Global cues to dictate market movements FUTURES & OPTIONS
Buoyed by Moody’s upgrade of the country’s sovereign bond ratings to Baa2 and change of the outlook on the rating to stable from positive, markets recouped most of the losses during the later part of the week.
While the Sensex closed marginally higher by 29 points at 33,343, the Nifty closed dipped by 39 points to close at 10,284.
Rating agency Moody’s has upgraded India’s local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive.
The agency, which upgraded the ratings after 13 years, cited the implementation of reforms as its reason. Interestingly, the last upgrade also came under the NDA- regime.
The immediate impact of the upgrade is that the cost of international borrowing will become cheaper for the government and Indian firms whose ratings are constrained by the sovereign rating.
The move has improved the sentiment in the equity markets. The government will have to remain on the path of fiscal consolidation for maintaining investor confidence.
Crude oil prices at elevated levels continued to be a cause of concern.
Near- term trend will be dictated by crude oil prices, macro economic data, FII investment pattern and Q2 results.
For the week ahead, chartists predict trading range of 32,850- 33,750 and 10,125- 10,450 for the benchmark indices.
Support for the indices evident at 33,125 & 32,850 and 10,215 & 10,145. Focus of market players for the next few weeks will be on the Gujarat Assembly Elections, RBI monetary policy and United States Federal Reserve meet. Derivative segment continued to witness brisk trading activity. Cornered by positive news of rating upgrade by Moody’s, short covering from bears was seen over the weekend.
Highest open interest is seen at 10,500 strike in index call options and 10,200 strike in index put options. Charts are indicating that the Bank Nifty is poised to cross the 26,000 mark. Close above 26,000 would see a further rally in Bank Nifty on account of short covering.
However, skeptics warn that the present rally would be a short lived one and advise partial booking of profits in the present exuberance.
Cement stocks are attracting renewed buying from funds. Stay invested in Ambuja Cements, India Cements and Ultratech.
Select bank stocks witnessed strong buying from savvy funds. After the rating upgrade, industry observers expect bank stocks to lead the rally from here on. Use declines to buy Bank of Baroda, ICICI Bank, Kotak Bank and State Bank of India.
Auto stocks led by Maruti are attracting buyers on every dip. Buy Tata Motors and M& M.
Metals continued to be in corrective mode. Watchers expect further correction in the near term. Contrarians may start nibbling at Tata Steel and Vedanta.
Other stocks looking good are Shriram Transport Finance, Ajanta Pharma, Ceat, Voltas and Repco Home. Investment Mantra: Following conventional wisdom is a sure way to miss the big winners. On the investment highway, don’t drive looking through the rearview mirror. The recipe for finding and investing in tomorrow’s megawinners is to evaluate the megatrends in each growth industry to determine investment themes.