Wednesday, August 3, 2011

TECHNICAL OUTLOOK: Overseas cues will influence the trend today

Market Outlook: Indian markets are expected to open with a negative note on the back of unconstructive sentiments on the global space. On the global space Wall Street slips 2% amid economic worries which sold off sharply to end at session lows with the Dow down for an eighth day amid economic worries and even after President Obama signed a bill to avoid a debt default. Other Asian markets followed the heat and trading lower; Hang Seng, Nikkei slip. On the overall basis we are negatively biased on the global phenomena and expect Indian market to trade with a curious support near 5350 or even test 5250 and any positive breakout would be expected only after 5500.

Results today: Bharti Airtel, Hindustan Copper, CEAT, Standard Chartered PLC, Oberoi Realty, Maharashtra Seamless, Jindal Drilling & Industries, Harita Seating Systems, Himatsingka Seide, Trident, IG Petrochemicals, Jai Corp, Swaraj Engines, Asian Granito, Megasoft, Kirloskar Electric, Deep Inds, OCL India, Subros, Tide Water, FIem Inds, Accel Frontline, United Spirits

Global events to watch for:

Þ Challenger Job-Cut Report.

Þ ADP Employment Report.

Þ ISM Non-Mfg Index.

Global indices Update @ 8:

Dow Jones : 11866 (-265.8)

NASDAQ : 2669 (-75.37)

Nikkei 225 : 9627 (-217.4)

Hang seng : 21978 (-442.4)

SGX CNX Nifty : 5385 (-82.00)

Gold (USD/t oz.) : 1657.4 (+12.9)

Nymex Crude (F) : 93.35 (-00.44)

INR / 1 USD : 44.22

TECHNICAL OUTLOOK: Overseas cues will influence the trend today

Stocks ended above the lows of the day, perhaps in expectation that the US markets would rally once again after the Senate passed the debt bill. But at the time of writing, we find the US markets sharply lower so those who had punted for an up gap open today are going to get a bit of a surprise. Stocks there were weighed down by a consumer spending report that showed Americans continued to pull back in June. The way things are, we believe that most of the triggers around us are used up right now. This will leave the market rather susceptible to rumors and news and hence we could see a bout of volatility. This was mentioned yesterday as well. Problem will be if we have small range volatility. In that case, trading also become difficult as there wouldn't be much of price coverage to make the risks worthwhile. This might then lead to gradual decline in volumes - which would then spike up the volatility even further. In sum, we are going to have a more difficult time ahead, it appears.

Set to complicate matters is the decline in the small and mid cap stocks that we got yesterday. So far these two segments had managed to hold their own, out performing the main indices decently. Is that phase about to end? Then momentum investing would have to be shelved and recent acquisitions abandoned- even at a loss. Remember the scene after October last? People are still stuck with goods from back then. You don't really want a repeat of that. With most leaders not doing well, it may be difficult to expect the next rung to do well. Particularly if the top end of the market does not hold up well. So those who trade or invest in the small and mid caps, please take guard.

The index broke beneath the 5450 levels but again, lacked any speed to the downside. This showed that not too many were ready to flow with the breakouts. Of course, there was considerable action in the 5500 Calls. The aggressive shorting of the calls has now brought the PCR back once again into the danger zone around 1.07. Unless this is not reversed quickly, the market is once again in danger of sliding. Already, it has signaled intent with the push beneath 5450. The strong support angle line on daily charts is also broken. Now, the next immediate support is at 5405 which is the 62% retracement of the most recent advance. The up 1x1 angle line is also placed around this level on the daily charts. We can aim for that for the day. Immediate resistance is seen around 5505 levels now and that may prove difficult to cross today.

Fertiliser stocks were to the fore on fresh rumours of urea price revisions. Every now and then this keeps happening and stocks show a small run. RCF and GSFC look to be the ones that could carry on if there is a continuation. Chambal from Futures could be a bet but dont rely on it too much. Reliance was the one that pulled the index out from the lows. If it fizzles out today then it will add to market woes. Banks are looking weak too. Axis shows a bearish pattern. If there is a down follow thru today then this should be hammered.

STRATEGY FOR THE DAY: Chances for a gap down market appear to be higher. If so, it would be a second gap in a row, attesting to a trend status in the decline. The PCR position is worrying so we should certainly have a bearish bias to the market as we go in today. Yesterday close is right near the pivot price for the day and hence if index is negative from the start, one can short with the last close as the stop. Option IVs have not moved higher (still around 18%) and so there is still some complacence in the market. But if speed is not seen then it is better to resort to Table levels for trading the day. Give momentum investing a rest for the day.

