Strong Futures
This is list of 10 Strong Futures: Hind Zinc, Ranbaxy, Orchid Chem, Divi'S Lab, Jindal Saw, McDowell-N, Cipla, Dena Bank, Recltd & BPCL.
Weak Futures
This is the list of 10 Weak Futures: Punj Lloyd, Aban Off shore, EKC, Ivrcl Infra, Rel Infra, Balrampur Chini, Sterling Biotech, Purva, Great Offshore & Abb Ltd..
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Market has strong resistance at current levels, so the uncertainty is still continuing. But as nifty is still in uptrend so the readers who are holding their longs in Nifty (bought on 26th November) may go on holding till the trend of nifty is in uptrend.
| FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| FII | 04-Dec-2009 | 2029.41 | 1831.27 | 198.14 |
| DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| DII | 04-Dec-2009 | 1036.44 | 1093.08 | -56.64 |
 | 5108.90 | ( -0.44 %) | -22.80 |  |
| 1 | 2 | 3 | ||
| Resistance | 5153.18 | 5197.47 | 5233.13 | |
| Support | 5073.23 | 5037.57 | 4993.28 | |
 | 17101.54 | ( -0.49 %) | -84.14 | | |
| 1 | 2 | 3 | |||
| Resistance | 17251.31 | 17401.08 | 17510.33 | ||
| Support | 16992.29 | 16883.04 | 16733.27 | ||
Sensex (17,101.5)
Markets vroomed higher last week on strong November auto sales and a very bullish second quarter GDP reading. The spectre of another credit crisis following in the wake of Dubai debt trouble dissolved in the slew of positive data from economies across the globe.
Nifty stopped less that one point short of its previous 52-week high while Sensex closed with strong 470 points weekly gain.
Traders were, however, edgy and this air of caution is reflected in the low turnover especially in the derivatives segment.
According to data released by the BSE, FIIs were net buyers through the week while the domestic institutional investors were booking profits.
The series of one negative monthly close followed by a positive monthly close has been continued with Sensex ending 6 per cent higher in November.
Open interest has once again crossed Rs 1-lakh-crore mark with puts outnumbering calls. The 10-week rate of change oscillator has been moving just above the zero line and the 14-week relative strength index has been hovering between 55 and 70 since August implying that though the bias has been positive, the benchmark has been in a corrective mode over the past three months.
Though the Sensex crossed above the key Fibonacci retracement resistance of 16,200 two months ago, the BSE 500 has only just reached this level at 6,700. It needs to be seen if the broader index is able to climb above this significant hurdle.
The mid- and small-cap stocks are still under-performing their large-cap peers. While the BSE Midcap index has retraced only 50 per cent of last year's decline small-cap index has retraced only 43 per cent.
The mood among the investing fraternity is buoyant as is wont near the upper end of trading ranges. But the Sensex has been drooping over the last three trading sessions resulting in weakness in daily momentum indicators.
The index is likely to face stiff resistance between 17,400 and 17,500 that can result in a sideways move between 16,100 and 17,500 for a few more sessions.
But the medium and intermediate term trends stay positive. Formation of a higher trough at 16,210 on November 27 reinforces this view and short-term investors can buy in declines as long as this level holds.
If we extrapolate the move from the July trough, the first target occurs around 17,970.
Minor count of the up-move from the recent trough at 15,330 gives us the targets of 17,421 and 18,170.
In other words, the index has the potential to rally a little further to the zone between 17,800 and 18,200 over the medium-term. However, the confluence of targets in this region makes it a potent reversal point. We stick with the 16,000 level as the medium-term trend deciding point.
Sensex can attempt to rally to 17,421 or 17,493 in the days ahead. If the rally halts around 17,500, a decline to 16,820, 16,640 or 16,200 can ensue. Presence of both the 21 and 50 day moving averages around 16,800 makes it a very important short term support. Target above 17,500 is 17,723.
Nifty (5,108.9)
Nifty recorded an intra-week peak of 5,181 before meandering sideways.
This index is clearly facing resistance near the recent peak formed on October 17 but the short-term chart pattern is bullish and portends a break-out to 5,312 or 5,319 shortly. The positive short-term view will change only on a decline below 4,950.
Short term traders can therefore buy in declines as long as this level holds. Subsequent support is at 4,806.
The medium-term view for the index is also positive but convergence of many intermediate term count targets between 5,300 and 5,400 makes it a potential reversal point for the current intermediate term uptrend.
Close below 4,400 is needed to turn the medium term view negative.
