Market watch: All eyes on RBI meet, Greece

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Spooked yet again by the fears over Greece default, markets shed most of the gains logged during the early part of the week during the sell-off on Friday to end on a flat note during the week ended.

Both the benchmark indices the Sensex and the Nifty with marginal gains of 46 points and 20 points closed at 16,867 and 5,059.

Market breadth was steady, but low volumes reflect the lack of confidence among the market participants. With inflation remaining very stubborn marketmen fear yet another rate hike by the RBI.

However, optimists expect the central bank to ‘pause’ to address worries about growth and corporate capex plans.

Post the RBI’s policy announcements focus will shift to Q2 earnings prospects.

The US President, Mr Barack Obama’s speech proved to be a damp squib and his sense of urgency in demanding lawmakers to act “right away” on his proposed job plan “exposed”the gravity of problems that US is facing at present.

Next week all eyes will be on the RBI policy meeting and Greece. Downgrades of European Banks by leading rating agencies may heighten volatility.

For the week ahead chartists predict trading range of 16,300-17,150 for the Sensex and 4,880-5,160 for the Nifty.

The immediate supports for the indexes are at 16,660 and 16,480 and 4,990 and 4,920. If the indexes fail to close above 17,100 and 5,150 levels convincingly in couple of sessions, expect trading range of 16,000-17,000 levels and 4,700-5,150 for the next few weeks.

Following conventional wisdom is sure way to miss the big winners in stock markets. It is like driving on the highway looking through the rear-view mirror. To achieve big investment returns, think independently.

Futures & Options

Volumes were extremely low in the derivative segment on account of heightened volatility. Stock specific activity was seen with large intraday moves.

*Put/call ratio of open interest rose to 1.54 from 1.4 reflecting confidence of short sellers.

*Expectedly ahead of RBI meeting, implied volatility surged in options.

*Option activity indicates range of 4,800-5,200 for the Nifty futures in near term. Ahead of the RBI meeting, rate sensitive sectors banking, auto and realty showed good resilience.

*Select banks such as YES Bank, PNB, Federal Bank, BOB and BOI witnessed good buying interest.

*Punters advice straddle strategy in the options of SBI and ICICI Bank.

*Two wheeler auto stocks are riding high on expectations of good rural demand. Buy on declines Hero Motocorp, TVS Motors and Bajaj Auto.

*Avoid realty stocks for present.

*Fears over CCI acting on cartelisation allegations triggered selling in cement counters at higher levels. Buy at lower levels ACC, Ambuja, India Cements and Birla Corp.

*Profit booking was seen in the telecom stocks at higher levels. Buy Idea and Bharti closer to Rs90 and Rs 380 levels for pullback gains.

*Earnings downgrades by couple of brokerage houses aborted the mild rally in metal stocks.

*Sell on rallies. Defensive sectors pharma and FMCG are back in demand.

*Buy Ranbaxy, Lupin, HLL and Dabur. Cutting losses early on mistakes is critical to avoiding the crushing effects of negative returns.

*Be just as willing to sell short as you are to buy.

*Objective should be to keep with the trend and make money.