Stocks to buy if market is strong:

APOLLO HOSPITALS During yesterdays declining market, there were some counters like this one that moved against it and traded on a positive note. Prices bounced up after a small dip and from a strong valuation support around 519-18 levels. RSI has formed a positive reversal pattern with the jump. Go long.




Buy above 534

6 points

544 / 548-49

Stocks to sell if market is weak

TUBE INV: A decisive fall last session led prices to break below a good ascending Gann line support and close below it. A follow thru will see the declines extend further and signal some bearish moves ahead. Momentum readings too plunged on heavy sell off. Sell.




Sell below 156

1.5 points

153 / 151

Or rally to 159

1.5 Points


GEOMETRIC Short to intermediate term bearishness looms large over this counter, as can be made out from the charts. Yesterday prices continued with their downward moves owing to sustained selling and RSI too has turned down afresh from 40. Fresh sell signal here. Go short.




Sell below 47.5

1 point



Sell Patel Eng below 130 for target of 128/125 stop above 132.1.

Buy Wockhardt at dip 450-455 for target 500 stop loss near 425.

Buy Cipla above 313 for target of 317/320 and stop below 309.8.

Stocks in action for the day: Wockhardt, JSW Steel, DB Realty, Tata Met, Carol Info

Danone acquires Wockhardt's nutrition biz for 250 m euros (or Rs 1550 crore); Wockardt m-cap Rs 5000 crore -Danone will acquire Wockhardt's nutrition business and brands as well as related industrial operations from Carol Info Service -Carol Info will be in focus (stock was up 20% yesterday - subsidiaries of Wockhardt) -Carol Info Services (earlier known as Wockhardt Life Sciences) makes these nutrition products at its factories, as an outsourced function -Khorakiwala family owns about 64% of the co company -The deal is more than double the amount at which it had signed a similar deal with US pharmaceutical giant Abbott a year ago ((Abbott deal was called off after Wockhardt’s lenders opposed the sale of its nutrition business))

NMDC says -Shocked by allegations of Lokayukta report -To clarify issues regarding alleged under-voicing -Cabinet approves long-term iron-ore contract prices -Iron-ore spot prices tend to be higher than long-term rates -No question of under-selling NMDC products -'Lokayukta confused about spot & long-term prices' -'Strongly deny Lokayukta report; it is misconceived' -CEP report says no violation of environmental norms by co -CEP report says no illegal mining by co -SC ban on mining in Bellary a 'Stock-taking Exercise' -Have suspended total ops; waiting for August 5 SC decision

Bangalore Chamber of Commerce says -Bellary suspension to affect 20 mt/yr capacity for industry -25% industry steel production to be impacted due to Karnataka issue -Cascading effect of prices will push up inflation -Production cuts among Karnataka iron, steel manufacturers in place

West Bengal CM has pulled up JSW Steel’s Sajjan Jindal to convey her disapproval over the delay in the 10 mt project at Salboni in West Bengal (BS)

Adani group acquires a 50% stake in 1.1 acre plot at Cumballa hill in Mumbai from DB realty for around Rs 150 crore (ET)

Tata Metaliks to shut its Goa plant as Iron ore supply from Bellary district takes a hit in the back of mining ban

DLF is selling a 27.4 acre plot in Gurgaon for around Rs 400 crore with Tata Realty & M3M developers in race to buy the land (ET)

Natco Pharma applies for first compulsory licence to sell a generic version of Bayer’s patented medicine drug Nexavar (ET)

GMR Infra opts out of race to acquire Australia based Bandanna Energy’s coal mines as due diligence finds local laws prohibiting foreign cos from mining on farm land (ET)

JK Paper’s rights issue of 5.8 crore equity shares at Rs 42/sh open on August 8 ((CMP: 44.55))

FM set to clear the merger of State Bank of Patiala & State bank of Hyderabad with SBI likely on August 6 (FE)

Pheonix Mills has bought HBS realtors entire 8.6% stake in its Market City Development in Bangalore for Rs 17 crore (Mint)

Apollo Global Management in talks with courier & shipping firm Gati for USD 100 million minority investment may involve up front equity & convertible instruments (TOI)

Valuemart Info Tech board approves conversion of 31 lakh equity warrants into equity shares at Rs 6/sh to promoters

BEML forays into Thailand for export of mining equipments by appointing Paragon machinery as its distributor for Thailand

Ex Dividend: VST Tillers Rs 9/sh, Shalimar Paints Rs 8/sh

F&O ban: Deccan Chronicle, Gitanjali Gems

Centre to plead to SC against blanket ban on Bellary mining

Orissa hopeful of resolving port projects row with DRDO

Lok Pal Bill will be introduced in Lok Sabha on Aug 4


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