Thursday, September 8, 2011

OUTLOOK: Bulls continue to hold on...

Market Outlook: Indian markets are expected to open in a flattish note on the positive range taking cues from the global markets. US markets closed near session highs to log their first gain in September amid easing worries over Europe's debt crisis and as investors shrugged off the Fed's beige book, which showed slower growth in some of the regions of the US while Asia markets are trading firm; Seoul Composite, Taiwan Weighted up. Indian Markets are following global cues, so we continue to hold a cautious outlook with support 5000 and resistance at 5200:

Global events to watch for:

Þ Jobless Claims.

Þ Bloomberg Consumer Comfort Index

Þ Barack Obama Speaks

Þ International Trade.

Global indices Update @ 8:

Dow Jones : 11414 (+275.5)

NASDAQ : 2548 (+75.11)

Nikkei 225 : 8804 (+41.21)

Hang seng : 19902 (- 145.7)

SGX CNX Nifty : 5118 (-02.00)

Gold (USD/t oz.) : 1897 (+19.80)

Nymex Crude (F) : 89.36 (+00.20)

INR / 1 USD : 46.02

OUTLOOK: Bulls continue to hold on...

The move that we had been talking about finally came thru yesterday and the index sped up to reach our target zones near 5130. The positional long play that we had created on the Nifty future is now nicely in the money. In addition, we had mentioned in yesterday's letter that we would be looking to go long in Bank Nifty if the prices were above 9650. The opening gap confirmed the indexes intentions and when the rise persisted, one could have gone long around 9700-9750 levels. The rise has moved quickly to the 38% retracement resistance yesterday and paused there. A move past yesterday high would give it a further impetus and would be a signal to continue with our long position. We should now revise our stoploss on this position to breakeven levels. If rise continues then the index has potential to continue till 10170-10300.

The Nifty has moved into the first of the resistance bands above and will continue to meet with more resistance as it winds higher. Hence it would be time to take some profits off partially and hold the balance with a tighter stoploss. Pitchfork channels suggest 5060 levels as a good stop. If the prices move past 5150 levels then it could continue towards the next resistance that is around 5230 levels. Then beyond that of course you have the wide gap that takes you right up to 5350. Optimists are already considering that as a possibility and we are seeing option activities emerging in that strike as well.

After several days of higher volatility, the IV dropped some. So looks like the short straddles that we had advised earlier would now begin to come thru. Big build up was seen in the 5100Put and 5000Put yesterday. That is intriguing. We don't believe all of it could be short positions. If someone is building long puts then there is apprehension about. Lets be alert about that. Hardly any significant additions to higher strike calls. So that means people are still expecting some more gains to be recorded?

Like we mentioned yesterday, sector rotation has certainly begun. Most of the earlier gainers witnessed some profit taking. Cement was up and running like we discussed yesterday. We like the changing dynamics of this business and the stocks are beginning to reflect that. India Cement moving up is also an indication of brisk short covering at work. Chart of Ultratech is very strongly placed. There is either going to be some spectacular gains or it is going to fizzle out spectacularly as well. So keep an eye on this one- it is going to be a big one in the future- either as a success or a failure. Either way we will have a trade in it! Brisk buying has been in progress in Infra stocks. Time for it to ease off. So don't chase those higher today. Reliance has hit the target resistance we had for it. If it declines, we will need to see some other heavyweights to counteract its downward pressure. So be on the watch for this- else it may impact the index to move lower.

STRATEGY FOR THE DAY: Bias is still to the up but now expect the speed to die down. Most people would now be in the profit taking mode as prices are heading into known resistance zones. So expected frequent pullbacks if there are upward spurts. Day traders therefore need to be ready to lock in profits quickly when they see them. Stocks would now shift to newer sectors as the buying action churns thru different names. Cement should continue to move higher while smaller priced bank stocks are also showing some further promise. Recent favorites liek VIP and Jubilant etc are all in a small declining mode. Wait for a day or two allow them to pull back into support before thinking of buying them again.

Stocks to sell if market is weak:

JAIN IRRIGATION A pullback from the low of 148 last month ended close to the 200-period EMA and prices since then had been witnessing some choppy moves. Yesterdays negative move seems to have broken a rising trendline support and closed below it. Momentum is starting to fade. Look to go short here.




Sell below 170

1.5 points

167 / 166

Stocks to buy if market is strong:

BHARTI SHIPYARD Prices have been on a pullback mode since end of August 2011. After a brief halt on couple of occasions, they resumed their run last session and have moved above a valuation resistance around 104 levels. The rise came on higher volumes and has signaled a fresh buy here.




