Despite shedding some of its recent gains, markets closed on an optimistic note during the week ended. On the BSE, the Sensex closed 122 points higher at 17,956 and the Nifty on the NSE ended with 42 points gain at 5,394. Though the Sensex crossed the psychological 18,000-mark twice this month, it failed to close above that level at the end of the sessions. The reason for this is said to be the prevalent scepticism over the ongoing rally and the lack of a follow-up buying from domestic institutions.
Inflation continues to be a worrying factor and a modest rate hike by RBI is not ruled out at the next policy meeting. In the short term, everything is being driven by earnings. But in the longer-term, the question is where is the economy really going and do other economies across the globe have enough momentum to get out of the recession? Weekend negative global cues may see markets open weak at the start of next week.
However, the recovery during the latter part may see indices close at new short-term highs. For the week ahead, chartists predict a trading band of 17,650 and 18,250 for the Sensex and 5,240 and 5,450 for the Nifty. Resistances for the week are at 18,140 and 18,280 and 5,460 and 5,520. Expect support to the indices at 17,720 and 17,540 and 5,330 and 5,240.
Short-term traders are advised to cut longs, if indices dip below the 17,650 and 5,300 levels.
FUTURES & OPTIONS
The derivatives segment continued to witness robust volumes and open interest has crossed Rs 1,50,000-crore mark. Sentiment indicators like open interest in stock futures, put/call ratio, implied volatility and VIX signal heightened volatility. TCS results clearly show that there is nothing fundamentally wrong with IT outsourcing services and that business from now onwards will be volume-driven and not margin-driven. Use sharp declines to accumulate large cap IT counters.
Steady buying was seen in both PSU and private banks. Axis Bank, Yes Bank, Canara Bank, OBC, UCO Bank and Union Bank were the favourites. With RBI policy meeting due in the next fortnight, buy only on corrections. Automobile counters continue to attract buyers at lower levels. Rumour mills are active saying bonus and stock split on cards in Maruti. Buy on declines Tata Motors, Bajaj Auto and Ashok Leyland. As expected, profit-booking was seen in PSU OMCs like HPCL, BPCL and IOC.
Modest buying interest was seen in sugar stocks on the expectation of an improvement in retail prices and decontrol of the industry. Buy on declines Shree Renuka and Bajaj Hindustan. Among side-counters looking good for strong gains are Onmobile Global, Power Finance Corp, Godrej Industries, IFCI, Tata Global Beverages and Zee Entertainment. 3G rollout indicates an exponential growth in the mobile VAS sector. Onmobile is well placed to reap the benefits. Buy for target price of Rs 350 in short term and Rs 475 in medium term.
Power Finance to report quarterly numbers, indicate sources. Buy for a target price of Rs 375 in near-term. IFCI may be granted banking licence, say insiders.
STOCK SCAN
Among niche food product companies, Unique Organics Ltd is attracting the attention of savvy players. The company is a pioneer in processing and export of certified organic spices, herbs, oil seeds, pulses and other products. A certification from the US department of agriculture and consistent quality resulted in exports to more than 20 countries. Buy for a target price of Rs 40 in coming months.
Andhra Petrochemicals Ltd, which belongs to Andhra Sugars group, is the only producer of oxo-alcohols like isobutanol, 2-ethylthexanol and n-butanol in India and accounts for over 30 per cent of the market. Results for the year-ended were weak on the account of plant shutdown for expansion. With the completion of expansion, sources predict excellent results for the current year. HPCL — which supplies feedstock naphtha — and yet another petroleum major are reportedly evinced interest in picking up a stake in the company. Buy at current levels for price target of Rs40.
South Indian Bank and DCB are on the radar of investors. The latest results of DCB reflects the success of ongoing business restructuring plan. The bank was able to reduce losses and is expected to post profits by next quarter itself.
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.