Wednesday, September 7, 2011

OUTLOOK: Positive vibes emerge....

Market Outlook: Indian markets are expected to open with a positive inline with recovery cues from the Asian markets. Asian markets trading firm; Nikkei, Seoul Composite up while US markets climbed well off their worst levels, however still ended lower for the third-straight day amid fears about the ongoing euro zone debt crisis and concerns over another recession. All major indices post their worst three-day start this month since October 2008. Gold crosses record $1920 as debt concern boosts demand. Indian Markets are following global cues, so we continue to hold a cautious outlook with support 4980-4960 and resistance at 5120-5200:

Global events to watch for:

Þ Jobless Claims.

Þ International Trade.

Þ International Trade.

Global indices Update @ 8:

Dow Jones : 11139 (-100.9)

NASDAQ : 2473 (-06.50)

Nikkei 225 : 8714 (+124.0)

Hang seng : 19828 (+118.4)

SGX CNX Nifty : 5080 (+12.50)

Gold (USD/t oz.) : 1876 (+02.70)

Nymex Crude (F) : 86.38 (+00.36)

INR / 1 USD : 46.12

OUTLOOK: Positive vibes emerge....

Yesterday's trading volatility would have proved a bit difficult for traders to handle. Initial weakness would have scared the weak kneed bulls. But a more detached view would have revealed that the price damage was rather minimal. The fall below Monday lows in the first hour smacked more of stop running. Matters were sedate until Europe began trading better on news. Then it was a scramble into the close as the shorts backed out and covered and once again the index posted a nice close above 5000 levels. That makes 4 in a row. Clearly indicative of a recovering market. Our view for the rise into the next trend change date set in the middle of the month or later seems to be panning out so far. We have been long for the past few days and now that position should be in the money. The target ahead is around 5115/5135/5170. We continue to hold long for those. Fresh longs should be looked for during intra day dips.

Bank Nifty also created a scare in the morning. To the point that it actually flashed a sell but then made amends by quickly making an about face. This was even earlier than the Nifty. So value buying certainly seems to have emerged in this sector. It was evident from the fact most of the Bank leaders were up and running. The finish is tantalizing. It is almost in with a buy signal on the hourly charts. Some positive follow thru today would clinch it for the index. And also for the stocks. Hence continue to pay attention to this sector and index today as well. Positive moves here will have positive fall out on the Nifty as well. We add Bank Nifty long today if the rise sustains above 9650.

Index is up, PCR is moving to 1.39 but for some continued unfathomable reason the IV is still holding up. Is it manipulation? Is it something that the market fears but we don't know about? These are intriguing questions for the moment now. How is this to be actioned? For starters, we have advised shorting strangles in expectation of volatility peeling off. Since that has not yet happened, we suggest reducing the quantity of the trade (in case any reader has a big position). We can still continue with the strategy but until there is clarity about the IV, lets stay a bit light. Bullish positions using options could be one way to go if the rise were to continue.

DLF suddenly losing its footing in such a swift manner (206 to 196 in a good day) shows that fresh troubles may be brewing. Short higher calls. HDIL and IB Real too look jaded so the sector continues to remain under pall. Looks like the short covering rally may be over for now. We really don't like the looks of Sun Pharma on the charts. Maybe a good pair trade here with Lupin (long)? Check it out. The onward move in Telecom also seems to have stalled, including in Idea. So looks like the market is about to shift gears in terms of sector preferences. Cement could be one of the new ones. Look for Reliance to meet with some supplies around 840 levels or so. If long, can consider some profit booking there.

STRATEGY FOR THE DAY: We have steadfastly stuck to a bullish view, asking readers to buy into dips. That is looking like it will pay off. Maybe we will have some hiccups along the way but we advice continuing to remain steadfast with the bullish view. Bank nifty can be added to the mix now as a fresh long position. Look for sector rotation to emerge so dont chase the recent gainers like Auto etc. Look for trades in stock options area as this is getting more active and day trades are also becoming possible for those that are nimble. Not to mention that these is also cheaper to trade compared to futures.

Stocks to sell if market is weak:

KPIT CUMMINS This stock has been in a consolidation phase since few trading sessions but has not been able to breach the horizontal resistance line on the daily charts. On Tuesdays trading session the stock showed some good promise but drifted lower end of the day which indicated unwinding of longs. Volumes on the downside has increased which suggest bearish bias. Sell.




