Buy
Fifth Consecutive Optimistic Week for the Stock Markets!!!!!
Last week we had mentioned about a small correction of up to 5940-5970 levels for the Nifty before any further rise. Nifty was accordingly dragged downwards up to 5970 levels in the initial trading session of the week itself. Nifty opened on a negative note and was dragged downwards up to our mentioned support level at 5972 to close lower by 2%. FMCG sector specifically ITC lead the move. Nifty opened on a positive note, moved downwards up to 5970 levels, was again pulled upwards taking support at these levels and ultimately closed near to where it opened. The third day undoubtedly opened lower and rose 2.5% in a single day with Realty sector and PSU banks specifically PNB at the forefront of the move. Last two days too traded with a positive bias up to our mentioned resistance at 6180-6200 levels. Nifty was revoked from moving further by the IT sector and Media sector.
Last week was the fifth consecutive optimistic week for the stock markets. Nifty has taken a resistance at our mentioned level of 6180-6200. Hence we can expect some correction of up to 6100-6050 levels for a bounce back. Moreover, the oscillators are lying in the over-bought zone hence nifty can fall further up to our next support at 5990-5970 levels in the first place and up to 5885 further which is the 50% retracement level. None of the indicators suggest reversal and hence if nifty has to rise further upwards with or without a breather; we maintain our next resistance at 6300-6330 levels. The stock has given a 'V' pattern breakout which suggests upward rally up to 6600-6700
Gold imports rose last week at the beginning itself to avail the benefits of possible large buying during Akshay Tritiya festival. However, the demand decreased that made gold to fall below its one month low due to the firmer dollar and fall in ETFs. The import has increased concerns about Current Account Deficit and trade deficit which records an increase to 17.8 billion $ for April. This accounts to nearly 138% rise in gold imports which shall contribute to high inflationary pressures and refrain RBI from any further monetary easing.
WPI data shows a rise of 4.89% which is the lowest since Nov 2009. The food inflation declined due to sharp fall vegetable prices and is expected to fall further if monsoon supports. Base metal prices too are easing out and hence we can expect marginal fall in the coming quarter, and thereby expect some easing by RBI.
Sell-off in Gold a Boon to Stock Markets
At the end of last week the stock market could manage to break the daily lower top lower bottom trend which it was carrying since February 2013. Nifty took a support 5500 levels and initially broke its immediate resistance at 5600 levels which was the major indicator of an uptrend rally in the markets. Nifty opened on a positive note and traded with a positive bias for the entire trading session. Nifty rallied almost 3.6% on the first two days itself. The third day acted as a breather with high intraday volatility to close flat. Auto, FMCG and Media sectors could beat nifty but Energy and IT sectors bought intraday bearishness in the markets. Last day opened lower and traded positively to close higher by 1.66%. Amongst all NSE India BSE India frontline stocks only NMDC, HCLTECH and TCS traded against the flow. All the IT sector stocks were hit badly due to poor Q4 results.
Nifty is still lying in the downtrend where Nifty has retraced to more than 61.8% in a single stroke as a part of correction. If the downtrend has to persist then we can expect another downward rally up to 5220-5200. To break the trend nifty will have to give a resistance breakout at 5970 levels. Nifty has moved upwards continuously on a daily chart with oscillators in the over-bought zone so we expect a correction of up to 5650-5675 levels. If the last day candle has acted as a rounding bottom breakout then our next major target would be 5950-5970 levels. Before this, Nifty might also correct up to 5600 levels again for a pullback where it will generate Inverse Head & Shoulders pattern.
Due to the weak economic results of China, the rumor about possible gold selling pressure by the Cyprus’s central bank turned into reality last week. The weakness in global markets and Cyprus sell off in gold made the gold market to fall to a 15 months low last week. Gold futures fell below 26000 i.e. up to 25270 in a single day. This was the major reason of a rally in the stock markets i.e. the inclination from Bullion to Equities. In the coming budget session because of CAD there will be some curbs on gold imports which might result in increase in import duty. The second biggest bottleneck to bridge the fiscal deficit is oil imports. The Government has recently appointed a committee under Vijay Kelkar to research about the intra country gas pricing and also find measures for enhancing domestic oil and gas production in the country itself. For this Government would be freeing the prices of domestic production of oil and gas.
RBI insists not to make any changes in the rates during the policy announcement on 1st week of May. Manufacturing sector recorded a growth of 2.2% in the current month specifically electrical machinery sector.
