Spooked by Karnataka developments, rising crude oil prices, weak rupee and rising US-China trade war tensions, the markets closed on a weak note during the week ended.
The Sensex shed 680 points or 1.9 per cent to close at 34,848 and the Nifty ended lower by 210 points or 1.9 per cent to settle at 10,596. Underperforming the benchmark indices, the BSE Mid-Cap index fell 2.7 per cent closing at 15,896 and the BSE Small-Cap index fell 2.8 per cent to end at 17,327. The breadth of the market continued to remain weak amidst high volumes. Clouding the picture was a combination of political and economic developments.
Loss of face for BJP in Karnataka may trigger political uncertainty in the run up to 2019 polls. Spiking crude oil price is the major concern at the current juncture, oil touching $80 per barrel for the first time since November 2014, this has the potential to upset India’s fiscal balance.
India’s crude oil bill was estimated at $105 billion for 2018-19, but this could now shoot up to $150 billion. Despite DEA displaying bravado, analysts feel that there will be upward revision of fiscal deficit. The weakening in the currency has also triggered a sharp outflow from overseas investors. It is pertinent to observe that FPIs have pulled out Rs 2,000 crores in four sessions.
The near-term trend will be dictated by macro data, investment by FIIs and DIIs, the movement of rupee, crude oil price movement and global cues. For the week ahead, chartists predict trading range of 34,250-35,300 and 10,400-10,775 for the indices.
Stock Scan
Pennar Industries is engaged in the manufacture of steel products, including Cold Rolled Steel Strips (CRSS) and Cold Formed Metal Profiles. It is engaged in the manufacture of hot-rolled and cold-rolled products of steel. It also manufactures tubes. Its business divisions include Steel products, Systems and projects, Tubes and Industrial components. The company offers precision tubes, cold rolled formed sections (CRFS), electro static precipitators, railway wagons and coach components, press steel components and road safety systems. Steady performance and buoyancy in user industries make the stock good bet for target price of Rs 100 in medium term.
Time Technoplast is engaged in manufacturing plastics products. Its segments include polymer products and composite products. It offers industrial packaging products, infrastructure products, technical products, material handling products and composite cylinders. It supplies a cross-section of industries. The company is focused on the transport and storage of products using pallets, crates and other containers. Buy for target price of Rs 200.
UCAL Fuel Systems offers fuel management systems for automotive sector. The company manufactures carburetors, pumps and air suction valve. The Company operates through the segment of automobile parts. Its product portfolio consists of a range of components for two, three and four wheelers. Its product range includes gasoline fuel injection system products, engine management systems, products for diesel applications and emission control, pumps to high pressure die casting and precision manufacturing products. Buy for target price of Rs 475.
Futures & Options
Following the uncertainty in cash market, derivative segment witnessed downward momentum. Fresh short positions were seen in Nifty Futures. Both Nifty and Bank Nifty ended the week in red, shedding nearly 2 per cent each.
In the option segment highest O.I. for Nifty in the current series is placed at 11,000 call option and in 10,500 put option. For Bank Nifty Futures the highest open interest is placed at 26,500 call option and 25,000 put option. Techies indicate that the head and shoulder pattern in the indices suggests further short term weakness.
Barring FMCG sector, nearly all the sectoral indices closed in red. In the banking sector all eyes are on SBI, which will report earnings on coming Tuesday. Tweets from the in-charge FM Piyush Goyal regarding recapitalization and restructuring of PSU banks have raised hopes. Avoid PSU banks for present and stick to private banks, say observers. Weak rupee prompted buying in tech stocks. Buy TechM, TCS and Infosys.
Churning in the power sector with several UMPPs being shut down or put on block for sale reflects the distress in the sector. Stay away from the sector. Resolution of Bhushan Steel (Bid of Tata Steel accepted) has raised hopes of similar solutions for other debt ridden companies having “value”. Watch out for action in this segment.
Renewed selling was seen in Autos and Capital Goods counters. Use weakness to buy Tata Motors and Voltas with medium term view. Charts suggest buying in Dabur, Granules, HUL, Kotak Bank, TechM and YES Bank; and selling in Cipla, Godrej Inds, Maruti Suzuki, TVS Motors and UPL.
