Weekly Market Outlook 16-20th Aug 2010

Technical Analysis
Nifty has formed an "ascending triangle" pattern indicating positive breakout After surging to fresh 52 week high of 5,492.30 on very first day of week Nifty witnessed a sharp sell off on Tuesday and Wednesday on the back of global sell-off. However on Thursday and Friday it managed to recover from week low of 5,372.45 and finally closed at 5,452.10 gained 0.23% w-o-w. This week initially becomes a disappointing week as Nifty retraced from 52 week high and fell sharply broke crucial support levels during the week. First, it broke the level of 5,480-5,460 range and then moved further downward to break the next major support level of 5,400. It finally got support at 5,380 levels which restricted its further downward move and ended the week above this crucial mark. As far as the momentum indicators are concerned, they are giving mix signals. On end-of-day chart stochastic and RSI are currently trading in neutral territory on the brink of showing positive divergence suggesting an upward move but another momentum technical indicator MACD is currently trading in positive zone on the brink of showing negative divergence indicating correction.  Nifty is trading very close to its 5 Day simple moving average (SMA), the possibility of Nifty moving further lower to test its 20 Day SMA which is positioned at around 5,426 levels cannot be ruled out. If Nifty breach this level then we could see fall upto mark of 5,380 where it has very strong support, else it might rebound from the current levels if it gets the support of its global counterparts. On 15 Minute intraday chart Nifty has formed ascending triangle pattern which is bullish breakout pattern if upper trend line breaks then Nifty could surge to new 52 week high and can test 5,540-5,560 mark else probability of correction upto 5,325 (50 Day SMA) level cannot rule out.
Stocks to Watch
SBIN (Buy) Particulars Rs. CMP 2,850.25 Target Price 2,920 Stop Loss 2,815 Support-Resistance 2,800/2,930 Comment Stock has given spurt on positive side after remaining range bound in price range of 2,600-2,652 for five days backed by its robust Q1 result reported yesterday. Though stock has surged to its all time high still there is upside potential of 70-80 points. Stock is trading above its 20 and 50 Day SMA comfortably showing continuation of uptrend. Stock next immediate mild support seems at 2,700 (5 Day SMA) while strong support at 2,550 (20 Day SMA). Technical indicators RSI is currently hovering in deep over bought territory on the brink of showing positive divergence while Stochastic is on the verge of entering into it suggesting upside. MACD is also trading in deep positive zone at 113 showing positive divergence indicating further upside. EDUCOMP (Sell) Particulars Rs. CMP 586.15 Target Price 550 Stop Loss 602 Support-Resistance 540/623 Comment After marking high of 702 recently stock corrected sharply, trading below 5 and 20 Day SMA indicating weakness. Stock next support seems at 550. If stock breaches its 50 Day SMA (575) level then we could see correction upto 550 mark. Resistance for stock seems at 623. Technical indicators Stochastic is currently hovering in neutral territory showing negative crossover while RSI is trading in deep overbought territory also showing negative divergence indicating correction. MACD is currently trading in positive zone on the brink of entering into negative zone showing negative divergence confirming correction in stock.
Indian Equity Market
The Week Gone By Indian markets belled the week on an upbeat note as buying was emerged in reality, metal and consumer durable stocks. However, thereafter markets tumbled on the concerns that China's economy continues to slow due to the weaker-than-expected Chinese imports data for July 2010. Further, U.S Federal Reserve's measures to put economic recovery in the world's biggest economy back on track, failed to impress investors. Later in week, markets got strength as investors hunted for bargains following a three-day losing streak and strong quarterly results of SBI boosted investors sentiment. Finally markets wrapped the week on a flat note. Looking Forward India's medium-term growth trajectory remains promising amid a still gloomy world outlook. better diversification in manufacturing & service sector contribution to GDP, underleverage and better demographics will continue to accelerate growth in the Indian economy. This makes India one of the most attractive investment destinations for global investors. Sensex is currently, trading at PE of 21.52, the Indian equities might appear expensive as it is trading above its long-term average valuations and also at premium to its peers. However, this premium could be justified given its macro strengths and diversified index composition. Unlike many other emerging market indices, which are concentrated towards commodities, oil & gas or exports-driven sectors, India's equity index composition is well diversified. Next week, buying is expected in IT, Power, FMCG and Healthcare stocks from current levels or from lower supports of 5400 levels of Nifty while selling positions can be accumulated in realty, banking and consumer durable stocks, if the Nifty fails to sustain above 5,400.. Nifty Top Gainers Company % Weekly Return Tata motors 13.40 SBI 8.80 Jindal Steel 5.70 Nifty Top Loser Company % Weekly Return Sterlite (8.8) Wipro (4.1) M&M (3.3)	Daily Movement of Nifty Daily Movement of Sensex, Net FIIs & MF investment Source for FII & MF: Sebi Weekly return on BSE Sectoral Indices
Weekly Price Movement of GDR Security Name Price (USD) as on 13-08-10 % change as on 06-08-10 L&T 38.70 (1.78) RIL 41.80 (4.87) SBI 118.17 3.21	Weekly Price Movement of ADR Security Name Price (USD) as on 13-08-10 % change as on 06-08-10 ICICI bank 40.76 (1.74) Infosys 59.28 (4.73) MTNL 2.85 (4.68) Rediff 2.03 12.15 Sify 1.39 0.00
Global Equity Markets
