Intraday Calls 20th Jul 2009
+ve sector , scripts : FMCG, IT, Automobile, Nucleus
HCL-Tech-215 for a target 223 stop loss 211
BUY M&M-778 for a target 807, 814-819 stop loss 679
BUY Kesoramind-313 for a target 345 stop loss 305
BUY ITC-229 for a target 238-242 stop loss 223
BUY Shiv-vani-310 for a target 325 stop loss 303
BUY HCL-Tech-215 for a target 231 stop loss 211
Expected Breakout
BUY Infy-1866 above 1890 for a target 2120 stop loss 1840
Investment -
BUY NMDC-389 stop loss 360
NIFTY FUTURES LEVELS
RESISTANCE
4409
4465
4519
SUPPORT
4371
4354
4298
4244
4155
4101
BUY SATYAM,STERLITE TECH
NIFTY FUTURES (F & O):
Rally may continue up to 4409 level for time being.
Support at 4354 & 4371 levels. Below these levels, expect profit booking up to 4298-4300 zone and thereafter slide may continue up to 4244-4246 zone by non-stop.
Buy if touches 4155-4157 zone. Stop Loss at 4101-4103 zone.
On Positive Side, cross above 4463-4465 zone can take it up to 4517-4519 zone. If crosses and sustains above this zone then uptrend may continue.
Short-Term Investors:
Bullish Trend. 3 closes above 3906 level, it can zoom up to 4600 level by non-stop.
BSE SENSEX:
Higher opening expected. Uptrend should continue.
Short-Term Investors:
Short-Term trend is Bullish and target at around 15379 level on upper side.
Maintain a Stop Loss at 13220 level for your long positions too.
POSITIONAL BUY:
Buy SATYAM COMPUTER (NSE Cash)
Uptrend to continue.
Mild sell-off up to 88 level can be used to buy. If uptrend continues, then it may continue up to 92 level for time being.
If crosses & sustains at above 95 level then uptrend may continue.
Keep a Stop Loss at 85 level for your long positions too.
Buy STERLITE TECHNOLOGIES (NSE Cash)
Uptrend to continue.
Mild sell-off up to 190 level can be used to buy. If uptrend continues, then it may continue up to 198 level for time being.
If crosses & sustains at above 203 level then uptrend may continue.
Keep a Stop Loss at 186 level for your long positions too.
Strong & Weak futures
This is list of 10 strong futures:
Sesa Goa, HCL Tech, Hero Honda, GSPL, Grasim, ZEEL, ITC, Wipro, REC LTD, Edu Comp.
And this is list of 10 Weak futures:
Purva, Sintex, Bajaj Hind, Orchid Chem, Nagar Fert, Prajind, GTL Infra, Mosear Bear, Pantaloonr & Essar Oil.
Nifty is in Up Trend.
Global Cues & Rupee
The Dow Jones Industrial Average closed at 8,743.94. Up by 32.12 points.
The Broader S&P 500 closed at 940.38. Down by 0.36 points.
The Nasdaq Composite Index closed at 1,886.61. Up by 1.58 points.
We did't get Rupee Updates.
Interesting findings on web:
Investors are betting that the stock market has restarted its spring rally.
Stocks ended little changed Friday but held onto an enormous gain for the week. Investors are looking to another flood of corporate earnings reports next week to provide more signs that the economy is healing.
Homebuilders' shares climbed after an upbeat reading on the housing market. Construction of new homes and apartments jumped 3.6 percent in June to the highest level in seven months, beating economists' estimates. Building permits climbed 8.7 percent, also beating forecasts.
The Dow Jones Industrial Average with its five-session upsweep its best string of gains all year. The Nasdaq has now risen for eight consecutive sessions, the longest run in more than four years. (Its highest close since Oct. 3.)
U.S. stocks edged down with banks leading the decliners and home builders the gainers. Bank of America set aside higher reserves to account of rising losses in mortgage and personal loans. IBM surged on earnings. Commodities rallied after housing starts rebounded.
Google slipped 12.35, or 2.8%, to 430.25 on the Nasdaq. The Internet-search giant's second-quarter results showed growth continued to slow, signaling the online advertising market remains in a slump.
Yahoo (Nasdaq) gained 65 cents, or 4%, to 16.84. The Internet-search company's talks with Microsoft about a Web-search partnership have accelerated and a deal appears imminent, The Wall Street Journal reported. Microsoft was off 15 cents to 24.29 on the Nasdaq.
The first wave of quarterly corporate earnings reports arrived stronger than expected, soothing investor fears of another economic crisis and helping push the Dow Jones Industrial Average to its strongest weekly gain since March.
