At his Prime, Big Bull Harshad Mehta did not have to actually buy a stock to send its price shooting.....he merely had to enquire about its price. The newly-elected UPA government seems to be wielding a similar power over the markets.
The mere mention of proposed economic reforms is enough to send delirious bulls rushing to load up on shares almost certain that a new bull market is underway.
The July settlement opened on Thursday with very low carryover and muted sentiment. Matters improved marginally on Friday but it looks as though July will see net losses.
For the week ahead, chartists predict trading range of 14,200-15,400 for the Sensex and 4,100-4,680 for the Nifty. Immediate supports for the indices are the ‘lows’ of Friday at 14,370 and 4,240. Below these levels, sharp decline to 13,800 and 4,050 is not ruled out.
Expect resistance to the indices at 14,960 and 15,280 for the Sensex and 4,460 and 4,580 for the Nifty. It is the time to get out of all the risky stocks and hold quality stocks; In the event of market reversal after the Budget, it becomes difficult to exit from speculative counters, warn savvy market players.
Capital goods, infrastructure and power stocks witnessed good buying interest. Further gains indicated in Punj Lloyd, IVRCL, Lanco Infra, NCC and HCC.
Speculative build up seen in ‘road’ stocks after positive statements from the roads and highways minister, Mr Kamal Nath. Buy Noida Toll and IRB Infra for target prices of Rs 60 and Rs 200 in next few weeks.
Real estate stocks are back in demand on reports of modest revival in housing sector. Buy DLF, Unitech and HDIL at current levels for short term targets of Rs 375, Rs 110 and Rs 290. After the announcement of Unique ID project, IT analysts are bullish on domestic e-governance opportunities.
Forecast of below normal monsoon, ‘fresh’ selling by FIIs and weak global economic reports have turned market players cautious ahead of the Union Budget.
With many Cabinet ministers making all the right noises, investors’ expectations are at sky high over the Union Budget. But remember that markets rise on hope and correct on news. In the absence of any negative global cues, market direction to be dictated by economic survey and Railway Budget in the coming week.
Selective buying suggested in the sector for good medium-term gains. Speculative build up in JP Associates, Suzlon, IFCI and Cairn may see stocks spike from current levels. Wild swings likely in Orchid Chemicals and Kingfisher counters say punters.
In the context of the next 10 sessions, the Budget is sufficient cause for ample caution because Budgets usually trigger higher than normal volatility. As things stand, the Nifty has been swinging about 150 points per session. It would be reasonable to expect at least some 200 point sessions in the next fortnight. Option premiums in the July series are higher than normal. They may drop slightly in the next week as the option chain gets populated but they are likely to remain on the higher side.
In the circumstances, option-selling remains a tempting but highly dangerous game. If you wish to sell, gambling on historical volatility being lower than implied volatility, stay at least 200 points away from the money.
Overall we advice members to be cautious and take longs with near stop loss.
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