Monday, November 09, 2009

Weekly Update 07 Nov, 2009 by Tanmay G Purohit
Nifty ended the shortened week up by 84 points or 1.79% at 4796. Nifty hit its lowest point in 10 weeks at 4538 on Tuesday and pulled back smartly to high of 4836 on Friday. Volatility was high owing to fierce battle between buyers and sellers but volumes were missing. Rally was backed by PSU stocks after the government said all profitable, listed state-run firms must have at least 10% of their shares in public hands, and unlisted firms that had a positive net worth, no accumulated losses and a net profit over the past three years should list. Since August, the government has raised USD 1.8 billion by selling shares in NHPC and Oil India, and last month it approved share sales of NTPC, Satluj Jal Vidyut Nigam and Rural Electrification Corp. Ministers and officials have also named firms such as Steel Authority of India, NMDC, Shipping Corp and Coal India as potential candidates for stake sales. The US unemployment rate has hit double digits at 10.2% for the first time since 1983 and shows how weak the economy remains even though it is growing. Rising unemployment also could threaten the recovery if it saps consumers' confidence and makes them more cautious about spending as the holiday season approaches. The Monsoon here was weakest in nearly 40 years and now the effects are starting to be felt as data showed food inflation remained firm at 13.39% for the 12 months to October 24. This correction has started after RBI announcing tighter monetary policy and now data to watch out would be IIP on 12 November along with Inflation on same day.
Going ahead Nifty needs to close past 4860 on a sustained basis to show the trend has reversed and volumes have dropped by 20-25% this week on the back of lower participation. For any reversal of downtrend, a breakout with large volumes is needed and if volume is lacking, even if the up trend starts it may not last long, 4650 is an important level to watch for support. For now the rally looks more of a pullback and one may lighten the positions as many are still stuck with Margin Funding and F&O which can pressurize more if market recovery stops here. TATA TEA, GRASIM, IDEA look good for investment.

Supp 4650/4530/4400 Res 4862/4948/5050

Last Weekly Update:-
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

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