Sunday, May 23, 2010

Weekly Nifty Update 22 May, 2010 by Tanmay G Purohit

Nifty has closed negative -162 pts (4931) at 12 week low after European worries took toll on global markets but PHARMA, FMCG and OIL & GAS remained resilient and METAL, AUTO and REALTY led the correction. ABB rose 22% this week on the back of open offer from parent at Rs 900/share. GAIL, ONGC, BPCL rose on the back of positive sentiment after doubling of natural gas prices while LT rose more than 5% after decent results. TATA MOTORS, DLF, SUZLON, HCL TECH, UNITECH lost more than 9% each after heavy profit-taking emerged in markets.

Out of 2222 companies announcing results so far Sales growth has been 24.4% while PAT growth is 23.9% driven by other income rise which is 28% and Interest costs have gone down 7%. AUTO, STEEL, BANKS, REALTY results have been good for March-quarter while POWER, CAP GOODS, TELECOM have disappointed – PHARMA has been the best of the lot and this is one defensive sector which can outperform even in a volatile market.

Crude being near $68 this is right time to free prices but decision has been postponed till June and it shows lack of vision; government has more than doubled the price of natural gas produced by state-owned ONGC and OIL INDIA to $4.20 per mmBtu, at par with the rate at which RELIANCE sells its gas – OIL, ONGC, GAIL, GSPL would benefit while Fertilizer subsidy may rise by Rs 2500Cr. Power tariffs may rise by Rs 1 to Rs 1.50 / unit on the back of rise in Gas prices. HPCL, BPCL and IOC would remain stable as decision on free pricing awaited.

RIL-RNRL begins talks and no guess on this while falling Crude prices may impact RELIANCE and this time RIL has not sold Refined product in forward market make me think they were of opinion Crude would move towards $100 as expressed by its Chairman. Coking Coal price rise 35% since October 2009, to USD230 per tonne in May 2010 and CRISIL has expected more, rise would benefit GUJ.NRE.COKE.

India plans to add 20,359 megawatts of power to its present capacity in the financial year 2011, helping ease a big electricity shortfall. India has an installed power capacity of about 160,000 megawatts while China adds about 100,000 MW of power every year. India has consistently missed its targets for building roads, ports and power plants and private interest has been lukewarm, with bureaucratic red tape and difficulties in acquiring land holding up projects. It looks very difficult that India will achieve a road building target of 20 kilometres a day, or add 78,700 megawatts of power generation capacity in the five years to 2012, targets set and then slashed by the government.

Greek crisis has started wave of sovereign defaults and how many of them unfold is really difficult to predict but concerns would keep investors away from putting in more money into emerging markets for time-being - The Greece crisis may have some impact on India's trade and services exporters, RBI governor Duvvuri Subbarao said indicating India is not totally immune to global problems while Subir Gokarn, Deputy Governor said “Cautious pace” is the best way to go and indicated the central bank may slow the pace of interest rate increases even though rising prices is a “big worry” for the economy.

Technical View: Nifty broke below 200DEMA at 4898 on Friday but weekly closing came above that level indicating some support from lower levels but this is a bear market and rallies would be fast and finish quickly after which sustained fall is witnessed. METALS, BANKS, CAPITAL GOODS and CEMENT stocks can see big correction so it is better to avoid the pack. Small cap with low Equity stocks which has run-up in the last 6months should be mostly avoided. Nifty is below 200DMA and now just 4 days going into settlement stocks which have corrected more than 10-12% would find it hard to recover this week - METALS look very weak and can fall more. 3G auction is over and government would get Rs 67710 Cr but no company has won nation-wide license and real & only winner of the auction is government in my view – TELECOM stocks would best be avoided for time being. 18 stocks from Sensex-30 and 27 from Nifty-50 trade below 200DMA and they would pressurize indices going forward, Nifty shows rounding top formation and big correction is possible if 4600 below move is seen.

Stocks looking good: EKC, IFCI, REC
Supp 4850/4770/4670 Res 4975/5060/5120

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