Thursday, May 5, 2011

TECHNICAL OUTLOOK: Bears continue to hold the fort..

Market Outlook: Indian markets are expected to trade flat in negative terrain on the back of mixed support from the global counters and uncertainty in domestic economic growth rates as investors fret about rising funding costs with policymakers determined to rein in prices sacrificing economic growth. We expect 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 Wall St selloff hits three days as economic worries mount and following to that Asian markets trading lower; Hang Seng, Straits Times down. Overall outlook for the markets today is that of cautious optimism with 5490 levels as a major support and key resistance near 5580.

Results today: Cipla, Bharti Airtel, Canara Bank, Kotak Mahindra Bank, Andhra Bank, Eveready Industries, Mid-Day Multimedia, Zydus Wellness, Mirc Electronics, KSB Pumps, Jindal Polyfilms, FACT.

Global events to watch:

Þ Monster Employment Index

Þ Jobless Claims

Þ Data on Productivity and Costs

Þ Bloomberg Consumer Comfort Index

Global indices Update @ 8:

Dow Jones : 12723 (- 83.93)

NASDAQ : 2828 (- 13.39)

Nikkei 225 : 1004 (+154.4)

Hang seng : 23227 (- 88.23)

SGX CNX Nifty : 5512 (- 24.00)

Gold (USD/t oz.) : 1517 (+02.30)

Nymex Crude (F) : 108 (- 00.59)

INR / 1 USD : 44.59

TECHNICAL OUTLOOK: Bears continue to hold the fort..

The market halted near the zone that we had indicated but could not really put together much of a rally. Not that much was expected. In fact we were quite explicit about this aspect, stating that " those who wish to bottom fish for a quick up trade can engage in that. But realize that you will be going against the trend and hence running a greater risk". The closing yesterday was neither here nor there. the low needs to get sealed in. That will not happen without a divergence pattern occurring on the oscillator charts. It has already begun showing up in the intra day charts but for it to show on the daily charts we do need that rally to come thru. the US markets were placed weak, having come off the open on poor jobs report. But is anyone really paying attention to that? We doubt it. The commodities are coming off some too- both Gold and Silver took a bashing in the last couple of days. So it appears that all asset classes are in the mood to retreat some. Maybe the risk-on phase is receding some.

Be that as it may, the main thing is that we don't have confirmation of a low yet. We will have that if the NF can move above and sustain above 5550. That is the nearest Gann angle support to recapture on the daily charts. But SGX Nifty is placed lower at the time of writing and if it stays that way till the open then we are probably continuing the decline. The 62% retracement level of the last advance holds out for 5470 as the next level. With FII figures continuing to be negative, the sentiment may remain subdued enough to carry prices to those levels today. What this will do is to postpone the rally a bit more. We find a minor trend change date for the 6th and hence the decline could extend till Friday. Read yesterday's index analysis again and view it along with today's. At points of change in the trend, there will always be multiple probabilities.

The option action is in support of more declines. Substantial call shorting action was visible yesterday- right down into the 5500 strike too. PCR is at 0.97. Recall our earlier updates when we have stated that a PCR around 1 is always a dangerous situation for bulls- it often heralds some sharp declines. So like we said yesterday, don't be adventurous about the buying, just be a guerilla. Hopefully that would have been heeded and overnight longs are not held. After all, the index did retrace sharply from the day's highs, showing that selling was still afoot.

Bias continues to remain negative as the market did not do enough to reverse the bearish attack. Hence we look for some lower targets too today. We have seen 6 down days in a row and of the last 9, just one has been a gaining day. Trend is getting stretched out here. Record session count pattern will begin to kick in now. Yesterday was a spinning top type of pattern. When these start to appear after a trend, the end is near. So one can engage in shorts but the risks are higher. If in doubt stay out is a good maxim to follow at such times.

