Buoyed by BJP’s victory in the assembly elections of Gujarat and Himachal Pradesh and positive global cues, markets extended their winning streak to third straight week. The week ended was great for the market as not only equity benchmarks, but also broader markets ended at fresh record closing highs. The Sensex surged 477.33 points, or 1.43 per cent, to settle at 33,940.30. The Nifty advanced 159.75 points, or 1.55 per cent, to settle at 10,493. Exuberance in the broader market was visible by the rally in the S&P BSE Mid-Cap index and the S&P BSE Small-Cap index (+4.51 per cent).
A IMF report suggested a blueprint for restructuring and privatisation of banks with clear time frames should be put in place as soon as possible. The plan must be accompanied by restructuring of the state-run lenders. The consolidation should avoid mergers of weak banks with stronger peers. Exit of the weakest banks should be considered, with voluntary transfer of liabilities and good assets to stronger market participants, leaving bad assets behind in liquidation.
Political “noise” from 2G judgment and deadlock in Rajya Sabha over PM’s comments on Manmohan Singh can be irritants. True to the minutes of the MPC, concerns over rising global oil prices and inflation in the country are increasing. The near-term trend will be dictated by F&O settlement, holiday “mood” of institutional players, macro data, and movement of rupee and crude prices. For the week ahead, chartists predict trading range of 33,475-34,500 and 10,325-10,675 for the indices.
Stock Scan
- K.C.P. Sugar and Industries is likely to be the prime beneficiary from the closure of another company Delta Sugars gaining access to the cane command area of the closed mill and is expected to gain significantly in the current crushing season. It has two sugar factories located in Krishna district of AP having an aggregate crushing capacity of 11,500 tons per day. Led by Vinod R. Sethi, ex-country head of Morgan Stanley, the company is reportedly contemplating a acquisition to consolidate its position. Additional crushing this year will translate into sweet profits for the company in next two quarters. Buy on declines for target price of Rs 60 in coming months.
- Amrutanjan Health Care is engaged in manufacturing Ayurvedic Pain Balms and Beverages. It specialises in Ayurvedic balm for headaches, cold and cough. The company’s segments include OTC products, beverages, chemicals and others. Successful entry into new segments like the women’s hygiene (sanitary napkin) and fruit based non-carbonated beverage markets during the past 3 years has transformed the company into achieving double digit growth. Buy on declines for medium term target of Rs 1,100.
- Greaves Cotton is a diversified engineering company that is a leading manufacturer and marketer of diesel engines, petrol engines, generator sets, pump sets and construction equipment. The company mainly manufactures diesel engines for three wheeled passenger vehicles, three-wheeled goods vehicles and four-wheeled mini trucks. It has manufacturing facilities in the states of Maharashtra and Tamil Nadu. Buy for medium term target of Rs 200.
Futures & Options
Despite the initial hyper volatility on the assembly elections results day, derivative segment witnessed exuberant trading during the week ended. Highest Open Interest (OI) for Nifty in the current series is placed at 1,0500-strike call option and 10,000-strike put option, while for Bank Nifty the highest OI is placed at 26,000-strike call option and 25,000-strike put option. Further short covering could propel the ongoing rally towards 10,600 levels.
The trend of Nifty is positive and more upside could be expected. Important target is around 10,650, which could be achieved in the next two weeks. However, due to year end, there is possibility of consolidation with range bound action. Tech, Metals, Auto, FMCG and PSU banks stocks were in forefront. Renewed buying was seen in tech counters.
Sources indicate that funds which were underweight in the sector are slowly doing fresh purchases. Use declines to buy TCS, Infosys and Wipro. Higher crude prices have led to shift of focus to exploration firms from OMCs. Further gains are likely in ONGC and Oil India. Ahead of December sales numbers, auto stocks were on fast track on reports of negligible impact of GST. Stay invested in Maruti, M&M and Hero Motocorp.
Restrictions on BoI and UBI due to a sharp rise in NPAs and erosion in capital by the RBI exhibits “no nonsense” attitude to resolve the problem. There is urgent need to allay fears over FRDI Bill and GOI to come out with further steps in the ongoing session towards resolution of NPAs feel players. Buy ICICI Bank, Axis Bank and PNB.
