Market may gain steam as Covid cases fall

On the back of the steady decline in daily Covid-19 infections, rising hope for another stimulus package to support the most affected sectors in the second wave of Covid, excellent Q4 earnings and positive global cues; the market had a historic week. After spending more than three months of consolidation, the benchmark indices ended at a record closing high with the BSE Sensex surging 882.40 points or 1.75 percent to 51,422.88, and the NSE Nifty rising 260.35 points or 1.72 percent to 15,435.65 points.

The broader markets also gained momentum, but underperformed benchmark indices, as the Nifty Midcap-100 index was up 1.1 percent and Smallcap-100 index up 1.83 percent. The momentum may remain positive with continuity in record highs in the coming week amid falling Covid cases, expected state-wise unlocking, and a likely stimulus package by the government, experts feel. RBI in its annual report, has issued caution over the meteoric rise in stock prices at a time when the country's gross domestic product (GDP) has contracted.

However, as financial market regulators both RBI and Sebi need to be cognisant of the risk going forward. NSO will release GDP growth estimates for March 2021 quarter as well as provisional annual estimates for 2020-21 on Monday. The Indian economy is estimated to show growth rather than contraction during January-March (Q4) of FY 2020-21.

Prominent companies including Aurobindo Pharma, ITC, Motherson Sumi Systems, PVR, Bharat Forge, and Bank of India will release their quarterly earnings in the coming week.

Heard on the Street: Ahead of monsoon, resurgence in so-called small-cap stocks is latest triumph for retail traders long derided as 'dumb money'. Many small investors are beating market pros at their own game. Momentum investing or buying assets simply because the price is rising. That, in turn, has drawn even more buyers, in part because of a behaviour dubbed FOMO (Fear of Missing Out). Individual investors tend to pour far more money into stocks with high momentum than low momentum. Don't buy 'cats and dogs' (unseasoned stocks). Remember that good stocks always come back – unknown stocks may disappear.

Quote of the week: "I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful"- Warren Buffett. Be prepared to invest in a down market and to 'get out' in a soaring market, as per the philosophy of Warren Buffett.

F&O / sector watch

Settlement week witnessed exuberant trading in the derivatives segment. Apart from increase in the Nifty futures rollovers, market wide rollovers stood at 93 per cent as against last month's market wide 83 per cent. Also, Nifty / Stock Futures stayed at 0.09 (last month 0.09), suggesting that market participants continue to bet more individual stocks. Rollover data suggests strength in auto, banking and financials, FMCG and IT sectors.

Mild pullback in counters of metals and pharma is likely. The maximum Put Open Interest was seen at 15,300 followed by 15,000, 15,400, and 15,200 strikes, while maximum Call Open Interest was seen at 16,000 followed by 15,500, 15,600, and 15,800 strikes. Call writing was seen at 16,000, 15,500, and 15,600 strikes while Put writing was seen at 15,400, 15,300, and 15,000 strikes. The volatility fell to the lowest level in 2021, supporting the bullish bias in the market. India VIX was down by 8.80 percent from 19.08 to 17.40 levels on a week-on-week basis.

The Implied Volatility (IV) of Calls closed at 16.30 per cent, while that for Put options closed at 17.71 per cent. PCR of OI for the week closed at 1.26. Overall options data indicates that the Nifty could see a broader trading range of 15,000-15,800 levels in the coming sessions.

Zee can climb to new highs in coming weeks on heightened interest. Stock futures looking good are IGL, L&T Finance, RIL, Shriram Transport, M&M, Voltas and Zee Entertainment. Stock futures looking weak are Apollo Hosp, HUL, Navin Flouro, Dr Lal Path Labs and UBL.

STOCK PICKS

Just Dial Ltd is a local search engine company. The company offers its services across various platforms, such as voice, Web, mobile Internet and mobile applications. It provides search plus transact services across various categories and platforms, and JD Omni services for its customers. It offers an array of search plus services, including order food online, book a doctor's appointment online, book movie tickets online, book a cab/flight/bus online, order grocery online, schedule a laundry pick-up online and schedule a courier pick-up online, among others.

JD Omni is a cloud-based solution, which can be accessed over cell phones and allows controlling and monitoring capabilities to business owners through a dashboard. It operates in India and Outside India. Sources indicate that the company is on the radar of a large business house. Possible takeover bid is not ruled out. Buy for medium term target of Rs 1400.

Shanthi Gears Ltd is engaged in the business of design, manufacture, supply and servicing of gears and gear boxes. Its custom-built products include loose gears, which include spur/helical gear, pinion shaft, internal gears, worm and wheel, straight bevel gear and spiral bevel gear, and its special gearboxes are catered to cement, mining, power and steel industries.

It offers various services, such as reconditioning of gear boxes and foundry. Its products have application in various industries, such as steel, sugar, paper, windmills, marine, plastic and chemical. It owns manufacturing facilities, foundry facilities, engineering facilities, metrology and calibration facilities, and quality assurance facilities. Buy on declines for price target of Rs240.

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