By C. Kutumba Rao - November 9th, 2009
Recovering most of its losses during the early part of the week, markets ended a highly volatile week finishing higher for the week.
On the Bombay Stock Exchange, the Sensex gained 262 points to end the week above 16,000-level at 16,158 and the Nifty on the National Stock Exchange (NSE) logged 85 points to close at 4,796.
Statements from the Union finance ministry putting at rest speculation about the withdrawal of stimulus packages, positive news flow about the public sector units disinvestment policy and clarifications over the implementation of new direct tax code have helped markets "recover" quickly.
A renewed buying support from both foreign and domestic institutional investors and positive global cues turned the sentiment positive for near term.
Keep an eye on IIP (Index of Industrial Production) numbers (expected to be weak on underperformance of the infrastructure sector in September) and cues over global economies from G-20 conference in Scotland.
For the week ahead, chartists predict a trading band of 15,620-16,800 for the Sensex and 4,600-4,980 for the Nifty.
High intraday volatility is back; traders are cautioned to trade lightly. Be bullish only above 16,400 or 4,900 on the closing basis.
You can trim long positions, if the Nifty trades below 4,700-level. Market players expect 4,650-4,700 level to act as a strong support; and 4,850-4,900 level as strong resistance for the near term.
Investment ideas are about information and insight. Information is valuable if it is proprietary.
Insight is valuable if we know what that information means. Identifying likely losers is every bit as important as picking winners.
Nifty futures recovered 300 points from the intraweek low on technical basis. Overall open interest incre-ased by nearly Rs 10,000 crore to Rs 94,000 crore. VIX has shot up from 25 to 29 suggesting a high short-term volatility.
Punters suggest strangle strategy by buying OTM call option of 4,900 strike and OTM put option of 4,700-strike in the Nifty to take advantage of high volatility.
Among the stock futures that witnessed long build up are Ranbaxy, Biocon, Ashok Leyland, Voltas, Mphasis and Bajaj Hindustan.
After the acquisition of Shantha Biotech by Sanofi-Aventis SA, MNC market watchers are looking at a next possible candidate. Punters put a target price for Biocon at Rs 350 in next few weeks. A rebound in realty, metals, banking and autos was on expected lines.
Select counters like HDIL, Sterlite, Tata Steel M&M, IOB, Andhra Bank and PNB may move up further on sustained buying. From the infrastructure pack, NCC, HCC, Lanco Infratech and IVRCL look good more returns in near term. A heightened buying in Lanco Infra on news flow may see it touch Rs 575 in coming days tip punters. Among the side counters, Voltas, Trive-ni, Cummins, Welspun Guj, LIC Housing, GSPL and PTC grab attention.
* Arshiya is setting up FTWZs across various locations in India and commissioned rail container transportation business through its 100 per cent subsidiary ARIL. Buy for a target price of Rs 250 in medium term.
* Volume action in Gateway clearly indicates that some major 'news' development in near term. Buy for short term target of Rs175 with suitable trailing stop loss.
* Gati has reported excellent second quarter numbers and a preferential issue at high premium reflects that worst is over and that the company is back on rails. Buy for a target price of Rs 85 in medium term.
* SE Investments focuses on microfinance and works with low income families to provide financial solutions. It also has a wind energy division. Buy on declines for a target price of Rs 300.
*M&M Financial Services can be treated as a proxy for micro finance company since the company operates in the underpenetrated rural financing segment. Its plans to diversify into mutual fund business have triggered buying interest in the counter. Buy for a medium-term target of Rs 350.
* HBL Power is the pioneer in the design, development and manufacture of specialised batteries and DC systems in India for defence, aviation, telecommunication and railway sectors. Available cum split, the stock is a good bet for an ex-split target of Rs 60.
* Indo Borax is synonymous with Boric Acid and has market leadership in the segment. A steady growth makes the counter a good long-term bet for a target price of Rs 90.
* Fresenius Kabi (earlier Dabur Pharma) is attracting buying interest due to its robust performance. Buy on declines for a target price of Rs 125.