Wednesday, June 22, 2011


Market Outlook: Indian markets are expected to open in a positive zone and trade flat on the back of constructive cues from the global peers. On the global space Wall Street gains as concern on Greece debt crisis eased and Asian markets trading higher; Nikkei, Hang Seng up. The monsoons this time are expected to be below normal for the second time in three years. The government has just announced that the June-September rainfall will be at 95% of the long period average. Quite clearly, not a very positive news for inflation forecasters because after almost 2 years of double digit inflation in food articles. On the overall basis we expect Indian market trade on cautious note with support near 5190-5220 and any positive breakout would be expected only after 5420.

Global events to watch for:

Þ FHFA House Price Index.

Þ FOMC Meeting Announcement.

Global indices Update @ 8:

Dow Jones : 12190 (+109.6)

NASDAQ : 2687 (+57.60)

Nikkei 225 : 9582 (+123.0)

Hang seng : 21981 (+130.8)

SGX CNX Nifty : 5309 (+33.50)

Gold (USD/t oz.) : 1547.7 (+01.20)

Nymex Crude (F) : 93.65 (- 00.48)

INR / 1 USD : 44.91


Matters were proceeding along relatively smoothly, albeit sluggishly, for the recovery process when the pledged shares matter of Kumar's hit the news. This was enough for traders to pull the rug under any stock where the promoter was known to have either borrowed heavily or pledged shares. Stocks fell across a wider front but fortunately, these were all non-index stocks and hence the nifty was spared the ignominy of another decline. But sentiment was damaged nevertheless. One other difference was that SKumar bounced back pretty quickly after the management came forth with some explanations. This was distinctly different from GTL experience of earlier day. But in any case, the market seems to be now over reacting to these kind of inputs. Time to distance yourself from the action of the masses. Avoid following these herd-like movements that happen during the day. They will end in losses most of the time.

On GTL, some new thoughts. We found out that the 16% FII holding is all amongst rather dubious names and hence quite likely to be friends of the promoter type holdings. Another, more damaging find was that the promoters have been selling stock non stop for the past 6 months or so. Check the Bse/nse website for details on this. On the Futures side, we find that about 10-12K contracts of OI has been rolling constantly. Assuming that much of this is arbitrage positions and considering the possibility that no one may really want to roll this to the next month, we could see the arbitrage position coming for a sell on expiry day (vwap). It is therefore quite probable that the stock could drop ahead of it and all the way into expiry. Stock could very well be trading at 80 levels or lower by then. Like we said yesterday, this is a permanent short on all rallies.

We saw some shift in the option trading pattern yesterday. Call additions were quite limited. On the other hand 5200 Put saw some substantial additions. Could be some sort of an end to the decline here? Maybe.

Nifty staying above 5280 almost all thru the day is to be considered a positive. The pivot for today is at 5290. The range for the month is almost created so maybe we will not see new lows during this month. June is a quarter ending and we do see the usual NAV ramping activity and that can be expected in the next week and should certainly shore up the prices. So, even though we did mention the lower targets etc in yesterday's letter, let us look upon it as a possibility for the next month.

Bank Nifty continues to fare decently although it took a hit down towards the later part of the day. It is again at a critical stage at 10460. if it survives here then it could even succeed in pulling the nifty out of the hole. But if it gives way beneath 10400 then it might add to the pressure that the nifty already faces. IT stocks are not too badly off after the slamming of the last few days. If they rise then it could be another positive trigger for the nifty.

STRATEGY FOR THE DAY: Situation is a bit neutral for today. We have to watch which way the wind blows before deciding to act. Look at both Nifty as well as Bank nifty. Check out leader stocks for strength as that is needed for the market to get back on its feet again. Without this, all attempts may remain small and easily repelled. Trade cautiously and use nearby stops.

Stocks to buy if market is strong:

ARVIND MILLS This Textile counter is in bullish trend since a year and prices have taken support of ascending trend line giving fresh dip buy opportunity. This counter is trading above its 100 DMA which retains bullish view in the counter . Go Long.




Buy above 78

1 point


Or Dip near 76

1 point


KWALITY DAIRY: This food packaging counter has bucked the trend in the past month, forming positive pattern on the chart. Bulls are totally active in this counter which reflects in the rates. Prices have crossed the critical moving average in the last week and after sustaining it has indicated fresh longs. Momentum reading shows propensity to move higher.




Buy above 125.5

1.5 points


Stocks to sell if market is weak:

BERGER PAINT Spurt of last two months fizzled out in this counter as it broke its 38.2% Fibonacci retracement. Also Prices breached ascending trendline support of last 6 months and gave close below it giving fresh sell signal. Rsi is also in slipping towards 40 levels signalling counter weak. Consider going short here.




Sell below 97

1 point

95 / 94

Or rally near 99

1 point

97 / 96


Buy Nifty above 5375 with stop 5350 for 5435.

Sell Nifty if below 5230 stop 5256 for drop to 5172.


Buy Hero Honda above 1765 stop below 1752 tgt 1785-1790
Sell Sintex around 165-166 stop above 168.10 tgt 161-160

Stocks in Action for the day: HUL, Spanco, Idea, Lanco Infra, Sun Pharma

Sun Pharma announces USFDA approval for generic Imitrex® injection -First ANDA approval for a Sumatriptan AutoInjector -Annual sale for Sumatriptan Succinate Injections in the US is approximately USD 190 million.

Tata to challenge Bill scrapping Singur deal: PTI Tata Motors says: At this point of time we have no guidance on this.

SBI Chairman on credit growth -SBI FY12 credit growth at 16-19% versus 19-20% seen before Witnessing some slowdown in corporate lending -Expect NIMs to be over 3.5% in FY12 Aim to cut FY12 net NPAs by 25 bps from 1.63% in FY11

Tata Autocomp -Likely to launch IPO in 2-3 weeks -Auto component maker from Tata Group -Promoters including Tata group, Tata Sons and Tata Motors will sell another 35 million shares or 17% of the existing equity. -First Tata group IPO since TCS in 2004

Lanco Infra on litigation notice from Bluewaters Power -Lanco Infra in talks to supply Griffin Coal to Bluewaters Power -Lanco Infra Bought Australia's Griffin Coal Mine Lanco Infra Sources -In constant communication with Bluewaters Power on coal price -Negotiations with company cannot affect Griffin Mine acquisition -Have completed Griffin Coal Mine acquisition

IRDA issues draft guidelines for life insurers' IPO IRDA says -Firms with 10 years experience can go for IPO -Prior approval of IRDA needed before applying to SEBI

TCS , Infosys & HCL Tech in race to acquire banking product software business of UK based Misys with an undisclosed amount (ET)

CBI gives clean chit to Idea as no evidence found of wrongdoing by Idea for getting six licences in 2008

Zuari Industries hikes it stake to 6.66% in Nagarjuna fertilizers & chemicals & by 4.95% in Texmaco (TOI)

HUL is now opting for a bidding process to sell its two buildings this year & raise Rs 700 crore & likely to sell its Lever house for around Rs 500 crore (HT)

Amul crosses $2 bn revenue, eyes 22% growth

Wockhardt gets USFDA nod for anti-bacterial tablets

Renault to launch premium hatchback in India in 2012

Godrej Consumer expects Rs 1,000 cr sales in Africa

New Listing: Timbor Home -F&O Ban: Kingfisher Airlines

TCS says more than 31,000 employees left company in FY11

One lakh litre diesel spills at Mundra port

Spanco plans to sell its stake to a PE firm and expects to close the deal in the next six months

HDFC Bank to buy 1% stake in BSE through preferential allotment valued at around Rs 3900 crore

Food EGoM to meet tomorrow to take a call on allowing the export of more sugar (BS)

DEPB may continue beyond September as current end date unrealistic for alternate scheme (FE)


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