Mkt gain to continue; expert tips to play oil stock now

Moneycontrol Bureau

Indian indices ended in green for the first time this week following better than expected May headline inflation data, strong global cues and short covering. The 50-share Nifty gained more than 100 points to close above 5800, while 30-share Sensex advanced 350 points to close above 19000.

“Overnight we had very positive cues from Wall Street which Nikkei and Hang Seng pick up and then we had a very good move in the foreign currency markets, the rupee coming to 57.50 which one thought was impossible a couple of days ago. Bond markets also chipped in with the 10-year bond yields falling smartly and then in the midday we had an inflation figure. So we had a series of global cues and good macro cues. That is why the rise has been widespread," PN Vijay, Portfolio Manager told CNBC-TV18 today.

He further added that the present rally which started today has quite a bit of steam left. “So at least for the next few trading days in the first half of next week we should see the momentum taking it up to 5900,” PN Vijay added.

Agreeing with him, SP Tulsian of sptulsian.com said that 5700 level, having tested by the market could make good support at least for whole of the June series. “I don’t think that there is any incentive beyond a point to go short on any of the stocks whether you talk of midcap poor quality stocks or the frontliners-prominent amongst them were the banking stocks,” he said.

Stocks in focus

Tulsian pointed that stocks of oil marketing companies like Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp would be in focus for next two-three days as the companies are likely to raise petrol price by Rs 1.50 to Rs 2 litre.

Shares of Videocon Industries and ONGC have been in focus in past-two three days after state-owned company erroneously issued a ‘draft press release’ about USD 2.5-billion deal with Videocon for a 10 percent stake in a Mozambique gas field.

Tulsian said that fundamentally Videocon shares have several concerns such as high debt, market unfriendly promoters. “However it is giving an indication that deal is likely to happen at or around USD 2.5 billion against the promoters expectation or demand of close to USD 3 billion. So, may be an upside of Rs 228-230 can be kept of, if the deal fructifies but otherwise I am not keeping the positive stance on the stock,” he added. Today Videocon shares ended up 2 percent at Rs 219.40 rupees.

Inflation

The wholesale price index inflation in May fell to a 43-month low at 4.7 percent as against 4.89 percent in April. It’s the sixth consecutive month that WPI inflation has fallen. However experts believe that sharp depreciation in rupee in the past few weeks can impact the future inflation data. Most experts ruled out a rate cut by Reserve Bank of India in its monetary policy scheduled on Monday.  

Also read: WPI down but FY14 growth at risk; rupee a worry: Experts

PN Vijay believes that RBI will leave rates unchanged in June due to concern of high current account deficit following sharp depreciation in rupee. He also pointed at the sumptuous liquidity in the inter-bank markets, which may prompt RBI to leave things unchanged.

However, Tulsian believes that RBI would not completely disappoint and would either provide 25 basis points cut in repo or 25 basis points cut in cash reserve ratio.

“One out of this will definitely come which will also keep this short covering coupled with the fresh renewed buying momentum coming in into the stocks and that can make the Nifty to move to a level of 5900 plus,” he added. 

Apart from this, Finance Minister P Chidambaram’s assurance on Thursday to expedite reforms also seems to boosted investor sentiments. Chidambaram said that the government will leave no stone unturned to achieve its revenue target.

On Thursday, Prime Minister Manmohan Singh called for formation of a Project Monitoring Group within the Cabinet Secretariat for fast-tracking of infrastructure projects. This initiative can unlock Rs. 7 lakh crore worth of bank funded projects stuck for various reasons and lack of clearances at the Central and State level.