Thursday, August 18, 2011

Stocks in action for the day: Mundra Port, CIL, Syndicate Bank, GTL, Idea.

Market Outlook: Indian markets are expected to open on a flat note on the back of mixed sentiments seen on the global peers. US markets close flat; crude gains 2% while Asian markets trading lower; Nikkei, Seoul Composite down. On the over all basis we remain cautious and any momentum above 5200 we expect profit booking at higher levels.

Results today: GTL, Asian Electronics, Ballarpur Ind.

Global events to watch for:

Þ Consumer Price Index

Þ Jobless Claims

Þ Existing Home Sales

Global indices Update @ 8:

Dow Jones : 11410 (+04.28)

NASDAQ : 2511 (- 11.97)

Nikkei 225 : 9019 (- 37.74)

Hang seng : 20262 (-26.53)

SGX CNX Nifty : 5052 (-17.50)

Gold (USD/t oz.) : 1795.3 (+01.40)

Nymex Crude (F) : 87.32 (+00.21)

INR / 1 USD : 45.36

OUTLOOK: In a tight spot...

The way the market traded yesterday left most people wondering about its real intent. Beginning slightly better (for the third day in succession) the prices led up rather nicely, moving comfortably past the 5095 mark that we had as a trigger and holding out much promise. But no sooner had we started relaxing that the prices came down with a thud, ostensibly on weak Europe opening. But what was different from the last two sessions was the fact that the decline created a higher bottom and did that during mid session rather than at the end as in earlier days. We managed to finish somewhat better. Ideal would have been a close nearer 5100 but then we shall take what the market is willing to give. In yesterday's letter we had mentioned that a TCD was due yesterday and hence we shall be watching the index to create a trend mode signal today.

A source of disturbance was of course the sharp fall in the Bank Nifty. On the daily charts it does appear that the index does not run into good supports until it hits 9750 levels. That is still a good 200 points away. Not much really, for the Bank Nifty but distant all the same. In addition, the Realty and Auto stocks were the ones most down. Now these are all retail patronized sectors and hence the conclusion is that the operators would be slamming them. Why would that be? Either they are looking for more declines or they are scaring people out of their holdings. Towards the end of the day, we found that the premium on the Nifty futures increased sharply. This typically happens when short covering is brisk. Now why would people want to cover shorts if operators are in a selling mode? Doesn't really fit the pattern.

Another thing which doesn't fit the pattern is 12L addition to 4800 Puts. The premium on this strike is too low for it to be a sale (around 14-15 levels only). Hence this has to be a long put position. We would think it might be longs created by those who are covering their shorts. Just in case, you know. Another element is that lots of call contracts were covered and that is typically when the market makes room for an advance. If people are booking profits, then the typical action is to roll down in the strikes- not take the position off. Hence it appears that market now has a greater chance to move up than down. This shall be confirmed in case the rise continues past the 5100 levels today. As long as 5000 is not being lost, we should now retain a bullish bias. This is the shift that has to be produced now. Look for Bank Nifty also to finish its decline and begin a rally. If a rise occurs, then there is potential upto 5165. On a fall, as mentioned earlier, 4950 is a good double bottom support that may not get broken.

IT stocks began staging a recovery. The target on Infosys head and shoulder pattern has been met. TCS and other leaders too have begun to see short covering. This sector should probably lead the recovery. Real Estate and Aviation got smashed pretty sharply. Selling may be a bit overdone there. Could see some rallies. But those are to be used to short and not go long. That would be for aggressive and savvy traders only. Capital goods stocks may see a rally. Keep them under your eye.

STRATEGY FOR THE DAY: We continue to look out for bottoming action. Hence do check rallies today for ability to sustain and for volumes, breadth, leadership etc to confirm. If all or most of these factors are in place, then conclude that the market is turning up. But may be difficult to expect speed. So dont look for quick payoffs. But most of the stocks are at value so not difficult for it to move higher if the right set of triggers are there. In case the market moves higher then it may be time for some momentum investing as well.

Stocks to sell if market is weak:

SKUMAR NATION This counter was quite volatile last session and finally ended on a low note. On the daily chart we see that prices have broken below a crucial valuation support around 49 levels and closed below it. Momentum that was already weak has taken a further beating. Go short here.




Sell below 47

1 point

45.5 / 44

Or Rise near 48.5

1 point


REDINGTON Prices had been comfortably moving up forming a sequence of higher tops and bottoms, going all the way to the high of 102. Topping out there, they have been witnessing some correction, in line with market weakness as well. Yesterdays decisive downmove has triggered a sell opportunity here. Sell.




Sell below 92.5

1 point

91 / 90

Or rally near 94

1 point


Stocks to buy if market is strong:

JINDAL SAW Prices yesterday managed to bounce back after hitting a new swing low. The turnaround led prices to close on a positive note and form a modified bullish pattern on the daily time frame. RSI too from mega oversold region is attempting to pullback. Consider buying if prices continue to rise.




Buy above 121

1.5 points

124 / 126 / 127.5


Buy HCL tech above 427 for target of 434/439 and stop below 421.8.

Sell Havells below 340 for target of 335/331 and stop above 343.6.

Stocks in action for the day: Mundra Port, CIL, Syndicate Bank, GTL, Idea.

Jet Airways (Stock was down 13% yesterday) Company says -Plan to start low-fare flights to overseas destinations -Aim to cut all expenses, excluding fuel, by over 25% this fiscal -Plan to up low-fare capacity on local routes to 85% versus 72%.

Board meets today - TTK Prestige consider amalgamation of Prestige Housewares India with itself Dhanus Tech to approve bonus issue

Brooks Laboratories IPO with the price band of Rs 90-100/sh closes today QIB's: Nil NII's: 0.33 times RII's: 0.61 times Overall: 0.26 times

Idea Cellular challenges single-judge bench Delhi HC order over 6 licences on Spice Idea to Delhi HC DoT lacks power to decide on mergers & put conditions -Merger of company is different from merger of licences -DoT has only authority to regulate licences

RBI likely to allow some companies to foray into banking space, but realty among four sectors to be kept out & govt may cap FDI in new banks at 49% (BS)

Cairn Energy writes to ONGC ; seeks NOC for Vedanta deal by September 21

Malaysian based Axiata Tele looking to raise its stake in Idea Cellular to 25%, looking for nod from Indian promoter Aditya Birla (ET) (Bought 0.9% from open market, ups stake to 19.98%)

GTL has approached Delhi HC challenging IFCI’s seizure of 18% stake in sister concern GTL Infra (ET)

Welspun eyes more acquisitions to expand its infrastructure business (BS)

Syndicate Bank likely to buy 26% stake in Aviva Life with an undisclosed amount (BS)

Reliance Gas Transportation Infra would need regulatory approval to sell its stake as PNGRB chairman says there’s a lock in clause for pipeline operators (ET)

Nalco moves SC challenging the Orissa govt’s decision to levy higher electricity charges on companies which generate energy for their captive consumption (FE)

SAIL plans 3 SPV to revive its Sindri unit likely to have a debt-equity of 80:20 for its Rs 35000 crore project (BL)

Coal India ’s plan to develop two underground coal gasification projects in Jharkhand & Maharashtra through private sector participation hits procedural hurdle (BL)

Nagarjuna Oil Corp six mtpa refinery in Tamil Nadu to be commissioned by year end and also to invest Rs 2500 crore on port, tankages & power plants (BL)

SAIL working on finalizing JV agreement with Japan’s Kobe (DNA)

Mundra Port & Welspun in race to develop & operate a Rs 2620 crore multipurpose port at Vizhinjam in Kerala (Mint)

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


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