Thursday, May 26, 2011

Stocks in Action for the day: RIL, GVK, HPCL, Tata Motors, Dhanlaxmi Bank.

Market Outlook: Indian markets are expected to open in positive territory with the help of constructive sentiments on the global space. On the global space Wall Street ends higher; crude advances 2% and following to that Asian markets trading higher; Hang Seng, Nikkei up. Overall outlook for the markets today is that of cautious optimism with 5325 levels as a major support and key resistance near 5450.

Results Today: HPCL, Tata Motors, Tech Mahindra, Videocon Ind, Mphasis, Aban Offshore, SUN TV, Welspun Corp, Welspun Projects, BGR Energy Systems, IGL,FDC, IFB Agro Ind, Muthoot Finance, Gujarat State Petronet, Inox Leisure, Ramky Infra, Jai Corp, Varun Shipping, Fame India, Core Projects, Ansal Properties & infra, Max India, TVS Electronics, Mirza International, Shree Ganesh Jewellery House, Bhartiya International, JBF Industries, UB Engineering, Tilaknagar Industries, VA Tech Wabag, Orient Ceramics, Dalmia Bharat Enterprise, IVP ltd, Engineers India, Igarashi Motors India, Mukand Engineers, Star Paper mills, Value Industries, Pudumjee Pulp & paper mills, Pudumjee Industries, Dishman Pharma, Shriram City Union Finance, Jindal Southwest Holdings, Kewal Kiran, Talbros Auto, Global Vectra, Varun Shipping, Fresenius Kabi.

Global events to watch:

Þ Jobless Claims.

Þ Corporate Profits.

Global indices Update @ 8:

Dow Jones : 12394 (+38.45)

NASDAQ : 2761 (+15.22)

Nikkei 225 : 9544 (+121.8)

Hang seng : 22820 (+72.95)

SGX CNX Nifty : 5358 (+10.00)

Gold (USD/t oz.) : 1529 (+01.20)

Nymex Crude (F) : 101.8 (+00.51)

INR / 1 USD : 45.38

TECHNICAL OUTLOOK: Bears unable to push lower.......

The few positives that we had mentioned in yesterday's letter were of no use as the prices began lower once again and preferred to stay down for the rest of the day. Gaps this week have been downward. Typically gaps occur in the direction of the trend and hence the trend continues to remain down. The three days of this week have seen the prices remain under the mid daily pivots every day. This once again confirms the down trend status. We will know that there is a change when these two situations don’t recur.

Another point made in yesterday's letter was about the discount between May and June. Recall that we had suggested that readers could take a short roll trade and then reverse it when the spread narrowed. The spread, in the last couple of days has moved from around +2.5 to -12 yesterday, leaving you with a nice profit if this trade had been done. This spread moved back to around -6 levels by the close indicating that either the pressure of short rolls are over or that short covering itself may have commenced.

IN the June series, the 5000/5100 put strikes added some fresh OI. These two are the highest OI strikes. Is that an indication of more dips? Maybe not, as bulk of the OI here has been formed earlier itself. The 5400 call saw some demand, we felt and looks like some call hedges may have been put on there against short futures.

Bank Nifty still holds above the support at 10330 that we had flagged off earlier. But it is doing so rather tenuously and that is not too encouraging. We continue to remain positive about this index but with reduced intensity. One solace we are drawing is from the strong showing of BOI, which, we have often found, has some leadership indication. This stock was up during the day and remained up at the close. Perhaps there is hope for the Bank nifty yet. And if this has hope, so does the index.

With 5350 broken yesterday, the odds are still wavering towards bearishness but the daily pivot is nearby (5350 only) and hence hope continues to flutter in our breasts about some redemption today. But it is the expiry day and volatility is often a feature on such days. Rolls are below par and there could be some swap action at the end that can create some confounding action. Be careful about trading today.

STRATEGY FOR THE DAY: The situation remains more or less similar as yesterday as the index has finished near points from where pushing upward may not be difficult. The Bank nifty is also hanging on for dear life. All in all, not a very good situation but not hopeless either. People are getting dispirited so sentiment is pointing towards a turn. Still looking for Banks to pull the market out of the current hole.

Stocks to buy if market is strong:

GITANJALI GEMS: This counter was one of the top gainers last session, rising smartly and witnessing a firm upmove. This rise was accompanied by huge volumes indicating a renewed buying activity. Momentum readings have received a boost as well. Look to buy.




Buy above 273

2.5 points

277-78 / 281

or Dips near 269-68

2.5 points

272 / 274-75

M & M FINANCIAL Prices have been on a steady drop since last month, forming a sequence of lower tops and bottoms. Last week they broke below the crucial support of 200-EMA and moved lower. After a brief attempt to rally in the last couple of sessions, prices turned down once again from the resistance of 200-EMA. RSI turned down from 40 levels. Sell.




Sell below 646

6 points

638-37 / 632

Or rally to 655-56

6 points

649 / 645

Stocks to sell if market is weak:

PIDILITE IND:Late April 2011 saw prices topping out from a fine rally and slipping into a corrective mode. This decline formed a lower top and prices are now on the verge of breaking below a valuation support around 150 levels. Momentum readings are taking a hit as well. Sell.




