Market Outlook: Indian markets are expected to open with a negative sentiments on the back of unconstructive mood on the global peers. On the global space The Dow and S&P 500 closed out their sixth week of losses on Friday as further signs of a global economic slowdown set the stage for more losses ahead following to that Asian markets trades lower; Shanghai falls over 1%. We expect Indian market support in the range of 5420-5375.
Results Today: Idea Cellular, TFCI.
Global events to watch for:
Þ No major events to eye on.
Global indices Update @ 8:
Dow Jones : 11951 (-172.4)
NASDAQ : 2643 (-41.44)
Nikkei 225 : 9441 (-73.10)
Hang seng : 22276 (-144.2)
SGX CNX Nifty : 5462 (- 23.00)
Gold (USD/t oz.) : 1533 .4 (+04.20)
Nymex Crude (F) : 99.07 (- 00.22)
INR / 1 USD : 44.72
TECHNICAL OUTLOOK: Bearish start to the week.
After a few days of minimal action the market showed some tendency to slip lower on Friday. The downmove led to a slight weakening of the weekly picture. Not much though, as the range was still limited. But the important thing is, the week ended negative and that will have a bearing on how people think. Now, the Dow has got socked for yet another week (it is the sixth down week in a row there) and when seen in that context, we should be beginning the week soft.
The daily chart of the NF is shown here with modified Gann angle lines. It can be seen that the support line has been successful in containing the previous big declines into it. now it is being approached once again. Current level of this trendline is at 5435- within hailing distance of the current levels. We do find in the past that the line has been penetrated some before rallies set in. Hence we have to allow for similar things this time around also, if it cracks. A 1x3 angle line suggests a drop till 5365 is possible without violating the support concept of this line. Weak overseas market advises would certainly hold out for this. Other indicators are also pointing towards more declines. The market would have to really make some strenuous efforts to negate these negative build up of signals.
Option positions are loaded against any advances. Calls were piled on end of last week. The PCR dropped sharply to 1.23. But IVs are holding steady around 16.5%. They are on the lower end of the spectrum but talks with professional option trading desks indicate an expectation that they may recede further. Hence there is continued shorting even at these levels. We have been suggesting some short options in the last week and that should have panned out rather nicely as the straddles and strangles have lost value during the week. But we feel we are not at a point where IV levels are low enough and possibility of a trended move high enough to warrant a long option position to be created. Can now go long 5500 straddle or perhaps 56-54 strangle if lesser premium payment is to be made. Note that the idea is to close out the option opposite to the direction that the market moves (i.e. close out the long call if the market moves down and vice versa) from these straddles and strangles.
Stocks appear poised to decline on a broader front as the ones flying bullish flags are few in number. More importantly, sector action appears visible in Banks, Cement, Real Estate, Mining, Metals etc. That again puts the odds in favor of declines for this week. so have a default "sell" setting on your trades at the start of the week!
STRATEGY FOR THE DAY: Prices, volumes, momentum, patterns are all lining up on the bearish side and overseas advises are also weak. it would therefore be very difficult for the market to swim against such a strong current. Look to short weak counters as well as active counters. Check the Table to see the ones that are breaking the "sell Below" levels and go after them. The ones breaking the second support are to be deemed very weak and they should be tracked for selling further on intra day rallies. Buys are mentioned but do keep strict stops on them if taken.
Stocks to buy if market is strong:
INDIA INFOLINE This financial counter has been showing some bullish intent. With last week moving in range bound manner this counter continues to hold bullish prospects and has given a positive closing. The volumes are also healthy signalling that we could explore buying opportunities today. Momentum retains bullish flavor signaling a buy.
| Entry | Stop | Target |
| Buy above 83 | 1.5 points | 85/87/88 |
Stocks to sell if market is weak:
GUJURAT FLOUROCHEM: This counter has been unable to sustain the bearish sentiment resulting in a steady declines. Attempts to move higher has been met with supplies triggering a wave of bearish sentiment. With charts indicating that last week was not encouraging one can expect the fall to continue. Sell
| Entry | Stop | Target |
| Sell below 352 | 3 points | 346/342/340 |
| Or rally near 357 | 3 points | 352 / 348/346 |
CENTRAL BANK: Banks have been suffering from the intense bearish onslaught for past few trading sessions. Fridays decline saw the prices caving in . This midcap banking counter saw some intense selling pressure pushing prices lower. With RSI unable to revive has moved below 40 levels signalling that the bears are into the act again inviting us to go short.
| Entry | Stop | Target |
| Sell below 116.50 | 1 point | 115/114/113 |
| Or rise near 118 | 1 point | 116/115/114 |
NIFTY RECOMMENDATIONS FOR THE DAY:
Sell Nifty below 5450 stop 5475 for fall to 5395.
