Banking sector stocks rock

The bulls claimed victory on the markets last week on short covering ahead of March futures expiry. The banking sector stocks lead the rally due to the banking regulation amendment bill, which was tabled in the Parliament.


A Japanese man walks in a supermarket bereft of stock onu00a0 the outskirts of the tsunami-damaged city of Rikuzentakata, in Iwate prefecture in Japan

The bill seeks to remove 10 per cent cap on voting rights for shareholders in private banks and give more regulatory teeth to the Reserve Bank of India (RBI) including powers to supersede boards of banks. The bill also seeks to exempt bank mergers and acquisitions from provisions of the Competition Act.
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Further, the bill makes it mandatory for persons to obtain prior approval from the RBI to acquire five per cent or more of the share capital of a bank. This was welcomed by the banking sector stocks and they all gained considerably and are continuing their winning streak.

Unrest
Global events like unrest in the Middle East and in North African countries like Libya and radiation fears in tsunami-hit Japan did not have much impact on our markets. We even saw crude price moving above $105 but on the whole, the global equity markets ignored it. Another important development last week was the visit of the legendary investor, Warren Buffett to India. This kept the market sentiment positive. The market widely expects an announcement from him regarding his investment in any one Indian company.

Crude
Nifty is showing strength above 5563 and if it can close above 5688 (200 Daily Moving Average or DMA) then we may see Nifty going towards 5748 (100 DMA) levels before March expiry. Nifty 7-day Relative Strength Index (RSI) is around 70, suggesting profit booking at higher levels at the beginning of the week. Investors should keep in mind that crude prices are a major concern for a country like India. Escalating concerns in Libya and other Middle Eastern countries may take crude oil towards $111, which can have an impact on the markets.u00a0 Aggressive traders can create short positions on Nifty, if Nifty comes very close to the 5700 level.u00a0 If someone is looking for a much safer Nifty strategy, then they can buy 5700 Nifty March call along with short Nifty futures at 5700.

Realty
On the sectoral front, we saw major movements happening in banking, realty, IT and metal stocks. The realty sector, which was beaten down for sometime, got support from lower levels. IT sector companies have increased their hiring, which gives an impression that they expect more contracts. Stocks like TCS, HCL Tech and Wipro are looking strong.

Metal prices gained on the London Metal Exchange (LME) especially Lead which helped stock like Gravita gain around 17 per cent this week. Stocks in the fertiliser sector like RCF, GNFC, FACT can attract more buying this week.

In the metal space, Hindalco and Tisco have more room on the upside. Option traders can buy Tisco 620 strike price call options for a period of three days. Hindalco 210 March call option can also give decent returns to investors in the short term.

Support
Economic data showed mixed trends. The European industrial new orders rose 0.1 per cent against 2.7 per cent, French business survey rose to 107 against 106 while the manufacturing Purchasing Managers Index (PMI) rose to 56.6 against 55.7.

The picture in the US showed existing homes sales declined to 4.88 million against 5.4 million and the new homes sales declined 250000 against 301000. Positivity was seen in the initial jobless claim, which declined to 382000 from 387000.u00a0

Gold faces resistance at $1447 and may correct before giving a breakout towards $ 1475.u00a0 It has support at $1420. The Gold-Silver ratio is more favourable to Silver. Silver can move above $38.13 once the ongoing correction completes. It has strong support at $35.80.

The author may have a vested interest in investments he has recommended. Feel free to e-mail him at alex@geojit.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

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