Sell below 150.5

1 point

148.5 / 147.5

Rally near 151.5

1 point



Buy Nifty above 5370 stop 5350 for rise to 5420-40.

Sell Nifty below 5337 stop 25 pts for a drop to 5280.


Buy OFSS above 2200 stop 2180 target 2230-2240

Sell DLF below 209 stop 211.50 target 204

Stocks in Action for the day: RIL, GVK, HPCL, Tata Motors, Dhanlaxmi Bank.

Tata Steel Says: Q4 India Operating Margin At 37% Q4 Europe Operating Margin At 7% Europe Operations Hit By High Interest Cost Demand Seen Strong In 2011 Led By Emerging Markets Demand Also Seen Strong On Recovery In Developed Markets Repaid Debt Worth $7.6 Bn In FY11 Q4 Group Operating Margins At 14% Have Forward Cover For $629 m

Zee News Says Revenue Boosted By World Cup This Quarter Muted Subscription Growth This Quarter (YoY) Still Funding 3 Newly Launched Channels Ad Growth Has Been Aided by Cricket World Cup FY11 Margins at 15%

Infosys Says Were Not Surprised By The Lawsuit Need To Disclose All Risks Associated With Co To SEC Working Closely With US Govt On Complaint By Employee Matter Has Been Taken Up By US Govt, Will Take Own Course Providing All Necessary Info In The Lawsuit India Issuing More Visas Than US India Should Push For More Fair Trade With US Visa Regulations Are Vague Right Now There Is Greater Focus On Visa Regime In US Today Cannot Say Being Unfairly Targeted By Senator Grassley

Fin Min Sources Say Oil Price Biggest Challenge To FY12 Fiscal Gap Aim 4.6% FY12 Fiscal Gap Aim 'Definitely Under Stress' May Look At Any Extra Borrow Need Only In October-December FY12 Budget Pegged Govt's Gross Borrow At `4.17 Lakh Cr

Fin Min Sources Say Govt Spend, Tax Collection Need More Tightening May Give `20,000-25,000 Cr More Oil Subsidy By March FY12 Food Subsidy Manageable Inflation Continues To Be Area Of Concern Moderation In Growth May Hurt Direct Tax Mop-up Have Little Choice But To Raise Fuel Prices

DLF Says Continue To Give Cautious Outlook For FY12 Moderated Calls On Capex To Be Taken During FY12 Not Lost Focus On Reducing Debt Despite Missing FY11 Tgts To Enhance Momentum In Divestment Of Non Core Assets Leasing Target For FY12 Is 2.5-3 msfModerating Land Aggregation, Capex To Reduce Debt Debt At `22,600 Cr Want To Be Net Debt Free In The Next 3-4 Years Appointed Advisors To Evaluate Sale Of Hospitality Biz Acknowledge That Debt Is Key Focus Area Prices May Be Increased To Mitigate Higher Costs DLF Took A One Time Cost Adjustment Of `475 Cr In Q4 Tax Rate Has Reduced From 28% To 23% (YoY) Mid Range Pdts To Be Converted To Plotted Developments Mid Range High Rises Not Cost Effective Right Now

Dhanlaxmi Bank's board approves issue of up to 2.07cr equity shares at a price of Rs 140/sh

Bank of India board apporves issuing 18 cr equity shares through QIP, FPO, rights issue subject to the necessary approvals

RIL to be free to price gas for the non-core users & priority sectors such as fertilizer units, power stations to get it for $ 4.2/unikt – ET

Solicitor General has reaffirmed that govt can impose preconditions of Cairn sharing royalty with ONGC in the Rajasthan block (ET)

GVK’s bid to acquire Australian based Hancock coal mines may derail as Hancock raised the valuation of its assets by around 30% on the back of rising coal prices (ET)

GMR Infra in talks with several entities including Apollo hospitals & Mayo Clinic for setting up a hospital in Hyderabad with an investment of around $ 1 billion (ET)

Telecom Dept wants the lucrative space spectrum to be made available to only a clutch of licensed users through competitive bidding route (ET)

Pratibha CRFG a JV between Pratibha Industries & China Rail First group has bagged an order of Rs 467 cr from Delhi Metro Rail Corp (BS)

Crompton Greaves to establish a greenfield power transformer & HT swtich gear plant in Brazil with an investment of $30m

Punjab Chemicals board decides to cancel the proposal of issue of 7.5 lakh Preferential Convertible Warrants (PCW) at a price of Rs 140/- to Hem-Sil Trading & Manufacturing

Vikash Metal & Power Ltd to consider right Issue

Board of Advanta India Ltd meeting on May 28, 2011, to consider and approve fund raising through FCCBs.

Rodium Realty Ltd withdrew the Draft Letter of Offer for the rights issue of 21 lakh shares

Automotive Stampings and Assemblies board approves right issue at the price of Rs 52/sh in the ratio of (5:9)

F&O ban: Deccan Chronicle, Orchid Chemicals, Power Finance Corp

RIL, Cairn India & Italy’s ENI have sought Oil ministry’s intervention to sort out objections raised by defence ministry on oil exploration activities in Krishna-Godavari, Palar & Andaman basins (DNA)

Power Grid to invest Rs 18,500 cr this year to increase the transmission capacity (Mint)


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