Market Khabar: US Fed, macro data to guide markets
Broader markets continued to under perform as markets turned hesitant.
Buoyed by RBI’s neutral stance, stable crude prices, timely monsoon and global cues, the markets ended with modest gains during the week ended. The Sensex closed at 35,444, up by 216 points or 0.61 per cent, while the Nifty closed at 10,768, higher by 71 points or 0.67 per cent.
Broader markets continued to under perform as markets turned hesitant. The mid- and small-cap stocks that were already under pressure saw further weakness after Sebi placed some firms under additional surveillance to check abnormal rise in stock prices that does not commensurate with the financial health of the companies.
After all six members of the MPC voted in favor of a policy rate hike, the RBI increased its repo rates by 25 bps. Rising crude prices, significant upsides in inflation expectations, HRA increases by state governments, revised guidelines for arriving at MSP for kharif crops and plausible deficiency of monsoons, could impart upside risks in inflation.
US President is scheduled to meet with North Korean leader Kim Jong Un on Tuesday. Outcome would have modest bearing on global markets, say observers. Amidst trade war initiated by US, global investors would be closely watching developments in the G7 summit, for more signs on the trade tension.
Near term trend will be dictated by US Fed meeting, progress of monsoon, domestic macro data, FII and DII activity, the movement of rupee, crude price and global cues. For the week ahead, chartists predict trading range of 34,900-35,950 and 10,575-10,950 for the indices.
Stock Scan
Hinduja Ventures is engaged in trading of electronic equipments, and treasury and investments. The company’s segments include real estate, and investments and treasury. The real estate segment consists of real estate activities in the form of property development; owns land in Bengaluru and in Hyderabad. The investments and treasury segment consists of activities relating to deployment of surplus funds and existing stock in trade/investments in shares and securities, other than subsidiaries. Buy on declines for target price of Rs 1,600.
Jyothy Laboratories is a multi-brand, multi-product company focused on FMCG industry. It is principally engaged in manufacturing and marketing of fabric whiteners, soaps, detergents, mosquito repellents, scrubber, body care and incense sticks. Robust expected GDP growth, increasing disposable incomes and growing living standards spell good times for FMCG firms. Buy for target price of Rs 750 in medium term.
Jamna Auto Industries is engaged in providing automotive suspension solutions for CVs. It is engaged in the business of manufacturing and selling of springs. The company has association with global leader Ridewell Corp, USA, for design and manufacturing of Air Suspension and Lift Axles. Buy for target price of Rs 125.
Rico Auto Industries is engaged in the manufacturing of clutch and crank case. The company is engaged in the manufacturing and sale of auto components for two wheelers and four wheelers. It manufactures and supplies high precision and machined components and assemblies, both aluminum and ferrous, to OEMs. Buy for target price of Rs 125.
Futures & Options
Mirroring the bullish undercurrent in the cash segment, derivative segment witnessed brisk trading during the week ended. On the options front, the maximum open interest in put options is at 10,600 strike and maximum open interest in call options at 11,000 strikes.
The Implied Volatility of calls closed at 10.78 per cent while that for put options closed at 11.21 per cent. The Nifty VIX for the week ended 6.43 per cent lower at 12.7 on weekly basis and is expected to remain sideways.
Trend analysis suggests, Nifty may trade in the range of 10,600 to 11,000 levels. The maximum upside levels to be watched for next week is 10,800-850 levels, and a confirmation of reversal could open up a resumption of sharp weakness from the highs.
After long hibernation, Pharma stocks significantly outperformed other stocks during the week ended. Follow up buying support needed from hereon for sustainable rally, say industry observers. Buy on declines Sun Pharma, Cipla, Cadila and Aurobindo.
Metal stocks were back in demand. Post RBI policy meeting and the meet between finance minister and PSB heads, observers expect stability in PSU bank counters. The proposal on transferring NPAs of PSBs to special purpose vehicles is back on the agenda. Contrarians suggest buying in good PSU banks. Resilient and sustained demand on home front to trigger more turnarounds in the sector.
Demand for sick units signals the change in cycle. Buy Tata Steel and SAIL. Stocks looking good are Apollo Hospitals, Balkrishna Inds, Cipla, Chennai Petro, CG Power, Hero Motocorp, MGL, Muthoot Finance, SAIL and Sun Pharma.