Friday, July 8, 2011

TECHNICAL OUTLOOK: Expectations for some declines…

Market Outlook: Indian markets are expected to open in positive note and expect to consolidate in the range of 5630-5750. On the global space US markets finished higher though off from their intra day highs after a pair of jobs news offered some hope that the employment picture was improving ahead of the critical government non-farm payroll report today; and Asian markets are trading higher; Nikkei, Hang Seng up. On the overall basis we expect Indian market trade with support near 5550 and any positive breakout would be expected only after 5750.

Results today: IndusInd Bank , HDFC

Global events to watch for:

Þ Monster Employment Index.

Þ Employment Situation.

Þ Wholesale Trade.

Þ Consumer Credit.

Global indices Update @ 8:

Dow Jones : 12719 (+93.47)

NASDAQ : 2872 (+38.64)

Nikkei 225 : 10170 (+99.20)

Hang seng : 22787 (+257.2)

SGX CNX Nifty : 5772 (+26.50)

Gold (USD/t oz.) : 1531.3 (+00.70)

Nymex Crude (F) : 98.47 (- 00.20)

INR / 1 USD : 44.41

TECHNICAL OUTLOOK: Expectations for some declines…

The expectations for some declines were rendered completely aside with the strong advance that the market showed in the mid session. This upmove was sudden and with big volumes and it brushed aside the previous high of 5705 and then stayed put near it for a while. It then picked up once again with high volumes and sped to the next expected target zone near 5760. We had indicated in our earlier letters that the next target zone is also nearby in case the 5700 levels were broken. But the speed and ferocity with which the index reached those levels leaves one wondering if there are other plans around right now. News about govt bond auction and the consequent expectations that the interest rates may actually be slashed seem to have fed the rally. Will it continue? The market is certainly betting that it will. So we have to run with that. Volumes shot up, 5700/19000 on indices was breached, FII money continues to come in, small and mid cap indices were up. Only domestic funds continue to be sellers. We see an immediate resistance at 5780 levels. At 5767 the index is at 50% retracement of the fall from Nov 10 high. The 62% retracement is still a good way away at 5905.

PCR edged further higher to 1.34 and we saw some big additions in the Put contracts. When the PCR makes it past the 1.30 levels, the trend certainly becomes stronger. so until this number drops below 1.20, we should be retaining a bullish bias. The OI range has narrowed some to 5500P and 5800C as the big strikes. This is going to widen further for sure. We saw some rapid shedding in calls (obviously) and lets see if 5900 picks up today in OI (current OI is 43L shares).

Interesting that all asset classes across the globe are up and running. US markets, Commodities, Indian Equities etc are all up. The "risk-on" trade seems to be aggressive right now! Our observations of the past about this phenomenon is that it doesn't last too long. So, lets enjoy it while it lasts. Much of the rally in equities (particularly India) came from drop in commodity prices. But suddenly, this is no longer the case. So lets not get carried away with the talk.

Bank Nifty bearish view has not come thru and the rise in Nifty has forced some fresh bullishness into this counter. But it is still a bit guarded, so revise stops (if still holding) to 11390. If shorts created then 11500 is stop and reverse point.

STRATEGY FOR THE DAY: Open is bound to be better but the key factor is whether there is continuation. The mood is ebullient right now and that could occur. But lets not forget that we are trading near resistances of different kinds and other than FII inflow there isnt anything much to fuel the rise. But not to rain on the parade. Set lower stops (5615 for swing traders and 5690 for day traders) or buy puts to address the risk and retain a bullish bias. We must be with the market and not with our feelings. If stops are triggered, exit and sit by the sidelines for some fresh signals. No need to be in the market all the time.

Stocks to buy if market is strong:

MARICO: Prices rocketed to new life time highs touching 162 levels and retaining all the gains closed near the high as well. This put an end




Buy above 142

1.5 points

145 / 146.5

Or dips to 140-39

1.5 points

142.5 / 143.5

SHOPPERS STOP: This counter has been maintaining a consistent bullish bias over the last several months. Yesterdays smart jump pushed prices to new life time highs, breaching a valuation resistance around 476 levels and has closed above it. Looking good, go long.




