Spooked by the sharp fall in bank stocks and renewed concerns over delay in rate cut, markets after hitting lifetime highs during the early part of the week shed all the gains on the Muhurat day to close on a weak note during the week ended. Benchmark indices Sensex and Nifty closed modestly lower by 42 points and 20 points at 32,390 and 10,147 respectively.
With the IPO of General Insurance (GIC) last week, fund-raising through IPO has crossed Rs 44,000 crore in 2017 and is the highest amount raised in the past 28 years. Strong appetite from institutional and retail investors could see as much as Rs 65,000 crore being mopped up via IPOs in 2017. Analysts, however, are sceptical on oversubscriptions of IPOs and overvaluations are becoming a market worry.
2008 was the year of mega IPOs. It is pertinent to recall that after Reliance Power’s IPO was oversubscribed 73 times and the markets were rallying to a new high, the markets then crashed on the listing day reflecting the result of irrational exuberance of those times. History repeats in stock market. Be cautious say old timers.
Overall earnings season will be closely watched due to the impact of GST that has been implemented with effect from July 1. The full impact of GST will be reflected in Q2 earnings.
Near term direction of markets will be dictated by Q2 earnings from biggies like Infosys, ITC and others, F&U settlement, currency changes and global cues. For the week ahead, chartists predict trading range of 31,850-32,800 and 10,000-10,275 for the benchmark indices.
Stock Scan
- Market Khabar recommends a portfolio of seven stocks for SAMVAT 2074.
- Orient Abrasives is an India-based company, which is engaged in the manufacturing of fused grains, monolithics and calcined products. Indicated target price in one year: Rs 70
- MOIL is engaged in the exploration, exploitation and marketing of manganese ore and products, such as electrolytic manganese dioxide and high carbon Ferro manganese alloy. Indicated target price in one year: Rs 400
- Pitti Laminations manufactures and sells electrical steel laminations, motor cores, sub-assemblies, die-cast rotors, and press tools in India and internationally. Indicated target price in one year: Rs 135
- CG Power and Industrial Solutions is engaged in the business of power transformers and reactors, low tension motors and switchgears. The Company provides end-to-end solutions to utilities, industries and consumers. Indicated target price in one year: Rs 150
- Dilip Buildcon is an India-based company engaged in the business of infrastructure facilities on engineering procurement and construction (EPC) basis. The Company undertakes contracts from various government and other parties and special purpose vehicles promoted by the company. Indicated target price in one year: Rs 1,250
- ICICI Prudential Life Insurance Company provides life insurance, pensions and health insurance to individuals and groups. Indicated target price in one year: Rs 750
- INEOS Styrolution India Limited is engaged in manufacturing, trading and selling of engineering thermoplastics. The Company is a styrenics supplier. Indicated target price in one year: Rs 1750
Futures & Options
Ahead of the settlement week derivative segment witnessed stock/sector specific trading. On the back of settlement, consolidation is likely to continue in the coming week. Any major uptrend or downtrend from hereon will largely depend on earnings feel punters.
Track rollovers for spotting winners of November series. Expect short covering on dips. Techies suggest that Nifty has to close above the 10,240 mark for the current momentum to extend further. However, Nifty can move 350-400 points on either side if important resistances or supports are broken accompanied by good volumes.
Bank Nifty underperformed in the week gone by mainly on account of the results of Axis Bank which dragged the index lower. Bank Nifty futures closed at 23,890, below the psychological support of 24,000. Further weakness in banking stocks is not ruled out.
ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Yes Bank, Canara Bank, IDFC Bank, RBL Bank and Vijaya Bank will announce their earnings in the coming week.
Track asset quality and read between the lines. Profits of majority of banks may be higher due to a low base in the year-ago quarter that was hit by higher provisions.
Important to watch out from Infosys would be commentary from new interim CEO UB Pravin Rao and Nandan Nikekani who was appointed as non-executive chairman of the company.
Results of ITC may provide clues of GST impact. Buy on dips stocks of capital goods and pharma sectors. Stocks looking good are Adani Ports, ACC, BEL, Bajaj Auto, Federal Bank, Hexaware, JSW Steel, Srei Infra and RIL.
