Friday, August 12, 2011

OUTLOOK: Stuck in gaps

Market Outlook: Indian markets are expected to open in gap up trend all eyes are on IIP numbers which will direct the market momentum. We expect IIP number to be better than expected near 8.5%-8.2% vs 7.8% last month. Globally markets were in positive momentum as US markets end higher; S&P, Nasdaq gains 4.6% and Asian markets trading firm; Hang Seng, Straits Times up. On the overall basis we are negatively biased on the global phenomena and expect Indian markets to trade with a watchful outlook with support near 5050.

Results Today: Coal India, Tata Steel, Unitech, HDIL, Punj Lloyd, Hindalco, BPCL, HPCL, Jaiprakash Associates, Tech Mahindra, Pipavav Shipyard, Gitanjali Gems, India Cements, Bharti Shipyard, Simbhaoli Sugars, Bajaj Hindusthan, Reliance Mediaworks, Fortis Healthcare, DB Realty, ITI, EIH Hotels, Nesco, Reliance Broadcast Network, Max India, Indiabulls Securities, Cox & Kings, BF Utilities, Elder Pharma, Gammon India, REI Agro, Nitco, Indo Asian Fusegear, Gujarat Flourochemicals, Hindustan Dorr, HMT, Kinetic Motor, Natco Pharma, Kanoria Chemicals, Sabero Organics, Saregama, Piramal glass, Venky's India, BAG films, JSL Stainless, Jai Balaji, Hathway Cables, Jaypee Infra, Jindal Saw, Century Textiles, Automotive Stampings, Jindal Polyfilms, Nitesh Estates, Videocon Industries, A2Z Maintenance, Patel Engineering, UTV Software, Plethico Pharma, Unity Infra, McNally Bharat, Ramky Infra, Sterling Biotech, Jyothy Labs.

Global events to watch for:

Þ Retail Sales.

Þ Consumer Sentiment.

Þ Business Inventories.

Global indices Update @ 8:

Dow Jones : 11143 (+423)

NASDAQ : 2492 (+111)

Nikkei 225 : 8997 (+15.6)

Hang seng : 19869 (+274)

SGX CNX Nifty : 5171 (+43.0)

Gold (USD/t oz.) : 1766.6 (+15.1)

Nymex Crude (F) : 85.01 (+00.7)

INR / 1 USD : 45.27

OUTLOOK: Stuck in gaps

The moves of yesterday were quite in line with what had been expected. We had indicated to our readers in yesterday's letter that the market is more likely to get into a congestion than trend for the day. The market tried to rally higher but found the going difficult. This was also expected. Towards the later part of the day the index suffered a decline and fears arose that the one and half day rally may have completed. But if we look at the charts we find that the low of the day before (when the upside gap was created) was at 5118 and until at least this level is lost one should not really be considering anything bearish. This price level around 5118 is also the value area of the last 5 sessions and hence a good point to look. A kind of a rolling pivot for this week would be around 5085 and that too is not far away from the value support zone. What we would suggest for now is to keep this entire range of 5085-5115 as a support zone for intra day dips and buy against such a support. If that too fails, then one can consider bearish postures. Bank Nifty is placed in an almost similar situation with 10300 as the pivot area and 10230 as the rolling weekly pivot. So that is the zone to check for support during intra day declines.

At the time of writing the US markets are up. But Europe continues to be a bit fuzzy and that is the real worry. Locally, there seems to be a division about the way forward on the economic reform front with some people calling for stronger action while others are stating that current pace is fine. Inflation has not cooled and the mood remains depressed. Volatility has dropped to around 29-30% but it seems unlikely that the IVs will drop beyond 25% this month. As long as people are unable to judge the range of the market, the volatility figures will remain up. Positive news for the day was that the data on monsoon was better.

Option data shows an upward revision of the OI addition in puts- 4600 strike shed and 4700 Put added a nice bunch. Of course, the big OI is still at the 5000P and that has not really moved lower yet. So that's the one to watch ahead. If market has to go lower, we should now see the OI there shifting downward. If that doesn't happen, then there is still some chances that the market may push higher for a couple of days more. Nothing remarkable about Call OI changes. The PCR has climbed to 1.09 on the back of some put OI shedding. If this keeps climbing, then the trends can crawl out from under the weight of the bearish stone.

