The damage in mainline indices doesn’t truly reflect the kind of carnage that was seen in many stocks. Nifty showed a cut of only about 1% at the close but a look at the list of losers and the kind of damage, reflects the true story. The whole ADA pack was massacred on account of heavy unwinding. R-infra, RMedia, RCom and Reliance Cap lost between 14 to 20% each on huge volumes. Most of the selling was seen in the last 60 minutes. The selling was not restricted only to this group as there were many stocks that suffered more than 10% cut and that too on big volumes. The list includes Aban, BEML, LITL, Bombay Dyeing, Orbit, Punj Lloyd, Onmobile, IVRCL Infra, Srei Infra, GMR Infra, JP Associates and TTML. Most of the stocks on this list have been under severe bear pressure for past few sessions and had already seen significant erosion in mkt Cap even before today’s big cuts. The list of losers was a big one as breadth was hugely negative. As seen yesterday there were no buyers even at lower levels. There is a clear crisis of confidence at bourses and nobody wishes to even look for bargain buys. Mid and small caps continue to be sold into as reflected in more than 3% cut in madcap index. Few stocks that managed to prop up index were Infosys, M&M, HDFC, HUL and Sun Pharma.
Wednesday, February 9, 2011
Crisis of Confidence
Inconclusive Meet on JPC Pushes Nifty Further Down
Market reacted negatively to the inconclusive end to the meet called to discuss parliament logjam. Nifty traded below 5400 for the whole session and lack of any support even at lower levels resulted in another sharp cut of more than 1.5%. There were sharp cuts in various counters mainly in infrastructure space. LITL that came out with results yesterday was down more than 17% as the stock collapsed to almost 18 months low. GMR Infra, Punj Lloyd, IRB Infra, GVK, Unitech and NCC witnessed cuts of 6 to 10 % each on relentless selling and almost no buying support even at almost 24-30 months lows. Other counters that witnessed significant loss in market cap were BEML, Ispat, JSW Steel, S.Kumars, KS Oils, Praj, MLL, Indian Info, IFCI, TVS Motors, Triveni, M&M and Titan. There was a clear disinterest in value picking any stock/sector as almost all sectors struggled. Bank Nifty made a new recent low after moving sideways for past 2-3 weeks and that doesn’t augur well for the broader markets. ICICI, HDFC bank and PNB lost ground. Number of mid cap banking counters made new recent lows. Few stocks that did manage to see some stock specific upmoves were Fortis, Bajaj Auto, ABG Ship, NMDC and Auro Pharma. But apart from Fortis that gained more than 5% on huge stocks others just about manage to eke out small gains. Overall, it was yet another good day for bears as they pushed for lower levels on almost no resistance by bulls.
Bulls seem to have thrown in towel as levels are being taken out without much effort. Till about two days ago we were discussing the possibility of 5450 providing some support and here we are about 150 points lower even from that level. Almost all sectors are succumbing to the negative sentiments with infrastructure being the current favorite with bears. The way some of the infra stocks have seen erosion of market cap over last 2-3 weeks is simply amazing. Many stocks have entered heavily oversold positions. 5350 has also not held and now we are firmly in the 4800 to 5450 range where we traded for almost 11 months before the Nifty broke out. 5440-50 has become an immediate strong resistance while 5550-60 remains a strong intermediate reversal level. One should be careful to be on the short side as stocks and indices have entered oversold zone and any positive factor (one of them could be Govt agreeing for JPC) could trigger a sharp rebound. 5375-5380 would be the initial level to watch and then 5440-50.
Tuesday, February 8, 2011
Markets Sluggish, Nifty Struggling
Market did not do much as indices stayed almost unchanged in the end. But there was volatility during the session. Nifty struggled to sustain above 5400 and the GDP numbers also didn’t help much. Nifty did find some rebound after the GDP announcement but late selling in key heavyweights again pushed it back to around 5400. It was a mixed session as some stocks did find some value picking at lower levels. Heavyweights like Hero Honda, ITC, NTPC, RIL and OMCs were amongst those attracting buyers. But, on the other hand there was selling in banking counters, infra counters, ABB, Jet Airways, Lupin, Cipla, Ranbaxy, Wipro, HDFC, TCS and L&T. Uncertainty about the governance still seems to be the topmost issue and the meeting scheduled for tomorrow to discuss parliament imbroglio might play a crucial role in deciding the short term direction of the market. Anything that favors a smooth functioning of parliament could trigger a sharp rebound in the markets as we are already trading in an oversold zone. But anything that prolongs the uncertainty could be a big negative in the short term. Technically, we are in an oversold market and there is crucial support at 5350. Immediate resistance is likely around 5450-70 and then a crucial one is placed at 5550-60.
Sunday, February 6, 2011
No Respite From Carnage
Friday session put paid to all expectations of bottoming out as benchmark indices nosedived. It looked like for first four days of last week as if 5400-5450 would prove to be a formidable support zone but one-sided move on Friday was enough to push even the hardcore bulls in a corner. Nifty lost over 130 points to slip below 5400 while Sensex shut shop just around 18k. This was the worst close in around 6 months. Carnage was seen across sectors as sentiments turned hugely negative towards the later half. On weekly basis, it was the relatively safe sector, FMCG was the worst impacted. BSE FMCG index lost over 6% during the week as investors sold heavyweights like ITC and Levers. Realty, Auto and the IT were the other ones that suffered the most, losing around 3% each. BSE metal index managed to eke out marginal gains on a relatively better show by Hindalco, NALCO and Tata Steel. Again, the global backdrop was positive as US indices moved to new post-Lehman highs. Local issues continued to bother investors.