US stocks fell by substantial margins during the week (till Thursday) as concerns about a waning economic recovery prompted a significant flight to safety in the markets. The weakness in the markets came as investors reacted to the commentary from the Federal Reserve, which said that the gears driving the fragile economic recovery are slowing, prompting concerns of a double dip recession. Also, buying enthusiasm remained subdued as investors were presented with another negative batch of US economic data, which was played a vital role in sinking the mood on Wall Street. Meanwhile, with earnings season winding down, market ignored the better-than-estimated earnings from the big companies. Looking ahead to next week, markets will look to a series of economic reports, with data on consumer prices, consumer sentiment, business inventories retail sales data giving a much clearer idea of the state of recovery in the world's biggest economy. Asian markets traded lower during the week. Japanese stocks slumped on the prospects of a downbeat US economy and a stronger yen makes Japanese exports less competitive and erodes overseas earnings when the revenues are repatriated. Sentiment was also hurt after Goldman Sachs cut Japan's economic growth forecasts for 2010 and 2011. Chinese stocks slumped after the July trade data showed imports growth slowing more than expected, raising concerns about the country's economic outlook for the rest of the year. Further, China's insurance regulator announced that it would modify rules to allow insurance companies' to invest as much as three times the previous limit in overseas capital markets. European markets remained lackluster during the week. After a cheerful start led by gains in commodity stocks markets weighed ahead of the Federal Reserve's latest monetary policy meeting. Further, the downbeat assessment of the economy by Fed dampened investors sentiments and pulled the markets to 3 week closing low. Lower industrial production in Eurozone also weighed on markets. However, better-than-expected economic growth in Germany boosted market's sentiments later in the week. Though, markets are likely to gain some ground in the coming week with Euro regaining its strength but gains in markets could be limited.	Weekly return on major Global Indices Data of US and European markets taken from August 05 to August 12, 2010 Data of Asian markets taken from August 06 to August 13, 2010 Weekly Change in the Composites of S&P 500 Industry Adj. Mkt. Cap as on 12-08-10 Adj. Mkt. Cap as on 05-08-10 % Change Energy 10,77,353  11,31,095  (4.75) Materials 3,47,334  3,60,827  (3.74) Industrials 10,29,341  10,85,964  (5.21) Cons Disc 10,05,490  10,41,750  (3.48) Cons Staples 11,31,305  11,41,663  (0.91) Health Care 11,54,818  11,72,673  (1.52) Financials 15,74,288  16,63,462  (5.36) Info Tech 18,05,263  19,05,720  (5.27) Telecom Services 3,09,503  3,08,753  0.24  Utilities 3,68,615  3,74,104  (1.47)
Key Events
Global Key Events More Americans unexpectedly filed applications for unemployment insurance last week. Initial jobless claims rose by 2,000 to 4,84,000 in the week ended Aug. 7. The trade deficit in the US unexpectedly widened in June to the highest level since October 2008 as consumer goods imports rose to a record and exports declined. The gap expanded USD 7.9 bn, the most since record-keeping began in 1992, to USD 49.9 bn in June. The UK's trade deficit narrowed more than forecast in June as exports rose to a two- year high. The goods-trade gap shrank to GBP 7.4 bn from GBP 8 bn in May. Exports jumped 4.3% to the highest since June 2008, and imports rose 1%. European industrial production unexpectedly declined in June, led by a drop in durable consumer goods. Output in the economy of the 16 nation's euro region dropped 0.1% from May, when it increased 1.1%. German exports rose more than economists forecast in June as the global recovery helped bolster an export-led expansion in Europe's largest economy. Sales abroad, adjusted for working days and seasonal changes, rose 3.8% from May, when they increased a revised 7.9%. China's industrial output rose the least in 11 months, retail sales growth eased and new loans climbed less than estimated, adding to signs that a slowdown is deepening. Production rose 13.4% in July from a year earlier, the statistics bureau said. Retail sales grew an annual 17.9% in July. China was a net buyer of Japanese bonds for a sixth straight month in June which is the biggest annual increase on record dating from 2005, according to a report released today by the ministry of finance in Tokyo. China purchased a net 456.4 billion yen of Japanese debt in June, which followed a net buy of 735.2 billion yen in May. Japan's current-account surplus unexpectedly shrank for a second month in June as export growth cooled in a sign the recovery in the world's second-largest economy is losing momentum. The gap narrowed 18% to Yen 1.047 tn from a year earlier.	Domestic Key Events The Centre's indirect tax collections grew a strong 46.2% in the first four months of the current fiscal from a year ago, pointing at a pick up in economic activity in July after industrial production growth in June came in below expectation.The total indirect tax mop for April-July was Rs 96,223 crore, driven largely by customs collections, which grew over 70% in this period to Rs 41,545 crore. Govt will impose a 10% import tax on power equipment for big projects within weeks to help level the playing field between domestic and foreign firms jostling in what may soon be the world's biggest market. The tax would reverse a policy of zero import duty on equipment for mega projects introduced to meet India's urgent capacity shortages. Government agreed to allow import of Chinese-made telecom equipment by leading telecom operators in India. The decision was taken after Prime Minister's Office (PMO) level talks. By this new instruction the department of telecommunications (DoT) will allow leading operators to import equipments, which have been stuck for over eight months and were menacing the launch of 3G services. Food inflation rose to 11.4% for the week ended July 31. On an annual basis, cereals turned expensive by 6.97%. Within this group, prices of pulses soared by over 20% while rice and wheat increased by 6.89% and 7.93%, respectively. India has allowed export of 1,50,000 tonnes to 2,00,000 tonnes of sugar that was imported by millers but could not be shifted out of the port due to a shortage of railway wagons. Indian millers had asked the government to allow exports of about 7,50,000 tonnes of imported sugar, which has piled up at a key port due to a shortage of railway wagons. Growth in industrial production slipped to its slowest pace in 13 months, whereas food price inflation shot through the double digit mark yet again. IIP for the month of June to be only 7.1% higher than its level a year ago, way below the May growth rate of 11.3% and lower than markets expectation. State-owned BHEL is in the process of setting up new manufacturing plants at Pudukottai in Tamil Nadu for which it would invest Rs 293 crore and another at Jagdishpur in Uttar Pradesh at an investment of Rs 230 crore.
