Investors need to be cautious over short-term trading

Renewed confidence from the positive global cues, accelerated vaccination program, opening up of economy, optimism over the prospect of additional fiscal stimulus and positive macroeconomic data; helped markets race higher during the week ended June 27, 2021.

The Sensex was up 226.04 points, or 0.43 percent at 52,925.04 points, and the NSE Nifty was up 70 points, or 0.44 percent, at 15860.40 points. Broader markets moved in tandem with benchmark indices. FIIs sold equities worth Rs2,685.9 crore, while domestic institutional investors (DIIs) bought equities worth Rs 4,729.17 crore last week.

So far in June, FIIs bought equities worth Rs 3,162.86 and DIIs bought equities worth Rs 2,436.20 crore. The back-and-forth in markets over the past two weeks suggests there is still lingering uncertainty over the path of interest rates, inflation and monetary policy.

Sceptics warn that the lead indicators like the breadth, or the internal strength of the market are weak. Caution should be buzz word from hereon. The market can become greedy or fearful in the short term resulting in mispricing.

NALCO, Graphite India, NBCC, Vodafone Idea, Rail Vikas Nigam, GMDC and Hindustan Aeronautics are among the companies which are going to announce their quarterly earnings in the next week.

Quote of the week

Courage taught me no matter how bad a crisis gets ... any sound investment will eventually pay off;

— Carlos Slim Helu

Don't despair amid the inevitable setbacks that all investors face, especially during a crisis in the market. If the reasoning behind the investment was sound, stick with it, and it should eventually turn around.

F&O / SECTOR WATCH

Settlement week witnessed brisk trading in the derivatives segment. Nifty saw rollovers at 84.61 per cent as against the three-month average of 76 per cent and Bank Nifty witnessed rollovers at 83.88 per cent over the three-month average of 76.4 per cent. Stock futures have seen a rollover of 89 per cent to the July series as against the last three series average rollover of 87 per cent.

Amidst some bouts of profit booking, a move past the 15850-15900 zone may propel the Nifty to 16400-16500 level. Use any corrections towards 15600 level to accumulate long positions with stop loss of 15400. In percentage terms, Bank Nifty has seen a higher rollover of 84 per cent as against last three series average rollover of 78 per cent.

For any sustainable up move, the Bank Nifty will have to cross 36,000 level. Surprise rally of 1,500 points in the Bank Nifty in the week ahead is not ruled out say punters. Sectorally, buying was seen in capital goods (up 4.06%), metals (up 3.5%), and IT (up 3.1%), while selling pressure was seen in oil (down 2.1%), utilities (down 0.7%), and FMCG (down 0.2%) during the week ended.

Stay overweight in the sector. With sector rotation playing out in the market Infrastructure, Construction and Capital goods look good for strong medium term gains. Heightened activity indicated in the fore new entrants to F&O-Metropolis, Coromandel, ABFRL and Indian Hotels.

Stock futures looking good are Axis Bank, ICICI Bank, GMR Infra, SAIL, SBI, Tata Steel and Zee Entertainment. Stock futures looking weak are Aarti Inds, Idea, APL Ltd, ONGC, Tata Chemicals and Voltas.

(The author is a stock market expert. He is former vice chairman of AP Planning Board)

STOCK PICKS

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Buy between Rs155-165 for medium term target of Rs250 (in 6 months) and long term target of Rs300-25 (9 to 14 months). Short term players can keep stop loss closer to Rs140. Risk / Reward ratio is 1:5.