Global Cues
The year-end mood appears to have set in already in global equity markets. They meandered sideways without any conclusive break in either direction. This lethargic move was reflected in the CBOE volatility index that declined from 25.5 to a low of 20.6 during the week.
The Dow moved between 10,200 and 10,500 last week and closed on a flat note. Strong rally beyond 10,500 will give the next target at 11,280 for the index. But as noted last week, the index might bide some time in a sideways range before attempting the next leg of the up-move. Medium term outlook will be roiled only on a close below 9,640. Asian benchmarks recouped almost all the ground they had lost in the previous week while some such as Philippines' PSE Composite and Straits Times Index recorded new 2009 highs.
Pivotals: Reliance Industries (Rs 1,089.1)
RIL moved past our second short-term resistance to an intra-week peak of Rs 1,120 and closed the week on a positive note, up Rs 40. Short-term trend in the stock is up since the November 3 trough of Rs 903. But the stock faces strong resistance in the region between Rs 1,100 and Rs 1,120. Inability to move above this region can result in the stock moving in a range between Rs 1,030 and Rs 1,120 for a few weeks before rallying higher. Subsequent short-term supports are at Rs 1,010 and Rs 985. As we have been reiterating, the area around Rs 1,100 is also a key medium-term resistance for the stock and unless it makes a strong move above it, it is expected to vacillate in the band between Rs 900 and Rs 1,100 for few more weeks. Medium term target above Rs 1,100 is Rs 1,200 and the stock could yet struggle to move above this level .
SBI (Rs 2,327.6)
SBI did a volte-face and moved contrary to our expectation to nullify the bearish evening star pattern that was beginning to develop in the weekly candlestick chart. The stock continues to face strong short-term hurdle at Rs 2,350. Fresh purchases are advised only on a decisive close above this level with the target of Rs 2,394 and Rs 2,479. Short-term supports for the stock are at Rs 2,273 and Rs 2,174. We change our medium-term view on the stock to neutral. Movement in the range between Rs 2,050 and Rs 2,500 would be conducive to the long-term outlook and could be a precursor to a break-out above Rs 2,500. Weekly close below Rs 1,900 is needed to turn the medium-term view negative.
Tata Steel (Rs 575.7)
Tata Steel did not challenge the support at Rs 490 and moved higher towards our first short-term target of Rs 572 instead. The stock will face strong resistance at the October 17 peak of Rs 600. A reversal from here can result in a sideways move between Rs 520 and Rs 600 for a few more sessions. However a break-out above Rs 600 will take the stock to Rs 660.
Investors with a short-term perspective can hold the stock with a stop at Rs 515. It however needs to be borne in mind that Tata Steel faces strong intermediate term resistance at Rs 660 and it is doubtful if the stock will be able to clear this level in the near future.
Infosys (Rs 2,382.5)
Infosys too was surprisingly resilient last week and ended with over 1 per cent gain. The stock is once more testing the resistance zone between Rs 2,400 and Rs 2,450. Inability to surpass this zone will result in the stock oscillating between Rs 2,100 and Rs 2,450 for a few more weeks. Such a move will be deemed positive from a medium-term view point and can usher in a rally to Rs 2,510 or Rs 2,637 over the medium term. Short-term investors can hold the stock with a stop at Rs 2,300. Medium term view for the stock also stays positive and a close below Rs 1,900 is required to negate this view.
ONGC (Rs 1,181)
ONGC moved in a very narrow range between Rs 1,170 and Rs 1,220 last week. The short-term quandary is unresolved by this move and the stock needs to record a sharp move above Rs 1,200 to signal an impending move higher towards the October high of Rs 1,273. Failure to move above this level can result in a decline to Rs 1,101 or Rs 1,039.
Maruti Suzuki (Rs 1,595.2)
Maruti too moved higher towards the intra-week peak of Rs 1,658 before giving up some ground on Friday. Short-term trend in the stock is up since the October 29 trough of Rs 1,368. But the stock needs to move past the key short-term resistance at Rs 1,620 to signal its intention to move towards a new peak.
NTPC, Maruti Suzuki outlook appears weak
NTPC (210): The outlook for this stock appears negative as long as it stays below 216. However, it finds immediate support at 205. A drop below that level (on a closing day basis) could weaken it to 190. On the other hand, only a close above 217 would negate the downtrend. In that event, it could reach 228-230.
F&O outlook
The 210 put saw unwinding of open position, while 210 call saw accumulation. This signals the emergence of call writers, expecting a further fall. The unwinding also suggests that put writers are covering their position.
The NTPC futures also shed open interest consistently during the week, pointing to lack of confidence among traders.
Strategy: Traders could consider going short on NTPC futures keeping the stop-loss at 216 and can book profits at 205 and 190 levels. Alternatively, they can also consider writing 215 call, which ended at 2.90 on Friday. Market lot is 1,625 per contract. This strategy is only for traders willing to take risk as loss could be heavy if the position turns against our expectation. One has to shell out higher margin also.
Maruti Suzuki (1,594): After recording its new high at 1,737, the stock has been on a downtrend. The downtrend persists in the stock as long it stays below 1,685. If the current trend sustains, the stock could reach 1,420 and even to 1,340. However, in between it finds strong support at 1,525.
Options are not active in Maruti Suzuki. Consider shorting Maruti keeping the stop-loss at 1,685. The stop-loss has been given high, as it could swing wildly. Traders with high risk appetite could consider this strategy. Market lot is 200/contract
Follow-up
We had advised traders to go short on L&T with a stop-loss 1,630. The stop-loss would have been triggered. However, the short strangle (using 1,560 put and 1,650 call) on L&T is slightly in the money,
We had also presented a short-straddle strategy on IFCI using 50-strike. The position currently rules at neutral. Consider holding it for a week.
Feedback or queries (on positions) may be sent to f&o@thehindu.co.in. Replies will be published in the Monday edition.
Investors seeking a good power exposure in their portfolios over the medium-term can invest.
The experience of running the 260 MW generating station at Vijayanagar, Karnataka,will be useful as the company commissions ongoing projects.
JSW Energy's initial public offer is for investors willing to wait for returns in the medium term. The company has been operating a small capacity generating station for the last few years but the bulk of its new projects will be commissioned in stages over the next one year and more. These projects, which will be part-funded from the proceeds of this public offer, will start contributing to the earnings in full measure from 2011-12.
In the near term, especially in the immediate period post-listing, the stock may not deliver major returns mainly because of the market's saturation with power IPOs in the last few months; the price performance of some these recent listings tell the tale.
Therefore, while investors looking for listing gains may not find this offer attractive, those seeking a good power exposure in their portfolios over the medium-term can invest.
Valuation
By conventional valuation parameters based on historical earnings such as price-earnings multiple (33 on fully diluted equity at Rs 115) or price-to-book-value (4.3 at Rs 115, compared to industry average of less than 3), the offer does appear expensive. Yet, it is important to note that earnings from almost the entire generating capacity to be part-funded by this offer will kick in only in the medium-term.
Current earnings are based on a capacity of 260 MW; against this, the company will have a generating capacity of 3,140 MW by 2011. By the end of this fiscal, JSW's capacity will have risen to 1,295 MW. What is important is that fuel supply and offtake of power have been fully tied up for the entire capacity that will go on stream by 2011 and the projects will be commissioned in stages gradually, adding to earnings.
The finances for the projects under implementation have been fully secured, including debt from banks. Transmission infrastructure for one of the major projects in Ratnagiri is being implemented by a joint venture with the State utility. With all major aspects of the projects taken care of, the uncertainties in implementation appear limited.
Project profile
JSW owns a 260 MW plant at Vijayanagar, Karnataka, part of whose generation is sold to group company, JSW Steel, and the remaining on short-term basis to other buyers. To this was added 600 MW in two stages in June and September this year. While half the power produced here is again being sold to JSW Steel, the other half, save a small 6 MW, will be sold on short-term basis through the power-trading subsidiary, JSW Power Trading Company.
The two big generation projects that are under construction now are the 1,200 MW plant at Ratnagiri, Maharashtra, and the 1,080 MW station at Barmer in Rajasthan. Both of these are being executed by wholly-owned subsidiaries.
The Ratnagiri project is based on imported coal for which JSW has signed contracts with an Indonesian company, PT Sungai Belati and an affiliate company of JSW Steel in Mozambique to supply coal. In fact, coal from the 25-year supply deal with the two companies will fuel some of JSW's other projects on the drawing board now.
The Rajasthan project will use lignite mined by a joint venture with a State government company and will also supply its entire electricity to the state utility. The first 135 MW unit of this project will be commercialised shortly with the remaining seven units to be commissioned in stages over the next one year.