Derivatives
Nifty ended on positive note at 5452.10 marks gaining 0.24% during the week. The Nifty August futures ended at 5,458.35 (LTP) with a premium of 6.25 points. If we look at the derivatives data we could see that Nifty future prices ended in the positive territory along with incline in open interest as well a incline in the cost of carry, this is an indication of long position is being built up at lower level and Nifty may take upside of 100 points in coming week. Nifty may face resistance at higher levels of 5,520 to 5,550 whereas on the downside support is seen at 5,300-5,350. During the week, there was significant accumulation of open interest in OTM Call and put options. Most of the open interest builds up in the range of 5,200-5,400 put and 5,500- 5,600 strike call options. significant short accumulation witnessed in the 5300 strike put and 5600 strike call option, indicating Nifty is likely to move between these levels. The Put-Call ratio of open interest increased during the week from 0.94 to 1.03 levels. The options concentration has shifted to the 5,300-5500 strike put option. The Volatility Index (VIX) remained low during the week and closed at 16.74%. Market participants should be watchful at current levels as any up move in volatility may trigger more downsides in the markets. Volatility has a strong inverse correlation with markets. The CNX IT index ended the week at 6,116.70 marks losing 2.29%. The CNX IT Futures prices declined with decline in the open interest along with incline in cost of carry this is an indication of closures of short position and fresh long position is being built up. For the coming week, immediate support for the Index is seen in the range of 6,000-6050 mark, whereas on the upside resistance is seen at 6,350- 6,400 levels. During the week the bank Nifty Index ended on a positive note at 10,737.35 rose by 3.41%. If we look at the derivatives desk we can see that the bank Nifty futures prices increased along with an overall addition of open interest but with decline in the cost of carry, this is an indication closure of long position. For the coming week bank Nifty support is seen in the range of 10,500-10,550 levels whereas on the upside stiff resistance would be faced at 10,850-10,900 levels. FIIs were net seller in index futures to the tune of Rs 1,127 crore, stock future 1,094 crore while in the index options FII were net buyer of 4,346 crore. The overall mood is cautious with upward bias. 5,520 to 5,550 levels for the Nifty continue to be an immediate resistance. Further. Significant short accumulation witnessed in OTM 5,600 strike call and 5,300 strike put & lower volatility is indicating a range bound market. Overall, the index is expected to remain in a broad range and settle around 5,300-5,550 levels. The market will continue to take cues from global markets; fund flows and risk appetite. trader can short 5,700 strikes Call and short 5,300 strikes put of Nifty for September expiry.	Open Interest in Nifty Future vis-à-vis Nifty Most Active Contracts Put-Call Ratio Volatility Index FIIs Cumulative trailing 5 day's data Particulars Buy Sell Net Index Futures 6,723.94  7,851.21  (1,127.27) Index Options 24,167.57  19,821.31  4,346.26  Stock Futures 6,074.28  7,168.54  (1,094.26) Stock Options 1,636.77  1,915.84  (279.07) *From August 06 to till August 12(Source: NSE)
Debt
Overnight rates have firmed up during the week as cash conditions turned slightly tight after government auctioned bonds worth Rs 130 billion. Banks are now once again borrowing from RBI. On LAF window, average daily reverse repo transaction fell to Rs 1,442 crorefrom last week's Rs 2,929 crore and average daily repo transaction rose to Rs 6,914 crore from Rs 4,247 crore last week. FIIs continued to remain net buyers in the market with buying worth Rs 1,252.2 crore compared to 2,288.6 crore buying in the previous week. Similarly, MFs continue to remain net buyers in the debt market, with Rs 2,613.7 crore (4 days) buying compared to Rs 3,021.6 crore of buying in the previous week. Bond prices recovered slightly during the week after central bank deputy governor's comments on inflation gave soothing relief to investors and data showed industrial output rose at its slowest pace in 13 months. Bond prices started the week on higher note following RBI's deputy governor Subir Gokarn said that adequate measures had been taken to control inflation and food prices would begin to ease on the back of good monsoon rains. Prices eased somewhat during the middle of the week as investors awaits industrial production data before taking any fresh position. Profit booking at higher levels also cooled prices. Later, bond prices remained flat as higher food inflation negate effect of lower IIP. Government data showed industrial output grew just 7.1% in June 2010 compared to revised 11.3% rise in May 2010. While Food inflation rose 11.40% yoy for the week ended July 31 compared to 9.53% for the week ended July 24. Next week, bond prices are likely to consolidate as concerns over RBI's move to tame inflation prevails in the market. Liquidity in the market has once again tightened after government sold securities worth Rs 25,000 crore. However, Any spike in inflation for July which is to be announced on August 16, 2010 may trigger selling in bonds and consequently put pressure on prices. During the week, RBI sucked Rs 7,210 crore from the system under Liquidity Adjustment Facility (LAF) window while Repo transaction stood Rs 34,570 crore. On August 06, 2010, the GoI auctioned 7.46% CG 2017 worth Rs. 5,000 crore, 8.13% CG 2022 worth Rs. 5,000 crore, 8.32% CG 2032 worth Rs. 3,000 crore. On August 13, 2010, the GoI auctioned 7.17% CG 2015 worth Rs. 4,000 crore, 7.80% CG 2020 worth Rs. 5,000 crore, 8.26% CG 2027 worth Rs. 3,000 crore. On August 11, 2010 RBI auctioned 91-day Treasury Bills worth Rs 7,000 crore and 364-day Treasury Bills worth Rs 1,000 crore.	Call Rates Date Rate (%) 6-Aug 4.22 9-Aug 5.16 10-Aug 5.47 11-Aug 5.68 12-Aug 5.60 FIIs & MFs investment in Debt Market Period FIIs Net Investment (Rs. Crore) MFs Net Investment (Rs. Crore) 6-Aug 874.20  1,066.80  9-Aug -55.40  806.50  10-Aug 234.60  658.60  11-Aug -101.10  81.80  12-Aug 299.90  - Total 1,252.20  2,613.70  This Month 3,730.20  8,450.10   (Source: SEBI) Bond Yield (7.80% CG 2020) Date LTP (Rs.) YTM (%) 6-Aug 99.88  7.85  9-Aug 100.05  7.79  10-Aug 99.71  7.83  11-Aug 99.85  7.83  12-Aug 99.79  7.81    Spread Liquidity Adjustment Facility Date Reverse Repo (Rs. Crore) Repo (Rs. Crore) 6-Aug 6,505  0  9-Aug 180  3,000  10-Aug 215  2,500  11-Aug 190  16,530  12-Aug 120  12,540  This week 7,210  34,570  This Month 17,780  53,505
