Monday, May 9, 2011

TECHNICAL OUTLOOK: All set for a rally...

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 global space Asian markets trading higher; Hang Seng, Straits Times up. Overall outlook for the markets today is that of cautious optimism with 5520 levels as a major support and key resistance near 5610.

Results today: HUL, Hindalco, Thangamayil Jewellery, Aurobindo Pharma, Whirlpool, ARSS Infra, Adani Power, GIC Housing, HOEC, Indosolar, Graphite India, Supreme Infra, Indian Bank, Hathaway Cables, Zuari, Mundra port, PTC India, Gokul Refoils, SRF, Mandhana Industries.

Global events to watch:

Þ 4-Week Bill Announcement

Þ 3-Month Bill Auction.

Þ 6-Month Bill Auction.

Global indices Update @ 8:

Dow Jones : 12638 (+54.57)

NASDAQ : 2827 (+12.84)

Nikkei 225 : 9838 (- 20.96)

Hang seng : 23345 (+186.7)

SGX CNX Nifty : 5578 (+30.00)

Gold (USD/t oz.) : 1496.5 (+04.90)

Nymex Crude (F) : 98.26 (+01.08)

INR / 1 USD : 44.59

TECHNICAL OUTLOOK: All set for a rally...

The reversal on Friday was along expected lines. After all the normal market moves indicate that a nine day successive fall is certainly a stretch and hence some corrective action is due. Intraday, we saw a fakeout action that confirmed that the rally would set in. there was a running of the stops during midsession after which the market headed higher, finishing better. Not much selling came thru as the market rose, probably indicating that most people are done with the selling by now. Hence the upward path could well be the path of least resistance for now.

In the last week we had mentioned about the divergence pattern on the charts. We had stated that this pattern was visible on the intra day charts but for it to appear on the daily charts a rally would be necessary. The same has begun to unfold now. The divergence pattern on the daily would be created during a subsequent fall. Now that may take a shape of a new low beneath the one created in the last week or it could set up a couple of lows above the last low where the pattern could develop too. The main point is that there is going to be at least one if not more dips before a bottom sealing can be called for. Hence we should not get carried away by any advance that may happen here. It will NOT be the start of another upward leg and therefore has to be dealt with like that from a trading point of view.

There are two ways to deal with it. The more active players can go with the rally, trading long (as they should have done from Friday) and then reversing to short when there is evidence of rally completion. The positional player however can await the completion of the rally and then short for the next decline (as this would be in line with the changed short term trend). Depending on how the reader sees himself, the suitable trade can be taken. This is for the index. For stocks the situation could be applied to those that are well correlated to the index. For other stocks, independent strategies would have to be created on a case by case basis.

On Friday we saw the PCR tick up a bit so it appears that the call shorting has eased. We also saw puts being squared, implying perhaps that no further declines are anticipated. These have to be, doubtless, long puts. (It would have the exact opposite meaning if the short puts were being squared though!). there is no further spike in IVs so it does appear that the market is not expecting more declines for now.

The most telling signal comes from the Bank nifty that opened and traded significantly better after closing near its worst on Thursday. Since Bank sector has been much the backbone of the recent rally, the shape of the move promises a decent follow thru. So this is the sector to play for the rally, in all probability.

Breakout buys today on NF are above 5580 while dip buys are around 5500. On the bank nifty it is a buy if it can stay positive compared to Friday. No need for any levels since the signal has already been flashed.

STRATEGY FOR THE DAY: The bias has shifted back to the positive and hence we look to buy dips or to buy breakouts today. Since the market is set off on a rally (seemingly) we want to trade both the approaches as we cannot afford to miss out (for aggressive players, that is). Since the NF has targets upto 5620-50 there is room for even for 1-2 day traders to take part on the long side if the market continues to rally. Bank sector stocks look well poised to continue and hence pay attention here for day trades. In case this sector does not perform, then expect the day to become range bound later. IT may also do well so keep a lookout there for some tradable stocks.

