Weekly Nifty Update 26 June, 2010 by Tanmay G Purohit

Nifty closed 7 points higher for the week at 5269 but stock-specific gains were witnessed. EGoM decided to free Petrol prices and raise Diesel, LPG and Kerosene rates which helped Oil Refineries and other related stocks – MRPL and GSPL are still value-picks and look to gain more from here. BPCL rose 18%, ONGC 6% while other gainers included IDEA +5%, RELCAP +4.6%. HCL TECH was top loser with nearly 8% losses along with WIPRO, JINDAL STEEL and TATA MOTORS which fell more than 4% each.

Indian markets are only among global markets to post gains in 2010 but Nifty is barely up 1.3% for this year so far and individual stocks have fallen more than 10% also in some case.

India may yet again miss the power capacity addition target as the country is likely to add around 55,000 MW of generation capacity against the targeted 62,000 MW in the 11th Five-Year Plan (2007—12), a Power Ministry official said and this is mainly due to cancellation of some coal blocks for power projects on environmental grounds. Auto and taxi fares in the Capital went up by 35% following increase in CNG prices while a similar hike is in the offing in Mumbai.

Inflation in India is spreading and the RBI could raise interest rates before its scheduled policy review late next month to tame high prices, chief statistician Pronab Sen said adding core inflation "is now starting to get worrying," with price pressures becoming more pervasive. MCX has got regulator nod to bring out its IPO and FINANCIAL TECH being one of the promoters can benefit by this news – stock looks good for 6-8% rise from current levels.

India’s monsoon rains are not helping either as they were 21 per cent below normal in the week to June 23, the India Meteorological Department said, reflecting slow progress since the season began in June. It will be a negative sign if rains don’t improve in a week or two as we witnessed the worst drought of nearly four decades last year but Weather office has revised 2010 monsoon forecast to 102% of long-term average. Food inflation has touched 16.9% in the year to June 12 Vs 16.12% last week.

Bank Liquidity continues to be tight and select bankers would meet RBI Deputy Governor on July 12 before RBI announces monetary policy on July 27. Hike in Petrol and Diesel rates may pressurize Auto stocks in short-term while same can add to inflation which is already high and RBI may act sooner which is reflected in BANKING stocks as profit-taking is witnessed in that sector. FERTILIZER, AGRI-related stocks and RAILWAY stocks are showing revival of interest in them. Arabica Coffee prices have hit 12-year highs and overall Coffee prices have jumped 30% this month – TATACOFFEE is a major beneficiary.

Technical View:

Nifty has closed barely higher this week after strong dash towards 5366 and it shows that follow-on buying is missing in markets. Nifty as long as stays above 5200 the trend is expected to remain positive but below 5180 more weakness is possible. This week Nifty has closed almost exactly at where it started and this is a weak sign after so good run-up. Next week is important as we have to see Nifty going higher above 5400 or once again correction may start.