The Dow ended the week up 7.3% at 8743.94, taking just five days to recover almost all the 7.4% decline of the previous four weeks, as investors took heart from blowout earnings by Goldman Sachs Group Inc. and positive comments from J.P. Morgan Chase & Co. and Intel Corp.
Even less-than-stellar reports from Bank of America Corp., Citigroup Inc. and General Electric Co. failed to halt the Dow's advance.
Stocks finished flat on Friday after a week of solid bank earnings, improving economic data and encouraging forecasts from the tech sector.
Financial stocks mostly fell, weighing on the broader market. Investors have been encouraged by strong profits from large banks, but there are still signs that the recession's grip hasn't eased as much as hoped, such as higher loan defaults.
For the week, all three indexes posted solid gains of 7%.
Only about 11% of major companies have reported second-quarter results so far. Plenty of surprises may await as more than half make their announcements in the coming two weeks.
But up to now, 71% of those reporting have beaten analysts' expectations. While forecasts were quite low, that is notably stronger than the 61% that typically surpass estimates, according to Thomson Reuters. And several big companies, including International Business Machines, J.P. Morgan and Intel, have made relatively upbeat comments about the future.
The Dow, which is made up of 30 blue-chip stocks including Bank of America, Intel, IBM, J.P. Morgan and GE, closed Friday up 32.12 at 8743.94. It remains down 38% from its 2007 record close.
Although the profit news has been better than expected, it still isn't especially good, and investors aren't exactly celebrating. Analysts still forecast that all 10 of the major industry groups represented in the Standard & Poor's 500-stock index, from finance to technology to energy, will post second-quarter declinesin profit compared to one year ago. They continue to forecast a profit decline for the S&P 500 companies overall for all of 2009.
A report just out from Goldman Sachs warns that it could take years for economic demand to get back to normal.
"We find that under reasonable parameters of supply and demand growth, it will take at least two years, and probably more like three to five years, to eliminate spare capacity in the manufacturing sector," said the report from Goldman economist Andrew Tilton. "In the labor market, the unemployment rate is likely to remain above the current concept of 'normal' for an even longer period."
That would be bad news in an economy more than two-thirds dependent on consumer demand.
At Harris Private Bank in Chicago, Chief Investment Officer Jack Ablin says he is preparing to move about 5% of the $60 billion his firm manages into stocks from bonds.
Today his portfolio is made up of 60% stocks and 40% bonds, and Mr. Ablin plans to make the shift toward stocks in a bet on a gradual economic recovery.
Key Private Bank in Cleveland is mulling a similar shift. "We think the rally will continue through the end of the year," said Bruce McCain, who helps oversee about $20 billion as head of the investment strategy team there.
The tech sector rallied Friday to close in the black for the eighth session in a row, as the Nasdaq Composite Index wrapped up the week with a 7.4% gain.
The Nasdaq (RIXF) rose 0.1% to close at 1,887. The index is now up 19.6% so far this year.
Another improved reading on the housing market counteracted any negative feelings in the market Friday, as the Commerce Department recorded 582,000 new housing starts in June, the best reading since November 2008, and revised May's figure to 562,000, a jump of 30,000.
Lender CIT Group ( CIT - news - people ) is scrambling to avoid bankruptcy, and reports Friday said it was in talks with a number of firms, including JPMorgan Chase ( JPM - news - people ) and Goldman Sachs ( GS - news - people ), about short-term financing that would keep it from filing Chapter 11. Speculation that the firm would get an eleventh-hour reprieve sent its shares up 70.7%.
In energy, crude oil jumped 2.5% to more than $63 a barrel to finish a week of strong gains.
Reporting this week:
Corporate heavyweights reporting this week should sharpen investors' view of the economy. Reports on the April-June quarter are expected from American Express Co., aerospace manufacturer Boeing Co., industrial equipment maker Caterpillar Inc. and drug maker Merck & Co. Key consumer companies Amazon.com Inc., Apple Inc., Coca-Cola Co., eBay Inc., PepsiCo Inc. and Starbucks Corp. are also due to report.
Investors also will look to Capitol Hill for direction on the economy. Federal Reserve Chairman Ben Bernanke makes his semiannual report to Congress Tuesday and Wednesday.
Investors will turn their attention to household names such as American Express Co, Apple Inc, Boeing Co, Caterpillar Inc, Coca-Cola Co, DuPont Co, McDonald's Corp, Microsoft Corp and diversified manufacturer 3M Co to see what the earnings of these dominant corporations say about the economy's health.
In the coming week, 143 companies in the Standard & Poor's 500 Index will report earnings. Results from big manufacturers will give investors the broadest picture yet of the earnings season. So far, banks and technology companies have set the tone.
