Tuesday, September 20, 2011

MARKET OUTLOOK : Negative move on feebling sentiments…

Market Outlook: Indian markets are expected to open in a negative terrain on the back of feebling sentiments on the Asian markets. Asian markets trading mixed; Hang Seng flat, Nikkei down while The US markets staged a strong comeback in the final hour of trading; cutting their losses by more than half, following a report that the Greek finance minister official said the debt-ridden nation may be close to a deal with its international lenders. However, still the stocks ended lower, snapping a five-day winning streak. The S&P rose above the crucial 1200 mark after falling sharply. The Dow closed down 108 points but was down more than 250 points in its session lows.

Back to Indian Markets are following global cues, so we continue to hold a cautious outlook with support 4980 and resistance at 5100.

Global events to watch for today:

Þ FOMC Meeting Begins

Þ Housing Starts

Þ ICSC-Goldman Store Sales

Global indices Update @ 8:

Dow Jones : 11401 (- 108.0)

NASDAQ : 2612 (- 09.48)

Nikkei 225 : 8773 (- 124.4)

Hang seng : 18754 (- 163.2)

SGX CNX Nifty : 5025 (- 16.50)

Gold (USD/t oz.) : 1783 (+04.80)

Nymex Crude (F) : 85.40 (-00.30)

INR / 1 USD : 47.79

MARKET OUTLOOK : Negative move on feebling sentiments…

Our letter of yesterday was rather specific about what traders needed to do in case of a decline. First, any pending longs were triggered out as the prices opened with a downside gap. Second, the market continued lower therefore short positions have got created. Third, the market closed weak so those short positions should probably be held. The situation was the same in the Bank Nifty and hence those that trade the Bank Nifty should also be trading short. Europe continued to trade weak and the Dollar is currently being pushed ahead by the TINA factor (standing for There Is No Alternative). The Dollar index traded up with a gap and that is a new one- we haven't seen the DX chart show a gap of this nature. Is it an indication of something new in the offing? That would not be palatable for sure. The INR reacted negatively and there seems to be more weakness brewing there, for sure. Those that trade currency futures should bet on the INR weakening further.

Put OI shedding was witnessed yesterday and once again lower puts are seeing some action. Lots of fresh shorting in calls so here the market seems to be hinting at more declines ahead. Like we have written in our letter earlier and also mentioned in our weekly letter, there is a good scope for IV rising once again. This can put the spoke on option sellers once again. It did seem like the IV would recede a bit when we closed for the week on Friday but the sharp gap up move in the Dollar index is giving us some shivers. Time count is running out on the S&P trends as well and if this were to fall (Europe is falling anyway), metals are softening, other sectors like Cap Goods are beginning to wilt too- all these don't really add up to a nice picture. Have a bearish outlook as we step into today. Let the market say otherwise before we decide to go long anything.

The Fed meeting today and tomorrow can create a lull perhaps. But if the trends are weak ahead of it, then there may be some additional nervousness. The G20 meet is next towards the end of the week. Greece default is also being talked about for this week, if you believe the bears. So this week is international news time. We had the first of the down gaps yesterday. It does seem likely that we may have more such in the days ahead. Not a time to leave adventurous long positions on. There doesn't really seem to be much of local news to counteract these global ones. Gold has hit down into support and is inching higher. It has not moved sharply but that doesn't mean anything either. If global equities begin to decline, it will be a signal for gold to move higher. Those of our readers who are into gold trading should use S&P decline as a trigger to buy gold. Other commodities don't really look worthwhile to trade for now. Stick to gold.

Attached chart is Nifty hourly with near term pitchfork drawn in. A decline below 5015 will break the lower channel and continue the decline that has set off from the recent high of Friday. The next halt in such a case appears to be only around 4950 levels. Bank Nifty would break a similar pitchfork if below 9490. Fresh shorts signaled there. Target on that would be around 9250.

Stocks are moving to specific beats. But in a market that has possibly run out of fizz for the uptrend, all buy news that you may receive from anywhere will have lesser scope to work out while sell recommendations may be aided by a declining trend. So be ready to move both ways for a while.

