Easing lockdowns will improve sentiment

Sustained by receding corona cases, easing lockdown restrictions in the country, renewed buying from FIIs and positive global cues; markets endured their winning streak over fourth consecutive week.

The BSE Sensex touched new all-time high on Friday, rising 374.71 points to 52,474.76, while Nifty gained 129.10 points to close at 15,799.35, during the week. The broader markets relatively outperformed with the BSE midcap and smallcap indices moving up by 2 and 3.5 per cent respectively. 77 per cent of the stocks in which retail investors hiked stake as at end-March 2021 are from the mid- and small-cap space.

The GST Council slashed the levy on several goods used for treatment of Covid-19 - ranging from key medicines and oxygen to hand sanitizers, pulse oximeters and ambulances - while leaving the rate on vaccines unchanged at five per cent.

The new rates will be applicable for a limited period - until September. IIP growth technically jumped 134 per cent year-on-year in April, mainly due to the base effect. According to National Statistical Office (NSO) data, the index of industrial production surged to 126.6 in April 2021 from 54.0 in the same month last year, when the nationwide lockdown had brought production to halt at most units.

CPI and WPI inflation for the month of May will be released on Monday, while Balance of Trade data for May will be announced on Tuesday. US FOMC meeting is a big event for global markets in the week ahead.

Although the Fed is not expected to take any action, tweaks in interest rate forecasts are likely. It is pertinent to observe that the yield on the benchmark 10-year treasury note closed below 1.5 per cent, its lowest level in more than three months, dragged down by tepid economic data and high demand from investors both in the US and elsewhere.

The primary market will be getting busy next week as four IPOs (initial public offerings) - Shyam Metalics, Sona Comstar, Dodla Dairy and KIMS hospitals are lined up in the coming week, looking to raise a total of ₹9,132 crore from share sales. Observers expect some outflow of money from secondary market to primary market to capitalize on possible listing gains.

F&O / SECTOR WATCH

Mirroring the 'exuberance' in the cash market, derivative segment witnessed brisk trading. Amidst bouts of selling, bulls managed to sustain the momentum in the indices. On the options front, maximum Call open interest was seen at 16,000, 15,800 and 16,200 strikes, while the maximum Put open interest was seen at 15,000 strike, followed by 15,700 and 15,800 strikes.

Tug of war was seen among bulls and bears at 15,800 strike as both call and put writers were seen adding hefty open interest on both the sides.

The Implied Volatility (IV) of calls closed at 13.36 per cent while that for put options closed at 14.31 per cent. The Nifty VIX for the week closed at 15.00 per cent. Low levels also suggest some caution in the market, which may result in extended consolidation in the index.

PCR OI for the week closed at 1.68. Option data indicated that the Nifty could see an immediate trading range of 15,500 to 16,000 levels in coming days.

Intraday volumes have dried up, either due to peak margin requirements or lack of retail participants' confidence at the current market levels. More and more stock-specific moves warrant very efficient risk management by the market players.

Put trailing stop-losses, as vigilant protection of profits at current and higher levels. Metal companies are likely to witness better earnings and capacity utilisation levels in the coming quarters of FY22 mainly on account of buoyant steel prices.

Adani group is expected to raise $500 million through a private placement of shares in Adani Airports Holdings before an eventual initial public offering and is targeting a valuation of Rs 25,500-29,200 crore ($3.5-4 billion) for the business.

Stock futures looking good are GMR Infra, Jindal Steel, REC, TCS, L&T Technology, UBL and Zee Entertainment. Stock futures looking weak are Amaraja, CUB, Granules, Escorts, Exide Inds and Petronet.

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

Just Dial Limited is a local search engine company. The company is engaged in providing search and related services. It is also engaged in other information service activities. 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 operates in India and outside India.

Why we are recommending

1. First mover advantage in Indian local search market. Strong Brand Recognition with 129.1 million unique quarterly visitors^ in Q4 FY21 (132.6 million in Q3 FY21)

2. Digitisation of economy after corona pandemic is big positive for companies like Just Dial.

3. Probable takeover candidate. Big players like Tata, RIL and others reportedly showing good interest in the company.

Buy between Rs975-985 for price target of Rs2000 in 12 to 18 months' time frame. Since the stock had good run up in recent times, stock loss should be slightly deep at Rs850.

VA Tech Wabag Limited is a company engaged in water treatment field. The company's principal activities include design, supply, installation, construction and operational management of drinking water, wastewater treatment, industrial water treatment and desalination plants. The company's segments include India and Rest of World.

The company has four clusters: India, Europe, Middle East & Africa (MEA), and Latin America (LATAM). The India cluster provides end-to-end water solutions for drinking water and wastewater plants, both in the municipal and industrial sectors. The European cluster caters to small and mid-sized projects.

Why we are recommending

1. World's Top 50 Private water operators WABAG ranked 4th globally by GWI for ensuring safe and clean drinking water and sanitation.

2. Offering spanning across municipal drinking water, municipal sewage, industrial

water, industrial effluents, desalination and recycle.

3. Technology focused company - owns more than 90 IP rights.

4. Significant debt reduction across the Group • Gross debt reduction of 33 per cent in FY 21 • Turned around from net debt to net cash position in FY 21.

Buy between Rs 285-295 for price target of Rs500 in 9 to 12 months. Keep stop loss below Rs250.