Report-Card Season
It's report-card season on Wall Street, when corporations release a flood of second-quarter earnings reports that provide a window into the companies' recent performance.
But during these difficult economic times, investors and analysts are also wondering: What's next?
That's where earnings outlooks come into play. These forecasts, generally released around the time of companies' earnings reports, set expectations for the future and offer some sense of where each company is headed.
But they're not always easy to decipher. Companies may give overly vague outlooks, or purposely set predictions low, hoping they can cheer — and make investors happy — when earnings come in "higher than expected."
Here are some questions and answers on how to wade through this torrent of forward-looking information.
Q: What do companies release in earnings forecasts?
A: Companies tend to issue two types of outlooks — short-term forecasts about the coming quarter, and longer-range ones for the next year. Some companies get down to specifics,predicting future per-share earnings, for instance. Others don't.
Given the topsy-turvy economy, it's likely these days that executives will resort to broad statements, such as that "things are looking better," rather than providing actual numbers, said Douglas J. Skinner, a professor of accounting at the University of Chicago's Booth School of Business.
By providing few specifics, executives can't be held accountable, Skinner said.
"No one can really pin them down later on if things don't look that great," he said.
Q: What will these outlooks tell us about the recession?
A: It's hard to come to any conclusions about an economic recovery by merely looking at one company's forecast. But investors may be able to make sense of it all by cobbling together predictions from a range of companies.
If most companies issue dour expectations, for example, that could suggest a bumpy road to recovery. If they tend to look positively into the future, that's considered good news for the market — and, perhaps, the overall economy.
Q: We've seen companies report good earnings but poor outlooks, and their stocks fall. Why do so many investors shrug off the earnings?
A: A stock is priced based on a company's ability to generate earnings in the future.
"The market is always looking forward," said Brian Bush, portfolio manager with Stephens Capital Management. "So investors are going to focus more on what companies are saying... than necessarily focusing on this quarter that they're reporting."
Q: Do companies purposely try to set forecasts low?
A: Generally, yes. There's nothing worse for an executive than predicting strong earnings growth and not being able to deliver. Besides legal ramifications — like the risk of a lawsuit if a company is seen as hiding bad news — lower-than-expected earnings could cost executives their jobs or affect their compensation, Skinner said.
So companies tend to issue rather cautious outlooks. If a corporation expects to earn $1.50 per share in the next quarter, it may set its outlook at $1.40 per share, just for some breathing room.
From the company's perspective, it's far better to surprise investors with positive results than with negative ones. That's why, increasingly, companies are tight-lipped about the future, said Scott Bleier, president of Createcapital.com, a research advisory service. Some companies don't even offer a forecast at all.
Q: Doesn't the market take this tendency toward low expectations into account?
A: You'd think so, but company stocks can still jump after reporting better-than-expected results, suggesting that the market places plenty of stock in forecasts — even if they're set cautiously low.
Q: Have any recent forecasts moved the market?
A: Yes. Chipmaker Intel Corp. released strong third-quarter sales predictions Tuesday that lifted investor confidence and gave the market a serious boost Wednesday. The Santa Clara, Calif.-based company said it expects to earn $8.5 billion in revenue, plus or minus $400 million — far more than the $7.8 billion analysts had originally projected.
On the other hand, the nation's banks — a big focus of the week because of their strong earnings — steered clear of specific guidance about the future and commented broadly about such issues as the future of consumer spending and credit card delinquencies.
Q: Is there other information in an earnings report that may reflect how a company will fare in the future?
A: Yes, but it all depends on the industry.
In the technology sector, analysts will be looking at companies' capital spending to gauge their confidence in the industry. If companies start pumping cash into areas such as research and development, that's a sign that they're optimistic about the future and working to invest in the business.
In sectors like banking, where service is key, statistics on the number of employees and total compensation takes much of the focus, said Pierre Jinghong Liang, associated professor of accounting at Carnegie Mellon's Tepper School of Business.
The bottom line, though: Don't expect earnings outlooks to serve as a crystal ball into a company's future.
Even after earnings season ends, many questions will remain about the economy and consumer spending, said Bush of Stephens Capital. And those are key factors in companies' future performance.
"I think the jury's still going to be out," he said. "I think the debate will continue well into the fall."
Asia:
Japanese financial markets were closed for a national holiday.
