Sunday, June 20, 2010

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and HYUNDAI are finding it difficult to improve exports as Europe faces financial crisis and European countries have withdrawn a key incentive – companies like Volkswagen are expanding in India aggressively and more small car entries would hamper market shares of existing players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
Supp 5198/5110/4960 Res 5330/5400/5550

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