Friday, August 19, 2011

Stocks in action for the day: HPCL, Jet Air, Cipla, DLF, Dr Reddy's Labs.

Market Outlook: Indian markets are expected to file down in the opening trades as global economic, European worries weigh on financial markets. US stocks dropped sharply on Thursday as data fuelled worries the economy was weakening and bank shares tumbled on fears the European financial crisis could spread havoc to other parts of the world. Factory activity in the US Mid-Atlantic region plummeted in August, falling to the lowest level since March 2009. Asia trading weak; Seoul Composite down 4.5%. On the over all basis we remain cautious with a support seen near 4800 if broken it can test 4742 on the worst scenario.

Results today: Gammon India.

Global events to watch for:

Þ No major events to watch for the day.

Global indices Update @ 8:

Dow Jones : 10990 (-419.6)

NASDAQ : 2380 (-131.0)

Nikkei 225 : 8751 (-192.0)

Hang seng : 19460 (-555.4)

SGX CNX Nifty : 4854 (-76.50)

Gold (USD/t oz.) : 1835.4 (+13.40)

Nymex Crude (F) : 80.85 (-01.53)

INR / 1 USD : 45.61

OUTLOOK: Bears have a vice grip...

Well, we had a plan A- that was to buy the market in case it went up. It didn't. Not even a hint that it would. In fact, it went the other way- heading down into the close with a break of the recent low at 4950 and finishing near about the lows. Absence of Plan B- which should have been to sell the market in case of a decline was not there because we were looking for a bottom formation very soon. However, some concerns based on the Bank Nifty moves were voiced yesterday as was the option positions. Both of those kicked in rather strongly yesterday. The Bank stocks were particularly bashed down yesterday and now the big ones are also beginning to tumble. We spoke also about other patterns that did not fit. Ultimately, everything in the market is a pattern. Indeed, the whole of technical analysis is all about patterns! When the patterns don't fit something is wrong. Always. Remember that.

Bank sector stocks moved further than what they were expected to. The quick decimation of the support expected near 9745 was a new signal that the market's intent is different. You cannot have banks going down and the Nifty making a bottom. So if the Banks are indicating lower then the Nifty too should move further south? Yesterday's break of 4950 showed a sharp fall- implying that a chunk of longs were given up there. To that extent the position overhang is gone. But that is poor solace for lack of strength. Yesterday's trading set up 5015 as the nearest level to regain. The daily pivot is at 5000. What an irony that these levels also look far away! The daily chart is not a happy one. The recent sideways move of the last many days looks like it resolving to the downside. On the weekly charts we find that the next support now is available around 4882 levels. Not far, but not near either. So there you have the levels for today. Default approach has to be bearish because that is where the evidence is pointing.

A change in the option situation yesterday was the sharp addition to call OI. These were near the money strikes like 5000 and 5100. Puts made way for lower strikes as the 4800P shed OI while the 4700P added anew. Even the 4900 Call added some big position but some of those could be a call hedge against short futures.

No stock was spared in yesterday's down move. Cement stocks were a small exception. As a whole they have been resistant to recent market declines. Could be worth considering for longs if market revives. Stocks that have been pledged bore the brunt of selling (KS Oil, Suzlon, Jet and such others). Once that selling is over the stocks may stop going lower. Could be candidates for an oversold bounce. Educomp was raided by IT and that sent the prices down. But the stock has been falling for a long time and perhaps this news based dumping could be the last straw? Prices hit support on monthly charts near 220-225. Time to look for a revival.

STRATEGY FOR THE DAY: Trend run seems to be rather strong to the downside. Weekend considerations should see both short covering and long liquidation occur so expect some volatility around here. As mentioned above, the Nifty support is still some distance away and prices have to climb a certain amount before qualifying for a buy. So today we have to check for some market triggers before acting. If it drops to the support zone indicated early in the day then one could attempt a long with a tight stop. But avoid that if it happens late in the day. Volatility would be present so be prepared to play both sides of the market. Keep adventurous action down to a minimum.

Stocks to sell if market is weak:

UNITED PHOS Prices have been tanking on sharp sell off since the last several sessions. Yesterdays weak market dealt yet another blow to the trend as prices plunged to hit new swing lows and closed near there as well. RSI has broken 40 and moved lower. Sell.




Sell below 139

1.5 points

136 / 134

Or Rise near 142-43

1.5 points


Stocks to buy if market is strong:

INDIA SECURITIES An out performer last session, this counter was seen rising against a falling market and managed to close on a positive note as well. From the daily chart we see that prices have moved up using support of 200-period EMA. Volumes were decent during the rise. Look to go long.




Buy above 53.5

1 point

55/ 56

Or dips near 52

1 point

53.5 / 54.5


Buy HERO MOTO above 1925 and stop below 1907.8 target 1945-47/1965

Sell RAYMOND below 334 stop above 337.5 target 330/325

Stocks in action for the day: HPCL, Jet Air, Cipla, DLF, Dr Reddy's Labs.

Cabinet note on FDI in retail within 7 days: -DIPP to define back-end operations w.r.t retail -DIPP: Department of Industrial Policy & Promotion Retail back-end to include grading, sorting, cold storage -Operations without customer interface will be back-end CoS proposed 50% FDI in multi-brand retail in back-end -DIPP will not have rigid definition of back-end -DIPP feels back-end ops can be outsourced

India Securities completes Vodafone stake sale to Piramal Healthcare -Arm sold 5.5% stake in Vodafone to Piramal Healthcare.

Bharati Shipyard to consider the proposal to issue 15.5 lakh convertible warrants to the promoter.

Shasun Pharma to consider issue of convertible warrants to the promoters & others.

Govt says CAG to study reply given at DGH, RIL meet on KG-D6 capex.

Jindal Cotex to raise around Rs 200 crore via GDR/ADR convertible into equity shares, FCCBs & QIP.

Zuari Industries has approved the scheme of arrangement & demerger between Zuari Industries & Zuari holdings.

Cipla , Dr Reddy’s under drug regulator scanner for sale of banned drugs by sending show cause notices (ET).

DLF to sell its 13 acre plot in Gurgaon to reduce its debt for Rs 300 crore (ET).

Cipla remains the top defaulter with National Pharma pricing authority yet to pay Rs 1555 crore to NPPA (BS).

Jet Airways aims to increase domestic lowfare capacity to 80-85% of the total fleet from 72% (FE).

SEBI may allow preferential QIP options, which will help speed up sale of stakes by promoters & also lower the cost of paring holdings (Mint).

HPCL in talks with BP Plc & France’s Total SA to revive a stalled USD 10 billion refinery & petrochemicals project at Vishakhapatnam (Mint).

BILT Q4 net up 15.42% at Rs 95.8 crore. During the quarter under review, the firm recorded a 10.28% increase in its revenue to Rs 1,187.4 crore, against Rs 1,076.7 crore in the year-ago period For the year-ended June 30, 2011, the firm had a net profit of Rs 265.6 crore, an increase by 10.48% from Rs 240.4 crore posted in the fiscal year ended June 30, 2010. During the reporting year, BILT's revenue stood at Rs 4,498.1 crore, up by 18.54% from Rs 3,794.6 crore in the previous fiscal.

F&O ban: Gitanjali Gems


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