Monday, July 05, 2010

Weekly Nifty Update 03 July, 2010 by Tanmay G Purohit

Nifty remained in a small range this week and it closed down by 31 points to close at 5237. Only stock-specific activity was seen and small / mid-cap stocks outperformed the indices. Government indicated intentions to de-regulate Diesel prices as well and as a result – BPCL +7.4% and ONGC +3.4%. IDFC rose 6.7% after company got status of Infrastructure Finance Company from RBI. POWER stocks became active this week – RPOWER +4.3% and NTPC +3.2%. CAIRN, GAIL, STERLITE IND were top losers from Nifty as they fell more than 4% each.

India's infrastructure sector output grew 5.0% in May from a year earlier, lower than an upwardly revised annual growth of 5.4% in April, government data showed; During April-May, output rose 5.1% from 3.5% a year ago. The infrastructure sector accounts for 26.7% of India's industrial output. India's refinery output rose 7.7% to 3.25 million barrels a day in May, the highest level since July 2008, as the expanding economy continued to boost demand and further fuel price deregulation would benefit the sector more. MRPL and GSPL look very good on charts – MRPL closing past Rs 84 is a major breakout and target of Rs 94 can be near after that while GSPL closing above Rs 103 for 2-3 sessions would pave way for Rs 125 in the stock.

Nuclear Power is in news once again after India signed a deal with Canada last weekend and Japan too has started negotiations toward a civilian nuclear pact with India, before Japan was concerned about India not joining the Nuclear NPT – beneficiary stocks would be APIL, AREVA, ROLTA, HCC and LT.

India's fiscal deficit from April to May was Rs 1.01 trillion ($21.7 billion), or 26.5% of the full-year target, the government said. India’s trade balance continues to worsen; May registers the largest trade deficit in 17 months of USD 11.3Bn as imports outstrip exports. India has become more vulnerable to slowdowns and financial crises abroad as foreign trade plays a bigger role in the economy – Foreign Trade represented 35% of GDP for the year to March 31, 2008, up from 21% a decade earlier, RBI said.

On Friday, RBI has raised Repo and Reverse Repo rates by 25bps each and Banks would be negatively affected. Mutual Fund AUM have dropped by 16% in the month of May and it indicates investor nervousness about Indian Equities after stretched valuations.

Purchasing Managers’ Index data for major economies of the world such as India, China, Korea have been bad and it may keep investors nervous about growth prospects in near future and though Met Dept is very positive about Monsoon this season, so far the rains have not been optimistic –annual monsoon rains for the week ended June 30 were 25% below normal. Auto sales have been brilliant once again for May but Hyundai has posted 3rd successive monthly decline in domestic sales to 10-month low, soon base effect would play its part for the sector and rising input prices can pressurize bottomlines of AUTO companies –margins and market share may be affected by increasing competition and entry of many new models.

CAMLIN at Rs 35 looks very good for an investment target of Rs 42-45 in a year’s time. As per chart stock trades in all time high territory. Indian disposable income increasing and more focus on education would benefit the stock. GLOBUS SPIRITS looks good for 6-8% gains in short-term.

Technical View:
Nifty has closed lower for the week but so far it has maintained crucial support at 5200. Nifty has broken up channel and now trades in a down channel indicating weakness, as long as it is unable to cross 5360 the weakness would persist and if below 5200 sustained move is seen more selling is not ruled out. Global markets are hitting more than 2-and-half week lows while Indian market still outperforms but history tells us that our markets have reacted late but soon they have fallen more than global peers so if below 100DMA 5116 sustained move is seen we may conclude that correction has once again started. Year 2010 as we see would be a year of negative and so far we haven’t seen large gains in markets. Nifty would have to cross 5400 soon to manage stronger rally but global risk is too much right now and rewards don’t favour so much risk, so only stock-specific approach is advised.

Stocks looking good: JUBILANT FOOD, MRPL, IDBI
Weak Stocks: M&M, JSW STEEL, WIPRO

Supp 5200/5138/5005 Res 5330/5395/5480

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