| Scripts to be watched today : ACC, Bhartiatl, BPCL, Cairn, HCLTech, HeroHonda, Infosys, KotakBank, MM, Reliance, RelInfra, Sterlite, TataPower, Tisco, Wipro Market Outlook | ||
| Last week, heavy sell off was witnessed in indices and market undertone has turned cautious. On weekly charts, Nifty has formed a bearish engulfing pattern and we may see selling pressure on rise. Immediate support for Nifty could be seen at 6,030-6,000 and sharp slide is unlikely unless the Nifty slips below the psychological 6,000 mark. Resistance could be seen at 6,180-6,240 level and likely to make new highs when Nifty closes above 6,311. On the derivatives front the Nifty Futures prices declined along with rise in the cost of carry and shredding of open interest, this is an indication of long closure at higher levels and fresh short position is being initiated. However, Nifty's 6000 Put continues to hold the maximum open interest, indicating strong support at this level and a round of short covering cannot be ruled out from 6,000- 6,030 zone. Indian markets is likely to open a flat note tracking mixed cues from global markets. Thereafter Nifty is likely to consolidate between 6,050 to 6,100 before giving breakout either side. In the absence of any domestic trigger, market is likely to take cues from global markets. | ||
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| UFLEX (SELL)
ONMOBILE GLOBAL (SELL)
DHANLAXMI BANK (BUY)
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Market Snapshot
Weekly Open Interest Gainers
Weekly Open Interest Losers
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On daily chart Nifty exhibiting "falling wedge" which is bearish breakout pattern if lower trend line breaks. Technical momentum indicators are currently suggesting correction in it. Stochastic is currently moving in oversold zone where RSI is trading in neutral territory at 45 showing negative crossover. Another indicator MACD is trading in positive zone, likely to show negative divergence, also indicating correction. However downside seems limited not beyond 6,020. Despite of correcting sharply in last two trading session Nifty is still trading above its 34 day EMA also indicating limited downside.
Derivative Outlook During the week the Nifty Index tumbled nearly 4% in line with the global peers and settled at 6071.65. On the derivatives front the Nifty Futures prices declined along with rise in the cost of carry and shredding of open interest, this is an indication of long closure at higher levels and fresh short position is being initiated. For the coming week, immediate support for Nifty is seen at 6030-5990 levels, a sustenance below the 5990 level decisively will make the trend further weaker and in that case Nifty may drag towards its 5930-5890 mark whereas on the upside resistance for Nifty is seen at 6155-6225 mark. Sector Outlook This week, buying is expected in, FMCG, shipping, Pharma and Textile sectors while selling pressure could be seen in Realty, Banking, Metal and Consumer Durables stocks if the Nifty fails to sustain above 6,030 levels. |
| Derivative Strategies for the week:
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| US markets | ||
| US stocks closed lower as investor worries about growing concerns that China's economy might slow and amid debt troubles in the Eurozone sent materials, energy and other commodities lower. The weakness in the markets was partly due to concerns that China plans to implement additional monetary tightening in order to slow the pace of its economy growth and limit inflation. Profit taking also contributed to the pullback following the strong gains seen in rent weeks. On the economic front in the US, a report showing a notable improvement in sentiment among American consumers failed to reverse the decline by the major averages. | ||
| European markets | ||
| European stocks fell tracking a global sell-off amid worries that China would resort to another round of monetary tightening to curb inflation. Also, downbeat GDP reports from the euro zone and data showing an unexpected decline in the region's industrial production further worsened sentiment. Eurozone's gross domestic product edged up 0.4% sequentially in the third quarter was more moderate than a 0.5% increase economists had forecast. Eurozone industrial production dropped 0.9% month-on-month in September, countering consensus forecasts that called for a 0.2% increase. On an annual basis, industrial production growth slowed to 5.2% from 8.4%. | ||
| Indian markets (Prev Day) | ||