Hong Kong shares rose for a fifth session Monday on commodity and financial stocks, with the Hang Seng Index reclaiming the 19,000-point level for the first time in more than a month. The benchmark index gained 1.8% in early action to 19,148.31, while the Hang Seng China Enterprises Index, or H-share index, rose 2.2% to 11,387.12. Market heavyweight HSBC Holdings /quotes/comstock/22h!e:5 (HK:5 69.30, +0.95, +1.39%) [s:HBC] advanced 1.8%, and China Life Insurance Co. /quotes/comstock/13*!lfc/quotes/nls/lfc (LFC 60.27, +0.02, +0.03%) /quotes/comstock/22h!e:2628 (HK:2628 31.80, +1.00, +3.25%) rose 3.1%. Aluminum Corp. of China, or Chalco /quotes/comstock/13*!ach/quotes/nls/ach (ACH 25.00, +0.78, +3.22%) /quotes/comstock/22h!e:2600 (HK:2600 7.90, +0.21, +2.74%) , gained 3.8%. In the energy sector, Cnooc Ltd. /quotes/comstock/22h!e:883 (HK:883 9.96, +0.17, +1.74%) /quotes/comstock/13*!ceo/quotes/nls/ceo (CEO 127.81, +2.00, +1.59%) gained 1.8% after its joint venture with a group company of China Petroleum & Chemical Corp., or Sinopec /quotes/comstock/22h!e:386 (HK:386 6.44, +0.10, +1.58%) quotes/comstock/13*!snp/quotes/nls/snp (SNP 83.00, +0.85, +1.03%) , agreed to buy a 20% stake in an Angola oil field for $1.3 billion. Sinopec stock added 2.2%
Shanghai copper rose over 3 percent on Monday to a nine-month high, tracking London copper's gains in the previous session and boosted by an improved economic outlook and a weaker dollar. A surprise jump in new U.S. home starts and permits in Junesuggested the battered housing sector was beginning to stablise, leading to optimism on recovery in the world's largest economy.
Shanghai's banking regulator yesterday emphasized the importance of the 40 percent down-payment rule for second homes in a bid to prevent real estate speculation.
Chinese economy:
The stronger-than-expected rebound of the Chinese economy has proved the power of investment as a key growth engine.
However, policymakers should keep in mind that there is a limit to such an investment-driven recovery. The emphasis should be more on a consumer-led recovery.
Almost single-handedly so far, an investment boom has put the country back on track to hit its growth target of 8 percent this year.
Latest statistics show that fixed asset investment soared by 33.5 percent year on year in the first six months, contributing 6.2 percentage points to the country's 7.1 percent headline real GDP growth for the first six months. In other words, investment accounted for about 90 percent of the growth while consumption and export together added only 0.9 percentage points.
Clearly, investment is playing an overwhelmingly important role in helping China to weather the global slump. At a moment when shrinking external demand has made export -- the long-term growth engine -- a drag on the economy, stronger investmentgrowth has picked up the slack caused by fall in exports to developed economies. As a result, growth of the world's third largest economy rebounded.
The release of such inspiring growth figures last week has, as expected, brought an end to domestic debates on whether the Chinese economy would see a V-shaped recovery. But, at same time, the issue of sustainability has been raised, and appropriately so, by many people.
Some observers warned that turning off the tap of fixed-asset investment would risk undermining the ongoing recovery, which is yet to be consolidated. Others insisted that it is dangerous for policymakers to further increase liquidity supply regardless of looming asset bubbles to stoke the investment boom.
Both arguments have their merit.
Obviously, Chinese policymakers have to weigh the huge potential of investment as a growth engine against the difficulties of sustaining an investment-led recovery.
Yet, for a lasting recovery, attention should no longer be fixated on overuse of investment to counter the economic crisis. It is time to set in motion a consumer-led recovery.
Unlike many developed countries that are set to endure a classic consumer-led recession, China faces a great opportunity to boost domestic consumption into an increasingly important long-term growth engine.
Though a 15-percent increase in retail sales may not be as eye-catching as the one-third surge of fixed-asset investment in the first half year, it does represent a rise of 3.7 percentage points in the growth of real domestic consumption in spite of falling prices and a gloomy global economy. Continuous income growth must have contributed to a broadbased rise in consumer spending.
Real urban household disposable income expanded by 11.2 percent in the first half year while real rural household cash income rose 8.1 percent during the period.
More important, fiscal subsidies and tax cuts for purchases of home appliances and cars have not only saved many domestic producers but also caught most automakers unprepared. Pent-up demand for new cars has beat all forecasts to make China the world's largest car market so far this year.
What is the potential of Chinese consumers?
An interesting report by the US-based consulting firm McKinsey predicted that the number of wealthy Chinese consumers -- people in households earning more than US$36,500 annually, which gives them the spending power of a US household making roughly US$100,000 a year - will likely increase by 16 percent annually in five to seven years, despite the global downturn. And these wealthy Chinese households, numbered 1.6 million in 2008, represented only the top 1 percent of earners in China's cities.
Compared with the 1.3 billion Chinese population, this is just the tip of the iceberg.
But if the government can swiftly tilt fiscal policies more in favor of increasing household income and improving social infrastructure, domestic consumption can be made to serve as a new thrust to propel balanced and sustainable growth.
INVESTMENT VIEW
Transmission Towers
PGCIL likely to open tenders for projects awaiting commissioning in FY11-key beneficiaries will be KEC, Jyoti, Kalpatru and Sujana Towers.
Power Grid Corporation of India (PGCIL) awarded contracts worth INR 27.5 bn for transmission towers, sub-stations, and rural electrification projects in H1FY09. Assuming an average execution period of 22 months for transmission projects, orders for projects expected to be on stream in FY11 are likely to be placed soon.
PGCIL is scheduled to open bids for eight transmission packages and seven sub-station projects. Consequently, the industry expects order inflows in excess of Rs 35 bn.
Orders from state electricity boards (SEB) and international geographies, however, are likely to slow down, due to the uncertain global macro environment.
Operating margins of players with fixed-price contracts to improve in FY10. Orders secured in Q1FY09 and Q2FY09 on fixed-price basis are likely to result in higher margins in FY10, given the steep decline in commodity prices (especially steel) since Q1FY09.
Kalpataru Power Transmission (KPP) secured key fixed price orders from the international geography in H1FY09. Hence, we believe, its operating margins are likely to be higher in FY10 compared with FY09.
Jyoti Structures (JYS) has higher proportion of variable-price contracts; hence, the decline in steel prices is unlikely to have a significant positive impact on it. Further, competition is likely to moderate due to more stringent pre-qualification norms on critical projects likely to be awarded henceforth.
Interest costs for coverage universe to be lower in FY10
The government has undertaken several initiatives to ease liquidity in the system and thereby moderate interest rates. Hence, interest costs are likely to be lower by atleast 300 bps in FY10 compared with FY09 for transmission tower companies.
The benefit is unlikely to trickle down in the near term. In our coverage universe, JYS has the highest sensitivity to interest rate movements, primarily on account of it's higher off balance exposure than peers.
Outlook and valuations: Improving visibility, but not enough
Slowdown in order accretion and higher raw material prices were major concerns for the power transmission EPC sector from H2FY08 to H1FY09. Order accretion concerns were partly addressed in H2FY09, and will get impetus post the general budget announcement on July 6, 2009.
However, liquidity issues, delay in associated generation projects may elongate execution cycles. On the positive side, margin pressures are likely to ease in FY10, given the decline in commodity prices and moderation in competition.
Margin improvement in FY10 could be greater for companies with higher fixed-price contracts. Improved market sentiment has allowed the EPC concerns to now fetch PE multiples twice of what they had been getting just 4 months ago. This expansion in PE multiples is likely to continue as improved bottom line for Transmission Tower players become evident from Q3 FY10.
Consequently, the entire sector is likely to get re-rated further with some sectoral gainers getting double digit PE multiples on expected earnings for FY11. There is possibility of gains to the tune of 50 per cent in all four stocks aforementioned by December 2009.
(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)
Weekly Index Outlook — Valiant fight back by the bulls 
Sensex (14,744.9)
Sensex that was staring down a crevasse towards the end of the previous week was pulled back by some brilliant rearguard action by the bulls. Statements emanating from the Government on intended disinvestment and financial sector reforms fortified the bulls and the ubiquitous short-sellers who once again had to back-track, helped stock prices head higher. Similar rebound in equity markets worldwide also contributed to the 1,240 points surge in Sensex last week.
The mood towards the end of last week was the exact reverse of that prevailing at the end of the Budget week. While the Sensex was threatening to breakdown in to a major down-move then, it appears to be on the verge of another strong up-move now. Volumes were extremely low in the first two sessions but it perked up towards the end of the week as stock prices continued to move higher.
Institutional investors, both domestic and foreign were net buyers through last week.
The reversal last week has resulted in a strong piercing pattern in the weekly candlestick chart of Sensex. This surge has also helped the index close above the 50 and 21-day moving averages. These are signals that that the recovery could continue. However, the daily oscillators are still trading in the neutral zone.
The 10-day rate of change oscillator is in the negative zone just below the zero line, while the 14-day relative strength is at 58.
These readings imply that last week's surge has negated the bearish implications of the post-Budget decline but this short-term up-move has to progress a little more to instil confidence about its sustainability.
Weekly oscillators have also not turned unduly bullish though they continue in the bullish zone.
When Sensex recorded the low of 13,219 last week, it retraced 31.5 per cent of the rally from 8,047.
The correction from 15,600 peak also consumed one-third of the time taken by the rally from 8,047 to 15,600. This meets the minimum retracement requirement for the correction both in terms of magnitude as well as time. In other words, the correction from 15,600 could have ended at 13,219.
