Friday, May 6, 2011

Stocks in Action for the day: Ceat, Indian Bank, PVR, Surya Roshni

Market Outlook: Indian markets are expected to open in a positive note taking cues from fall in crude prices and short covering attempts. On the overall basis we expect some downgrades in earnings for companies as they may see slower sales increases and a squeeze in profitability with borrowing, and raw materials eating up cash. On the global space US markets see profit booking ahead of jobs report and following to that Asian markets fall on weak US cues. Overall outlook for the markets today is that of cautious optimism with 5420 levels as a major support and key resistance near 5510.

Results today: Piramal Healthcare, MTNL, NIIT, SKS Microfinance, KEC International, Cadilla Healthcare, Tata Sponge, Union Bank, Central Bank, GlaxoSmithKline Pharma, Rolta India, Eicher Motors, Federal Bank, GE Shipping, DCM Shriram Consolidated, Walchandnagar Industries.

Global events to watch:

Þ Employment Situation.

Þ Consumer Credit.

Global indices Update @ 8:

Dow Jones : 12584 (- 139.4)

NASDAQ : 2814 (- 13.51)

Nikkei 225 : 9822 (- 181.5)

Hang seng : 23111 (- 150.5)

SGX CNX Nifty : 5480 (+32.00)

Gold (USD/t oz.) : 1487 (+06.20)

Nymex Crude (F) : 100 (+00.89)

INR / 1 USD : 44.59

TECHNICAL OUTLOOK: End of the downtrend...??

Market was dull till about the mid session. When most people were out to lunch, someone came in and slammed the NF down and the market never recovered from that hit till the very end. The fall was on substantial volumes and one could state that the bulk of the day's volume actually came during the declining period. It appears that everyone just threw their positions away as there was no real news (except some stray rumors about ADAG getting arrested). To us it looked more like some ETF exiting as there was consistent selling in some large cap names. With market at a downward tilt, holders of trading longs too abandoned or were forced to abandon by their broker.

The ending stage seems to have been some selling into a buyer less market. Note that the closing level of the index was about 10-20 points above the last tick. This showed that the last half hour was without much volumes. Is that good or bad? it is bad because it can create a gap down today at the start. It is also bad because it shows that sellers are being forced into abandoning longs. But in a way it is good because this is how it happens at ending phases of trends. Does this signify the end, then? No clear answer on that one as it could stretch for another day and still remain valid.

so what is to be done? Well yesterday's letter was quite clear on what to do. No change today. Since the 62% retrenchment is broken and closed below, the market is perhaps in a mood to retrace something bigger? We will know the answer to that today. That is not too palatable as it indicates deeper downsides, going to Feb lows and below. So lets not go there right now. After 9 down sessions, it is time for consolidation if not revival. Lets deal with that first as that is a more immediate prospect. For going down to the deeper levels, we need to have some event or news. Neither of these are currently visible or audible.

Remember what we wrote about regarding the PCR yesterday (and earlier)? Well it dropped further to 0.91-still in bearish territory and therefore holding out chances for more declines ahead. Calls are getting hit aggressively. Substantial OI from 6000 to 5500 calls. Hardly much in Puts. Whatever is there is getting rolled down now to 5400-5300. Top strike is only 51L compared to a slew of such OIs for calls. Clearly, the market is poised for declines here as far as options are concerned. Of course this can make for some brisk covering when the market moves higher. But if the current pace goes on, by then the call shorts would have made enough money and bailed out. So, option positions say no adventurous buying to be engaged in. When markets fall every level looks as though it is too low to sell. But then trends have this nasty habit of persisting much beyond what a losing trader can endure. So if you are on the losing side, admit defeat and move out. Live to fight another day.

Now there is no real Gann angle line support until around 5370 levels. That is still a good 100 points away and previous swing high is at 5396. A drop that far will induce more fears. Maybe lead to a flush out decline. Typically that is how such moves end.

STRATEGY FOR THE DAY: Ultimately, one of the lows will be the final low and someone, somewhere will hit it or speak about it. But it will be more by fluke than by any design. But what is more important is whether we can trade it? We recommend long positions at the given lower target zone of 5370. In fact we suggest creating long positions in small parcels from around 5400 thru to 5370. No point in looking for levels if one cannot bring onself to trade them. Else they all become academic. Stocks moves will be very volatile as no one is sure of whats going on and will be largely following the lead of the prices. Chances are that volumes will be lesser, thereby increasing the volatility factor even further. Trade only if there is some definite trend status to the price. Avoid choppy markets.

Stocks to buy if market is strong:


Prices collapsed heavily last session on heavy sell off, driving the trend further low and closing on a negative note. The fall has accelerated the bearish momentum here and is looking to go further down. RSI has breached 40 levels and looking weak. Go short.