Commodity
Crude oil prices started the week on a higher note. The crude prices were up in line with the global equity markets. Even a stronger dollar could not bring the prices down. But the crude oil prices fell immediately after as the dollar continued to strengthen. The prices continued to move substantially down even after the energy department reported a decrease of 3 mn barrels in the crude stocks for the week ended 6 August. Moreover, the statement issued by the Fed that the economic recovery is likely to be more modest in the near term than had been anticipated led the crude prices further lower. The downward rally in the crude prices continued after the release of disappointing economic data. The US Labor Department reported that the number of initial claims for regular state unemployment insurance benefits rose more than expectation and to the highest level since February. Finally, the crude prices registered a substantial fall of more than 6% on w-o-w basis in the international as well as the domestic markets. The crude oil prices are expected to stay flat in the coming week. A further fall in the crude prices cannot be anticipated as the prices have already fallen too far too fast. But, a price rise is also highly unlikely as the economic outlook seems gloomy. Moreover, the economic data so far has also not been much encouraging. Gold prices opened the week's trade on a slightly upward note as the US jobs data released during the last weekend stoked fresh fears regarding the economic recovery. But, immediately after the yellow metal pared the initial gains to fall on the back of strengthening dollar. The prices continued to slip as the dollar further gained strength. The gold prices bounced back towards the end of the week as the investors' confidence regarding the global economic recovery faltered after the release of the US jobless claims. Moreover, gold also has gained the Federal Reserve said economic growth is slowing and it will revive its Treasury purchases, and on negative production data globally. The domestic gold prices also moved in sync with the trends in the international gold prices. The domestic gold prices finally ended higher as the fresh buying emerged due to the ongoing festivities and the upcoming wedding season. The gold prices finally registered a gain of around 2% in both the markets on w-o-w basis. The gold prices are likely continue with the upward rally in the coming month on the signs of the slowing economic recovery. Moreover, a revival in the treasury purchases is also likely to push the prices further up. The domestic prices may also move up in line with global trends and due to the ongoing festival season.	Weekly change in Crude prices per Barrel   12-Aug 05-Aug Change (%) Intl Crude Oil Prices (USD) 75.90 81.61 (6.99) Domestic Price (Rs) 3,540.77 3,768.18 (6.04)   Inventories (weekly change) Week ended Change Total Inventory 06-Aug-10 (3.0) mn barrels 355.00 mn barrels Weekly change in Gold prices in Rs/10gms   12-Aug 05-Aug Change (%) London pm fix(USD/troyoz) 1,213.00 1,192.50 1.72 Mumbai (Rs/10gms) 18,400.00 18,035.00 2.02
Forex
Domestic currency failed to sustain at higher levels during the week and retreated to 3-week lows, close to 47 level against the dollar. Demand for US dollar was strong during the week as some importers bought dollars to cover their USD exposure. Further, a sluggish Indian equity market due to global economic outlook also weighed on Rupee. Japanese Yen also gained against INR as it continues to strengthen against USD and tested multi-year highs stronger than 85 against the dollar. However, INR managed to register gains against Euro as the European currency slid against USD. INR/ 13-Aug 6-Aug %Change USD 46.58 46.02 (1.22) EURO 60.05 60.70 1.07  YEN 54.10 53.42 (1.27)	INR vs. USD and Euro
Economy
Indicators Latest Previous Change Investment Deposit Ratio (%) 31.14 (Jul 30) 31.36 (Jul 16) Credit Deposit Ratio (%) 72.36 (Jul 30) 73.25 (Jul 16) Money Supply (%) 14.70 (Jul 30) 15.20 (Jul 16) Bank Credit (%) 19.70 (Jul 30) 21.30 (Jul 16) Aggregate Deposits (%) 14.00 (Jul 30) 14.60 (Jul 16) Forex Reserves USD bn 287.35 (Aug 06) 284.18 (Jul 30)
Results Declared
Companies Total Income (Rs. Crore) Net Profit (Rs. Crore) Qtr ending June '10 Y-o-Y  %Change Qtr ending June '10 Y-o-Y %Change Aurobindo Phar 868.81 10.32  63.34 (29.92) Power Grid Corp 2,149.69 17.96  703.18 28.64  GMR Infra 78.02 335.87  -6.96 (295.51) Jain Irrigation 725.92 26.66  52.31 (5.90)  Reliance Cap 227.02 (63.18) 50.41 (51.66) Adani Enter 933.69 (65.74) 84.16 6.90  Educomp Sol 173.18 8.01  44.22 21.92  Great Offshore 248.85 8.36  26.73 20.41  Nagarjuna Constr 1,087.77 8.52  41.39 8.29  Piramal Health 570.37 0.11  66.91 (9.72) Tata Motors 10,485.56 55.94  395.72 (22.98) Bharti Airtel 9,373.70 3.50  1,930.90 (28.15) MTNL 1,033.90 (4.74) -451.44 863.59  Videocon Inds 2,905.39 17.50  153.69 23.59  Apollo Hosp 526.89 25.26  39.27 (12.34) Hindustan Copp 239.32 (35.06) 26.2 11,809.09  Ranbaxy Lab 1,234.49 10.07  -0.08 (100.01) Tata Power 1,995.44 (6.02) 262.98 (33.75) Tata Steel 6,599.91 16.57  1,579.39 99.97
Weekend Platter on http://www.indiabulls.com/securities/research/equity_analysis_report/Special_Report_PDF/WP_Aug%2013.pdf & http://www.indiabulls.com/securities/mailermis/weekly-reports/weekend-platter-13Aug2010.aspx Index Outlook: Heavyweights to the rescue Sensex (18,167) Odds piled up against the progress of the ongoing rally last week. Slowing economic growth in the US and Europe, domestic first quarter earnings doing likewise and indices nearing critical resistance caused a mid-week wobble in the Sensex. Rear-guard action by some index heavy-weights such as SBI and Tata Motors that set the sky ablaze with their pyrotechnics prevented a deeper cut. Small and mid cap stocks appeared a trifle lost. The biggest positive going for the market at this point is the consensus that a crash is imminent. Given the dubious track-record of such opinions, market could just manage to spring a surprise this time around too. Volumes in derivative as well as cash segment were high as investors churned stocks aggressively in anticipation of another correction. Open interest has climbed above Rs 1,70,000 crore again. High index put call ratio however means that short-covering can cushion any serious correction. BSE Smallcap Index recorded a new 30 month high of 9,788 last week. This index is however nearing the key intermediate term resistance at 10,000 that can be the termination point of the rally from March 2009 low. The BSE midcap index has moved above the corresponding resistance at 7,300 and is holding strongly above it. The 10-day rate of change oscillator is in the positive zone though its movement is closely hugging the zero line, indicating a neutral bias. The 14-day relative strength index is also hovering around 55 indicating that a break is possible in either direction. Weekly indicators are also trudging sideways since last November. There is no alteration in our medium term view for the Sensex. The first medium-term target we are working with is between 18,300 and 18,600. It is likely that the index reverses lower from this region to head towards the lower base of this range, below 16,000. If this resistance zone is surpassed, next target lies around 19,300. Last week's correction in the Sensex is not serious enough to cause any consternation. In fact, the short-term trend is sideways with a positive bias since July 14. Though the index is heading higher once more, it will face resistance at 18,310 and 18,385 in the near-term. Reversal from these levels can cause a sideways move between 17,850 and 18,400 for few more sessions. Support to watch out for in the days ahead is the one at 17,750. Close below this level will imply a reversal in the short-term up trend. The medium-term uptrend will however be under threat only on a close below 17,400. Nifty (5,452.1) The Nifty declined to the intra-week low of 5,372 before reversing higher on Thursday to close the week marginally in the green. The targets for this move are 5,459, 5,513 and 5,567. Since the first target has already been achieved, investors ought to tread a little cautiously in the early part of the week. The resistance zone around 5,550 indicated last week will also impede the progress of the index. A reversal below 5,550 will result in the index declining to 5,390 or 5,327 in the days ahead. Short-term traders can continue to buy in declines as long as the index trades above the second support. Medium term trend deciding level for Nifty is 5,200. Investors ought to continue to stay wary from a medium term perspective since the index is at the upper end of its medium term trading range. Failure to move past this ceiling can cause another decline towards the floor of this range that is at 4,700. Target on a strong move above 5,550 stays at 5,780. Global Cues Global stocks received a sharp setback last week on dour economic readings from US and Europe. Major benchmarks reversed to close between 2-4 per cent lower once more casting doubts on the medium-term trend. CBOE VIX closed higher in all five sessions of the week as nervousness returned to capital markets. The intra-week high for this index was 27.2. The Dow reversed lower from the intra-week peak of 10,720 to shed 4 per cent from those levels. First short-term support is around 10,300 where it is currently halting. But it can decline to 10,180 or 10,040 in the near-term. Close below 10,040 will signal that a more serious correction is unfolding. The fact that this index has closed below its 200-day moving average for the week is also a cause for worry. What is notable in last week's trade is the fact that Asian benchmarks that had been very resilient and moving on to fresh highs over the past two weeks buckled down to end in the red. Shanghai Composite Index too closed 51 points lower last week. This index needs to close above 2,770 to move to a place of relative safety. — Pivotals: Reliance Industries (Rs 979) The counter fell 2 per cent last week in line with our expectations. It declined below our second support level of Rs 964 and found support at Rs 957, before bouncing up slightly. The near-term trend is down for RIL from its late June peak of Rs 1,092. This downtrend remains in place as long as the stock trades below Rs 1,025. The stock is testing its key support level of Rs 980. A strong close below this level can pull the stock lower to Rs 957 and then to Rs 936 in the short-term. Traders can hold their short position with stop at Rs 1,000. Inability to decline below Rs 957 would be a signal for taking profits off the table and tread cautiously. Key resistances for the ensuing week are at Rs 1,010 and Rs 1,030. The stock is in a medium-term downtrend. As long as it traders below Rs 1,050, it has the potential of testing support level of Rs 950 in the medium-term. Subsequent important support is at Rs 920. State Bank of India (Rs 2,849.4) The stock turned red-hot on Thursday following its Q1 results announcement. It finished the week with 8.7 per cent gain, recording an all-time high at Rs 2,879. Both medium and short-term trends are up for the stock. The short-term trend would stay positive as long as the stock trades above Rs 2,700. Traders can hold their long position with stop-loss at Rs 2,780. The stock can rally to the resistance of Rs 2,880 and then Rs 2,900 in the short-term. Failure to exceed beyond the first resistance would signal profit booking and the stock could witness correction to Rs 2,750 or Rs 2,700. Supports below Rs 2,700 are at Rs 2,650 and Rs 2,600. Medium-term investors can continue to hold the stock with stop at Rs 2,350. Tata Steel (Rs 527) Following volatile movement between Rs 507 and Rs 553, the stock closed the week with loss of Rs 4. It is experiencing selling interest in the band between Rs 540 and Rs 550. Initiate fresh short positions if the stock declines below Rs 515 with stop at Rs 530. It can test support at Rs 500 or Rs 490 in the near-term. Significant resistances are at Rs 550, Rs 564 and Rs 580. The stock has been on a medium-term down trend from this April peak. Emphatic drop below Rs 490 will drag the stock lower to Rs 470 and to Rs 450 in the medium-term. However, strong rally above Rs 575 will contradict this downtrend. Infosys Technologies (Rs 2,780.2) The stock retreated by slipping almost 3 per cent last week. It failed to surpass the resistance at Rs 2,900 and moved back to Rs 2,800 and then to Rs 2,757 (intra-week low), in line with our anticipation. In the ensuing week, it can consolidate sideways in the zone between Rs 2,730 and Rs 2,830. Tumble below Rs 2,730 will signal negative bias and can pull the stock down to Rs 2,700, a key support level. We reiterate that investors with medium-term horizon can consider holding the stock with stop at Rs 2,600.  