Tuesday, February 22, 2011

Market Outlook: Indian markets are expected to open in a negative terrain

Market Outlook: Indian markets are expected to open in a negative terrain on the back of destructive momentum seen on the global counters. Asian mkts trading weak; Hang Seng, Nikkei down 2%. Overall outlook for the markets today is that of cautious optimism as the bulls must hold the Nifty above the 5450 levels sustain ably to manage an upmove in the coming session. The support for the Nifty is at 5460 and resistance at 5590.

Results Today: Ranbaxy

Global events to watch

Þ Consumer Confidence data

Global indices Update @ 8:

Dow Jones : 12391 (+73.11)

NASDAQ : 2833 (+02.37)

Nikkei 225 : 10644 (- 213.1)

Hang seng : 23000 (-485.38)

SGX CNX Nifty : 5470 (- 60.50)

INR / 1 USD : 45.11

Technical Outlook : Volatile markets to test traders.....

The market pulled a Friday trend on the reverse! After dropping down towards the lows of the day initially, the sudden volte face was something totally unexpected. mainly because it was without warning of any sort and not really backed up by any news or event. Perhaps it was just operator action based on the bunching up of positions? We did see substantial amount of calls at the 5400 and 5500 strikes during the day and these were created at the lower levels of the Nifty. With the rise in the Nifty much of those positions were cleared out. Now were these shorts that got squeezed or was the long position created in the options and then the futures hoisted upward to cash out on the options? We will never know for sure but it does smack of operator action to us. So be careful today. Watch for follow thru on the action today before committing to the upside.

Bank Nifty is another story though. The hourly chart showed a nice set up that set off a buy yesterday and prices have held the gains to the close. Most component bank stocks are also well placed and should continue higher. Can look to trade long here. The IT index is coming back into reckoning again. It has managed to set off a buy signal on the daily chart yesterday. Leader TCS, Wipro etc are on the run and should help carry the index higher. Though this is a bit illiquid, readers can consider taking longs in smaller sizes as there is scope to move higher.

Crude prices shot up yesterday. Those that are into commodities can take a look at this one. But we do find an expanding triangle type pattern on the charts and hence some caution is necessary. WTI prices have set up $92 as an important resistance and this would need to be crossed for us to worry about the situation in oil. Rising Crude has a very dampening effect on the market sentiments and hence this is something to keep track of.

Nifty has an important price pivot at 5465 and yesterday has moved above this level. As long as it retains above this level, we can remain bullish but if declines give up this level easily then forget about bullish views.

Strategy for the day: As suggested, lets first check out whether there is follow thru on the advance before committing to long positions on the Nifty. Check for breadth and leadership in case of continued advances. Better prospects appear to be available in Banking and IT and hence readers should look there for some tradable opportunities. Stocks are wearing quite a mixed look and therefore some proactive approach would be required for the day.

Stocks to buy if market is strong


Prices rocketed last session on aggressive buying and closed near the days high. Looking at this move on the daily chart we find that prices are on the verge of breaking out from a broad trading range. Yesterdays move has led RSI break out of 60 region after a long time and looking good for a further rally. Buy.




Buy above 195

2 points

198-99 / 201

Or dips to 193-92

2 points

196 / 198


This newly listed counter after an extensive decline since its listing in Dec 2010, finally bottomed out at 230 levels and has been attempting a pullback in the last couple of weeks. Yesterday we saw this counter rising once again after a two day breather. This bounce back has triggered a fresh buy here.




Buy above 270

4 points

277 / 281 / 284

Or dips to 265-64

4 points

271 / 274 / 276

Stocks to sell if market is weak


Prices have been moving in a series of lower tops and bottoms over the last several months. After a recent pullback from the low of 72, prices hit overhead resistances once again and have turned around afresh in the last three sessions. RSI has turned down from 40 levels. Go short.




Sell below 81

1.5 points

78 / 77


Buy Nifty above 5510 stop 5490 rise to 5620.

Buy Nifty on dips to near 5470 with stop 5455 for rise to 5535.


Buy ABG Ship above 369 stop below 366 target 375

Sell IOC around 318-320 stop above 322 target 312

Stocks in Action for the day: RIL, Videocon, Idea, Scooters, Ranbaxy

RIL-BP deal -BP to take 30% stake in 23 oil & gas blocks of RIL -BP enters 50-50 JV for sourcing & marketing of gas -RIL to get USD 7.2 billion in aggregate -RIL, BP JV to also create infra for gas transportation BP says -Total investments can go up to USD 20 billion -Future performance payments of USD 1.8 billion RIL says -To continue being operator in all 23 blocks -Company's 23 blocks' gas output at 1.8 billion cu Ft/Day Mukesh Ambani: -Cairn-Vedanta deal different from RIL-BP -Cairn-Vedanta involved Pre-NELP blocks -No plans to partner with BP for shale -Our deal involves post NELP blocks -Do not anticipate any trouble in getting approvals -RIL has one of the strongest balance sheets in the world -Deal will position RIL to be debt-free Bob Dudley: -RIL, BP have grown together over time

Govt sources say -Looking for outright sale of Scooters India -Cabinet note for HMT bearings circulated More heavy industries companies also candidates for disinvestment Alert - Loss in FY10 Scooters India Rs 22 crore

ONGC awarded UAE based National Petroleum Construction an oil contract valued at USD 227 million to build wellhead platforms at Mumbai high field (ET)

NMDC in talks with Tata Steel to sign an equal joint venture for setting up a 2 mtpa steel plant at Bastar in Chattisgarh (ET)

Idea Cellular faces Rs 300 crore fine on M & A norms violation charge (BL)

SAIL to invest USD 12 billion in four three mtpa manufacturing facilities in Mongolia, South Africa & Oman (BS)

SKIL Infra to raise over Rs 2250 crore through IPO (BS)

GVK Power plans to buy coal mines overseas & may fund the purchase with as much as 75% of debt component (FE)

Apollo Hospitals has revised its capital raising plans looking at scaling down to Rs 600 crore from Rs 900 crore (FE)

United Bank of India plans to raise Rs 308 crore through a preferential issue of up to 27.98 million shares at Rs 110.04/sh (Mint)

Videocon promoters investigated by CBI in the 2G scam with respect to the shareholding pattern of Datacom solutions Pvt Ltd (Mint)


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