Thursday, February 24, 2011

Technical Outlook : Volatile expiry on the cards

Market Outlook: Indian markets are expected to open flat on the back of no clear support from the global peers. Wall Street ends lower; Crude hits $100/bbl while - Asian markets trading firm; Hang Seng, Seoul Composite up. Overall outlook for the markets today is that of cautious optimism as the bulls must hold the Nifty above the 5420 levels sustain ably to manage an upmove in the coming session. The support for the Nifty is at 5400 and resistance at 5510.

Global events to watch

Þ New Home Sales

Þ Jobless Claims

Þ FHFA House Price Index

Global indices Update @ 8:

Dow Jones : 12105 (- 107.0)

NASDAQ : 2722 (- 33.43)

Nikkei 225 : 10534 (- 44.55)

Hang seng : 23009 (+102.27)

SGX CNX Nifty : 5434 (- 06.50)

INR / 1 USD : 45.20

Technical Outlook : Volatile expiry on the cards

Sharp rise in oil prices was expected to spook the markets but strangely it has not! Does the market then believe that the rise in oil is a temporary thing? Certainly does seem that way from the looks of things as oil continue to maintain its strength during the day but so did the markets. Where does that leave us? Well, our view is that we should follow what the charts suggest. Right now the way oil is poised on the charts, there does appear to be a lot more room to the upside. Hence we would remain a bit circumspect on the prospects for the index. Perhaps it is the proximity to the expiry that is keeping matters in check here? In that case, the market should drop after today's expiry? The way options positions have shaped up it is clearly still shooting for the 5400-5500 band for expiry. In yesterday's trading we saw some sharp sell off when the index neared the 5500 levels. Would that then point the finger towards 5400 levels for expiry. On intra day charts we are finding small higher bottoms on the charts and so far the OI at the 5400P is unshaken. It is still the largest OI strike for this month (as well as the next). so, as we stated earlier, everything looks poised for a finish between 5400-5500. Trade that way for the day. The only thing that could spook this expectation is some large stocks facing difficulties in rollover. So far that does not appear to be the problem but you never know for sure. So do keep track of the rollover situation alongside.

Bank Nifty appears to have failed at the site of support. Yesterday we had written that readers should check status of leader bank stocks to see if the index would do better. Instead, what we got was weakness in the leader bank stocks. On the daily charts, the index is in a sell mode and with the hourly chart signal failing now, we should be bearishly biased on the index for the day. perhaps, expiry related pressures may yet save the day but avoid fresh longs for now though.

Stocks continue to be quite mixed. Infra may be a play for the budget because all sorts of correct noises are being made by President, PM and now FM. So Rel Infra, L&T, JPA etc are all candidates for a buy in case they move down today. Reliance has finished with a buy signal mode. That could be positive for the market as a whole today if there is a follow thru on this signal today. Sugar is beginning to look up but lacks momentum. Orchid has come out of the ban list and has begun moving higher once again. Keep a watch on this name.

Strategy for the day:

No clarity on trends yet but the data is pointing to a range between 5400-5500 to continue into today. Expect an expiry around 5420 levels or so. Be wary of any strong move above 5500 towards the end of the day which one should participate in as there could be plenty of steam in that move. Mixed stock positions with limited moves would indicate that we should prefer the levels on the Table to guide us about the moves.

Stocks to buy if market is strong


This construction stock witnessed a razor sharp rally last session on gigantic volumes, turning out to be one of the gainers despite a volatile market. Such a rise was seen after a really long series of massive decline and has also led RSI to finally move above 40 after a long time. Buy.




Buy above 172

4 points

180 / 184 / 187

Or dips to 164-62

4 points

170 / 173 / 176

Stocks to sell if market is weak


Prices have been maintaining a series of lower tops and bottoms over the last few months. As we see on the chart the short term trend has deteriorated due to extensive selling. This week we saw the decline getting renewed after a tiny pullback rally. With the outlook continuing to be negative, sell.




Sell below 132

1.5 points

129 / 128-27


A sharp pullback from the low of 318 few sessions ago, led prices to hit overhead resistances around 380-390 levels - 200-EMA and valuation region and being unable to get past them despite few attempts, led prices to turn down afresh in the last two sessions. Consider going short.




Sell below 352

3.5 points

347 / 343 / 341

Or rally to 357-58

3.5 points

352 / 349 / 347


Buy Nifty above 5486 stop 5490 rise to 5620.