| The domestic bourses witnessed substantial bloodbath as broadbased selling across sectors dragged the market which ended in negative for the third straight session. The market kicked off the session on a weak note as the benchmark indices witnessed a gap down opening plunging deep into the negative terrain, tracking dismal global cues. Asian markets plunged taking cues from overnight loss in the US market that came on the back of strength in the dollar and a disappointing outlook by Cisco. Meanwhile, the Japanese market declined as bank stocks plunged on concern the nation's lenders will not be exempt from stricter capitalization rules as speculated earlier this week. Further, the Chinese stocks dragged as commodity prices declined and on concerns that the government may step up measures to contain growth in housing and consumer prices after inflation accelerated to a two-year high last month. Soon after the subdued start, the benchmark indices dragged further before giving an desperate attempt to move above the baseline by erasing all the opening losses. But the upmove remained short lived and the market plunged again. As the day progressed, the domestic bourses dragged further and the dismal IIP numbers which came in post mid-session, gave market the final blow, taking the benchmark Nifty below the 6,100 level. In the sectorial front, the Realty space carried forward the weakness from the previous session and was hammered the most during the session, plunging by 4.76%. The weakness in the sector came in as concern rose that the Chinese government may step up measures to contain growth in housing prices. The Metal and Banking sectors also showed considerable weakness and fuelled the market drag, declining by 3.31% and 2.90% respectively. Both the Nifty and Sensex traded with considerable weakness throughout the session and finally closed deep into the negative terrain. The NSE Nifty closed below the 6,100 mark, while the BSE Sensex closed below the 20,200 level. | ||
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- Supp / Resis SPOT/CASH LEVELS FOR INTRA 15TH NOV
Sensex (20,156.9)
Investors were jolted out of their post-Diwali stupor when the market suddenly turned tail and headed downward. The formula that induced the correction last week was similar to the one that caused the wobble in January and May this year: European sovereign debt, monetary tightening in China and global growth concerns.
The liquidity prop was withdrawn slightly as foreign investors turned net sellers in the last three sessions of the week. No one can complain about these investors cashing out some of the gains made since September. Volumes were very high through the week. Derivative volume nudged Rs 2 lakh crore on Friday as traders churned their positions aggressively.
Open interest has once again piled up to Rs 1.7 lakh crore. Interestingly, the put call ratio is quite low, close to 1 indicating that bears are finally winding up short positions. It is no wonder that the correction has kicked off now since the market derives this vicarious pleasure in trapping the maximum number of people on the wrong side. The Sensex could not better the muhurat trading session peak and reversed from the intra-week high of 21,076. Oscillators in the daily chart have taken a dent and are signalling a sell.
The 14-day relative strength index has retreated in to the negative zone. Weekly oscillators are not affected much by last week's decline and neither are monthly oscillators, implying that though the short-term could be choppy, the trend in longer time frames is not under threat yet.
The strong close of the Diwali week had lulled us in to believing that the momentum could carry the Sensex a little higher beyond the previous peak of 21,207 before correction sets in. But the decline last week suggests that a five-wave move from 15,960 low formed on May 5 could have been completed at 21,108, a tad short of the previous peak.
As indicated last week, the targets for the 5 th wave from 15,960 low are 20,922, 21,638 and then 22,460. This wave can terminate between the first and second target at 21,108. The question is how deep can the ongoing correction get? The most likely targets for a medium-term correction are between 19,563 and 19,141.
We stay with the view that a sideways move between 19,500 and 21,500 is possible for the rest of this year before the index attempts to move higher. The medium-term view will be roiled only if the index goes on to close below 19,141.
The short-term trend is down in the Sensex but it has strong support in the band between 19,800 and 20,000 from where a bounce is possible. Psychological significance of 20,000 level and presence of the 50-DMA at this juncture adds to the significance of this support. Subsequent supports are at 19,712 and 19,355. Resistances for the week ahead would be at 20,500 and 20,750.
Nifty (6,312.4)
Nifty too could not record a new life-time high and reversed lower from the peak of 6,335 formed on Monday. As indicated last week, the target of the 5 th wave from 5,937 trough was at 6,290, 6,509 or 6,760. It is possible that this wave terminated after crossing above the first target. If so, the correction that ensues that pull the index lower to 5,872 or 5,745.
What can ensue is sideways consolidation in the band between 5,800 and 6,400 for the rest of this year. Such a move however maintains the long-term bullish outlook for the index since it would be the second wave of the move from 5,937 with the third wave up yet to unfold. Medium-term view for Nifty will turn negative only on a close below 5,745. Subsequent targets are 5,565 and 5,380. The short-term trend is down and any bounce next week will face resistance at 6,165 and 6,235. Traders can initiate short positions on reversal from either of these levels. The index however has strong support around 5,960 and traders should watch out for reversal from this zone.
