Market Khabar: Q2 results, IIP data to dictate direction

On the back of two major announcements by the government — to recapitalise banks and one of the largest highways construction project named as “Bharatmala Project”, renewed buying from FIIs and positive global cues; markets closed near their life time highs during the week ended. Benchmark indices Sensex and Nifty rallied sharply by 767 points  and 176 points to close at 33,157 and 10,323 respectively. 

The broader market, represented by NSE mid- and small-cap indices, outperformed the benchmark indices and closed higher by 3.00 per cent and 3.7 per cent. Renewed buying from FIIs infused positive sentiment. Observers feel that recapitalisation of banks is more of a quick fix solution and doesn’t actually solve the problem. 

Consolidation in PSU banks, autonomy of management, and upgradation of tech are need of the hour. It is pertinent to notice that the recap plan is cash neutral and is not expected to affect the fiscal deficit. Global brokerages are labeling it as India’s TARP — a reference to the US Troubled Asset Relief Program implemented in the throes of the financial crisis. 

Near-term trend will be influenced by Q2 results from heavyweights like Tata Steel, HDFC, Hindalco, Bharti Airtel, Hindalco, etc. Direction will also be dictated by liquidity shift to IPO market, macro economic data like IIP numbers, US Fed meet and global cues. For the week ahead, chartists predict trading range of 32,750-33,750 and 10,175-10,485 for the benchmark indices. Support is evident at 32,925 & 32,700 and 10,250 & 10,175. 

Stock Scan

• Pitti Laminations is one of the largest global manufacturers of special purpose laminations for all types of rotating electrical machinery and the country’s largest manufacturer of Electrical Steel Laminations, Motor Cores, Sub-Assemblies, Die-Cast Rotors and Press Tools.  The products have application in industrial motors, alternators, hydro-electric and thermal power generators, wind power generators, DC machines, pumps, medical diagnostic equipment and aeronautic wing control motors.  Buy for medium term target price of Rs 150.
•  Globus Spirits is an India-based alcoholic beverages company. The Company is engaged in manufacturing, marketing and sale of Indian Made Indian Liquor (IMIL), Indian Made Foreign Liquor (IMFL), Bulk Alcohol and contract bottling for established IMFL brands. Buy for target price of Rs175. 
• Pincon Spirit (PSL) is an India-based liquor company.The Company is engaged wholesale of intoxications likes wines and liquors; refining and packaging of edible oils (FMCG), and blending and bottling of IMFL and IMIL. The Edible oils business segment is engaged in the manufacture of edible oils and the Company owns a refining and packaging unit. Buy on declines for target price of Rs 110.
•  Grindwell Norton is a holding company, which manufactures abrasives. The company’s segments include Abrasives, and Ceramics & Plastics. Its Abrasives segment offers bonded abrasives in the form of wheels and other shapes, such as segment and sticks, which are used for various applications ranging from polishing or lapping to removing high quantities of materials. Buy on declines for target price of Rs 750.

Futures & Options

Derivative segment witnessed brisk stock or sector specific trading during the week ended. Mirroring the bullish undertone rollovers of Nifty/Bank Nifty stood at 73 per cent/69 per cent as against 70 per cent/65 per cent. Rollovers for Nifty were higher in terms of percentage as well as total open interest in comparison with last month and last three-month average. Momentum can carry Nifty upto the immediate resistance level of 10,500 say punters. 

On the options front, November series starts with the maximum open interest in put options at 10,000 strike and maximum open interest in call option at 10,500 strike. On the back of the announcement to recapitalise PSU banks, Bank Nifty witnessed a mega rally during the week ended. Bank Nifty currently faces strong resistance at 25,000.  PSU banks were the flavor of the week with many surging over 30 per cent. PNB, Canara Bank, and SBI, touched fresh 52-week highs. 

Observers feel following the move the assumption that private banks can keep gaining market share from public lenders is “no longer as strong as it was earlier”. Use declines to accumulate PSU banks. ICICI Bank and Axis Bank will benefit from the eventual clearing of nonperforming loans in the financial system. Buy on declines. 

Infosys’ results were in line with expectations. The company will buy back 11.3 crore shares or 4.92 per cent of equity capital at Rs 1,150 a piece. It will be spending Rs 13,000 crore for the same. Stay invested in the stock for present.  The infra sector received much needed boost with the announcement of Bharatmala. Stay invested in low-debt infrastructure companies.