Buy Pantalolon around 279-282 stop 278 tgt 286-88

Sell Auro Pharma around 207-210 stop 211 tgt 203-201

Stocks in Action for the day: Hero Honda, ABB, Confidence Petroleum, Bata India, Hindalco Industries, Gammon India

Singapore's GIC, Bain Cap to invest Rs 4500cr in Hero Grp: After deciding to end its 26-year association with Honda late last year, the Munjal family promoted Hero Group is looking to sell part of its stake that it acquired from Honda to Government of Singapore Investment Corporation (GIC) and private equity firm Bain Capital, reports CNBC-TV18's Kritika Saxena citing sources. GIC and Bain are likely to invest up to Rs 4,500 crore in Hero Investments. Sources said the deal is valued at a premium to the current market price and is structured via a Singapore-based special purpose vehicle. The Munjal family, sources said, will hold at least 50% in the SPV. Hero Investments has received approval from the Foreign Investment Promotion Board and the Rs 4500 crore transaction has been forwarded by the FIPB to the Cabinet, sources added. Several PE players including KKR, Blackstone and Warburg Pincus were in the race, but GIC and Bain Capital emerged as the frontrunners in the deal.

ABB reported standalone net profit of Rs 6.76 crores for the quarter ended December 31, 2010 as compared to Rs 109.60 crores in the same quarter previous year. Total income increased to Rs 2074.60 crores from Rs 1906.78 crores a year ago.

Centre okays mining in Bellary forests: Centre has approved diversion of forest land in Bellary for mining on the condition that the Karnataka government put in place a mechanism to control illegal mining including evidence of action in cases booked against violators as well as action taken on the Lokayukta report.

Confidence Petroleum’s fully-owned subsidiary Hemkunt Petroleum has bagged contract from Hindustan Petroleum Corporation for providing LPG bottling through its LPG Bottling Plant at Sehore (Bhopal). With the award of this contract the bottling capacity will increase substantially.

Greenply Industries has commenced commercial production of densified plywood at GIDC Estate, Bamanbore, Surendranagar, Gujarat with effect from February 22, 2011. The stock was at Rs 187, down 0.48 per cent on the BSE. It touched a high of Rs 192.10 and low of Rs 186.05 in trade so far.

Bata India’s consolidated net profit for quarter ended December 2010 rose to Rs 88.37 crores as against Rs 62.57 crores in the same quarter previous year. Net sales stood at Rs 1273.85 crores as compared to Rs 1090.17 crores in the same period previous fiscal.

Solar Industries India plans to consider and approve the acquisition of land of promoters Satyanarayan Nuwal and Manish Nuwal on behalf of the company.

Hindalco Industries has informed that due to protracted acts of indiscipline by workmen at Alupuram Plant, the company was forced to declare a lock - out at the plant.

Commercial Production at Rohit Ferro-Tech’s third and fourth furnace at Haldia has started from February 23, 2011. The company will make manganese alloys from this unit which is mainly targeted for exports.

Gammon India and its joint venture partner OJSC Mosmetrostroy has been awarded two contracts for design and construction of underground stations and associated tunnels for Chennai Metro Rail Limited amounting to Rs. 1947 crores.

Pratibha Industries has secured a contract for proposed development of educational institute for Taleem Research Foundation. The contract is worth Rs 57 crores.

Tanla Solutions has announced implementation of its 3G video platform with a suite content services including ongoing world cup cricket match videos for all Reliance 3G mobile subscribers across their presently live 6 circles in India. Tanla's 3G platform is a comprehensive media application platform that enables operators, application service providers and content providers to extend video based services to 3G users and broadband IP networks.

MAN Infraconstruction has signed memorandum of understanding with STFA, a Turkish multinational infraconstruction contractor currently operating in eight countries. The duo will be co-operating in the field of port and marine construction in India.

MindTree has signed two multi-year and multi-million dollar deal for IT Infrastructure Management Services to service providers in Europe and US-based bank. The deal is worth $70 million for a period of 5 years.

Caraco Pharmaceutical Laboratories has entered into a merger agreement with Sun Pharmaceutical Industries, which has increased its offer price per share by 10.52%.

Mahindra & Mahindra Financial Services has allotted 61, 33,205 equity shares of Rs 10 each at a price of Rs 695 per share aggregating to Rs. 426.25 crores to Qualified Institutional Buyers under the Qualified Institutions Placement.

The heavy industries ministry has cleared outright sale of sick state-run companies Scooters India and HMT Bearings in a clear departure from its divestment policy that focused on sale of small stakes in profit-making firms. The government holds 95% in Scooters India and 97% in HMT Bearings through HMT. The two companies together incurred losses of around 37 crore in the fiscal year ended April last.


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