AFTER a strong opening, markets lost ground during the latter part of the week ending on weak global cues and worries on inflation front.
On the BSE, the Sensex marginally ended up 3 points at 17,574 and the Nifty on the NSE inched up 6 points to close at 5,269. It is pertinent to note that while FIIs have been steady buyers, domestic institutions were sellers.
However, broader markets were ‘good’ with heightened activity in many midcap and smallcap counters. government’s nod to give a free hand to oil companies to fix petrol prices was a surprise move. The move to ‘control’ deficit by rationalising subsidies has enthused foreign investors. However, analysts fear the cascading effect of the decision on the already high inflation.
“Underperforming” monsoon is becoming a cause of worry. Expectations over the Q1 results may spark stock specific movements. Impact of Wall Street reform bill on global markets is not ruled out. For the week ahead, chartists predict trading range of 17,280-17,920 for the Sensex and 5,140-5,380 for the Nifty. Short term resistances for the indices are at 17,740 and 17,880 and 5,320 and 5,365. Hold long positions with stop at 17,300 on the Sensex or 5,200 on the Nifty. Gutsy traders can initiate fresh shorts if indices fail to cross 17,800/ 5,340 levels. Do not rule out yet another attempt by the indices to record new yearly highs if ‘conditions’ cooperate. Markets change continuously and so must investors.
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Futures & options
EXPECTEDLY the settlement week witnessed robust volumes in the derivative segment. Overall rollovers were healthy and higher than last three months’ average. Interestingly, Nifty ‘short’ rollover is also much higher than last three months average. Option activity shows heavy call writing at 5,300 and 5,400 levels indicating strong resistance to Nifty in this band.
After the spike in the prices of PSU oil marketing companies, mild profit booking is not ruled out. However, use sharp corrections to buy ONGC, IOC, BPCL and HPCL. Spill over effect on other oil and gas counters such as Essar Oil, MRPL, GSPL and Oil India is not ruled out. Fears of policy rate hike have kept banking stocks subdued. Use the ongoing correction to accumulate smaller PSU banks like IDBI Bank, Andhra Bank, Vijaya Bank and others.
Fuel price hike will only be a short-term dampener for automobile companies. Use correction to buy auto stocks. Capital goods counters are showing good leadership and are good bets for medium term. Buy APIL, Punj Lloyd and BHEL for target prices of Rs 700, Rs 144 and Rs 2,550. Steady buying seen in pharma stocks. Further gains indicated in Aurobindo, Orchid Chemicals, Dr Reddy and Lupin. Range bound activi ty indicated in metal counters till global cues improve.
Among the side counters Noida Toll, Opto Circuits, GTL Infra, India Infoline, KFA and GMR Infra look good for targets of Rs 36, Rs 265, Rs 52, Rs 108, Rs 55 and Rs 64. Nothing goes up or down forever. After a sustained move in either direction, markets will enter a protracted period of narrow range trading and consolidate.
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Stock scan
Low profile JOCIL, a subsidiary of Andhra Sugars Ltd, after listing on the NSE is attracting the attention of savvy investors. The company is engaged in the manufacture of stearic acid flakes, fatty acids, hydrogenated non-edible oils, glycerin, soap noodles and application in pharmaceuticals and is involved in the generation of power from biomass and wind. The company also offers contract manufacturing services related to its products and has customers of repute such as Hindustan Unilever. B.V. of nearly Rs 195, EPS of Rs 48 and dividend of 100 per cent make this ‘value’ stock good for target price of Rs 575 in medium term.
Onward Technologies Ltd is one of the fastest growing engineering design services company and is one of the largest ISVs for banking software solutions. Sources indicate turnaround performance from the company in Q1. Buy on declines for target price of Rs 50.
Precot Meridian Ltd, an Elgi group unit is one of the few totally integrated textile players with a total turnover of over Rs 445 crore. The company has market leadership in ‘eco-friendly’ 100 per cent organic combed cotton yarn used for knitting and weaving. Riding on the boom in the yarn sector, the firm reported turn-around in the year ended with EPS of Rs 23.