Buoyed by good corporate earnings ahead of Diwali, M&A deals and steady macro economic data, markets extended gains for second consecutive week to close near all-time highs.
Moving up sharply, the benchmark indices the Sensex and the Nifty gained 618 points and 188 points to close at 32,432 and 10,167 respectively.
The broader market represented by mid- and small-cap indices also continued to move higher portraying the “bubbly” market sentiment. It is pertinent to observe that as far as monthly trends are concerned, FIIs have been net sellers to the extent of Rs 6,476.58 crore worth of shares, while DIIs purchased Rs 7,050.10 crore till date.
The talk of a stimulus to boost growth sparked concerns of fiscal slippage and FIIs are on selling spree resulting in rupee weakness.
For the first time in its rule, the government is facing sustained discontent over economic policies as growth slows, job losses mount and distressed farmers protest. However, statement from the PM that his government is fully committed to reverse the trend and is “ready to take decisions” has infused positive sentiment.
Inflation unexpectedly slowed in September reviving expectations for an interest rate cut to spur flagging growth. The weaker-than-expected inflation could add pressure on RBI to cut rates to revive growth that has been slowing for the past five quarters. The IIP data indicate a mild recovery.
Near-term direction of markets will be dictated by Q2 earnings, wholesale inflation numbers, movement of rupee, investment trends of FIIs and DIIs and crude oil prices.
Futures & Options
Mirroring the exuberance in the cash market, brisk trading was seen in the derivative segment. With nearly all major sectors like banks, metals, auto & pharma supporting the market Nifty looks all set for further gains.
In the option segment, Nifty call option at 10,200-strike has the highest open interest of more than 30 lakh shares and on put side 10,000-strike put has the highest open interest of over 70 lakh shares in open interest respectively.
Despite possible hiccups from PSU banks’ results, Bank Nifty seems to have just begun its upswing and the next leg of rally is likely to be led by the banks. Buy on declines Axis Bank and KTK Bank for surprising gains.
M&A action in the telecom space has put the sector back on radar of players. Telecom sector result in RIL’s results provided pleasant surprise on margins. Expect further gains in Bharti Airtel and RIL.
Coming above expectations, TCS’ results provided the necessary “trigger” for tech counters. Buy HCL Tech, Wipro and TCS.
Steady IIP numbers suggest recovery in capital goods sector. Use declines to buy Siemens, Exide Inds and L&T. Results from heavyweights like Colgate, Bajaj Auto, Ultratech Cement, Axis Bank and Wipro coming out with quarterly earnings would impact sentiment in the coming week.
Stock Scan
Garware Polyester is an exporter of polyester films. The company also manufactures sun control window films. It offers infrared rejection films and films to reduce the impact of mobile tower radiation. The company has shifted its focus to the Speciality Films and has developed new products for the international market. These films will mainly cater to the export markets. The company, through its step down subsidiary, Global Pet Films Inc., markets brands, such as GLOBAL WINDOW FILMS and Garware Sun Control and exports its products in China, Europe, Australia and Africa, among others. Buy on declines for target price of Rs 350.
Sobha Limited is engaged in the construction and development of residential and commercial projects. The company is also engaged in contractual projects. In an industry which is characterised by fragmented segments and players — design, manufacturing, construction and sales — what has stood in Sobha’s stead is its unique backward integrated process focused on quality. Passage of RERA Act and the government’s decision to overhaul capital gains taxes to pave the way for the listing of (REITs) is big plus for organized realty players. Buy on declines for medium term target of Rs 700.
