Thursday, July 7, 2011

Stocks in action for the day: SKS Microfinance, Lanco Infratech, RIL, SBI.

Market Outlook: Indian Markets are expected to open with a flattish note and expect to consolidate in the range of 5620-5720. On the global space US stocks ended on positive note on the back of better than expected mfg index numbers; while Asian markets trading in mixed trend. On the overall basis we expect Indian market trade with support near 5550 and any positive breakout would be expected only after 5750.

Global events to watch for:

Þ Jobless Claims.

Þ Monster Employment Index.

Þ Chain Store Sales.

Global indices Update @ 8:

Dow Jones : 12626 (+56.15)

NASDAQ : 2834 (+08.25)

Nikkei 225 : 10072 (-10.11)

Hang seng : 22627 (+109.5)

SGX CNX Nifty : 5637 (+01.00)

Gold (USD/t oz.) : 1528.8 (- 00.40)

Nymex Crude (F) : 97.29 (+00.20)

INR / 1 USD : 44.38

TECHNICAL OUTLOOK: Pressure continues.....

Market tried rallying up, ran into the strong resistance around 5660 and then fell back. The fact that it could not rally and the fact that it fell from expected resistance both indicate that the reaction in the NF is set to continue. But price damage is limited yet as selling is not forceful in the face of some aggressive FII buying. But note that domestic MF selling is equal to the task and that is probably why we are not moving in either direction. We have been maintaining that we should be a buyer in NF only during dips but that dip is slow to come. However, we have also advocated being short options for such situations and that would be working out nicely. For example short strangles have lost about 15-20 points since Monday and that is more than what one could have earned trading Nifty in this week!! Looking at the current set up, we now are inclined to drop the support buy point because the prices have drifted sideways into near term trendlines and below 5610 it would break a support and that might induce some downward momentum and carry the index to around 5540 levels or so. This is large enough a band for day traders to short and participate too. so we would be looking for some small intra day trended action today on the downside in case of breakdown.

We have been tracking Bank Nifty with some caution flags and yesterday it provided the signal that we were highlighting- not moving higher past the resistance and then falling to a low close. Those that were following the analysis should have been short yesterday. This should be considered a positional play as there is room for some 2-3 session dive at least. You can buy a 11500 call as a stop on this position. It is currently quoting around 140. That is pretty much the kind of stops that you need to have on the Bank Nifty trade anyway. You can roll down the call hedge in case the price of the futures go lower. Some costs, yes, but no worries on spiky moves.

PCR edged higher to 1.25 so put shorting continues. IVs continue to hover around 17% so there is no particular heightened sentiment in the markets just yet. This might make for some placid trading environment for a while more. Overseas markets also appear to be settling into a groove and hence feeds from there are also not expected to spike any volatility locally. Most trades yesterday appear to be concentrating on the ATM strikes so there is no directional bias in options play as of now.

STRATEGY FOR THE DAY: Open should once again be flat and trading may remain listless. Rallies running out of steam quickly or early in the day should be taken as a sign that market may slide intra day. But if rallies continue thru to later parts of the day then we may have a mixed session where attention could shift to the mid cap stocks. Momentum investing seems permissible in the current environment. Check that out. For trading futures, Table levels seem to be the best. Wait for the trade to come to you and dont chase them.

Stocks to buy if market is strong:

SADBHAV ENG :Prices have been consistently forming higher bottoms over the last few months and heading north. Yesterdays razor sharp move seems to have ended a corrective phase and formed yet another bottom to move higher. Momentum is starting to improve as well. Consider going long.




Buy above 142

1.5 points

145 / 146.5

Or dips to 140-39

1.5 points

142.5 / 143.5

GUJ GAS: Though prices have been forming higher bottoms, they have been unable to form higher tops. This is because a strong valuation resistance and gap region around 397 levels have been applying pressure on prices. However yesterdays rise has closed near the resistance and is once again attempting to move higher. We recommend a breakout buy here.