Sell below 150

2.5 points

147 / 145 / 144

Stocks to buy if market is strong:

UTV SOFTWARE After a brilliant skyrocketing move since Feb 2011, prices halted after reaching 1050 levels during July 2011. Since then they were seen consolidating at higher levels and witnessing consistent accumulation, thereby maintaining the strong bullish bias. This week has seen prices revive afresh and RSI too has moved up from 60. A fresh buy signal here, go long.




Buy above 983

10 points

998 / 1005-06

Dip near 976-74

10 points

988 / 994

RUCHI SOYA Prices started this month with a nice upside breakout from a strong 200-EMA moving avg resistance and have traded higher this week. After a tiny dip in the session before last, they resumed the uprun last session and have moved up nicely. Momentum readings have got a fresh boost as well. Buy.




Buy above 108

1.5 points

111 / 112

Or dips to 106.5

1.5 points

109 / 110


Buy Nifty above 5060 stop 5020. Tgt 5130.

Buy Bank Nifty above 9650 stop 9550 for 9800


Buy ORCHID CHEMICAL above 209 for target of 213/215 and stop below 205.90

Sell BAJAJ AUTO below 1645 for target of 1625/1615 and stop above 1660.2

Stocks in action for the day: IOC, Cipla, Shree Renuka, SAIL, Pipavav

Pipavav Shipyard to raise Rs 160 crore by issuing convertible warrants at Rs 78 (CMP Rs 77) -To issue 50 lakh warrants each to Rakesh & Rekha Jhunjhunwala -To Issue 5 lakh to Utpal Seth -To issue 1 crore to promoter

SAIL led consortium bids for 4 iron ore blocks at Hajigak, Afghanistan -Consortium include NMDC, RINL, JSW, JSPL, JSW Ispat, Monnet Ispat

Lavasa: Sources -Top HCC officials call on PMO for Lavasa -Ask PMO to intervene to speed up environmental clearance -HCC alleges undue delay in MoEF's decisions -EAC had suggested clearance for phase I of Lavasa -MoEF set 5 pre-conditions for clearance -Jayanthi Natarajan studying Lavasa case -Clearance to Lavasa likely to be delayed -Lavasa case is before a new bench of Bombay HC

PG Electroplast IPO of 57.4 lakh shares with a price band of Rs 190-210/sh opens today

Tata Autocomp shelves USD 260 million IPO

ONGC begins pumping oil from KG field basin & has plans to start gas production by next year (ET)

Govt has no proposal to reduce taxes on petro products as it earned Rs 1.02 lakh crore through taxes in 2010-11 (ET)

Shree Renuka Sugar in talks with several PE companies to sell its 25% stake, to retire debt in its wholly owned company Renuka Brasil holdings (ET) (There is also buzz of sugar de-control)

Cipla closes two of its four marketing divisions, move aimed at improving productivity (ET)

Inter-Ministerial panel wants fertilizer & power companies to get a major share of domestic natural gas & rejected a proposal to introduce a pooled price mechanism (ET)

JP Associates may rope in a partner for its cement business, currently in talks with South American based Cemex & Votorantim to dilute its stake upto 26% (BS)

NTPC to setup a 500 mw coal based power plant in Srilanka with an estimated cost of Rs 3150 crore

DLF to move the CCI by early next week to appeal against the CCI order imposing a Rs 630 crore penalty on the firm (BS)

Dabur India ’s Amit Burman keen to buy out Mumbai based BJN foods, with the BJN promoters valuing the company at around Rs 300 crore (FE)

KSK Energy is scouting for a strategic partner to sell its 20% stake in its Singapore arm (DNA)

Emami promoters make a USD 400 million realty foray in Srilanka (DNA)

Indian Oil may raise petrol prices as revenue losses from selling the fuel at govt controlled rates have increased further more (Mint)

Nutek India board to consider issue of bonus shares

F&O ban: ABG Shipyard, Gitanjali Gems

Listing of TD Power Systems w.e.f September 8

NTPC to set up first overseas power plant in Sri Lanka

Auto component manufactures bet big on R&D facilities

Mobile tariffs likely to go up further, says Sunil Mittal

Maruti to shift new Swift production partly to Gurgaon

Cairn to seek ONGC nod on Vedanta deal


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