STRATEGY FOR THE DAY: As mentioned, the low not being locked in can lead to some more declines. Beware of a gapped down open that does not see a follow thru. That is a typical way for many downmoves to end. Alternatively, a smaller range day would be another signal. Sentiments being tentative, moves are unlikely to last. So if day trading then look to lock in profits soon as you see them. Stocks will move with the news. But Auto, Realty should continue to take a licking. No momentum plays for now.

Stocks to buy if market is strong:


Prices have been on a consistent rise in the last couple of months. Yesterdays rally managed to exceed a primary Gann line resistance and has closed above it. RSI has ticked up above 60 once again, looking bullish. Volumes were high during the rise. Go long.




Buy above 170

2 points

173 / 174

Or dips to 168

1.5 points

170.5 / 171.5


A phenomenal rally in this counter seen during April 2011 catapulted prices to a high of 159 in three weeks time. Topping out there as the trend had stretched out quite a bit, prices slipped into a corrective phase thereafter. Yesterday they managed to bounce back sharply after having held strong supports on the daily time frame. With the trend getting a fresh boost, go long.




Buy above 145

1.5 points

148 / 149

Or dips to 142.5

1.5 points

145 / 146

Stocks to sell if market is weak:


Banking counters have been tanking heavily this week and yesterday too we saw a massive fall here. This counter slipped afresh after couple of days breather, breaking below supports and closing lower. RSI has broken crucial support at 40, indicating growing weakness. Sell.




Sell below 556

6 points

547 / 543

Or rally to 565

5 points

558 / 554


Sell Nifty around 5520 with stop 5535 for a decline to 5470.

Buy Nifty around 5460 with 20 pt stop for rise to 5554.


Buy Sintex above 183 stop 180.50 target 188

Sell ACC on rallies to near 1030-33 stop 1041 for tgt 1008

Stocks in Action for the day: OMC Counter, Jyothy Labs, Tinplate, Ranbaxy, Piramal

Holcim says no plans to merge ACC and Ambuja Cements -Merger and recent stake purchase: Management commented that it has no plans to merge ACC and ACEM. The recent stake purchases in both ACC and ACEM, notwithstanding relatively firm stock prices, were done to increase its stake to 50%. As per management, as provisions pertaining to merger control (in current form) under the Competition Act become effective in June 2011, it will be difficult to raise its stake in these companies. With 50%+ stake in each of these companies, it will be considered a single economic entity and can work in areas of improving asset footprints and efficiencies with regard to logistics across the two companies. In our view, this could affect the near-term stock performance of ACC and ACEM, which have been supported by expectations of continued purchases by Holcim.

Lenders begin to hike rates; PNB, YES Bank raise base rate & PLR by 50 bps: Taking a cue from the Reserve Bank of India, commercial banks and housing finance companies have started raising lending rates. Just a day after the central bank raised key policy rates and the savings bank account rate , Punjab National Bank and YES Bank increased lending rates for existing and new customers while LIC Housing Finance hiked rates for new customers.

Diesel & petrol may cost Rs 5 more from next week: Fuel prices will rise next week as the government is planning to increase the state-set price of diesel by up to Rs 5 per litre while oil companies are preparing to raise petrol rates by a similar amount after assembly polls end on May 10. The empowered group of ministers (EGoM) on fuel prices, which fixes the price of diesel, cooking gas and kerosene, will meet on May 11 to consider the oil ministry's proposal to raise diesel prices by Rs 5 per litre - the first increase since June last year. The ministers would also consider increasing the price of cooking gas and kerosene.

Silver, gold fall for third day from record highs: A 5% tumble in silver on Wednesday marked its biggest three-day loss in five years, and dragged gold down, as speculators continued to dump long positions after margins requirements were hiked early this week. Silver has now lost 20%, the conventional criteria for a bear market, since it rallied to a record high near USD 50 an ounce last Thursday. Gold also notched its worst three-day decline since January despite a broad dollar drop and a ramping up of gold reserves by Mexico.