Stock Recommendations:
Buy Dena Bank:
Buying Range: 94-93
Target: 101
Stoploss: 90.40
Dena Bank has give 50% retracement and a daily trendline breakout with justifiable volumes. P/B ratio 0.77 Divindend Yield 3.17 and a consistent rise in PAT makes it a good buy
Buy ONGC:
Buying Range: 336-334
Target: 354
Stoploss: 326
Kind of a channel and flag breakout on weekly charts with rising volumes. A positive move on the last day followed by a breather might lead to another positive rally for the stock. The stock has o unsecured loans with a P/B ratio of 2.53 Dividend Yield of 2.19 and D/E of 0.9. Current Ratio exceeds 1.
You might also look at SAIL for a buy and Auropharma, HCLTECH and Ranbaxy for Short
Bulls to Start Afresh or to Make April Fool???
We had talked of a support at 5600 levels for the Nifty and as a result nifty fell near to these levels at 5604 and rose further upwards with this support. Now we expect a continuation of a bounce up to 5730 levels at first place and 5770-5800 levels further. If the rise at the end of last week has acted as a breather then nifty might fall further up to 5550 levels and also up to 5450 levels for the gap filling. The weekly chart is not giving any positive indication and suggests a range bound momentum. On the daily charts nifty is almost at a double bottom. Thus the coming week’s opening would decide whether it was a bottom finishing or just a breather in the stock markets.
The Indian stock markets opened with a gap-up and traded with a negative bias for the entire trading session for gap filling. Amongst all NSE India, BSE India sectors Metal sector was at the forefront to drag the markets downwards. DLF was the only stock that could beat nifty by closing higher by 5%. The second day opened lower and traded optimistically lethargic. The reason being FMCG sector trying to pull it upwards but The Realty and Energy sector did not allow it to rise further. With a festive gap of one day the stock market again opened on a positive note, was dragged downwards due to fall in frontline Auto stocks viz; Tatamotors and Heromotors but was pulled back by the Metal sector to close higher by 0.73%.
Though not GDP growth, but Government is thoroughly trying to achieve its fiscal deficit target. The first step towards is the rise in diesel prices by 45 paise. Government has already achieved almost 97% of fiscal deficit target that it had estimated. If this continues it would accelerate inflation and growth is bound to decrease. Moreover, the current account deficit will continue to rise with the consistent imports of oil, coal and the gold demand and comparatively lesser exports specifically food products due to lower global demand for food to cover-up. RBI is expected to cut repo rates by 50bps more in the coming quarter to balance the weak growth and growing inflation.
Bulls On Parade in the Stock Markets
Last week started with a long lower shadow candle that indicated an impressive comeback of bulls in the latter half of the session where bears lost the control. The stock markets ended negatively flat, reason being the worst performance of Realty sector. The second day confirmed the bulls run by opening lower and thereby trading with a positive bias to close higher by 1.5%. The only major stock that could not standby the bullish trend was Bajajauto. Otherwise none of the BSE India and NSE India sectors traded with a negative note. The third day opened with a gap-up but was forced to fill the gap intraday itself by the worst performance of FMCG sector specifically HUL and ITC. However, Realty sector specifically DLF helped the stock markets to recover in the second half. Fourth and fifth day opened lower and gave an impulsive momentum to the markets with Realty, IT sector and Media sector on the fourth day and Metal sector specifically Jindal Steel on the last day to lead the move.
Though 2013 Union Budget ended with mixed sentiments in the markets, the policies or resolutions for the upcoming year seem positive as we are heading towards the Assembly elections 2014. The government would concentrate more on increasing revenue than cutting expenditure. Hiking expenditure target and achieving fiscal deficit target by increasing the growth rate is the central idea. The government has already initiated the move by selling stakes in the major companies to gain revenue. Subsidies would be decreased by restricting spending and encouraging investment/savings. And so we are lacking in winning the domestic as well as foreign investor sentiments.
According to Montek Singh Ahluwalia India is not the lone country to face the crisis challenges and it is worthless to expect India to withstand the global slowdown when other nations cannot. Moreover, the situation is not as extreme as hyped. India has the potential to achieve the growth target of 8% and it is already on its way. The percentage of poverty reduction is phenomenon and the country needs to assure the investors, FDIs and FIIs that there is a lot of business that the country can make.
What next…..
Last to last week the oscillators were lying in the oversold zone and the resultant was a dynamic positive momentum in the stock markets. Now, the oscillators are lying in the overbought zone but unclear about the negativity. Last week closure is near to our mentioned resistance at 5970 levels. We expect a correction from near to these levels. If the positive trend persists then the Nifty might fall up to 5790-5810 levels to give another impulse. Otherwise the major support is at 5660 levels. Speaking about the long term trend nifty gave an optimistic close after a consistent fall for 5 weeks. So our next major resistance is at 6110 levels. However, the markets have already retraced the fall and hence we can expect a bit of correction too. Investors are advised to act on the intraday opening sentiment of the markets.