Stocks looking good: TATA COFFEE, CIPLA, EKC

Weak Stocks: INFOSYS, SAIL, BHARTI AIRTEL

Supp 5200/5129/5000 Res 5350/5410/5525

Weekly Nifty Update 19 June, 2010 by Tanmay G Purohit

Nifty has closed at 5262 higher by 142 points for the week led by Reliance stocks – RELCAP, RCOM, RPOWER rose more than 6% each while DLF, LT, STERLITE, INFOSYS were other gainers. BPCL, BHARTI AIRTEL, AXIS BANK were top losers from Nifty.
Advance Tax collections for Q1 have been healthy - RIL has paid Rs 653 crore, an increase of 108%, the banking sector was a mixed bag during the quarter as SBI, ICICI BANK, CITIBANK, BANK INDIA, DEUTSCHE BANK numbers were not positive while YES BANK, UNION BANK were very good; CEMENT companies have paid less Advance Tax than last year.
Market reaction on Direct tax code has been lukewarm and DTC is expected to be implemented from 1st April2011. Major negative implication will be FIIs would be charged capital gains. The current difference between long-term and short-term capital gains has been eliminated. Capital gain is seen as income from ordinary source and is to be taxed at applicable rates.
Exceeding all hopes, the auction for BWA and 3G spectrum have ensured Rs 106,336 crore to the government, over three times the original estimate, with successful bidders for Broadband Wireless Access committing over Rs 38,617 crore and this is likely to reduce the Centre's fiscal deficit to 4.47% of the GDP during 2010-11 from an estimated 5.5% and curtail its huge borrowings.
Mutual Funds have net sold Rs 390Cr in May and over 4 lakh investors are estimated to have closed their mutual fund accounts in the past three months, largely driven by redemption in equity-focused MF schemes as per AMFI statistics which indicate fading interest in Indian equity by retail investors.
Though May has been a record month in exports for Auto industry, MARUTI and HYUNDAI are finding it difficult to improve exports as Europe faces financial crisis and European countries have withdrawn a key incentive – companies like Volkswagen are expanding in India aggressively and more small car entries would hamper market shares of existing players especially cheaper manufacturers like MARUTI and TATA MOTORS, both stocks look to correct.
India's power output grew an annual 6.39% in May to 67.98 billion kilowatt hours, the Central Electricity Authority said, even as coal shortages curbed thermal power generation. India's peak power deficit, the shortfall between supply and demand in peak hours, in May is estimated to narrow at 12.8% compared with the actual 14.3% in April. Coal shortage is very high and GUJNRECOKE would benefit by any rise in coal prices. RELIANCE in its AGM has indicated foray into Thermal power generation and whenever that happens it would add to demand for coal in the country.
Gone week was full of rumours about Reliance group stocks - first Reliance taking stake in RCOM, then stake buy in Reliance Infratel through buying GTL INFRA, then bidding for UMPPs for entering power sector, then came reports about stake in FORTIS and about PIPAVAV SHIP stake buy – no rumour is yet confirmed and it is advisable to stay away from rumoured stocks as that can backfire very easily. BAJAJFINSERV Down -12% this week as many rumors of World’s Richest man Warren Buffet will take stake; never follow someone blindly, always take informed decision. Big investors know the timing and they get best bargain while common public buy in euphoria and sell in panic.
STANDARD CHARTERED’s IDR is showing strength in a weak market and looks safe investment buy for 8-10% returns from current levels.

Technical View:
After 7 days of rally Nifty fell for one day but that is normal after overstretched rally. 5200 and 5110 can be support on downside. Weak stocks will see more selling --- TATASTEEL, SAIL, JSWSTEEL, HINDALCO, AXISBANK, BHARTIARTL, ACC, TATAPOWER, STER, RANBAXY, ICICIBANK, UNITECH are some stocks that look bearish for the settlement week ahead. METALS, CEMENT stocks haven’t recovered well with market pullback and these would be first to see selling pressure. Nifty is trading in an up channel and traders can use 5100 as stop loss for current up trend. It still looks like a pullback rally as in last 9 months we haven’t seen Nifty move much, it is around same levels and stock rotation has been very fast as a result money-making for Retail investors has been very difficult. Momentum can stretch Nifty towards new yearly highs also but risk-reward is still not favourable for an investor and traders need to switch between profitable positions quickly.

Stocks looking good: KPIT, UNIPHOS, APTECH
Weak Stocks: STER, FORTIS, HOTEL LEELA
Supp 5198/5110/4960 Res 5330/5400/5550

KPIT - Strong buy CMP Rs 132

KPIT (Rs 132)

• KPIT Cummins provides technology solutions to global clients in the areas of Advanced Technology Solutions, Enterprise IT and Business / Knowledge. So far the company has made seven acquisitions since 2002, most recent being Sparta last year.
• KPIT is dealing in following verticals - Auto Electronics, Semiconductor Solutions, Business Intelligence, Global Business Solutions, Manufacturing and Diversified Financial Services. KPIT developed AUTOSAR 2.0 complaint tools used by leading Tier-1 company to develop system level components for car manufacturers.
• KPIT focused on three verticals - automotive, industrial and high-tech, these sectors got badly affected by the downturn and now we already see Auto industry reviving very well along with other sectors.
• The company is looking at Government and Defense contracts which would result in the company foraying into the domestic space.
• Recently the stock is in a firm up trend after announcement of Joint Venture with BHARAT FORGE for innovative solutions belonging to next generation of automotive technology.

