Hope rally continues; Sensex, Nifty at new highs

Investors are likely to remain cautious tomorrow on account of March series F&O expiry

Benchmark stock indices scaled new closing highs yet again with the 'hope rally' continuing on Wednesday following strong rupee and firm global cues amidst robust foreign fund inflows.
 
Foreign institutional investors (FIIs) bought shares worth a net Rs 1223.28 crore on Monday, as per provisional exchange data.
 
The 30-share BSE Sensex added 40 points or 0.2% to close at 22,095 while 50-unit Nifty edged 12 points or 0.2% higher to close at 6,601.

Among heavyweights, Larsen & Toubro (L&T) and Tata Motors were the top contributors to benchmark Sensex’s upmove while losses in TCS and ITC among others limited the upside.

In broader markets, metal and capital good stocks remained in demand while defensive plays such as pharmaceutical, software and FMCG stocks fell out of favour. BSE Metal and capital goods indices surged over 1-2% while healthcare, consumer durables and IT shed between 1-2%.

The rupee was last trading near its 8-month high levels at 60.12-a-dollar versus its previous day's close of 60.48/49, helped by gains in the domestic sharemarket and other Asian currencies.

Globally, shares in Asia scaled to two-week highs on Wednesday, with sentiment getting a boost from firm U.S. data released overnight and diminishing concerns over the Crimean crisis.

Volatility is likely to spike ahead as traders roll over positions in the futures & options (F&O) segment from the near-month March 2014 series to April 2014 series. The near-month March 2014 F&O contracts expire tomorrow.

"Nifty future is up by around 6% in this series and making new records highs with significant open interest addition. Put Call Ratio is moving up, fresh Put writing seen at 6550 and 6600 strike, Call writing is shifting to 6700 strike. OI concentration data indicates that now 6580-6585 zone is likely to act as an immediate support while on upside move may be seen towards 6666 levels. Now it’s better to reduce the position or shift to option strategy as we are heading towards the volatile market scenario ahead of political movement," said Chandan Taparia, Derivatives Analyst at Anand Rathi financial services.

The political potato was also on the boil today with Congress party releasing its election manifesto today. The manifesto focuses on populist measures, which experts have dubbed as a desperate bid to counter the anti-incumbency wave which got reflected in latest opinion polls.

Party President Sonia Gandhi said Varanasi seat will be challenged but the candidate is still not decided. Big-wigs such as Narendra Modi and Arvind Kejriwal are too contesting from Varanasi.
 
Investors expect BJP led NDA coalition government to emerge victorious in 2014 polls. This has fuelled the current rally on hopes that the new government will give a boost to the economy as capex cycle resumes.

Movers and shakers

ITC has dipped 1% to Rs 355 on the BSE, with the stock falling on profit booking after recent upmove.

Tata Motors edged almost 3% at Rs 401.15 on the Bombay Stock Exchange on media reports of price hike in April.

“Tata Motors is mulling increasing prices of its commercial vehicles portfolio by about 1%, primarily due to high input costs and continued inflationary pressures,” the PTI report suggests quoting a Tata Motors spokesperson.

Shares of pharmaceutical companies remained under pressure with the Bombay Stock Exchange (BSE), S&P BSE Healthcare index dipping over 150 points in late noon deals.

Glenmark Pharmaceuticals, Lupin, Dr Reddy’s Laboratories and Divi’s Laboratories declined 3-4%, while Biocon, Ipca Laboratories, Sun Pharmaceutical Industries and Cipla closed 1-2% lower on the BSE.
 
Ashok Leyland has 11.3% to Rs 22.15 on back of heavy volumes on the bourses.