Monday, August 30, 2010

Weekly Nifty Update 28 August, 2010 by Tanmay G Purohit

Nifty has closed 122 points down at 5408 and it has once again failed to show follow-up buying above 5500 levels. REALTY stocks were major losers this week as BSE Realty fell more than 8% after RBI hinted at more rate hikes in future. UNITECH and DLF fell more than 8% each while JPASSO, HINDALCO, RELINFRA were among top losers. OIL & GAS stocks rose as Oil Marketing companies are expected to announce Petrol Price hike in September – BPCL +11%, ONGC +4.7%.
Reflecting the trend of sizable chunk of restructured assets turning into bad loans, rating agency CARE has pegged Indian banking sector’s gross non-performing assets (NPAs) at 3.5 per cent of gross advances by March 2011.  It expects 15 per cent restructured assets to be converted into NPAs in FY11. This was in addition to the normal system NPAs, CARE said. At the time of reviewing the banking sector’s performance for the nine months ended December 2009, CARE had projected gross NPA levels at 2.8 per cent (approx) by March 2010. The overall gross NPAs of all scheduled commercial banks (SCBs) stood at Rs 81,813 crore (2.5 per cent of Gross Advances) as on March 31, 2010.
Data published by the Reserve Bank of India show that `total factor productivity’ —often considered as a driver of growth for an economy—has dropped from 2.6% in ‘92-97 to 1.7% in ‘97-2005, while productivity in agriculture has slipped from 3% to -0 .2%, that in industry has dropped from 3.1% to 1.4%.The much awaited new indirect tax regime Goods and Service Tax (GST) is unlikely to be implemented from the scheduled date of April 1, 2011, a top government official said underscoring the fact that this government has been unable to push reforms in the right direction.
India's key monsoon rains were 29% above normal in the week to Aug. 25, compared with 6% below normal rainfall in the previous week, the weather office said. Annual food inflation fell for the second straight week, to 10.05% for the week ended August 14, as prices of vegetables like potato and onion declined, previous week the same was 10.35% but more rate hike talks may keep pressure on REALTY/AUTO/BANKING stocks. MARUTI has raised prices of its cars recently and reports say TOYOTA would do the same from October as rising input costs pressurize Auto companies and especially YEN rising against dollar impacts Japanese auto companies. Indian IT companies are finding it hard to recruit and retain employees as the recovery takes a definite shape. And their bottomlines are getting hit due to rising wages and high attrition. Earnings before interest, tax, depreciation and amortisation (EBITDA) margins or operating margins have been dipping for most of the IT biggies in the recent quarters largely because of the spurt in wage inflation.
The Cabinet approved Direct Taxes Code (DTC) Bill, paving the way for reduced tax rates and exemptions, which could come into effect from next fiscal. Reports state that the Bill will be tabled in the Monsoon Session of Parliament, it is important to see if there are any changes in the passed Bill and draft DTC. MAT Minimum alternate tax, it has been clarified that tax would be levied on the book profit, as is the current practice, and not on gross assets was proposed in the draft. Market behavior on settlement showed market is in over brought position which means shorts are missing and this normally gives faster correction if Market fails to make higher levels So underperformers with value would be safer POWERGRID, NTPC, NEYVELILIG, TATACOMM, ONMOBILE, NHPC, SJVN, PTC, GLENMARK and JUBILANT.
Technical View: Nifty has closed below 26DMA (5441) which was very crucial support in this whole rally, now next important support is at 5350 below which 5200 is possible soon. As indicated last week Nifty is near upper channel resistance in weekly graph and as long as sustained move above 5600 is not seen heavy selling pressure may persist. Nifty needs to breakdown below 5350 but looking at overall picture there is a lot of weakness in individual stocks. For Sensex 17800 is crucial support and below that major correction is not ruled out. We will continue to hold our cautious view and stay in good cash position. Since 1990 we have seen correction after every two years and they have been minimum magnitude of 25% so CAUTION advised.
Stocks looking good: GAIL, TATACOMM
Supp 5350/5290/5200 Res 5452/5520/5580

