Saturday, September 05, 2009

Weekly Technical View by Tanmay G Purohit:

Nifty (4680) fell 52pts week on week as it consolidated between 4735 and 4576 through the week. India's economy grew 6.1 percent in the June quarter from a year earlier, roughly in line with forecasts as government stimulus helped spur demand, but a poor monsoon threatens to erode growth later in the year even as it drives prices higher. The difficult task facing RBI is the probability of inflation as India's consumer price index rose 11.89% in July Vs 9.29% rise in June. The Centre expects a shortfall of 45-50 lakh hectares (lh) in the total kharif paddy area this year but Monsson worries are starting to recede as during this week, country as a whole received rainfall 4% more than normal. For the period 1 June to 2 Sept, monsoon has been 23% below LPA against 25% last week. 
RIL-RNRL ADAG group stock out-performed market RNRL, R-POWER, REL.CAP, REL.INFRA and RCOM after Government diluting its stand on the Krishna-Godavari (KG) basin gas row in the Supreme Court. Auto and Cement companies posted strong numbers for August. Maruti exports grew more than 150% and M&M is trying to make presence in US, so India is emerging like an auto manufacturing hub for the world. Crude Oil cooled down last week which infused fresh strength into oil marketing and refining stocks - BPCL/HPCL/IOC/GAIL/MRPL to name a few. OIL INDIA IPO has also helped sentiment in those stocks and being attractively priced, investors can think of subscribing to OIL INDIA IPO. India exports have declined for 10th consecutive month on the back of falling global 
trade as indicated by more than 35% fall in Baltic Dry from its recent high also and trade deficit is narrowing which is a good sign if we can have trade surplus. 
We have completed just one week of September and already total OI is at Rs 87240 Crs which is an alarming level. Mid and Small cap stocks are outperforming the large caps and in case Nifty doesn't sustain higher levels, a big crash may happen soon as stocks will fall on their own weight. Nifty has taken support at trendline near 4570 and after rangebound movement looking to get over, it may try to breakout above 4730 once again. Indices have been sideways in a broad range after elections for nearly 3 months so now any trend emerging may have a rapid move. Nifty breaking out above 4730 can target 4850-4900 but FII selling is not abating and one should be cautious at higher levels. Break of 4550 to be negative for short-term trend. Fair strategy may be coming to 50-60% cash and take bets on the remaining 40% part so that opportunities won't be missed and high cash level can provide chance to buy at lower levels.
Supp 4585/4510/4450 Res 4740/4849/4900

Book Value
* Pre IPO levels calculated at higher band of Rs 1050/share

Last Week Recap Of Technical View:

Nifty (4732) rose 4.49% this week after taking repetitive support around 4350 in previous week. Nifty has hit new 2009 high at 4743 but Sensex is yet to cross its yearly high 16002 which may happen next week. IIP data was positive at 7.8% and 1st Quarter GDP will be announced on 31 August which will be watched keenly. Global markets are giving support to our markets too and for time being it seems that China worries have been put aside by market players but one should be cautious about that aspect as it may come back to haunt global markets some time in future once again.Rainfall activity is 25% below normal for period 1 June to 26 August. IMD predicts better rainfall next month but expects the whole season activity lower by 20% compared to average which would make it the worst monsoon in 4 decades i.e. since 1972 and it has put our crops and power on risky grounds.
Nifty for next week looks to reach 4790 which is 61.8% retracement of whole fall from 6357 to 2252 and above that levels near 4900-5000 can be possible. More volumes and participation is necessary for indices to march ahead, in case Nifty continues sluggish movement, it will fall on its own weight. As we are trading in new yearly high territory, trading interest should rise and investors need to be cautious with penny stocks as those can easily catch you on wrong foot. Be in such stocks that you are perfectly comfortable to hold even in longer term.
Supp 4642/4573/4450 Res 4793/4872/4994

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