Wednesday, September 21, 2011

Stocks in action for the day: Everonn, ONGC, KS Oils, Suzlon, HDIL, HCL Tech.

Market Outlook: Indian markets are expected to open in a negative terrain on the back of mixed sentiments on the global markets. On the global space US markets erased most of their gains to close mixed in a thin-volume trading, post a report that stated that no deal has yet been reached on Greece and as investors waited for the outcome of a two-day meeting of the Fed on interest rate policy. Dow Jones gained 7.65 points erasing its earlier triple-digit rally while Asian markets are trading lower; Hang Seng down, Nikkei flat.

Back to Indian Markets are following global cues, so we continue to hold a cautious outlook with support 4980 and resistance at 5190.

Global events to watch for today:

Þ Bank Reserve Settlement.

Þ Existing Home Sales.

Þ FOMC Meeting Announcement.

Global indices Update @ 8:

Dow Jones : 11408 (+07.65)

NASDAQ : 2590 (-22.59)

Nikkei 225 : 8721 (+00.74)

Hang seng : 18808 (-206.3)

SGX CNX Nifty : 5131 (- 36.00)

Gold (USD/t oz.) : 1804 (- 05.00)

Nymex Crude (F) : 86.47 (-00.30)

INR / 1 USD : 48.22

TECHOUTLOOK : Support for the Nifty is at 4980 and resistance at 5190.

Yesterday's market caught us unawares, let us admit that. We certainly had not anticipated the kind of rise that occurred. Not that we are trying to defend that but we are reasonably certain that most people did not anticipate such a strong advance either. The index spurted towards the later part of the day and ended rather strong, with a push above the recent high at 5155. This actually continues the rise that had been set off earlier- something that we had presumed to have completed. The INR is turning weak (something that we had mentioned yesterday), Greece appears to have done something but the major issue of a default is not yet resolved. the Fed meet is ahead of us and there is nothing locally happening to excite anyone- and still the market went higher! Greece faces redemptions and interest payments for more than €16bln until year end. Two major CDS rollovers are also looming today and on 20th December. Maybe they have suddenly found the money from some ancient Greek temple (like we also did in Kerala?). Like the Tortoise from Kung Fu Panda said," There are no coincidences". So we treat every move the market makes with seriousness and hence we shall look upon this move as something out of the ordinary. Therefore, follow thru action becomes paramount. That is what we should be looking for today.

For this we have attached today a 15 minute chart of the NF with Bollinger band and pitchfork channels added. Why both of these- one may well ask. Well, they do indicate different elements of the trend although both are price channels. We notice that the prices tagged the Band towards the end of the day and that could be possibly owing to some brisk short covering action that seems to have emerged in the later part of the day. As long as the prices continue to tap the band and stay beyond it today (if, that is) then we should continue to remain long or have a bullish view. But if prices were to give up quickly or after a better open, then understand that yesterday's rise might well have been on short covering rather than sustained fresh buying. The other channel- the pitchfork- shows that the prices are still short of the median line, which should be the logical target for the move. This is around 5185-95 zone for today and there are other techniques that show a cluster resistance in that zone as well. Hence a move into those areas could well be profit taking levels for those that are holding long from yesterday. Again, if the prices fizzle out without meeting the median line, then it would mean some immediate weakness which would prompt a move back to the lower channel line, which is around 5100 levels now. The Trigger line of the pitchfork has also been shown and this is coming thru around 5050 today. This is the trend change level in the intra day time frame so it is something to be aware of as we go into the trade today. Volatility these days is considerably higher and hence one should not consider that such moves may not happen.

Like we stated earlier, this is news-based week. So volatility should certainly prevail. So we still advise not to get carried away with sentiments during advances or declines. By that token, we should be looking for some topping action today. But, as ever, we trade the market and not the forecasts. We have made some forecasts on what are the possibilities but they remain just possibilities. Look for the market to confirm those readings and then act on those signals. For e.g. we saw some really big addition to the 5000/5100 puts being added yesterday. These seems to be an aggressive long positions being played thru short puts.

