Inflation may influence markets
Market Khabar by C. Kutumba Rao
Trending with global markets, Indian indices posted th-eir biggest
weekly gains in five months during the week ended. On the BSE, the
Sensex gained 1,376 points to close at 16,371 and the Nifty on the NSE
logged 368 points to end at 4,942.
Moving in tandem with frontline indices after a long time, both the
CNX Midcap and the BSE Smallcap indices also gained eight per cent
plus. Market breadth clearly reflects that worst may be over for
present. Rise in commodity prices was seen impacting inflation
numbers. While inflation and GDP are the most talked about numbers,
market players feel fourth quarter results will determine near term
direction of markets.
Though decoupling theory has been discarded, some savvy old timers
believe that domestic consumption and investment story as far as real
economy is concerned will emerge a winner in long term. Do not be too
obsessed with global picture and focus on Q4 results and domestic
With the Left Parties showing red flags to Indo-US nuclear deal and
inflation becoming primary concern markets are likely to remain range
bound till macro economic picture improves and monsoon prediction is
available. For the week ahead, chartists predict trading bands of
15,680 to 17,360 for the Sensex and 4,580 to 5,240 for the Nifty.
Expect stiff resista-nce to the indices on upside at 16,800 and 17,200
and 5,100 and 5,250. On downside support is evident at 16,080 and
15,800 and 4,820 and 4,680.
Cut all short term longs if indices trade below 15,860 and 4,760
levels. Do not be too exuberant and adopt cautious approach as markets
are not out of woods yet. With onset of results season, adopt stock
specific approach for near term trading. Buy when stocks have few
friends. Be patient. Don't be rattled by fluctuations. Rational and
clear thinking are what's needed to succeed as an investor.
Despite week ended being the settlement week, trading volumes
continued to be moderate. Strong recovery in the markets was not
reflected in volumes indicating that "confidence" level is still low.
Punters were seen preferring to cover most of the shorts, and fresh
build up in long positions resulted in Nifty futures trading at
premium to spot. Key resistance level for Nifty traders is 5,100
points. One interesting observation is active trading in Nifty 5000
strike December call option and Nifty 4300 December put option.
Barring couple of sectors nearly all the sectors witnessed good buying
interest from lower levels.
Side counters like HDIL, Edelweiss, GBN and others scored impressive
gains. Modest buying interest was seen in technology, metals, capital
goods and power counters. Banking counters were seen facing resistance
on every upmove. Reports of most banks likely to take a hit in their
investment portfolio and slowdown in credit disbursal are clouding the
Ahead of Q4 numbers, tech counters are witnessing good warehousing.
Stay invested in Infosys, Wipro and Satyam for further gains. Media
stocks are attracting renewed buying. Buy on declines Adlabs, GBN and
Zee. Surprise move in WWIL not ruled out. Buy for target price of Rs
Cement counters are beginning to show comeback gains. Buy ACC, Ambuja
Cements and Birla Corp. Among the side counters, looking good for
gains are Idea Cellular, Redington, Praj Inds and Gitanjali. Issuance
of petro bonds may give fillip to PSU oil refiners like IOC, BPCL and
* Network18 which has acquired Infomedia India is likely to rename the
company as Infomedia18 and also leverage the substantial printing
capacity of the company for launch of specialist magazines. Already a
JV with Forbes Media has been to launch a fortnightly has been inked.
Buy Infomedia for medium term target of Rs 350.
* Jain Irrigation Systems is planning to expand into food processing,
piped gas and water management. A little known fact of the company is
that it is the world's largest processor of mangoes and pomegranates.
Buy on declines for steady gains in medium term.
* Edible oil player Sanwaria Agro Oils has reportedly undertaken wind
power project to improve operating margins. The company also
manufactures Lecithin, an emulsifier used in edible oil industry. With
sales rising by an average of 101 per cent over past five quarters,
PAT will improve the valuation. Buy at current levels for good long
* Select stocks like Prime Focus, Allied Digital, Subex, Gati, and
Electrotherm have witnessed spurt in volumes. Prime Focus operates in
niche segment of media sector concentrating on high class processing
and digital arena. Post recent correction the stock looks good bet for
short term price target of Rs 825. Subex is reportedly back on growth
path and has restructured for better performance. The company is
focusing on branding and improvement of margins.
* Electrotherm is reportedly expanding into related areas. The company
is reportedly making QIP at attractive price. Good results and booming
user industry make the stock good bet on every decline.
* Allied Digital has rec-ently launched remote management services.
Excellent results and reports of inorganic growth by acquisition route
make the stock good buy on declines.
Inflation may influence markets