Wednesday, June 1, 2011

Stocks in Action for the day: COAL India, Ambika Cotton Mills, Suryajyoti, JSW Energy, SKS, Kingfisher, Tata Invest

Market Outlook: Indian markets are expected to open in positive terrain and trade in ranged manner. Good Monsoons expectations could be the possible trigger for our economy, We believe that lower-than-expected domestic GDP data is discounted in recent underperformance in markets. On the global space US stocks gain on speculation about Greece bailout package while Asia trading mixed; Hang Seng down, Nikkei flat. Overall outlook for the markets today is that of cautious optimism with 5510 levels as a major support and key resistance near 5600.

Economy Update: India’s economy grew 8.5 per cent in fiscal year 2010/11 below the government's estimates of 8.6 per cent. The economy grew 8 per cent in last fiscal. For the quarter ended March 20011, the GDP grew at lower-than-expected 7.8 per cent against 9.4 per cent in the same period a year ago.

Global events to watch:

Þ Motor Vehicle Sales

Þ Challenger Job-Cut Report

Þ ISM Mfg Index

Þ Construction Spending

Global indices Update @ 8:

Dow Jones : 12569 (+128.2)

NASDAQ : 2835 (+38.44)

Nikkei 225 : 9695 (+02.19)

Hang seng : 23630 (- 54.04)

SGX CNX Nifty : 5564 (+12.00)

Gold (USD/t oz.) : 1532.5 (- 04.30)

Nymex Crude (F) : 103.09 (+00.75)

INR / 1 USD : 45.03

TECHNICAL OUTLOOK: Bulls into action...?

We waited patiently for a rally to emerge and were rewarded with some brisk moves yesterday. About time, as we had also stated in yesterday's letter. The market really stretched it but one was relieved to see it come thru. The rise was strong, speeding steadily towards the monthly pivot- something we are seeing after a few months! The attached chart of today is NF 60 minutes where the arrow shows how the turnaround happened rather nicely and as laid out by the technical set up. After having met with resistance at the bands several times in the past, the prices cross it and then tap down into it to take fresh support and then zoomed away. Now that we are at the monthly pivot, what is the probability? Can it go thru and continue higher? Certainly looks possible but having reached the monthly pivots, one should be alert for some halt too. This is true for the Bank Nifty too. The quarterly pivot in this case too is around 10950. So if the markets have to move higher, then they will really have to show some extra strength.

Option markets seem to be suggesting that though. The IV has dropped a couple of points in recent days so market seems to be rather comfortable with the rise. Lots of Puts got added yesterday, taking the PCR to 1.3. Certainly a far cry from the last month when PCR was consistently below 1. Yesterday's put additions appear to be clearly directional in nature (unlike the earlier days of option action). So looks like market is becoming a bit decisive here. The breadth was very good yesterday, with all sectors in the blue and almost the entire list from Futures being in the positive. Is that some kind of overkill? Could it be some sort of NAV ramping for the month by funds? These are nagging questions that refused to go away from the mind.

Next up for resistance is 5680 levels, which still leaves enough room on the top. It is possible that index may move slower while action shifts to the stocks. Retail could be back in action. After all they have been waiting for quite some time to get back in the game. If this is so, then we should see small cap stocks from futures list as well as good momentum action in the B group. Watch for this as a confirmation of such a situation before acting. On the lower side, daily pivot at 5520 would offer first support while gap area support around 5480 would be next. dips into these zones will remain buying opportunities for today.

STRATEGY FOR THE DAY: Retain the bullish bias of yesterday but do watch whether pullbacks continue to carry further and break supports. if that happens then it is better to close out long positions and wait by the sidelines. Shorts are indicated only for aggressive players. Watch the signal as mentioned to engage in momentum investing plays. Unless it looks like the trend may sustain for a few days or more momentum plays become garlands in the neck. Sugar and Fertiliser stocks looked to be action. Maybe some govt announcements on the way, perhaps. Check and trade.

Stocks to buy if market is strong:

RAYMOND: This counter witnessed a two way move but the bulls won the battle by a great margin and prices closed on a high note. Looking at the chart we note that they dipped down towards support at 200-EMA and finding some heavy buying near the intraday low, bounced back sharply to end above a strong descending Gann line resistance. Consider going long here.




Buy above 361

4 points

369 / 373 / 376

or Dips near 354-52

4 points

360 / 363 / 366

SUN PHARMA ADV: Prices spurted sharply last session and moved to new swing highs. The rally was accompanied by a nice surge in volumes as well and RSI also has crossed 60 levels. Overall setup looks good for further up run. Buy.