The stops on our short positions in both Bank Nifty and Nifty are triggered with yesterday's rise. Not too much damage done to the gains made earlier. But we had no call for going long yesterday and hence are currently without a position. Looking at the charts we find resistances coming up at 5195 and then5225. The latter is known to everybody- the yawning gap exists there and for certain that one will have some self fulfillment by itself and so will act. Point is whether people will act before that will reach? We think that is quite possible- so do look at the resistance at 5195 levels first before thinking more bullish.

Stocks are picking up once again with several poised on some verge of a breakout. Can we go with breakouts if one is expecting the index to run into a resistance zone? Obviously not. Hence if you do take them, make sure that you are either day trading those or have firm stops beneath them. What about shorting? Well for that you need some confirmed turn in the market and we prefer to let that happen first before committing to that side. So for today no longs and no shorts in the indices in the letter but we may advise the same if situation warrants it over the SMS service during the day.

STRATEGY FOR THE DAY: Bias is still slightly negative as we are nearer to the resistances but without a clear signal one does not want to take a decisive position. Hence today is a day to watch and jump ship as the situation arises. Stocks will largely follow a bullish path as retail activity is visible. Keep track of the Fed action. Big expectations that QE3 will be rolled out. But that is a much bigger thing than what trader expectations will drive. Expect volatility so dont be stuck with positions in one direction for long. Take profits off in case you see them. Watch for supply to emerge when and if we get into the resistance zone indicated for the Nifty. If the market turns there, look to short the Bank nifty rather than the main nifty as the former is weaker on relative strength right now.

Stocks to buy if market is strong

GLODYNE TECH: Last couple of weeks have seen prices move in a sideways consolidation phase, facing couple of resistances on the daily time frame. Yesterdays small but firm upmove has led prices to show a better move and attempt a breakout from here. Momentum readings and volumes have got a fresh boost. Expecting a breakout here. Buy.




Buy above 337

3.5 points

343 / 346-47

Dip near 332-31

3.5 points

337 / 340

VIP IND: Yesterday prices moved close to all time high of 1003 but managed to register a new all time close at the end of the day. They managed to breakout from a bullish pattern on the daily charts, pennant and have signaled fresh buying opportunity here. RSI from 60 has moved up afresh and volumes were offering full support as well. Buy.




Buy above 995-999

10 points

1020 / 1030

Or dips near 985

9 points

998 / 1008

Stocks to sell if market is weak

KOLTE PATIL Prices plunged last session, breaking a short ascending trendline support and closing below it. Though they pulled back from the intraday low and closed higher, they still have closed weak and signal possible fall ahead. Momentum has taken a fresh beating. Go short.




Sell below 37

1 point



Exit longs in the region of 5195-5220.

Sell Nifty short below 5100 stop 5130 for fall to 5050-5030.


Buy MAX IND above 214 stop below 211.90 target 217-219

Sell BHEL below 1640 stop above 1655 target 1620 - 1610

Stocks in action for the day: Everonn, ONGC, KS Oils, Suzlon, HDIL, HCL Tech.

Everonn Education has approved issuing 2.62 million shares on preferential basis to Varkey Group at Rs 528 per share.

Prakash Constrowell IPO with a price range of 130-138/sh closes today QIB's: 0.31 times (x) NII's: 0.52x RII's: 1.40x Overall: 0.73x

RDB Rasayans IPO of 45 lakh shares with a price range of 72-79/share opens today

EID Parry has increased its stake in subsidiary US Nutraceuticals LLC to 100 per cent from 51 per cent.

Reports says Gold may scale peak $2,000 by year-end: Gold will probably top $2,000 an ounce by year-end amid surging investor demand, a Bloomberg survey showed. Prices will rise to a peak of $2,038 before December 31, 2011 and Next year, gold will peak at $2,268, according to the average in the survey. Gold has surged 25% this year, touching a record $1,923.70 in New York on Sept. 6. The metal climbed as escalating debt woes in Europe and the prospect of faltering US growth boosted demand.

