Thursday, June 16, 2011

TECHNICAL OUTLOOK: Bears take control.

Market Outlook: Indian markets are expected to open with a gap down on the back of global selloff and trade cautious on the back of rate hike expectations. On the global space Global stocks, euro fall on wrangling over Greek aid while Asian markets following the suit. RBI is likely to hike its repo rate by 25 bps today. It is likely to follow this up with two more rate hikes of 25 bps each in August and September before taking its foot off the rate hiking pedal and pausing to assess the impact of past tightening measures on inflation. 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 Housing Starts.

Þ Jobless Claims.

Global indices Update @ 8:

Dow Jones : 11897 (-178.8)

NASDAQ : 2631 (-47.26)

Nikkei 225 : 9494 (-80.17)

Hang seng : 22005 (-337.9)

SGX CNX Nifty : 5391 (-61.00)

Gold (USD/t oz.) : 1527.5 (+01.30)

Nymex Crude (F) : 95.44 (+0.63)

INR / 1 USD : 44.68

TECHNICAL OUTLOOK: Bears take control.

Then market opened with a down gap and was never really able to make it up for the rest of the day. This is important. We notice that this is the 4th downward opening gap since the topping out on 3rd June. Usually, gaps are seen in the direction of the trend. Even though some of the gaps were filled it does not change the picture. There were no upside gaps on any day since then. hence the trend bias is clearly down. The way the market has traded yesterday also suggests that there was some selling afoot. The intra day dips saw increase in volumes while the rallies (actually sideways consolidations intra day rather than rallies) were all on low volumes. We finished a bit off the low but that seems to have been on short covering. The NF had traded at 15 point premium in the morning and by later part of the day this premium had vanished. Many times this indicates some renewed shorts getting into the market.

The options positions too indicate similarly. The calls were added but this time around, in addition, the puts were unwound. It is when both these events happen simultaneously that we should take a greater notice. this sharply increases the chances of a follow thru decline on the next day. Now we have this Greece news to grapple with once again and that is certainly not going to keep the US or Europe in happy state. It will also sharpen the Dollar and lead to some declines in the commodities. There is every chance that we may open gap down today. If that happens below the 5430 levels then we will have a continuation of the decline towards the next lower target around 5365. So if the market cannot revive after a weak start today then it is better to join the bears in their outing during the day.

Advance tax numbers should start rolling today and that may have some impact on the stock moves. RBI policy is something that the market may look at. Upto 25 bps rise seems to be in the prices already. More may be a dampener. SBI has been hammered in advance. At 2192, the prices are at 50% retracement of the entire advance from 2009 low. So time to be a bit careful here. A one year low is seen around 2140. Watch these levels for some tractions today. Banks carry about 20-22% weightage totally on the Nifty. Hence this sector should be watched today for the tipping point of the trend as there is an event that could trigger their moves. Yesterday all of them were down and look poised a bit weak. IT is the other one looking a bit weak and could drag index down if they continue to remain soft today.

STRATEGY FOR THE DAY: If a down gap open, apply our usual five minute rule for a reversal. Chances are that market may go lower since overseas advises are not positive. It may come back a bit on short covering before the RBI meet. But do keep a sharp watch on the bank sector stocks today as directed as they will determine the trends. Not a day for adventure, that is for sure. So avoid those cheap stocks as well as tips from sundry people. In case of declines, can go long puts as there is room for a drop and speed could be decent for options to come home.

Stocks to buy if market is strong:

MAX INDIA: Prices last session bounced back smartly after a day of breather, taking support at valuation region around 176 levels. This turn around has also helped RSI to bounce up from 60, indicating further strength. This week has seen a tremendous increase in volumes further highlighting the trend strength. Go long.




Buy above 180

2 points

183 / 184.5

Or dips near 177

1.5 points

179.5 / 181

Stocks to sell if market is weak:

USHA MARTIN: After moving in a small ranged sideways phase, prices yesterday resumed the declining mode by plunging afresh and closing near the days low. This fresh fall has pushed momentum further south, thereby indicating sustained weakness in the counter. Continuing to look weak, go short.