Government to Direct the Stock Market Movement
We had mentioned a bounce of up to 5970 for a further fall in the Indian stock markets. Likewise we saw a small rise of up to 5971 levels and then a fall marking a low at 5835 levels. We had mentioned our initial support between 5840-5820 levels. Now Nifty is lying between these levels. The stock markets opened on a positive note but ended on a sluggish but optimistic note. The major positive movement was led by the only NSE India & BSE India sector viz; the Realty sector specifically DLF and JPAssociate. The second day experienced tremendous buying specifically in ONGC, DLF, ACC. The third day opened with a gap-up, traded on a positive note up to our mentioned resistance at 5970 levels and was dragged downwards due to profit booking and selling pressure. The fourth day opened with a gap-down and noted a bearish day for the stock markets and the Metal sector specifically Jindalsteel and Tatasteel. The last day opened on a negative note, depicted some intraday positivity but was again dragged downwards to close just above its opening level.
Now the country is heading towards budget announcement and now every small reaction of the government will direct the movement of the stock markets. The major focus is not just to bridge the fiscal deficit gap but also to decide the manner which could balance the growth as well as inflation rate. As a result RBI is not so keen for monetary easing.
One of the major drawbacks of our economy is the consistent outflow of capital through oil and gold imports. To curb the situation, oil ministry is looking forward to a petrol and diesel price hike but assures that a very less would be passed on to the ultimate consumer. In case of Bullion specifically gold, government has already raised the import duty by 2% and as a result the demand is expected to fall up to 30-40% till the current quarter ending. Government is likely to take some action for both cases in the coming budget.
However, any hike in the duty or prices is bound to affect the ultimate consumers only. If not the petrol price hike then the road cess hike!!! Small consistent hikes in the prices affect the savings and investment capacity of retail investors which is not realized at the micro level. Moreover, the other major means undertaken by the government to raise capital are divestments in the major Indian companies. This would ultimately dampen the productivity. To add to it FDI inflows too fell up to 19% in the current month due to the economic uncertainty worldwide. The coming budget might also introduce a hike in few direct and indirect taxes.
What next….
The nifty price is lying between our mentioned support at 5840-5820 levels and is near to the 100 days EMA support. Now we can expect a bounce of up to 5940 levels for the gap-filling. If nifty falls our next support would be at 5750 levels. Nifty should not fall below Friday’s low to give a bullish sentiment. 5970 is still a major resistance level. Nifty has fallen for fourth consecutive week and oscillators too are lying in the over-sold zone. Any major budgetary news and the budget announcement will decide the fate of investors which will be depicted in the charts too. So keep a watch on price movements and stay tuned!
Stock Markets at a Support but Not Justified!!!
We had mentioned a further fall of up to our support level at 5850 and Nifty seems to have taken a support at these levels which would be confirmed in the coming week. We had expected a continuous fall up to these levels but we experienced a small correction in the first half of the weekly session and then the fall. The stock markets opened on a positive note but traded with a negative bias due to stock specific negativity in ACC, Jindalsteel and IDFC. All NSE India & BSE India sectors ended flat. Second day went bullish with Pharma sector specifically Sunpharma and Energy sector specifically ONGC at the forefront of the move. The third day opened positive and was pulled upwards IT sector specifically HCLTech but was again dragged down due to the selling pressure. The selling continued to the next day with major fall in the Infra sector. The last day opened with a gap down but saw a reversal and fresh buying with all sectors to end on a flat note.
The next two weeks are crucial for the economy with the Railway and Union budget announcements. The stock market is likely to react accordingly. The Railway ministry is likely to make provisions for high speed rails. Government is likely to provide subsidy to oil & Gas retailers to recover their below cost sales. Moreover, to achieve the fiscal deficit target Government is likely to proceed with its debt sales. For funding Divestment in PSUs would be the best option according to the government.
Last quarter saw lower demand for consumption and poor quantitative manufacturing which led to a fall in IIP in the last quarter. However, though the domestic demand fell, the exports have increased by 0.8% and hence, likely to bridge the trade deficit irrespective of the persistent oil and gold imports by the country. To curb the rising inflation and the falling IIP RBI might cut repo rate by 25Bps during March, 2013.
What next…..