Buy above 398

2.5 points

402 / 404-05

Stocks to sell if market is weak:

DECCAN CHRONICLE Last week prices started to lift up from an accumulation phase but meeting resistance enroute, they topped out and have slipped into a small correction this week. Yesterdays continued fall has confirmed the weakness and we may see some more dip before the prices can resume the prior uprun. Sell.




Sell below 68

1.5 points

66 / 65

Rally near 69

1 point

67.5 / 66.5


Sell Nifty below 5610 stop 5630 for a drop to 5550.

Sell Nifty on rallies to near 5675 stp 5702 for 5620


Buy PFC above 198 stop below 195.5 tgt 202-203

Sell GESHIP BELOW 279 Stop above 282.10 Tgt 274-272

Stocks in action for the day: SKS Microfinance, Lanco Infratech, RIL, SBI.

RIL to Oil Ministry: -CAG audit beyond scope of govt powers, PSC -Audit cannot transform into performance review -Audit must concern itself with integrity of accounts -Audit must be on adherence to management committee's decisions -CAG audit cannot supplant management committee role-Management Committee comprises RIL, Niko, DGH, MoPNG officials -CAG's mandate not to second guess operator, management committee -Will attend exit conference on July 12 'as courtesy'-Attendance not part of contractual audit process -Time given to reply to Draft CAG audit inadequate -CAG's adverse comments have financial consequences -Comments impact commercial standing & biz reputation -CAG should be concerned with info & not source

Board meets today: -Rainbow Papers to consider setting up of subsidiaries at UAE, USA & Singapore Pitti Laminations to consider issue of shares/warrants on pref basis -Neuland Laboratories to consider rights issue of shares

SBI sources -To make Rs 2,100 crore additional provision in Q1FY12 -Additional provision over & above normal provisions for slippages -To provide Rs 1,000 crore towards enhanced provisions on bad loans -To provide Rs 550 crore for counter cyclical provision in Q1FY12 -To make Rs 500-530 crore for provisions on restructured loan in Q1FY11 -SBI still collating provision data for fresh slippages -Enhanced bad loan provs post RBI CAG says -Conducted performance review of KG-D6 basin -CAG report on RIL only a draft report -Will hear all parties involved in draft report -Hold both entry & exit conferences on CAG report

MFIN CEO Says -Bill is now striking a good balance between RBI, state govt -RBI to fix percentage margin of MFIs -MFI to declare annual percentage rate to borrower -Annual % rate to comprise interest rate & other fees -Margin defined as gap between annual % rate & cost of funds -All MFIs must get license from RBI -Bill specifies registration process for MFIs -RBI to be authority for MFI registration -Proposed MFI bill to overwrite all other laws related to MFIs -Proposed MFI bill to overwrite even state laws w.r.t MFIs

CBI says -Dayanidhi Maran blocked grant of licenses to Sivasankaran -Dayanidhi Maran delayed Siva's application for over 2 years -Sivasankaran was forced to sell out to Malaysian firm Maran's intention was to block issue of licenses

Disney World in talks with Atlanta to setup a Disneyland style theme park in Gujarat for around USD 2.1 billion (ET)

Insurance Regulator scraps the minimum three year profitability clause for life insurers to float IPO giving a fresh life to cos struggling for capital (ET)

Shipping companies to face 20% rise in the operating costs on surge in bunker oil prices to USD 650 per barrel (ET)

Trent shelves plans to open stores of UK’s Arcadia group in the country to focus on Spanish fashion brands Zara (BS)

Tata Steel to utilize Riversdale funds of USD 1.14 billion to start new projects & expand & upgrade existing ones (BS)

Vaswani Industries listing to get a go ahead but the investigation from SEBI still continue on the co (BS)

Ashok Leyland , L&T , Bharat Forge , Tata Motors & M&M have bid for a Rs 44,000 crore defence ministry contract to supply combat vehicles for the Indian army (FE)

