[1]It was yet another nasty week for the stock markets across the globe with the indexes plummeting by four per cent to 10 per cent over the past five days.
The reports that the US and the Europe are 'dangerously close to a recession' have rattled the global markets.
On the BSE, the Sensex ended 698 points lower at 16,142 and the Nifty on the NSE closed at 4,846 with 227 point cut.
The market breadth worsened with large number of stocks touching 52-week lows. It is pertinent to observe that many midcap and smallcap stocks are already close to 2008 lows.
Despite assurances from the finance minister and the RBI that the impact of global developments on India will be limited, lack of concrete steps has not given confidence to the investors.
Grappling with Anna phenomenon on one side and on the other side, expectations of the fast track passage of the bills in the monsoon session are fast evaporating.
The most worrying for the markets is the perception that there is not much more that can be done by the US Fed and politicians of Europe; and that a global banking and economic crises is on cards.
Gold is becoming preferred asset class for investment. Headlines out of the US and Europe will continue to dominate market direction this week also.
Track Q1 GDP numbers and F&O settlement on the home front.
For the week ahead, chartists predict a trading band of 15,600 to 16,550 for the Sensex and 4,625 to 5,000 for the Nifty.
Immediate supports for the indexes are at 15,850 and 15,600 and 4,750 and 4,650. In the event of relief rally, expect strong resistance to indexes in the zones at 16,350 and 16,400 and 4,950 and 5,000.
In the event of relief rally expect strong resistance to indexes in the zones at 16,350 to 16,400 and 4,950 to 5,000.
Futures & Options
The week-ended was short sellers ‘dream’ market. Aggressive shorting was seen in the Nifty and Bank Nifty. Strong FII outflows have also kept the sentiment negative.
The option activity indicates heavy put writing at 4,800 and 4,700 and call writing at 5,000 strikes of Nifty. VIX has spiraled to 52-week high indicating that volatility will not end in near term.
Track roll overs to new series in F&O to spot oversold stocks for a relief rally and also for good shorts in the new series.
With inflation remaining stubborn, rate sensitive’s banking, realty and auto stocks were the 'favorites' of short sellers. Caution is the watch word, say old timers.
Use corrective rallies to trim positions. Stick to cash-rich and debt-free companies.
Technology stocks witnessed sharp selling on the back of weak Nasdaq and crash of stocks like HP in the US. Long term players can start SIP in frontliners like Infosys and TCS from current level, feel industry sources.
Stay invested in defensives FMCG and pharma. Use corrections to buy ITC, HLL, Dabur and Godrej Inds. Track LME prices for opportunities in metals.
Oil marketing companies like BPCL, HPCL and IOC are set for rebound on the back of fall in the international crude oil prices. Policy changes have made fertiliser counters good for long term.
Stock futures looking good for rebound are Biocon, Cipla, LIC Housing, Reliance Infra, Escorts, JSW Steel, Arvind, Petronet and Tata Chemicals.
C. Kutumba Rao is a Hyderabad-based stock market analyst. The views expressed and the recommendations made are those of the author. Readers are advised to consult their consultants before making any investments. This newspaper is not liable for decisions made on the basis of this column
Links:
[1] http://archive.asianage.com/sensex-agencyjpgcropdisplayjpg-938