Wednesday, July 6, 2011

TECHNICAL OUTLOOK: Nifty continues to range ....

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 end flat; Netflix boosts Nasdaq while Asia trading mixed; Hang Seng down, Nikkei up. On the overall basis we expect Indian market trade with support near 5550 and any positive breakout would be expected only after 5750.

Market Cues: NSE F&O Open Int was up Rs 2950 crore at Rs 1.05 lakh crore. As per provisional data of July 5, FIIs were net buyers of Rs 826 cr in cash markets. DIIs were net sellers of Rs 898 cr in cash mkts. FIIs were net sellers of Rs 574 cr in F&O.

Global events to watch for:

Þ ISM Non-Mfg Index.

Þ Challenger Job-Cut Report

Global indices Update @ 8:

Dow Jones :12569 (- 12.90)

NASDAQ : 2825 (+09.74)

Nikkei 225 : 9988 (+16.37)

Hang seng : 22633 (-114.60)

SGX CNX Nifty : 5655 (+05.50)

Gold (USD/t oz.) : 1513.2 (+00.50)

Nymex Crude (F) : 97.09 (+00.20)

INR / 1 USD : 44.49

TECHNICAL OUTLOOK: Nifty continues to range ....

Tuesday was another low key affair. No gap this time but markets moved a little lower. Nothing unexpected there. The price damage is still quite limited but the key point is that it has been three sessions now and the high has not been taken out. This is in contrast to the last week move where everyday the market recorded a higher high. If one takes the nearest downswing (Apr high to June low) then at 5700 levels the index ran up 62% retracement of the fall. The main resistance trendline was also here. It had also been preceded by a near-vertical run for 6 sessions. Expiry too was over. So not unusual that the index is finding difficult to make further gains. We also find resistance at 5760 levels where even more resistances are bunched up. So breakout trades above the recent high will also not get you too much, please note. Hence buying dips would have to be the way to go. Nearest support for today to do this is around 5590.

In yesterday's letter we had warned about Bank Nifty hitting some resistances. It had a decent day but still hovers in the resistance range. So nothing has changed for today. If there is a breakout, then we are in a tricky situation. Unlike the Nifty, this index has been rallying vertically now for 8 sessions now. Therefore breakout buying will carry a higher risk. Hence our advice is not to follow a breakout in this name unless you trade intra day and enforce strict stops. Pending long positions should have their stops raised to 11348 or higher. If it drops without rising beyond yesterday high, then make haste to exit longs and more aggressive traders can even short with some nearby stop.

Option activity seemed to be rather limited yesterday and largely confined to near the money strikes. This is more suggestive of traders putting on some short straddles and strangles. Nothing very directional about it. Current OI outstanding show 5700-5800 in Calls and 5500-5300 in puts. So It looks like the big position in 5300 has now moved upward to 5500 and that is slightly bullish signal.

Among stocks, Bhel has fallen big time yesterday as news about the FPO crept in. It has room till about 1920 levels or so before support emerges. All recent declines have seen some strong demand emerge near 1900 levels and that is the one to be watched closely for some opportunity. Ranbaxy has built up a strong resistance at 550 and one should watch that closely for a breakout because it will probably see an upward run if that is crossed. call Ratio spreads are happening at nil cost right now (540-560) and could be attempted if one wants to trade options.

STRATEGY FOR THE DAY: Open should be flat because we have no particular feed coming thru from any area. Trading may also remain a bit lackluster and stock specific. We had mentioned earlier this week that it is time to resort to the Table. That remains the case yet and one may look at stocks that are dropping down into support zones to buy in as there does not appear to be any strong trend on. Just be careful that there is no news element attached to the one that you pick because that could induce some volatility and trip up the table levels.

Stocks to buy if market is strong:

GUJ FLOUROCHEM After a razor sharp run during the last week of June 2011, prices topped out at new highs of 405 and slipped into a small consolidation phase in the last few sessions. From the daily chart we can see that the consolidation is taking support at a strong valuation region around 384-85. Expecting a bounce back, buy.




Buy above 386

2.5 points

390 / 392-93

MASTEK This Tech stock was seen shooting thru the roof last session on aggressive buying activity. Prices zoomed to new swing highs and despite the cool off from the intraday highs, they managed to close on a positive note. Volumes were gigantic and also pushed the momentum sharply higher. Buy.




Buy above 127

2.5 points

131 / 133-34

Dip near 122-21

2.5 points

125.5 / 127

Stocks to sell if market is weak:

MAX INDIA Prices formed yet another higher top at 192 and topping out there have collapsed sharply this week. Yesterdays decisive fall has broken below a rising Gann line support and closed below it. RSI has turned down from 60. Go short.




Sell below 180

1.5 points

177.5 / 176

Rally near 182

1.5 points

179.5 / 178


Buy Nifty on dips to around 5590-95 stop 5580. Tgt 5665.


