Bank, Reliance Infra and Idea. The most important rule of trading is to play great defence, not great offense. Whatever is hard to do in the market is generally the right thing; and whatever is easy is usually the wrong thing to do.
STOCK SCAN
Info Edge (India) Ltd is India’s premier on-line classifieds company in recruitment, matrimony, real estate and education. Some of the leading brands of the company are Naukri.com, Jeevansat-hi.com, 99acres.com and Shiksha.com. Apart from capitalising on growth opportunities and scaling up existing businesses, the company has invested in start-ups which are beginning to prove profitable. With heightened interest in US markets in the internet businesses, punters expect renewed interest in Info Edge. Buy for four figure target in next few months. Time Technoplast Ltd manufactures and sells polymer based products to growing industry segments like industrial packaging, automotive components, healthcare and lifestyle products and material handling solutions and composite cylinders. Expanding rapidly the company now has more than 40 production facilities across the globe and is recognised for its innovative plastic products. Buy for price target of Rs 125 in medium term. HT Media, Shoppers Stop and Astral Poly are on the radar of savvy fund managers. Buy on declines.