The stock trading at Rs 132 looks very good long term investment and investors can accumulate this stock in dips. It is near a major breakout and once Rs 145 is crossed next rally would be very smooth; 12-15 month investment target can be Rs 190-200 for the stock.
In short-term one can buy around current levels for target Rs 155-160, stops below Rs 128 for short-term traders only.

Weekly Nifty Update 12 June, 2010 by Tanmay G Purohit

Nifty has closed at 5119 down 16 points and this week has seen flat closing after lot of volatility in the markets. BSE REALTY index fell the most 3.8% while HEALTHCARE stocks stood strong. SIEMENS, HDFC BANK, M&M, CIPLA rose more than 3% each while DLF, BPCL, HINDALCO, HCL TECH and UNITECH were major losers from Nifty.
India's IIP rose 17.6% in April from a year earlier, sharply higher than 13.5% growth recorded in the previous month, underscoring a strong pick up in the economy. Data was better than expected and it may push RBI to raise rates before July 27 policy review meeting; it would be interesting to see how Base rate comes into effect as banks are to enter new system of lending from July 1.
Mines Minister has said that proposal to impose a windfall tax on miners for Iron Ore has been sent to Finance Ministry and it is negative for SESA GOA. Metal stocks have not recovered in this rally and this looks the weakest sector of the market where big correction is possible when market falls again.
Finance Minister has said Escalation in Euro zone crisis may hurt capital flows and India cannot remain aloof of global developments and he also cautioned banks should pay immediate attention to contain Bad Loans. He has cautioned banks that rising non-performing assets (NPAs) could lead to high lending rates and in turn hamper credit flow to productive sectors.
Both IMF and World Bank have warned that a double-dip recession could not be ruled out in some countries if investors lose faith in efforts in Europe and elsewhere to tackle rising debt levels and first time we are witnessing cautions from all important organizations about global recession.
Global hedge funds suffered worst losses for 18 months as investors bet wrongly that stock markets would rise. Hennessee Hedge index said funds were down on average 2.99% last month, the heaviest fall since October 2008.
The Indian auto industry sold 12,08,851 units last month, a record sale for the month of May and auto export from the country stood at 1,79,130 vehicles which is also a record but best looks discounted by the market as Nifty trades around 21 P/E and correction would be a chance to buy for long term investors; we have previously also advised maintaining 65-70% cash and we would wait for better opportunity until right time comes.

Technical View:
Nifty is trading in a channel for the last 8 months and now until breakout above 5200 is not seen trend would be considered weak. Any break below 5020 would give way to fresh selling in days to come where levels below 4600 are also possible. Nifty to become strong has to close past 5200 on a consistent basis.

Stocks looking good: TATACOMM, JSW ENERGY, HDIL
Weak Stocks: TATA STEEL, SESA GOA, HERO HONDA
Supp 5075/4950/4760 Res 5170/5265/5350

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Check print edition of Economic Times in Personal Finance section also, same article is published.

Weekly Nifty Update 05 June, 2010 by Tanmay G Purohit

Nifty has closed higher 2nd week in a row and it gained 68 points to close at 5135. AUTO and PSU stocks were major gainers this week after robust sales numbers from all Auto companies and PSU stocks saw buying as we move into decision for Fuel price deregulation on Monday June 7. TELECOM stocks rose on value-buying support after various stake sale rumours in the sector – RCOM rose 14%, IDEA 11% while BHARTI was up 6%. METALS continued to lose this week as Steel Companies indicated price decrease in June – STERLITE fell 4.8%, JINDAL STEEL, TATA STEEL were among top losers. SUZLON fell the most 8% in Nifty after company announced Rights issue of 2:15 at Rs 63/share.

