Friday, July 15, 2011

Stocks in action for the day: TCS, Zee Enter, ECE Inds, Bharti, Cranes Soft.

Market Outlook: Indian markets are expected to open in a positive geography following to the Asian cues. On the global space US stocks slip post Bernanke comment; Nasdaq down 1.2 while Asian markets trading mixed; Hang Seng slips. The US markets finished lower after Bernanke said the Fed is not prepared to take further action and amid ongoing concerns about the US debt ceiling, erasing earlier gains fueled by encouraging economic news as well as strong earnings from JP Morgan. 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: Aanjaneya Lifecare, Gujarat NRE Coke, TTK Prestige, Balaji Telefilms, Tata Sponge, Essel Propack, Banco Products, Camlin Automotive Stampings, Akash Optifibre, Onward Technologies, JK Paper, Ponni Sugars

Global events to watch for:

Þ Consumer price index data for June.

Þ industrial production numbers for June.

Global indices Update @ 8:

Dow Jones : 12446 (-54.49)

NASDAQ : 2762 (-34.25)

Nikkei 225 : 9955 (+19.45)

Hang seng : 21944 (+04.42)

SGX CNX Nifty : 5598 (+13.50)

Gold (USD/t oz.) : 1584.2 (-05.10)

Nymex Crude (F) : 96.18 (-00.75)

INR / 1 USD : 44.52

TECHNICAL OUTLOOK: Market flashing mixed signals.....

Sudden, not too many could take advantage of it either. Even though the market went a bit further than what we had outlined in our letter yesterday, we believe that the overall picture as yet remains largely unchanged. In the attached chart of today notice how the rise of yesterday has actually caught the rising trendline from beneath. Now, this is never a good signal because, many times, tops are formed against such patterns. So readers ought to be on the guard now for continuation downward.

Bank Nifty rallied back to near the trendline resistance on the daily charts and then fizzled out some. No change in view here too. Continue with a bearish posture unless prices clear the overhead resistance. But a few bank stocks did litter the gainers list in yesterday's trading. So we have to raise the caution flag here a bit. Lets never get complacent about anything in the market!

In yesterday's letter we had queried whether the large put addition was a signal of bullish position creation and we did see some amount of bullish action (before that hit near the end). We again see a lot of addition to the 5700 Puts (i.e. In the money!). One of the possibilities to consider is whether some Put ratio spreads or ladders are being created.

Prices are indicating that this could be so. Else it is difficult to conceive that someone is shorting ITM puts. Now, that would be a bit too aggressive for the kind of markets we are having. We had earlier suggested that strangles bordering the expected range would be good trade. Such a trade would have been a 5500-5700 strangle. This was about 90-95 points two days ago, it is currently priced around 80. If no big move comes in today, then the theta loss of the weekend will begin to get priced in today and we may see this pair erode to around 70 levels or so.

TCS following in the footsteps of Infy is not a good signal. Most institutions are long till their neck in TCS. Something going wrong here could zap the stock a bit and with that the index. So be on the watch here today. Auto stocks have turned mixed as has real estate. sugar took a breather yesterday and some financials were in the fray. Things are too mixed right now to take any sector based view. Everything seems quite stock specific and may continue to remain that way. IDFC lower puts were well traded yesterday (130) and we find a large volume upmove in the stock prices as well. Some bullishness to continue there? Similarly IFCI seems to be witnessing some good activity in the 50 call. Time to check it out.

STRATEGY FOR THE DAY: Opening may be flat as there is really no particular feed to the market to make it show any gaps. Continue to expect small range moves as weekend pressures will also act to reduce the amount of activity. Results flow has started and its impact on stock prices are also visible. But the trend of the market is not too strong and hence these effects are quite limited in time extension. So if you take a position on the back of results, make sure you bail out soon after as sustained moves are absent.

Stocks to buy if market is strong:

EID PARRY Sugar stocks have been doing pretty well, on back of higher sugar prices globally. This is reflective in the chart. This particular counter is one of the dark horses in its sector. Having said so this counter looks bullish than any other sugar counters. RSI has had a good support 65 levels which is seen only in a bullish counter. BUY.