The question that arises now is what will be the medium term trajectory for the Sensex from here? As is usually the case when indices are in a range, we are faced with multiple counts.
It would be best to see the movement over the coming week to decide on the right count. These are few of the likely trajectories,
Strong move past 15,000 would take the index to the resistance zone between 15,600 and 15,800. Reversal from this zone will result in a range-bound move between 13,000 and 15,800 for a few more months.
Break-out above 15,800 would take Sensex to 16,200 or beyond.
Failure to move beyond 15,000 early next week will bring the bears out of their lairs and they would drag the index down to 13,300 or 12,730. This would imply that the correction would have legs.
The preferred view is the first one of a range-bound move over the next few weeks that continues to give traders a torrid time as the monsoon uncertainty and earnings season plays out.
Sensex is poised close to the key short-term resistance zone between 14,600 and 15,000. A reversal from here can take the index down to 13,830 or 13,200 over the short-term. A strong close above 15,000 will give the next target of 15,440 and 15,600 to the Sensex.
Nifty (4,374.9) 
Nifty declined to the low of 3,918 before rebounding to the peak of 4,390. The index is testing the key short-term resistance at 4,390. A strong close above this level will take the index to 4,592 or 4,693 over the short-term.
But reversal on Monday will result in a decline to 4,100 or 3,920 once again.
Nifty has also retraced 36 per cent of the up-move from the March lows when it recorded the trough of 3,918 last week. Resumption of the intermediate-term uptrend will, however, be confirmed only on a close beyond 4,693 that will give the next medium-term targets of 4,741 and 5,100.
But a reversal from 4,693 will result in a sideways move between 3,900 and 4,700 for a few more months.
Global Cues
Bulls started partying with renewed vigour last week sending most global indices 4 to 8 per cent higher. Commodities were not excluded from this celebration. Reuters CRB Index closed 4 per cent higher, while Nymex crude prices recovered from a low of $58.3 a barrel to close at $63.5.
Asian indices were largely subdued last week. But since the correction over June had been relatively shallow in many Asian indices, some such as Jakarta Composite, Straits Times Index and KLSE Composite Index recorded new 2009 highs last week.
It was however the spectacular 7 per cent rally in the Dow that set the tone for the rest of the indices to follow.
The losses recorded in the last three weeks were wiped out in just one week indicating a strong bullish undercurrent in the market. This index completed 33 per cent retracement of the up-move from the March lows when it recorded the intra-week low of 8,087 on Monday.
That meets the minimum retracement criteria from the second leg. If the third leg of the move from March took off last week, it will have the minimum target of 9,575. But another pause around 8,878 will result in the index fluctuating in a range between 8,000 and 9,000 for a few more months.
It also needs to be watched if the Dow holds above the zone between 8,300 and 8,500 where the 21, 50 and 200 day moving averages are currently forming a compression. Corresponding upper target for the third leg in S&P 500 is 1,045.
Reliance (Rs 1,933.4)
RIL reversed from the low of Rs 1,718 to move to the short-term resistance at Rs 1,970 indicated last week. The stock is in a medium-term down-trend since May 19 and will face strong resistance at Rs 2,018 and Rs 2,200 in its quest to reverse this trend. The 50-day moving average at Rs 2,070 is also a resistance that short-term traders need to watch out for.
The short-term trend in RIL is however up. The stock is currently halting just below its key short-term resistance at Rs 1,960. If this level is crossed, the stock can rally to Rs 2,020 or Rs 2,070 over the short-term. Fresh long positions are advised only on a close above Rs 1,960. Short-term supports for the stock would be at Rs 1,875 and Rs 1,815.
State Bank of India (Rs 1,674.6)
SBI moved in line with our expectation, reversing from the support at Rs 1,500 to move towards the second target at Rs 1,690. We stay with the view that Rs 1690 is a key trend-deciding level for this stock. A downward reversal from here can pull SBI lower to Rs 1,419 or Rs 1,300 while strong close above this level will mean that the up-trend from the March low of Rs 894 can resume to take the stock higher to Rs 1,900 again.
Short-term traders can hold the stock with a stop at Rs 1,570. Move above Rs 1,690 will take the stock to Rs 1,730 or Rs 1,780 in the near-term.
Tata Steel (Rs 392.7)
Tata Steel too recorded strong gains in the last four sessions that helped it close well above its 200-day moving average at Rs 350. The stock completed 47 per cent retracement of the up-move from the March low when it formed the low of Rs 330 on Monday. It is, however, too soon to judge if the correction is complete. Strong close beyond Rs 435 is required to signal the resumption of the intermediate up trend.