Friday, August 27, 2010

TECH stocks continue to show weakness

In last post we saw BSE IT index showing bearish patterns and now individual stocks are also breaking down, so going by such a picture if markets fail to move higher TECK stocks may underperform.
Please download the PDF to check latest report on IT Stocks:
IT bellwether Infosys Technologies plunged 2.65 per cent in early trade a day after the government approved hiking the minimum alternative tax (MAT).   High attrition rate hits IT companies' bottomlines

Wednesday, August 25, 2010

Indices in India – a study of patterns - Tanmay G Purohit

Following is an analysis of major indices in India and they are tracked regularly by investors. I have included BSE Sensex, BSE  Metals, BSE IT, BSE Teck, BSE Auto, BSE Realty and NSE BankNifty here. I have packaged all the indices in a single file, please download from this link:
BSE IT Index is making bearish Head & Shoulders formation, below 5400 it would be broken and further 300 point fall is not ruled out as per the pattern logic. Above 5600 move would negate the formation. Below 5400 up channel would be broken too.

Monday, August 23, 2010

Weekly Nifty Update 21 August, 2010 by Tanmay G Purohit

Nifty closed the week 78 points higher at 5530 and it is 3rd consecutive positive week for the index. RANBAXY was top gainer with 11% rally, HINDALCO, HDFC BANK rose more than 5% each. CEMENT stocks moved higher this week – ACC and AMBUJA were among top gainers. SUZLON was biggest loser from Nifty as it fell 12% after poor results while IDEA, UNITECH, CAIRN and RCOM lost more than 3% each.
Power stocks look attractive for long term investors and they haven’t performed in last 12months POWERGRID, PTC, NTPC, NEYVELILIG, GIPCL and NHPC in PSU space is more attractive with good growth prospect in years to come. POWERGRID is likely to foray into telecom-tower business as per media reports and stock looks very good near support and investors can consider accumulating this stock as entry into telecom towers would make very good business sense for the company. TATA group stocks TATAELXSI, NELCO and TINPLATE looks good for long term investors to slowly accumulate.
Nifty Index would see some changes effective October 1st with BAJAJAUTO, DRREDDY and SESAGOA (Positive) replacing IDEA, ABB and UNITECH (Negative) and stocks added would give good returns in short term 4-5months use dips to buy. MSCI index saw some changes and TATAMOTORS weightage has increased to 2.15% from 1.83% while TITAN has been removed from Global Small cap index and no new addition of Indian stock is disappointing. There are a few changes in Index which in short term could impact the prices as MF & FIIs change their investment as per Index Changes: CASTROL, KSKENEGRY enter CNX MNC Index ABANOFFSHORE , ACC out of CNX MNC Index DBREALTY enters CNX Realty Index PARSVNATH out of CNX Realty Index MUNDRAPORT and POWERGRID enter CNX Infra Index IRBINFRA, MTNL out of CNX Infra Index. SEBI may double limit for retail investors from 1lac to 2lac if implemented would be positive for equity market as more participation will be seen.
Stock Market has corrected every 2 years more than 25% - data available from 1990 shows and 25% has been the lowest or minimum correction - 1990 Oct to 1991 Jan -41%, 1992 Apr to 1993 Apr -56%, 1994 Sep to 1996 Jan -39%, 1998 Apr to 1998 Oct -37%, 2000 Feb to 2001 Sep -58%, 2002 Mar to 2002 Oct -25%, 2004 Jan to 2004 May -32%, 2006 May to 2006 Jun -31%, 2008 Jan to 2008 Oct -64% now in 2010 we don’t know how much market can correct but Reward is not worth the risk we can take in this market which is highly overvalued so we maintain our hold Cash strategy till a reasonable correction happens. This is a trading market where intraday gains are high with Index moving within 3% for last 6week best thing is Underperformers are turning Outperformers
Technical View: Nifty has closed above 5500 for the week and now it trades exactly at weekly channel resistance near 5550 and above that 5640 is possible. Nifty has completed 13 weeks after hitting low of 4786 in May and as long as 5400 is held up trend may continue. 26-DMA has been very strong support in whole rally and now that is at 5426, so one can keep 5400 as stop loss for current up trend. Volatility may rise going into F&O Expiry week with such a high position already built up, any failure to move past 5650 would be met by selling pressure.
Stocks looking good: GLENMARK, IDBI, FSL
Weak Stocks: EDUCOMP, SAIL
Supp 5490/5410/5330 Res 5550/5640/5730

