Wednesday, June 15, 2011

Stocks in Action for the day: BHEL, DrReddy, INOX, Idea, DB Realty, RIL, Suryachakra Power

Market Outlook: Indian markets are expected to open on a flat note with cautious trading range on the back of rate hike expectations. On the global space US equity markets end 1-1.5% higher; energy leads and Asian markets lacklustre; Taiwan, Kospi down. On the domestic space market expects Policy rate hikes between at best 50 and 75 basis points to control inflation which is hovering around 9.5%. On the overall basis we expect Indian market trade on cautious note with support near 5450 and any positive breakout would be expected only after 5600.

Global events to watch for:

Þ Industrial Production data.

Þ Housing Market Index.

Þ Consumer Price Index.

Global indices Update @ 8:

Dow Jones : 12076 (+123.1)

NASDAQ : 2678 (+39.03)

Nikkei 225 : 9561 (+13.51)

Hang seng : 22431 (- 64.92)

SGX CNX Nifty : 5505 (-11.00)

Gold (USD/t oz.) : 1526 (+01.50)

Nymex Crude (F) : 99.07 (- 00.30)

INR / 1 USD : 44.77

TECHNICAL OUTLOOK: Range bound market continues.

The day's range was just 40 points on the NF and that can never make for any comfortable trading. Small wonder then that most people are opting to short options to trade directions. At least, this way the amount on play is limited. This is of course, presuming that most people are trading with controlled quantity. That is one of the dangers in options trading. Readers must be careful not to let the quantity get out of hand because options can move pretty quickly- indeed a lot more faster than stock prices- and cause unduly large losses if one is on the wrong side. Hence always control the quantity when trading options as it is easy to get misled by the lower prices.

Mid cap action continued and that should have kept traders busy thru the day. News on inflation did not cause any change in directions so it appears that the market has already absorbed this. Possibly then, it could have also absorbed the possibility of a raise in interest rates at the next RBI policy due out tomorrow. This leaves us guessing- along with everyone else- about what is that trigger which will make markets move?

Our view on that is simple- stop bothering about the trigger anymore. Short some options as day as well as positional plays and collect the premium differences. As long as markets remain in this region, option premiums are going to slide. If one is scared of being short options, create ratio spreads so that there is some partial hedging at least. One could consider long options too, seeing that the IVs are low. But if no trigger shows up and dullness continues, it is possible that IVs could actually decline further from the current levels of 17%. Looking at the large OI positions at the 5600C and 5400P, it does seem like a lot of people are betting that the IVs are not going to rise.

Brief attempt was made to cross the Weekly pivot at 5516 but prices dropped from there. Now the daily pivot has joined the weekly pivot for today at a similar level, making it a slightly more important value for the day. Lets see how the index fares today. For a rise, it should stay clear above 5520. Nifty hourly chart indicates strong descending trendline resistance (Red Line) preventing the uptrend to emerge. The market has been unable to overhaul this resistance suggesting supplies at higher levels.

A Fibonacci from the high made on June 3 highlights that the prices are failing after retracing 50% of the decline. Market has again been unable to sustain above the weekly pivot indicating that there is no strength on the upside. Nifty needs to move beyond 5535 to generate some buying interest.

STRATEGY FOR THE DAY: The trading of yesterday does not lend itself to any bias. Leading counters too appear to be mixed and hence there is indeed no bias. So today is a day to go with the flow. The Table will certainly do a good job on such days. So resort to that. Stocks are following their own trends too and here too we recommend that readers use the Table levels to judge new trades and how they should be managed.

Stocks to buy if market is strong:

TTK PRESTIGE: Last session saw prices of this counter rocket to hit yet another new life time high at 2912 levels and retaining most of the gains, closed high as well. This has also led them to make a decisive move after the last few sessions range bound moves. The rise came on huge volumes. Go long here.




Buy around 2870-80

25 points

2930 / 2960-70

Or dips near 2830-20

25 points

2870 / 2890

JUBILANT FOOD: Prices formed a higher bottom last session using the support of 20-period MA and rising Gann line and bounced back sharply last session. Closing near the days high, they have retained the fresh bullish bias and indicate more rallies ahead. Momentum has spiked up afresh as well. Buy.




Buy above 814

8 points

830 / 840

Or dips to 800-798

8 points

815 / 825

Stocks to sell if market is weak:

M & M FINANCIAL Prices plunged last session on heavy sell off and closed much lower. Last several sessions have seen prices moving in a range bound manner, being unable to exceed the 200-EMA resistance. Yesterdays fall has indicated possibility of moving away from this range. Go short.




Sell below 633

6 points

623 / 615

Or rally to 641-42

6 points

633 / 628


Buy Nifty above 5535 stop 5510 for 5580

Buy Nifty on dips to near 5470 stop 5455 for tgt 5535


Buy Hcltech around 510-512 stop below 506.9 tgt 518-520

Sell Aban around 558-560 tgt 552-550 stop above 564.50

Stocks in Action for the day: BHEL, DrReddy, INOX, Idea, DB Realty, RIL, Suryachakra Power

Q1 Advance tax numbers: sources -Century Textiles likely to pay nil versus Rs 17 crore (YoY) -Century Textiles likely to pay MAT of Rs 5 crore -Oracle Financial Services pays Rs 35 crore versus Rs 30 crore (YoY)

