Wednesday, July 20, 2011

Stocks in action for the day: Bajaj Auto, Piramal Health, Jaihind Proj

Market Outlook: Indian markets are expected to open with a gap up note on the back better than expected constructive rally in the global markets. On the global space US stocks rises on strength in better numbers from IBM & Apple, healthy housing starts following to that Asian markets are trading higher; Hang Seng, Nikkei up. 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 5650.

Results today: RCF, Dr Reddy's Labs, LIC Housing Finance, Petronet LNG, Bharati Shipyard, Mindtree, Polaris, Exide Industries, Reliance Industrial Infra, Thangamayil Jewellery, Dish TV, Crisil, Ingersoll Rand, Rane Engine, Infotech Enterprise, Mangalam Timber, Century Plyboards, Selan Exploration.

Global events to watch for:

Þ Existing Home Sales.

Global indices Update @ 8:

Dow Jones : 12587 (+202.2)

NASDAQ : 2826 (+61.41)

Nikkei 225 : 10022 (+132.8)

Hang seng : 21924 (+21.75)

SGX CNX Nifty : 5660 (+41.00)

Gold (USD/t oz.) : 1590.6 (-10.50)

Nymex Crude (F) : 98.30 (+00.80)

INR / 1 USD : 44.58

TECHNICAL OUTLOOK: Market rebounds from support.

In yesterday's letter we had outlined a few levels on the higher side that needed to be crossed for the market to go higher. It was noted early in the day that the index made a low just above yesterday's low and that was the first signal of bullish intent. Next it followed up with a move above the levels required one by one. That was the second signal of bullish intent. Then it charged upward to the earlier resistance at 5660. Had that been crossed, it would have been yet another signal of bullishness. However by then the price strength ran out and profit taking set in soon as the bears perceived some weakness. But price damage was quite limited and hence it is presumed that the bulls are still in good command at the close. Now if the rise were to continue further we are looking at 5665/5685/5730 as the next set of levels that would be challenged. On the downside, intraday declines should continue to retain above 5580/5560.

Yesterday's letter also mentioned about the status of the Bank Nifty and the improving situation there. Matters continued to improve further there and now were are awaiting some upside breakout action to confirm the change in the trend situation there. Note that if such a breakout were to happen now then it would be a positive signal not only for the Bank Nifty but for the main Nifty as well. This will then trigger the Nifty into an advance that may carry on towards the expiry date or so.

There are clear changes in the Option position (unlike yesterday) with all signals pointing towards the bullish side. 5600 Puts added a big chunk (11L in OI) while we also see a big addition of about 8L shares in the 5800 Call. Given that this strike call is priced only at 10 levels it is obvious that it is not a short and should therefore be a long addition. Someone is punting here for higher prices. It looks worthwhile going long the 5700 or the 5800 C for playing the long side in case the uptrend come thru.

Among stocks, there were some interesting patterns made by offbeat stocks such as HCC and TTML. Now these were down and out stocks but they seem to be making a comeback into reckoning after a long time. Lot sizes in futures could be large so readers averse to such large lot sizes should probably try their hand in these names using equities. Sugar shares were again up after a day or two of profit taking. Check these out.

STRATEGY FOR THE DAY: Expectations have shifted to some bullishness and hence we should be looking for intra day resistances to be crossed and supports to be held. Look at Bank sector stocks and index to move and if they do, latch on to them for day as well as positional plays. Small and mid cap action is picking up. Check out results flow and see where positive moves occur after results and trade/invest in those stocks for a few days. Momentum investing time is once again at hand.

Stocks to buy if market is strong:

SRF: After a series of declining moves and prices struggling to move up, they finally showed a firm upmove last session on the back of fresh buying activity. Yesterdays smart rise helped prices to close above two strong resistances - 200-EMA and descending trendline. The rise has come on massive volumes. Buy.




Buy above 321

2.5 points

325 / 328 / 330

Dips near 317-16

2.5 points

321 / 324-25

MARICO: Prices have been maintaining a consistent higher top and bottom formation for a long time now. Looking at the daily chart we see that yesterday prices witnessed a sharp rise and have formed yet another higher bottom. RSI on the other hand has formed a positive reversal pattern, thereby triggering a fresh buy opportunity here. Go long.




Buy above 161

1.5 points

164 / 165.5

Or dips to 158

1.5 Points

161 / 162

Stocks to sell if market is weak:

BAJAJ ELECTRIC This counter witnessed a sharp crash last session on renewed selling activity, after prices tested resistance around 268 levels. The swift turnaround has also led RSI to turn down from resistance at 60, thereby signaling a fresh sell signal here. Sell.




Sell below 255

3.5 points

250 / 247-46

Or rally to 260

3.5 points

255 / 253-52


Buy Nifty above 5635 with 5605 stop for a rise to 5685

Buy Nifty on dips to near 5575 with stop 5555 for rise to 5625.