Hero Honda Motors reported standalone net profit of Rs 1927.90 crores for the year ended March 2011 against Rs 2231.83 crores in the same period a year ago. Net sales were at Rs 19245.03 crores for year as compared to Rs 15758.18 crores.

IRB Infrastructure Developers has received letter of award for the project of six laning of Ahmedabad to Vadodara. The company is required to form a special purpose vehicle for this project as per provisions of the bid within 30 days of LoA.

Goldman Sachs on Ranbaxy -Potential fine of USD 1 billion to settle FDA charges relating to Lipitor-US Federal prosecutors negotiating settlement with Ranbaxy

PNGRB says -PNGRB opposes RIL's take-or-pay pacts with city gas companies -RIL's push for take-or-pay to harm city gas cos -Urge Oil Ministry for flexible KG-D6 offtake by city gas cos -Also seek changes in gas allocation policy for city gas -PNGRB: Petroleum & Natural Gas Regulatory Board

RBI gov says -NBFCs have grown in size, sophistication, interconnectedness -In light of global crisis, need to revisit NBFC regulation-Usha Thorat Panel on NBFCs may submit report soon

Piramal -Piramal Healthcare to mull merging Piramal Life Research unit on Friday -Piramal Health holds 17.88% stake in Piramal Life Sciences

Alstom says -Alstom-shanghai electric JV will manufacture only boilers -Alstom-shanghai electric JV will take atleast 1 year for approvals -Alstom-shanghai electric JV will not be in conflict with BHEL partnership

NTPC CMD: -Confident that Ansaldo order will be sorted out soon -Worried that KG D6 output may not be enough -Our Gas projects of 12th plan will get affected -Am sure govt will make its own assessment of gas output at KGD6 as well -Confident we will be able to get gas allotment very soon

Brokerages on Hero Honda ((Totally divided)) -Morgan Stanley says numbers in line, prefer Bajaj over Hero Honda -Credit Suisse maintains Outperform, ups target to Rs 2348 from Rs 2294 -Macquarie maintains Underperform, target Rs 1550 Goldman Sachs maintains Sell, target Rs 1590 -BoA ML maintains Buy, ups target 4% to Rs 1970 -UBS maintains Buy, target Rs 2200 -Standard Chartered maintains In-line, target Rs 1764 -Citi maintains Sell but raises target to Rs 1501 from Rs 1443 -RBS maintains Buy, cuts target to Rs 2002 from Rs 2107

Torrent Power Q4FY11 YoY (cr - crore, vs - versus) -Total Income up 0.3% at Rs 1722cr vs Rs 1717cr -Expenditures up 3% at Rs 1268cr vs Rs 1234cr -PAT up 18% at Rs 339cr vs Rs 287cr -OPM at 32% vs 35%

Tinplate Q4 -Revenue dn 30% at Rs 169 Cr vs Rs 241 Cr -PAT dn 81% at Rs 1.4 Cr vs Rs 7.4 Cr -EBITDA Margin at 10.5% vs 11.8% -Recently Tata Steel stake in Tinplate has gone up to 59.45% from 42.88% earlier.

Nandan Exim Q4 -Revenue up 60% at Rs 192 Cr vs Rs 120 Cr -PAT at Rs 5.4 Cr vs Rs 2.6 Cr EBITDA Margin 10.4% vs 12.2%

Andhra Papers FY 11 -Revenue up 21% at Rs 767 Cr vs Rs 634 Cr -PAT down 17% at Rs 45 Cr vs Rs 54 Cr -EBITDA Margin at 17.2% vs 20.3%

Oberoi Realty Q4 FY11 -Revenue up 61% at Rs 263 Cr vs Rs 163 Cr -PAT up 31% at Rs 137 Cr vs 105 Cr -EBITDA Margin at 53.2% vs 63.2%