ING Vysya Bank – Sources -ING Vysya Bank launches QIP with a total size of Rs 525 crore -ING Vysya Bank QIP floor price at Rs 342.09/sh -ING Vysya QIP leads to 10.24% dilution; to issue 1.53 crore shares -IDFC, JM Financial, Enam bankers to ING Vysya QIP

DEA Secretary R Gopalan on Fuel Prices -Considering duty rejig for fuel products, EGoM will meet shortly -Have to take decision on diesel prices fast -Delaying fuel price hike to impact inflation rate

Caraco shareholders approve merger with Sun Pharma

Bharat Heavy Electricals is in talks with Areva, Alstom, Toshiba, General Electric and Siemens to source technology for manufacturing higher rating nuclear sets of 1,000 mw and above. The power equipment maker has a tripartite joint venture with Nuclear Power Corporation of India and Alstom to manufacture 700-mw nuclear turbines

Dr Reddy's Mexican arm receives USFDA warning letter: Drug maker Dr Reddys Laboratories on Tuesday said its Mexican arm has received a warning letter from the US health regulator for violation of current goods manufacturing practice regulations. The company's Mexico facility produces intermediates and active pharmaceutical ingredients. The USFDA had inspected Dr Reddy's Mexico facility in November 2010 and later sought certain explanations from the company. However, the regulator issued the warning letter dated June 3, Dr Reddy's looks forward to working collaboratively with the USFDA to resolve the matters contained in the warning letter

Home, auto loans to become dearer; rate hike imminent: Home and auto loans could become costlier again when the Reserve Bank of India (RBI) meets on Thursday to review monetary policy against the backdrop of strong inflationary pressures. The impact of the nine rate increases since March 2010 is slowly emerging with slowing car and home sales, faltering industrial growth and rising borrowing costs. The government and the RBI have flagged taming inflation as top priority.

Cos raise Rs 2,025cr in April via IPOs, rights issues: The quantum of funds mopped up by India Inc through IPOs and rights issues fell by almost 69% in April to Rs 2,025.7 crore compared to the levels raised in March this year.

INOX Leisure has commenced operations of multiplex cinema theatre situated at City Centre, Matigara, Siliguri, West Bengal, from June 14, 2011.

Tata Communications has increased its holding in Neotel Ply to 61.5 per cent through direct subsidiary VSNL SNOSPV Pte. Consequently, Neotel has become a subsidiary of Tata Communications.

Reliance Communications has protested state-owned BSNL's move to pull the plug on interconnections between the network of both companies in Punjab and Haryana last month, and said that move impacted about four million of its customers in this region.

Idea Cellular's sales and profit growth during the March 2011 quarter surpassed analyst expectations. Reduced network operating expenses relative to revenue and lower operating loss of new circles boosted the performance. During the March quarter, net profit rose by a sharp 13% to Rs 274.5 crore from the quarter ago level. Revenue rose by 7% to Rs 4,234.7 crore.

Suzlon Wind Energy Corp, a North American subsidiary of Suzlon Energy, has bagged order for 15 S97-2.1 MW wind turbines from Canada-based Sprott Power Corp. The project is expected to be completed in March 2012.

RIL wants to dilute stake in Deccan 360: Reliance Industries will dilute its stake in freight services firm Deccan 360, which is battling rising operating costs and low business volumes. Reliance, controlled by billionaire Mukesh Ambani , had invested over 100 crore in the firm in April last year, hoping to boost the supply chain and logistics operations for its retail business. Gopinath, Reliance said the company could sell its entire stake if it got a good buyer, as Deccan 360 had failed to achieve certain milestones necessary for a fresh round of funding.

Retail sales in the US fall on weak auto demand

Tea industry wants SPTF to increase subsidy to 40%

Emami to strengthen R&D capability with new Rs 12-cr centre

Delhi govt to spend Rs 5,000 cr to set up industrial parks

K'taka targets 14 mn tonne food grain production in FY'12

F&O Ban: Deccan Chronicle, Kingfisher Airlines, KS Oils

Listings today: Symphony Ltd

Suryachakra Power inks MOU with Sunborne Energy services & Citadel research & solutions to establish a 5 MW concentrated solar thermal power project in Andhra Pradesh ((Stock active))

BASF SE clarifies for not buying any stake of the shareholders of the company via Open Offer

SCIL Ventures promoter makes a delisting offer to acquire 8.06 lakh shares with a floor price of Rs 123/sh ((CMP:123))

Oil Ministry rejects any losses to the state on the back of RIL raising capital cost of developing gas fields & to repel private capital in exploration business (ET)

Bombay HC has admitted Sahara’s appeal on Jet Airways liability to pay 18% interest on the payment due for the buy out of Air Sahara (ET)

Nippon & Sumitomo likely to retain Tata Steel as partner in India & compensate 2nd partner Bhushan Steel – ET

Indian Sugar mills to lobby hard on decontrolling sugar prices & allow exports of at least 1.5 million tonnes with the season beginning in October (BS)

Niko Resources expects the quantity of gas to go down from RIL’s by 17% (YoY) (FE)

Rushil Décor IPO of 56 lakh shares with a price band of Rs 63-72/sh opens on June 20

RBI & Govt differ on FDI limit & capping capital requirements with RBI wanting to set Rs 1000 crore for private banks & a 49% FDI limit (Mint)

CBI asks Enforcement Directorate to freeze bank accounts of Dynamix Realty a part of DB group (Mint)


No comments: