Tuesday, July 26, 2011

TECHNICAL OUTLOOK: Strong market cues begins the week on a positive note

Market Outlook: Indian markets are expected to open on a flattish note on the back mixed cues on the global space. All eyes are on Reserve Bank of India's (RBI) monetary policy meeting will set the direction for the stock market in the week ahead. We expect RBI to keep rates unchanged which sound quit possible with the given circumstances. On the global space US stocks end lower on possible rate downgrade and Asian markets are trading mix, The Nikkei average snapped a three-day run of gains on Monday after US debt ceiling worries nudged the yen higher, but a key technical support held on hopes that a last minute deal will be reached and upcoming corporate earnings will be strong. On the overall basis we expect Indian market trade with support near 5600 in the near term and any positive breakout would be expected only after 5740.

Results today: Maruti Suzuki, BHEL, JSW Steel, Shriram Transport, SKS Microfinance, Shoppers Stop, TTML, Glenmark, Thomas Cook, Alembic, WWIL, Tata Investment Corporation, Opto Circuits, Asian Paints, Monsanto India, Pidilite Industries, Lumax Auto, Binani Industries, Taj GVK, Shreyas Shipping & Logistics, Great Offshore, Merck, V-Guard Industries, DCM Shriram Consolidated, Tinplate, Premier, Seamec, Visa Steel.

Global events to watch for:

Þ Consumer Confidence.

Þ New Home Sales.

Global indices Update @ 8:

Dow Jones : 12592 (-88.36)

NASDAQ : 2842 (-16.03)

Nikkei 225 : 10054 (+04.33)

Hang seng : 22436 (+142.8)

SGX CNX Nifty : 5699 (+12.50)

Gold (USD/t oz.) : 1616.9 (+02.50)

Nymex Crude (F) : 99.37 (+00.17)

INR / 1 USD : 44.41

TECHNICAL OUTLOOK: Strong market cues begins the week on a positive note

Market ran up pretty briskly in the later part of the day, clearing the recent supply point at 5660 and then heading higher. Close was off the highs above 5700 and ending looked promising. At least it left everyone in good cheer. But one has to take note of the fact that the average traded price of the day is around 5660 levels only and hence it is obvious that the rise has been on thinner volumes and was probably some brisk short covering action. Even those that went long would be wanting to bail out in the morning today as they may not want to chance their arm with a pending long when the RBI meet happens after 11 am. So look for selling to emerge at higher levels in the morning. If a gap open occurs, then it is very possible that there could be some immediate selling. On the other hand, there would be selling even if the market opened lower- out of panic that there could be more declines. The only way the market may remain steady and not attract too much selling would be if it opens around the same levels that it closed at yesterday. Given the probabilities for selling is more, holders should be looking to protect profits where possible. After struggling for a while, the Bank Nifty gave it a charge too, aiding the Nifty to stage some gains.

Now both the indices are at the level of the overhead resistance trendlne coming off the Nov 10 high. This is a tested trendline and a failure or breakout at this level is to be considered a serious signal. July 25 was a trend change date and with prices trading into resistance and being at a high, there is a case here for price and time match. Hence readers are alerted to be very careful with their fresh trades. Do not get carried away by the talk that is going around. Look at price action and decide. Talk is often misleading. If Nifty stays above 5715 then think bullish for the day and ahead but if it falls beneath 5650 then surrender long Nifty positions. There is no call to sell short though (except by very aggressive day traders only) as bear triggers are not seen until a break of 5560. That is far away at the moment. On Bank Nifty, rise can carry on till 11665 before meeting next resistance while decline below 11000 is required for bearish trigger. If prices remain below 11350 (particularly after the policy announcement), then surrender pending longs at the very least.

In the past two days, about 1 cr shares have been added to the Put OI. Alongside about 77L shares have also been shed from the Call OI. This is quite substantial and is more suggestive of a market wanting to go higher. The PCR has moved up aggressively to 1.34 and at these levels the market does indeed turn further bullish. So this evidence is against the possibility of the market recording a high yesterday. Lets see how matters actually flow. After a long time we are seeing three strikes (5500 and 5600 Puts as well as 5800 Call) with an OI above 1 cr each. This pretty much defines the contours of the market for the next couple of days till expiry.

Though Bank nifty fared well, the leader bank stocks are still not too healthy. But look out for SBI around 2550. There is a double resistance cluster out here and prices are very near these levels. So it is make or break time for it. Further progress of the Bank Nifty will depend on how this leader stock performs. Icici Bank has a good support on the weekly charts but this will be threatened in case prices fall beneath 1030. These are two of the biggest ones to keep track of in the post RBI meet price move today.

Telecom stocks were on the roll since last couple of sessions. The immediate levels of resistance to look for in major stocks are Bharti (447),Idea(95-97), Rcom (113) and TTML (24). If long, then look to cash out around those levels.

STRATEGY FOR THE DAY: There may be some initial profit taking selling in the morning hour but that may not be paid much heed unless the volumes are very large. Market may idle into the RBI announcement (typically around 11 am or so) and the relevant levels to watch for both Nifty as well as Bank nifty have been given above. Take note of it and judge the trend status. Individual Bank leader levels have also been mentioned today. Check those as well. Telecom stock run should now be coming to an end as it is a few days old and time for a shift in the sector preference. We have provided the next resistance levels as well. Momentum investing continues to be possible as there is sufficient momentum in the mid and small cap area. This should be continued.

Stocks to buy if market is strong:

CESC: Prices were seen rocketing on huge volumes indicating fresh surge of buying coming in last session. They have hit new swing highs and also renewed the prior sharp advance. This has also led RSI to turn around afresh from support at 60. With this fresh buy signal, one can go long here.