Sell below 286

2.5 points

281 / 278 / 276

Or rally to 291-93

2.5 points

287 / 283


Prices have been on a steady drop in the last few sessions. From the chart we see pullback attempts were made but not enough to sustain and move up afresh, mainly due to lack of follow thru. After couple of indecisive moves prices slipped down afresh yesterday. Sentiment is still weak here. Sell.




Sell below 112

1.5 points

109 / 108

Or rally to 114.5

1.5 points

112 / 111

Stocks to sell if market is weak:


This counter has been on a steady uptrend forming a neat sequence of higher tops and bottoms. Yesterday we saw prices bouncing back from strong supports and on the back of short covering. A follow thru here will indicate fresh buying. Expecting this pullback to continue, go long.




Buy above 338

3 points

343-44 / 347

Or dips to 333

3 points

338 / 341


Sell Nifty below 5440 with 25 pts stop for a decline to 5390-70.

Breakout Nifty buy is only above 5555. 30 pts stop and 70pts tgt. OR

Buy Nifty around 5400 to 5370 with stop below 5350 for a revival. Hold overnight if close is strong. Else exit.


Buy BGR above 515 stop 510 target 528

Sell Jet on rallies to near 445 stop 448 for tgt 433

Stocks in Action for the day: Ceat, Indian Bank, PVR, Surya Roshni

Commodity carnage -Biggest single day fall in commodities in 3 years -Dollar rises 2% against Euro, 1.5% against AUD -CRB Index falls nearly 5% -Crude slides over 10%, Brent at USD 111/barrel, WTI crude trading blow USD 100/barrel -Silver collapses over 14% to below USD 35, gold falls to USD 1487 an ounce

Cipla Q4 (cr - crore, vs - versus) -Net profit at Rs 214 cr vs Rs 275 cr (YoY) ((Poll: 243 cr)) -Net sales at Rs 1,615 cr vs Rs 1,317 cr (YoY) ((Poll: 1528 cr)) -Other income at Rs 20.3 cr vs Rs 45.1 cr (YoY)

Jyothy Labs -To buy 50.97% in Henkel India for Rs 119 crore at Rs 20/sh -To refinance Henkel India's debt of Rs 454 crore -To also buy Henkel AG's preferential shares in Henkel India -To buy 68 million preference shares of Henkel India -Henkel AG has option to buy up to 26% in co after 5 years

Phaneesh Murthy Says -Not seeing robust returns from financial services -Booked USD 9.7 million of acquisition cost this quarter -Patni is 600 bps lower in gross margin & EBITDA -Will close Patni deal next week -Will announce management changes next week -Have not decided on delisting Patni -Do not want to operate 2 listed companies -Focus on Patni buy, delay in project budgets caused dip in Q1 revenue

AERA Chairman says -GVK seeks nod for Mumbai Airport Development fee -Will take few weeks to decide on application

Eveready Industries Q4 -Net sales down 10% at Rs 204 cr vs Rs 227 cr -Adjusted PAT at Rs 3.3 cr vs Rs 8.3 cr -EBITDA down 57% at Rs 9.3 cr vs Rs 21 cr -EBITDA margin at 4.6% vs 9.4%

Fertilizers and Chemicals Travancore Q4 Net sales up 7.5% at Rs 685 cr vs Rs 637 cr -Net loss Rs 10 cr vs net profit Rs 93 lakh -EBITDA down 28% at Rs 31 cr vs Rs 43 cr -EBITDA margin 4.5% vs 6.8% General and Administrative expenses up 1.3 times at Rs 8 cr vs Rs 3.5 cr.

Surya Roshni Q4 FY11 -Net sales up 47% at Rs 739 cr vs Rs 504 cr -PAT up 40% at Rs 40 cr vs Rs 29 cr. EBITDA margin 11% vs 9.7%.

Muthoot Finance lists today

Network 18 board meet today to consider issue of securities on preferential basis to the promoters

Piramal Lifesciences board meet today to consider a proposal for demerger of the new chemical entity research unit of the co in Piramal healthcare

PVR approves sale of 2 crore shares of CR Retail Malls, a wholly owned subsidiary of the Company to Companies belonging to JM Financials Group for Rs 100 crore

Infinite Computer Solutions buyback of 14 lakh shares at maximum Rs 230/share commences from today

Indian Bank gets Govt nod for FPO of 6.14 crore shares

Jindal Power has deferred its plan to raise Rs 7200 crore through an IPO on the back of weak market sentiment & rise in cost of capital & raw materials (ET)

Ceat to raise its tyre prices by 3-5% from this month end to offset the surging rubber prices for the second time this year (FE)

CBI informs Supreme Court that probe against ADAG, Tata not over as of yet (TOI)


No comments: