This is list of 10 strong futures:
Nifty is in Down trend
| FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| FII | 06-Nov-2009 | 3390.14 | 2803.12 | +587.02 |
| DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| DII | 06-Nov-2009 | 1347.32 | 1110.7 | +236.62 |
 | 4796.15 | ( 0.64 %) | 30.60 |  |
| 1 | 2 | 3 | ||
| Resistance | 4833.28 | 4870.42 | 4904.63 | |
| Support | 4761.93 | 4727.72 | 4690.58 | |
 | 16158.28 | ( 0.59 %) | 94.38 | | |
| 1 | 2 | 3 | |||
| Resistance | 16269.70 | 16381.11 | 16478.37 | ||
| Support | 16061.03 | 15963.77 | 15852.36 | ||
Market was at its whimsical best last week. Stock prices appeared to be rolling down a deep chasm last Tuesday but just when most market participants were convinced that the downtrend was going to be long-drawn and painful, stock prices reversed higher, once again trapping short-sellers.
The week ahead could flow along similar lines as bears try to wrest control from the slightly nervous bulls.
Intraday volatility was also extremely high as prices swung both ways exasperating the trading fraternity. Volume was subdued in the cash segment while it was quite brisk on the derivative side. Stocks received support from both foreign and domestic institutional investors last week. Open interest has crept above Rs 90,000 crore again but increase in short positions can help to cushion declines.
Momentum indicators in the weekly chart continue to point southward. The 10-week rate of change oscillator is perched on the zero line. Decline in to negative zone will denote that a protracted medium term down-trend would follow.
Oscillators in the daily chart have reversed higher but they continue in the bearish region implying that near term outlook remains cloudy. Sensex also remains below its 50-day moving average positioned at 16450.
The short-term trend in Sensex is down since the peak of 17,493 but one leg of this down-move was completed last Tuesday at 15,330.
The pull-back witnessed in the later part of last week has not progressed enough to signal that the correction has ended. There are multiple wave counts at this point and we would like to see the movement next week before determining the medium term trajectory for the index. Movement next week can flow along either of these paths,
If Sensex makes no headway next week and reverses below 16,300, then a decline to 14,940 or 14,120 can be expected in the near term.
If the index moves up to 16,700 but is unable to move beyond this level, a sideways move between 15,300 and 16,700 can ensue for a few more sessions.
Short-term outlook will turn overtly bullish on a move above 16,700 paving the way for the rally to progress to 17,500 or even 18,000.
Our preferred view is that the index attempts to move to 16,700 and then spends some time consolidating sideways. Investors however need to stay cautious as long as Sensex trades below 16,700.
If there is a sharp decline, Sensex will find support in the zone between 14,700 and 15,000 in the near term.
Nifty (4,796.1)
Nifty declined to 4,538 in the first session of the week before staging a rally to close 84 points higher.
The index has closed above the key 4,700 level after testing our first downward target of 4,581 briefly. A five-wave move was completed at last week's low. But it is not yet clear if this is the end of the correction from 5,182 peak or if this down-trend will have legs that take it lower. Some guidelines for next week's trading are,
If the index struggles to move above 4,800, it would imply that there can be a decline 4,540 or 4,450 in the near term. Target on a decline below 4,450 is 4,190.
A pull-back rally that halts around 5,000 will result in a sideways move between 4,500 and 5,000 for a few more sessions.
Strong move beyond 5,000 would imply that the worst is over and the index is headed towards 5,300.
Our preferred view in the second one in which the index moves between 4,500 and 5,000 for a few more sessions. The medium term view will stay negative unless there is a close above 5,000.
Global CuesGlobal benchmarks stabilized last week and pulled back to close the week in the green. It is however not yet clear if the correction that began around October 20 is complete or if this is a minor pull-back in a larger down-trend.
CBOE VIX fell sharply to close 24 per cent lower from the peak of 31.8 recorded on Monday implying that trading sentiment has once more swung towards optimism.
It is the show of resilience in the Dow that is very surprising.
This index dropped less than 5 per cent in the recent correction and is already close to its recent peak, having retraced all the lost territory.
As long as this index stays above 9,600, the possibility of another lunge towards 10,500 levels remains open. Corresponding target for S&P 500 is 1,160.
RIL declined towards our first medium-term target in the first trading session of the week but the 200 day moving average positioned there helped to arrest the slide.
As indicated last week, the third leg of the down-move from Rs 2,490 peak has the targets of Rs 1,827 and Rs 1,532.
Since the first target has already been achieved, a rebound is possible here. But if the stock is unable to move beyond Rs 2,000 next week, it will imply a decline to the next medium-term target of Rs 1,532.
The short-term trend in the stock is up but it will face resistance at Rs 2,000, Rs 2,050 and Rs 2,100.
A rally above Rs 2,100 is required to make the medium-term view neutral again.
Fresh shorts can be initiated on a failure to close above Rs 2,000.
SBI (Rs 2,204.2)
SBI vacillated in the range between Rs 2,050 and Rs 2,250 before closing the week on a flat note.
The hammer pattern in the weekly candlestick chart as well as minor up-move in the daily oscillator charts denote that the stock can move higher to Rs 2,285 or Rs 2,335 in the week ahead.
Reversal from either of these levels will drag the stock lower to the medium-term support at Rs 1,900.
Traders can hold their longs with a stop at Rs 2,080.
Fresh purchases should be avoided on a close below this level since the next short-term target for the stock is Rs 1,880.
Tata Steel (Rs 499.7)
Tata Steel too attempted to claw back from the low of Rs 434 recorded on Wednesday. This short-term uptrend will face resistance at Rs 529 next week.
Failure to move above this level will imply an impending move lower to the medium term support zone between Rs 405 and Rs 420.
The medium-term trend in the stock appears to have reversed from the Rs 585 peak.
A rebound from these levels can make the stock consolidate in the band between Rs 400 and Rs 600 for a few more weeks.
Such a consolidation will be conducive for an extension of the intermediate-term uptrend that began from March lows.
Infosys (Rs 2,217.8)
Infosys too trudged sideways in a narrow band last week.
The medium-term trend in the stock remains downward and unless it records a strong close above Rs 2,320, the possibility of the stock declining towards Rs 1,936 or Rs 1,906 over the medium-term remains open.
Fresh purchases from a trading perspective are therefore recommended only on a close above Rs 2,320.
The stock could remain in this narrow band between Rs 2,130 and Rs 2,250 for a few more sessions. Traders can avoid this counter as long as the stock is glued to this range.
ONGC (Rs 1,159.2)
ONGC recouped most of the losses made on Tuesday in the subsequent sessions and closed the week with a mild Rs 26 gain. Key resistance for the week ahead is at Rs 1,210.
Failure to move above this level will denote an impending decline to Rs 1,025. Medium-term view will turn neutral once the stock records a close above Rs 1,210.
Maruti Suzuki (Rs 1,473.3)Maruti rebounded strongly last week to close 5 per cent higher. Short-term resistances exist at Rs 1,520, Rs 1,560 and Rs 1,600. Move beyond Rs 1,600 is required to mitigate the negative medium-term view. Key medium-term supports are Rs 1,368 and Rs 1,250.
We suggest traders to set a bear put spread for the week, using Nifty Nov put options with strikes 4,900 and 4,600. Both strikes have seen a significant build up in open interest, suggesting that these could be the interim resistance and support for the index.
The put spread will entail an initial debit of Rs 119/ share; Rs 173 outflow for the long put sans the Rs 54 inflow for the short put.
The initial debit, which is cost of setting the spread, would also be the maximum loss you can make.
Do note that you can time both the legs of the transaction depending on how the market opens on Monday.
The spreadMaximum profit potential: The maximum profit for this spread will occur when Nifty moves below the strike price of the sold option, i.e. 4,600 on expiry. The maximum profit potential will be limited to the difference between the two strikes minus the net debit paid or the cost of setting the spread. In this case, the maximum profit will be Rs 181.
Maximum loss potential: When your spread is totally out of money i.e. when Nifty value is higher than the 4,900, the maximum loss that you can suffer will be limited to the net debit paid, Rs 119.
Overall, by setting the spread you would be taking a maximum risk of Rs 119 to earn a maximum profit of Rs 181.
Exit strategiesVolatile that markets are, it is advisable that you make an exit at the first profit opportunity itself, especially since the strategy affords only limited returns. So, if the index appears to be trending down, you can consider a premature closure of the short option (provided price points are beneficial). Alternately, you can also cut losses if the Nifty trends up beyond 5,000. Traders can also hedge their upside risk by purchasing Nifty Nov 5,000 put (closed at Rs 40) as technical indicators also point at a possibility of a pullback rally beyond 5,000. Note that the additional transaction would however increase your overall cost.
