| Market Outlook | ||
Last week, Nifty managed to close at 5,948.75 on the back of encouraging advance-tax figures and RBI's decision to ease the liquidity through open market operations and reducing SLR. Today, Indian market is likely to open on a flat to negative note following weak sentiments from Asian markets. Asian markets were mostly lower on report that South Korea would carry out firing drill near the border during the day. Resistance for Nifty now seems at 5,980-6,034 while support stand at 5,905-5,846. On upside if level of 5,980 breaches decisively then we could see rise up to mark of 6,034 (50 Days simple moving average), on the lower side if level of 5,905 (20 Days simple moving average) is breaches then Nifty could retrace up to support of 5,846 mark. Bullish Trend can only be confirmed if Nifty trades above 6,034 level. Indian market is likely to move with positive sentiments in near term. The Q3 advance tax figures saw an overall increase of 15-20% year-on-year. Further, The RBI maintained key rates in its mid-quarter policy review and announced the purchase of Rs 48,000-crore government securities through open market operations (OMO), besides reducing SLR by 100 basis points to 24%. These measures are expected to ease the tight liquidity scenario. The IT sector gained significantly last week. The strength in the sector is likely to continue this week as well. Fresh long positions can be assumed in metals and sugar stocks from current levels or from lower supports of the Nifty at 5,846 levels. However, Short positions can also be assumed in telecom and Realty stocks if the Nifty fails to breach 6,034 levels on the upside | ||
| Tip for the day | ||||||||||||||||||||||||||||||||||||||||||
SAIL (BUY)
NETWORK 18 MEDIA (BUY)
SKS MICROFINANCE (SELL)
SINTEX (SELL)
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| US markets | ||
| US markets closed mixed on the options expiration day. Merger & Acquisition news lifted banking while better than expected results pushed technology stocks. Banking stocks were uplifted from reports that Marshall & Ilsley agreed to be acquired by BMO Financial in a deal valued at approximately USD 4.1 billion. Better than expected results from leading technology firms Oracle and Research in Motion pushed technology stocks higher. Oracle reported a 47% yoy jump in revenue to USD 8.6 billion while its net income rose to USD 1.87 billion, or 37 cents a share, from USD 1.46 billion, or 29 cents a share in the same period last year. Further, Research In Motion reported a 40% yoy growth in revenue to USD 5.5 billion while earnings were up 58% yoy earnings to USD 1.74. However, negative sentiments were generated on concerns of European debt crisis after Moody's cut Ireland's rating. | ||
| European markets | ||
| European markets witnessed selling pressure as banking shares fell after ratings agency Moody's cut Ireland's rating. Moody's has slashed its credit rating on Ireland by five notches to Baa1 from Aa2 citing concerns over banking liabilities and economic prospects. Meanwhile, European leaders in Brussels agreed to set a permanent bailout fund for debt-stricken countries in the region by 2013. European Central Bank also said it will increase its capital base by Euros 5 billion (USD 6.6 billion) to Euro 10.76 billion. Markets ignored some of the better than expected economic reports including German business confidence. | ||
| Indian markets (Prev Day) | ||
| Today, the domestic bourses ended on a cheerful note after trading volatile for the majority of the session. The market started off the session on a volatile note, as the benchmark indices seen trading across the baseline during early trade. Most of the Asian stocks traded lower following a overnight loss in the US market as Moody''s announced it was reviewing Spain for a negative outlook, Portugal held a weaker-than-expected 3-month bill auctional, and Japan''s Tankan survey indicated manufacturers'' confidence was at its lowest point in about two years. The Japanese stocks fluctuated as the yen's depreciation against the dollar buoyed carmakers while trading companies fell after metal prices dropped. A rangebound movement was witnessed till the final couple of hours and the benchmarks traded sideways. During the later part of the day, a sharp upmove was witnessed in the banking space, following the RBI announcement of slashing the SLR rates and the market surged to the positive terrain. Finally the benchmark indices managed to hold on to the gains and closed near their respective intraday highs. In the sectoral front, the IT space remained in limelight and carrying forward yesterday's gains, it surged by 2.79%. Further, the Banking, Metal and Realty sectors well supported the rally towards the end and advanced by 1.86%, 1.32% and 0.98% respectively. Both the Nifty and Sensex gained substantial momentum during the final hours and ended on a very strong note. At the end, Sensex closed at 19,864.85 up by 217.08 points. It touched an intraday high of 19,897.22 and low of 19,554.35. Nifty ended at 5,948.75 up by 56.45 points. It made a high/low of 5,956.15 and 5,855.05 respectively. | ||
Lokeshwarri S.K.
Sensex (19,864.8)
Market is at its capricious best this month, keeping both bulls and bears on tenterhooks. Just when most expected the Sensex to plunge below 19,000, it rebounded, to end the week closer to the 20,000 mark. Investors were seen nibbling at stocks that were unduly battered in the recent spate of scams. Lower inflation number, the RBI maintaining status quo on policy rates and increase in corporate advance tax also gave a leg-up to the index.
