Wednesday, August 17, 2011

Stocks in action for the day: Mah Satyam, Shree Cem, Jubilant Life, DLF.

Market Outlook: Indian markets are expected to open on a flat note on the back of mixed sentiments seen on the global peers. Wall Street ends lower; Nasdaq slips 1.2% and Asia markets are following the trend and trading lower; Nikkei, Shanghai Composite down. On the over all basis we remain cautious and any momentum above 5200 we expect profit booking at higher levels.

Results Today: HCL Infosystems, KDL Biotech.

Global events to watch for:

Þ Producer Price Index.

Þ EIA Petroleum Status Report.

Global indices Update @ 8:

Dow Jones : 11405 (-76.97)

NASDAQ : 2555 (-31.75)

Nikkei 225 : 9114 (-91.89)

Hang seng : 20354 (+162.9)

SGX CNX Nifty : 5021 (-20.50)

Gold (USD/t oz.) : 1788.6 (+03.60)

Nymex Crude (F) : 86.86 (+00.21)

INR / 1 USD : 45.24

OUTLOOK: Unable to sustain upward traction...

The opening was fine but not the rest of it. Inability to hold on to gains made earlier in the day is a sign of weakness and the market therefore drifted down thru the day to finish almost near the lows for the day. The weak finish does not generate good feelings and in all probability, we should see some follow thru price action lower. But the pace has certainly slowed and to that extent one feels a bit confident that declines may not be as bad as the ones seen earlier. Market looked like it was waiting for some kind of positive trigger but that never came and as a result, the downward drift.

As far as the pattern goes, the oscillators are already into a divergence status starting yesterday. This does not however say whether the prices can drop further or note. For it to be denoted a bottom, we do need to see a rise. Until that appears, we have to continue with the prospect of more declines. The dip-buy point given in yesterday's letter was 5040 and that came too late in the day for any trade to be taken by day traders. Perhaps swing players could have done so. But usually, a move occurring late in the day is better avoided and one should ideally wait for the next day to initiate fresh trades. In earlier letters as well as in our weekly letter, we have made reference to the mid month offering a TCD. We have it narrowed down to today and hence would be very watchful of either a bottoming formation or an attempt to revive from current levels. So today is an important day for the market. In case the revival occurs from here, we expect the market to remain up for about a month or so during which time it can correct upward reasonably well. For those trapped with long positions on the upper side, this will present a good opportunity to exit from those longs. This will be true for the index as well as individual stocks.

One would wager that the activity in the options segment was pretty normal in nature. OTM strikes were added in both calls and puts. Nothing very directional about this. Only notable point was that the IV ticked up a tad. This could possibly be signaling a demand for OTM options, particularly Puts. So, to that extent there is s alight directional bias downward. But based on our expectation that the market could form a bottom today, we may consider creating some OTM Call long position as well. This is of course a directional trade and is to be created only if there is evidence of bottoming.

Real estate stocks were sold down aggressively to new lows yesterday on the futures. But long range bars may suggest a temporary low in the making. However use all rallies to short. DLF news is bad and rallies back to 197-200 zones would form ideal shorting areas. RCom lost its recent support zone at 84 and caved in to new all time lows. Seems to be headed for 65. Can short current and rallies. Similar seems to be the fate of other ADAG stocks. Its almost like some last rites are being performed here! Finding buy counters is difficult but in case the market recovers, the more recently listed stocks could probably provide some opportunities in the futures. Momentum investing may prove difficult and is best left for later.

If the index continues lower then one can look for support only around 4955. On the upside we can look for a move beyond 5095 as a signal of the first return of strength.

STRATEGY FOR THE DAY: We are looking for some form of bottoming out today. This may come in the form of some acceleration down to supports or it could come in the form of holding of recent lows and then a rally upward. We need some minor higher top and bottom formation on the charts to clinch the issue and hence this should be awaited. We shall alert subscribers about this aspect thru SMS if it happens during the day. All buying decisions should be timed after the evidence of a bottoming is received and not until then.

Stocks to sell if market is weak:

IRB INFRA: This counter has been on a steady fall since last month, declining substantially on consistent selling activity. After a brief attempt to rally from lower levels, prices yesterday got hammered once again as they plunged on fresh sell off. RSI is on the verge of breaking 40 and moving lower. Sell.




Sell below 155

2.5 points

151 / 149

Or Rise near 160

2.5 points


AUROBINDO PHARMA: This pharma counter has been taking a severe beating over the last several months. Yesterdays sharp fall has pushed prices to new swing lows and closed near the low as well. Momentum readings have taken a sharp beating as well. Go short.




Sell below 147

2.5 points

143 / 141

Or rally near 150-51

2.5 points


Stocks to buy if market is strong:

APOLLO HOSPITAL: Prices yesterday flipped up from support of strong valuation region at 516 levels and closed above it. This fresh turnaround has generated a buy signal. Momentum readings that had been trending down have also seen a boost. Buy if prices continue to rise.




Buy above 530

6 points

540 / 545

Stocks in action for the day: Mah Satyam, Shree Cem, Jubilant Life, DLF.

Tata Motors: -July global sales down 6% at 85,392 units (YoY) -July global CV sales up 16% at 47,238 units (YoY) -July global passenger vehicles down 24% at 38,154 units (YoY).

CCI on DLF: -DLF to cease imposing unfair terms on buyers in Gurgaon -DLF fined Rs 630 crore by CCI for abusing dominant position.

Man Industries promoters exploring possibility of amicable settlement -More clarity on possible settlement in 1-2 weeks -JC Mansukhani had moved CLB Mumbai on suspension by company.

State Bank of Bikaner and Jaipur ups base rate by 50 bps to 10.25%. -State Bank of Bikaner and Jaipur ups BPLR by 25 bps to 15%.

Listing of Indiabulls Wholesale Services pursuant to scheme of arrangement w.e.f August 18.

Oil marketing companies rule out cut in petrol price for now (ET).

Govt allows Reliance Life Insurance to sell 26% stake to Japan based Nippon Life insurance but asks IRDA to frame a common policy before approving the deal (ET).

Emami set to complete its Rs 1000 Cr acquisition in three months also in final stages of talks with companies in India & abroad including personal care business of Paras Healthcare for acquisition.

SRS Ltd IPO of 3.5 crore equity shares with a price band of Rs 58-65/sh opens on August 23.

Mahindra Satyam bags a contract from IRDA for an integrated surveyor licensing management system for around Rs 40 crore (FE).

Jaypee Cement & Shree Cement are among 10 cement companies likely to be probed for suspect cartelization (BL).

HPCL exploring overseas acquisitions & plans to invest Rs 3000 crore towards exploration & production efforts through Prize petroleum co (Mint).

Jubilant Lifesciences signs a long term supply agreement in proprietary products business with an International life sciences co valued at over USD 80 million for three years.

Ex Dividend: L&T Rs 14.5/sh, GAIL Rs 5.5/sh, BASF India Rs 8/sh, JBF Ind Rs 8/sh.

F&O ban: Deccan Chronicle, Gitanjali Gems, KS Oils, Suzlon.

Ex Stock split: PI Industries from Rs 10/sh to Rs 5/sh.

Nissan Copper board to consider reverse stock split of shares.

Winsome Yarns to consider allotment of 1.2 crore equity shares of Rs 10 on conversion of warrants.

Exclusion in F&O Contract: Nagarjuna fertilizers w.e.f August 26.

Adani to pick up 20% in Green Gas.

Piramal Health eyes investments in global majors.

SAIL digs into Indonesian mines amid uncertain regulatory regime.

Steelmakers moving up value chain for better margins.


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