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Avoid long calls until expiry; auto results eyed: Experts

Investors are advised to remain short in May series as the remaining last few days will have a very dull trade.

May 25, 2013 / 10:22 AM IST
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Moneycontrol Bureau

Investors will remain cautious for next few sessions, as the market inches closer to end of May series. Earnings of auto giants like Tata Motors and Mahindra and Mahindra will also be keenly eyed by investors, experts said.

Investors are advised to remain short in May series as the remaining last few days will have a very dull trade. However, SP Tulsian of expects at least 100-125 point rally over next four sessions.

In the beginning of this series, Tulsian had predicted 5750 as support and resistance at 6150. "But we have seen that 6,150 got breached, it moved to more than 6,200. So maybe here, 5,750 could be held on with a support seen at 5,850," he said.

He advised to avoid going long on Nifty over next few sessions.

Technical analyst Sudarshan Sukhani of also advised traders to take off at least half of their positions. "For the other half make it a positional trade, keep a short position in the Nifty with a stop loss at 6080," he added.

On Thursday along with global markets Indian stock indices nose dived on fear that liquidity, which had been a key reason for rallies in the past few months, may get hampered. US Federal Reserve Chairman Ben Bernanke's comments that he might bring down the level of bond purchases and reduce money printing on revival in US economy instilled fear of plunge in liquidity among investors.

While Indian indices recovered today, the mood was still guarded on the street. The Sensex closed at 19704, up 30 points over the previous close, after touching a low of 19568.49 earlier in the day. The Nifty ended 16.50 points higher at 5983.55. 

"At this point of time, I think investors are better off just in a wait and watch zone. The reason is that I think the problems overseas have not got resolved and unless we don't see some calmness returning to the global markets, I don't think retail investors should take the plunge," Dipan Mehta, Member of BSE and NSE told CNBC-TV18.

He feared that deeper correction can not be ruled out considering the run up in indices in past month.

Apart from May series end, fourth quarter earnings of auto giants like Tata Motors and Mahindra and Mahindra and some other large cap companies like DLF and Oil and Natural Gas Corporation will be eyed by investors in the next week.

Mehta expects M&M to post a good set of numbers as they have been able to increase the market share in a very tough environment. He said investors must keep eye on management commentaries on FY14 as there has been signs a slight deceleration in the growth rates for utility vehicles.

Movers and shakers of the day

Pharmaceutical stocks have been in focus over past few days due to negative news flows. Wockhadt shares plunged 6.5 percent down today to close at Rs 1229 on reports that the company’s Aurangabad facility has been red-flagged by US Food and Drug Administration.

Pharmaceutical companies have been doing exceedingly well in past year as compared to other sectors and hence investors are slightly overweight on the sector. Mehta said despite the negative new flow, long-term fundamentals of the sector are sound and recent rupee depreciation will also be beneficial.

“So, I would say that at corrections these stocks are interesting to increase exposure to, but in case of stocks like Wockhardt one should just wait and watch,” he said.

Tulsian believes that this might be a good time to buy Wockhardt as he expects things to settle down over next 10 days. The stock can move back to Rs 1300-Rs 1350

“One cannot make the stock to correct beyond this because the share is now ruling at a PE multiple of less than eight…. the management has also said that they will be appointing a consultant to retrace these grievances,” Tulsian said.

Among other movers and shakers of the day, United Spirits shares rose 6 percent to Rs 2,551.45 after hitting a life high of Rs 2,587 earlier in the session. United Breweries Holdings also hit the 10 percent upper circuit at Rs 39.45 after Karnataka High Court allowed UB Holdings to sell shares to Diageo and Religare.

Tulsian said that United Spirits will continue to upgrade, as now there are even more chance of creeping acquisition by Diageo. He expects Diageo to acquire 5 percent every year. Higher FII holding in the stock, which is more than 50 percent will also make it easier for Diageo to gain further stake in the company.

“Obviously with Diageo coming in then that will be seen hugely positive for the stock,” Tulsian said.

As a part of the more than Rs 11,000 crore agreement between Mallya and Diageo inked in 2012, Diageo was to get around 13 percent stake from UBH's holding in United Spirits.

first published: May 24, 2013 06:36 pm

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