Kennametals India Q4 FY 11 YoY -Revenue up 27% at Rs126 Cr vs Rs 99 Cr -PAT up 43% at Rs 20 Cr vs Rs 14 Cr -EBITDA Margin at 24.6% vs 22.2%

Technocraft Industries Q4 FY 11 YoY -Revenue up 22% at Rs 133 Cr vs Rs 109 Cr -PAT at Rs 8.3 Cr vs Rs 3 Cr -EBITDA Margin 14.4% vs 14.9% -Tax expenditure down 58% at Rs 2.5 Cr vs Rs 6 Cr

RIL -Ex-Dividend of Rs 8/sh -Block deal: Promoter entities Priyesh Commercials & Reliance property management services bought 65 lakh shares from Radha Krishna Ent ((Don’t know if Radha Krishna is also promoter entity)) -It plans to invest USD 12 billion in the chemicals business to tap the rapidly growing market for hygiene & healthcare products & aims to lead the world rubber industry (ET)

Ashoka Buildcon has begun collecting toll from May 04, 2011 for NHAI project of four to six laning of Belgaum-Dharwad section.

Tata Communications has launched its Virtual Proxy (vProxy) managed security service in partnership with Zscaler. The vProxy managed service shortens the time and reduces the expense associated with enabling proxy services and provides a solution that works for all users - both on-net and off-net.

Garware Offshore Services' vessel M.V. 'Kailash' has been awarded four year firm contract in Brazil. The approximate annual value of the contract stands at Rs 38 crores.

BIG CBS, a joint venture between Reliance Broadcast and CBS Studios International, has launched its three channel bouquet with BIG CBS SPARK.

Tube Investments of India has reported gross turnover of Rs 3130 crores for 2010-11 and operating profit before exceptional items moved up from Rs 169 crores to Rs 221 crores.

Navin Fluorine International has acquired controlling stake in Manchester Organics, a U.K-based company, engaged in specialized chemical research, at a price of 4.335 million pounds.

The High Court of Andhra Pradesh has sanctioned the scheme of amalgamation for merger of Deccan Chronicle Holdings's wholly owned subsidiaries, Deccan Chargers Sporting and Odyssey India with itself.

Sambhaav Media has received a letter of intent from Gujarat State Road Transport Corporation for implementation of Public Entertainment System on build, own and operate basis in 2000 buses and 50 bus stands.

Bombay HC orders Jet to pay Sahara Rs 478 crore for Air Sahara takeover, dismisses Sahara claim of Rs 2000 crore: Jet Airways will have to pay Rs 478 crore to Sahara India within two weeks as dues for the takeover of Air Sahara, the Bombay High Court said on Wednesday.

Ex-dates - BajajCorp: Stock split from Rs 5 to Rs 1

Canara Bank, OBC, Bank Of Maharashtra hike base rate by 50 bps

Siemens AG declares numbers, says India revenue grew at 19%

State set to raise Floor Space Index for suburbs by 0.33 & FSI of 3 for old buildings in the next few days (ET)

PVR set to sell Phoenix Mill property for over Rs 100 crore (ET)

JK Paper is exploring its options to build a 2-3 lakh tonne pulp mill in South Asia valued at around Rs 1000-1200 crore (ET)

Unitech to invest Rs 2000 crore in new projects this year (BS)

ONGC in talks to acquire oil sands reserves in Canada & may increase its investments in Kazakhstan to help offset declining production (FE)

NMDC to buy stakes in 2 Australian mines by the end of this month (Mint)

Bharati JV starts buying land for its joint venture partner Bengal shipyard in East Midnapore with the cost valued at around Rs 2000-2500 cr (DNA)

Global private equity giant is likely to acquire at least 26% stake in Jyothy Laboratories for Rs 667 cr triggering an open offer to minority share holders (TOI)

Tata Steel proposed Rs 22,500 crore investment for a 4.5 million tonne integrated steel plant in Vietnam as the issues have been finally ironed out after a four year wait (HT)


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