Tuesday, September 6, 2011

Stocks in action for the day: Spicejet, RIL, Nelcast, Hotel Leela, Dunlop, TCS

Market Outlook: Indian markets are expected to open in line with the global cues. Asian markets trading lower; Nikkei, Straits Times slip. Indian Markets are following global cues, so we continue to hold a cautious outlook with support 4980-4960.

Global events to watch for:

Þ ISM Non-Mfg Index

Global indices Update @ 8:

Dow Jones : 11240 (-253.3)

NASDAQ : 2480 (-65.71)

Nikkei 225 : 8676 (-108.3)

Hang seng : 19436 (-180.2)

SGX CNX Nifty : 4979 (-34.50)

Gold (USD/t oz.) : 1901 (+24.6)

Nymex Crude (F) : 84.01 (-02.44)

INR / 1 USD : 45.93

OUTLOOK: Managing to hold on... to the support.

A gap down move was on the cards. Our letter of yesterday had already indicated that dips were possible but we had also mentioned clearly that intra day dips are to be used to go long in the market. That would have proved to be worthwhile advice because the market moved down to 4960 levels and then pulled up into a nice little advance that would have been profitable for all those who bought in. Alongside we had alerted readers to look for some positive action appearing in the Bank stocks and the Bank index has perked up some more but is still short of that buy signal. Perhaps it may get issued today. It will happen once it is past 9650. So continue to watch this index for signals that might fuel up the main Nifty further.

Nifty is once again on a buy mode at the end of yesterday. So in case someone had missed it earlier, the same signal is on currently and hence on a minimal follow thru today we can continue add. Since yesterday's price action was largely range bound, the stoploss point continues to remain below the 4950-60 level and one can go long with this as a stop. Of course, it would be a stop and reverse trade in case the stop levels are triggered. Do look at that possibility in case the Bank index is unable to effect a buy signal.

We wrote about the uptick in the IVs despite the holidays and were intrigued to find that Volatility continue to move up on an intra day basis. Yesterday too the VIX has closed higher! Speaking to a few people we were still unable to find the possible reason as to why the IVs should be up. Could it be linked to Obama's upcoming speech later this week? Seems skeptical. Fact however is that the IVs are up and remain up. So any strategy directed towards cashing in on volatility and theta erosion is currently not working out. That prompts us to consider whether there could be some operator activity in propping the IVs up? This may not be so far fetched a thought as the bulk of the market volumes today is in options and if moving the volatility a few points higher can force a lot option players to square up their shorts, you can be reasonably sure that the operators would do it. Keep that in mind.

Gainers for the day showed some good names while losers were rather smaller ones. Hence we can continue to remain bullishly biased. Given that markets are not running into a stronger trend, we should continue to see the ranged and mixed action of stocks. News led BF Util to spurt yesterday. It is trading at near term resistance. Moving up further would open up more ground for some further gains. ADAG group stocks were up for the third session running. No doubt some rally was due here too. But we suggest not chasing these names higher as they are treacherous and weak in trend strength. Some value buying seems to have emerged in Infra stocks and a few of these names may continue higher.

STRATEGY FOR THE DAY: As the index continues with a buy signal on the intra day charts, we have to approach the market with a bullish bias and use intraday dips to buy into. Bank Nifty may be on the verge of issuing an up breakout signal so pay attention to that one as well. Watch the volatility readings and see if it begins to recede. If it does, then the uptrend will continue without much difficulty but if it does not or spikes higher further, then it is better to be careful because something not clear at the moment is happening. Sector plays are a bit mixed right now and hence we have to take a stock specific approach even within the sector.

Stocks to sell if market is weak:

HINDUSTAN ZINC HIND ZINC has tried to rally, but it has been a typical ‘relief rally’ which has ended. It was halted by overhead resistance in the form of the moving average band as can be seen in the appended chart. This coincided with a previous gap as well. All this calls for the bears to come back in action, which did play out on Monday. Consider going SHORT at the above mentioned levels.




Sell below 126

2 points

123 / 122

Stocks to buy if market is strong:

DELTA CORP Prices were seen rallying smartly on the back of fresh buying activity. Last several sessions have seen prices consistently holding support at the 200-EMA and bounce up each time. Yesterdays rally from there has confirmed their intent further more. Volumes were huge and momentum was high. Go long.




Buy above 95

1.5 points

98 / 100

Dip near 92

1.5 points

95 / 97

IRB INFRA Last week prices formed their first minor higher bottom after a declining trend and showed signs of a fresh pullback. This has been confirmed last session as they managed to rally further and breakout from a descending trendline resistance. Buy here.




Buy above 159

3.5 points

164 / 168

Or dips to 155-54

3.5 points

160 / 163


Buy Nifty above 5015 stop 4960 for 5115.

