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

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