Index strategy: Long strangle to play rise in volatility Is Nifty ready to break past its range? Well, the drop in NSE Volatility Index does seem to suggest so. The VIX ended Friday at 16.74, the lowest in closing-day basis since its launch in April 2008. A low VIX bodes well for a market uptrend. However, given the strong resistance for the index at 5,550, the drop in implied volatility of options, a corrective action too could be in the offing. Traders with a high-risk appetite can consider setting a long strangle to play the likely rise in volatilities and benefit from a significant move in either direction of the index. This can be done by buying Nifty Aug 5,500 call, which closed at Rs 36 and Nifty Aug 5,400 put that ended the week at Rs 38. The strategy will involve an initial debit of Rs 75 per lot. You can stagger the purchase of the call and put on Monday depending on how it opens. Note that since the two options used are out-of-the-money, you will need a larger move in the index to earn profits. In this case, the spread will become profitable only when the index breaches past 5,575 or trudges below 5,325. Exit Strategy If the index moves decisively past 5,500, the strike price of the option purchased, exit the long put while running the profit on the call. In a similar fashion, exit the long call first if the index moves lower than 5,400, the strike of the long put. The maximum loss (on expiry) would be limited to the cost of setting the spread, i.e. Rs 75 in this case. Sizzling stocks: Tata Communications (Rs 330.2) The stock found key long-term support in the band between Rs 230 and Rs 240 in early June 2010 and has been on a short-term uptrend. It surged more than 6 per cent on Monday, this bullish momentum prolonged till the stock ended end the week with a 20 per cent gain. The weekly volume is extra-ordinary. The stock is currently testing significant long-term resistance in the zone between Rs 330 and Rs 340. Strong weekly close above this zone will take the stock ahead to Rs 370 and to Rs 390 in the medium-term. Inability to surpass the resistance zone in the near-term will drag the stock lower to its immediate support level of Rs 295–300 range. Key support below this level is at Rs 270. Raymond (Rs 374.9) Raymond was more enthusiastic by gaining Rs 133 or 55 per cent last week. The volume traded was astonishing. From March 2009 low of Rs 68, the counter has been on an intermediate-term uptrend. With previous week's unusual surge, the stock has breached its key long-term resistance at Rs 350 conclusively. Immediate resistance for the stock is at Rs 400 and Rs 410 band. Both the daily and weekly relative strength indices have entered in to the overbought territory signalling near-term cautiousness. Therefore, a reversal from the current levels can pull the stock down to Rs 350 or to Rs 310 in the medium-term. On the other hand, as long as the stock trades above Rs 280, it has the potential to reach target of Rs 460 and Rs 480 in the long-term. — Stock strategy: Weakness in Aban, Suzlon Aban Offshore (Rs 832.95): The long-term outlook remains negative for Aban Offshore as long as it rules below Rs 1,245. The short- to-medium term outlook also remains weak. The stock has turned weak after it hit its resistance on the recent climb. Aban Offshore now finds an immediate support at Rs 682 and resistance at Rs 902. F&O pointers: The Aban Offshore futures (market lot 250) shed open interest, indicating that traders preferred to book profits. The fact that the September futures is quoting at Rs 826, lower than the current series price, indicates accumulation of short position. The August series, however, ended in a slight premium with respect to the spot close of Rs 831.3. Options are not very active. Strategy: Consider going short on Aban Offshore with a stop-loss at Rs 890 for a target of an initial Rs 750. Adjust the stop-loss suitably to protect the profit. Alternatively, traders can consider writing Rs 900 call option, which ended on Friday at Rs 5.85. Note that writing options requires margin money commitments and is risky as profit is limited to the premium received while losses can be unlimited if the stock moves against your position. Traders with a penchant for high risk only should consider this strategy. Suzlon (Rs 56.8): The outlook seems to be negative for Suzlon Energy. The stock finds crucial support at Rs 54.6 and resistance at Rs 61.5. A close below Rs 54.6 could weaken the stock to Rs 44 initially and then to Rs 34.25. F&O pointers: The Suzlon futures (market lot: 4,000) added fresh short position on Friday, indicating negative bias for the stock. Option trading, however, indicates strong support at Rs 55. Strategy: Consider shorting Suzlon futures only if it dips below Rs 54.6 with a stop-loss at Rs 59 for an initial target of Rs 50 and then Rs 44. Adjust the stop loss suitably so as to protect the profit, as Suzlon is a high beta counter. This strategy is for a slightly long period. Follow-up Last week, we had advised traders to consider going short on Ashok Leyland with a stop loss at Rs 72, which may have been triggered though it did provide some profit opportunities. However, we believe that Ashok Leyland is still under pressure and might touch our previous week's recommended level. The alternative strategy of writing 75 call is in the money. Traders could continue to hold on to it. FIIs offer cues on picking realty stocks Even as the real estate sector remained the stock market underdog for most part of 2008 and 2009, retail investors seem to have picked stocks selectively, on the back of beaten-down valuations and prices. Stocks such as Ansal Buildwell, Ansal Housing, Lok Housing, D.S. Kulkarni Developers, BSEL Infrastructure Realty and Prajay Engineers Syndicate all saw a sharp increase in