Spooked by rebound in crude oil prices, heightened volatility in rupee, escalation of US-China trade war and renewed selling in mid- and smallcap segments kept the markets weak during the week ended.
Indian equities were the only ones in Asia adding value in the two weeks through June 21. Sensex closed 266 points lower at 35,423 and Nifty ended 108 points lower at 10,714.
Broader markets continued to see correction for the second week. Mid- & small-cap stocks that were under pressure for the last few weeks saw further weakness dampening the sentiment.
Continuing their stance, FIIs remained sellers in the cash segment but were seen hedging their positions by remaining buyers in the derivatives segment, while DIIs were seen supporting the markets at lower levels.
After the announcement of an increase in supply by Opec and its allies, oil prices corrected sharply from a three-and-a-half-year high of $80.50 a barrel to around $73 a barrel. However the correction was short lived and prices are on rebound again.
Emerging market stocks and currencies posted their worst quarter since 2015 amid escalating trade war concern and weakness in China. The rupee dropped to a record low against the US dollar during the week ended.
Near term trend will be dictated by trade developments between US and China, progress of monsoon, domestic macro data, FII and DII activity, the movement of rupee, crude oil price movement and global cues. For the week ahead, chartists predict trading range of 34,750-36,000 and 10,475-10,900 for the indices.
Stock Scan
Oriental Hotels is engaged in the business of hoteliering, including accommodation, restaurants and catering services. It offers rooms, food and beverages, and allied services relating to hotel operations. The company’s subsidiary is OHL International (HK), which is located in Hong Kong. Recent initiatives like the easier e-visa regime, Swachh Bharat Abhiyan, Make in India and other measures are expected to build a positive global image for the country and will thus have a long term impact for the industry. Reports suggest very strong buoyancy in room occupancy; and with no significant addition of new properties across the country, existing hotel companies are expected to report strong earnings in next few quarters. Buy for target price of Rs 90.
Jindal Saw manufactures and supplies iron and steel pipe products, fittings and accessories with various manufacturing facilities in various countries, including India, the US, Europe and the UAE. The company is also poised to be a high quality player in the growing coating services industry with established capacity. Buy on declines for target price of Rs 150.
Pioneer Distilleries is a subsidiary of United Spirits (USL) In 2011-12, USL acquired PDL and is presently holding 75 per cent shareholding in the company. The company’s business activity falls within a single primary business segment i.e., Potable Alcohol and related products. All facilities are supported by state of the art pollution control equipment to ensure zero pollution. Turnaround performance and rumors of open offer for delisting may trigger spike in the company’s stock price, say insiders. Buy for medium term target of Rs 450.
Futures & Options
The settlement week witnessed brisk and volatile trading in the derivative segment. After trading weak for better part of the week, Nifty Futures staged good rally on the first day of new series. Nifty Futures ended the week 1.34 per cent lower at 10,689, ending its five-week winning streak, while Nifty Bank Futures closed 1.71 per cent lower at 26,330.
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 PCR OI for the week closed up at 1.06 which indicates OTM put writing. India VIX ended the week 7.65 per cent higher at 12.93. On the technical front 10,600-10,650 spot levels is strong support zone and current trend is likely to continue towards 10,750-10,775 levels. Crossover of 10,775 levels with good volumes may propel Nifty closer to its all-time high, say punters.
On the back of weak rupee, technology stocks witnessed good buying interest. Forex gains may see the tech biggies report good Q1. Use corrections to buy Infosys, HCL Tech and TCS.
PSBs continued to be on weaker wicket on fears of yet another wave of NPAs in Q1. Private banks continued to remain resilient. LIC is expected to invest up to Rs 13,000 crore in several tranches in IDBI Bank. Insurance regulator Irdai approved LIC’s plan to buy 51 per cent stake in IDBI Bank subject to some conditions. Contrarians can start accumulating PSBs with long term view.
Ahead of Q1 results, stock specific action will remain the flavor of next few weeks. Stocks looking good are Bata India, Dabur, Exide Inds, Godrej Inds, Lupin, Kotak Bank, Tata Elxsi and Torrent Pharma.
