Tuesday, November 03, 2009

Weekly Update 01 Nov, 2009 by Tanmay G Purohit
Nifty (4711) closed down 5.71% or 285 pts to hit 7-week low; all 5 sessions had negative closing this week. Weekly Adv-Dec 548-2499 BSE and 157-1167 on NSE.
Nifty closed down by 7.32% in October and Adv-Dec for the month 918-2247 on BSE and 361-1004 on NSE. Telecom stocks were major losers this month with RCOM losing -43%, IDEA -31% and BHARTI AIRTEL down -30% after pricing power worries made investors dump those stocks and RCOM came out with 50% drop in Net Profits. REALTY stocks lost after IT department gave show-cause notice to DLF and results in that sector were below expectations. RBI raised provisioning requirements for loans to Real Estate companies and it added to negative sentiment in REALTY stocks. ADAG stocks faced major hammering RNRL down -28%, RELINFRA lost -14%, RPOWER dropped -18%  after RCOM was accused with accounting mis-statements. ADAG results were bad and now more sell-Off can be seen. SUZLON lost 27% and the company has widened its loss to Rs 356 Cr from Rs 22Cr last year in Q2. SESA GOA lost 6.6% in the week after SFIO probe gave way to large profit-taking in the stock.
RBI raised SLR by 100bps to 25% on Monday in its Policy Meeting and selloff started after RBI joined Australia and Israel to tighten the monetary stance. After showing a healthy expansion of 7.1% in August, the growth in core infrastructure sector dropped to 4% in September, making analysts wonder whether robust industrial recovery can be sustained and IIP data on 12 November would be watched closely. Poor results from Corporate India added to the negative sentiment and volumes rose to all time high just before expiry. For the 1893 companies announcing results, Sales have dropped by 5.7% whereas Profits have grown by 39.5% and Other Income component has risen by 7%. Reduction in excise duties as part of the Government-sponsored stimulus plan helped in expanding margins in some sectors with companies preferring to keep the savings rather than pass it on to customers. The numbers continued to show sharp divergence between sectors. While auto and cement companies reported strong sales, led by improved volumes, others such as metals, steel and realty players reported a fall in sales, due mainly to depressed realisations. 
Nifty has fallen nearly 9.5% from its top at 5181 and liquidity which was driving force for the rally has disappeared just at the symptoms of tightening monetary conditions. F&O unwinding was over at Expiry but margin call pressure needs to be watched with caution as it may give to further panic in market. Redemption for hedge funds would be known this week and one would wait for 4550-4600 levels for some value picks - IDEA, PTC, GRASIM, IGL can be picks for an investor. 

Supp 4645/4548/4402 Res 4850/4928/5035

Nine US banks seized in largest one-day haul, 115 banks go belly-up in 2009 http://www.dnaindia.com/money/report_nine-us-banks-seized-in-largest-one-day-haul_1305481

Last Weekly Update:-
Nifty closed down 2.82% or 144 pts at 4997  in a shortened week. Indices fell for first 3 days on trot and Friday we had a little bounce which normally happens after 3-4 day correction. RELIANCE shares ended down 4% on Friday after HARDY OIL abandoned D9 block. Stock of HARDY fell 41% on London Stock Exchange yesterday on the back of this news. Hardy in May this year had said that it estimated the prospective resources at Block D9 at 10.8 trillion cubic feet of gas and 143 million barrels of oil, almost equal to the reserves in the country’s most prolific KG-D6 block, whose monetary value is estimated to be $50 billion. It was then pulled up by the Director General of Hydrocarbon (DGH) saying it was premature to publicize the prospects of reserves.  Reliance, which surrendered a third of the 45 exploration blocks to the government for unsuccessful exploration with sunk cost of Rs 1,400 crore, said on Friday it would not surrender this block, but would drill three more wells. The stock has weakened as it has closed below 75Day EMA and in case more negative newsflow for the stock continues with Supreme Court hearing between RIL-RNRL going on, Rs 1900 may become next support for RIL, the stock needs to be watched closely as it has more than 10% weightage in the Nifty and more than 13% in Sensex. 

Nifty has broken down from a rising wedge which indicates bearishness ahead and it is poised at make or break level as it trades near crucial support of 4900 which is lowest point in last 5 weeks. Move past 5120 is needed this week to show strength once again. FMCG stocks look good on the back of above-expectation results from ITC and HINDUNILVR would be good as an investment pick. Current stir going on in Gurgaon auto belt may impact AUTO stocks negatively. COAL INDIA has hiked coal prices by 11% which is first rise in last two years and GUJNRECOKE may also be benefitted. Hike in coal prices can impact METAL, CEMENT and POWER stocks . SAIL once again has denied any price increase owing to possibility of lack of demand and it indicates low pricing power for the PSU Steel company. RBI meeting on Oct 27 would set the trend for BANKING stocks. Current rally is driven by liquidity as earnings season is not giving so healthy signals, the growth in Sales for 426 companies announcing results so far has been 1.8% while PAT growth is 28% which is mostly driven by Other Income component which has risen 71% this September quarter. Most of the good news looks priced in and liquidity would be first to reverse at slightest of fears, so caution is advised. 

Supp 4930/4878/4782 Res 5055/5123/5185

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