retail holding between the peak market of December 2007 and now (June 2010). For instance, retail investors hiked their stake in BSEL Infrastructure Realty from 15 per cent in December 2007 to 49 per cent now. In Ansal Housing, holdings over the same period were hiked from 22 per cent to 33 per cent. With the price earnings multiple battered between 1-2 times during the March 2009 lows, these stocks may have been ostensibly ripe candidates for investing. Fundamental risks No doubt, many of these stocks have delivered 200-300 per cent returns. However, the fundamental risks remain very high. To understand the impact of the downturn on these small companies, sample this: BSEL's consolidated sales for FY-10 was Rs 30 crore, about one-tenth of its sales of Rs 374 crore in FY-08. Net profits plunged to Rs 87 lakh from Rs 77 crore! These companies, without a strong niche or any specific strategy to protect themselves in a difficult market, may take a long while to see a pick-up or instead just operate at a new 'reduced' normal. Hence, the possibility of these stocks receiving any re-rating after the initial run-up remains muted. The risks of holding these stocks also remain high as a market correction may drag them to depths again. Investors would, therefore, do well to book profits in these stocks and exit them. FII choices On the other hand, FIIs have been quite choosy in picking stocks from this sector and have not been lured by short-term returns. Their exposure, either through the market or through qualified placements in stocks such as HDIL, Anantraj Industries, Unitech and Puravankara Projects, between December 2007 and now clearly suggests that they have been careful to pick more sustainable recovery models. Conversely, they quickly off-loaded stocks such as Prajay Engineers Syndicate, D.S. Kulkarni Developers, Ganesh Housing and Ansal Housing; perhaps rightly so, if their current financial performance is anything to go by. Investors may, therefore, also additionally look for cues from FIIs, as they are bound to remain choosy in picking stocks from the realty sector. Worth of currency futures exchange One of the key advantages of an exchange traded product is the robust risk management systems. For most traders and investors in India, the currency market has traditionally been perceived as a market for banks and OTC brokers. It was with a view to enable entities to manage volatility in the currency market that the RBI, on April 20, 2007, issued comprehensive guidelines on the usage of foreign currency forwards, swaps and options in the OTC market. At the same time the RBI set up an Internal Working Group to explore the advantages of introducing currency futures. Exchange Traded Currency Futures was introduced in August 2008. They allowed a resident Indian to take a position in the currency market, thereby opening up the currency market. Volumes in the OTC market are being driven by market's ability to meet the needs of participants. For example, it is used by importers and exporters to hedge payables and receivables; borrowers find it an effective way to hedge foreign currency loans and residents find it an effective tool to hedge investments offshore. Participants need to have an underlying exposure to be able to book trades in the OTC market. Mechanics Currency futures are standardised contracts with fixed lot sizes ($1,000 per contract of USD-INR futures) traded on recognised stock exchanges, as opposed to currency forwards which can be customised according to the requirements of the client by banks or OTC brokers. The mechanics of exchange-traded currency futures market differs from the OTC market, in that it provides a transparent market determined rate that is available to all market participants. Market participants need not have an underlying exposure in currency to trade. The futures contract is a cash settled contract. Unlike the forward market where only on maturity settlement takes place by delivery of one currency for the other, in the case of an exchange traded futures contract, mark to market obligations are settled on a daily basis in rupees. As the profits or losses in the futures market are collected and paid daily, the scope for building up of mark to market losses in the books of various participants gets limited. One of the key advantages of an exchange traded product is the robust risk management systems. The counterparty risk in the futures market is eliminated by the presence of a clearing corporation. The corporation is the counterparty for every transaction on the exchange. In the unlikely event of a default, the corporation will fulfil the obligations of the defaulting party, and then proceed to recover dues and penalties from them. Over the last year, market participants have realised the benefits currency futures market bring them in the form of an efficient, transparent, easy to access and cheap medium to hedge and take a position. The small lot sizes in the market make it attractive for smaller corporates and SMEs and those who will get a competitive and transparent rate on the exchange. The average daily volumes in the currency futures market in May 2010 was $8.33 billion, while the turnover in the forwards market was $5.7 billion. This is a feature unique to India and Brazil where the futures market has overtaken the forwards market in volumes. Suzlon's woes continue; focus on emerging markets to improve volumes Suzlon Energy's consolidated net losses for the quarter ended June 2010 worsened to Rs 912 crore — almost double the losses it incurred a year ago. Higher foreign exchange losses — notional as well as incurred — and lower volumes, especially in subsidiaries, were the key reasons for losses. Consolidated revenues, too, declined 42 per cent even as the company's standalone sales grew 60 per cent year-on-year (y-o-y). Consolidated sales is not fully comparable with the year-ago numbers as the company's gearbox unit, Hansen Transmissions International, ceased to be a subsidiary and has become an associate company. The gearbox segment accounted for 15 per cent of the revenues in the June 2009 quarter. Increase in operating losses, even after exclusion of foreign exchange losses, remains a key cause for concern. A revival in volumes may be the only solution to move out of the loss zone. There remains some