Mimicking the high volatility in global markets and caught in the bear grip, Indian markets witnessed another week of manic trading.
After recording the second biggest single day decline, the Sensex on BSE made a feeble recovery to close the week with 4.9 per cent loss at 14,995 and the Nifty on the NSE shed 3.6 per cent to end at 4574. The steep fall in the BSE Smallcap index by 11 per cent and the CNX Midcap by 8.5 per cent clearly reflect the panic and dilemma of retail investors.
Volumes continued to be dismal on low trading interest. Negative news flow like selling of Bear Stearns portfolio and impact of derivatives and FCCB exposure losses to some corporates turned markets jittery. Fears of more bad news from US and rise in inflation index kept the markets in nervous mode.
The US Federal Reserve's rate cut, falling commodity prices and good corporate advance tax numbers failed to enthuse traders. With strong inflation numbers dampening expectations of a rate cut by RBI in near term, only robust fourth quarter results may trigger stock-specific buying in coming days. Many stocks in B group are available at below five P/E levels at mouth watering valuations.
Start bottom fishing advice savvy market players. For the week ahead chartists predict a trading band in the range of 14,400 to 15,800 for the Sensex and for the Nifty a range of 4,200 to 4,960. Expect stiff resistance to the indices on upside at 15,400 and 4,750 levels. Support is evident at 14750 and 4450 levels for BSE and NSE respectively.
Initiate fresh positions if indices trade steadily with improvement in volumes above 15,400 and 4,800 levels. Aggressive short selling is not suggested at present levels.
Never assume a market fact based on what you read or what others say; verify everything yourself. Fundamentals are not bullish or bearish in a vacuum; they are bullish or bearish only relative to price.
F&O segment E xpectedly volumes continued to be on the lower side due to high volatility and uncertain environment. With overnight global trends determining market openings (either gap up or gap down), keeping an open position is like buying a single day lottery ticket. Rollover of shorts in index futures is evident from Nifty April futures trading at deep discount of 22 points to spot.
Volume selling below 4,490 may see Nifty futures slide to 4,350. Move above 4,850 may propel it to 5,100 level. Ahead of settlement week sentiment indicators like implied volatility, put/call ratio and open interest indicate another bout of volatility.
Moderate rollover of open interest positions was seen ahead of settlement week due to long weekend.
Volumes may show strong improvement in the coming week. Nearly all the sectors witnessed savage selling. Realty, banking, metals and power counters witnessed unwinding of positions. Nibbling was seen at some IT and auto counters on the last trading day. Further upside indicated in Tata Motors, Mahindra & Mahindra, Satyam Computers and Wipro. Banking stocks are at crucial support levels.
Modest bounce back from current levels is not ruled out. Buying suggested in small quantities in both PSU and private banks. Defensive buying was seen in select FMCG stocks.
Stay invested in Hind Unilever, Colgate and ITC. Beaten down by news flow Orchid, S Kumar, Purvankara, IFCI, Wockhardt and Idea Cellular look good short term bets at lower levels.
Among the side counters, Indian Hotels, Sesa Goa, IRB Infra, JP Hydro and Tulip IT look good for some gains from current levels. Never buy or sell merely on the basis of background statistics. Technical market considerations and psychology must also be taken into account.
The recent meltdown has relegated the stocks of once high-flying sectors to market's scrap yard. The time to make money in the stock market is not when everything looks gung-ho, but when things look as if they are going bust. Many midcap and smallcap companies have already lost fifty to over seventy five per cent of their value. While it is agreed that just because these stocks or sectors are down does not mean that they will not fall further, there are bargains which may turn out to be multibaggers. Sift through the salvage yard, separate the gems from the scrap yard. If you wait too long to buy, until every uncertainty is removed and every doubt is lifted at the bottom of a market cycle, you may keep on waiting and waiting. ¦ Maytas Infra, Solar Explosives, Bilcare, Spanco Tele and Sagar Cements are witnessing buying interest from savvy players. Belonging to the kin of Satyam's promoters Maytas Infra is aggressively moving in all segments of infrastructure like ports, airports, housing etc. Stay invested and accumulate on declines for good medium term returns. Solar Explosives is the second largest explosives and explosive initiating devices manufacturer. With the user industries mining and infrastructure undergoing tremendous expansion the company is poised to report excellent topline growth. Buy on declines. Many south-based cement companies are on the radar of foreign majors for tie ups or mergers. Unlisted My Home got good valuation for its cement division. Positive news is on cards in Sagar Cements. Stay invested for further gains. Pharma packaging major Bilcare and RADAG owned Spanco Tele are witnessing good buying at lower levels. Buy for medium term.