Buy above 90

1.5 points

92 / 93

Or dips to 88.5

1.5 points


Stocks to sell if market is weak:

M & M FINANCIAL: Sharp sell off in this counter has triggered yet another fresh sell signal here. On the chart we see that prices have turned down from the resistance of the 200-EMA region and has closed lower. RSI has made a fresh downturn from 40. With both price and momentum taking a beating, we advise going short here.




Sell below 644

6 points

634 / 629 / 625

Or Rally near 650-652

6 points

642 / 637-36


Buy Nifty above 5565 with stop 5540 for rise to 5615-20

Buy Nifty on dips to near 5520 with 5505 stop for rise to 5592


Buy Ambuja Cem around 138-139 stop 136 tgt 143.

Sell Cipla below 327 stop 329.50 for tgt 321-319.

Stocks in Action for the day: COAL India, Ambika Cotton Mills, Suryajyoti, JSW Energy, SKS, Kingfisher, Tata Invest

Coal industry looks past Japan dip as Asia demand booms: Coal producers in Indonesia and Australia are racing to ramp up output to capture Asia's booming demand for power that has quickly filled the gap left by a drop in demand from quake-hit Japan. Exports of coal from Indonesia, the world's top exporter of thermal coal used to fuel power stations, were diverted to China in the wake of Japan's devastating earthquake and tsunami in March, showing the hunger of the rest of Asia to soak up available spot cargoes

ACB (India) files papers for Rs 1,000 cr IPO: ACB (India), which operates coal washeries, on Tuesday filed preliminary papers with market regulator Sebi for an initial share sale, which could garner over Rs 1,000 crore. Global coordinators for the issue are IDFC Capital, Edelweiss Capital, JP Morgan India and Macquarie Capital Advisers (India) According to the statement, the Book Running Lead Managers to the issue are Axis Bank, ICICI Securities and YES Bank.

Hind Rectifiers reported net profit of Rs 6.89 cr for the year ended March 2011 against Rs 4.08 cr in the same period a year ago. Net sales were at Rs 45.39 crore as compared to Rs 28.13 crore last fiscal.

Ambika Cotton Mills reported net profit of Rs 42.44 crore for the year ended March 2011 against Rs 17.63 crore in the same period a year ago. Net sales were at Rs 318.52 crore as compared to Rs 208.07 crore.

Suryajyoti Spinning Mills reported net profit of Rs 36.6 crore for the year ended March 2011 as against Rs 15.83 crore in the corresponding period last fiscal. Net sales were at Rs 269.53 crore as compared to Rs 394.26 crore.

Cummins India reported standalone net profit of Rs 590.99 crore for the year ended March 2011 against Rs 433.87 crore previous fiscal. Net sales were at Rs 3945.44 crore as compared to Rs 2844.87 crore.

Aditya Birla Nuvo reported standalone net profit of Rs 379.69 crore for the year ended March 2011 against Rs 283.40 crore a year ago. Net sales were at Rs 6283.06 crore as compared to Rs 4702.36 crore.

Mandhana Ind sees FY12 net up 35%, may seek retail JVs: Mandhana Industries has already announced plans to launch Salman Khan’s 'Being Human' brand of apparels through own stores this year, but has put its earlier plan to launch outlets to retail its own textiles and garments on the back burner. It may now seek retail joint ventures with international brands, some of whom may be its existing clients. The expansion at Tarapur is expected to be completed by September-October, while the Baramati unit will be operational by January next year. Post this expansion, Mandhana Industries will have garment manufacturing capacity of 10 million pieces a year, compared with 3.6 million now. The company currently has annual yarn dyeing capacity of 3 million kilogram, weaving capacity of 36 million meters and processing capacity of 52 million meters.

Indian ADRs: Mah Satyam up 6%, Patni up 5.5%

Auto stocks in focus on May sales data

Bosch to consider a special dividend

F&O ban: Deccan Chronicle

Tata Sons ups stake in Tata Investments to 68.26% versus 65.21% via warrants conversion

PSU Oil companies to cut ATF prices by about 4% effective midnight

SKS Microfinance plans to charge a processing fee of 1% of the loan amount on all micro loans offered across India

Sujana Towers board has approved the resolution to convert 2.7 crore convertible warrants into 2.7 crore in equity shares at a premium of Rs 10/sh

Airlines to face penalties on the failure to pay the development fees to GMR infra with Kingfisher owing a development fee of Rs 105 crore (ET)

Coal India has rejected Adani group’s proposal to form a JV as the co cannot enter into a JV on a single proposal basis from a private company & it has to be done through the expression of interest mode (ET)

Oil surge fuels Vedanta’s Cairn buy resolve as company may accept stringent royalty terms as crude prices have shot up 30% since the deal was announced (ET)

JSW Energy has called off its USD 418 million deal with Canadian resources company CIC Energy (BS)

IDFC to wind up its project development business by diluting stakes & booking profits (BS)


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