The first of four units at Ratnagiri will be commissioned by January 2010 with the remaining ones scheduled to go on stream in stages over the next one year. Half the power produced here will be sold on long-term PPAs to the Maharashtra state utility (300 MW) and Adani Enterprises (270 MW); the other half will be sold on short-term basis through the power trading subsidiary.
Eventually when all the projects are commissioned by 2011, JSW's sales will be shared equally between long-term PPAs with State utilities and short-term merchant buyers. Even in the unlikely event of merchant power prices falling, as some fear, JSW's balanced exposure to that market will help the company.
JSW is also planning a 240 MW hydroelectric plant in Himachal Pradesh but several approvals are yet to be received for this project including the crucial environmental approval. The company has included this project among those that will be part-financed by the public offer though it is not set for commissioning till the end of 2015.
We have not considered this project, as also others adding up to 7,740 MW on the drawing board, while valuing the offer. These projects, all of them coal-based, are projected for commissioning in 2014-15.
Risks to our recommendation
All the projects under construction now will be equipped with Chinese boilers and turbines. There have been misgivings on Chinese equipment following the failure of a turbine installed by a state utility. Yet, a number of private power projects under implementation in the country now use Chinese equipment to save on cost and time.
Indeed, JSW's original 260 MW plant uses Chinese equipment and the company appears to have been encouraged by the experience to follow suit with its other projects. However, group company JSW Steel is in the process of setting up a boiler and turbine manufacturing plant in joint venture with Toshiba Corporation near Chennai. This venture should be able to supply to JSW's future projects.
With the company adopting a 75:25 debt:equity ratio for funding its projects, as much as Rs 9,979 crore of the total Rs 14,055 crore capital outlay for the ongoing projects will have to be funded by bank loans. While these have been tied up, they have not been fully disbursed yet. Some of these loans are also contracted on a variable rate basis. These, along with the undisbursed part of the loans which will take prevailing higher rates, could exert some pressure on the internal accruals of the company. A lot will depend on realisations from short-term power sales to cover up for higher debt servicing costs.
FAQs on new platform
Suresh Parthasarathy
The National Stock Exchange (NSE) has implemented a new system called Mutual Fund Service System (MFSS); the BSE has also launched a similar platform. Under the new set-up, investors wishing to buy and sell mutual fund units can do so through their share-brokers. At present though, investors can buy only 30 UTI schemes. But the NSE has said that many other fund houses, such as Reliance, Tata, Birla and ICICI, are in talks with them for participating in the new platform.
There are, of course, existing online systems for trading in MF schemes; investors can log in to the fund house Web site or can execute through online portals such as ICICIDirect.com, Funds India and Fundsupermart. Where the NSE system scores is that investors can hold their units in dematerialised form rather than as statements of account.
Here are the answers to some frequently asked questions on the new trading platform.
How does one buy units through share-brokers?
If you have a trading account and a demat account with any broker, then it is similar to buying shares through your broker. If you don't have trading and demat accounts, you must get one opened to buy and sell MF units.
Under the new platform am I allowed to buy only equity schemes?
No. You can also buy debt schemes, balanced funds, monthly income plans, income schemes and even gilt funds.
What is the advantage of the new system?
The process of buying is more simplified, with 1.5 lakh share broker terminals and the penetration of share-broking offices even in rural areas. Investors need not fill application forms for buying different schemes; all you have to do is to call your broker or log in to your online trading platform.
Will my NAV vary during the day, depending upon my purchase time?
No. Any order placed before the cut-off time of 3 p.m will have same NAV that is likely to be declared later in the day. Any order(s) placed after the cut-off time will have the next trading day's NAV.
How are payments settled?
You will have to issue a cheque to your broker. He, in turn, will settle the amount with the fund houses.
When are the units likely to be credited to my account?
In all probability, it would happen the morning after you put through your trade.
If I have demat account with CDSL and a trading account with a BSE member, is it possible to sell in the NSE?
It is only possible to deliver the units to the same exchange. Therefore, it is not possible to sell in the NSE without an NSDL account. However, the BSE allows both CDSL and NSDL members to trade on the BSE.
Will the broker charge a fee for the transaction?
Currently, the NSE has said it will not charge a transaction fee, but it could be introduced at a later date. For the transaction, your broker may receive upfront commission if that is allowed by the scheme and he may also receive the trial fees.
I am trader in the equity market. Is it possible to trade on the new platform?
In the new platform traders can take advantage of the market volatility and buy and sell mutual fund units at short intervals . But one has to pay exit load based on the terms and conditions of the scheme.
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Arvind Parekh
+ 91 98432 32381