Buy Grasim above 2215 stop below 2178 tgt 2261-2265

Sell Sintex below 177 stop above 179.50 tgt 174-173

Stocks in action for the day: Tech Mahindra, Opto Circuits, Godrej Consumer, KSK Energy, Idea, RIL

BT to stay invested in Tech Mahindra: UK-based telecommunications player BT today said it will continue to hold stake in Indian IT firm Tech Mahindra for the time being. BT has a 24.4% shareholding in Tech Mahindra. Tech Mahindra remains a key supplier to BT and, while further sales may be considered in the future, BT expects to continue to have a shareholding in Tech Mahindra for some time. There were speculations that BT may exit in view of likely merger of Mahindra Satyam and Tech Mahindra.

DGH - Exclusive govt sources -DGH says no back door exploration in Cairn Raj block -Cairn Energy operates RJ-ON-90/1 block -Additional 1,708 sq kms area granted to Cairn India -CAG report critical of additional area grant -License for RJ-ON-90/1 block always with ONGC -Panna Mukta & Tapti told to share information with CAG -Will consider correctives after CAG final report

RIL - Sources from WSJ -Mukesh Ambani looking to sell Reliance Gas Transportation Infra -Reliance Gas Transportation Infra involved in gas transportation -RIL spokesperson declines to comment

Analjit Singh -May be appointed Chairman, Vodafone India -Analjit Singh may pick up further 1.53% stake in Vodafone India

TDSAT -Restrains DoT from Rs 250 crore penalty on Idea -TDSAT order says demand of Rs 250 crore against Idea-Spice overlapping license -Idea had been penalised for 5 overlapping Licenses

Opto Circuits has taken restructuring initiative and transferred the investments of three of its US subsidiaries, Cardiac Science Corporation, Criticare Systems Inc. and Unetixs Vascular Inc, into Opto Cardiac Care, a wholly owned subsidiary of the company. The company has also transferred the investments of its subsidiaries, Eurocor Gmbh, and N.S.Remedies into Opto Eurocor Healthcare, a wholly owned subsidiary.

NIIT moved higher after it joined hands with IBM to offer career educational projects to students ready to join the IT industry.

Thomas Cook moved higher after opportunities opened for the company post a visa waiver program announced in Dublin. Under the program, Indians visiting Britain on tourist visas can now visit Ireland without a visa.

Man Infraconstruction has bagged an order worth Rs 100 crore from Viraj Profiles for civil and structural construction work.

KNR Constructions has bagged an order worth Rs 580.17 crore from Sadbhav Engineering towards rehabilitation and upgradation to two lane with paved shoulders and maintenance of Chhindwara-Linga-Umarnala-Saoner section in the state of Madhya Pradesh.

Rainbow Papers is planning to pump in about Rs 700 crore for its expansion plan at its existing Gujarat unit. T

Viom Networks, a joint venture between Srei and Tata Teleservices, has had preliminary discussions with bankers exploring a strategic merger with the beleaguered GTL Infra. But the discussion between India's largest independent telecom tower companies remains tentative and has "low probability" of sailing through.

Escorts group is planning to list its three big business verticals as separate entities. In the process, Escorts will hive off the railway component and auto component businesses. The idea is to unlock the value of its subsidiary businesses and offer investors interested in the group opportunities beyond the tractor business.

Environment Ministry denies clearance to Gujarat Mineral Morga-II Coal Mine Environment Minister -Gujarat Mineral's Morga-II In no-go area - KSK Energy identified Morga-II coal substitute KSK Energy, Gujarat Mineral in Morga-II coal supply pact

Tamil Nadu Court says -Sun Pictures COO H Saxena sent to 2-day police custody -Bail plea to be heard after police custody over

Ex Dividend: Canara Bank Rs 11/sh

F&O Ban: Kingfisher Airlines

Muthoot Capital Services approves rights issue of 65 lakh shares at Rs 80/share

Godrej Consumers , Hershey’s call off India JV, US major to sell its 51% stake in JV to Godrej – ET

JSPL gets additional 5% stake in Rocklands via open offer, ups stake in Australian company to 19.39% - BS

Indian Hotels Sea Rock project into environment trouble, may take atleast a year to get all necessary approvals - BS

ECE Industries board approves buy back 8.4% equity at maximum Rs 145/share ((CMP: 126))

SC scraps US order canceling plot allotments to hotel majors like ITC , Indian Hotels – FE

Circuit Systems open offer at Rs 14.75/sh

PVR buys out JP Morgan, India Advantage Fund from group firm

Recession, low valuations create buying opportunity in DuPont

TPG to acquire blood testing major Immucor Inc for $2 bn

Land records should be mapped zone-wise, digitised: CII

Closure of mining operations may hit steel output in South


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