hope on this front as Suzlon's order intake has been improving over the last couple of quarters. Between May 2010 and now, Suzlon's orders have grown by a healthy 30 per cent to 1,459 MW. India and China accounted for 63 per cent of the orders while exposure to Europe stood reduced to 11 per cent. The order break-up suggests the following: one, Suzlon has clearly shifted its focus to Emerging Markets as against the traditional regions of U.S and Europe. For instance, India accounts for 580 MW of the total order book at present — double the domestic order book that stood two year ago. This essentially means higher profit margins as Indian orders have historically provided lucrative operating profit margins as high as 25 per cent; two, the geographic shift in orders may also mean lowered risk of defaults or postponement of orders awarded. Such risks at present remain higher in European nations such as Spain or Greece. The company's European subsidiary, Repower, also appears to be making slow progress. Its order book expanded by 15 per cent over the previous quarter, what with offshore wind turbine demand showing promise. Equity expansion Even as the order book, valued at Rs 22,700 crore, is expected to start translating into revenues towards the end of FY11, Suzlon may continue to face challenges in expanding its per-share earnings as a result of significant equity expansion. It has temporarily been relieved of debt worries as it changed the conversion terms of its foreign currency convertible bond (FCCB) issues to bring it closer to current market prices. It also raised about Rs 1,200 crore through a rights issue. Current debt-equity ratio at less than 1.5 times, therefore, appears comfortable. However, its equity expansion — 12 per cent through the rights issue and another possible 15 per cent through conversion of FCCBs into equity — is likely to keep per-share earnings muted over the next few quarters. Strong & Weak  Stocks for 16th August 2010 This is list of 10 strong stocks:  Tata Motors, Tata Comm, Petronet, SBIN, Bank Of India, Sun TV, UCO Bank, Allahabad Bank, Orient Bank & Titan.  And this is list of 10 Weak Stocks RNRL, Nagar Const, Punj Lloyd, Rcom, R Power, EKC, Moser Bear, ABB, Reliance &  Rel Infra. The daily trend of nifty is in Uptrend  Supp / Resis SPOT/CASH LEVELS FOR INTRADAY FOR 16th August 2010 Indices Supp/Resis 1 2 3 Nifty Resistance 5480.57 5509.03 5541.57 Support 5419.57 5387.03 5358.57 Sensex Resistance 18268.14 18369.25 18478.11 Support 18058.17 17949.31 17848.20 SUPPORT / RESISTANCE LEVELS FOR INTRADAY TRADING IN CASH MARKET FOR 16TH AUG 2010 Company Name  Exchange LTP* R1 #1 S1 @1 R2 #2 S2 @2 R3 #3 S3 @3 ABB Ltd. NSE 782.65 787.70 777.90 792.75 773.15 797.50 768.10 Allahabad Bank NSE 211.25 213.33 208.73 215.42 206.22 217.93 204.13 Bank of Baroda NSE 779.40 787.87 770.47 796.33 761.53 805.27 753.07 Bank of India NSE 462.95 471.37 456.02 479.78 449.08 486.72 440.67 Banking Index Benchmark Exchange Traded Scheme (Bank BeES) NSE 1082.05 1090.70 1068.70 1099.35 1055.35 1112.70 1046.70 Everest Industries Ltd. NSE 261.90 291.90 246.00 321.90 230.10 337.80 200.10 Everest Kanto Cylinder Ltd. NSE 117.85 119.10 116.75 120.35 115.65 121.45 114.40 Everonn Education Ltd. NSE 605.00 619.60 588.20 634.20 571.40 651.00 556.80 Moser Baer India Ltd. NSE 62.25 63.50 61.00 64.75 59.75 66.00 58.50 Nagarjuna Construction Co. Ltd. NSE 160.50 162.92 157.97 165.33 155.43 167.87 153.02 Nagarjuna Fertilisers & Chemicals Ltd. NSE 30.20 30.65 29.90 31.10 29.60 31.40 29.15 NSE Index NSE 5452.10 5480.57 5419.57 5509.03 5387.03 5541.57 5358.57 Oriental Bank of Commerce NSE 419.60 426.90 407.90 434.20 396.20 445.90 388.90 Petronet LNG Ltd. NSE 105.55 107.40 104.00 109.25 102.45 110.80 100.60 Punj Lloyd Ltd. NSE 116.75 118.27 115.77 119.78 114.78 120.77 113.27 Punjab National Bank NSE 1139.05 1152.17 1128.57 1165.28 1118.08 1175.77 1104.97 Reliance Capital Ltd. NSE 763.70 771.13 759.13 778.57 754.57 783.13 747.13 Reliance Communications Ltd. NSE 168.10 172.05 165.60 176.00 163.10 178.50 159.15 Reliance Industrial InfraStructure Ltd. NSE 913.00 952.93 869.03 992.87 825.07 1036.83 785.13 Reliance Industries Ltd. NSE 979.10 991.77 968.47 1004.43 957.83 1015.07 945.17 Reliance Infrastructure Ltd. NSE 1083.75 1104.37 1070.77 1124.98 1057.78 1137.97 1037.17 Reliance Natural Resources Ltd. NSE 38.55 39.17 38.17 39.78 37.78 40.17 37.17 Reliance Power Ltd. NSE 155.25 156.78 154.03 158.32 152.82 159.53 151.28 State Bank of India NSE 2850.25 2891.97 2796.27 2933.68 2742.28 2987.67 2700.57 Sun Pharmaceutical Industries Ltd. NSE 1750.90 1758.92 1738.97 1766.93 1727.03 1778.87 1719.02 Sun TV Network Ltd. NSE 509.40 542.15 482.80 574.90 456.20 601.50 423.45 Tata Chemicals Ltd. NSE 363.20 367.03 359.83 370.87 356.47 374.23 352.63 Tata Coffee Ltd. NSE 468.05 476.97 462.07 485.88 456.08 491.87 447.17 Tata Communications Ltd. NSE 329.55 336.62 319.32 343.68 309.08 353.92 302.02 Tata Consultancy Services Ltd. NSE 854.40 865.53 840.63 876.67 826.87 890.43 815.73 Tata Motors Ltd. NSE 1013.40 1029.77 1002.27 1046.13 991.13 1057.27 974.77 Tata Power Company Ltd. NSE 1326.85 1341.43 1310.73 1356.02 1294.62 1372.13 1280.03 Tata Steel Ltd. NSE 527.20 536.87 520.67 546.53 514.13 553.07 504.47 Tata Teleservices (Maharashtra) Ltd. NSE 24.40 24.73 23.98 25.07 23.57 25.48 23.23 Titan Industries Ltd. NSE 2983.85 3065.55 2861.60 3147.25 2739.35 3269.50 2657.65 UCO Bank NSE 102.50 103.98 101.13 105.47 99.77 106.83 98.28    *LTP stands for Last Traded Price as on Friday, August 13, 2010 4:04:19 PM     #1R1   stands for Resistance level 1                         @1S1   stands for Support level 1     #2R2   stands for Resistance level 2                         @2S2   stands for Support level 2     #3R3   stands for Resistance level 3                         @3S3   stands for Support level 3          The levels given above are with respect to previous closing price on the NSE / BSE.  Buy / Sell (Aug 13, 2010)   Buy Sell Net FII 2452.25 2402.01 + 50.15 DII 1625.92 1592.54 + 33.38 *Disclosure: I don't have any positions in the above said scrips & NIFTY FUTURES. Disclaimer: "I do not make any warranties, express or implied, as to results to be obtained from using the information in this e-letter.  Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report. -- Arvind Parekh + 91 98432 32381