Global cues
Global indices reversed lower in the second half of the week to end about 2 per cent lower. Volatility index spiked above 21 on Friday and finally closed at 20.6 denoting that investors have turned nervous with Irish debt concern and fears of China hiking policy rates. The Shanghai Composite Index that had gained 20 per cent since beginning of September nose-dived 5 per cent on Friday. That this index is reversing lower from its 40-week moving average and its key resistance at 3,300 does not bode well for the medium-term outlook in this index.
DJ Euro STOXX is reversing lower from the medium-term resistance at 2,824 implying that the down-trend that began in April continues to be in force in the index.
The Dow reversed lower from the peak at 11,450 to close below the key long-term resistance at 11,266. As mentioned last week, this level (11,266) is extremely important and Dow needs to sustain above it for at least a couple of weeks to signal a break-out. The pattern that is forming since July low appears to be an irregular flat and this pattern could have ended at the 11,450 peak. The short-term trend has however not reversed lower with last week's decline in Dow. A close below 11,000 will herald the onset of a medium-term down-trend.
— Lokeshwarri S.K.
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| Nifty to move in a range of 6,020-6,250 Nifty started the week (8-12 November, 2010) on negative note backed by weak global cues. On daily chart Nifty exhibiting "falling wedge" which is bearish breakout pattern if lower trend line breaks. Price is near to lower trend and expecting it to move within wedge pattern till the time it does not break upper or lower trend line. In spite of Friday sharp fall Nifty managed to close just above lower support line of wedge pattern. If Nifty manages to trade above it then we could see upside in forthcoming session otherwise not ruling out the possibility of major correction. On upside Nifty resistance level is 6,200 while on downside it has mild support at 6,020. On upside if level of 6,200 breaks then we could see rise in it up to mark of 6,250, on the other side if level of 6,020 is breaches decisively then it could retrace up to 5,980. Volatility persists over the past few sessions as global cues playing a major role now. Volatility may be continue some more time and hence the investors are suggested to trade cautiously.Technical momentum indicators are currently suggesting correction in it. Stochastic is currently moving in oversold zone where RSI is trading in neutral territory at 45 showing negative crossover. Another indicator MACD is trading in positive zone, likely to show negative divergence, also indicating correction. However downside seems limited not beyond 6,020. Despite of correcting sharply in last two trading session Nifty is still trading above its 34 day EMA also indicating limited downside. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Looking Forward During the week huge sell off was witnessed in Indian equity market which should be considered as a good buying opportunity. Foreign funds continue to aggressively mop up Indian shares. The appetite for Indian equities from foreign institutional investors is very high because of a good monsoon, improving fiscal situation and rising domestic consumption. Further, Fresh infusion of dollars into the US markets, by way of buying bonds, which will push up bond prices and bring down the yields, and the bond markets in India would react accordingly. Since economies like China and Singapore are at best cautious in their regulation of capital flows, India is likely to see a gush of capital flows, which is likely to push up the stock prices. Next week, buying is expected in Healthcare FMCG, banking and Auto stocks from current levels or from lower supports of 6,000 levels of Nifty.
| Daily Movement of Nifty  Daily Movement of Sensex, Net FIIs & MF investment Weekly return on BSE Sectoral Indices | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| US stocks edged lower during the week (till Thursday) as investors kept an eye on the G20 summit of world leaders in South Korea amid concerns that divisions regarding currency valuations could prevent the leaders from reaching a broad agreement on global economic cooperation. Further, markets retreated as investors feared that Fed's quantitative easing move will have little impact on economic recovery and may drive up inflation. Some selling pressure was also generated by the release of weaker than expected quarterly results from media giant Disney, Kraft Foods and Dynegy and disappointing outlook from Cisco System. On economic front, investors were presented with encouraging economic data, which was failed to support the market. Looking ahead to next week, trading may be impacted by the release of retail sales, consumer sentiments, business inventory, producers price index and housing starts. Additionally, Home depot and Wal-mart are due to release their quarterly results. Asian stocks plunged during the week. Chinese markets plunged after China's central bank raised the yield on the one-year bills and on speculation that China will increase interest rates to curb higher-than-expected inflation that hammering down