Markets Weekahead: Derivatives expiry, oil to fuel volatility

April 22, 2011

(The views expressed in this column are the author’s own and do not represent those of Reuters)

Indian equity indices ended partly higher in the past week shedding nervousness after Infosys results. HCL Tech and a clutch of private sector bank results rekindled hope, helping the indices end in green.

The results of industry mammoth Reliance Industries were below expectations on refining margins and stagnant production from its gas blocks. Markets are likely to react pessimistically. Even TCS results would not help sentiment.

Next week, we will have the F&O expiry which will ensure sufficient volatility. Till now, the broader range discussed last week has not been violated and considering the current heavy call/put writing at 6000/5700 levels, it’s safe to assume that these levels would indicate the range for the market.

We have numerous results lined up but mostly from the mid-cap space. Results from firms like Wipro, Petronet LNG, Gujarat Gas, LIC Housing, Biocon, Titan would be interesting to watch out for.

Future Venture is coming out with an IPO, the subscription of which will start next week. We have an avoid rating on the issue as we believe there are better available listed players to play directly on the great Indian consumption story.

The Karnataka government is expected to provide export quotas for iron ore and Sesa Goa, Sundur Mangenese, etc would react positively.

The supply-dominated cement industry would start reporting numbers with ACC and Ambuja. The expectations are not great from the sector and any further negative surprise would lead to heavy selling.

Natural gas consumption is increasing at a faster pace in India. Although huge capex plans are lined up, availability has been an issue with RIL’s KG-6 reporting a decline in output. However, demand would continue to be robust and hence companies like Petronet LNG, Gujarat Gas, IGL would benefit in the long run, especially Gujarat Gas. GAIL could end with excess unutilised capacities for a while.

The advancement of crude has been raising eyebrows again as growth would come under pressure. The eventual outcome in the form of inflation, higher subsidies and a hawkish RBI stance would leave markets jittery. Look out for the movement in crude oil as there is another school of thought which believes a big correction in crude is overdue.

Overall, booking profits and waiting for bargain hunting would be a good strategy. On the Nifty, 5900/5940 is likely to be respected as there are not enough factors or triggers to decisively cross these levels.

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