Sunday, August 15, 2010

Weekly Nifty Update 14 August, 2010 by Tanmay G Purohit

Nifty ended the week 13 points higher at 5452 closing in positive 2nd consecutive week. TATA MOTORS and SBI were major gainers this week after good results with 13% and 8% gains respectively. JINDAL STEEL & POWER rose nearly 6% this week. STERLITE fell 9% while WIPRO and INFOSYS too turned out to be top losers after Border Security Bill passage in USA. M&M fell 3%.
Derivative data points to selling of FIIs in Nifty futures and stock future and they bought Puts too, FIIs were buyers in Indian market and that included aggressive buying in Puts. FIIs have been buying Indian stocks aggressively but from last many days they are aggressively buying Put options also indicated by increased buying in Index Options and rising Put Call Ratio of Nifty.
Federal Reserve kept the interest rates unchanged in USA but said that the gears driving the fragile economic recovery are slowing, prompting concerns of a double dip recession which will pressurize Global markets. Now Globally U.S, Europe and Japan are showing no growth with China aggressively slowing down which could mean capacity created globally would have lesser people to consume and in turn make India a dumping ground which would force Indian producers to sell at lower prices and this is visible in Indian corporate results with data available for 2951 companies sales has grown 20% while Net profit growth is down -8%. Metal, Capital Goods and TECH would have immediate impact and rising dollar could add to negative funds flow, U.S. trade deficit widened sharply by 18.8% in June to $49.9 billion, is the largest trade gap since October 2008 which would force U.S policy makers to tighten their policy towards China & India.
Mining stocks are bearing the brunt of the Karnataka government’s decision to permanently ban export of iron ore from the state. The government is also mulling sharing of 26% mine profit from locals. TATASTEEL SAIL SESAGOA STER NMDC and many Metal stocks can show impact.
The annual rate of inflation based on the wholesale price index of food articles in the country ended a declining trend and bounced back to a double-digit figure of 11.40% (provisional) during the week ended 31 July from 9.53% which may trigger RBI to act again soon, next monetary policy review on Sep 16 awaited but Crude Oil coming down could help Oil Marketing Stocks and ease inflation too.
RELIANCE has raised Rs 9,300 crore in three earlier rounds of treasury share sales, between January 2009 and January 2010 and now media reports talk about 4th tranche happening very soon between Rs 950 and Rs 980 per share. Analysts say the stake sale can happen any time before March 2011 as after that Capital Gains tax would impact the deal. RELIANCE stocks are not participating in this rally and many large cap stocks have not gained well in this rally except for a handful and small cap stocks are performing many of whom are not supported by good fundamentals. PATNI has declared Rs 63/share as dividend and investors can buy some shares for taking benefit of dividend as the stock provides nearly 12% dividend yield at CMP Rs 517.
Technical View: Nifty has closed comfortably above 5450 but it is still trading inside a rising wedge formation which is bearish in nature. Nifty breaking out above 5500 can touch 5560 and 5630 but a fall below 5380 would be very worrying now. Nifty has completed 12 weeks of rally from bottom of 4786 in late May and we are near an important turn date, also Nifty trades very close to its weekly up channel resistance; so caution is still advised. Traders can keep 5350 as stop loss and play individual stocks but Investors are advised to raise cash levels and stay away from small cap stocks.
Stocks looking good: NEYVELI, ORCHID, KTK BANK
Supp 5385/5320/5200 Res 5490/5550/5660

Friday, August 13, 2010

Update on KPIT

KPIT buy was given on 18 June, the stock has performed as per expectations and now nearing our investment target also. Investors are advised to take profits. 

