Thursday, May 19, 2011

Stocks in Action for the day: Coal India, RIL, L&T, JPAssociates.

Market Outlook: Indian markets are expected to open in positive sense and trade flat with no clear support from global markets and no domestic triggers. Petrol will be costlier by 40 paise again after it witnesses a substantial hike of 5 a litre last week and diesel will cost 12 paise a litre more as the oil ministry has decided to raise the commission for petrol pump owners. On the global space US markets snaps 3-day losing streak; Dow Jones up 81 pts while Asian markets trading mixed; Hang Seng up, Nikkei down. Overall outlook for the markets today is that of cautious optimism with 5400 levels as a major support and key resistance near 5500.

Results: L&T, Ashok Leyland, Jet Airways, SREI Infra, Tata Power, Emami, Wockhardt, Gammon Infra, TCI Finance, Redington India, Voltas, Pidilite Industries, Rico Auto Industries, Chennai Petroleum, WWIL, Northgate Technologies, OCL India, Pratibha Industries, Zicom Electronic

Global events to watch:

Þ Jobless Claims

Þ Existing Home Sales

Global indices Update @ 8:

Dow Jones : 12560 (+80.60)

NASDAQ : 2815 (+31.79)

Nikkei 225 : 9651 (-10.91)

Hang seng : 23119 (+107.9)

SGX CNX Nifty : 5428 (+01.00)

Gold (USD/t oz.) : 1498.2 (+02.40)

Nymex Crude (F) : 100.30 (+00.20)

INR / 1 USD : 45.08

TECHNICAL OUTLOOK: In line with expectations....

Some more declines exhibited and that was in line with expectations. The 5400 level was pierced briefly before pulling back. For a while it looked like stops had been triggered during that fall. If it was, the move didn’t really last much. There was a sharp spike to 5450 during the day but that looked more like some stops on shorts were triggered! Main point is that the daily pivot was not even tested and that is disappointing for those feeling bullish. The hopeful side of the issue is that the daily pivot is descending every day (obviously, since new lows are being made every day!) and it is now down to 5425, which will not be difficult to exceed today. So, today could be a bit different from the earlier two days, and maybe we may attempt a minor rally? Weekly pivot is at 5550 and that is also reachable now if the index makes an effort. Mind, that is going to be an effort as the sentiment is so fragile right now.

The lower side targets etc continue to remain as had been indicated in yesterday's letter. That door is certainly wide open so we dont want to keep looking upward. The fact that the index poked beneath 5400 levels is bad enough. We had mentioned about the addition to 5200 puts in yesterday's letter. We find that another 20L has been added yesterday too. So certainly some determined player collecting all that puts here. Price remains at Rs4 so we continue to maintain that it is a long position and not a short. So that is a signal to be alert. The 5400C also added another whopper of a position.

The 60 min chart shown today has the stochastic indicator in the lower pane. Note that rallies have been rebuffed quickly and oversold areas carry strength bands, implying that the downtrend status is not overcome yet. Hence lets not be in a hurry to grab any upward price action and double check on the bottom formations. Ideally, index should put in a higher bottom or build a bit of a base before rising. A spiky upmove would not be a trend signal and will, in all probability, be only a momentary rally and therefore not worth following.

STRATEGY FOR THE DAY: Market is perched between support and resistance today and hence has a chance to move either way. Odds are not too clear and hence it is better to wait for the market to signal its intent. Day trades are a bit tricky today and hence readers should work with tight stops in case they want to play the moves intra day. Positional players have no signal for now and hence should stay away until something more concrete shows up in evidence. So today could be a day of rest or observation rather than action. Stocks likely to follow in the wake of index moves so proactive action may be required to participate in them.

Stocks to buy if market is strong:

BAJAJ FINSERVE This week has seen prices spurting up on renewed buying action. Yesterdays sharp rise confirmed that there is fresh buying momentum that has triggered such an upmove. Momentum readings are moving in sync as well. Last rise also came on high volumes. Go long.




Buy above 522

5 points

530 / 534-35

or Dips near 515-14

5 points

521 / 525

Stocks to sell if market is weak:

PURVANKARA PROJECTS: Prices of this construction counter have been struggling to show any consistent upmoves and has been pressurized by bears during any such rally attempts. Similar was the case last session when prices turned down after a rally seen last week. This has also led RSI to slip below 60 once again. Sell.




