 Corporate News Headline | |
| • | Reliance Industries said it will invest USD 1.7 bn in a joint venture with Atlas Energy Inc to produce gas from shale, sedimentary rocks, in Marcellus region. (BS) |
| • | ACC said it has commissioned its third wind energy farm near Satara in Maharashtra. The wind farm comprises two turbines of 1.25 Mw capacities each at a cost of about Rs. 130 mn. (BS) |
| • | Sun Pharmaceuticals said its unit had received tentative US regulatory approval to market a generic version of Forest Laboratories' Namenda tablets. (BS) |
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| Economic and Political Headline | |
| • | The 3G spectrum auction evoked an excellent response from mobile operators, with the reserve price of Rs. 35.00 bn for pan-India operations escalating nearly 12% to Rs. 39.13 bn. According to information posted on DoT website, five rounds of auction were completed. Delhi circle, for which the reserve price is set at Rs. 3.20 bn, generated the maximum interest from bidders with the winning prices at the end of round five was Rs. 3.73 bn. Nine circles saw negative demands. (BS) |
| • | China posted its first trade deficit in six years in March even as the yuan stayed pegged to the dollar, aiding government efforts to play down the currency's role in global economic imbalances. The USD 7.24 bn shortfall was reported by the customs bureau on its Web site. Imports surged 66% from a year earlier as exports gained 24%. (Bloomberg) |
| • | UK producer prices jumped in March by more than economists forecast in the biggest increase for almost two years as manufacturers passed on higher costs of raw materials, fanning inflation pressures. The cost of goods at factory gates rose 0.9% from the previous month, the Office for National Statistics said in London. (Bloomberg) |
 | 5361.75 | ( 1.08 %) | 57.30 |  |
| 1 | 2 | 3 | ||
| Resistance | 5392.05 | 5422.35 | 5467.25 | |
| Support | 5316.85 | 5271.95 | 5241.65 | |
 | 17933.14 | ( 1.23 %) | 218.74 | | |
| 1 | 2 | 3 | |||
| Resistance | 18031.35 | 18129.57 | 18287.66 | ||
| Support | 17775.04 | 17616.95 | 17518.73 | ||
| FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| FII | 09-Apr-2010 | 2629.9 | 2396.81 | 233.09 |
| DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| DII | 09-Apr-2010 | 1285.26 | 1351.72 | -66.46 |
Foreign institutional investors continued to place unflinching faith in out stocks and remained net buyers even as domestic institutions took some money off the table. Trading interest as reflected in the surging open interest remains high. High index put call ratioimplies that the market is reaching overbought levels. As earnings season unfolds from next week, stock-specific action could dominate the trading sessions.
It has been an unbelievable run for the Sensex since the third week of February and it has recorded nine consecutive positive weekly closes in this period. Weekly oscillators have moved in to the bullish zone indicating that the current up-move can extend a little further. But oscillators in the daily chart continue to show negative divergence implying that momentum is sagging in the short-term time-frame.
The Sensex closed a step above the upper boundary of its current medium-term range between 15,700 and 17,800. If we consider the monthly chart of the Sensex from a trend-follower's perspective, the index has recorded one leg up from March to October 2009. There has been a long-drawn sideways movement in the aforementioned range ever since.
There are two ways in which this sideways movement can be viewed. It can be a consolidation or a halt before the next leg-up unfurls. And that leg will ensure that the index at least gets close to its life-time high. The other, more bearish eventuality is that a down-side break-out can turn this range in to a rounding top kind of formation that preceded a down-move.
In other words, break-out is possible in either direction, even if simple trend following techniques are applied. Investors can resort to cherry-picking stocks since index watching could turn out to be an unfruitful activity in the coming weeks.
The medium-term trend in the index continues to be up since 15,651. The series of small steps formed since the second half of March resembles a 5th wave diagonal triangle formation. In this case there would be a pull-back to at least 17,300 or 17,100 in the near-term. However, a close below 17,100 is required to signal that a deeper correction is unfolding. On the higher side, the index has the tendency to turn weak at the knees every time it approaches 18,000. Once it gets over this bashfulness, a move to 18,274 or 18,559 is possible.
The near term has turned a trifle choppy and Sensex can move in a sideways range between 17,500 and 18,300 in the ensuing sessions. Resistances for the week ahead are at 18,060, 18,274 and 18,559.Supports are at 17,700 and 17,500.
Nifty (5,361.7)
Nifty blazed higher to record the peak of 5,399.65 before giving up some gains. The short-term trend continues to be up despite the bout of volatility that rocked this index in the later half of the week. Short-term traders can hold their longs with stop at 5,280. If this level holds, we can expect another leg up to 5,392 or 5,455. Support below 5,280 is 5,235 and fresh long positions should be avoided on a close below this level.
