Macroeconomics to dictate terms FUTURES & OPTIONS
Buoyed by the India Meteorological Department (IMD) upgrading the prospect of normal monsoon, good Q4 earnings, renewed buying from FIIs and positive reforms push from the government, markets zoomed to new life highs during the week ended.
The benchmark indices the Sensex and the Nifty gained sharply by 329 points and 116 points to close at 30,188 and 9,401 respectively.
Renewed buying from FIIs boosted sentiment. It is pertinent to observe that withdrawals by FIIs in the previous month did not stop the indices from reaching historic highs.
Accelerating domestic flows have begun to create a “powerful offset” against capital outflows. Indian exports are defying a firm rupee, riding a rise in global growth. Exports rose to a six year high in March and, for now, that upward trend is tipped to continue as the world economy chugs along and foreign direct investment boosts productivity and stabilizes the economy.
Near term market direction will be dictated by Q4 earnings, macroeconomic data like IIP and WPI numbers, sector specific news in pharma and IT sectors, FII activity and global cues. The base year for factory output and wholesale prices has been changed to 2011-12 from 2004-2005.
The new base for industrial production comprises 809 items. The data is more comprehensive and gives the RBI a better idea of the economy’s output gap allowing it to raise or lower interest rates as necessary.
For the week ahead, chartists predict trading range of 29,800-30,500 and 9,250-9,525 for the benchmark indices. Support for the indices evident at 30,000 & 29,800 and 9,335 & 9,275.
STOCK SCAN
Everest Industries is engaged in manufacturing and trading of building products, such as roofing products, boards and panels, other building products and accessories and manufacturing and erection of pre-engineered steel buildings and related accessories. The company’s segments include Building products and Steel buildings. It offers products for industrial, commercial and residential applications. Its building products and solutions are available in approximately 1 lakh villages and over 600 cities in India and also in 30 countries. Buy on declines for medium term target of `475.
Enkei Wheels (India) is an India-based company, which is engaged in the auto parts and equipment industry. The company’s operations include the manufacturing of aluminum alloy castings wheels mainly used in automobile industry in India. The firm has allotted 7,06,500 equity shares on preferential basis last year at `188 (including the premium of `183) each to Enkei Corporation, Japan. Buy for target price of `450.
L.G. Balakrishnan & Bros is a transport firm. The company is engaged in the business of manufacturing chains, sprockets and metal formed parts for automotive applications. The company’s segments include transmission, metal forming and others. The firm’s products are marketed under the Rolon brand. It has manufacturing units in TN, Maharashtra, Uttrakhand, Karnataka, Haryana and Rajasthan. Buy on declines for four figure target.
Post recent correction, select stocks like Ganesh Benzoplast, Andhra Petrochemicals, Coffee Day Enterprises, Rain Industries and TAJ GVK Hotels look good for buying. Savvy players are accumulating the counters for strong medium term gains.
FUTURES & OPTIONS
Mirroring the strong bullish undertone in the cash market, derivative segment witnessed brisk trading. Maximum open interest in call is at 9,500 strike and in put is at 9,300 strike.
The underlying extreme short term trend of Nifty is slightly weak and there is a possibility of some more consolidation or minor weakness by early next week.
Key lower support to be watched is around 9,3309,340 levels. In the coming week Nifty is likely to oscillate between 9,300-9,500. Long build up was witnessed in auto, banking, cement, FMCG, metals, IT, pharma and real estate.
Under ownership over the years has triggered the vigorous buying in the realty space. Further gains are predicted in the sector. In the auto sector renewed buying was seen in the two wheeler segment. Further gains are indicated in TVS Motors and Hero Motocorp.
With Nasscom allaying fears of mass layoffs in IT sector and indicating that it is imperative to realign and skill the workforce to remain competitive in globally; expect contrarian buying in Tier1 IT firms.
True to repeated caution in pharma, last week carnage was seen in Glenmark counter. Post results, shares of Glenmark Pharma hit seven-year low on concerns of the company’s inability to reduce debt and overhang of pricing pressure in the US. Tread cautiously in the pharma counters.
FMCG stocks are attracting good buying interest. Buy Godrej Consumer for strong gains in next few weeks. Expectedly heightened activity continued in banking counters. Sources suggest buying in PSU banks on every correction. After RBI report on YES Bank suggesting under reporting of NPAs, observers say this may be true for other private banks also.