Despite a sharp sell-off on Friday, markets ended higher for the third week in a row on the back of a strong FII inflows.
On the BSE the Sensex ended 95 points higher at 18,858 and the Nifty on the NSE closed with 33 point gain at 5,660.
A heightened action was seen in midcap and smallcap stocks. The Cabinet re-shuffle, policy actions like decontrol of DAP fertiliser prices ahead of monsoon session of parliament and the results of Infosys will dictate near term direction of markets.
International crude oil prices are slowly inching upwards again, thus becoming a cause of concern.
Track economic data (IIP on 12th and monthly inflation on 14th) for clues on the RBI’s next move towards the end of month. Global data like FOMC minutes, European banks stress test results, Chinese Q2 GDP and others may give indications of the state of the global economy.
For the week ahead chartists predict trading range of 18,460-19,240 for the Sensex and 5,520-5,850 for the Nifty.
Supports for the week are at 18,680 and 18,480 and 5,610 and 5,555. Failure to cross the 200-DMA at 19,150 and 5,743 like in the week ended may see indices test the lower range of the ongoing rally in the days ahead.
Successful investing and trading has nothing to do with forecasting. A investor’s planned buying policy should always dovetail closely with a predetermined selling policy.
Futures & Options
After a subdued start during the early part of the week, volumes improved sharply during the later part of the week ended in the derivative segment. However, sentiment indicators like open interest, put/call ratio, implied volatility and VIX indicate mild weakness in near term.
Option activity with significant open interest build up at 5,500 strike put options and short positions in the 5,700 strike call options indicate the range for Nifty in the coming days. Sustained buying interest was seen in the realty stocks after long hibernation.
Further gains likely in DLF, Unitech, HDIL, Sobha and Orbit Corp. Auto stocks were seen attracting buyers at lower levels.
Accumulate Tata Motors DVR, Maruti and M&M on declines. Ahead of results mild buying was seen in Infosys and TCS. Keep an eye on Infy results which will set the tone for results season.
Spooked by the reports of new mining bill making it mandatory for miners to share profits and royalty with affected land owners, metal and mining stocks witnessed mild sell-off. Industry sources say that the bill will affect ‘new’ companies more and will have only marginal impact on the ‘old’ ones. Buy Sesa Goa and Tata Steel for surprising gains.
Expectedly sugar stocks gave sweet returns on renewed buying interest. Hold and add on declines for further gains. RIL continued to ‘drag’ the indices on sustained selling at higher levels.
Sources indicate that despite lower gas output from KG basin RIL will report better numbers on account of higher refining margins. Accumulate ahead of results. Range bound trading was seen in Banking, Pharma and Capital Goods stocks.
Track CASA and NPA data to weed out underperformers in banking. Momentum gains likely in PNB, BOB, Axis Bank and IndusInd Bank.
Buying interest indicated in Aurobindo Pharma, Divi Labs, Ranbaxy and Lupin. Further gains likely in L&T and Punj Lloyd. Among the side counters looking good are Videocon Inds, Aditya Birla Nuvo, Idea, Essar Oil, DCB, Chambal Fert and IFCI. Risk control should not be confused with fear of risk.
Stock scan
VA Tech Wabag Ltd is a multinational player in the water treatment industry with market presence in India, Middle East, North Africa, Central and Eastern Europe, China and South East Asia.
The company owns more than 160 patents (product and process) and provides a complete range of water and waste water treatment solutions.
Buy on declines this technology focused company for target price of Rs 1,800 in medium term.
Bliss GVS Pharma Ltd has the most modern plant to manufacture the female contraceptives, soft pessaries and suppositories. Leading brand of the company is ‘Today’.
The company also manufactures wide range of other products like protein powders, dermatological preparations etc. Excellent growth in the last two years and good prospects makes the stock good medium term investment for target price of Rs 35.
Launch of new products like Infectigaurd and others have given fillip to stock price of Elder Health Care Ltd. Stay invested for further gains. Punters of textile counters tip Grabal Alok Impex for short term gains.
SSPDL (erstwhile Srinivasa Shipping), Vadilal Enterprises and Ador Welding on the radar of savvy players.
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.