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

No comments: