Monday, July 25, 2011

Indian markets are expected to open with a negative note

Market Outlook: Indian markets are expected to open with a negative note on the back unconstructive trends on the global space. All eyes are on Reserve Bank of India's (RBI) monetary policy meeting will set the direction for the stock market in the week ahead. On the global space US Stocks traded weak ahead of long slog of negotiations to resolve the US debt crisis and Asian markets are trading weak. On the overall basis we expect Indian market trade with support near 5555 if trend continues it can test even 5450 in the near term and any positive breakout would be expected only after 5680.

Results Today: RIL, Sterlite Industries, NTPC, REC, Patni Computers, Dhanlaxmi bank, OBC, Bank of India, GI Engineering, Graphite India, HSIL, Welspun Projects, Jindal Cotex, Deep Industries, Geometric, IndBank Merchant Banking, Peninsula Land, Zee News, SE Investments, Chemplast Sanmar, Energy Development Co, Easun Reyrolle, Heidelberg Cement, Jyoti Structures, Balaji Amines, Coromondal Engineering, Visaka Ind, Supreme Ind, Edelweiss Capital

Global events to watch for:

Þ No major events to watch for the day.

Global indices Update @ 8:

Dow Jones : 12681 (-43.25)

NASDAQ : 2858 (+24.40)

Nikkei 225 : 10068 (-63.48)

Hang seng : 22282 (-162.5)

SGX CNX Nifty : 5619 (-22.00)

Gold (USD/t oz.) : 1613.5 (+12.00)

Nymex Crude (F) : 98.89 (-00.98)

INR / 1 USD : 44.37

TECHNICAL OUTLOOK: Bulls take over.

We mentioned on Friday that if there is a follow thru then the prices could fare better. They did. Opening with a gap up, the market managed to hold on to the gains and saw it thru till the end. It did not engage the important supply zone near 5660 and so we haven’t seen that big hit that we have seen in the recent past. Could the market be planning to vault over that resistance with a gap on Monday too? Could be possible. But Friday finish of the overseas markets is not going to lend any helping hand. Also, Tuesday's RBI meet will provide a small dampener. There are rumors afloat in the market about possible 50bps hike (25 bps rise is already in the prices). Prices are once again about to meet the overhead resistance that has been holding it down. It now only needs a closing or two above 5680 to cross this. If it does then we should be equally forceful to the upside like we had mentioned we would be to the downside last week. Problem is that the market is not making up its mind whether it wants to force itself upward or downward. We are therefore forced to wait for the actual outcome. The daily oscillator charts are showing that they have all pulled back to near the neutral zone after having reached higher earlier. This puts the bias in favor of a rise. Weekly charts show oscillators at a neutral situation as well. Sentiment shifts bias both sides on alternated days. Results flow has been mixed. Since 12 July we have had alternating up and down opening gaps on (almost) every successive day- so there is certainly no clarity on what is going on. We can only draw some bullish bias from the fact that the weekly charts have not shown a closing near the low since mid June. So bulls are still in control here.

Bank stock results were all better than expected and after some sputter, most stocks were up and running. This has enabled the Bank index to look up nicely at the end of the week. For two weeks running now we have seen the Bank nifty pick up nicely from lower levels so clearly, there is some interest to buy these stocks yet. The prices are once again approaching the main resistance trendline. If it is crossed decisively then it would be a definite bullish signal for the market as a whole and we should switch tracks to trading long every where. So next week is an important one for Bank nifty and consequently, the entire market sentiment. Dont forget to keep track of this one, therefore.

There was a complete vault-face on the options front. Call shorting disappeared and puts have been added in substantial quantity. This includes ITM strike of 5700 Put as well. Does that mean someone going long expecting a decline? Last week we saw this huge build up in 5500 and the prices moved up- can that be a pattern? The sizes are substantial (over 50L shares added in Puts on Friday) so it is not the handiwork of some few delta desk guys. This is big ticket action. There was substantial shedding of call positions as well. The quicksilver change from one end to another is disconcerting and difficult to call. One has to consider, perhaps, that it could be some big spread position between 5600-5700 puts (both added about 25L shares each). We saw this possibility in the calls on Thursday (5500-5600 spread). That was successful. Perhaps since we are approaching expiry, bulls may have used a bull put spread? Just pondering here- nothing concrete. Alternately, it could also be a bear spread- looking for a decline? We dont believe they are just short puts- that would be too damn aggressive. If it is so, then someone out there knows something that we all dont.

Reliance should be in action today with the clearance of the BP deal. Chart shows a trendline resistance at 885. Crossing of this should be positive. Oscillators are showing a shift in the bias back towards bullish and this news should probably do the trick. So if the lion moves then the jungle should come alive. Watch this stock's move today for clues on bullishness. Fizzling out would be very disappointing. So be alert for that too.

STRATEGY FOR THE DAY: If there is an upside gap today, it would indicate a shift in the bias back towards bullishness and one should change strategies that way. Reliance and Bank Nifty should provide us the clue about this aspect. If market turns better then almost all stocks can participate so stock picking would not be difficult. In such a case trade stocks as well as index. But if bullish attempts fizzle out then it is the sidelines once again. Results flow continue. Check market response to news rather than your belief about the news. Follow the market, not your beliefs about it.

Stocks to buy if market is strong:

NATIONAL FERTILISER After forming a base around 87 for past few trading session the prices received a strong boost on the daily charts. The strong buying participation helped the prices breach the ascending trendline resistance and give a closing above it. With momentum inching higher one can look to go long in this counter today.




Buy above 92

1.5 points

94 / 95.50 /96.50

Or Dip near 90

1.5 Points

92 / 93.50 / 94.50

RUSHIL DÉCOR This new listing has been holding on to its gains and have been finding favor with the bulls. The consistent volumes on the upside has ensured that the prices are able to move higher steadily. The move out from the range has invited strong buying participation suggesting more upside in store. Go long.




Buy around 188-190

2.5 points


Or dip near 183-184

2.5 points

188 / 191 / 193

Stocks to sell if market is weak:

SUNPHARMA ADVANTA Prices after breaching the value area around 95 have been unable to regain the level and moving lower. The steady fall in the prices coupled with weakness in momentum has given the bears an upper hand. With sellers holding fort one can look to go short at current levels and on rallies.




Sell below 92

1.5 points

90 / 88.50/87

Rise near 94

1.5 points



Buy Nifty above 5680 with stop 5655 for rise to 5741

Sell triggers are far away so intra day dips are all buys for today.


Buy TATA Global above 103.5 for target of 105/107 stop below 102

Sell Exide below 148 for target of 146-145/143 stop above 150.1

Stocks in action for the day: DRL, Tata Motors, Edserv, Bharti, RIL

Bharti Airtel may bid for Zimbabwe Telco -Bharti may look at stake in NetOne -NetOne is Zimbabwe's 3rd largest network -NetOne has offered to sell 60% -MTN may also bid for NetOne stake

FDI in RETAIL -Committee of Secretaries (CoS) okays FDI in retail -Committee of Secys recommends 51% FDR in Retail

Kishore Biyani says -CoS decision brings us closer towards FDI clearance We are meeting many US retailers -Proposal for investment of USD 100 million in back-end is fair -Looking at partnerships in electronic biz

FDI - -Divergence of opinion on quantum of FDI in retail -Majority of secys in CoS favour 51% FDI in retail -6-7 CoS secys favoured 51%, while 4-5 wanted lower 4-5 secys favoured allowing only 49% FDI Some suggested phased opening up of FDI in retail -Final view of cabinet secy to be recorded in minutes Minutes likely to be issued in a few days -Some CoS secys did not favour blanket restrictions Some CoS secys only want conditions on backend investment -DIPP Proposed Mandatory 51% FDI in back-end -Some Secys not in favour of population based rollout -DIPP to finalise note for cabinet after CoS minutes nod -No timeline for cabinet approval

Draft Land acquisition bill -Consent of 80% of those affected by project a must -Land owners to get 6 times the registered price -20% rise in land value to go back to land owners for 10 years -Rs 2,000 a month to be paid to land owners for 20 years -Emergency clause applicable only if national security involved

Jaipal Reddy says -Law Ministry completing vetting of Cairn -Vedanta deal nod -Will communicate decision on Cairn-Vedanta deal soon

Kapil Sibal says: -DoT approves national optical fibre network -Fibre network to cost Rs 20,000 crore in first phase -To take proposal to cabinet shortly -Funding for broadband network to come from USO fund -USO Fund has balance of Rs 16,000 crore

DoT says: -VSNL land issue to come at next meet -Reviewing TRAI view on license cancellations

Zydus Cadila in talks to acquire brands & manufacturing facility of Biochem petrochemicals for around Rs 450 crore

SpiceJet set to raise Rs 400 crore through a share offering by December end (ET)

Steel companies likely to pull out operations in Karnataka with the shutdown of 50 mines in state to hit iron ore supplies to steel companies (ET)

Religare Arm to buy South African brokerage firm Noah Financial Innovation for an undisclosed amount (ET)

Emami Group to team up with Sheth developers to develop a real estate property in Mumbai with an investment of around Rs 100 crore (ET)

Urea GoM to discuss draft policy on the urea price decontrol next week (BS)

Dr Reddy's acquires prescription business of JB Chemicals in Russia & other CIS markets for USD 34.85 million

Ashok Leyland board approves bonus issue in 1:1, fixes August 03 as record date

IDFC PE invests Rs 150 crore in GVR Infra

Tata Motors opens plant in Rosslyn SA investment of Rs 71.97 crore

Sterling Holidays to raise Rs 120 crore for ongoing projects

Axis Bank seeks changes in RBI nod for ENAM Deal

Edserv Softsystems : Board to consider price fixing of the GDR issue

Ex Dividend: Tata Chemicals Rs 10/share, Siyaram Silk Mills Rs 7/sh, Bombay Dyeing Rs 3.5/sh

Automotive Stampings to issue 56 lakh equity shares at Rs 52/sh on rights basis

F&O Ban: Aban Offshore, ABG Shipyard, GTL, Kingfisher airlines

Kirloskar Ferrous Ind to install a new high pressure moulding line with an investment of around Rs 200 crore

Union Bank to hike BPLR by 25 bps to 14.5% from today


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