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

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