Markets await for Budget commentary

Supported by Q3 results, positive global cues, continued buying from DIIs and FIIs and macro factors, the markets recorded its longest winning streak since 2010 to close on positive note for eighth week in a row.

The Sensex rose 539 points to settle at 36,050, while Nifty rose 175 points to settle at 11,069.

However, the market breadth was positive in only one out of the four trading sessions of the week reflecting caution ahead of the Budget.

Note ban has given push for investments into the nation’s stock market. Key indices have gained about 45 per cent since the end of 2016, one of the best performances among more than 100 global indexes.

Old timers feel that it is creating a big funnel of money coming from domestic savers into a small pipe of stocks. Be cautious on the small and mid-cap sectors which have the risk of getting a little bubbly.

Rising discontent in rural areas may pressure Arun Jaitley to announce significant fiscal measures that could win back villagers.

Going by past track, governments that choose in their last full-budget to focus on urban issues have rarely met success at the ballot box. Expect the budget to mark a shift to issues relevant to farmers.

Analysts expect push for more farm insurance, expand cold storage and improve logistics from production to marketing.

FM’s statement that the country’s economic growth is not “justifiable and equitable” and that the agriculture sector will be the government’s top priority is a pointer for the contours of budget.

For the week ahead, chartists predict trading range of 35,550-36,600 and 10,875-11,250 for the benchmark indices. Support evident at 35,800 & 35,550 and 10,975 & 10,885.

Stock Scan
Gufic Biosciences is engaged in the manufacture of pharmaceuticals, medicinal chemicals and botanical products. It is a specialised manufacturer of lyophilized products, herbal formulations and infertility products. The company is one of the largest manufacturers of Lyophilized injections in India and has a fully automated lyophilization plant. Buy on declines for target price of `200.

India Glycols offers Mono Ethylene Glycol (MEG), Ethylene Oxide Derivatives (EODs) and Ethyl Alcohol. The company is engaged in the manufacture of technology-based bulk, specialty and performance chemicals, and natural gums, spirits, industrial gases, sugar and nutraceuticals. It offers products to agrochemicals and mining, among others. Buy for target price of `875 in next few months.

Johnson Controls-Hitachi Air Conditioning India Ltd, formerly Hitachi Home & Life Solutions (India) Ltd (HHLI) is engaged in the business of manufacturing, selling and trading of Hitachi brand of air conditioners (ACs), refrigerators, washing machines, air purifiers, chillers and variable refrigerant flow (VRF) systems. The company offers a range of split ACs consisting of over 80 models and tropical inverter technology products. It caters to various sectors, such as entertainment, education, residential, industrial and hospitals. Besides, regular air conditioning products, the company also has special product categories like Telecom which are developed to meet niche requirement of cooling for telecom products. The Company enjoys first-mover advantage in providing this unique cooling solution and is an industry leader in this segment. Buy for medium term target of `4,500.

Futures & Options
Ahead of the Budget week, derivative segment witnessed brisk trading and rollovers for Nifty and Bank Nifty were higher in terms of total open interest but the rollover cost was lower.

On the options front, the maximum open interest in put options is at 10,500 strike and maximum open interest in call option is at 11,500 strike.

Strong rollovers in Bank Nifty suggest continued upward momentum for the index upto its immediate resistance level of 28,000. It is important to recall that after the last Budget, it was followed by an excellent up trended move of around 2,300 points in Nifty in the span of 1 year.

Observation of important turnarounds in Nifty immediately after major events indicates Budget 2018 is expected to lead the market direction for next week and there is a higher probability of Nifty showing top reversal in the next 1-2 weeks. Chartists indicate 10,950-11,000 spot levels as strong support zone and current trend is likely to continue towards 11,200-11,250.

Apart from Budget, outcome of US Fed meet and trends in crude oil and dollar will dictate the near term direction of markets.

True to predictions tech stocks are witnessing buying. Further gains indicated in TCS, Infosys and HCL Tech.

Private banks continued to lead the rally in banking sector. Though the PSU banks are under a bit of pressure, the private sector banks are doing their bit to keep the bullish sentiment intact. Start accumulating SBI, PNB and BOB.

Renewed buying interest was seen in Pharma counters. Worst seems to be over for the sector, stay invested in Sun Pharma, Lupin and Cipla for further gains. Realty stocks are expected to be in focus on expectations of sops.

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.