On a weekly basis, the markets gained for sixth consecutive week, with benchmark Sensex rallying 393 points to close at 38645, while the broader Nifty rose 123 point to finish at 11,680. We need to note that FIIs have infused over Rs 5,100 crores in August — the second consecutive month of inflow — on improvement on the macro front, better Q1 earnings and correction in the mid and small-cap space.
The economy expanded at 8.2 per cent in Q1, the fastest pace in nine quarters, as strong domestic consumption and manufacturing growth overwhelmed any global trade-war worries. At this pace, India looks set to become the world’s fifth largest economy, ahead of the UK.
Weekend auto sales numbers were a mixed bag. Expect the rupee to remain weak in the backdrop of strength in US dollar as well as escalating concerns over trade wars.
Near term trend will be dictated by domestic macro data, FII and DII activity, the movement of rupee against the dollar, crude oil price movement and global cues.
For the week ahead, chartists predict trading range of 38,150-39,250 and 11,520-11,850 for the benchmark indices. Support for the indices evident at 38,350 and 38,150 and 11,575 and 11515.
With indices in uncharted territory, after six weeks of stellar run, the market is expected to consolidate in the next few weeks and Nifty is not expected to move above the key overhead hurdle of 11,790 levels for near term. There is a higher possibility of beginning of a sharp downward correction from the highs in the next two weeks. Minor weakness could be expected for the next week.
Stock Scan
Parag Milk Foods is engaged in manufacturing and processing of milk and milk products. Its brands include Gowardhan, under which traditional dairy products, such as ghee, are marketed; Go, under which western lifestyle dairy products, such as cheese, are marketed; Pride of Cows, under which premium milk is sold, and Topp Up, under which flavored milk is marketed. It has an aggregate milk processing capacity of two million litres per day. Buy for target price of Rs 475.
J. B. Chemicals & Pharmaceuticals is one of the fastest growing pharma companies. It has a range of innovative specialty products. It markets various contrast media products in India such as Contrapaque (Iohexol), Lek Pamidol (Iopamidol), Trazograf (diatrazoic acid), Trazo-gastro — Oral contrast (Diatrazoic acid), Magnilek Injection (Gadopentatic acid) and Cardio-lek Injection (Iodixanol). Its brands in India include Metrogyl, Nicardia, Rantac, Dicloran, OF, Cilacar and Zecuf. Fair valuation and good visibility of earnings make the stock good bet for a target price of Rs 500 in medium term.
Universal Starch Chem Allied is a leading producer of starch-based products. Product range includes maize starch powder, modified starch and liquid glucose. Its products find application in various industry segments like food, paper, textiles, pharma and confectionery. The manufacturing plant is located at Dada Nagar. Buy for a target price of Rs 175.
Quick Heal Technologies Ltd, Z.F.Steering Gear (India) Ltd, Nikhil Adhesives Limited and Sarada Plywood Inds Ltd are on the radar of savvy market players. Stay invested and add on declines for further gains.
Futures & Options
Derivative segment witnessed brisk and volatile trading during the week ended. Nifty Futures closed higher for the ninth consecutive week. In the options segment, the highest open interest was seen at the 11800-strike call option and 11600-strike put option. The PCR OI for the week closed at 1.12 which indicates OTM put writing.
Led by PSU banks, Bank Nifty gained 227 points closing at 28,062. Even as private banks like YES Bank and InduSind Bank were on weak wicket; select PSU Banks like BOB, PNB and others witnessed buying. With the Centre looking to make resolution of NPAs a political issue, industry watchers expect fast track solution to the issue. Contrari-ans can use sharp corrections to buy PSU banks for good long term gains.
After the challenging times of 2012-16, depreciation of rupee coupled with revival in BFSI segment gave impetus to IT companies. The movement of rupee will directly help IT companies enjoy higher margins. Stay invested in biggies like TCS, Infosys and Wipro; and look for opportunities in midcaps.
August auto sales show case divergent trends. M&M, Ashok Leyland and Tata Motors reported 14%, 27% and 27% growth in sales. Buy TVS Motors and Ashok Leyland for unexpected returns.
True to predictions several pharma stocks ended the week on a very strong note. Dr Reddy, Lupin, Sun Pharma and Cipla look good for gains from current levels.
From the PSU space, National Alumini-um and NMDC look good.
Looking good for short term are Apollo Hospitals, Bharat Forge, BOB, Godrej Inds, KPIT, L&T, Lupin, Petronet LNG.
