Focus on mid-cap stocks for profits

Focus on mid-cap stocks for profits

Stock market activity is likely to shift to second-tier shares this week as speculators seek profits amid falling volumes.

Bonds could lose pace after a recent rally as traders await further data on inflation trends.

The stock market may open slightly higher on Monday after truckers called off a week-long strike that had raised fears of stoking already high inflation, but lack of institutional interest is likely to keep the broad market rangebound.

The key index, which has fallen more than 12 percent so far this year, is also expected to be sluggish due to technical factors, though intra-day movements could be sharp because of speculative activity, traders said.

The index rose 1 percent last week to 5,117.01 points, helped by lower oil prices and a strong debut by software services major Tata Consultancy Services Ltd.

"People are waiting for some trigger. The market has already priced in second-quarter results, which are likely to be good despite ... inflation,"

Shares of shipping lines and refiners without retail networks, such as state-run Mangalore Refinery and Petrochemicals Ltd. and Shipping Corp. of India, could attract interest because these companies stand to benefit from oil prices easing from recent peaks, some dealers said.

Refiners will maintain their sale price to oil marketers even though their input costs have fallen, while demand for shipping freight remained high even as oil prices peaked.

Foreign and local funds are likely to take to the sidelines amid continued concerns over inflation, and foreign investors are still cautious about the new Congress-led government.

Shares may also come under pressure as short-term players look to book losses to offset short-term capital gains on which they have to pay 30 percent tax until mid-September, the date when a new 10 percent rate is expected to take effect.
Mid-cap rally is likely to continue till the middle of October by which time, financial results of most mid-cap companies will be announced. Try to book your profits during this rally.

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