Jet Airways joins other airline stocks in caving thru the a multi month sideways. This sector is certainly on the sell list of everyone it appears. They remain shorts. Tata Comm is a stock on the mend. News on the land story is doing the rounds and the market seems to be responding positively to this. There is room on the topside if the effort to improve continues higher. Keep this stock on your radar.

STRATEGY FOR THE DAY: Gap continues to be a dominant part of this weeks proceedings with volatile global conditions. The week has been very choppy and hence lack of positions may lead to a tame end to the week. Possibly, another dull day. If that is so, then, as usual, refer to the TAble for tradable levels. Stocks are following a random pattern and moves dont last very much because confidence is low and volumes are low. Be thrifty with your approaches and keep advneture spirits curbed.Gap down open is again on the cards on back of weak US markets hence readers are warned not to get overly active in such a market. Intra day volatility is possible and may indeed be sharp and a bit scary too. But in sum they should not really be creating lower lows or higher highs either. So best to approach this with the aid of our Table given in this letter or use the extra names available on our Dyna Level service (free on our website). Do continue to keep a watch on Europe and the news that comes out of there. After all that is at the root of the current problems.

Stocks to buy if market is strong:

COX & KINGS This counter has been buzzing on the bourses last few sessions. Last session also it was one of the best movers. Looking at the chart we see that prices have been holding support above the 200-EMA and bouncing up from it each time. Yesterdays rise saw momentum readings and volumes shoot up as well. Buy.




Buy above 230

3.5 points

235-36 / 239-40

Or dips near 225-24

3.5 points

230 / 233

AMTEK AUTO This auto ancillary counters after a spate of declines arrested its fall on Tuesday and started moving higher. The bullish faith displayed in this counter has helped it overhaul above 40 levels on the RSI. The positive closing yesterday on volumes suggest that fresh buying may emerge today.Stay alert to go long.




Buy above 155

1.5 points

158 / 160

Or dips near 151-152

1.5 points

155 / 157

Stocks to sell if market is weak:

SINTEX: Prices have been unable to muster strength for last few trading sessions and the bearish pressure continues to push prices lower.The supplies at the top highlights the intensity of negative bias. The momentum continues to weaken inviting us to go short at current and on rallies.




Sell below 147

2 points

143 / 141

Or Rise near 150-151

2 points


Stocks in action for the day: RComm, Petronet LNG, Parsvnath, SCI.

Tata Motors says: - Consolidated operating margin at 13.3% versus 14.6% (YoY) - Interest rates hit Q1 commercial vehicles sales - Raised truck, bus prices by 2.5% in Q1 - Raised car, utility vehicles prices by 2% in Q1

IPO Corner: Tree House Education & Accessories QIBs: 0.50 times NIIs: 0.09 times RIIs: 1.12 times Overall: 0.68 times

ICICI Bank -Hikes base rate by 50 bps to 10% effective August 13 -Hikes BPLR by 50 bps effective August 13

SBI -Hikes base rate by 50 bps to 10% effective August 13 -Hikes BPLR by 50 bps to 14.75% effective August 13

GMR Energy acquires 30% stake in Indonesian Co Golden Energy mines for around USD 450-550 million

EGOM set to meet today on allowing more exports of sugar

SCI to hive off offshore business into subsidiary as domestic industry is facing pressure due to volatile markets (ET)

Parsvnath board approves fund raising of upto Rs 2000 crore through QIP (Current Market Cap Rs 1860 crore)

Tata Motors and Ashok Leyland to collaborate with Petronet LNG to introduce the use of LNG for vehicles being a cheaper alternative to existing fuel (BS)

Adani Gas subsidiary of Adani Enterprises to pick up 20% equity in Green Gas a JV between GAIL and IOC (BS)

Reliance Communications may seal USD 1.5 billion outsourcing deal soon to manage & maintain CDMA, GSM networks (ET)

Jindal Saw arm in tie up with NTPC for creating & operating infrastructure with a capital investment of around USD 140-170 million (Mint)

Entegra board has recommended a bonus issue of shares in the ratio of 4:13

Jindal Polyfilms board to discuss the proposal for buy back of shares

F&O Ban: Deccan Chronicle , Gitanjali Gems , Suzlon


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