Stocks to buy if market is strong:


The sharp declines over the past few trading sessions bottomed out last Thursday and gave a strong breakout above the value area resistance around 73 levels and close above it. The surge in volumes signals the resumption of bullish trend in this counter. With momentum favoring the bulls one can look to go long.




Buy above 77

1.5 points


Or dip to 75

1.5 points



The past three sessions of indecisiveness gave a strong follow through on the upside as the bulls wrested the initiative to stage a remarkable upward traction. The spurt in volumes helped the RSI revive from 60 levels highlighting that the bulls are very much in control. One can explore buying opportunity today.




Buy above 712

6 points

722 / 729 /736

Or dip near 705

6 points

715 / 722 / 729

Stocks to sell if market is weak:


This counter exhausted its trend status after it ran into its prior top around 94 and since then its only downhill for this counter. The sharp selling interest triggered the gap area support and prices have closed below it on the daily charts. As the momentum weakens one can conclude that the bears are in no mood to spare this counter and downtrend is likely to sustain.




Sell below 80

2 points

77 / 75 /73

Rally near 82-83

2 points

80 / 78 / 76


Buy Nifty above 5580 with 5549 stop and tgt 5629-49

Buy Nifty dips to near 5500 with 20 pts stop and 60 pts target.


Buy Tata Mot above 1200 stop 1190 target 1224

Buy Andhra Bk around 142-140 stop 139 for tgt 144-46

Stocks in Action for the day: Unitech, Piramal Health, KSK Energy, SKS

SKS Microfinance Q4FY11 (cr - crore, vs - versus) -Income from operations at Rs 171 cr vs Rs 282 cr -Net loss: Rs 70 cr vs net profit Rs 63 cr -Provisions & write-offs: Rs 106 cr vs Rs 14.8 cr -Total expenditure: Rs 211 cr vs Rs 124 cr -ROA: -5.74% Vs 6.3% -ROE: -15.4% Vs 27.8%

Eicher Motors Q1FY11- Consolidated -Revenues up 33.5% at Rs 1390 cr vs Rs 1041 cr (Estimates - s 1350 cr) -PAT up 82% at Rs 73.2 cr vs Rs 40.2 cr -OPM at 11.7% vs 8.7% (Estimates - 9%)

Henkel India -Open offer at Rs 41.2/sh (CMP Rs 35.2) -Jyothy Labs acquired Henkel AG stake at Rs 20/sh and had bought 14.9% stake from SPIC at Rs 35/sh -Jyothy’s stake upon full subscription will go up to 85.87%

GVK Q4 -Net profit at Rs 36.8 cr vs Rs 33.1 cr -Net sales at Rs 461.8 cr vs Rs 488.6 cr

Piramal Life says -Board okays demerger of new chemical entity research unit -Swap ratio to be 1 share of Piramal Health for each 4 held

India Infoline Q4 -Net profit at Rs 46.8 cr vs Rs 52.2 cr -Income from operations at Rs 367.4 cr vs Rs 309.5 cr

Bhushan Steel Q4 -Net profit at Rs 288 cr vs Rs 241 cr (YoY) -Net sales at Rs 1,970 cr Vs Rs 1,610 cr (YoY)

Godrej Properties Q4 -Net profit at Rs 60 cr Vs Rs 57.5 cr (YoY) -Net sales at Rs 317.6 cr Vs Rs 150.2 cr (YoY)

GE Shipping Q4 ((Bad numbers)) Consolidated net profit at Rs 10.8 cr vs Rs 155.7 cr -Adjusted PAT at Rs 95 cr vs Rs 223 cr -Consolidated total income at Rs 600 cr vs Rs 767 cr -EBITDA at Rs 232 cr vs Rs 316 cr

Surya Laxmi Cotton Mills Q4 FY 11 -Net sales up 57% at Rs 184 cr vs Rs 117 cr -PAT doubled at Rs 8 cr vs Rs 4 cr -EBITDA Margin at 14% vs 12%