With the holiday season beginning in earnest from next week, a sharp move in either direction is highly unlikely. Stock prices could trudge sideways with a bullish bias over the remainder of 2010. Volumes were low in both cash and derivative segment. FIIs continued in the profit-booking mode. Open interest has crept above Rs 1,50,000 crore again and proportion of index puts is also increasing denoting that traders are expecting the market to decline further.
The short-term trend in the Sensex is currently up but momentum in the daily charts is sagging. Rate of change oscillator in the daily chart has declined in to the negative zone, while the relative strength index is moving sideways in the neutral zone. What is more worrying is that the oscillators in the weekly chart are also moving from bullish to bearish zone. Unless the index perks up soon, prices could slide lower from these levels.
The Sensex has gone nowhere in the last three weeks and is whipsawing in a narrow band between 19,100 and 20,200. Such a move is conducive to our medium-term view of the index moving in a wide trading band between 19,000 and 21,500 for few more weeks. The long and medium-term views for the index are positive and this sideways movement will be considered a base-building effort. Targets on a breach of the upper boundary are 23,031 and 24,098.
As we have been reiterating, this rosy scenario will receive a setback if the index closes below 19,000. We are assuming that the ongoing correction is retracing the upmove from the May low of 15,960.
A shallow sideways correction can result in a range-bound move as discussed above and a deep but swift correction will result in decline to 18,530 or 18,000 before the rebound. Weekly close below 18,000 is needed to signal that a correction of a larger degree is unfolding.
The Sensex can move higher to 20,025 or 20,317 next week. The index will continue to face strong resistance in the zone between 20,200 and 20,300 in the days ahead. Short-term view will turn positive on a close above 20,300. Such a move will indicate that the index can move close to its all-time high by the year-end.
Conversely, failure to move above 20,300 will result in the index remaining in the band between 18,800 and 20,300 for the rest of 2010. Supports for the days ahead will be at 19,582, 19,388 and 19,074. Close below 19,000 will take the index down to 18,565.
Nifty (5,948.7)
The Nifty too edged higher to record the intra-week high of 5,956. Short-term trend in the index is up and it can attempt to move higher to 5,988, 6,087 or 6,230 in the days ahead. The index will continue to face strong resistance in the zone between 6,030 and 6,100.
Presence of the 50-day moving average poised around this level adds to the significance of this hurdle. Traders can therefore book some profits on their long positions on a reversal from this zone. However, strong move above this zone will mean that the Nifty can move on to a new peak by this year-end. Short-term supports will be at 5,865, 5,809 and 5,721.
Our medium-term outlook for the index remains unaltered. Both long and medium-term trends are currently up. Current consolidation between 5,700 and 6,350 can be followed by a break higher to 6,680 or 7,270.
However, decline below 5,650 will mean that the index can head to 5,514 or 5,425 before a recovery. The index needs to close below 5,400 to turn the medium-term view negative.
Global markets were subdued last week but most benchmarks managed to hold on to the gains made in the previous week. CBOE volatility index is poised just above the trough recorded in April. If this index declines below 15, it will mean the beginning of a sustained bull-market in US markets
Commodities had a strong week and the CRB index closed at a new yearly high pushed higher by agri-commodities such as sugar and coffee.
This index is approaching the key long-term resistance band between Rs 615 and Rs 635.
Dow is steadily inching higher and it closed the week at a new two-year high.
We maintain the medium term targets at 11,630 and 12,000 for this index. Short-term view will turn negative only on close below 11,300.
Asian benchmarks such as Hang Seng, Jakarta Composite, Philippines Composite and so on continued in short-term down-trends as investors booked some profit before the year-end.
5,948.75 5,857.35 19,864.85 19,508.89 1,29,188.2 1,24,931.57 0.89 0.89 20.24 21.63 ASHOKLEY 37.64 -7.16 VOLTAS 35.61 -5.06 EDUCOMP 29.68 0.10 SINTEX 28.55 -2.35 SUNTV 28.05 0.72 ALBK -35.47 4.28 INDIACEM -29.52 -0.71 KSOILS -27.44 27.32 PFC -26.34 5.15 M&M -22.75 -6.12 Nifty managed to close above its 9, 14 and 100 day`s SMA level placed at 5,910, 5,917 and 5,846. For the coming week resistance for Nifty seems at 5,980-6,034 while support stand at 5,905-5,846 level. On upside if level of 5,980 breaches decisively then we could see rise up to mark of 6,034 (50 Days simple moving average), on the lower side if level of 5,905(20 Days simple moving average is breaches then Nifty could retrace up to support of 5,846 mark. Bullish Trend can only be confirmed if Nifty trades above 6,034 level. Derivative Outlook Nifty recovered sharply on the last day of the week after positive step taken by RBI in its mid-term policy. During the week, Nifty gained 1.56% and closed at 5,948.75 mark. The Nifty December future ended at 5,960(LTP) with premium of 11.25 points. On the derivatives front the Nifty Futures prices inclined along with decline in the open interest but with incline in cost of carry indicating short covering from the lower level after a sharp selloff. For the coming days, 5,905-5,846 level would act as the strong support for Nifty While on upside, resistance could be seen 5,980-6,034. Sector Outlook Long positions can be assumed in software, energy, and metals at current levels or from support of 5,850 levels. Short positions can be accumulated in BFSI, realty, telecom and infra if the Nifty fails to sustain above 6,000-6,050 levels. Derivative Strategies for the week: Short Nifty December 5800 Put Option and Simultaneously Short 6100 Call Option Long Renuka Sugar December 90 Call Option and Simultaneously Short 95 Call Option Bull Spread
Market Snapshot
16-Dec 10-Dec Nifty Sensex NSE F&O Turnover (Rs. Cr) PC Ratio India VIX
Stocks % change in OI
% Change in Price
Weekly Open Interest Losers
Stocks % change in OI
% Change in Price
Technical Outlook
CMP: 5,948.75 View: Range bound Strategy: Short Strangle Market Lot: 50
CMP: 89.80 View: Positive Strategy: Market Lot: 2000
Reliance Industries (Rs 1,055.8)
The stock advanced 3 per cent during the week, accompanied with low volumes, which is a cause for concern.