GDP data was above expectations as Indian Economy grew by 7.4% during 2009-10 Vs 6.7% in 2008-09 but Agriculture growth has been lowest in 5 years at 0.2% because of weak rainy season last year. Better growth in Economy may make Central Bank tighten more and Deputy governor Subir Gokarn said RBI will not move away from the monetary policy tightening path and interest rates will rise in the coming months.
The government said on Friday all listed companies are required to maintain a minimum public float of 25 percent and existing listed companies having less than 25% public holding have to reach the stipulated level by an annual addition of not less than 5% to public holding and it can make many companies raise money through IPOs which may pressurize Secondary markets in the wake of global slowdown.
FII data shows negative signs as they sold Net Rs 9,436 crore in the month of May and they have turned net sellers after January as Eurozone troubles have made them take money out of India and Rupee depreciating more would pressurize only. Though GDP data was impressive Chief Statistician Pronab Sen said it may be difficult to achieve an 8.5% economic growth this fiscal as many uncertainties persist - the growth drivers continue to be weak; because consumer demand is not growing that fast, Sen added.
AUTO numbers were excellent for May and production & sales figures of five cement companies signal healthy demand from real estate and infrastructure sectors, although the impending monsoon is likely to put the brakes on cement usage in the near term.  - A.C.C, GRASIM, JPASSOCIAT, ULTRATECH, SHREECEM can see more correction. SAIL has cut prices by Rs 1500/tonne this week and Copper, aluminum, zinc fell as metals extended their decline after Chinese manufacturing expanded at a slower pace in May, adding to signs that growth may moderate in the world’s biggest metals consumer and Metal stocks here show 15-20% more decline – TATA STEEL, STERLITE, BHUSANSTEEL would lead the fall when markets start correcting. The global sugar market will see a surplus of about 5 million tonnes this year, 30% more than previously expected, even as consumption rises, while India is unlikely to export any excess sugar soon, industry sources said – SUGAR stocks have shown outperformance in a weak market and they may continue if monsoon recedes somewhat.
The monsoon rains were 11% below normal in the week to June 2, the weather office said and if such news continues it would impact negatively. Food prices are still a concern as food price index rose 16.55% in the year to May 22; India's anxiety over erratic monsoon rains will become more acute as rising incomes and a growing population push up demand for farmed produce faster than supply, turning the nation into a major importer within 5 years.

Technical View:
Nifty has pulled back for the last 8 sessions and now 5170 which is 61.8% retracement of the whole fall is a crucial resistance. Nifty has formed support at 4960 and caution advised if that is broken. After this week Nifty has been able to close above all important averages which is a positive sign but volumes remain a concern and participation is missing while Adv-Dec stats are also not supportive. METALS, CEMENT, CAP GOODS would be weak sectors while SUGAR can pull back more. FERTILIZERS show signs of more short-term rally and UNIPHOS looks good too. It is advisable to remain stock-specific in this market as Index not showing a lot of strength and risk-reward not favourable for an investor.

Stocks looking good: APIL, UNIPHOS, DIVI LAB
Weak Stocks: ABAN, FORTIS, HOTEL LEELA
Supp 5070/4955/4840 Res 5175/5279/5349

AXIS BANK breaks the up trend

AXIS BANK (CMP Rs 1205) has broken the up trendline support which it had been maintaining well in whole rally. Now there are rumours of KARNATAKA BANK being merged with AXIS BANK but whether really synergies are present after the merger is anybody's guess. We have seen ICICI BANK cracking after unfavourable ratio of merger with BANK OF RAJASTHAN and I feel small private banks merging with larger ones would be negative in short-term.
AXIS BANK shows next major support at Rs 1048 which is its 200DEMA and looking at formation levels below Rs 1000 look possible. Investors may take profits in this stock while traders may have Rs 1240 as stop loss for the down move.