Tuesday, July 12, 2011

TECHNICAL OUTLOOK: Downhill again…

Market Outlook: Indian markets are expected to open in a negative topography following to the Asian cues. All eyes on Software major Infosys which is due today with its Q1FY12 numbers. The results, which come amidst economic uncertainties in Europe and margin pressures back home, will set the tone for the overall IT sector performance this quarter. So all this put together we will remain negatively biased for the day. On the global space Wall Street skids on global financial fears following to that Asian and other market slip post increase in Italy debt crisis. 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: Infosys , Geojit BNP Paribas , Maharashtra Scooters , UCAL Fuel , Magma Fincorp , Koutons Retail India , Sagar Cements.

Global events to watch for:

Þ International Trade.

Þ FOMC Minutes.

Þ NFIB Small Business Optimism Index.

Global indices Update @ 8:

Dow Jones : 12505 (-151.4)

NASDAQ : 2802 (-57.19)

Nikkei 225 : 9915 (-154.5)

Hang seng : 21871 (-475.3)

SGX CNX Nifty : 5552 (-68.00)

Gold (USD/t oz.) : 1553 .5 (+04.30)

Nymex Crude (F) : 94.40 (-00.75)

INR / 1 USD : 44.37

TECHNICAL OUTLOOK: Downhill again…

Our market seems to have sensed the weakness in the overseas markets and had dropped in advance yesterday. We have been looking for some declines into the support zones- first near 5600 and then near 5540. The way the overseas markets have traded seems to suggest that the decline should carry on till the second level of support before some meaningful support emerges. 5540 is the 38% retracement of the rise from the June 20 low and is also near the gaps created at that price zone. If there is a gap down open and a quick slide into that area early in the day then one should be looking at the violation of the morning low as a signal that this market intends to go deeper. However, if it is going to attempt a rally, then is what the market will do and subsequently in the day, attempt to go higher. So, today is an important day for the market. In any case, the trend change date is set for the 15th so we may see some to and fro moves yet before another trend emerges.

Bank Nifty has moved down as had been expected. It did take a day or so more than what we wanted but the resumption of the uptrend was never on (as might have been in the case of the Nifty). 11075 is the minimum expectation and if that were to break- which it might well do- then we are looking at around 10700-800 levels as the next and more meaningful support for this index. We have been asking readers to short this and continue to advice the same. Hold your shorts for the lower targets and reduce your stops to even now or maybe even a bit lower than that.

Earnings season from today. Infosys kicks off as usual. But looking at the stock's behavior nothing major seems to be on the cards. There were some rumors floating around for a bonus announcement but prices dont seem to be revealing any such positive feelings. Jain Irrigation has rallied sharply and moved into resistance. One should consider shorts in this counter. It is under bearish grip. Adani Ent has similarly attempted a rally but this is coming off a sideways move. The stock has been out of action for a long while but been able to hang on to its levels. Perhaps the flexing of muscles yesterday is a hint of some good results to come? Look at this one with positive bias if the rise attempt continues into today. NSE has announced addition of 8 more stocks to the FnO list. A couple of them are duds- who trades in JSW Energy and TTK Prestige and VIP etc? Sometimes you really wonder at the logic of NSE to include names into the list! Look at things like MRF and Concor and Asian Paints etc in the current list- what are they doing there except wasting space?

PCR has dropped to 1.20 and the IV has moved up a tad to 18.5%. This betrays a slight nervousness as the market shifts to a slight downtrend. There may be apprehensions that this could snowball further? Continued addition of 5400 Puts is suggestive of someone taking up a bearish positions in options. Use intra day rallies to initiate short calls at higher strikes for day trades in options.

STRATEGY FOR THE DAY: Weak open is on the cards and hence one could look for some downward traction. If dip towards the Nifty level mentioned in the letter occurs in the earlier part of the day can be considered as a buying opportunity for the day traders. The overseas market conditions being tentative one can expect the market to remain rangebound. In these times one can resort to the Day Trading Table and take some trades. With result season around the corner one can expect some stock specific moves.

Stocks to buy if market is strong:

TIMKEN: Prices have been successfully climbing up forming a sequence of higher tops and bottoms over the last few months. Yesterday prices ended a small dip and renewed the prior run and closed the day with fat gains. Volumes were high and momentum got a fresh push. Look to buy here.




Buy above 236

3.5 points

241 / 244-45

Or dips to 231

3.5 points

236 / 239

J B CHEM: Since second week of June 2011 prices have been making consistent attempts to pullback from the earlier sharp fall and recoup losses made then. The steady rally formed yet another minor higher bottom yesterday and flipped up with a sharp rise. Prices look set for possibly more rallies ahead. Buy.




Buy above 139.5

1.5 points

142.5 / 144

Or dips to 137

1.5 points

139.5 / 140.5

Stocks to sell if market is weak:

GLODYNE TECH This counter has been under the bearish grip for quite some time now. Yesterdays continued fall highlights the same. The decline was substantial and ended up breaking a strong valuation support around 325 levels and has closed below it. RSI has dipped down afresh from 40. Fresh sell signal here.




Sell below 317

3.5 points

312 / 309-08

Or rally to 323-24

3.5 points

318 / 315


Buy Nifty on dips to 5550 with a stop below 5530 for a rise to 5615.

Sell Nifty on rallies to 5630 with stop 5650 for a decline to 5560.


Sell Mphasis below 455 target 450/446 stop above 460.2
Buy ABG Ship above 382 for target of 386/389 and stop below 378

Stocks in action for the day: Infosys, SpiceJet, Essar Oil, Madras Cem

Cabinet reshuffle is likely today evening.

