After three weeks of gains, markets closed in negative territory during the week ended on the back of weak IIP data, disappointing results from Infosys, inflation numbers and negative news flow from the Eurozone.
On the BSE, the Sensex ended 296 points lower at 18,562 and the Nifty on the NSE closed at 5,581 shedding 80 points. However midcap and smallcap indices remained unchanged on renewed buying interest in the broader market.
The resilient response of markets to the Mumbai blasts was heartening. The Cabinet reshuffle turned out to be a non-event and clearly the focus of market players is on results announcements.
Old timers suggest adopting a stock-specific appro-ach. Monsoon and developments in global markets may dictate near-term direction of markets.
US stocks and many other global markets fell the most in five weeks due to the worries about a deepening debt crises in Europe and the prospects of downgrading sovereign credit rating for the United States in the wake of a deadlock between the US President Barack Obama, and Republican Congressmen over the debt ceiling.
If the unthinkable US debt default happens, analysts say it would cause panic throughout the financial system. Track global cues carefully.
For the week ahead, chartists predict a trading range of 18,200 and 18,950 for the Sensex and 5,480 and 5,720 for the Nifty. Levels to watch on the indices are immediate resistances at 18,800 and 19,050 and 5,640 and 5700, strong supports at 18,400 and 18,220 and 5,540 and 5,500.
Futures & Options
Despite a smart mid-week rally, markets lost steam during the latter part of the week-ended. Volumes in the derivative segment were robust in comparison with tepid volumes in the cash segment.
Speculative shorts have increased and put/call ratio is close to 1 again. Option activity indicates a trading range of 5,450 and 5,750 for the Nifty.
Amidst the fears of yet another interest rate hike at the next RBI policy meet on July 26, a range bound trading was seen in banking stocks. Accumulation was seen in private banks. Kotak Bank, Federal Bank, South India Bank and Karnataka Bank look good for both short and medium term.
Technology counters are attracting selling on every rally. Further weakness is not ruled out in the frontline stocks.
Sporadic bouts of selling were seen in metal stocks. Raw material concerns are increasing for metal companies. Caution is advised.
Ahead of the RBI policy meet, a mild rally is likely in the rate sensitive sectors like auto and realty. Buy on dips stocks of M&M, Ashok Leyland, DLF, Unitech and IB Real.
In an otherwise weak market, steady buying was seen in pharma and hospital stocks. Buy on declines Cipla, Lupin, Divi Labs and Fortis Healthcare.
Renuka, Bajaj Hindustan and Balrampur Chini are witnessing good accumulation on every decline.
Raw sugar futures have surged 53 per cent in last 10 weeks in the international market and may touch 30-year peak in coming months despite good harvest predicted by major producers.
Among the side counters looking good are Adani Power, Apollo Tyres, Exide Inds, Godrej Industries, Hotel Leela, IB Real, PTC, Pantaloon, Tech Mahindra and Sintex.
Stock scan
TVS Srichakra Ltd, belonging to the TVS group, is one of the leading two-and-three- wheeler tyre manufacturers in the country and is one of the major suppliers to all leading original equipment manufacturers such as TVS Motors, Hero Honda, Bajaj Auto and Yamaha Motors.
The company is also one of large manufacturers of industrial pneumatic tyres, flotation, motorgrade, farm and implements tyres, skid steer tyres, multipurpose tyres and vintage tyres.
Robust fundamentals like book value of Rs 149 and earnings per share of Rs 51 and recent fall in key raw material rubber make the stock a good bet for the medium term. Sources indicate stock split/bonus in near future.
De Nora India Ltd, formerly Titanor Components Ltd, is the leader in the field of electro chlorinators, cathode and anode for chlor-alkali industry, cathodic protection systems and electro-winning. Ahead of bringing the latest technologies in water treatment by the MNC parent, the company is considering of a buyback of its shares in accordance with regulations.
Turnaround performance and the possibility of delisting in future make the stock good bet for medium target of Rs 175.
Dairy companies are expected to report good results, say industry watchers. Keep a watch on Heritage Foods, Hatsun Agro and Umang Dairies. Sources indicate re-positioning of dairy and retail businesses of Heritage Foods for better operational margins.
Buy on declines. Umang Dairies of the JK group is on the radar of savvy punters.
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.