STOCK FUTURES RECOMMENDATIONS FOR THE DAY:
Sell Biocon around 364-367 stop 369 tgt 357
Sell Auro Pharma below 176 stop 178.50 tgt 170
Stocks in Action for the day: RIL, Atul Auto, IGL, HCL Info, Maruti
Indonesian nightmare for Tata, Adani, JSW, Lanco: The Indonesian government has, in an order, decided to link the price of coal exported from the country with a benchmark based on international prices of coal. Mining companies will have to modify all their old contracts by September 23, 2011, the Indonesian government has said. That puts currently operational plants of Tata Power (the Mundra ultra mega power project in Gujarat), Adani Power, (also in Mundra), JSW (in Ratnagiri, Maharasthra) and Lanco Infratech (Udupi) in the line of fire because most of their feedstock comes from Indonesia. Indonesian coal had been traditionally sold at a discount of around 15% compared with fuel from Australia and South Africa. The overall implication would be complex to assess as it will depend on individual companies’ import content, proportion of non-regulated supply and the extant bid on escalatability of coal prices. Merchant power sales are price-sensitive, and while sellers may take some hit on their margins, overall volumes could certainly dip
Govt sources say:- DEPB extension notification by Monday -FM approval underway for extension of proposal -Fixed 3 months purely as transition arrangement -'Come what may, DEPB ends on September 31, 2011' -All items covered by DEPB will get covered in new scheme -DEPB cost Rs 8,520 crore in FY11 -Switch to duty drawback scheme in 3 months
RIL buys Bharti’s 74% stake in life and non life insurance JV for undisclosed amount Sources Say AXA to retain management control in Bharti AXA life & general -Company operations will remain status quo -No operational changes in terms of employees -Time-line of deal no yet finalised Deal subject to IRDA approval -IRDA recently released M&A guidelines for non-life companies
IRDA on RIL-AXA deal -Companies yet to make a formal application to the regulator -Cannot comment on time-line of deal approval -Not concerned with valuation of deal -Valuation of deal is a matter between the companies -Must be satisfied that said co 'fit & proper' to run insurance business -Said company must have technical competencies to run insurance business
MoEF to Maharashtra Govt -Initiate action against Lavasa under Environment Act -Lavasa constructed on 681 ha without environment clearance -Lavasa constructed despite show cause notice from MoEF -MoEF issued show cause notice to Lavasa on November 25, 2010
SC to hear Kanimozhi and Sharad Kumar bail plea. This is their last chance to relief. If SC gives bail will open up a window for the others.
Maruti Suzuki’s management accepted the demand of the striking workers to form a separate union with no external affiliation with any political party or have outsiders as members (BS)
Oil Ministry has supported Saumitra Chaudhari panel’s recommendation to implement notional price pooling of natural gas for the fertilizer sector (FE)
GAIL set to bid for acquiring 20% stake in shale gas assets with deal valued at around USD 400-500 million (TOI)
Indo Asian Fusegear to consider the conversion of warrants in equity shares
Castrol India: Dividend of Rs 8/sh
F&O Ban: Deccan Chronicle, Kingfisher Airlines, KS Oils, Punj Lloyd
Jyoti Structures Africa subsidiary of Jyoti Structures has bagged two contracts from the South African power utility Eskom for Rs 225 crore
Southern Ispat & Energy board has approved the allotment of 8.8 crore equity shares each underlying 29.4 lakh GDR's issued in the name of Bank of NewYork Melton
HCL Infosystems board has approved the sale of the company's Digital entertainment business as a going concern to HCl security ltd
TV 18 India has sanctioned the scheme of arrangement between TV 18 India ltd & Web 18 Software services Ltd
Cambridge Solutions ltd board has invocated the corporate guarantee of USD 66 million on the company by Xchanging UK ltd.
Auto Unions in the Manesar-Gurgaon belt will observe a two hour tool down strike on Tuesday in support of the agitating employees of Maruti ((Unions from Hero Honda, Scooter India, Rico Auto, Endurance Auto, Satyam Auto to join the strike))
Vedanta to invest Rs 10,000 crore more in Orissa to complete its aluminum smelter & power plants at Jharsugada in Orissa (ET)
Atul Auto plans to invest Rs 200 crore to foray into the LCV segment & the products are likely to hit the road by December next year (ET)
Indraprastha Gas (IGL) has served a legal notice to the petroleum sector regulator for granting city gas distribution licenses in the absence of key members on its board allegedly against the recent SC order.
DGH has refused to recognize RIL’s three new natural gas discoveries at its KG- D6 block were revival of the low outputs depends on the production from the new discoveries (ET)
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