Sun Pharma Advanced Research Q4 FY11 -Revenue up 71% at Rs 58 cr vs Rs 34 cr -Net loss of Rs 9 cr vs net loss of Rs 22 cr

KSK Energy Ventures Q4 FY 11 Consolidated -Net sales doubled at Rs 337 cr vs Rs 163 cr
-PAT down 51% at Rs 49 cr vs Rs 99 cr -Total expenditure up 3.3 times at Rs 268 cr vs Rs 60 cr -EBITDA margin at 31% vs 67% -Consumption of raw material up 4.5 times at Rs 180 cr vs Rs 32 cr

Walchandnagar Inds Q4 FY 11 -Net sales up 1.4 times at Rs 287 cr vs Rs 119 cr -PAT up 1.5 times at Rs 5 cr vs Rs 2 cr

Federal Bank Q4 FY 11 -NII up 9% At Rs 448 cr vs Rs 410 cr -PAT up 46% at Rs 171 cr vs Rs 117 cr

Piramal Healthcare Q4FY11 QoQ -Revenues Rs 559 cr vs Rs 403 cr -Revenues with other income Rs 689 cr -Adjusted OPM 8% vs loss of Rs 18 cr -Reported EBITDA Rs 263 cr - resulting in OPM of 38% -PAT Rs 201 cr vs Rs 60.3 cr -Income from investments Rs 130 cr -Forex gain Rs 87.8 cr -CRAMS + 38% YoY to Rs 349 crore – India +60% YoY to Rs 190 cr -Critical care +31% YoY to Rs 116 cr –Minrad +56% to Rs 80.8 cr Q4FY11 YoY -Revenues Rs 559 cr vs Rs 941.8 cr -Adjusted OPM 8% vs 23.5% -PAT Rs 201 cr vs Rs 154 cr

NIIT Technologies’ consolidated net profit stood at Rs 182.22 crores for the year ended March 2011 against Rs 126.37 crores a year ago. Net sales were at Rs 1232.25 crores as compared to Rs 913.71 crores

GlaxoSmithKline Pharmaceuticals’ standalone net profit for quarter ended March 2011 stood at Rs 46 lakhs against Rs 161.19 crores in the same quarter previous year. Net sales were at Rs 602.90 crores for the quarter as compared to Rs 541.10 crores

Taro Pharma has filed suit against Suven Life Sciences in New Jersey District Court, USA claiming that Suven’s proposed Malathion product will infringe one or more claims of 445 patent.

Varun Industries has recommended dividend of Rs 1.80 per equity share on 2.91 crores equity shares of Rs 10 each. The above dividend if declared will be paid on or before August 26, 2011

Cadila Healthcare reported standalone net profit of Rs 610.38 crores for the year ended 31 March 2011 against Rs 503.27 crores a year ago. Net sales were at Rs 2176.23 crores as compared to Rs 1832.93 crores.

Rolta India’s standalone reported net profit of Rs 100.84 crores for the quarter ended March 2011 against Rs 194.95 crores in the corresponding previous quarter. Net sales were at Rs 370.75 crores as compared to Rs 355.06 crores.

SPML Infra has received orders from Goa Water Supply and Sewerage Board and Dehradun Municipal Corporation aggregating up to Rs 163.50 crores

AP govt snaps 1700 acre deal with firm fails to make complete payment for its knowledge project

Power Finance Corporation board approves price band of Rs 193/- to Rs 203sh for FPO ((CMP: 214))

ICICI Bank ups base rate, BPLR By 50 bps effective Saturday

Vardhman Acrylics: Board meet today to consider buyback + results

Listing of Paramount Packaging today

Aanjaneya Lifecare IPO opens today

Network18 to raise Rs 300 crore via preferential issue to promoters

Amrutanjan Health Care Ltd fixed the buy-back price at Rs.900/- ((CMP: 708))


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