Buy above 108

2.5 points

112 / 114

Dips near 106

2.5 points

110 / 111.5

PRISM CEMENT counters were doing well last session, buzzing on some strong buying activity. This counter as well was trading on a positive note and has made an attempt to bottom out from the prior decline and move up afresh. We expect to see a follow thru here. Buy.




Buy above 42.7

1 point



Buy Nifty on dips to 5065 Stop 5030. Target 5150.


Buy HDIL above 110 for target of 112-114-115 and stop below 108.4

Sell LUPIN below 470 for target of 464-461 and stop above 474.

Stocks in action for the day: JSW Ispat, RComm, Maruti, RIL, Crompton.

Jairam Ramesh says -The Land Acquisition Bill is not a one-sided legislation -Bill done in record time of 55 days, but have not rushed it -'Do not think India inc has anything to complain about' -Have been criticised by NGOs, trade bodies & farmers -Good starting point for land acquisition

Listing today: TD Power Systems (issue price Rs 256/sh)

CAG report on Air India & KG-D6 to be tabled today ( RIL to be in focus)

Maruti ’s new plant likely to come up in Gujarat as strident labor unions force company to consider moving out of Haryana

Reliance Communications bags Rs 1400 crore deal from HDFC Bank to build & maintain a data centre (ET)

Crompton Greaves promoter buys 0.4% from open markets between August 18 and September 6

Govt likely to decide on capital infusion in SBI by this month end (FE)

JSW Ispat accused of violating environmental norms at one of its plant in Maharashtra (FE)

Adani Power can’t scrap its agreement to supply power to Gujarat utility with appellate tribunal dismissing its petition (Mint)

Madhucon group forays into hospitality sector, plans to setup 2 hotels in Hyderabad (DNA)

Jubilant Foodworks plans overseas foray with entry into Srilanka and Bangladesh – BS

Ex Dividend: Godfrey Phillips Rs 35/sh, HPCL Rs 14/sh, Savita oil Rs 20/sh

F&O Ban: ABG Shipyard, Gitanjali Gems

Rhodia Specialty Chemicals make an open offer to acquire 6.7 lakh shares at Rs 386.72/sh (CMP: 410)

Rabha Plastics makes an open offer to acquire 16.8 lakh equity shares at Rs 4/sh (CMP: 7.2)

Passenger vehicle sales in India fell 5.7 percent in August, Pawan Goenka, president of industry body Society of Indian Automobile Manufacturers (SIAM) said on Wednesday, as higher interest rates and rising vehicle costs hit demand.

Jubilant Life Sciences has received ANDA Approval for Pantoprazole delayed release tablets 20 mg & 40 mg.

Diamond Power Infra has got letter of intent for supply and erection of 220KV D/C line for Halvad-Sadla and BECL-Botad aggregating 131.47 kms.

Bombay Burmah Trading has agreed to sell its BCL springs division located at Aurangabad to NHK Automotive Components.

ONGC has started pumping oil from a deep-sea field in KG Basin, marking its entry in the promising high-tech area and boosting its prospects to make more discoveries.

Educomp Solutions has signed an agreement with Directorate of Public Instruction, government of Chhattisgarh for implementation of ‘ICT@Schools’ project in 582 government High and Higher Secondary schools in the state. The total value of the order is Rs 60.72 crore.

Sterlite Grid, a wholly owned subsidiary of Sterlite Technologies, has awarded contracts to Hyundai Heavy Industries, Baoding Tianwei Baobian Electric and Areva T&D India for supplies of equipment for substations. The total value of these contracts amounts to Rs 500 crore. These sub-stations would be set up in Bhopal (Madhya Pradesh) and at Dhule (Maharashtra).

Kalindee Rail Nirman has recently received a contract worth $ 15 million from Bangladesh Railway for Railway Projects scheduled for completion in 18 months.

Zuari Industries has received intimation from OSI, an overseas shareholder that it is in the final stages of a scheme of arrangement including merger with Globalware Holdings, an overseas company (which is part of the promoter group).

NMDC has signed the contract for coke oven package for upcoming 3 MTPA Integrated steel plant at Nagarnar, with the consortium lead by M/s Bhilai Engineering Corporation. The total cost of the package is Rs 1978 crore.

Forging industry may grow by 10-12%

Ex-BP boss Hayward makes $4 bn bet on Genel Energy

Decks cleared for Uninor to raise funds via rights

CCI orders probe against Apple

Animation industry to reach Rs 4,375 cr by 2013


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