Thursday, June 30, 2011

Indian Markets are expected to open in positive terrain

Market Outlook: Indian Markets are expected to open in positive terrain on the back of global constructive trends. On the global space Wall Street higher after Greece vote, BofA gains following to that Asian markets trade higher; Hang Seng gains 377 points; Nikkei, Hang Seng up. On the overall basis we expect Indian market trade on cautious note with support near 5520 and any positive breakout would be expected only after 5700.

Global events to watch for:

Þ Jobless Claims.

Þ Bloomberg Consumer Comfort Index.

Global indices Update @ 8:

Dow Jones :12261 (+72.73)

NASDAQ : 2740 (+11.18)

Nikkei 225 : 9796 (- 01.12)

Hang seng : 22426 (+365.4)

SGX CNX Nifty : 5643 (+35.00)

Gold (USD/t oz.) : 1512.5 (+02.10)

Nymex Crude (F) : 94.98 (+00.21)

INR / 1 USD : 44.94

TECHNICAL OUTLOOK: Running into resistance.

All the points we made on the Nifty in our letter of yesterday remain valid for today also as the prices have traded up into the target resistance zone of 5585-5610. We have been advocating an exit long strategy on this move. But the Nifty seems in no mood to relent. Prices closed above the 5600 levels yesterday and there are clear expectations that we may see an upside gap move today. If that happens, then the rise will probably continue. We have an immediate target at 5625 but that may be easily surpassed with the current momentum, especially if there is a gap. So, is it wrong to recommend a book profit at these levels? Ultimately, market trading is about analysis, trade entries and management and proper exit. We have analyzed correctly the situation and suggested an entry for our positional players around 5280-90. We have asked them to hold on until this target zone is reached. Now we are asking them to exit on the belief that principle of safety is better than valor in the market. The trend is not so strong that it can carry substantially higher. Big moves to happen on expiry days, no doubt. But why take a risk? You are paying us to find you low risk trade set ups and strategies. And that is exactly the reason for the exit long recommendation. Those who are prone to higher risk taking can of course ignore the recommendation and go down their own road.

Where we find continued strength, like in Bank Nifty, we have been indicating continuing the trade. The prices struggled all day long yesterday but then managed to exceed the 11120 levels that we had tagged as an important resistance. The close is well above this and hence we can expect that the Bank Nifty should continue towards the next target around 11300. Readers are advised to take their long trades off as you go into that target zone. For those who wish to play the long side of the Nifty today, the safe route would be long 5700 call. There was a sizable build up in this strike yesterday in options and hence market players are clearly punting for this to happen. In addition, we continue to see substantial addition in 5600/5500 puts, implying further upmoves being possible. Therefore it looks to be a worthwhile punt.

Sugar shares were up yesterday on news. There could be some more upside in them. International prices moving past 26c/pound would be a further fillip to sugar stocks. So do keep track of this fact as we move along. Metal stocks too were in good form. Since they are coming off a trough, short covering should see them thru into today as well. Sterile has been put on the buy list by Goldman Sachs. Such events usually see a day or two of buying emerge from these circles. We mention these kind of stocks only when the news/event tallies with some sort of pattern on the chart. This is so in all of the above cases.

STRATEGY FOR THE DAY: Expiry bias is for further gains and hence one should be looking for some safe punts. We have suggested one way to deal with this but you can make your own too. Rolls have progressed smoothly enough and hence no major action from arbitrage positions is expected at the end of the day. Stocks from sugar, metals are looking positive and should be looked at for trades.

Stocks to buy if market is strong:

E.I.D PARRY: Sugar counters saw their fortunes sweetening as bulls went aggressive in this sector yesterday. The delayed participation in the rise saw the prices of this counter moving up smartly helping the prices post a strong closing on daily chart. With RSI tipping over 60 levels after a while one can expect some upward traction in this counter look to go long.




Buy above 243

3 points

247 / 250 /252

or Dips near 240

3 points

244 / 247 / 249

JINDAL SAW: Prices of this counter had received a drubbing and are in a stage of recovery. Last 3 trading sessions have witnessed strong buying action helping prices move higher. With the metals pack being favored by the buyers this counter is expected to benefit as well. The sharp rise on volumes have helped prices overcome descending trendline resistance eon daily charts and close above it. Buy.




Buy above 158

1.5 points

160 / 162 / 163

Or dips near 155.50

1.5 points

157.50 / 159 / 160

Stocks to sell if market is weak:

GLENMARK PHARMA Despite some strong movement across the market this counter has been unable to rpoduce any gainse.With last two session seeing supplies emerging prices have begun to wilt. The selling participation witnessed yesterday on declines indicate that we could witness some shorting opportunity in this counter today. Sell




Sell below 315

3 points

311 / 308


Buy Nifty above 5610 stop 5590 for a rise to 5663/5690.

Buy Nifty dips to near 5515 stop 5485 for tgt 5585.


Buy Biocon above 360 stop below 356 tgt 366-68.

Sell Tata Power below 1280 stop above 1292.10 tgt 1262-1258.

Stocks in action for the day: Diamond Power, Welspun Corp

The country's largest hydro power producer NHPC will soon finalise a joint venture with the Orissa government for setting up three Hydel projects having a total capacity of 300 MW in the state.

Diamond Power Infra has received order aggregating Rs 78 crore to supply tower materials for 400 K V quad and twin lines to be supplied over the next 6 months.

Egyptian Indian Polyester Company, a 70 per cent subsidiary of Dhunseri Petrochem & Tea, has begun the construction work at 4,20,000 tpa green site PET resin plant in port town gulf of Egypt with laying of foundation stone. The plant is likely to be commissioned by Q4 2012.

Welspun Corp has agreed to a transaction by which funds affiliated with Apollo Global Management, LLC will invest in the Welspun Group. The transaction is expected to close on or before August 12th, 2011.

Lanco Infratech now has a new headache. Close on the heels of the A$3.5-billion lawsuit filed by Perdaman Chemicals , one of its customers, the Indian infrastructure company could also likely be staring at stricter prospects, including a review of the company's export licence from Australia to India.

Agila Specialties, the specialties subsidiary of Strides Arcolab and Malaysian Bio-XCellSdnBhd have signed agreements for the establishment of a customized facility to manufacture biopharmaceuticals and sterile injectables in the Bio-XCell ecosystem in Johor, Malaysia.

ONGC will be in focus after the board of state-run explorer approved a follow-on share sale plan, but the company will file papers when it gets a regulatory approval from the government.


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