The index faces strong resistance between 5,380 and 5,400. But it could attempt to push past this zone to 5,466 in the days ahead. A sideways movement between 5,250 and 5,450 is then expected to ensue.
Global CuesIt was a week in which stock prices moved higher despite growing fears of sovereign default by Greece. Continued signs of economic revival in the US helped ward off a deeper decline and Dow moved up to the coveted 11,000 mark on Friday. The S&P 500 and Nasdaq too closed at 52-week highs last week.The Dow has the short-term targets of 11,284 and 11,573. But the presence of strong long-term resistance at this zone can usher in volatility in global equity markets once these levels are attained. Corresponding resistance for S&P 500 is at 1,230.
CBOE volatility index declined to the lower end of its current trading band at 16 as stock prices zoomed higher. UK's FTSE 100 is showing remarkable strength and has moved above the intermediate term resistance at 5,500 despite the turbulence in Euro zone and the political uncertainties in the country.
Other European and Latin American indices are also close to their January peaks again. Most Asian indices recorded strong close last week. Shanghai Composite and Nikkei index were among the few laggards.
Pivotals
Reliance Industries (Rs 1,123.9)
It was a volatile week for Reliance Industries as the stock first surged to the intra-week peak of Rs 1,171 before declining to the low of Rs 1,101. It has attained our short-term target of Rs 1,155 and the failure to close above it underlines the strong resistance that exists at this level. Key resistance for the upcoming sessions exists at Rs 1,143. Failure to move above this level can pull the stock lower to Rs 1,095 or Rs 1,070 in the days ahead.
Reversal from the resistance at Rs 1,155 implies that the stock can decline to Rs 1,040 or Rs 966 in the weeks ahead. But traders can retain their short positions only as long as the stock trades below Rs 1,200. Move above this level will signal the resumption of long-term up-trend in Reliance Industries.
State Bank of India (Rs 2,106.5)
State Bank of India moved in line with our expectation and turned tentative around the resistance at Rs 2,130. As explained in our last column, failure to move emphatically above this level will cause a decline to Rs 2,000 or Rs 1,890 over the ensuing weeks. Fresh purchases are therefore advised only on a strong close above Rs 2,150 in this counter. Supports for the week are at Rs 2,076 and Rs 2,059.
The medium-term trend in this stock is down since the October 20 peak of Rs 2,500. Failure to move beyond Rs 2,150 will result in the stock fluctuating in the range between Rs 1,900 and Rs 2,150 for few more weeks. Targets above Rs 2,150 are Rs 2,200 and Rs 2,270.
Tata Steel (Rs 676.8)
Tata Steel broke above the key intermediate-term resistance at Rs 660 on Tuesday to record the week's high of Rs 694, a tad short of our target of Rs 700. It needs to be watched if the stock is able to hold above the resistance at Rs 660 for another week. Since this is a long-term trend deciding level, we need at least two more weekly closes above this to ensure a break-out. Next long-term targets for the stock are the May 2008 peak of Rs 924 and the stock's life-time peak of Rs 970.
Short-term supports for the stock are at Rs 650 and Rs 627. Short-term traders can hold their long positions with stop at Rs 645.
Infosys (Rs 2,678.8)
Infosys moved sideways in the narrow band between Rs 2,600 and Rs 2,700 last week. The short-term outlook for the stock remains bearish as long as it trades below Rs 2,750.
Short-term traders can therefore initiate shorts in rallies with stop at Rs 2,760. Downward targets are Rs 2,580 and Rs 2,520.
We adhere to the view that the medium-term outlook will turn downward only on a close below Rs 2,300.
Sizzling stocks
Ballarpur Industries (Rs 37.8)
If the past week belonged to paper stocks, it was Ballarpur Industries that walked away with the laurels among the stocks in this sector. The stock gained a massive 40 per cent when it recorded the peak of Rs 38.4 on Friday. It has also managed to close above the medium-term trend channel within which it has been moving since last July. The stock had key intermediate-term resistance at Rs 30.5. Since the stock has moved strongly above the resistance, it can now move on to the long-term resistance at Rs 40.
However investors with short to medium-term horizon should tread carefully in the zone between Rs 38 and Rs 40 since a long-term peak was formed here in January 2008. Some profit can also be booked on a reversal from this zone.
Long-term investors can hold with stop at Rs 30. If we consider the long-term chart for Ballarpur Industries, the long-term targets on a move above Rs 40 are Rs 44 and Rs 53.
Indiabulls Fin Services (Rs 126.9)
This stock has been on fire since the onset of this week and zoomed higher from Rs 106.1 on Monday to attain the intra-week peak of Rs 127.5. Indiabulls Financials was however one of the under-performers of 2009 since the stock gave up all the gains made in April and May in the slide that ensued from October last year.