Buy above 269

3 points

273 / 276

GIC HOUSING After rallying from lower levels, this counter failed to breach the overhead resistance at 120 levels. Since then, it has retreated its gains and started to fall apart. Yesterday, it managed to breach the critical moving average as can be seen in the appended chart. Momentum indicators have reversed and signs of bears entering this weak counter. SELL.




Buy above 110

1 points

108.50 / 107

Rally Near 111.50

1 Points

110 / 108

Stocks to sell if market is weak:

JAGRAN After coming down significantly, this counter fails to arrest its fall at any prior support. Yesterday, after closing below the moving average it has given confirmation to go short. Momentum indicators are lying low and fail to give any sort of a bounce back. The ascending trendline also has been violated on the daily charts. SELL.




Sell below 114

1.5 points

112 / 110

Or rally to 115.50

1 points

114 / 112


Sell Nifty below 5570 with 5595 stop for a drop to 5515.

Sell on rallies to near 5620 with 5635 stop for a drop to 5560.




Stocks in action for the day: TCS, Zee Enter, ECE Inds, Bharti, Cranes Soft.

Board Meets: - JK Paper to propose a rights issue. Simbhaoli Sugars to consider hiving off its power business into Simbhaoli Power subsidiary of the company

India's largest software services exporter, Tata Consultancy Services (TCS), reported their first quarter earnings which saw better-than-expected profits driven by increased spending by clients. India's largest software services exporter Tata Consultancy Services (TCS) has reported net profit of Rs 2,380 crore in the quarter ended June 2011, which was better than expectations. Revenues increased just 6.3% in the June quarter at Rs 10,797 crore from Rs 10,157.5 crore in earlier quarter while the poll expected at Rs 10,674 crore. Customer focus and balanced business model helped performance this quarter. Travel, hospitality and telecom were seen double digit growth. However, earnings before interest and tax (EBIT) was down by 1.7% at Rs 2,826 crore from Rs 2,875.7 crore on quarter-on-quarter basis. EBIT margin grew at 26.2% - less as compared to 28.3% in previous quarter. Decline in margins was slightly higher than expected on account of wage hikes and currency volatility.

Textile cos: Sources -CCI probing alleged cartelisation by textile companies -CCI probing nearly 18 synthetic fibre manufacturing companies -Companies include Bombay Dyeing , Century Rayon, among others -Companies include Grasim Industries , ModiPon, Among Others.

Apollo Hospital QIP book launched: Sources -Apollo Hospital looking to raise Rs 320-350 crore via QIP -Enam, Citigroup & Nomura Bankers to apollo Hospital QIP.

Stock Split: Rallis India from Rs 10/sh to Re 1/sh.

F&O Ban: ABG Shipyard , Kingfisher Airlines.

Future Ventures has made an additional acquisition of 5.1% stake in its subsidiary company Indus League clothing.

Shipping Corp signs shipbuilding contract with China Co.

Cranes Software in loggerheads with offshore investors holding FCCB’s with Bank of New York Mellon begins proceedings on behalf of the selected investors (ET).

GVK ’s plan to run Bangalore International Airport hits hurdles as its current stakeholder Siemens is scouting for other buyers after a disagreement over valuation with the company (ET).

Bharti Airtel to provide an exit option for its minority JV partner Telecom Consultants of India currently holding 30% in the JV (ET).

NTPC not to go ahead with its 1320 mw plant Bengal project with an investment of at least Rs 8000 crore (BS).

GTL likely to go for debt restructuring to see an equity infusion of Rs 2000 crore (BS).

ECE Industries to buy back a maximum of 8.7 lakh shares at Rs 145/sh ((CMP: 113.30)).

Zee Entertainment to buy back a maximum of 5.5 crore shares at Rs 126/sh ((CMP: 127.65)).

Bombay HC asks Adani Group to withdraw its petition for not the giving the security clearance for developing & operating a new container terminal at Jawaharlal Nehru airport (Mint).

Hero pays Rs 811 crore tax on Honda stake buyout – DNA.


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