Will new trading hours help investors?
An investor wishing to buy or sell a stock will get additional time to do so with more price points.
The recent move by the Securities and Exchange Board of India (SEBI) to allow stock exchanges to extend trading by two-and-a-half hours from 9 am to 5 pm has elicited groans from some quarters and applause from others. Though the move is not adequate to address the issues raised by SEBI's discussion paper on this subject, it will be beneficial to the investor community.
The primary reason for increasing the trading hours, cited by SEBI in its discussion paper, was to allow domestic stock prices to assimilate information flow originating in other countries and to adjust accordingly.
The current market hours on the bourses, from 10 am to 3.30 pm, already straddle trading hours in some Asian and European exchanges. Increasing the trading session by one hour in the morning and by an hour and a half in the afternoon does not materially enhance this overlap.
It is also an established fact that the movement of the US equity market and the economic data emanating out of US are the prime movers of global equity prices.
The proposed market close of 5 pm is still at least two and half hours before the opening of the US stock exchanges, giving stocks on Indian exchanges little opportunity to adjust to developments taking place in US.
Competition
The other argument in the discussion paper pertains to increased competition among international exchanges and allowing participants to execute trades in India that would otherwise have been executed overseas.
The allusion here is clearly to trading of Nifty futures on the Singapore Stock Exchange (SGX Nifty). Trading volumes in these instruments saw a spike following the restrictions imposed on overseas derivative instruments (ODI), or participatory notes, in October 2007 in India. But the fact that volumes in SGX Nifty increased manifold after the ODI restriction shows that the trading is mainly driven by entities that do not wish to register with the Indian regulators.
It is difficult to perceive how increasing market timings will make such entities shift their trading to domestic exchanges.
What is more, volumes in the SGX Nifty have seen a sharp decline since the middle of 2008 as hedge funds faced severe redemption pressures and had to cut back on their activity or close it altogether.
The monthly volume in October 2009 was only 42 per cent of its peak volume. SGX Nifty can hardly be termed a threat to domestic exchanges. Also, the new market timings do not span the entire trading duration of the SGX Nifty.
The plus points
The proposed increase in trading sessions is, however, not an entire wash-out and does have some beneficial facets for investors and traders. Investor wishing to buy or sell a stock on any day will get additional time to do so with more price points. Longer session would lead to reduced stress levels and could throw up more lucrative prices as the session progresses.
The longer hours and greater overlap with Asian and European markets would allow Indian stock prices to react to news flow from these countries to some extent in the extended time, leading to lower volatility.
The exchanges and the broking community stand to benefit from this measure as day-trading volumes can be expected to go up, with longer trading hours.
A day-trader who has squared off one trade would be tempted to initiate another trade if the sessions were longer. Since it is the traders who contribute to liquidity on the bourses, this would give a fillip to liquidity on the bourses, leading to better price discovery.
Much talk has ensued about intermediaries being displeased with this move. But since many of them already offer commodity trading platforms that extend up to 11.30 at night, not too many adjustments will be needed on this front.
Serious traders who trade 24x5 in the foreign exchange market, commodity market and so on, may even be puzzled by the debate on this minor tweaking.
Though the increase in market timings is a step in the right direction, it is inadequate as it does not give Indian equities the window to assimilate information flow from the US — a key global market driver.
SEBI could have left the cash market timings as they are now, from 10 am to 3.30 pm, but increased derivative trading hours up to 11.30 pm to coincide with commodity market timings.
As trading is an optional activity for most, traders could restrict trading hours according to their convenience. Giving a break of an hour is also an option that the regulator can consider.
The inordinate delay between publishing the discussion paper and giving the order for implementing the change, and not making the responses to the discussion paper available to public are other issues the regulator needs to address.
Fisher's scuttlebutt
A strong ability to defend established markets against new competitors is essential for sound investment.
When it comes to effective long term investing, the quantitative aspects of a business are a great filter, however the intangible qualitative traits go a long way in deciding how the results turn out. Philip Fisher's scuttlebutt technique is one that views a stock as a puzzle with pieces put together through questions on various qualitative aspects of a business. His approach points to the necessity for a strong marketing arm in a desirable investment candidate. Size is a major impediment to growth. The bigger a company gets, the harder it becomes for a new product release to have a major impact on sales growth.
This is the point where effective marketing plays a big role in deciding fortunes. For instance, agrochemicals major Rallis India has managed to fend off competition from several multinationals, with an extensive distribution network and a well-trained sales team that reaches out to the last mile in the rural areas. There are no metrics for an investor to measure an organisation's sales and marketing capability. However, the marketing team's work and feedback are crucial to keep consumers in the loop and to improve, develop and sell existing and new products and services.
Communicating to consumerA company investing good time and money into building a knowledgeable sales team will be well rewarded for it. Communicating to the consumer the merits of a new product is crucial to its success. For instance, Cadbury India's advertising campaigns in the 1990s worked to build very important 'mindshare,' which continues to benefit the product even today.
These apart, the idiosyncrasies of individual businesses, such as patents, intangible assets, unusual finance expenses, cutting-edge technology, and so on, require special consideration to gauge their impact on the corporate's bottomline. Being prepared for possible surprises makes it easier to face them when they do come along. A management keeping a tight leash on expenses by monitoring costs gains a vital edge through margins, which are crucial to tide over bad times and increased competition. The operations aspect aside, one should always consider the effect of equity dilution through convertibles or additional fund-raising on their investments. A desirable investment should have appreciated to an extent where dilution is unlikely to hurt long-term returns for shareholders.
Traits to look forIn addition to providing a qualitative framework, Fisher provides simple tips for investors looking to build a portfolio:
Avoid companies with a very limited track record.
Annual reports should be complemented with research based on the 'scuttlebutt' technique.
A high price or P/E does not disqualify a company from being a good investment.
Diversification cannot protect you from reckless bets.
Avoid aping the crowd in making investment decisions; general market weakness provide opportunities to buy quality companies at reasonable prices.
To summarise Fisher's investment thought in his own words "Technology is just one avenue to industry leadership. Developing a consumer 'franchise' is another. Service excellence is still another. Whatever the case, a strong ability to defend established markets against new competitors is essential for a sound investment."
Silver delivers higher returns than gold
| SHINING BRIGHT. |
Silver has outperformed the yellow metal in terms of return on investments despite gold hitting new peaks in the recent months.
Spot gold prices in the last six months have moved up 12 per cent to Rs 15,965/10 gm in October, while silver has jumped 24 per cent to Rs 25,999 a kg in the same period.
Similarly, in the last one year, gold has given a return of 35 per cent while silver delivered 54 per cent to investors.
In the three months ended October, silver registered a gain of 16 per cent while gold gave a return of eight per cent.
Consumption patternSilver has significant industrial demand unlike gold which depends mainly on jewellery and investments that had turned weak after the recent global economic meltdown, said Mr G. Harish, Vice-President (Research), JRG Wealth Management.
Besides, silver had fallen sharply compared to gold during the last year, he added.
Gold prices in the international markets dipped 30 per cent to $681 an ounce in October last from $986 an ounce in July last. In the same period, silver plunged 56 per cent.
Gold prices in the international markets track the dollar movement against the euro and react to inflationary concerns, but silver relies on the demand-supply equation, said Mr Sushil Sinha, Head of Sales, Karvy Commodities.
In India, gold prices are of late reflecting the international prices after adjusting for rupee value against the dollar.
In fact, in the last few months gold prices have not risen as much as they had in the international market, mainly due to the dollar trading weak against the rupee, he added.
Though silver has delivered better returns than gold, there are few options for retail investors to tap the benefits.
As far as gold is concerned, retail investors can invest as low as Rs 10 a month through post office's Gold Pass Book scheme.
Post offices also sell gold coins of 0.5 grams to eight grams. Gold exchange traded funds (ETF) operated by mutual fund houses are also available.
Few retail avenuesHowever, when it comes to silver, investors have to either buy from the spot market or take position in the commodity futures market. Online commodity exchanges offer silver in five kg, 30 kg and 100 kg lots.
"Silver ETFs, which are quite popular in the international markets, are yet to take off in India. Investor interest in silver will grow once we have more avenues," said an analyst.
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Arvind Parekh
+ 91 98432 32381