Buy above 486

3.5 points

492 / 496 / 499

Stocks to sell if market is weak:

TECPRO SYSTEMS: After a sharp pullback rally in recent session, prices hit a road block this week and on some profit booking have turned around last couple of sessions. RSI too has turned around from 60 levels signaling exhaustion. If prices continue to trade lower, sell.




Sell below 276

2.5 points

272-71 / 268-67


Buy Nifty above 5780 with stop 5750 for 5845-5860.

Buy Nifty on dips to 5665 stop 5645 for drop to 5720-5745.


Buy HDFC on dips near 710-713 stop below 705 tgt 720-723

Sell Patel Eng below 156 stop above 157 tgt 152

Stocks in action for the day: JSW Steel, Peninsula, Sun TV, Punj Lloyd.

Punj Lloyd -To withdraw provision of additional financial support to indirect subsidiary Simon Carves due to prevailing market conditions and the financial condition of Simon Carves. Simon Carves likely to be placed in administration.

SBI-To hike base rate by 25 bps to 9.5% from July 11-SBI to hike some deposits by up to 100 bps effective Jul 11

GoM on mines-Coal mining cos to share 26% profit with locals-MMDR Bill likely in monsoon session -GoM decision on MMDR bill to go to cabinet

Jairam Ramesh Says -Non-coal miners to share 100% royalty with locals -Coal miners to share 26% profit with locals Chennai police summons Sun TV CFO Unnikrishnan

Sun TV CFO Asked to produce financial details of Sun Pictures-To be questioned on financial transactions of Sun Pictures-To be quizzed on alleged non-payment of Rs 83 lakh to producer

Temasek says So far invested upwards of USD 5 billion in India -7-8% of global portfolio invested in India -Looked at MFI segment in FY10; saw early cracks -Invested over USD 700 million in India in FY11 -Divested nearly USD 500-600 million of India portfolio in FY11 -Continues to stay invested in Tata Tele, Bharti Airtel -Bullish on broad financial sector - invested in NSE, Max -Looking at infra, ports, power, healthcare services sector -Lot more active in public market, invested in Coal India, EIL -Real estate sector marred with governance issues.

D Maran: Sources -D Maran to be questioned by CBI before FIR is registered -CBI to take D Maran's version on Sivasankaran allegations -CBI may question Kalanithi Maran in connection W/2G probe

Ex Dividend: VST Industries Rs 45/sh, HUL final dividend Rs 3.5/sh, Pfizer final dividend Rs 4/sh, Tata Elxsi Rs 7/sh.

Board meets today: Nitin Fire Protection to consider fund raising via QIP, rights issue, FCCBs, GDRs

F&O Ban: Kingfisher Airlines.

Varun Industries to further issue 70 lakh equity shares on conversion of warrants at Rs 43.20/share

GoM approves Draft Mines & Minerals Development & Regulation Bill (MMDR Bill)

Neuland Lab board approves the rights issue of shares not exceeding Rs 12 crore

Adani Power board approved amalgamation of Growmore trade & Investment Pvt Ltd Mauritius with self

Peninsula Land to jointly develop 300-acre Thane plot, to get around 22% share of revenue (ET)

RBI asks banks to reduce the pace of lending to the commercial real estate sector fearing an asset price bubble (BS)

JSW Steel to halt expansion of Vijaynagar unit until it receives approval for captive iron ore mine in Karnataka (BS)

NHAI has proposed that private companies developing expressways will have to buy land on their own could hit the feasibility of over 18000 km of expressway projects (FE)

Fuel retailer’s losses set to halve in Q2 on the back of price hike & easing crude prices (FE)

International Coal Ventures plans to acquire 24% stake in Singapore based MEC Coal faces fresh hurdles with NTPC against investing in a holding firm wants bank guarantee for payment (Mint)


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