Sell below 53

1 point

51.5 / 50.5

Or rally to 53.8

1 point

52.5 / 51.5

MOTHERSON SUMI Prices formed a minor lower top last session and crashed out heavily towards the days close. The decisive move and a negative close have now triggered a fresh sell opportunity here. RSI too has turned down afresh from 60 levels. Look to sell here.




Sell below 228

2.5 points

224 / 222-21

Or rally to 231-32

2.5 points

227.5 / 225


Sell Nifty below 5430 stop 5455 for fall to 5365.


Sell Orient bank below 329 stop above 333.50 tgt 323-320.

Sell Tata steel around 560-563 stop above 566.10 tgt 553.

Stocks in Action for the day: GVK Infra, SAIL, Ashok Ley, IIFL, Maruti.

Q1 advance tax numbers: sources (cr - crore, vs - versus).

Hindustan Zinc pays Rs 200 cr versus Rs 100 crore (YoY)

PNB pays Rs 400 cr Vs Rs 320 cr (YoY)

BHEL pays Rs 520 cr Vs Rs 430 cr (YoY)

NTPC pays Rs 360 cr Vs Rs 280 cr (YoY)

SAIL pays Rs 350 cr Vs Rs 340 cr (YoY)

Bharti Airtel pays Rs 170 cr Vs Rs 180 cr (YoY)

GAIL pays Rs 250 cr Vs Rs 280 cr (YoY)

PFC pays Rs 165 cr Vs Rs 128 cr (YoY)

REC pays Rs 150 cr Vs Rs 130 cr (YoY)

Power Grid pays Rs 75 cr Vs Rs 60 cr (YoY)

ING Vysya Bank: Sources -ING Vysya Bank raises Rs 1000 crore via QIP, preferential allotment -ING Vysya Bank raises Rs 513 crore via QIP issue -ING Vysya raises Rs 487 crore via preferential allotment to parent ING at Rs 344.23 Other stocks and sectors that are in news today.

ONGC in talks with BG India, ENI to sell up to 30% stake in its Krishna Godavari block, plans to spend around Rs 36,000 crore on developing the block – BS

SAIL FPO may be deferred till the end of 2011 on the back of volatile markets – ET

Ex-dividend today: PNB (Rs 22/sh), Bharat Bijlee (Rs 25/sh), Divi's Lab (Rs 10/sh).

Trading in TV18 would be suspended from June 21 on back of scheme of arrangement.

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

GVK Infra set to buy 2 of Hancock Prospecting thermal coal mines in Australia for Rs 10,730 cr

Ashok Leyland board okays 1-for-1 bonus share issue

ADF Foods board meet today to mull preferential allotment of convertible warrants to promoter group

Lavasa Update: Bombay HC adjourns Lavasa case to July 12

Oil companies hike ATF prices by average Rs 1,431/kL effective from midnight

Sharad Pawar says to take call on more sugar exports in 10 days

Nesco has decided to cancel the stock split of its equity shares from Rs 10 to Rs 1

Serious Fraud Investigation office investigating cartelization allegations on Ultratech, Ambuja, ACC

Govt plans 15% import duty on sugar from July 1 as the production is higher then domestic demand

Indo Asian Fusegear board meet today to review scheme of arrangement

CAG raps Petroleum ministry for undue favours to RIL, others

Ramco Systems launches cloud analytics solutions

IFC to invest $4 mn for green energy

India Infoline (IIFL): -Deutsche Securities Mauritius buys 65 lakh shares ((P-note)) -ICICI Pru Life sells 36 lakh shares

Ashok Chawla panel on shale gas exploration -Panel gives a red flag on the exploration -Policy only after studying environ impact of fracking -Public discussion must on shale gas exploration -Chawla panel report being studied by govt, to take call on final adoption soon

Maruti Strike Update: -2 lakh workers to go on hunger strike on June 17 -Supply of Maruti's Sx4, Swift, Dzire stopped, both manufactured at Manesar plant: Sources

Akshaya Homes to enter healthcare

Dr Reddy's Mexican unit gets warning letter from USFDA

Lupin’s Australian subsidiary Generic Health has acquired the worldwide rights to the GOANNA brand and the complete range of premium therapeutic oils, rubs and ointments marketed under the brand.

Smartlink Network Systems has launched its seven motherboards models under the brand DIGILIFE. These include three from AMD platform, one Atom bundle and three from Intel platform.


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