Buy Mundra Port above 162 for target of 164-165/168 and stop below 159.8

Sell GMDC below 159 for target of 156/154 and stop above 160.6

Stocks in action for the day: Bajaj Auto, Piramal Health, Jaihind Proj

FIPB: -Govt approves Cox & Kings plan to allot warrants, NCD of Rs 750 crore -Defers Allcargo Global plan to issue convertible warrants.

Allahabad HC -Scraps UP govt land acquisition in greater Noida -Orders 608 hectares in greater Noida be returned to farmers -Compaies Impacted: Supertech, Amrapali, Patel Engineering, Nirala Estate, Arihant.

Prism Cement Q1FY12 (cr - crore, vs - versus) -Net Sales up 27% at Rs 978 cr vs Rs 773 cr -Net loss at Rs 10 cr vs net profit Rs 56 cr -Total expenditure up 52% at Rs 966 cr vs Rs 634 cr -EBITDA down 71% at Rs 47 cr vs Rs 161 cr -EBITDA margin at 4.8% vs 20.8% -Bottom-line affected as a reason of high cost of consumption, purchases, freight etc -Moreover the company faced a shutdown in the quarter incurring an addition expense of Rs 25 crore

Honeywell Automation Q1FY12 -Net sales up 5% at Rs 348 cr vs Rs 331 cr -PAT up 17% at Rs 27 cr vs Rs 23 cr -EBITDA up 61% at Rs 37 cr vs Rs 23 cr -EBITDA Margin at 10.6% vs 6.95%

Orient Ceramics and Industries Q1FY12 -Net sales up 16.4% at Rs 71 cr vs Rs 61 cr -PAT down 60% at Rs 2 cr vs Rs 5 cr -Total expenditure up 17% at Rs 68 cr vs Rs 58 cr -EBITDA down 17% at Rs 5 cr vs Rs 6 cr -EBITDA Margin at 7.04% vs 9.84% -Q1FY 11 saw an exceptional gain of Rs 7 crore boosting the bottom line.

Chambal Fertilizers Q1FY12 -Net sales up 21% at Rs 1150 cr vs Rs 951 cr -PAT unchanged at Rs 64 cr Total expenditure up 23% at Rs 1060 cr vs Rs 859 cr EBITDA down 3% at Rs 156 cr vs Rs 160 cr -EBITDA Margin at 13.57% vs 16.82%.

Rane Madras Q1FY12 -Net sales up 17% at Rs 152 cr vs Rs 130 cr -PAT up 20% at Rs 6 cr vs Rs 5 cr Total expenditure up 17% at Rs 145 cr vs Rs 124 cr EBITDA up 13% at Rs 9 cr vs Rs 8 cr EBITDA Margin at 5.92% vs 6.15%.

Dcom Systems makes an open offer to acquire 20% equity (19.5) lakh equity shares at Rs 140/sh in Jaihind Projects ((CMP: 122))

Jaihind Projects to convert the 25 lakhs convertible warrants at Rs 60/sh

Ex Dividend: Wendt India Rs 25/sh, Bajaj Electricals Rs 2.8/sh, Gravita India Rs 4/sh, Apcotex Industries Rs 7/sh, Aptech Rs 2.5/sh

Inventure Growth & Securities IPO of 70 lakh shares with a price range of Rs 100-117/sh opens today

F&O ban: Aban Offshore, ABG Shipyard, Kingfisher Airlines

Viom Networks a JV between Tata Teleservices & SREI group may acquire GTL Infra after the company reduces its debt through a restructuring process (DNA)

Chambal Fertilizers proposes demerger of shipping division of the company in India steamship subsidiary

Piramal Healthcare in talks to buy Enam’s financial stake in ING Life Insurance valued at Rs 2400 crore (ET)

Govt set to give a conditional approval in the deal between RIL & BP requiring the companies to give assurance on increasing the gas output from the KG-D6 block (ET)

Deadlock over cashless payment ends with PSU firms & hospitals agree on a new set of tariffs except Apollo Hospitals (ET)

DoT unlikely to cancel 53 licenses as recommended by TRAI for non-fulfillment of rollout obligations (BS)

Bajaj Auto to setup its fourth plant near the Mundra port in Gujarat with an investment of Rs 1000 crore plans to export at least 60% production from the plant (BS)

Bajaj Auto likely to raise stake in Austrian sports bike maker KTM power sports from 39.26% to 49% (Mint)

Raymond ’s engineering business unit plans to enter the forgings segment during this year plans to invest Rs 200 crore also looking for acquisitions (DNA)

Hindustan Copper unlikely to go ahead with fresh infusion of equity in its FPO under the govt’ divestment programme (DNA)

BMC wants to mop up around Rs 3000 crore a year by levying a premium of 100% on developers who wants to exceed FSI by 25% (TOI)

Jindal Steel's Oz arm picks 13% more in Rocklands Richfield.

Cadila's Q1 net up 15.4%, standalone declines 23%.

Edserv in pact to expand chartered accountancy coaching.

Technocraft Industries to consider dividend.


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