Sell below 101.7

1.5 points

100 / 99

Or rise to 103

1 point

102.5 - 101.5

MCLEOD RUSSELL This counter has been on a steady descent over the last few sessions, forming lower tops and lower bottoms. Yesterdays heavy fall has breached supports on the daily time frame and closed below it. Momentum readings have taken a beating. Consider selling here.




Sell below 254

2.5 points

250 / 248-47

Rally near 257

2.5 points

253.5 / 251/5


Sell Nifty on rally to near 5520 stop 5540 for tgt 5435.


Buy TCS above 1155 stop 1145 target 1168

Sell Biocon below 345 stop 348 target 340

Stocks in Action for the day: Coal India, RIL, L&T, JPAssociates.

Citi on Coal India E-auction accounts for 11-12% of CIL’s volumes, realizations almost 2x sold under Fuel supply agreement (FSA) Ban on E-auction unlikely, but quantity cap likely CIL’s FY12E earnings could be hit 26% in worst case scenario

UBS on Coal India Stopping of E-auctions unlikely, Worst case scenario of coal being sold at FSA prices Worst case scenario could lead to FY12/13 EPS cut of 37%/23% Target price could be cut to Rs 340

Goldman Sachs says higher domestic coal availability would lead to EPS uptick of 2-8% for utilities like Adani Power, Lanco Infra and KSK Energy

Plan Comm Sources Say Cut Down On Coal India's e-Auction, Coal India Should Adopt Pool Pricing For Thermal Coal Power Producers Also Cry Foul On Coal India e-Auction APP Writes To Plan Comm On Curbing Coal India e-Auction APP: Association Of Power Producers, Includes Tata, Reliance, Adani Power

Fin Min Sources Say Govt Considering Duty Rejig For Crude, Fuel Products Expenditure Dept Favours Duty Cut, Central Board Of Excise & Customs Opposed To Duty Cuts EGoM On Fuel Prices Likely In Next Few Days, EGoM To Consider Diesel, LPG Price Hike Govt Working On New Oil Subsidy Share Mechanism Formula To Fix % Share As Function Of Crude Oil Price Govt Share Of Subsidy Likely To Rise With Crude Prices 'Several Radical Decisions Likely In Next 2-3 Weeks'

RIL Says 'Deeply Concerned & Surprised At Fall In Output From KG-D6 Hope BP Will Help Fix The Problem

Fin Min Sources Say National Building Construction Corporation IPO Up For Cabinet Approval In 3 Weeks Govt To Divest 10% Stake In NBCC

Listing of Vaswani Industries on May 17 has been delayed as SEBI is probing in to the alleged manipulation during the issue of book building process

Rajshree Sugars and Chems Q4 FY 11 YoY Revenue up 16% at Rs 165 Cr vs Rs 142 Cr PAT up 1.4 Times at Rs 24 Cr vs Rs 10 Cr Total Exp up 14% at Rs 129 Cr vs Rs 113 Cr EBITDA Margin at 21.8% vs 20.4%

DB Corp Q4 FY 11 YoY Revenue up 28% at Rs 32 Cr vs Rs 25 Cr PAT up 25% at Rs 5 Cr vs Rs 4 Cr EBITDA Margin at 25% vs 32%

Bajaj Holding and Investment Q4 FY 11 YoY Revenue dn 16% at Rs 59 Cr vs Rs 70 Cr PAT dn 46% at Rs 33 Cr vs Rs 61 Cr

Bajaj Auto reax ML Cuts price target by 9% to Rs 1340, reiterates Underperform Macquarie Reiterates Outperform, target Rs 1650 Nomura Maintains Buy, target Rs 1810 UBS Maintains Buy, target Rs 1750

Saint Gobain Q4 FY 11 YoY Revenue up 14% at Rs 25 Cr vs Rs 22 Cr PAT up 33% at Rs 2 Cr vs Rs 1.5 Cr EBITDA Margin at 24% vs 13.6%.

Galaxy Surfuctants withdraws IPO abruptly

F&O Ban: Deccan Chronicle, Power Finance Corp, Punj Lloyd

From PTI: Fert Cos May Be Allowed To Hike DAP Prices By Over Rs 600/t

Orchid Chemicals to raise up to Rs 1000 cr via equity/FCCBs

Citi cuts JP Assoc’s FY13 EPS est. by 18%, cuts target by 8% to Rs 100

Gammon Infra board to consider the rights issue of shares


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