Karnataka results to provide direction
Despite rising crude oil prices and weakening of rupee against the dollar, the markets, buoyed by good Q4 earnings, easing of geopolitical tensions and lower than expected US inflation, which eased investor fears of fast interest rate hikes by the US Fed, resumed the upward movement to close higher during the week ended.
The Sensex gained 620.41 points or 1.78 per cent to close at 35,536 and the Nifty ended higher by 188 points or 1.77 per cent to settle at 10,806.
Underperforming the benchmark indices, the BSE Mid-Cap index fell 217.02 points or 1.31 per cent and the BSE SmallCap index fell 173.36 points or 0.96 per cent. The breadth of the market remained weak amidst high volumes.
It is pertinent to observe that in the current fiscal year, FIIs are seen on the sell side in both equities and debt market. However, DIIs continued to be net buyers and were seen supporting the markets at lower levels.
Anticipating a win for the BJP-led NDA, the markets, ahead of Karnataka polls, defied the weak rupee and the rising crude oil prices to stay firm.
After a prolonged period of low prices and relative calm, oil watchers are predicting a surge of volatility following Trump’s move to re-impose sanctions on Iran. Analysts are already warning of an eventual return to $100 oil.
The near-term trend will be dictated by the outcome of the Karnataka polls, macro data, investment by FIIs and DIIs, movement of rupee, crude oil prices and global cues.
For the week ahead, chartists predict range of 35,500-36,000 and 10,65010,960 for the indices.
STOCK SCAN
■ Vascon Engineers is an engineering, procurement and construction (EPC) company. The company’s principal activities include real estate development, hospitality, and manufacturing and building management system. It has presence in Bangalore, UP, Chennai, Ludhiana, Mumbai, Pune and Goa. Buy for target price of `75.
■ Prozone Intu Properties is a focused retail and residential-led mixed-use real estate development company. It is harnessing the domain expertise and ingrained experience of Intu Properties Plc, UK’s largest retail real estate developer, combined with promoter’s in-depth knowledge of the Indian markets. The company has a strong focus in tier 2 and 3 cities in India. After proving itself in Tier 2 as a successful player, the company is now beginning to explore opportunities in Tier 1 cities. Buy on declines for target price of `100 in medium term.
■ Maharashtra Seamless is engaged in manufacturing steel pipes and tubes. Its manufacturing plant has a capacity to produce 1,50,000 tons per annum of carbon and alloy steel hot finished and cold finished seamless pipes. It has a 7MW wind power plant in Maharashtra and a 5MW solar power plant in Rajasthan. It also owns a 20 megawatt solar power project in Rajasthan. Buy for target price of `775.
■ Enkei Wheels (India) 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 company's products are mainly used in utility vehicles and mid-size car segments. Buy on declines for medium term target price of `650.
FUTURES & OPTIONS
Mirroring the bullish undercurrent in cash market, derivative segment witnessed robust volumes. However, the breadth, indicating the overall health of the market, was weak.
Nifty Futures managed to reclaim 10,800 levels that was last seen in February 2018. True to predictions, short covering fueled the rally in Bank Nifty Futures propelling it to close at 26,413 up 2.7 per cent. Expectedly private banks solely aided the outperformance. PSU banks continued to be laggards.
On the options front, the maximum open interest in put is at 10,500 strike and maximum open interest in call at 11,000 strike.
Techies indicate 10,70010,750 spot levels as strong support zone; and current trend is likely to continue towards 10,900-10,950. On the back of favourable cyclical trends in metals, metal stocks were back in demand. Buy on lows JSPL, Tata Steel, Hindalco and JSW Steel.
Sentiment for bank stocks improved after better than expected results from private banks like ICICI Bank, HDFC Bank and Kotak Bank. Sharp provisions have kept PSU Banks on weak wicket. Contrarians suggest bottom fishing in select PSU counters.
Pharmaceutical stocks could react on Monday following Trump’s announcements regarding the drug policy, Trump blueprint to lower drug prices, called “American Patients First,” weren’t as biting as his words suggested. Expect a strong relief rally in Pharma stocks.
Charts suggest buying in Arvind, Adani Ports, BPCL, Container Corp, HDFC Bank and Engineers India; and selling in Federal Bank, Cholamandalam Finance, Sun Pharma, Siemens and Titan Inds.