Markets hinge on monsoon
By C. Kutumba Rao
Displaying good resil-ience, stocks rallied smartly from lower levels
recorded during the early part of the week ended. After touching intra-
week lows of 14,645 and 4,369, the Sensex and the Nifty shed nearly
2.5 per cent to end the week at 15,190 and 4,517.
Modest renewed buying interest was seen in midcap and smallcap stocks.
Continued selling by FIIs and concerns over sustained rise in
inflation impacted negatively on the market sentiment. Better than
expected IIP numbers have provided some comfort to bulls.
Tight rope walk by the RBI and the government to combat inflation
without sacrificing growth may succeed, say observers. Reports suggest
that the government may bring back Indo-US nuclear deal for approval
citing the necessity for energy security.
Barring any negative developments on political front, near term
direction of markets depends on the progress of monsoon and the global
cues. Advance tax numbers and expectations over Q1 results may trigger
modest rally from current levels.
For the week ahead, chartists predict trading band of 14,600-15,800
for the Sensex and 4,400-4,750 for the Nifty. Expect strong resistance
to the indices on upside at 15,500 and 15,740 and 4,595 and 4,680.
Supports for the indices would be at 14,645 and 14,480 and 4,400 and
4,330. Key levels to watch for reversal are 4,700 on the Nifty and
15,800 on the Sensex. Spend at least as much time researching a stock
as you would be for buying a TV. Bull markets are born on scepticism,
mature on optimism and die on euphoria.
Poor volumes in the derivatives remained a cause for worry. Wide
discount between spot Nifty and Nifty futures, build up of open
interest in Nifty futures and Nifty put options reflects 'confidence'
of bears over near term market direction. While put-call ratio of
volumes stood at 1.14 and PCR for open interest was at 1.69, implied
volatility for puts has declined and implied volatility for calls has
improved suggesting flat trend or possible short covering rally. With
the exception of pharma and fertiliser sectors, most of the sectors
witnessed brutal selling. Changes in fertilizer policy have been
received positively by the industry. Stay invested in Tata Chemicals,
GSFC and add on declines Chambal Fertilizers. From the cash group buy
on declines Zuari Inds and Coromandal Fert. Ranbaxy deal has given
fillip to pharma stocks. Dr Reddy, Lupin, Glenmark, Aurobindo and
Biocon attracted good buying interest. Stay overweight in the sector.
Sharp profit booking was seen IT and FMCG counters. Use corrections to
buy Infosys, HCL Tech, Satyam, ITC, HLL and i-Flex. Banking and realty
stocks continued to witness selling. Industry sources say worst is
over and banking counters are close to 'bottoms'. Long term inve-stors
can begin accumulation of select private banks and low priced PSU
* Oil Country Tubular's results confirm turnaround in its fortunes.
Subdued Q4 is due to benefiting from the boom in oil exploration. Its
turnover has touched Rs 339 crore and cash EPS is Rs 8.15. Buy at
current levels for target price of Rs 125 in medium term.
* Listed during the bear phase of markets, textile stock Bang Overseas
has attracted the attention of sa-vvy punters. Post completion of
expansion the company is likely to post a tur-nover of Rs 200 crore.
Punters tip it as another BRFL.
* True to warnings given, investors have been "bottled" in some newly
listed scrips. Creating trading interest by way of volumes, bulk deals
and then distributing the 'subscribed' stock to lay inv-estors has
become favorite 'pastime' of operators these days. Tread carefully in
* Green building project of Shree Ram Urban Infrastructure is
attracting heightened interest from industry pundits. The project is
likely to be eligible for carbon credits also. Investors with risk
taking ability can buy the stock at current levels for price target of
* Heightened interest seen in Garware Wall Ropes and Adani Enterprises
from savvy players. Restructuring and good results have sparked
interest in Garware Wall. Buy on declines for a target price of Rs
150. Diversified Adani Enterprises the flagship company of Adani group
is reportedly going to have a "makeover." Unlocking of hidden value of
many divisions is reportedly on cards. Stay invested for further
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