Now Nifty is near to our mentioned support level at 5850. Though the indicators are not suggesting any direction, we expect a bounce back of up to 5970-6000 levels in the first place. In case nifty falls further, our major support would be at 5840-5820 levels. On weekly charts nifty has fallen for three consecutive weeks with oscillators lying in the over-sold zone. Last week nifty has given a trendline breakdown but not justifiable. So no exact direction for the next week could be given. Our mid-term support and resistance are at 5580-5600 and 6100-6120 levels. Please keep eye on Government policy and economic news for investor reactions.
Double-Top and Hanging Man in the Stock Markets!!!!
The Indian stock markets opened on a flat note and traded with a negative bias for the initial half due to the worst performance of energy sector, but was again pulled upwards by the Realty sector specifically DLF. The second day opened on a negative note, experienced a sudden impulse near to our mentioned resistance level at 6100 and then was again dragged downwards by the Realty sector. Amongst all NSE India & BSE India frontline stocks, only Axis Bank could exceptionally beat nifty by almost 4%. The third day was lethargic and range bound with a tug-of-war between Realty at the positive front and Infra at the negative one. The fourth day initialed the bearish momentum but was saved from falling further by Media & Realty sector and the exuberant move of PNB to close higher by 10.24%. The last day was totally negative and broke our immediate support level at 6015-6000. Nifty broke down to 5983 levels but recovered to close near to our mentioned support at 6000 levels.
When all eyes were on the RBI policy announcement, RBI relaxed both banks and investors by announcing 25bps cut in both CRR and repo rates for the first time. Both the cuts were implemented at the same time to bring a balance between declining GDP and at the same time declining inflation too. WPI has declined in the third quarter to 7.18% which has helped the inflation to decline. However, the GDP has also shown a negative trend and fallen more than expected. The factors being lower industrial output and lower foreign demand due to the global uncertainties. Thus a stand taken by RBI was to achieve a balance of higher inclination towards investment and bring down the expenses.
The two major bottlenecks are the oil and gold imports which are consistently rising. It is difficult to curb the oil demand but can be done in case of gold and other bullion demands. One major step taken by Government was to hike import duty to 6%. Such timely measures taken by RBI and Government shall maintain the credit rating of the country.
What Next:
The nifty has traded above our mentioned resistance level and below the support level but have closed near to these resistance and support levels. Now that nifty has moved within our mentioned range we currently expect a further fall of up to 5950 levels if it breaks the 6000-5990 levels. On the weekly chart the oscillators have given a negative crossover. Moreover, last week’s fall confirmed the doji pattern. Our medium term support would be at 5820-5850 levels. However, nifty succeeded in closing near to our support level. So nifty can bounce back up to 6000 levels. The current pattern is a kind of double top. Let’s wait-n-watch.
Stock Market Bullish After the Trendline Support
The Indian stock markets opened on a positive note, were dragged downwards initially up to the last days close and were again pulled upwards to close flat. The second day experienced high selling pressure due to the poor performance of Realty sector. The third day opened on a negative note and so was dragged downwards in the initial half of the session but was again pulled upwards by Media sector and NSE India BSE India stocks like Bhartiartl and Tatapower. The fourth day again was dragged downwards up to the trendline support level. Realty sector that ended 5% lower was held responsible for the downfall. The fifth day took a positive turn from the trendline support level itself to close higher by almost 1%. Realty sector experienced short covering and fresh buying in the last session of the week that beat nifty by 4%. In short Realty sector movements directed the stock markets. The reason being drop in real estate prices in the metropolitan and the realty stocks thereby a shift from Equity to Realty.
FDIs experienced a two year low figures due to global uncertainties. Therefore in a need to promote investment and raise foreign capital through FIIs our very own FM P Chidambaram is heading towards achieving fiscal deficit target of 5.3% till the budget and 8% GDP growth by 2014. Moreover, FM is more concerned over reducing expenditure by increasing tax base. As a major contribution RBI relaxed some investment rules for FIIs into Indian debt markets by raising limits on Government and corporate bonds.
What Next…..
The trendline support for the Nifty is at 6015-6000 levels. The Nifty has experienced fresh buying at the end of last week with oscillators’ positive crossover. On the weekly chart too the long lower shadow depicted that the bulls defeated the bears’ domination and made a comeback. So we can expect some more impulse in the initial part of the weekly session. We can expect a positive momentum up to 6100 in the first place. However, we cannot ignore the fact that nifty was bearish for the entire week except for the last daily session and hence the last day tick can also act as a halt or breather for another downfall. So if Thursday’s low at 6005-6000 is broken then we can expect a further fall of up to 5950 levels. The stock market is likely to react more on pre-budgetary and other financial news and set its trend accordingly like what it did for Realty sector last week.