The ongoing short-term up-trend will face resistance at Rs 396 and Rs 435. Fresh long positions are advised only if the stock closes above Rs 396 on Monday.
Infosys (Rs 1,867)
It was a strong 8 per cent rally in Infosys last week that disproved our assumption of a medium term reversal in the stock. Close above the previous peak at Rs 1,854 implies that the stock can now move higher to the intermediate term resistance zone between Rs 1,900 and Rs 2,000. Short-term investors can hold the stock with a stop at Rs 1,785. Next short-term support is at Rs 1,728.
The medium-term trend will stay positive as long as Infosys trades above Rs 1,700.
ONGC (Rs 1,041.5)
ONGC reversed from the support at Rs 980 and is currently in a short-term uptrend. As explained last week, if this support holds, it would imply strength from a medium-term perspective with a possible move higher to Rs 1,200 or to the former peak at Rs 1,386 over the medium-term. Medium-term investors can hold the stock with a stop at Rs 960.
Nifty future may trade sideways
Thanks to positive global cues coupled with strong performance by the Indian IT and banking majors, the Nifty future witnessed a sharp recovery.
It closed at 4,381.5 against the previous week's close of 3,993.2, posting a 9.7 per cent weekly gain.
In the process, the future also moved into premium over the spot that ended Friday at 4,374.95 points. Importantly, the strong rally this time around was backed by high trading volumes. That said, a good part of the gains came on the back of a fall in open interest; as against an open interest of 2.25 crore shares last week, it was lower at 2.14 crore shares the current week.
Follow-up
Last week we had presented two strategies — going short on Nifty futures with stop-loss at 4,200 and buying Nifty 4,000 put.
As the market moved against our position, and also a bit too soon at that, these strategies may have backfired terribly.
Outlook
The strong resurgence in Nifty future helped it cross the crucial hurdle at 4,350. The next resistance appears around 4,585 levels, breaching which Nifty future could touch 4,800. It however has minor resistance in between at 4,635 and 4,750 levels.
The immediate support level appears at 4,065.
A move below this level could weaken the Nifty future to 3,650, the chances for which appears rather bleak now.
In between 3,850 could also act as a minor support level if Nifty future breaks 4,065 level.
As the Nifty future had a sharp run-up last week, we expect it to move sideways in the coming week.
Option monitor
Put writers seem to be making most of the recovery. Almost all the put contracts ranging from 3,600 to 4,500 saw the emergence of writers, indicating that traders may be getting convinced that the market may not fall significantly from hereon.
Among the puts, the highest number of accumulation happened at 4,000-strike (71.14 lakh shares) and 3,800-strike (54.44 lakh shares), indicating that these could act as a strong support level for Nifty future.
In comparison, calls shed open interest, indicating that writers may have scampered for cover as the Nifty scaled gains.
Volatility index
Volatility index ended the week on a flat note. The volatility index closed at 35.89 against last week's 35.83.
Recommendation
Traders can consider the following two strategies.
1) Consider going long on Nifty future keeping the stop-loss at 4,065. The stop-loss has been given lower intentionally as the Nifty may also see sharp volatility during the week. If the Nifty future opens on a strong note, traders may have to adjust the stop-loss suitably so as to protect profit. Exit can be made at 4,550, 4,635 and at 4,800 levels.
2) Traders can also consider a short straddle strategy using 4,400-strike. The maximum profit in this strategy is limited to the amount of premium collected by writing the options. The premium of Nifty 4,400 call closed at Rs 92 while that of put stood at Rs 112. The short straddle, however, is a risky strategy since it involves writing options.
FII trend
The cumulative FII position as a percentage of the total gross market position on the derivative segment as on July 9 slipped to 31.87 per cent (33.69 per cent). FIIs were net buyers throughout the week. They increased their index futures holding to Rs 8,490.59 crore (Rs 7,405.02 crore) and stock futures to Rs 19,065.46 crore (Rs 16,867.64 crore). They now hold index options worth Rs 25,237.23 crore.
FII DATA
| FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) |
| Category | Date | Buy Value | Sell Value | Net Value |
| FII | 17-Jul-2009 | 2786.83 | 2644.68 | +142.15 |
| DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) |
| Category | Date | Buy Value | Sell Value | Net Value |
| DII | 17-Jul-2009 | 1709.76 | 1174.4 |
+535.36 |
SPOT LEVELS FOR 20TH JULY
 | 4374.95 | ( 3.39 %) | 143.55 |  |
| | 1 | 2 | 3 |
| Resistance | 4433.52 | 4492.08 | 4593.77 |
| Support | 4273.27 | 4171.58 | 4113.02 |
 | 14744.92 | ( 3.47 %) | 494.67 | |
| | 1 | 2 | 3 |
| Resistance | 14921.89 | 15098.85 | 15397.01 |
| Support | 14446.77 | 14148.61 | 13971.65 |
Reliance BIG listing on cards
Mumbai, July 18 Mr Anil Ambani, Chairman of Reliance ADAG, plans to list his group's media and entertainment arm, Reliance BIG Entertainment.
