F&O settlement, Q3 nos to guide markets

Shrugging away the rising crude prices, the markets fuelled by better than expected Q3 numbers, announcement of a reduction in extra borrowing, fresh cut in GST rates, rumour of allowing 100 per cent FDI in the banking sector, favorable global cues hit new highs.

Benchmark indices Sensex and Nifty closed 919 points and 213 points higher at 35,512 and 10,895 respectively.

Bank Nifty vaulted by 1,160 points to 26,910.

Underperforming the benchmark indices, both the BSE mid- and smallcap indices closed lower by 2.1 per cent and 2.7 per cent respectively.

Cut in GST rates on 29 goods and 54 services ahead of the Budget kept the sentiment positive.

With market players anticipating a sea change in the earnings trend starting from Q3 results, stocks specific action may continue ahead of Budget.

Economic data like WPI, IIP and PMI are also suggesting improvement in pricing and volume growth.

With Prime Minister Narendra Modi delivering the opening speech at the World Economic Forum Summit in Davos, observers expect heightened interest on India from foreign portfolio investors.

Near term trend will be dictated by F&O settlement, investment pattern of FIIs, international crude oil prices and global cues. Track developments of US shutdown. Prolonged imbroglio may cast shadow on global markets.

For the week ahead, chartists predict trading range of 35,500-36,000 and 10,750-11,025 for the indices.

Key supports for the indices are at 35,250 & 35,000 and 10,825 & 10,750.

Stock Scan

• Chemicals manufacturer Mangalam Organics is engaged in the manufacturing and selling of Camphor, Sodium Acetate and by-products, Terpene Chemicals, Synthetic Resins and Phenol formaldehyde resins. It offers camphor tablets under the brand name mangalam. After the fire in the synthetic resin segment during June 2015, production was stopped, however it  has been able to selectively restart the production of few high margin synthetic resins in the last two years. The Company exports its products to Europe, the US, Africa and the Middle East. The company’s manufacturing units are located at Kumbhivali village, Taluka Kahalapur, Khopoli, district Raigad, Maharashtra. Buy on declines for target price of '325.
• HealthCare Global Enterprises is engaged in managing cancer hospitals, cancer centers and medical diagnostic services, including scientific testing and consultancy services in the pharma and medical sector. Headquartered in Bangalore, it is the largest provider of cancer care in India and has pioneered the introduction and adoption of several technologies in the country. It is involved retail sale of pharmaceuticals, medical and orthopedic goods and toilet articles. Buy for medium term target of '450.
• Wonderla Holidays belonging to V Guard group is engaged in the business of amusement parks and resorts. The company’s segments include Amusement park, Resort and Others. The Company operates approximately three amusement parks in Kochi, Bangalore and Hyderabad under the brand name Wonderla. It has acquired land in Chennai. Buy for medium term target of '625.

Futures & Options
Ahead of the settlement week, derivative segment witnessed brisk trading and Nifty Futures managed to close at record highs for the fifth consecutive week.

Sentiment indicators like implied volatility, open interest, put/call ratio and VIX suggest only gains and consolidation from current levels. In the options segment highest open interest for Nifty in the current series is placed at 11,000 call option and 10,500 put option.

Bank Nifty has the highest open interest placed at 27,000 call option and 26,500 put option. Decisive move above 10,800 level could open up the next upside target of around 11,000/11,150 levels for Nifty, which could be achieved in the next 1-2 weeks.

Banks were the flavor of the week. Led by ICICI Bank, private banks like Axis Bank, HDFC Bank and Kotak Bank logged good gains. PSUs were laggards but are expected to move up in the next leg of rally of bank stocks. Buy SBI, BoB and PNB.

Results from HUL reflect the health of FMCG sector. Buy on declines HUL, Godrej Consumer, Dabur and Marico.

True to predictions, tech stocks are back in demand. Use corrections to buy Infosys and TCS. Below par results from Wipro were a dampener.

Q3 earnings of auto firms are expected to be strong due to low base. Buy Maruti Suzuki and Hero Motocorp.

RIL’s results were better than expectations. Market players expect positive response on Monday. Target of '1,150 is not ruled out.

Other stocks looking good are Coal India, Container Corp, Canara Bank, DHFL, ICICI Prudential, Jubilant Food, Kotak Mahindra Bank and NIIT Tech.

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.