Although the year 2010 began on a bleak note with the stock crashing 35 per cent from its January peak, a medium-term uptrend is currently in progress. Immediate resistance for this uptrend is around Rs 125. If the stock sustains above this level, investors can expect a move higher to Rs 143 or Rs 158 in the next month or two.
That said investors with a short-term perspective can cash out if the stock fails to move emphatically beyond Rs 128. Stop-loss for this time-frame can be at Rs 118. —
Stock Strategy: Consider shorting Dr Reddy's, CESC
Dr Reddy's Lab (Rs 1,248): After touching its all-time high of Rs 1,318, the stock has been in a downtrend. It now finds a crucial resistance at Rs 1,286 and has a support at Rs 1,230.
A dip below Rs 1,230 would take the stock to a low of Rs 1,168 initially and then to Rs 1,076, if the trend sustains.
On the other hand, a close above Rs 1,276 could lift the stock to its all-time high level.
F&O pointers: Despite a sharp fall on Friday, Dr Reddy's Lab added 15.7 per cent in open interest, presenting a negative bias for the stock.
Dr Reddy's Lab futures (market lot 400 shares) is still ruling in premium with respect to the spot close of about Rs 1,242.
None of the options witnessed any trading activity on Friday.
Strategy: Consider going short on Dr Reddy's Lab if it dips below Rs 1,230.
In that event, you can keep the stop loss at Rs 1,230. Adjust the stop-loss progressively to protect profits.
CESC (Rs 408.7): The stock has been on an uptrend. It now finds strong resistance at Rs 414 and has support at Rs 375.
However, since the stock is nearing the overbought zone, it could see some selling pressure soon. In that event, it can test its support at Rs 375.
F&O pointers: The stock shed open interest on Friday, despite scoring handsome gains. The unwinding of position indicates that the stock could face some resistance from here on.
None of the options witnessed trading activity.
Strategy: Consider going short on CESC, with a stop loss at Rs 414.
How to value stock advice
As a benchmark, 1 per cent of your portfolio size is a reasonable limit for annual advisory fees, provided you are happy with the service.
Look for verifiable evidence of the person's records before following the advice.
Opinions, so the saying goes, are like mothers; everybody has one. Nowhere is this truer than in the stock market. What's unusual about the stock market is not just the number of opinions you come across. It is also that while some people offer advice at the drop of a hat, others demand a fortune for theirs.
Opinion vs advice
You can turn on the TV or pick up any newspaper and find good opinions on the stock market, and that's free. With so many opinions being given freely, does it make sense at all to pay for stock advice?
To answer this question, it is important to first distinguish between opinion and advice.
Opinions express a general view of a stock but often leave the most important questions unanswered: 'What price to buy at?''; ''how long before I should sell?''; and ''how much can I make on it?''.
To be really useful, 'advice' should enable you to act with the belief that you are doing what was intended by the advisor.
What to pay
So assuming you do find a talented and trustworthy advisor, how much should you pay? This is an easy question to answer in hindsight. If you followed the advice and made a profit, its value ought to be lower than (or a portion of) your profits.
If you didn't, it should have no value. Of course, this is not a useful approach, because most advisors take an upfront fee. So how much should you pay for stock advice, given that you don't know if it will turn out to be good or bad? You should consider two factors; the likelihood and the magnitude of returns.
Track record
Gauging the likelihood of success is obviously not easy with stocks, but one crucial factor you can use to evaluate an advisor is his track record. Always look for verifiable evidence of the person's results before following the advice.
This evidence could come from client referrals, from their own records or from an independent industry body. Use whatever is available to you. Paying for advice without first seeing a track record is like buying a stock without looking into the books; it's not advisable.
Okay, we all know that ''past performance doesn't guarantee future performance'', but in the stock market past performance is the only guide you have.
When considering what the magnitude of success may be remember that despite the outlandish claims people make, no one gets it right all the time.
In fact, very few people beat the market by a huge margin.
A good advisor may beat the market by a few percentage points per year; he will not generate a multiple of the market return. The maximum you should be willing to pay, therefore, depends on the size of your portfolio as much as it depends on the advisors themselves.
On a Rs 1 lakh portfolio, an advisor charging Rs 1,000 a month has to beat the market by 12 per cent just to justify the fees; this would be some achievement.
However, on a Rs 1 crore portfolio, the advisor can charge Rs 10,000 a month and only have to beat the market by 1.2 per cent, clearly much less challenging.
As a benchmark, 1 per cent of your portfolio size is a reasonable limit for annual advisory fees, provided that you are happy with the service and the results delivered.
Arvind Parekh
+ 91 98432 32381