Buy Nifty on dips to 4960 with 4930 stop for a rise 5025.


Buy IRB above 161 for target of 163/165 and stop below 159.4

Sell Dr Reddy below 1478 for target of 1462-1460/1451 and stop above 1492.2

Stocks in action for the day: Spicejet, RIL, Nelcast, Hotel Leela, Dunlop, TCS

SpiceJet takes off after block deal: The block deal was executed at a discount of 2.06% to Friday's (2 September 2011) closing price of Rs. 24.25. Sources say bought buy SBI (8.4m shares)

Cabinet approves Draft land acquisition bill; industry feels jitters Jairam Ramesh says -Draft land bill to be placed in current parliament session-Suggestions will be taken on board by parliament standing committee-There was no change on the bar on irrigated land -Once defined, public purpose will not be changed

CREDAI says -Happy that transparency will come in land acquisition-Unhappy that affordable housing not under bill-R&R clause will lead to 50% increase in market costs

CII says -Total cost involved could turn out to be a negative-Bill has gone overboard on costs of rehabilitation

BF Utilities is expected to enter into a land development deal with Prestige Estate in Bangalore, reports ET Now. The total revenue potential from the project is estimated around Rs 880 crores. The land development will be done by the BF Utilities Ltd's subsidiary NICE.

NCC has secured new orders aggregating Rs 629 crore from Water Resources Division Raigarh, Chhattisgarh, Maharashtra State Electricity Distribution, Mumbai and e Bharat Cocking Coal, Dhanbad.

Tricom India has sold its ASBA software solution to Karnataka Bank. The company plans to market the product to other banks as well.

Nitin Fire Protection will hold board meet on September 12, 2011 to consider and fix record date for issue of bonus shares.

All the three plants of Dwarikesh Sugars, situated in Uttar Pradesh, with captive power generation capacity of 30 megawatts have been registered with National Load Dispatch Center for generation of renewable energy certificates.

Ranbaxy (UK) has launched esomeprazole 20 mg and 40 mg tablets, the first approved generic bio-equivalent version of the product NexiumTM, with annual UK sales of £ 60 milliion.

National Peroxide's plant located at Kalyan has commenced commercial production after capacity expansion to 84,000 tonnes per annum 68,000 tonnes p.a.

ONGC's follow-on public offer is likely to hit the capital market on September 20 say media reports. The company is set to raise around Rs 12000 crore via the FPO. The issue may close on September 23. The government is planning to sell 5 per cent stake in the PSU.

Suven Life Sciences has got four product patents which will be valid through 2027 for new treatment entities used for treatment of disorders associated with neurodegenerative diseases.

Parabolic Drugs has commissioned its eighth manufacturing plant at Derabassi facility. The company has increased the capacity of its Cephalosporin facility by 15 per cent.

Shares of Everonn Education continued to remain under pressure following arrest of Everonn Education Founder and Managing Director P Kishore on Tuesday. Kishore was arrested on Tuesday evening on charges of bribing an income-tax official. He allegedly wanted to suppress taxable income of 116 crore.

Tata Chemicals' wholly owned subsidiary Gusiute Holdings has completed share purchase of 4,378,000 common shares of EPM Mining Ventures Inc., Canada.

Reliance Communications, India's second largest telco by subscribers, is merging its three business divisions, a move that will make about 10% of its 7,000 executives redundant and result in redeployment of another 2,000 employees to 'field functions'.

RIL in focus: CAG report on hydrocarbons is expected to be tabled today

Pipavav Shipyard to consider issue of convertible warrants

DoT to seek corporate affair’s ministry’s view on the five-year old deal between Tata Group and Idea (ET)

TCS puts in USD 500 million bid to acquire a controlling stake in the IT systems of Lufthansa (ET)

Dunlop plans to sell of its property in Mumbai for around Rs 300-350 crore (BS)

Neyveli Lignite plans to invest Rs 40,200 crore to build power plants in Tamilnadu, Rajasthan and Uttar Pradesh (BS)

JSW Steel likely to clear land hurdle for its proposed 3mt integrated steel plant in WB (BL)

Hero Group to set up a Rs 650 crore hotel in Gurgaon

Hotel Leela board meet on September 7 to consider hiving off co's Kovalam Hotel

Gujarat Natural Resources board approves GDR issue of up to Rs 250 crore

UltraTech Cement August cement production up 2.3% at 3.02 mt (YoY)

Ashok Leyland August total sales at 7218 versus 7480 YoY

Axis IT&T to consider & finalise the merger of its various group entities

Nelcast : Stock Split from Rs 10/sh to Rs 2/sh

F&O Ban: ABG Shipyard, Gitanjali Gems

Ex Dividend: Container Corp of India Rs 8/sh, Grasim Rs 20/sh

2G case update: Unitech 's Sanjay Chandra's bail plea adjourned to September 6


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