Weekly Outlook on Indian Stock Markets - 29th June to 3rd July 2009

Last Week Highlights
The last week marked the expiry of June series. The June series was a lukewarm with indices remained range-bound and closing around May levels itself. During early June, indices once looked to break major psycological levels, but then later sucumbed to profit booking.

Now budget is just right at the corner, and markets are again gaining strength on hopes that new government would take positive measures towards reviving the growth. On Friday, we have seen strong buying by domestic and foreign institutions and this is likely to continue during the next week as well.

The sectors that really look promising is the Banking and Power. Banking stocks have been seeing good accumulation over the last few days, especially mid-sized PSUs like Andhra Bank, Central Bank, UCO Bank, etc. Similarly, Power stocks, except NTPC (as it is fighting legal battle with Reliance), are also seeing some good appreciation in last few days, including PTC, PFC, Power Grid and Reliance Power.

FII View
FII on Friday have been strong buyers in the derivatives segment. In the cash segment, Foreign Institutions purchased stocks worth 550 crores. Domestic Institutions, too, were net buyers by around 330 crores.

In the Index futures segment, FIIs were net buyers of about 1100 crores. Nifty and Bank Nifty have seen some long positions being created. In the Index Options segment, FIIs were again net buyers by 370 crores. Several out-of-money calls seen some good Open Interest build-up and premiums for those have also increased, indicating positive sentiments from the institutions.

In the stocks futures segment though, FIIs were net sellers by 285 crores. It might be done to hedge their index long positions.

The cues indicate further upside in the markets from the current levels, which can be considered as pre-budget rally. It is advised to the traders to keep booking profits at the higher levels and simultaneusly, buy out-of-money call options to hedge their positions on the long side. We might see profit booking coming in the markets after the budget.

Stock Views
On Friday, buy recommendations for Network18 and IVRCL Infra saw their target prices being hit. Those who have not booked profits in IVRCL can remain keep their positions open, by taking target price (364) as stop-loss. We expect this stock to remain bullish till budget.

Few new stock ideas for the week are:

Scrip Name - Buy/Sell - Recommended Price - Target Price - Stop Loss Price
M&M - Buy - 695 - 740 - 684
ABAN - Buy - 895 - 945 - 854
Moserbear - Buy - 93 - 102 - 86

Options Strategy
Buy Nifty 4200Put, 4700 Call and Sell two 3800Puts, 3600 Put - the combined strategy would give losses if Nifty remains range-bound between 4200 and 4600 levels. It will give unlimited profits, if Nifty goes above 4800. On the downside, it comes into losses, if Nifty goes below 3600.

The strategy can be viewed by clicking here...

Wishing you a great trading week ahead!!