Bulls Initiated the Stock Market Momentum
The Indian stock markets opened on a positive note and traded with a positive bias to close higher by 1.22%. Amongst all NSE India & BSE India sectors; Realty sector specifically DLF directed the stock market. IT sector too performed well. The second day went bullish with Infra and Realty sectors at the forefront to beat the Nifty. The third day experienced short selling where Metal sector specifically Hindalco & Jindalsteel, Auto sector specifically Maruti & M&M dragged the Nifty downwards. Fourth day experienced short covering and fresh buying. Fifth day opened with a gap-up and was volatile for the entire trading session. Energy sector specifically BPCL, ONGC, NTPC tried hard to pull the markets upwards. However, the sudden 8% fall in Wipro due to poor quarterly results and overall Media sector dragged the markets downwards. Ultimately stock markets ended on a flat note.
India has succeeded in achieving a low inflation at 7.18% in December as against 7.24 in November. The major reason being expectation that RBI would cut interest rates on 29th January policy issue. Moreover, due to the use of advanced seeds, fertilizers and irrigation facilities Government assures 4% growth in Agricultural sector which shall help to decrease food inflation. However, this slowdown would help only the wholesale Price Index. The retail prices have still not come down due to the unchanged retail inflation. Thus, RBI itself is not willing to practice rate cut to bring in liquidity. Currently Repo rate cut of 25bps would be the maximum that RBI can do.
Now, PM is heading towards preparations for budget announcement. He has commenced discussions regarding policy amendments to be done during the budget. Montek Singh Ahluwalia supports Deregulation of Diesel prices as he assures that Diesel price hike would not impact inflation on other commodities and once the overall inflation slows down, diesel prices could be relaxed.
What Next….
The nifty and Sensex momentum would be more reactive of the budgetary news and RBI decisions for some more time. Moreover, the major company results would impact the sector specific performances and the overall markets.
The nifty accelerated with fresh buying and was volatile at the end of last week. So it would be difficult to predict the first step of the coming week. Nifty has also made a new high with rising volumes and oscillator positive crossover. If the rally continues we can expect another bull jump up to 6180-6150 levels. In case the nifty corrects, the first support would be at 6020- 6000 levels. The next support would be at 5940-5950 levels.
Bearish Turned Flat Stock Markets; Credits: Infosys Ltd.
The Indian stock market opened higher but with a gap-up i.e. it experienced selling pressure at the initial trading session itself. The stock market was bound to get dragged downwards. Amongst all NSE India & BSE India sectors, only Metal sector could withstand the pessimism. The major culprits were FMCG sector specifically HUL and Infra sector specifically LT and JPassociate. The second day ended on a positive note with most of the sectors performing exactly in the reverse direction. Last three days closed on a flat note with intraday bearish attitude. On the fourth day all the NSE & BSE sectors were flat with stock specific movements directing the markets. ONGC performed the best while Ultratech Cements performed the worst. Fifth day too was bearish but was saved from falling further due to exuberant performances of IT sector stocks specifically Infosys that gave a dynamic impulse to close higher by 17.04% ,Wipro at 6.17% and TCS at 3.77%. The reason was better than expected quarterly results for Infosys.
Now, one of the major factors determining the direction of the stock markets is the RBI policy announcement. The policy announcement would be held on 29th January, where RBI would declare whether it has implemented any change in the interest rates. Other commercial banks have raised hope for CRR and Repo rate cut. This would ease the lending and bring in liquidity. Moreover, to win investor confidence Government is planning to ease those tax rules which would discourage investments. Government has also approved 14 FDI proposals last week thereby inviting more foreign capital in the country. Government would also hike fuel prices and cut subsidies on oil imports to discourage imports.
RBI has also approved the rise in loan to value ratio from 60% to 75% to encourage gold loan companies. Thereby last week gold surged due to demand from retailers for the wedding season ahead. The Government has also assured a minimum of 5.3% fiscal deficit target irrespective of the downgraded ratings by rating agencies.
What Next….
The Nifty traded negatively flat for the entire day. We had talked of a correction of up to 5950 levels for the nifty and thereby nifty has closed at 5951 levels. Last week trading sessions were bearish but overall flat. This might have acted as a breather for another positive impulse. Moreover, the oscillators are lying in the over-sold zone. So if nifty breaks the immediate resistance at 6040-6050 levels, then we can be bullish on the markets. However, the weekly chart shows open-high for last week and the oscillators have given negative crossover in the over-bought zone. Hence we can expect some more fall in the nifty with a support level at 5825-5830.
Coming week has a couple of IT sector stocks specifically TCS & HCLtech, Banking sector stocks viz; Axis Bank & HDFC Bank and FMCG sector stock ITC, to announce their third quarter results. Let’s wait-n-watch where the results direct us.
