TANMAY OBSERVES!

Weekly Update 12 Dec, 2009 by Tanmay G Purohit

Nifty closed very flat as it was up just 8 points week-on-week and the action has clearly shifted to individual stocks now. Telecom stocks IDEA, BHARTI AIRTEL and RCOM were among major gainers this week and one may take some profits in those stocks as the short-term up trend may have run its course; TATA COMM looks good as the stock trades near important support. BHEL & LT were other gainers in Nifty after positive IIP data and good Cap Goods growth numbers. Metal stocks looked weak with TATA STEEL, STERLITE being top losers this week.

The driest spell in nearly four decades and floods in some parts of the country have trimmed farm output and pushed up food prices as the food price index rose 19.05% in the 12 months to November 28.  Investments in mutual fund schemes saw a sharp 68% decline in November to over Rs 45,100 crore over the previous month, as investors preferred to stay away from equity market even if market breadth has improved this month. 

After Dubai being downgraded by global rating agencies, it was turn of Greece and Spain where agencies have cut outlooks from stable to negative and after 3 downgrades, the risk this time around is more of “sovereign” nature which can impact global sentiment faster than any other worry, Indian markets have a tendency to correct late but when it happens it overreacts. 

Nifty has formed a triple top at 5181 and the pattern has impacted weekly as well as monthly graphs too, so until we see a strong move above these levels, the trend may remain weak and lower levels of 4950/4800 are not ruled out. IIP data was quite positive and a growth at 10.3% is very impressive but market is always forward-looking and the best looks discounted by nearly 73% rally in 2009 for Nifty. Advance Tax figures would start coming in soon and those would give some cues for Q3 results in January.

India has signed Nuclear fuel supply deal with Canada and Russia and this would benefit India as power capacity would increase - NTPC, LT, HCC, THERMAX, ROLTA can benefit.

Supp 5040/4935/4806 Res 5188/5258/5366

Last Weekly Update:-

Nifty closed up 3.38% or 167 points at 5108 after strong Q2 GDP numbers at 7.9% which surpassed many expectations. RANBAXY was top gainer in Nifty with nearly 14% rise after the company launched generic version of Valtrex in US markets. Auto numbers were very strong once again and TATA MOTORS shot up 13% this week. Telecom stocks saw value buying support and BHARTI AIRTEL, IDEA & RCOM rose smartly. HERO HONDA and HIND UNILEVER lost 4% each this week.

The annual rate of inflation for food articles rose to 17.47% for the week ended November 21, 2009, data released on Thursday showed. This is the sharpest rise in food prices since 1998 and food inflation may become a major worry for the government later as it may impact manufacturing inflation also. Experts feel high food inflation coupled with 7.9% GDP growth may force RBI to resort to rate action earlier than expected.  Markets have shrugged off Dubai woes for now but UAE has become top receiver of Indian exports and USA as second top export destination for India, if both regions face some economic problems, India would be affected to some extent and a big part of remittance benefits comes from both these destinations only. The leveraged asset purchases of Dubai-based wealthy NRI in the past few years may begin to haunt them, as the collapse of real estate prices in the emirate prompts calls for additional funds as margins which may force them to sell some Indian assets, experts say. REALTY is one sector which is haunting the globe and caution is advised in this sector. India’s fiscal deficit during April-October increased to 2.45 trillion rupees Vs 1.17 trillion rupees (YoY) owing to falling tax receipts & rising spending and in percentage terms, the fiscal deficit is 61.1% of the government's full year budget deficit aim of 4 trillion rupees. Despite equity markets gaining almost 80% so far in the current year, the number of new FIIs coming to India has touched a six-year low as only 111 new FIIs got registered with SEBI till November, against as many as 375 in calendar year 2008. 

Nifty has hit double top at 5181 to its previous top in October and as long as it is not crossed comfortably, the trend may remain down. Once breakout above 5200 is seen, Nifty may test 5350-5500 levels on upside. Action has clearly shifted to cash stocks and index heavyweights are lagging for now, so stock-specific approach looks best in this market. Below 4950 caution is advised.

Stocks looking good for next week - RELIANCE, EKC, ORCHID CHEM, NEYVELI, ROLTA

Supp 5067/4943/4850 Res 5165/5250/5342