property and resource sector stocks. Hong Kong markets tumbled as HSBC reported lackluster third-quarter results and on concerns the People's Bank of China may deliver another interest rate hike soon after the release of China's inflation data for October. However, Japanese markets was able to registered gains after investors cheered the bounce in USD as it tempered gains in strong yen, offering some relief to Japanese exporters. The Bank of Japan offered to purchase a long-term government bonds under a fresh asset-purchase program. European stocks fell during the week (till Thursday) as renewed concerns over euro-zone government debt that pushed the yield spreads of 'peripheral' bonds against the German benchmark sharply wider again and a strength in dollar put pressure on commodity prices. Moreover, banking stocks remained under pressure after German financial giant Commerzbank reported and French investment bank Natixis both reported third-quarter earnings below expectations. Further, leaders of the G20 group of nations are reportedly struggling to reach a common ground to reduce global currency and trade tensions, as talks enter a second day in Seoul. However,, better than expected economic data failed to boost market sentiments. Also, markets ignored better than expected earning from results from Vodafone Group Plc, BT Group, Barclays Plc, Siemens and Vedanta Resources. | Weekly return on major Global Indices Data of US and European markets taken from Nov 04 to Nov 11, 2010 Data of Asian markets taken from Nov 05 to Nov 12, 2010 Weekly Change in the Composites of S&P 500
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Bond Yield (7.80% CG 2020)
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| Rupee saw sharp decline against USD towards the end of the week due to weaker equity markets and bunched up demand for dollars a day after the Veteran's Day holiday in US. Further, concerns that divisions regarding currency valuations could prevent the leaders of G 20 nations from reaching a broad agreement on global economic cooperation also weighed on INR. However the local currency managed to edge higher against JYP and Euro. Rupee gained close to 3% against Euro as the common European currency fell sharply against major currencies. Euro fell during the week as concerns that Ireland will struggle to gain support for its budget and political uncertainty in Greece resulted in blow out in spreads between Euro area peripheral country government bonds against the German benchmark.
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Pivotals
Reliance Industries (Rs 1,061.8)
RIL launched in to a vicious correction last week to decline 5 per cent from its intra-week peak of Rs 1,119. The short-term trend has reversed lower with the breach of Rs 1,060 level. Next support is at Rs 1,045. Presence of both the 50 and 200-day moving averages in the zone between Rs 1,035 and Rs 1,045 makes it an important support zone to watch out for next week. Short-term resistances are at Rs 1,080 and Rs 1,100. Traders can play short as long as the stock trades below the first resistance.
Intermediate term trend in RIL is sideways in the band between Rs 900 and Rs 1,200. Strong close above Rs 1,200 is required to signal a break-out that can take the stock towards its life-time high.
State Bank of India (Rs 3,030.4)
The giant bearish engulfing candlestick in the weekly chart of SBI leaves no room for doubt that the much-awaited correction is finally here in the stock. 1:1 extrapolation of the up-move from March 2009 low gives us the target of Rs 3,472. That the stock reversed from the peak of Rs 3,515 implies that the entire move from the bear market low can now be corrected. That gives us the minimum downward targets of Rs 2,730 and Rs 2,500.
The short-term trend is down in the stock and a bounce next week can take the stock to Rs 3,150 or Rs 3,200. Short-term traders can initiate fresh short positions if the stock reverses lower from either of these targets. Short-term target on the downside is Rs 2,890.
Tata Steel (Rs 605.7)
Tata Steel faces key intermediate-term resistance at Rs 650 that is 61.8 per cent up the decline recorded in 2008. The stock is once more reversing lower after testing this level in the first week of October. The stock can decline to Rs 565 or Rs 538 in the days ahead. Decline below the second support can drag the stock towards the medium-term support around Rs 450.
Short-term trend in the stock is down. Traders can initiate fresh short positions in rallies with stop at Rs 625 and the target of Rs 580.
Infosys Technologies (Rs 2,999.2)
Infosys could not move beyond Rs 3,110 and reversed lower from the intra-week peak of Rs 3,105. Short-term targets on the downside are Rs 2,944 and Rs 2,920. Short-term resistances are at Rs 3,060 and Rs 3,105.
Short-term trend is down since the peak of Rs 3,249. This trend will be negated only on a firm close above Rs 3,135. If the short-term low of Rs 2,946 is breached, the stock could head towards Rs 2,800 in the weeks ahead. Presence of 200-DMA at this level can arrest a prolonged down-trend. — Lokeshwarri S.K.
Srividhya Sivakumar
With the results season behind us, the markets might once again start looking at global markets for trading cues.
