Markets to look at global cues for direction

The markets, which closed on a weak note during the week ended, was spooked by negative news on both domestic and global front.

The Sensex and the Nifty ended 131 points and 32 points lower at 33,176 and 10,195 respectively. However, mild buying interest in the broader market saw BSE mid- and small-cap indices close 1.4 per cent and 1.6 per cent higher.

Shades of political instability by 2019 cast shadow on the markets after TDP decided to exit NDA.

Widening current account deficit on the back of a rising trade gap has become a cause of concern. According to the government data, trade deficit expanded to nearly $43 billion in the October-December period from $32 billion in the July-September period. The wider trade deficit was partially on account of higher crude oil prices.

FII selling and portfolio outflows have resulted in rupee becoming the second-worst Asian currency so far this year.

Near term market direction will be dictated by political stability cues in terms of no confidence motion in the Parliament for the ruling party, news flow on monsoon, US Fed meeting, primary market (IPOs), macro economic data, international crude oil prices and global cues.

For the week ahead, chartists predict trading range of 32,600-33,600 and 10,050-10,350 for the benchmark indices. Support for the indices evident at 32,850 & 32,600 and 10,110 & 10,030.

Nifty is precariously poised above the 200-DMA of 10,100; breach of this level and multiple closings below this level may pull down Nifty to as low as 9,200-9,300 levels in next few weeks itself, warn techies.

Stock Scan
Tejas Networks is a provider of carrier grade communications equipment and solutions for telecom industry. The company is a supplier of optical networking equipment to telecom carriers across the world. It is ranked amongst top-10 suppliers in the global optical aggregation segment.  Its technology facilitates various applications, such as video calls and mobile television. Tejas procured order for installation, commissioning and maintenance of GPON equipment for a national fiber optic network project. Buy on declines for target price of Rs 500.

EIH Ltd, under the aegis of The Oberoi Group, operates hotels and cruisers in five countries under the luxury ‘Oberoi’ and five-star ‘Trident’ brands. The group is also engaged in flight catering, airport restaurants, travel and tour services, car rentals, project management and corporate air charters. Oberoi Hotels & Resorts is synonymous the world over with providing the right blend of service, luxury and quiet efficiency. The group’s commitment to excellence, attention to detail and personalized service has ensured a loyal list of guests and accolades in the worldwide hospitality industry. Buy for medium term target of Rs 325.

GMM Pfaudler manufactures glass-lined equipment, storage vessels and alloy steel equipment and is a leading supplier of engineered equipment and systems for critical applications in the global chemical and pharmaceutical markets.  Pfaudler Inc., USA the world leader in Glass Lined equipment holds 51% stake. In 2015, Deutsche Beteiligungs AG a leading German private equity company acquired Pfaudler Inc., USA. Buy for medium term target of Rs 1,200.

Futures & Options
Amidst heavy volatility, the derivative segment witnessed brisk trading. Sentiment indicators like open interest, implied volatility, VIX and put/call ratio suggest further fall from current levels in near term.

On the options front, the maximum open interest in put options is at 10,000 strike and maximum open interest in call option is at 10,400 strike. The near term trend of Nifty is clearly down.

It is pertinent to observe that for year-till-date, Nifty is already down by 3.4 per cent.

Pullback rallies will have short life and there is a possibility of further weakness down to the low of 10,000 mark, by next week. There is a minor possibility of upside bounce in Nifty, from near 10,000 mark, in coming weeks. Use relief rallies to reduce positions.

On the back of buying in select counters like BOB, Axis Bank and YES Bank, Bank Nifty futures ended the week 1.34 per cent higher. Signs of stability in the sector are on horizon. Buy PSU banks like Canara Bank, Syndicate Bank and BOB.

Barring TCS, technology counters witnessed renewed buying interest. Shares of TCS fell 6.5 per cent during the week after its promoter Tata Sons sold about 1.5 per cent stake in block deals. Use present weakness to buy frontline IT counters.

Defensive buying was seen in FMCG sector. Hind Unilever, Marico and Godrej Consumer look good for further gains.

Improvement in domestic demand to give fillip to metal counters, say watchers. Buy Tata Steel and Hind Zinc.

Short term rally indicated in cement stocks. Buy ACC and Ramco Cements. Reports of tax issues raised by CAG have triggered selling in RIL.

C. Kutumba Rao is an avid follower of stock markets. This newspaper is not liable for decisions made on the basis of this column. Views expressed in the article are personal views of the writer.