Sunday, June 13, 2010

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
Supp 5075/4950/4760 Res 5170/5265/5350

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