Tuesday, August 30, 2011

Stocks in action for the day: DLF, BGR Energy, Atlanta, NCC, ONGC.

Market Outlook: Indian markets are expected to open with a constructive note taking cues from the global markets. On the global space Wall Street ends up on consumer spending data and Asian stocks gain on US spending, Greek bank tie-up.

Global events to watch for:

Þ Consumer Confidence.

Þ State Street Investor Confidence Index.

Global indices Update @ 8:

Dow Jones : 11539 (+254.7)

NASDAQ : 2562 (+82.26)

Nikkei 225 : 8986 (+135.1)

Hang seng : 20285 (+420.0)

SGX CNX Nifty : 5008 (+68.50)

Gold (USD/t oz.) : 1824 (+27.00)

Nymex Crude (F) : 87.53 (+00.26)

INR / 1 USD : 45.87

OUTLOOK: The market turns around....

Brisk short covering coupled with some value buying at what were deemed as cheap levels. The good part was the beginning of the day itself was with an upside gap and then when the index went above the weekly pivot of 4850- which is what we were looking for- and then sustained over it, the writing was clear on the wall. The market would go up further. Since it was coming out of a deep hole, it is more than likely that the rally would last about 2-3 sessions. Hence there should have been no big hurry to book out of gains. Even if one did so with day trading positions, a little something should be left over to take advantage of a trend mode. Plan your trade quantities this way, particularly when we are trading at significant turning points or are coming off them.

We had discussed the sharp increase in the IV in the letter of yesterday and had opined how this was owing to demand for OTM puts rather than any increase in fear. Quite in line with this the IV dropped sharply today right at the beginning and slid to 26% by the end of the day (after having reached 33% on Friday). Option premiums which were juicy at the end of Friday suddenly looked a bit pale as they were hit by shrinking IV as well as rising prices. Looking at the action in the Options OI shows us a picture of a market making room for itself to the upside. ATM and slightly above calls were shed while slightly below the money puts were hit with some fresh shorts. Addition of OI in higher calls could be the creation of some shorts as well as some spread positions. But it keeps the PCR in check and should help to continue the trend upward.

Almost all the stocks moved higher and that was not surprising considering that all were oversold and a bounce was imminent. Broad breadth visible yesterday should probably continue into today and hence stock picking may not be such a difficulty. Question is whether it can last beyond the initial couple of days. It may be simpler to take some action thru the options where some hedged strategies could be put together. Readers should check out the stock option areas as well as this is getting quite active too.

Bank Nifty has set off on a rally as well. No significant resistance till it moves to around 9450 levels. If above that, then the strong resistance is around 9570 levels. For now, these two can be considered as the important resistance level that the stock will have to handle. Nifty future, similarly, has its earliest resistance around the 5050 levels while a continuation could see it challenge the important gap areas above 5225.

STRATEGY FOR THE DAY: Market seems to have set off on a rally and should continue further. Nifty as well as Bank nifty both look good to trade from the long side yet. One can protect with puts or if view is limited bullish then one can write the higher call options also. For writing, wait to see when the movement loses forward momentum. This way one can control the risks some. Similar action can be considered in stock futures as well. All sectors may continue to take part in the advance and hence stock picking should not be a big problem.

Stocks to sell if market is weak:

MARIC: Marico had been steady so far but on Monday it opened gap down and traded down the entire day, despite the broader market rallying. It has closed precariously at support levels in the form of moving average bands and an ascending trendline. Any follow through of the action will send the prices lower. Consider going SHORT below last close.




Sell below 148

2 points

145 / 143.5

Stocks to buy if market is strong:

INDIABULLS FIN Prices rallied smartly last session on short covering and fresh buying activity and managed to close the day after breaking out from a descending trendline resistance. RSI from oversold region has made its way higher, moving above 40. Looking good for more uprun. Buy.




Buy above 154

1.5 points

157 / 159

RAJEST EXPORTS Recent sessions have seen the tops being restricted with prices moving in a sideways phase this month. There was a dip in between but they managed to quickly bounce back from lower levels. Yesterdays move up was from support at 200-EMA. Volumes were huge and prices are now set to rise further. Buy.




Buy above 110.5

1.5 points

113.5 / 114.5


Buy Nifty above 4967 stop 4935 for rise to 5005.

Buy Nifty on dips to near 4885 stop 4860 for rise to 4945.


Buy Max above 186 for target of 188-189/192 and stop below 184.

Sell Pantaloon on rallies near 288-289 for drop to 284/281 and stop above 292.2.

Stocks in action for the day: DLF, BGR Energy, Atlanta, NCC, ONGC.

Draft Banking Licence – Reactions -Finance Secretary says broking companies left out to avoid conflict of Interest.

Sunil Godhwani of Religare Enterprises -Our expectations have not been dashed -Draft guidelines throw up points for discussion -Would like to see more clarity on foreign shareholder coming in -We can align our business to meet regulatory intent if needed.

BMR Advisors -RBI will exercise discretion while granting licenses.

Ajay Srinivasan -RBI guidelines are a good step for financial inclusion.

M&M Finance says -New banking guidelines very balanced -Prima facie we qualify for banking license -'Have said we are interested in promoting a bank'.

L&T Financial Services says -We seem to be meeting guidelines for banking licence -Banking guidelines along expected lines.

ONGC FPO likely to hit markets on September 20 -ONGC FPO road shows likely to start on September 5 -ONGC likely to file FPO documents by September 8.

SC adjourns Sanjay Chandra bail plea hearing -SC to hear Chandra's bail plea again on September 5.

Man Industries spat -Both parties exchange proposal for possible settlement -Settlement formula proposes 1 party buying other party shares -RC Mansukhani offers Rs 140/sh to buyout JC Mansukhani's shares -CLB reserves order after hearing both party arguments.

CCEA to take up BHEL 5% FPO on Tuesday.

Atlanta in talks with IIFCL, SBI, UBI and Hudco to raise Rs 700 crore debt for its 117 km road project (ET).

BPCL eyes Maharashtra & Karnataka to setup a land liquefied natural gas terminal with an investment of around Rs 4500 crore, with a capacity of 5-6mt (BS).

Reliance Broadcast in talks with PE players to raise Rs 300-400 crore through a fresh equity issue (FE).

NCC to monetize its land to finance projects by leveraging 400 acres of land valued at Rs 400 crore (DNA).

DLF clarifies on the sale of its IT Park, that the company is still exploring various strategic options on the sale of its park stake.

BGR Energy bags order worth Rs 444 crore from Nuclear Power Corp of India.

Asian Granito India to consider raising of fund by way of preferential issue.

Ex Dividend: Gujarat State fertilizers & Chemicals Rs 7/sh, REC Rs 4/sh, Neyveli Lignite Rs 2.3/sh.

F&O ban: ABG Shipyard.

R-Power seeks shareholders nod to raise funds.

Prime Comfort to invest Rs 200 cr in three years.

RIL's KG-D6 gas output dips below 45 mmscmd.

Fortis to open four new hospitals by 2013.

Tata BP Solar commissions 1-MW solar power plant in Orissa.


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