Previous Report Link:

Wednesday, August 11, 2010

AXIS BANK shows bearish signs

AXIS BANK (Rs 1290) has been moving in a very good up trend but now cracks are developing. 100 Day EMA (figure below) has been providing strong support and acted as an automatic trendline for the stock, currently 100DEMA stands at Rs 1242.

Oscillator Study:
14 Week RSI shows weakness in the stock. In previous rally AXIS BANK touched Rs 1287 as high when RSI was 71.24 and now at new high Rs 1396 RSI is only at 69.48. In-between RSI bottomed at 57.16 and now that bottom is under threat as currently RSI is 57.61 again. This is a negative divergence in Weekly RSI and it indicates bearish view on the stock.

Volumes are showing bearish pattern
AXIS BANK has been moving higher but volumes are not in unison, normally Volumes need to confirm the trend of prices. As volumes are dipping with rising prices, a trend reversal is expected in AXIS BANK. Trend line support for weekly graph is at Rs 1275 currently.

  • Strong uptrend of AXIS BANK may be reversing
  • RSI is showing latent weakness but price breakdown is pending
  • Breakdown below 100 DEMA as well  as Trendline in Weekly graph is near same levels at Rs 1250 and below that trend may reverse
*Comments welcome, click images for better view, technical picture to be updated after breakdown

Sunday, August 08, 2010

Weekly Nifty Update 07 August, 2010 by Tanmay G Purohit

Nifty moved higher this week as it closed up by 72 points at 5439 and it has recovered last week’s losses easily. Leading the gains were TATA MOTORS, BHARTI AIRTEL, KOTAK BANK, HCL TECH, WIPRO which rose more than 5% each while SAIL, RPOWER, RCOM pressurized the indices falling more than 3% each.
Economy has been supportive so far with the bull market in India and the HSBC Markit Purchasing Managers' Index, based on a survey of 500 companies, edged up to 57.6 in July from 57.3 in June when it slipped from a multi-year high, but China PMI has dropped below 50 to 49.4 which indicates contraction in industrial activity which is why funds for emerging markets may get attracted towards India rather than China once again.
Steelmakers like SAIL, Tata Steel and JSW reported 18-40% drop in volumes for the quarter ended June, while cement sales hit a 57-month low, but demand grew at 2.51%, even as prices have declined 10 per cent – both industries show some slowdown pressure.
Due to SEBI decision to ban entry load, the mutual fund industry's equity assets are down by Rs 8,000 crore (net outflows), according to data from the Association of Mutual Funds in India (AMFI).
Cognizant Net profit in the April-June period rose 22% to $172.2 million, and revenue surged by $145 million, the strongest increase amongst all IT majors and revised its 2011 guidance upwards, saying that its revenue will now grow by 36%, instead of 25% earlier has boosted TECH stocks - KPIT, NIIT, APTECH, ONMOBILE and they continue to look good Technically. US Senate on Thursday passed the Border Security Bill which would require companies who have more than half their U.S. employees on H1-B or L-1 visas to pay thousands of dollars in special new fees for each worker; Som Mittal who is president of NASSCOM said, "The way they've done this, the majority of the impact is on the Indian companies," and total impact for IT sector in India could be $200 to $250 million which can have an initial negative impact this week for IT Stocks. The bill looks wrongly timed as U.S president likely to visit India in November 2010.
IPO recent success has generated interest in newly listed stocks but due to lack of price history one should not overexpose - ASTERSILICATE after listing made a high of Rs 258 and closed yesterday at Rs 101 which is below listing price of Rs 118.
Data announced for 1858 companies so far indicates a poor Q1 performance for Indian companies – Sales rose 20% while Profits have fallen 9.8%. Nifty trailing P/E is 23 while broader market S&P CNX500 P/E is 21 do not justify huge premium to other emegring markets. Detail study of result show financial sector has been outperformer and valuation are already rich while Oil & Gas is bogged down by Government polices; Metal and Capital Goods are facing supply side pressure from global slowdown where margin pressure is clearly visible. After downgrading RELIANCE now some research houses like Citi, Nomura, Motilal Oswal, Merrill Lynch have downgraded Sensex EPS estimates and selling may worsen if markets are unable to move higher.
In last 5days FIIs brought Rs.12,700crs in options  PCR from 1.28 to 1.38 ---- which means more of PUT buying ----- Derivative analsyt tell me that --- Volatility is @ years low and Open interest @ year high ------ which all indicate a major correction.   Many feel FIIs are buying daily but they are also buying puts
Technical View: Nifty has been unable to move past 5477 but until 5340 levels are held upside could still be possible. METAL stocks look weak and SAIL, JINDALSTEL, JSWSTEEL are almost near break-down levels. Adv-Decline ratio is still flat and Volumes too are not improving, so strength of this breakout is still suspect but until trend doesn’t break down we have to go with the existing move that is up. Many Small and Mid-Cap stocks have started performing and for many fundamentals don’t support, traders can have these stocks but  exit quickly whenever profits are seen, for investors I would advise stay in value picks.
Stocks looking good: MAX, APIL, FSL
Supp 5400/5340/5230 Res 5486/5536/5650

