Nifty Holds Even

Nifty swung both ways before closing almost unchanged. The intra day range was almost 100 points as Nifty dipped below 5500 mid session before staging a smart recovery that took it past 5550. Stock specific moves dominated the session and most of the action was seen in the mid caps space. The tea counters were very active and most rose sharply on heavy volumes. Mcleod Russell was up around 9% while Tata Coffee rallied for second successive day and gained over 13%. Some other prominent mid cap gainers were S.Kumar’s, BGR Energy, MLL, IVRCL Infra, Bombay Dyeing, Apollo Tyres, Noida toll, Wel Corp and Hexaware. The ADA group stocks also gained ground on some short covering. Certain stocks that have gained ground in the last few sessions witnessed some profit taking. This list includes Cairns, DCHL, Indusind Bank, PNB and Sun Pharma.

Nifty has been trading around 5500 for past 4-5 sessions now but has failed to give a closing above 5550. The range between 5550 and 5600 continues to provide stiff resistance. RIL has been consolidating between 970 and 1000. Breakout is likely above Rs 1000 that could open higher targets of around 1035 and even Rs 1060-65. Breakout in RIL, if and when that happens could also help Nifty to move past 5600. BGR Energy was mentioned as a breakout candidate above 455 and that breakout has taken place. Sustained trades above 450 could take it around 485 and 510. LIC Hsg has potential to target 215 and even 228-230 over next few sessions.  Some other stocks that might show an uptrend over next few sessions are Bombay Dyeing, Welcorp, Jet Airways( above 460) and CESC.

Nifty has immediate support around 5470-80 and then around 5430-45 while resistance is likely between 5570-5610.

Crude Still A Worry For Markets

Markets opened on a positive note and continued to move up in a slow and steady manner and finally spot Nifty closed 57 points higher at 5520. Market breadth was relatively strong as  advances on NSE were an impressive at 943 as against 487 declines. Among the frontline stocks Infosys Technologies led the market from the front and it got support from other stocks like Tata Motors, HDFC Bank and Bajaj Auto. Tech Mahindra was the surprise winner as it closed at Rs.743 ( went up by Rs.65). With the political stalemate between DMK and Congress getting resolved, a little bit of more short covering will be expected tomorrow. Rising crude oil prices still continue to remain a worry as Libya crisis is still to be resolved. The 200 DMA lies at 5660 and the best case scenario for the bulls would be a rally till this level. The journey to this level is however not expected to be smooth as higher levels would definitely see intense selling . Crude is the biggest worry for the market and market movements will hence be extremely volatile and choppy till this issue gets resolved.

The best strategy in the current scenario would be to adopt a trading approach in frontline stocks and investment in midcap and smallcap stocks postponed till the 200 DMA is decisively crosses. One should stay in cash and there is no hurry to invest into the market. Short term preferably intraday trading is what one should follow.

Nifty futures will face resistance at 5562, 5620 and 5660 levels and strong support on the downside lies at 5495 and 5465 levels.

DMK and Libya Have Their Impact on Nifty

Markets opened lower on account of soaring crude price because of unrest in Libya and also because of the political crisis as a result of DMK pulling out of the government. The weakness persisted till afternoon but as rumours of a patch up between DMK and the Congress party surfaced, Nifty futures smartly bounced back from a low of 5400 to a high of 5482 in a span of just 2 hours. The dramatic recovery of 80 odd points was a surprise but the improved sentiment could not spill over to the broader market as the advance decline ratio remained miserable at 375 advances as against 1072 declines.

We are of the view that for the markets crude oil is a bigger worry as it has the potential to derail the economy whereas the political crisis will not have any impact on the stability of the government as it has sufficient outside support for survival. The Libya crisis is expected to be over in the short run and hence will have a limited impact. The issue which worries the market is whether this problem in Gulf extends to Saudi and other countries also. For the time being, Nifty is expected to trade in the range of 5200 and 5600. Crude Oil movement alone can break this range of Nifty on either side. If Libya crisis gets resolved early and the problems do not spread to other parts of Gulf, then an upward breakout is possible. The lower breakdown will happen only if oil moves beyond $125. Till then Nifty might trade in the range of 5200 on the lower side and 5600 on the higher side.

For the immediate short term, Nifty has strong support around 5448, 5400 and then 5375 levels whereas it will face resistance around 5510 and 5545 levels.