Buy above 350

3.5 points

355-56 / 360

Or Dip near 343-42

3.5 Points

348 / 351

BILCARE Last couple of months prices have been gradually forming minor higher bottoms and making attempts to end the prolonged declining phase and move up once again. Yesterdays swift bounce back from a small dip has now created the possibility of seeing a breakout from overhead resistances. Buy.




Buy above 424

3.5 points

429-30 / 434-35

Or dip near 418-17

3.5 points

423 / 427

Stocks to sell if market is weak:

ALSTOM PROJECTS: After a razor sharp run during second week of this month, prices soon topped out and have slipped into a fresh fall since last week. Yesterday prices broke below the crucial support of 200-EMA and crashed lower. Momentum too has taken a further dip indicating some weakness here. Sell.




Sell below 574

5 points

567 / 563-62

Rise near 580-81

5 points

574 / 570




Buy IDFC above 144 for target of 146/148 and stop below 142.5

Sell MCLEOD below 275 tgt 272-271/268 stop above 278.5

Stocks in action for the day: Coal India, Mastek, RIL, Jet Air, Zee News

Telecom and HRD Minister Kapil Sibal says -Hope to announce new telecom policy by October Some companies have sought govt okay to exit sector

Mastek Q4 (QoQ) (cr - crore, vs - versus) -Revenues down 4% at Rs 144.2 cr vs Rs 150.4 cr (Estimates Rs 143.2 cr) -EBITDA at Rs 2.6 cr vs Rs 52 lakh -Net loss at Rs 7.7 cr vs loss of Rs 7.1 cr (Estimates - loss Rs 7.6 cr)

Mastek FY11 -Total income down 15% at Rs 614 cr vs Rs 721 cr -Loss of Rs 55.9 cr vs profit of Rs 67.7 cr -Loss includes exceptional item of Rs 27.2 cr impairment of the goodwill of Vector Insurance Services Mastek says -Revenues flat on a sequential basis -Loss due to impairment of goodwill to extent of Rs 27 cr

Sterlite Q1FY12 (YoY): -Net sales up 66% at Rs 9824 cr vs Rs 5925 cr (Estimate at Rs 9800 cr) -EBITDA up 84% at Rs 2758 cr vs Rs 1497 cr (Estimate at Rs 2850 cr) -EBITDA margins at 28.1% vs 25.3% -PAT up 63% at Rs 1640 cr vs Rs 1008 cr (Estimate at Rs 1650 cr)

RIL Q1 - Headline numbesr meet expectations, but Petchem was weaker than expected (QoQ) -Sales up 11.5% at Rs 81018 cr Vs Rs 72674 cr -OPM at 12.25% Vs 13.54% -Net Profit up 5.3% at Rs 5661 cr Vs Rs 5376 cr

Parrys Sugar Industries Q1FY12 consolidated -Net sales up 88% at Rs 126 cr vs Rs 67 cr -Net loss at Rs 27 cr vs net loss Rs 31 cr

Welspun Projects Q1FY12 -Net sales down 50% at Rs 41 cr vs Rs 80 cr -Net loss at Rs 6 cr vs net profit Rs 4 cr -EBITDA margin at 2.5% vs 22.5%

Novartis India Q1FY12 -Net sales up 12% at Rs 188 cr vs Rs 168 cr -PAT up 19% at Rs 38 cr vs RS 32 cr

Peninsula Land Q1FY12 Net sales down 28% at Rs 106 cr vs Rs 148 cr -PAT unchanged at Rs 50 cr -EBITDA margin at 51% vs 24%

Bank of Maharashtra Q1FY12 -NII up 44% at Rs 591 cr vs Rs 410 cr -PAT up 3% at Rs 122 cr vs Rs 118 cr -Other income up 30% at Rs 173 cr vs Rs 133 cr

Dhanlaxmi Bank Q1FY12 -NII up 33% at Rs 64 cr vs Rs 48 cr -Other income up 77% at Rs 55 cr vs Rs 31 cr -PAT down 43% at Rs 3.4 cr vs Rs 6 cr -Provisions and Contingencies at Rs 10 cr vs Rs 2 cr

Zee News Q1FY12 consolidated (QoQ) -Income from operations down 16% at Rs 64 cr vs Rs 76 cr -PAT down 71% at Rs 2 cr vs Rs 7 cr -EBITDA down 43% at Rs 8 cr vs Rs 14 cr -EBITDA Margin at 12.5% vs 18.4%

Ex-rights: JK Paper : Rights issue of Rs 42/share in the ratio of 3:4

F&O ban: ABG Shipyard, GTL, Kingfisher Airlines, Suzlon

Jet Airways to merge Jetlite & Jet Konnect, to have only 1 low-cost brand

Gujarat Narmada Valley Fertilizers (GNFC) completes its Nitric Acid 2 project with a cost of around Rs 262 crore

Thermax partners with Amonix to offer concentrated photovoltaic systems for solar power generation in India

Muthoot Finance to raise funds by public issue of NCD's aggregating to a total of upto Rs 1000 crore

Jindal group in talks with Orbit Corp for joint development of the bungalow in Mumbai – ET

Oracle Financial Services to rethink its plan to sell its India services unit to PE firm Caryle after it gets a bid way below expectations – ET

Reliance Power, Power Grid Corp, L&T, Lanco Infra, Sterlite Energy & Adani Power are among 22 companies to have bids for setting up Rs 1025 crore power transmission project for connecting two southern states – ET

Coal India seeks govt nod to acquire 30% stake in Indonesian mine company Golden Energy with an undisclosed amount – BS

Bharti-Walmart JV has pumped in an additional Rs 120 crore investment in the company – FE


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