Stocks to buy if market is strong

DELTA CORP The current month has seen this counter zoom into focus and trade quite well, despite volatility in the market. Yesterdays smart rise led prices to vault above a strong intermediate descending Gann line resistance and has closed higher. RSI has moved up from 60 and volumes were huge last session. Buy.




Buy above 113

1.5 points

116 / 117

Dip near 111.5

1 point

113 / 114

Prices last session managed to hold support at an excellent region around 170-71 levels and bounced back well. The turnaround from a rising trendline and valuation region has generated a fresh buy signal here. Momentum and volumes are in complete sync with the move. Go long.




Buy above 175

2 points

179 / 181

Stocks to sell if market is weak

PANTALOON RETAIL Prices hit new minor swing low last session, owing to sustained sell off all thru the day. The close near the days low has signaled more declines to come. RSI has turned down afresh from 40, adding to the bearish pressure on the trend. Go short here.




Sell below 245

2.5 points

241 / 238

Rally near 250-51

2.5 points



Sell Nifty below 5015 stop 5045 target 4980-55.


Buy FINANCIAL TECH above 885 and stop below 876 target 898

Sell PATEL ENGG below 102 for drop to 99 / 98 stop above 104.10

Stocks in action for the day: Areva T&D, Maruti, EID Parry, GTL, IVRCL.

IVRCL under CBI scanner: PTI -Alleged irregularities found in Tsunami housing project -Housing project in Puducherry-CBI alleges loss of Rs 35 crore to Puducherry & Central Govt

GTL : Sources -Lenders admit GTL to corporate debt restructuring (CDR) -SBI Caps proposes restructuring of GTL loans-Loans to GTL to be restructured over 8 years -Total loans under CDR around Rs 6,000 crore -Interest rate on loans to GTL to reduced to 10.8% from 13.5%

ICICI Bank (With 29.3% equity in GTL) did not vote for CDR -GTL to repay USD 150 million worth ECB to 10 banks by September 19 - SBI , PNB , StanChart have lent forex loans to GTL -Banks likely to restructure forex loans given to GTL

EID Parry in share-purchase pact with arm US Nutraceuticals LLC -To up share in arm US Nutraceuticals LLC to 100%

GoM on coal to meet on September 20 GoM on coal -To discuss NTPC's North Karanpura project-To discuss BK Chaturvedi report on go, no-go area

Sharad Pawar says -Food EGoM to meet at 4:30 on tue to review onion export ban -To formulate pragmatic farm product import, export policy soon

National Housing Bank says -In final stages of forming Mortgage Guarantee co -Expect to set up Mortgage Guarantee co by March-end -To hold 38% stake in Mortgage Guarantee co -To seek FIPB nod for Mortgage Guarantee Co before December -Aim to borrow Rs 10,300 crore in year to June 30

Maruti conflict escalates as govt pulls out of talks, negotiations break down after union leaders arrest.

Blackstone-Carlyle to bid for Reliance Infratel, likely to value tower business at around USD 4 billion (TOI)

RIL plans 4-week shutdown of 2 units at Jamnagar SEZ refinery

Areva T&D India wins contract for 765 kv extra high voltage substations worth Rs 220 crore

Sakthi Sugars redeems FCCB's worth USD 2.4 million

RIL ties up with Siemens for homeland security solutions

SA based Litha Healthcare announces strategic tie up with Natco Pharma (BS)

Vivimed Labs in talks to buy Spain’s Uquifa for around Rs 263 crore (Mint)

Sintex looking to buy custom moulding firms in USA, Europe (DNA)

BPCL eyes LNG terminal in Mozambique with an investment of USD 400 million for its 10% stake (TOI)

Ex Bonus: Cummins India at 2:5

F&O Ban: ABG Shipyard, Gitanjali Gems

Listing today on NSE: Vaswani Industries

SC to hear bail pleas of 3 ADA group employees on September 27

Prasar Bharti to bid out DTH operations to private players ((Beneficiary: Dish TV, Sun TV))

Companies may lose undeveloped Mineral Reserves in Jharkhand, if state Govt’s draft policy is approved. To impact SAIL & Tata Steel (ET)


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