Markets to look to Q3 earnings for trends

Buoyed by positive global cues like US jobs data and domestic developments like approval of recapitalisation bonds to strengthen banks, the first week of 2018 saw the Sensex and the Nifty close at their lifetime highs. Sensex and Nifty ended 97 points and 28 points higher at 34,154 and 10,558 during the week ended.

Renewed buying from FPIs kept the sentiment positive. The broader markets too were in exuberant mode with the BSE mid-and small-cap indices rising 0.69 per cent and 0.97 per cent.

Expectations from Budget, which will be presented in the Parliament on February 1, may keep market volatile with stock specific action in the coming couple of weeks.

Marketmen are wary of a populist Budget since this will be the last “full” Budget of the government ahead of next elections.

Fundamental solid policy changes matter a lot to the direction of the economy and inflation and are therefore important for the markets.

Crude oil prices crossed $68 a barrel level for the first time since May 2015 making it the key risk for country like India which imports more than 80 per cent of oil requirement.

Observers feel that the crude can touch $70 and beyond that the risk will increase in terms of widening fiscal deficit.

Near term direction of markets will be dictated by Q3 earnings, crude oil prices, expectations over Budget, macroeconomic data and global cues.

For the week ahead, chartists predict trading range of 33,650 - 34,575 and 10,390-10,725 for the benchmark indices. Support for the indices evident at 33,850 & 33,650 and 10,475 & 10,400.

Stock Scan
Jindal Drilling & Industries is engaged in providing services to entities involved in exploration of oil and gas. The company is engaged in providing drilling and related services. It offers various services, such as offshore drilling, directional/horizontal drilling, measurement while drilling (MWD) services and mud logging services. The performance of the company has also been significantly driven by the directional drilling and is expected to perform on a larger scale in this segment. Buy on declines for target price of Rs 375.

Kesar Petroproducts was established in 2010 (incorporating the business of Shreyas Intermediates). The company is among leading Indian manufacturers of Phthalocyanine Blue Crude and downstream products and accounts for 8 per cent of the global CPC Blue Crude (and downstream products) market. With the considerably larger dyes market de-growing, prospects for pigment market are compelling as it accounts for a mere 2 per cent of the overall colours market presently. The traction is reflected in the numbers: even as the market for pigments is growing annually indicating a vast operating leverage that can keep the company growing sustainably for years to come. Buy for target price of Rs 125.

Anant Raj is a real estate firm. It is engaged in the business of construction and real estate development. The company is involved in real estate activities with own or leased property. It is also engaged in development and construction of IT parks, hospitality projects, SEZs, office complexes, malls and residential projects in Delhi, Haryana, Rajasthan and the NCR. Buy for target price of Rs 150.

Futures & Options
Market undertone remained bullish in the derivative segment with renewed FII buying and short covering. The derivative data suggests further gains in near term.

In the option segment, heavy put writing was witnessed in 10,400 and 10,500 strikes, which would act as the main support for Nifty futures in the coming week. Highest O.I. for Nifty is placed at 11,000 call option and 10,400 put option. The upper range 10,550-60 level is placed at the verge of upside breakout. But if the upside momentum is not picking up with volumes, the danger of beginning of downward correction from the highs is not ruled out say techies. The short-term trend of Nifty is positive amidst range-bound action.

Ahead of Q3 results, renewed buying was seen in IT sector. Watch out for the commentary from managements over the visibility of earnings and key monitorables. Use corrections to buy Infosys, Wipro and TCS.

On the back of expansion of manufacturing activity at the fastest pace in 5 years in the month of December, good momentum in core sector growth and monthly auto sales numbers signaling revival in the economy; cyclicals like Metals and Capital Goods were back in demand. Buy on declines Tata Steel, Hindalco and Vedanta. Visible buying was seen in L&T, BHEL and Reliance Naval. Stay invested in capital goods counters for strong unexpected gains. Impact of crude prices was seen on OMCs. Mild weakness in HPCL, BPCL and IOC not ruled out. Expect ONGC and GAIL to log gains.

Stocks looking good are Adani Ports, Bharat Financial, BHEL, HCC, Hexaware, IDBI, NIIT Tech, RNaval, Tata Chemicals, Titan Inds and TechM.