"We are just making our beginning. We have kept our options open for raising funds and will evaluate them as we go along," he said in a conference call from New York.
More deals
Reliance ADAG has formalised partnership with Hollywood studio DreamWorks for film production with an initial funding of Rs 4,042 crore ($825 million).
"This will include $325 million through equity placement, $150 million through Disney and the remaining through debt financing from a syndication of banks," said Mr Ambani.
As part of the deal, DreamWorks will make five-six films a year for global audiences with the first to begin production this year.
Walt Disney will handle the marketing and distribution of the studio's films globally, while Reliance BIG Entertainment will be the India distributor.
Mr Amitabh Jhunjhunwala, Mr Steven Spielberg and Ms Stacey Snider will also be part of the Reliance ADAG board.
"Considering the business situation, this is one of the largest outlays in film production in recent times. Revenues from Indian films account for only one per cent of the US market and this will change," said Mr Ambani.
Mr Spielberg, who has produced and directed movies like Jurassic Park and ET , said, "Initially, the new venture will focus on commercial and action movies before experimenting with art films."
Projects
DreamWorks Studios is already working on films such as Tintin and has approached Clint Eastwood for another movie.
It had acquired a whole lot of projects from Paramount during the separation. An announcement of the initial films to go before cameras will be made at a later date, said Mr Spielberg.
This is not Mr Ambani's sole venture in Hollywood.
BIG Pictures, owned by Reliance BIG Entertainment, plans to produce movies with Nicolas Cage's Saturn Productions, Jim Carrey's JC 23 Entertainment, George Clooney's Smokehouse Productions, Chris Columbus' 1492 Pictures, Tom Hank's Playtone Productions, Brad Pitt's Plan B Entertainment, Jay Roach's Everyman Pictures, Brett Ratner's Rat Entertainment and Julia Roberts' Red Om Films.
Momentum indicator
Moving average convergence and divergence (MACD) is a trend following (lagging) momentum indicator which is dynamic and premeditated to identify trend changes. Developed by Gerald Appel in the 1960s, MACD shows the correlation between a fast and slow exponential moving average (EMA) of closing price. Gerald Appel recommended 12 and 26 days as standard periods. This indicator is calculated by subtracting the 26-day EMA (which is slow moving) from the 12-day EMA (which is fast moving). The formula is as follows:
MACD = EMA (12) of price - EMA (26) of price
A signal line or trigger line is plotted on the MACD chart to give buy and sell signals. This signal line is formed by smoothing MACD with another exponential moving average line. The standard period for signal line is nine days.
Signal = EMA (9) of MACD. The MACD and its signal lines fluctuates above and below a zero line, that is from the positive to the negative territory, similar to the price rate of change (ROC) indicator.
The daily chart of Andhra Bank illustrates moving average convergence and divergence oscillator that is plotted below the price. In the MACD plot, the thick red line is the MACD line and red dotted line is the signal line. When the MACD line rises above the signal line, the indicator provides a bullish signal, which implies that the price of the stock is on the verge of experiencing an upward momentum. In June 2008, November 2008 and March 2009, MACD indicator in Andhra bank signalled buy. On the other hand, the MACD declining below the signal line that is a negative signal, which indicates that it is time to take profit or to initiate sell. In May 2008, September 2008 and January 2009 the MACD signalled sell. It would be prudent to wait for an established cross above the signal line before initiating a position.
Divergence
Divergence between the MACD and the price chart also provide signals to investors about the right point for buying or selling a stock. When the stock price makes lower lows while the MACD plots higher lows in the negative territory, a positive divergence is formed. Likewise, when the stock price continues to rise forming higher peaks, while MACD peaks out and begins form lower peaks in the positive territory, it is a negative divergence and a sell signal. In early December 2008 and early January 2009, the MACD oscillator in Andhra Bank chart signalled caution to bulls by forming a negative divergence. When the MACD line rises significantly from the signal line in the positive territory, the gap widens between the two lines. This indicates that the stock is overbought and is likely to revisit normal levels. Similarly, when the MACD line declines significantly from the signal line in the negative territory, as the gap widens between the two lines. The stock may then revisit normal levels.
MACD is generally not suggested for ranging market or sideway conditions. Second, this oscillator is slower in giving buy or sell signals when compared to ROC or RSI oscillators.
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Arvind Parekh
+ 91 98432 32381
--
Arvind Parekh
+ 91 98432 32381