Govt likely to pay around Rs 30,000 crore more in subsidy to state refiners with global crude prices expected to substantially inflate govt’s oil subsidy bill (FE)

Cabinet set to clear 3rd phase of FM expansion will boost the confidence of investors & FM radio cos as it envisages the rollout of 806 FM stations across 237 towns (FE)

NMDC to start operations at a magnesite mine & plant in J&K with an investment of around Rs 150 cr (Mint)

Ex Dividend: Astrazeneca Pharma Rs 10/sh, M&M Finance Rs 10/sh, Repro India Rs 6/sh, Thermax Rs 9/sh, Zodiac Clothing Rs 5/sh, Bank of India Rs 7/sh, Cadila Health Rs 6.25/sh, Graphite India Rs 3.5/sh

Dr Reddy’s Laboratories has got USFDA import alert for its Mexican facility. The unit generates business of around $60 million. The company won’t be able to sell products in the US from Mexican facility.

Lupin has been granted final approval by the USFDA for its Abbreviated New Drug Application ANDA for Amlodipine/ Benazepril capsules. The commercial shipment of the product has already begun.

JSW Steel has reported 9 per cent growth in crude steel production in Q1FY2012 compared to corresponding quarter a year ago.

Kavveri Telecom has designed and developed satellite receiver for space applications which will be used by Raman Research Institute. This product will be used for aircraft navigational purpose.

The initial public offering of L&T Finance is likely to hit the capital market on July 19, say reports. The company plans to raise Rs 1750 crore via the IPO. The existing L&T shareholders may get 7.14 per cent reservation in the IPO.

Nihar Info Global has received work order from Andhra Pradesh Industrial Infrastructure Corporation, Hyderabad for maintenance of all websites of APIIC, Lotus Mail Server and for providing onsite support.

Maruti Suzuki will shift production of Swift DZire to its Gurgaon facility from Manesar, where a labour strike last month stubbed production. The carmaker will carry out layout changes at its Gurgaon plant, which has escaped any major industrial dispute in the past decade, to facilitate the sedan's rollout.

Idea Cellular got a breather from hefty fine after a telecom tribunal restrained the department of telecom from imposing penalty on the Aditya Birla Group firm. The Telecom Disputes Settlement & Appellate Tribunal, a quasi-judicial body that solves disputes in the telecom sector, asked DoT not to impose Rs 250 crore penalty on Idea Cellular for holding overlapping mobile permits in five telecom circles.

The USFDA has issued a warning to Cadila Healthcare for violating manufacturing regulations at its Sarkhej plant in Gujarat. US-based chocolate and confectionery major Hershey's and the Godrej Group have called off their joint venture in India following management differences in running the entity. At a recent board meeting, both sides mutually agreed to call off the partnership following which Hershey's will sell its 51 per cent stake to Godrej Consumer Products for an undisclosed amount.

BP Plc, Europe's second-largest oil company, is hoping to help Reliance Industries find more oil and gas and boost output at the showpiece KG-D6 fields after its $7.2 billion deal, the nation's largest foreign direct investment ever, is cleared by the government.

Perdaman Industries moves court against Lanco Infratech ; seeks restraint on mortgaging of Griffin coal

SKS Microfinance auditors identifies 400 cases of alleged cash embezzlement, fictitious loans & unauthorized advances given by some employees to borrowers

Excel Infoways to allot 1.01 crore shares at Rs 25.25/sh to QIB's under qualified institutional placement (QIP)

Govt sources say cabinet to take up RIL-BP deal on Thursday

Listing today: Rushil Décor , Birla Pacific Medspa

F&O Ban: Kingfisher Airlines

Finance Ministry releases MFI Development & Regulation Bill

Indo Asian Fusegear board meet on July 9 to consider buyback of shares

Indo Asian Fusegear has changed its name to Eon Electric

Kingfisher Airlines promoters pledge entire 53% stake


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