Sunday, August 01, 2010

Weekly Nifty Update 31 July, 2010 by Tanmay G Purohit

Nifty has closed down by 81 points at 5367 and fall was led by LT and RELIANCE both fell sharply on profit-taking after results. M&M, HCL TECH, HDFC BANK gained more than 4% each this week while MARUTI was top loser with 11% loss after poor results, JP ASSO fell 8%.
Rains were just 5% below normal as on July 29 and they are likely to be 107 percent of normal in the remaining two months of the June-September season, the weather office said, raising expectations of strong growth in farm output.
The parliament speaker on Friday adjourned sessions for the fifth straight day as opposition protests over high prices scuppered debates – many important economic reforms are pending and such delays would hamper them more.
For 712 companies reporting numbers so far - Sales have risen by 23.05% but Profits have seen a fall of 7.6%. Cheaper imports and higher capacity addition have lowered profit margin; Government Oil Subsidy policy has been a very big contributor to the fall in net profits. Sales growth of 23% is still very impressive but now rising interest rates would add burden. BSE500 which is a broader index is trading at 21 times P/E on trailing basis which is very expensive as other emerging markets.
MARUTI profits fell first time in 5 quarters and HERO HONDA profits too fell first time in 11 quarters indicating pressure on existing auto companies as new players enter the market and these stocks may continue to underperform. HDFC Bank, Kotak Bank, Central Bank, Syndicate Bank have raised deposit rates and if lending rates start rising it may hamper Auto, Realty demand.
RBI has tightened more that expected and Fin Min has said it would lead to further easing of inflation, RBI has said that economy could face a significant risk in the form of slowdown in capital flows, it will undertake mid-quarter policy reviews and will release monetary-policy statements every six weeks, compared with the once a quarter currently.
Infrastructure industries expanded by 3.4% in June, the lowest in 10 months, on a sharp slide in coal, electricity and cement output; Output of crude oil, petroleum refinery products and steel that make up the six core infrastructure industries were marginally higher or flat, according to Commerce Ministry data.
Steel companies are facing China slowdown heat - ArcelorMittal, the world’s biggest steelmaker, forecast third-quarter profit will slump as much as 30% from the prior three months as China’s economy slows, costs rise and demand weakens during the European summer.

Technical View: Nifty as long as maintains 5340 support technically trend would remain up, crossing of 5450 is needed for strength to come back once again. Markets are showing weakness and with India Inc performance not up to the mark this quarter, having Cash is advisable but as long as trend is not actually broken correction would stay away. Nifty breaking 5200 would be very important trigger for further fall.
Stocks looking good: KALINDEE, MTNL, UNIPHOS
Supp 5300/5205/5140 Res 5450/5525/5630