Bank base rates: - HDFC Bank hikes base rate, prime lending rates by 25 bps - Union Bank of India hikes base rate by 25 bps to 10.25% - Oriental Bank ups BPLR, base rate by 25 bps effective today

The Enforcement Directorate has issued showcause notices, under Foreign Exchange Management Act, to Etisalat DB Telecom and its five directors. The total amount involved in the show-cause notice is Rs 7,258 crore, and the charge hurled against Etisalat DB and its directors is that they violated FDI norms and concealed it from the Foreign Investment Promotion Board.

The Supreme Court has rejected construction major Gammon India's petition challenging the government decision to impose custom duty on the machines it imported from Germany. Earlier, the Custom Excise and Service Tax Appellate Tribunal had also rejected Gammon's plea and held that it would have to pay the custom duty.

Maruti Suzuki is once again headed for a confrontation with the rebel workers' body at its Manesar plant that witnessed the 13-day strike last month. Fresh trouble is brewing at the plant as the rebel body Maruti Suzuki Employees Union has decided to boycott the union election slated for July 16. The company has said it neither recognizes the rebel body nor is ready to talk to them.

New in F&O: -NSE adds 8 new securities to F&O list, to declare date of introduction later - Arvind , BF Utilities , Gitanjali Gems , JSW Energy , Jubilant Foodworks , South Indian Bank , TTK Prestige , VIP added to F&O

FDI in retail: Exclusive sources -Planning committee supports 51% FDI in multi-brand retail -Department of consumer affairs wants only 49% FDI -Finance Ministry will share views on multi-brand FDI at CoS meet

EGoM: Exclusive Finance Ministry sources -EGoM on Tuesday to discuss cap on subsidised LPG cylinder -Panel had proposed capping subsidised cylinders at 4

Essar Oil owes USD 2 billion to Iran for oil imports since late December when RBI ended long standing payments mechanisms for refiners (Mint)

Madras Cements in talks with Lafarge & holcim to divest its cement grinding unit in West Bengal for roughly Rs 350 crore (TOI)

BPCL lines up investment of Rs 50,000 crore to expand its capacities in refining, retail & upstream projects (TOI)

F&O Ban: Kingfisher Airlines

Karuturi Global board meet today to decide opening date of GDR issue

Chowgule Steamships revokes 29 lakh shares of promoters representing 7.99% equity

Essar Oil bets big on coal bed methane gas, looking for aggressive acquisitions both in domestic & local arena (ET)

SpiceJet to delay its regional routes as company waits for the RBI nod for USD 250 million funding to buy Bombardier Q400 – ET

SBI holds on to its plan to acquire a stake in Tata Motors finance following objections raised by RBI – BS

5 firms including JSPL , GVK Power may lose coal blocks if the production process doesn’t go underway – FE

Aster Silicates has completed civil work for additional 300 mt plant for production of sodium silicates. The furnace work will get completed by September 2011 end. The company has also undergone feasibility study for installing unit in the Middle East.

Glenmark Pharmaceuticals has received second and final upfront payment of $25 million for GBR 500 deal signed with Sanofi. With this payment, the company has received the entire upfront payment of $50 million.

Reliance Power’s wholly owned subsidiary, Coastal Andhra Power has become eligible for carbon credits as per accreditation accorded by the Executive Board of the Clean Development Mechanism.

Sintex Industries reported consolidated net profit of Rs 94.57 crore for the quarter ended June 2011 and net sales of Rs 1109.51 crore in the same period.

Hindalco Industries were under pressure after reports that the Environment Ministry withheld clearance for the Mahan coal block in Madhya Pradesh, which is intended to fuel power plants of the aluminium producer, and referred the matter to a Group of Ministers.

Orchid Chemicals’ Cephalosporin API manufacturing facility located in Alathur (Chennai) has been shut after a closure notice by the Tamilnadu Pollution Control Board (TNPCB) citing some non-compliance with regard to the disposal of solid waste. The Company is in talks with the TNPCB officials and is confident of resolving the issues and bringing the plant to a fully operational stage at the earliest.

NIIT Technologies has signed multi-million GBP contract with Eurostar, the high-speed passenger service between the UK and mainland Europe, to provide infrastructure management services for its core business applications.

Venus Remedies has launched Aceclofenac injections in India under the brand name ACHNIL. The drug is used in treatment of acute pain and is effective for 24 hours.

Shanthi Gears’ net profit rose 17.64 per cent at Rs 7 crore for quarter ended June 2011 as against Rs 5.95 crore in the same quarter a year ago. Net sales stood at Rs 40.22 crore as compared to Rs 32.54 crore in the same period a year ago.

Morepen Laboratories has received USFDA approval for anti-allergic drug Desloratadine for manufacturing at its Parwanoo plant in Himachal Pradesh. The drug is non-sedative anti-histamine drug and is an active metabolite of Loratadine which is wide accepted anti-allergy drug in the US market

After Swan and Unitech Wireless, the Income Tax Department is looking into the tax implications of a deal between Datacom solutions and the Videocon Group after the former was allotted 2G licences in 21 circles for Rs 1,507 crore in 2008.

Compact Disc India will delist shares from Indian stock exchanges at a price of Rs 75 per share. Due to the on-going dispute with HS8C Bank, the delisting process was delayed, the company said. Its board has decided to settle the outstanding dispute with the bank first, to avoid any kind of uncertainty with the delisting process.


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