Pharma FDI -Commerce minister Anand Sharma writes to PM on pharma FDI -Anand Sharma critical of Arun Maira panel on pharma FDI -Arun Maira is member, planning commission -Anand Sharma points fingers at delay in Maira recommendations -'Time has elapsed in forming panel, terms of reference' -'Deliberations of panel are getting prolonged' -'Meanwhile, possible takeovers of indian pharma companies' -'Concerted attempt to blunt challenge of Indian generics' -'Indian generics are a major challenge to MNCs' -'Merit in concerns of Health Ministry on pharma takeovers'-'Seeks FDI in pharma to be put on approval route' -'Okay with 100% FDI via auto route only for greenfield' 'Possibility of MNCs working in tandem as cartel' -'If takeovers allowed at same, production capacity to be limited'
-'Adequate capacity does not exist public sector pharma' -Arun Maira panel asked to promote pharma investment

Kishore Biyani on DIPP says -New definition of group co what industry wanted -New definition has removed doubts; is clearer-New definition specifies permissible wholesale extent -DIPP's new definition eases definition of group co-Foreign wholesalers could sell only 25% to front-end group company -No govt statement has suggested direct FDI in retail -Never said in talks with Carrefour -Will confirm if in talks with Carrefour after FDI allowed -Affordable rent mantra of mall developer, retailer partnership-Festive sales in the east showing positive trend

CBI submits report in SC against Dayanidhi Maran, Arun Shourie Sources say -No clean chit to Maran, no evidence against Arun Shourie -Investigations still on against Pramod Mahajan -Essar-Loop chargesheet delayed again

HCL Tech : Sources -HCL Tech likely to have bagged part of Deutsche Bank IT contract -Deal for IMS, managed services, application development-Deal likely to be around USD 300 million over 5 years -Part of Deutsche Bank deal awarded to TCS HCL Tech says -Cannot comment on market speculation

Lupin gets US FDA approval for Oral Contraceptive Norethindrone -To start shipping generic Norethindrone to US shortly

KSOIL Sale may hit a hurdle as accounting issues & a loss of around Rs 400 crore deters buyers (ET)

Future Group in talks for a JV with Japanese based Convenience Store Chain. Japanese company to invest Rs 3000 crore in first tranche (ET)

HDIL to sell Virar Land to raise Rs 650 crore & repay its debt; company has put 5 million sqft of land of the block & already sold 1 million sqft to local developer (ET)

Welspun Infra buys 50% in a Rs 400 crore project developed by ARSS Infra in Orissa (ET)

IL & FS exits Auto Infra JV with Japan based Orix Corp (ET)

Kerala to take back 85 acre land back from Suzlon , govt says the company encroached on people's land

TPG, Shriram Group could split Vishal Retail partnership on Shriram group's inability to infuse more money (FE)

NTPC to use spare land to cross acquisition hurdle (FE)

Voltas leads race to buy Wipro's water business

Australian based Legacy Iron Ore approves NMDC bid for acquiring a majority stake for around Rs 158 crore (Mint)

Monsoon sinks Coal India output hopes as production to remain flat due to excessive rains in eastern India; hopeful of 5% growth (DNA)

Mundra Project may cause Tata Power a Rs 500 crore loss on Indonesia's decision to benchmark its coal to international prices (DNA)

L&T set to partner Hindustan Shipyard for ship building (BS)

Ex Date: Bajaj Hindusthan Rights Issue in the ratio of 2:1 at premium Rs 36/sh ((CMP: 46.95))

F&O ban: ABG Shipyard, Gitanjali Gems

Govt says lifts ban on onion exports

Areva T&D India’s transmission business has been awarded a contract approximately worth Rs 220 crore by Bhopal Dhule Transmission, a subsidiary of Sterlite Technologies, for construction of 765kv extra high voltage substations.

Break-down in the turbine of Servalakshmi Paper’s power plant has been rectified. The power plant and paper plant have resumed production from September 19, 2011.

Subex has signed an asset purchase agreement with NetCracker for sale of its activation business.

Shares of IVRCL were under pressure after reports that the company's CMD Sudhir Reddy, is under the CBI scanner for alleged irregularities in a Tsunami housing project in Puducherry.

Blackstone and Carlyle Group have jointly expressed interest to bid for Reliance Communications’ tower business, say reports. The potential investors are holding initial due diligence that may lead to a bid offer, valuing the enterprise at about $4 billion.

Shares of ONGC slipped, a day after the finance ministry said that ONGC fuel subsidy outgo will almost double to Rs 47,640 crore this fiscal so that diesel, domestic LPG and kerosene can be sold at below market prices to consumers.

The Orissa Minerals Development Company has informed that at present there is no such specific plan about stock split and bonus issue. However, in near future, it may take action in this regard.


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