Macro data, US Fed meet to guide markets

Enthused by good Q4 results, positive global cues and strong inflows from DIIs, the markets surged higher extending their winning streak to fifth straight week to close at 2-month high during the week ended.

Sensex closed at 34,970, up by 554 points or 1.61 per cent, while Nifty closed at 10,692, up by 128 points or 1.21 per cent.

Caution was the watchword in the broader market. Underperforming the benchmarks, the mid- and the small-cap indices inched by 0.7 per cent and 0.3 per cent to close at 16,917 and 18,240 respectively.  

Events like rising crude prices and pre-poll predictions on Karnataka elections outcome will trigger sharp volatility in market.

Rising crude prices spell triple-whammy setback for the country with rising inflation, widening current account deficit and risk of weaker rupee resulting a wider trade deficit, a worsening of stretched government finances, and slower economic growth.

Bubbly oil prices risk reversing the improving economic fundamental ‘sweet spot’ experienced during 2014-16 by the country. The surge in oil prices couldn’t have come at a worse time for the country and poses challenge for policy makers trying to strengthen the economy in time for general elections next year, say analysts.

Near term trend will be dictated by US Fed meet, macro economic data, Q4 results, FII and DII activity, the movement of rupee against the dollar and crude oil price movement.

For the week ahead, chartists predict trading range of 34,500-35,500 and 10,570-10,725 for the benchmark indices.

Stock Scan
Parag Milk Foods is engaged in manufacturing and processing of milk and milk products with one of the largest and most varied product portfolio in the dairy-based foods segment. The company’s brands include Gowardhan, Go, Pride of Cows and Topp Up. It has an aggregate milk processing capacity of approximately two million liters per day. The company has a product basket comprising over 150 stock keeping units (SKUs). Its manufacturing facilities are located in Manchar (Pune district) and Palamaner (Chittoor district). Buy on declines for target price of Rs 475.

Elpro International is engaged in the manufacturing of electrical industrial machinery, apparatus and parts, and construction of residential and non-residential buildings, including additions and alterations. The company is also engaged in the manufacturing of other electrical equipment. The products are used in a range of applications by industries, such as power generation and distribution, railways, telecommunication, solar energy and wind energy. The company’s manufacturing plant is located at Chinchwad, Pune, Maharashtra. Buy for medium term target price of Rs 80.

Triveni Engineering and Industries is engaged in the manufacturing of sugar. The company’s segments include sugar, engineering and others. It manufactures white crystal sugar and has approximately 7 manufacturing plants in UP. It is one of the largest integrated sugar players in India, with seven sugar mills strategically located across the western, central and eastern parts of the sugarcane rich areas of UP. It has installed capacity of 68-megawatt. Buy for target price of Rs 75.

Futures & Options
Settlement week witnessed brisk trading in the derivative segment. Rollovers for Nifty were higher in terms of total open interest as well as the number of shares vis-a-vis last month and the last three month average, indicating a continued upward bias for the Nifty.

On the options front, May series starts with the maximum open interest in put options at 10,500 strike and maximum open interest in call options at 11,000 strike. On the technical front 10,600-10,620 spot levels is strong support zone and the trend will face resistance near 10,800-10,850 levels. Nifty range of 10,500-11,000 levels is predicted for the near future. A close above 25,430 levels may propel Bank Nifty Futures beyond 26,000 level in very few sessions. Holding long positions with strict stop loss and regular profit booking would be a prudent strategy for the next couple of weeks.

Banking sector made a comeback under the aegis of private sector banks. Bank Nifty gained 451 points or 1.81 per cent during the week ended. Yes Bank, Axis Bank and InduSind Bank notched up gains. Buy Andhra Bank, Karnataka Bank and OBC for short term.

Maruti results were slightly below expectations. The coming week will see automobile majors declaring their sales data for April. Reports suggest that tractor and three-wheeler sales are extremely good on the back of good monsoon and improved rural sentiment.

Crude prices remain buoyant, underpinned by expectation that Opec will stick with its production cuts despite sharp decline in inventories.

Stocks looking good are Apollo Tyres, Amara Raja Batteries, Berger Paints, Cadila Health, Equitas, Hind Zinc, Jindal Steel.

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.