Our expectations that Nifty might have seen a credible low around 5400 and we could see a sustainable rebound came to nought on Friday. The sheer momentum of the fall was unnerving as Nifty collapsed almost 185 points from its intraday high of 5556. Fall was aggravated due to weekend unwinding as traders rushed to square off any long positions. The fact that the worst impacted stocks were the ones that had held on relatively well suggest that investors and traders are in a panic mode now. The momentum is usually at its highest closer to the peaks as well as bottoms. Again, despite the sharp fall on Friday we do believe that Nifty might be closer to bottoming out though the momentum suggests otherwise. We have already seen correction of around 15% from November top and usually the normal corrective moves are of 12 to 17% magnitude. Then as already suggested on earlier occasions also Nifty provided stiff resistance between 5350 and 5500 when we were trying to move higher. As an INVESTOR with at least 6 months view it would be advisable to invest a part of investible funds in companies that have shown good quarterly numbers. As a trader the momentum is still down and it would be better to wait for some bottoming out patterns to emerge before attempting long positions.
Thursday, February 3, 2011
At Last! Nifty Moves Up
Finally, we witnessed a rally that was able to sustain for a whole session. Nifty opened on a slightly positive note and kept on building momentum as the day progressed. It was a mix of buying in some stronger counters like Hindalco and short covering in highly oversold counters like DLF and others. Heavyweights like SBI, L&T, RIL and Tata Motors witnessed some interest at lower levels and for a change this interest persisted for the whole day. Bharti was the biggest gainer amongst the index heavyweights as it gained over 5%. Some of the other big gainers were Polaris, DLF, HDIL, JP Associates, Syndicate bank, Renuka, REC, Bata, IVRCL Infra, Hindalco, Sintex, HCC, Adani and Exide. But , there were a few that remained on the selling list. The list includes Sobha, Cummins, Voltas, OFSS, Ashok Leyland, IOC and HCL Tech. Nifty managed to close above 5500.
Nifty faces immediate resistance at around 5540-50 but as stated earlier also we believe that the rebound has some more legs to it and Nifty could inch up towards 5650-5680. The efforts to break below 5400 have been unsuccessful despite strong negative sentiments. It seems that combination of short covering and value buying could sustain Nifty and should it take it higher. Even the weaker stocks/ sectors like realty and infra could also move higher on short covering. The stronger stocks are Hindalco, Bharti, Sterlite, TCS and Tata Steel. Banks have seen consolidation for past 7-10 sessions and could now move higher. The better looking charts in the short term are SBI, ICICI, Syndicate bank, Indusind Bank and Union bank. Bank Nifty might move above 11000 in coming sessions. Hindalco has given a break out above 240 and one can accumulate it for next technical target of around Rs 265.
Bottom Continues To Elude Markets
Markets shed all its intraday gains towards the close. Mr. A. Raja’s arrest by CBI triggered the change in sentiments as Nifty suddenly shed about 50 points in a matter of 15-20 minutes. But, whatever the reason, fact is that Nifty is unable to sustain higher levels and this is in a backdrop of persistent positive global cues. There were a number of stocks that did find buying support at lower levels, be it on short covering or value buying. But, there were more stocks that weighed heavily on the indices. Hero Honda reacted negatively to its numbers and was the biggest drag on indices. Other index losers were NTPC, Bhel, Bajaj Auto and HDFC. Nifty failed to move past 5500 and closed almost unchanged at 5430. Despite, the late sell-off we continue to be of the view that Nifty is unlikely to sustain below 5400 and this level is likely to provide a strong support even if a temporary one. On an intra-day basis we might slip to around 5350 but closing is unlikely below 5380-5400. RIL is witnessing strong volumes around Rs 900 and a move above 930 could take it to around Rs 965-970. Volatility is likely to be on higher side as market tries to find a bottom.
Tuesday, February 1, 2011
No Respite From All Around Selling
Market opened on a flat note but saw huge selling immediately especially in stocks like Tata Motors whose monthly sales figures disappointed the markets in a big way. Yesterday’s gainers like Bank of Baroda, Canara Bank and SBI gave up all its gains. Weakness and heavy selling by FIIs in Tata Motors and Reliance broke the strong Nifty Support of 5425 and the market finally closed on a very weak note. The factors which are affecting the market in a big way are the macro concerns like interest rates, inflation figures and serious governance deficit which has weakened the sentiments in a very big way. ADAG stocks witnessed fresh bouts of selling as Reliance Infra closed below Rs.700 and Reliance Capital made an intraday breach of Rs.500. Titan made some brave attempts to rally but that too faced a lot of resistance around 3650 levels. The only stocks which showed some decent buying were HDFC and HDFC Bank.
There is very little one can do at this stage and hence it would be prudent to stay on sidelines. Bottom picking the market would be like catching a falling knife. Hence, we are of the view that one should not invest fresh money in the market till the time markets make a higher bottom at least on the hourly charts.
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