RBI’s stance fails to dampen markets
Despite the disappointment of status quo decision on rate cut by RBI, the markets edged further during the week ended as it consolidated on the gains notched in recent weeks along with positive global cues.
Benchmark indices, the Sensex and the Nifty closed marginally higher to close the week at 28334 and 8794 respectively.
BSE Mid cap and Small cap indices continued to outperform frontline indices. It is pertinent to observe that while the frontline indices have gained around 7% in the current year till date, the midcap and smallcap indices have gained over 12%.
On the back of betterthan-expected earnings in the face of demonetisation and hopes of a global recovery suggested by US President Donald Trump, the RBI’s surprise decision to not cut rates and the change in its stance to neutral from accommodative failed to dampen the market’s spirits.
Expect sideways movement in the market as investors eagerly wait for the outcome of five state assembly elections.
Weak industrial output data may see the markets play out softly during the early part of the coming week.
For the week ahead, chartists predict a trading range of 27750-28850 and 8600-8925 for the benchmark indices.
Support for the indices evident at 28000 & 27750 and 8680 & 8590.
The market is most dangerous when it looks best; it is most inviting when it looks worst.
STOCK SCAN
Orient Refractories is engaged in manufacturing refractories and monolithics items, and trading of refractory items. The company is a globally operating supplier of refractory products, systems and services for steel industries. It manufactures a range of slide gate plate refractories for various international systems. It caters to over 500 customers in India and across the world. Buy on declines for target price of `225.
Shreyans Industries is engaged in the manufacturing of writing and printing paper. The company also has interest in textiles. The firm’s plants include Shreyans Papers and Shree Rishabh Papers. The company’s combined capacity for the manufacture of writing and printing paper is approximately 85,000 metric tons per annum. Recent hike in prices and expected improvement in outlook for the industry spells good times for the company in next few quarters. Buy for target price of `200.
Apar Industries is engaged in the business of manufacture of conductors, transformer/specialty oils and power/telecom cables. The firm’s specialty Oil business has a range of products such as transformer oils, white oils and liquid paraffin’s, industrial/automotive oils and process oils. Buy on declines for target price of `1250.
Prime Focus is a media and entertainment industry services company. The company provides end-to-end creative services, technology products and services, production services, and post production services. It has seven offices in India and another seven offices globally. Buy for target price of `150.
FUTURES & OPTIONS
On the back of consolid tion mood in the cash market, the derivative segment witnessed mild fall in trading volumes.
Sentiment indicators open interest, implied volatility, put/call ratio and VIX suggest modest correction in next few weeks. Highest open interest in the option segment was seen at 9000 strike call option and 8600 strike put option. Sector rotation and stock specific moves are predicted. Renewed buying interest was seen in technology, capital goods and realty sectors.
Reports of lower than expected damage from US’ moves on immigration front triggered bargain buying in the frontline IT stocks.
Rumors of differences in the Infosys management over compensation package to CEO may cast shadow on the stock price.
Cement stocks witnessed good buying interest on expectations of boost to infrastructure sector. Buy ACC, Grasim and India Cements. Other stocks looking good are Bharat Forge, Voltas, Crompton Greaves, SRF, Granules, Marico, Siemens and Grasim. TRADING MANTRA: Institutions watch the 50day and 200-day moving averages on daily charts. There’s good reason for traders to keep those MAs on their daily charts.
When a market mover such as Sensex or Nifty component retraces to 50day MA and then begins to bounce on strong volume, institutions might be nibbling on the stock. If the set up meets the trading criteria of the trader, he may choose to join them for party.