Equity Strategists : Market Commentary

Equity Strategists : Market Commentary

Auto, Banking Sectors Lead Rally In Budget Week

The Budget week lived upto its reputation of being a volatile one. Volatility began on the Budget day itself as Nifty rallied initially, only to give up most of its gains. But, the day after saw a one sided up move of around 200 points as Nifty moved past 5500. Overall, it was a good week for bulls as indices rallied over 4%. This came against the backdrop of higher Crude prices and a lukewarm Budget. But, the fact that there were no expectations whatsoever from the Budget and there were short positions going into the Budget helped the markets. Auto, FMCG and Banking indices were the top three gainers for various reasons associated to Budget. There were no sectoral losers but the least gains were seen in IT and Oil and Gas. Nifty crossed 5600 briefly on Friday before selling set in at higher levels. Markets have seen a decent rally post Budget but now we are placed just around the strong resistance zone of 5550 to 5600. As mentioned earlier, it may not be easier to take out this resistance in one go. But, we do believe that market has made a sustainable bottom around 5230 and for the first time since November 2010, we have a higher bottom and now higher top( 5608 on Friday). The resistance at 5600 is likely to be taken out eventually maybe over next 5-7 trading sessions. Any correction should find initial support around 5440-60 and then a strong one around 5350-5375. The second level is unlikely to be breached and positional traders could take long positions on declines in Nifty as well as bullish counters with positional stop loss below 5340. Clear breakout is seen above 5625 with potential targets of 5770 and around 5900. Banks and Autos have been the leaders in the current rally. One needs to be selective in Autos and we see positive bias in Bajaj Auto and Hero Honda (above 1560). Banking is looking to be in a better shape and one can use dips to accumulate stocks like HDFC Bank, SBI, Yes Bank, Indusind Bank, Allahabad bank, OBC, Canara Bank and BOI. Another important thing to note is that once Nifty stabilizes above 5625 short covering could lift the weaker sectors like Infra and Realty too. Certain other counters that are looking positive and are Buy on dips candidates are L&T, IDFC, Havells, Cairns and Sterlite.

Nifty has immediate support around 5445-60 and then around 5375-5400 while resistance should be seen between 5570-5610.

Nifty In Consolidation Mode

It was a choppy day for the markets as Nifty see-sawed between 5470 and 5570. Nifty opened on a weak note and traded with negative bias in the morning session. But, sentiments recovered and turned for the better on news that Col. Gaddafi has accepted peace moves. Nifty recovered more than 100 points from the day’s lows. But, expectedly selling came in at above 5550 levels as Nifty closed at 5536. Overall, it was a satisfactory day considering the fact that we had gained around 200 points on Tuesday. DCHL was the biggest gainer amongst the derivatives counters as it gained over 14% on huge volumes. Other significant gainers were Sobha, Triveni, Orbit, Renuka, Karnataka Bank, KFA, Godrej Ind, Indian bank, JP Associates, Tata Power, Bhel, L&T and Apollo Tyres.  On the losers’ list were S.Kumar’s, Welcorp, IDFC, Sun Pharma, LITL, Hotel Leela, Adani Power, Aurobindo, Reliance Infra and Jain Irrigation.

Nifty managed to sustain and close above 5500. Markets are showing strength and a close above 5550 would be very positive for the short to medium term trend. It may take some time and Nifty might consolidate between 5400 and 5600 for 3-5 days. But, broadly the trend has turned positive and any declines should be used to accumulate positively biased counters. Sustained trades above 5600 could trigger another wave of short covering and that might benefit the badly mauled counters like IVRCL Infra, DLF, JP Associates, LITL and the likes. As of now the large caps HDFC, HDFC Bank, L&T, SBI, Bhel and Bajaj Auto are looking good and should be accumulated for decent trading gains over next 2-4 weeks. JSW Steel has given a breakout above 940 and is likely to target Rs 1025-1040 in next few sessions. Similarly Bajaj Auto has broken out from an inverted head & shoulders pattern and is looking bullish. Some others that are looking bullish are Godrej Ind( above 177), Apollo Tyres, IOB( above 140), Havells, LIC Hsg( above 202), Wipro( above 448), Kotak and IRB( above 195).

Nifty has immediate support around 5445-60 and then around 5375-5400 while resistance should be seen between 5570-5610.

Nifty Goes Through A Post Budget Big Bang

Nothing big bang was there in the Union Budget but it was a big bang day at the bourses as indices gained over 3%. The session began on a marginally positive note but momentum gathered as the day progressed. Auto and financial stocks led the rally as was mentioned in the previous newsletter but the velocity of the up move as witnessed in stocks as well as indices was totally unexpected. The monthly sales figures released by Auto manufacturers further fuelled the momentum. The biggest gains were seen in TVS Motors, Ashok Leyland, M&M, Maruti and Escorts. Bank Nifty zoomed higher by more than 4% on across the board buying in banking stocks. Short covering too aided the up move. Nifty finished the day at 5530 almost at the high point of the day. Nifty has moved up sharply and is now placed just below the strong and crucial resistance zone of 5545 to 5575. This single day up move of around 200 points has raised hopes for a positive bias over short to medium term. This is not to suggest that it would be a straight upmove without any corrections/consolidations. In fact, we could see some consolidation just around the current levels before making another attempt at taking out 5600. The global cues could trigger some kind of correction. Technically, the levels to watch for on the downside are 5440 and then 5370-5380. We could retrace back to the second level but this level should provide strong support for the upward bias to persist. So, practically as a trader one should use declines towards 5440 and 5375 to take bullish positions in Nifty as well as stocks. Bullish pattern is seen in LIC Hsg and sustained moves above 202 could trigger strong up move. As mentioned in previous newsletter some banking and auto stocks are also looking positive and one can accumulate these stocks on decline.