While the sentiments aren't overtly negative now, it isn't as positive either. This suggests that the market could be range-bound for some time to come. Technical indicators point at a negative bias in the short-term. Depending on how the market opens on Monday, traders can either short Nifty future on its failure to breach past key resistances at 6,165 and 6,235 or go long on reversal from its support at 5,960.
Traders with lower risk appetite can consider a covered call on Nifty, if the index support holds. You can set this by buying current month Nifty futures and selling November Nifty 6,300 call (closed at Rs 20). While you will benefit from the long position in the index futures when the index trends up, the short leg of the call option would provide some protection against a decline. The short option would also help generate additional income. However, do note that the strategy would require a high margin commitment from your side.
You can time the purchase of the index futures and short call depending on the market conditions. But once the spread is in place, look out for 6165 and 6235 resistances.
If the index trends up as expected, consider closing the long index future position at any of the two resistance levels (depending on your risk profile). Leave the short call option open if the index doesn't move up too high too soon. However, close the short leg if the index breaches decisively past the first resistance.
Contrarily, if the index trends lower, cut your long position when it breaches its support at 5,960. However, keep the short call open, as it would then turn deep in the money. That said, the maximum profit you can make from the short call would be limited to Rs 20 (the premium you received while selling it).
Reliance Power (Rs 181.9)
It was an electrifying performance by Reliance Power last week. The stock initially soared on receiving credit worth $5 billion from the US Export Import Bank. The up-move accelerated on Thursday on the buzz about the company benefiting from fresh gas allocations to be made by the Power Ministry, sending the stock 15 per cent higher to its intra-week peak of Rs 191.
Reliance Power is in a wide trading band between Rs 130 and Rs 200 since last June. There is a strong resistance for the stock around Rs 200 since it occurs at 38.2 per cent retracement of the 2008-crash. Investors with short-to-medium term perspective can cash out if the stock fails to clear this level. Subsequent medium-term targets are at Rs 233 and then Rs 267.
Investors with short-term perspective can hold with stop at Rs 178 while stop-loss for medium-term can be at Rs 168.
IDFC (Rs 190.5)
IDFC launched in to serious correction last week and the stock plunged 12 per cent lower to its intra-week low of Rs 189. The short-term trend in the stock is down since it has breached the trough at Rs 200. But short-term investors can hold the stock as long as it trades above Rs 189.
Key medium-term support for the stock is, however, at Rs 175 and investors need to start worrying only if this support is violated. If IDFC holds above Rs 175, it will mean that the stock can move on to a new high over the next 12 months. — Lokeshwarri S.K.
Stock Strategy — Consider shorting NTPC, IDBI
K.S. Badri Narayanan NTPC (Rs 192.2): The outlook for NTPC remains negative. The stock seems to have turned weak and could be headed towards Rs 175. There is however a crucial support at Rs 190. Its immediate resistance is at Rs 196. A close above Rs 196 has the potential to lift the stock towards Rs 207-208. As long as NTPC stays below Rs 235, the outlook remains negative. F&O pointers: The NTPC futures witnessed accumulation of fresh short positions. The NTPC November futures closed at a slight premium to the spot. Option trading (November) indicates a negative bias for NTPC, as 190 and 200 strikes of NTPC calls saw higher accumulation in open interest. This signals the strong emergence of call writers. Strategy: Consider shorting NTPC futures with an initial stop-loss at Rs 196 for a target of Rs 175. If NTPC opens on a weak note, shift the stop-loss lower to Rs 193. Low-risk appetite traders can consider buying NTPC 190 put, which closed at about Rs 2 on Friday. IDBI (Rs 186.50): After surging to an all-time high of Rs 202, the stock has now turned weak. It however has a strong support at Rs 175, while Rs 200 poses a strong resistance. The stock could test its support in the coming week. F&O pointers: IDBI Bank witnessed unwinding of long positions, signalling profit-booking. The IDBI Bank futures closed at Rs 187.15, a marginal premium over the spot close. Heavy accumulation of open interest in 190 and 200 calls and unwinding in 190 put indicates negative bias. Strategy: Consider shorting IDBI Bank with a tight stop-loss at Rs 195, for an initial target of Rs 175. Note: The analysis and opinion expressed in this column are based on F&O data available at this point of time and on technical analysis based on past price movements. There is risk of loss in trading. SPOT/ CASH LEVELS FOR INTRADAY TRADING 15TH NOV 2010
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