Q3 results, Budget buzz to dictate market

Buoyed by continuous foreign fund inflows, optimism about Q3 results, expectations over upcoming Budget and positive global cues, markets closed with decent gains for second consecutive week in a row.

Both Sensex and Nifty concluded the week at record high closing levels. Sensex rose 438.54 points or 1.28 per cent to settle at 34,592.39, while Nifty rose 122.40 points or 1.16 per cent to settle at 10,681.25.

Centre’s move to attract foreign capital and revive economic growth by simplifying FDI norms in key sectors  and allowing foreign firms to invest upto 100 per cent through the automatic route in single brand retail kept the sentiment positive.

Clearance to foreign carriers to buy up to 49 per cent in Air India has set road map for disinvestment, say observers.

The compulsions of giving a rural bias in Budget and method that will be adopted for raising the resources needed in the GST regime is what the market is worried about.

Retail inflation accelerated more than estimated to a 17-month high and little respite is seen in the coming months amid a surge in oil prices. Though most economists predict no change in rates in the RBI’s policy review on Feb. 7, surprise rate increase is not ruled out .

Near term direction will be dictated by Q3 earnings, crude prices, expectations over Budget, the movement of rupee, macro data and global cues. Expectations from Budget may keep market volatile with stock specific action.

For the week ahead, chartists predict trading range of 34,100-35,050 and 10,515-10,825 for the benchmark indices. Support evident at 34,300 & 34,050 and 10,500 & 10,425.

Stock Scan
Borosil Glass Works  manufactures scientific ware items and consumer ware items. The Company's segments include Scientificware, Consumerware, Flat Glass and Others. Its brand includes Borosil. The company is merging three group firms Hopewell, Fennel Investment and Vyline Glass with itself for more synergy. Buy on declines for target price of `1500.
Group company Gujarat Borosil is engaged in manufacturing flat glass. It is involved in manufacturing solar glass tempered or annealed glass, and patterned (figured) glass. The Company is engaged in low iron solar glass production for application in solar power sector. The company’s manufacturing facility is located at Govali, Bharuch district, Gujarat. Buy for target price of `225.

Vishnu Chemicals is in the business of manufacturing, marketing and the export of chromium chemicals and other specialty chemicals. Its principal product/services include Basic Chromium Sulphate and Sodium Bichromate. Its manufacturing plants are located in TS, AP and Chhattisgarh. Restructuring and improvement prices to translate into good results in coming quarters, say observers. Heightened interest is expected to propel the stock towards `650 in next few months.

Talwalkars Better Value Fitness is engaged in the health and fitness services, and gymming business. Its fitness centers operate under four formats, including Talwalkars, which offers personal training, and steam and massage; Power World Gyms (PWG); Healthy India Fit India (HiFi), which offers functional format gyms, and Zorba, the yoga studios. Buy for target price of `500 in medium term.

Futures & Options
Mirroring the cash market, the derivative segment too saw brisk trading. Nifty futures, which managed to close at fresh highs for the fourth consecutive week, ended the week at 10,684, up 1.05 per cent.  Bank Nifty futures relatively underperformed, ending the week 0.38 per cent higher at 25,733.

Among Nifty Call options, the 11,000 strike call has the highest open interest, while in put options 10,500 strike hold the maximum open interest.

On the technical front, 10,580-10,600 spot levels is strong support zone and current trend is likely to continue towards 10,750-10,800. Data indicates bullish scenario to continue with Nifty having multiple strong supports at lower levels. Any decline towards the 10,575 mark should be an opportunity to re-enter, which is also the important near term support for Nifty.

Expect heightened action in financials on the back of IDFC Bank announcement of its merger with NBFC Capital First. The Q3 earnings of banks will be major cues for the sector. Federal Bank, YES Bank, HDFC Bank, Kotak Mahindra Bank and IDFC Bank are scheduled to report their results in the coming week.

After the results of TCS, marketmen do not expect any surprises. IT stocks are expected to trade in a thin range with a negative bias in the coming week.

It is pertinent to observe that the Nifty Metal index ended higher on a weekly basis for the sixth week in a row.  On expectations of shining Q3 earnings, metal and mining firms are likely to remain positive. Buy on declines Tata Steel, JSPL, Hind Zinc, JSW Steel and Vedanta.

After months of underperformance, pharma firms are beginning to look good. Buy Aurobindo, Divi Labs and DRL.

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.