Despite developments on the trade war between the US and China and fears over outcome of the Opec meeting, the markets ended on flat note due to a rally in the later part of the week.
Indian equities were the only ones in Asia adding value in the two weeks through June 21. The Sensex closed at 35,690 up by 67 points and the Nifty closed at 10,822, higher by just 4 points. Weak market breadth reflects the undercurrent nervousness over the market direction in near term horizon. The mid- and small-cap stocks that were already under pressure saw further weakness.
The FIIs remained sellers in the cash segment but were seen hedging their positions by remaining buyers in the derivatives segment. DIIs, however, were seen supporting the markets at the lower levels. Monsoon rainfall was 9 per cent lower than normal so far in June, but in some states such as Gujarat the deficit was as high as 93 per cent. However, according to reports, monsoon expected to revive strongly from Sunday.
Following calls from consumers to curb rising fuel cost, weekend announcement of Opec to boost supply may provide some comfort. The tariff threat on European cars escalates global trade war.
Track developments on the escalating trade war rhetoric wherein no one is ready to blink first. Near-term trend will be dictated by trade developments, progress of monsoon, domestic macro data, FII and DII activity, the movement of rupee, crude price movement and global cues. For the week ahead, chartists predict trading range of 35,150-36,250 and 10,650-10,975 for the indices.
Stock Scan
Bandhan Bank is a commercial bank, which offers a variety of asset and liability products and services designed for micro banking and general banking, as well as other banking products and services. Incidentally, Kolkata-based Bandhan is the first bank to be set up in the eastern part of India after Independence. Its asset products consist of retail loans including a substantial portfolio of micro loans, as well as MSME loans. The bank has mobilized deposits more than Rs 27,233 crore and its outstanding loan book is nearly Rs 26,378 crore. With the philosophy of “Aapka Bhala, Sabki Bhalai” the bank is competitively at par with country’s top private and state-run banks. Buy on declines for medium term target price of Rs 1,000.
Godrej Agrovet holds leading market positions in the different businesses in which it operates — Animal Feed, Crop Protection, Oil Palm, Dairy and Poultry and Processed Foods. Buy on declines for target price of Rs 1,200.
Sundaram Brake Linings is engaged in the manufacture of automotive, non-automotive, railways and industrial friction materials. SBL products are extensively used in commercial vehicles, passenger cars, tractors (agricultural), railways and two wheelers. The company with its leading edge technology is a pioneer in the manufacture of asbestos free friction materials in India. The company has a presence in the domestic OEM and aftermarket. The company has approximately five manufacturing facilities, strategically located near major ports. The Company exports its products to over 50 countries across the world. Buy for mediumterm target of Rs 775.
Futures & Options
Ahead of settlement week, the derivative segment witnessed brisk trading during the week ended. Nifty Futures witnessed a sideways consolidation, inching marginally higher for the fifth week. Nifty moved in a tight range of ~1.4 per cent, ending 0.21 per cent higher at 10,837.
Bank Nifty futures relatively outperformed ending 1.44 per cent higher at 26,791. On the options front, the maximum open interest in put options is at 10,700 strike and maximum open interest in call options at 11,000 strikes.
The PCR OI for the week closed up at 1.15 which indicates OTM put writing. Analysis suggests 10,700-10,750 spot levels is strong support zone and current trend is likely to continue towards 10,900-10,950. The maximum upside levels to be watched for next week is 10,950-10,975 levels, and a confirmation of reversal could open up a resumption of sharp weakness from the highs. Track rollovers for spotting winners of July series.
True to prediction, Pharma stocks continued to attract good follow up buying support. Buy on declines Dr Reddy, Divi Labs, Natco, Sun Pharma, Cipla, Cadila and Aurobindo.
The long addition of 8 per cent in the open interest was seen in BankNifty. Techies say the index has given a bullish symmetrical triangle pattern breakout on daily chart. Expect 27,000 target, say punters. Sustained buying was seen in ICICI Bank and HDFC Bank.
On the back of Opec move to boost oil supply, short term rally indicated in oil marketing firms. However, avoid fresh buying for present and book profits on bulges. Stocks looking good are Bajaj Auto, Cipla, Dabur, Godrej Inds, HDFC, LIC Housing, M&M and Tata Motors.
