TANMAY OBSERVES!

Weekly Update 19 Dec, 2009 by Tanmay G Purohit

Nifty closed down 129 points or 2.53% Week-on-week and it has hit 14-day low at 4979 closing at day and weekly lowest level. HEALTHCARE stocks had big buying interest this week as BSE HC Index rose 3.76% this week and RANBAXY, CIPLA, SUN PHARMA were among top gainers in Nifty. TECH stocks remained resilient through the week on the back of gains in TCS, WIPRO, INFOSYS and HCL TECH. Major draggers for index have been BANKING and REALTY as both indices fell more than 5% this week. OIL and GAS index too retreated 4% after nearly 5.5% decline in RELIANCE INDUSTRIES.

Advance Tax numbers for Q3 were out and the all India direct tax collection, which includes corporate and personal taxes, increased 8.1% to Rs 2.27 lakh crore, according to figures that are currently with the income-tax (I-T) department. Corporate tax collection has gone up by 11.3% to 1.48 lakh crore.The tax collection from foreign banks operating in India has also come down significantly, affecting the rate of growth in tax collection. Large tax-payers such as SBI, RIL, HINDUNILVR, TATA STEEL have paid higher advance tax this quarter. Overall, companies in the auto industry and pharmaceuticals have paid higher advance tax. BANKING was a dampner as the Adv Tax payments were pretty flat while the stock performance has been amazing the last one year that is why the sector is witnessing large profit-taking after disappointment in Adv Tax figures. Prices of potatoes and pulses raised food inflation to 19.95% in the first week of Dec’09 against 19.05% in the previous week and experts feel RBI may raise rates earlier than expected. Leading steel companies like SAIL JSW, ESSAR and BHUSHAN may hike prices next month to cash in on the demand surge in domestic markets after steel prices internationally have improved by about $30 a tonne in the past one month. DLF's over all debt will go up by Rs 2,200 crore as a result of integration of its whollyowned subsidiary DLF Cyber City Developers Ltd with Caraf Builders & Constructions and it may be further overhang on the stock which is already looking weak from REALTY space.  Both the BSE and NSE have postponed the implementation of new trade timings to January 4, 2010, from the earlier decided December 18, 2009. In its mid-year review of the economy, the government said GDP growth could top 7.75% during the fiscal to March 2010, as attention turns to policy measures that will be required to keep inflation under check. 

Nifty has broken down from the range-bound trade and the triangle is also broken which indicates any sustained move below 4950 and Nifty may test 4840/4805 as next support in this fall. Move past 5100 would be necessary to show some strength but the formation of triple top is very bearish and it seems to have started working now. Avoid leveraged positions and invest where value is available. GLENMARK, SUZLON, PTC, EMCO would provide margin of safety.

Supp 4939/4841/4730 Res 5068/5153/5228

Last Weekly Update:-

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