Wednesday, July 13, 2011

Stocks in action for the day: Gujarat NRE, M&M, Motherson Sumi, DLF.

Market Outlook: Indian markets are expected to open in a positive geography following to the Asian cues. On the global space Wall Street continued to skid on global financial fears while Asian has seen some sort of recovery. 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 5600.

Results today: Bajaj Finance , Bajaj Finserv , Gujarat Lease Financing , MPS

Global events to watch for:

Þ Bank Reserve Settlement

Þ Treasury Budget

Global indices Update @ 8:

Dow Jones : 12446 (-58.88)

NASDAQ : 2871 (-20.71)

Nikkei 225 : 9926 (+00.89)

Hang seng : 21854 (+191.1)

SGX CNX Nifty : 5548 (+22.50)

Gold (USD/t oz.) : 1565.7 (+04.30)

Nymex Crude (F) : 97.07 (-00.75)

INR / 1 USD : 44.68

TECHNICAL OUTLOOK: Weakness looms ahead of result season.....

The market was weaker than had been expected. The opening moves itself brought it down to the target zone near 5540 and even though we got a mild rally post that initial weakness, it was never enough to carry the day and as a result, weakness in overseas markets continued to pressure the index down and we slid to test the support near the 5500 levels. This was found to be a lot better as it held a couple of attempts to test it and then towards the end of the day, we saw a mild rally as the intra day shorts covered. For the nifty this was the second opening gap downward and that is indicative of the bears being currently in charge of the trend. In the hourly charts, the moving average band has been broken and therefore some sell signals are in place now. The gap area of yesterday near 5610 should now act as a resistance and rallies back to near the 5600 levels would provide shorting opportunities. this will be possible if the index is able to sustain today above 5540 levels. On the lower side, one can look at 5480 in case the 5540 level is unable to offer any support today.

Bank Nifty continues to remain weak and we should be using rallies in this name to short. The 50% retracement zone for this index is at 10900 and that is the minimum pullback that we expect, although better and stronger supports are still further away.

Infosys was a big disappointment to those who hoped for some salvation. Indeed, the stock has validated yet again the bearish head and shoulder pattern on the top that is suggestive of long term bearishness. We advise investors also to bail out for now. It is quite possible that Infosys day in the sun are over. Move to HCL Tech or TCS. They are now grabbing the baton. Mphasis had another torrid session yesterday. This is another IT stock under severe pressure. Decline below 427 is now an invitation to short afresh for a challenge of the recent lows. Avoid buying at all costs for a while. We have remained consistently bullish on Fortis. The stock is doing all the right things to confirm the bullishness. Use every dip to buy or one can even invest in this counter for the medium term.

PCR continues to drop- now at 1.15 and IV has ticked up further to 20%. Market is certainly uneasy with the current situation it appears. Couple this with the large build up of OI yesterday at the 5300 Puts and the apparent shorting of 5500 Calls and you have a forming picture of bearishness. So that is what options are warning. No need therefore to become prematurely bullish. Index has already dropped about 260 points from the recent high. That is about half of a normal monthly range. so no need to get unusually bearish either. Look for some range action between 5650-5480 till Friday is what we would think. Lets see how it shapes up.

STRATEGY FOR THE DAY: We should be ready for either side trade today if day trading. Longs are to be preferred above 5540 while shorts can be created if prices stay beneath 5520. In either case about 60-80 points is on the cards. We may not get too much of a trend for the next couple of days and hence one should actually be looking to create some short option positions once this observation is confirmed. But we dont want to short anything until confirmed as IVs are increasing and that may create problems for short options. Stocks may follow results trail so do keep track of what is going to announce results today. Dont chase the results stocks as the trend strength being low, rises may not sustain. however, if any stock falls on bad news or results, one can certainly chase that for day shorts.

Stocks to buy if market is strong:

WOCKHARDT: Despite the market weakness, Pharma counters were better performers last session with this one being one of the gainers. Prices yesterday soared to new swing highs and retaining most of the gains, closed up as well. They have staged an excellent breakout from prior tops and resistance around 414 levels. Buy.




Buy above 418

5 points

426 / 430 / 434

Or dips to 410-08

5 points

418 / 423

Stocks to sell if market is weak:

WHIRLPOOL An intermediate descending Gann line resistance has been restricting prices each time they test this region for the last many months. We saw the same happen last week as the counter was struggling to keep up with the upmove and yesterday they eventually dropped lower on fresh sells. Go short.




Sell below 251

2.5 points

247 / 245-44

Or rally to 255

2.5 points

251 / 249

SUBEX : Prices have been on a steady drop forming a sequence of lower tops, lower bottoms. Last week they formed yet another lower top and had been trading lower. Yesterdays decisive fall has triggered yet another sell opportunity here. RSI has just about breached 40 levels. Sell.




Sell below 55.5

1 point

54 / 53

Or rally to 56.5

1 point



Buy Nifty around 5520 stop 5510 and exit longs around 5600 (range trade)

Sell Nifty below 5510 stop 5530 for drop to 5465.


Buy ABB above 884 for target of 895-899 stop below 874.8

Sell Bom Dyeing below 359 for target of 354/351 and stop above 363.5

Stocks in action for the day: Gujarat NRE, M&M, Motherson Sumi, DLF.

Motherson Sumi Systems board meet today to announce its acquisition plans Motherson Sumi to announce 500-600 million Euro acquisition today: Sources

Dr Reddy's Labs (DRL)-Trading on Alchemia shares in Australian halted pending an announcement-Buzz that it could be an approval for Arixtra generic (fondaparinox) -Arixtra generic is going to be manufactured and marketed by DRL

Fuel EGoM -To meet on Wednesday to discuss cap on subsidised LPG cylinder -Fuel EGoM meet postponed from July 12 due to cabinet reshuffle

CBDT sources - Mahindra Satyam not allowed to file revised returns -CBDT issues order to Mahindra - Satyam in tax case -No provision to file revised returns on revised balance sheet-Mahindra Satyam has sought to file revised returns-Overstated income period from 2003-08

New listing: Readymade Steel ((Only on BSE)), issue price: Rs 108/sh F&O Ban: Kingfisher Airlines

Govt panel okays 6 PPP road projects worth Rs 9800 crore

HCL group in advanced talks to acquire around 44% stake in DLF Pramerica Life Insurance for around Rs 450 crore & later buy out DLF’s residual 30% stake in the company (ET)

M&M group in plans to tie up with an experienced company to foray in the general insurance segment (ET)

DoT moves SC claiming that Sun Direct TV should pay an annual licence fee as per the licence agreement since the matter pertaining to adjusted gross revenue is pending before the Apex court (FE)

BHEL plans to enter new markets such as Burkina Faso, Niger & Sierra Leone by supplying power generation equipment valued at Rs 3200 crore (Mint)

Mundra Port plans a 200 acre plastic processing park that will attract investment of about Rs 4000 crore (Mint)

Gujarat NRE settles litigations over a mining lease of a coal mine in Australia by paying over USD 45 million (DNA).


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