Weekly Update 14 Nov, 2009 by Tanmay G Purohit
Nifty closed up 4.23% or 202 points as markets continued the pullback that started last week. HCL TECH, SAIL, TATA MOTORS, IDFC and TCS were major gainers in Nifty this week while RELIANCE rose more than 8% on the back of reports about acquisitions by the company. REALTY and TELECOM stocks were on the losing side as BHARTIAIRTEL, DLF, UNITECH and RCOM were dragging the Nifty. PSU stocks such as NEYVELI, EIL, NMDC and REC rose sharply after disinvestment announcements from Government. Nifty has completed nearly 3/4th of the correction in quick time which gives a feeling that this is still just a pullback. Though breadth has been very strong, volumes have remained quite low to make the rally dubious. Last 3 consecutive sessions, Nifty has made tops at 5016, 5014 and 5017 which is a kind of triple top formation and in case Nifty is not able to close past 5050 comfortably this week, a serious wave of selling may start once again. 4800 is an important support level below which caution is advised.
IIP data for Sep'09 was out and the industrial growth came in at 9.1% which was very encouraging as far as recovering of the economy is concerned. Prime Minister in G-20 meeting has said India would exit Stimulus as growth as picked up, so in next few months roll back excise and customs duty can be possible and which would lead to re-rating in stocks as few sector enjoyed higher profit as they didn’t pass on the full benefits to end users. PM has said deficit and inflation can be a threat to Indian recovery and if stimulus measures are rolled back, many sectors like Auto may see decline in profits and rise in costs. India’s sovereign rating won’t be raised unless the government works toward reducing its budget deficit and debt, according to Moody’s Investors Service as the agency feels India has a lot of domestic-currency debt, a very high debt-to-GDP ratio, and a very high budget deficit year after year. Govt plans 30% hike in gas price and it would be beneficial for GAIL, GSPL, OIL and ONGC. Nifty making new highs above previous levels around 5181 would indicate a euphoric rally ahead where the gains will be fast but may not last long, for now being stock-specific is only advised -GAIL,BHARTI AIRTEL, PTC, IGL show promising signs and can be held as downside looks limited there.
October WPI inflation at 1.34 pct y/y - govt http://in.reuters.com/article/
Last Weekly Update:-
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