Continued buying prompted by softening of inflation is likely to keep frontline automobile counters in the green next week, analysts said. “Investors are likely to make purchases at lower levels. However, much would depend on the overall market sentiment,” Mumbai-based analysts said.
This is the first time in 28 weeks that the index had fallen week-on-week. The finance ministry, too, in its statement said there are some early signs of moderation of inflation.
Rising inflation has led to sharp falls in interest rate-sensitive stocks such as automobile counters as investors feared tightening of monetary policy to control inflation.
The Reserve Bank of India has already raised short-term benchmark rate by 125 basis points and cash reserve ratio by 150 basis points since beginning of the current financial year (2008-09) to tame inflation.
Automobile stocks would also see positive effect of softening in global crude oil prices.
The Indian crude oil basket on Thursday rose 22 cents a barrel to $112.19. It has averaged $113.12 so far this month, down about 14.6 per cent from July’s average of $132.47.
The pharma sector stocks are seen range-bound with a positive bias next week, dealers said. Shares of Cipla and Sun Pharmaceutical are seen up, while Ranbaxy and GlaxoSmithKline Pharma are seen down on charts, said Dharmesh Shah, technical analyst with ICICI Direct.
Technically, Cipla is seen positive with resistance at Rs 245, Shah said.
The company was in the news this week, giving an update on its plans for the year after its annual general meeting. Based on this, Citigroup has recommended ‘sell’ on Cipla on a possible slowdown in revenue growth.
Cipla had reiterated its revenue guidance of 12-15 per cent in 2008-09, which implies a slowdown in next three quarters, as the company reported 32 per cent growth in April-June, Citigroup report said.
Sun Pharma, riding on favourable court verdict on its offer for Taro Pharma, is likely to extend its gains next week, with resistance at Rs 1,525 and support at Rs 1,396.
