TANMAY OBSERVES!

Weekly Technical View by Tanmay G Purohit 10 Oct 2009:

Nifty (4945) closed down by 138 points or 2.72% compared to last week and it is the lowest closing in 4 weeks. FMCG, METALS and PHARMA stocks were gainers this week - HUL +8%, TATA STEEL +4%, JSL +8%, LUPIN +8%, AUROPHARMA +4%. Telecom stocks got de-rated this week post tariff war, which hammered four days of this week - RCOM plunged 22%, IDEA down 15% and BHARTI AIRTEL tumbled 21.4%. Selling was seen in technology stocks as well due to appreciation in the rupee. HCL TECH lost 12%, TCS down 11%, WIPRO down 9.3% and INFY down 6.9%. 

Nifty has broken a crucial trendline support on Friday. Below 4900 Nifty may witness rapid selling and levels around 4770-4800 may be tested quickly. Sustained move above 5070 is necessary to regain the lost momentum in the market. Results season has started and Infosys Technologies Ltd. posted a 7.5% increase in quarterly profit and raised its full-year outlook, a sign that information-technology  spending is starting to rebound globally. The company beat its own as well as street’s estimates for the quarter, and raised revenue forecast for the year ahead but Indian Rupee has appreciated more than 13% recently and that can weigh down on growth prospects of Tech companies. Rising rupee will help in reducing import bill but exports will be impacted badly and that can put export-oriented industries once again on slowdown track. RIL announced its audited results for FY09 and gave away 1:1 bonus and Rs 13 interim Dividend which would be available to RPL shareholders as well but the stock hasn't shown any strength even after such an announcement as honestly bonuses don't impress as the investor is left with more shares but same amount of wealth. Next week important results will be HDFC BANK, AXIS BANK, HDFC, EXIDE, SINTEX, ULTRATECH and one is advised not to take positions keeping result impact in mind as the volatility can kill an expert trader as well, always read fine print and then take informed decision. Sensex has gained more than 18% in September Quarter and more than 72% so far this calendar year which indicates all the good news is already priced in, even if we see results along expected lines it is not going to make a big difference to valuations, but a small disappoint may also make investors nervous resulting in fall in prices; even 20-30% correction is not ruled out in Nifty/Sensex in my view. Invest only 20-30% of the corpus and rest set aside for future opportunities which may materialize in weeks to come. GAIL and CASTROL accumulate in dips for long-term investment.

Supp 4888/4780/4710 Res 5005/5070/5145

Last Week Recap Of Technical View:

Nifty (5083) closed 2.51% up week on week after both Nifty and Sensex have closed above psychological levels of 5000 and 17000 respectively. India's annual June-September monsoon rains, vital for farm and overall economic growth in Asia's third-biggest economy, were 23 percent below average in 2009, the worst since 1972, government data showed on Thursday. But because of lower rains this season, Inflation has inched up towards 0.83% as of September 19 and analysts expect the rate of price rise to cross 7% by this fiscal end. India's finance minister Pranab Mukherjee warned "there is inflationary potentiality and inflation may go up further. When it goes up it is a matter of concern.". India's exports fell by annual 19.4% in August for the 11th straight month, but exporters bleeding under the global recession foresee better times around Christmas. But amid hopes of economic revival and worries of rising unemployment, the US economy has been in recession for 23 months, one of the longest periods since the 1930s Great Depression. Auto Sales for the month of Sept 2009 have hit record high after GM, Hyundai, Honda and Ford sold record number of vehicles on the back of festive season and banks flooded with deposits provided easier credit norms. The director general of hydrocarbons has blamed the fight over gas supplies between the Ambani brothers for the poor response to 70 oil, gas and coal-bed methane blocks on offer. “Fewer numbers of bids may come in for Nelp-VIII due to negative publicity because of the fight between two corporate giants,” said V K Sibal, director general of hydrocarbons indicating the transparency of Indian firms is at stake owing to the Ambani Fued. Nifty crucial support exists around 4880-4900 and as long as that is sustained, one should not worry much about trend reversal. But risk-reward is still not favourable and traders would enjoy this market, investors need to be cautious and 60-70% cash may be kept aside for future investment picks. NTPC and GAIL look good and one can accumulate these stocks for long-term gains. Caution advised if 4880 is broken.

Supp 5015/4955/4880 Res 5125/5188/5296