Spooked by multiple fundamental headwinds like soaring inflation, rising interest rates, current account deficit, political stalemate and corruption scandals, the Indian stock markets continued their south bound journey during the week ended.
On the BSE the Sensex ended 612 points lower at 18,396 and the Nifty on the NSE shed 184 points closing at 5,512. The market breadth was extremely weak reflecting the all pervading negative sentiment. Aggressive FII selling including unwinding of some P-note positions over possible government crackdown on black money stashed abroad hurt the market mood.
With the results season coming to an end, the focus of market players is on the upcoming Budget Session of Parliament. Failure to resolve the present stalemate between the ruling coalition and opposition may seriously hamper policymaking, fear observers.
Weekend nervousness over political unrest in Egypt may see global markets remain weak during the early part of next week. Stock market over-reaction to negative news can yield new opportunities to long term investors. For the week ahead chartists predict trading range of 17,800-18,760 for the Sensex and 5,340-5,720 for the Nifty.
Current downtrend can pull down indices to 18,160 and 17,880 and 5,440 and 5,360. A relief pullback in the indices may take them to 18,660 and 18,900 and 5,590 & 5,680.
The market is most dangerous when it looks best. Don't try to pick the top and the bottom of the market.
FUTURES & OPTIONS
Despite a weak undertone the derivative segment continued to witness robust volumes on heightened speculative activity. Rollovers to February series were higher for Nifty in comparison with stock futures.
Put addition at 5,400 and 5,300 strikes and call writing at 5,700 and 5,800 strikes of Nifty indicate trading range of 5,400-5,700 for the week ahead. Sharp rise in PCR and VIX reflect 'oversold' nature of market. After weakness during the early part of next week, sharp rebound from lower levels is not ruled out. Expect stock specific action and not sectoral action for next few weeks. Expectedly ahead of the 'rumoured' consent order RIL has fallen to a 52-week low. Decline below Rs 900 may see the stock test Rs 860-Rs 830 zone.
Technology heavyweights Infosys and TCS have closed below their short term support levels at Rs 3,200 and Rs 1,190. Failure to sustain above these levels may see them correct to Rs 3,100 and Rs 1,145.
Defensives like pharma and FMCG counters also witnessed unwinding of positions. Use the correction to accumulate Divi Labs and ITC for near term gains. Results of most of the PSU and private banks were better than expectations. Despite fears that high inflation-high interest rate environment not conducive to banks; investors with long term view can start SIP in select counters.
Global volatility in crude oil prices and dollar after the Egypt crises may impact oil and metal stocks. Sharp selling was seen in rate sensitive realty and auto counters. Apply sell on rallies strategy. From the battered midcap stock futures punters suggest relief gains in 3i Infotech, OnMobile, GMR Infra and McLeod Russel. Buy weakness and sell strength.
True to predictions, Vishnu Chemicals Ltd and Balaji Amines Ltd have reported excellent results bettering analyst expectations handsomely.
In just nine months of current year, turnover of Vishnu Chemicals has crossed last full year's turnover and net profit has grown by 400 per cent. In the domestic market the company has garnered market share of over 80 per cent in chrome chemicals and the recent introduction of new specialty chemical products has put the company on aggressive growth path.
The company may end current year with EPS of above Rs 22 and Rs 35 for the next year say sources. Available at a P/E of just about 6, the stock looks very good investment bet for target price of Rs 250 in medium term.
Balaji Ami-nes is one of the leading manufacturers of Aliphatic Amines and derivatives of specialty chemicals. It caters to pharma companies (inputs for APIs), agro chemicals, refineries (lube extraction), water treatment chemicals, rubber chemicals and photographic chemicals.
Strong return on net worth at 23 per cent, high operating margins at 19 per cent and excellent Q3 results make the stock good buy for target price of Rs 100. Motherson Sumi Systems Ltd has been trading firm even on weak trading days. Strong accumulation in the counter is clearly evident.
Good results and the increasing global presence of the company and revival of global auto market make this auto ancillary stock good buy for steady long term gains.
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 columns