Equity Strategists

Friday, December 10, 2010

Broadbased Selling Dominates Markets

Markets were in an extremely jittery mode as there was a broadbased selling across all sectors and stocks. The only saving grace was seen in stocks like Infosys, Wipro, ITC and Oriental Bank of Commerce which closed in the green. The damage in the midcap and smallcap stocks was the most painful for investors as rumours of a large number of company promoters being involved in rigging of stocks alongwith shady operators was doing the rounds of Dalal Street, We are of the view that very soon SEBI will come out and clarify the companies and promoters which are involved so that rumour mongering stops and investors have clarity about the companies which are in their portfolio.

Nifty can fall to its previous swing low of 5690 and we feel that it might find support around the range of 5650-5725 levels. We very strongly advise not to bottompick stocks and stay away from the market till some sense of stability comes back. Bottoming out is a process and not an event and hence one should have the patience for the market to complete this process. Till then, it would be wise to stay on the sidelines.

Support for Nifty lies around 5725/5690 and 5650 whereas resistance lies around 5790 and 5825-5840 levels.

Wednesday, December 8, 2010

Nifty Succumbs To Nervous Sentiments

Markets succumbed to the nervous sentiments as Nifty slipped below 5900 during the session. Nervousness was aided by the reports that IB has submitted reports of price rigging in few companies. So, there was sharp sell-off seen in some of these scrips like KS Oils, IRB Infra and Ruchi Soya. Mid and small caps were hurt the most as stocks plummeted due to lack of buying rather than any other particular reason. Amongst the large caps, banking remained under pressure and list of prominent losers was crowded with many banking names. Bank Nifty shed another 2% as it closed almost on a 3 months low. OMCs were up on reports that petrol prices might be raised as Crude moved above $90. There were some other gainers like Hexaware, Ranbaxy and ACC but overall the sentiments were extremely negative and there were much more losers than gainers. Some of the major losers were Ruchi Soya, KS Oils, Renuka, IRB, KFA, ABG Ship, Al bank, Union bank, Jain Irrigations, Orchid, Axis, Bajaj Hind and BGR Energy.

Nifty failed to sustain above 5940 but found some intraday support around 5880. But, the short term trend again has shifted into negative and would remain so as long as we trade below 5950. On the downside, levels of 5835-45 and then 5770 are possible. Banks are not showing any signs yet of bottoming out and could continue to bother indices in coming days. IT and metals to lesser extent are showing some signs of stability. Short term sentiments are being affected by all kind probes be it market related (Mkt operators, price rigging) or Government agencies related (2G Scam etc). It would be advisable to stay away till some sanity and stability returns. Few stocks that have been hammered because of short term events but hold investment values could be bought in small quantities with medium to long term investment horizon. (9-12 months). Some names that could be considered are IRB Infra, Welspun Guj and HCC.

Nifty has support around 5835-40 and then around 5770 while resistance is likely around 5960-70.

Tuesday, December 7, 2010

Banking Stocks Witness Strong Selling

Nifty opened on a buoyant note and traded above 6050 for considerable period. Metals and IT were largely responsible for this buoyancy. But, the leader thus far, banking saw significant amount of selling throughout the session and was largely responsible for markets shaving off all its gains. In fact Nifty closed marginally in the red at 5992. Most of the PSU banks witnessed strong selling as investors were spooked by RBI Governor’s advice to the banks on reducing lending rates and increasing deposit rates. This advice, if followed could mean reduction in NIMs of most banks. SBI lost around 4% while Can bank, BOI, Indian Bank, OBC, PNB, BOB and Allahabad Bank were other major losers. Bank Nifty was down around 2.5%. Metals were significant gainers as Tata Steel led the sector with an intraday gain of over 3%. JSW Steel, Ispat, Bhushan, JSPL and Sterlite were other prominent gainers. Tata Motors continued to accelerate as it hit a new all time high. Some other notable gainers were Welcorp, Ruchi Soya, Havells, CESC, IGL, Srei Infra, Sun Pharma, Siemens and United Spirits.

Nifty failed to encounter stiff resistance around 6050 and lost significant ground in the later half to slip below 6000. Twice now, market has failed to close above psychological levels of 20k and 6K despite spending significant intraday period above these levels. 6040-6070 remains a stiff resistance and it seems that we could see a swing to lower side and possibly a test of support at 5920-30 or even 5870-80. Banking that had taken the market higher has reversed its direction and could under perform in coming weeks. It would be prudent to avoid bargain hunting in banking stocks, particularly the PSU ones till the time the profit taking/selling subsides. Metals are showing some resilience as are some Capital Goods counters. Down days could be utilized to take long positions in leaders from these two sectors. IGL has given a daily breakout by closing above Rs340. Sustained trades above Rs 340 could take the stock higher to around Rs 365-370. Havells could target Rs 418-425 above Rs 404.

Nifty has support around 5925-40 and then around 5865-80 while resistance is likely around 6030-6040.

Monday, December 6, 2010

Nifty Rebounds Amidst Fragile Sentiments

Market recovered smartly over the week as Nifty gained over 4%. The rebound was across the board with the worst impacted sectors like Realty and Metals gaining the most. But, despite a stronger looking rebound the sentiments remained fragile as rumors continued to impact trading. It was particularly so on Friday as mid and small caps reacted adversely to the SEBI’s decision to ban promoters of four companies. However, despite the fragile sentiments it was a strong recovery that too Nifty to 6000 levels again and it was only the strong resistance around 6030-50 that stopped Nifty from going further. Incidentally both Sensex and Nifty found resistance round the psychologically important levels of 20K and 6K respectively.

Technically, the levels of 5020-40 and then 5850 are important supports on daily and weekly charts, while sustained move above 6050 could pave the path for another smooth move to around 6180-6220. Banking stocks made a strong comeback but it’s the IT stocks that look to be the best bet to take Nifty higher. BSE IT index closed on a weekly all time high as did BSE Healthcare index. Followup buying and support in Infosys, TCS, Wipro and HCL Tech on Monday or Tuesday could open up higher targets for these stocks. Tata Motors, M&M and Bajaj Auto are also looking good. L&T, Cummins and Crompton are also showing positive bias and here again followup in next couple of sessions could mean higher levels. Bharti is finding some resistance around Rs360 but it has strong support around Rs330 and any dips towards this could be utilized to take fresh positions. Infra and Realty did see some rebound last week but still are not out of the woods completely. So as a trader it would be better to stay away from long positions in these two sectors. Metals are looking better than Realty. JSPL has bounced back significantly from the low of around Rs 575 a few sessions ago and sustained trades above Rs 690 could take it further to around Rs 735-750. Tata Steel is moving sideways between 585 and 625. Positional trades could be taken on the long side in Tata Steel with a 6-8 weeks view.

Friday, December 3, 2010

Performance Highlights - Equity Strategists

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Performance HIGHLIGHTS

INVESTMENT PICK (HOLDING 6 MONTHS)

Recommended ARIES AGRO @ 111.25 ON 25/03/2010