It may still be considered to be testing the key resistance at Rs 1,050.
A decisive close above this resistance is considered as initial sign of recovery.
Strong move above Rs 1,080 will imply that the stock has been on a short-term uptrend and a rally to Rs 1,120 is possible in the upcoming days. Fresh long positions can be initiated only if the stock moves above Rs 1,080 with stiff stop-loss.
Reversal from the current or Rs 1,080 levels will pull the stock down to Rs 1,020 or Rs 990 once more.
In the medium-term, the stock has been in a sideways consolidation phase between Rs 900 and Rs 1,200 band.
State Bank of India (Rs 2,761.8)
Amidst choppiness, SBI managed to marginally advance Rs 25 last week. It has formed a spinning top candlestick pattern in the weekly chart, implying indecisiveness.
We reiterate that as long as the key support at Rs 2,650 holds, traders can initiate long positions with tight stop-loss.
The stock can move higher to Rs 2,850 and to Rs 2,964 levels.
On the other hand, failure to move beyond first resistance will pull SBI down to Rs 2,700 or Rs 2,650 again.
Tumble below Rs 2,650 can accelerate the short-term downtrend and the stock can decline to Rs 2,600, its 200-day moving average is poised around this support. Key support below this level is pegged at Rs 2,500.
Tata Steel (Rs 658.8)
The stock jumped 6.6 per cent last week, decisively breaching its 21- and 50-day moving averages.
It is also trading well above its 200-day moving average.
Further, on December 16, it climbed 2.5 per cent accompanied with above average volumes, closing emphatically above the resistance level at Rs 650. This has signalled a bullish outlook for the short-term.
Traders can consider holding their long positions with stop-loss at Rs 645.
Upside targets are Rs 680 and then Rs 700 in the medium-term. Significant supports for the upcoming week are at Rs 620 and Rs 590.
The stock has been on a medium-term uptrend from its June 2010 low of Rs 450. As long as the stock trades above Rs 550, the medium-term uptrend holds.
Infosys Technologies (Rs 3,292.3)
Last week the stock jumped 4.6 per cent in line with our expectation and achieved our short- as well as medium-term targets.
It recorded a new life-time high at Rs 3,296.9 on December 16 by gaining 2.7 per cent. This up move has conclusively penetrated the resistance at Rs 3,200. Moreover, there is an increase in volumes over the past four trading sessions. The daily as well as weekly relative strength indices are featuring in the bullish zone signalling upward momentum.
In all time frames, the stock has been on an uptrend. Traders can consider holding their long position with stop-loss at Rs 3,220.
Next targets are Rs 3,350 and Rs 3,400. However, failure to move higher will result in a minor decline to Rs 3230. Subsequent important supports for the stock are at Rs 3150 and Rs 3050 levels. Medium-term investors can stay invested in the stock with stop-loss at
Rs 2,990. — Yoganand D.
JSW Steel (Rs 1,164.3)
JSW Steel rebounded 11.5 per cent last week after taking support from its significant long-term support band between Rs 1,040 and Rs 1,050.
The stock, however, has been on a medium-term downtrend from its life-time high of Rs 1,400 that it marked on October 4.
The stock currently faces key longer-term resistance at Rs 1,200.
Inability to exceed beyond this level will result in the stock resuming its on-going medium-term downtrend and re-test the support band between Rs 1,040 and Rs 1,050.
Next support is at Rs 950. Strong move above Rs 1,250 will mitigate the downtrend and will pave way to Rs 1,300 or Rs 1,350 levels in the medium-term.
Arvind (Rs 63.8)
Since the March 2009 low of Rs 10, the stock has been on long-term uptrend forming higher peaks and trough. Taking support from its long-term uptrend line around Rs 46, Arvind skyrocketed 30 per cent with good volumes last week.
It has decisively crossed its 21- and 50-day moving average positioned at Rs 50 and is hovering well above them.
Move above Rs 66.5 can lift the stock higher to Rs 80 and then Rs 85 in the medium-term.
Nevertheless, reversal from the resistance at Rs 66.5 will drag the stock down to Rs 55 or further down to Rs 50. Decline below Rs 42 will be a threat for the uptrend. — Yoganand D.
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