Monday, October 18, 2010

WEEKLY REPORT 18-10-10 to 22-10-10

18-10-10 to 22-10-10
Stay sideways till stability
Be Stock specific
We don’t think it’s a very trending market
'Undertone' of the Market, become un-clear
Q-2 Earning, Global cues & Fund Flow
Focus on individual stocks as the focus shifts to Q2 results
The big story for the coming week will of course be the mega Coal India IPO which opens on Monday. Meanwhile, the volatile consolidation phase continues in the Indian market. Investors seem to be treading cautiously given that we are in the midst of the earnings season. Also, some cooling was expected as last month's rally had left the market a little overheated. So, after five straight weeks of advance, which lifted the key indices near their all-time highs, we have seen a minor pullback over the last two weeks. Still, the bulls almost pulled off new highs in the middle of this week when the Sensex soared by nearly 500 points only to retreat in the next two sessions.
After this week's volatility people are bound to be a little jittery about the near-term prospects for the market. And, there are no easy answers as results will continue to trickle in. At the same time, the anxiety over the fragile external scenario will keep the market players on tenterhooks. The heightened action in the global currency markets and the verbal feud over the sticky issue could also weigh on the sentiment. Fed chief Ben S. Bernanke says he is ready to ease the monetary stance further but will be cautious in unleashing Quantitative Easing 2.
All eyes are now on the next FOMC meeting, which is slated for Nov. 3. US will also hold congressional elections around the same time. Back home, the RBI policy meeting is scheduled for Nov. 2. Before that there will be a G20 summit in South Korea on Oct. 22-23.
Among the top results next week include Sesa Goa, HDFC, L&T, Bajaj Finserv, ING Vysya Bank, Mindtree, Bajaj Auto, Concor, HDFC Bank, Ashok Leyland, Persistent Systems, GSFC, Ambuja Cement, SKF India, Allahabad Bank, South Indian Bank, Mahindra Forgings, TVS Motor, Sasken, Zensar Tech, ACC, Eclerx, M&M Financial, Chennai Petro, Ipca Labs and Biocon.
Lots of global data points will be on tap as well. In the US, a slew of housing sector reports will be released apart from statistics on industrial production, Fed's Beige Book survey, weekly jobless claims, leading economic indicators and the Philly Fed index. Germany will announce ZEW survey of Economic Sentiment and IFO business outlook. Minutes from the BOE and RBA's last policy meetings will also be issued, besides UK retail sales. China's Q3 GDP and September economic indicators will also be watched closely.
The markets are currently driven by liquidity and at some point people would find it a bit expensive. They would be pulling out liquidity and that’s exactly what is happening right now. Traders feel that possibly the markets do not have too much of an upside from here. Because of which people are booking out at this point of time and we think again we are close to that 6060-6120 band. And, in case we break that then yes we think there is some more trouble for us.
  • TREND:
We won’t say the market has broken down; it’s been doing these wild swings because a lot of weak hands have recently entered-it’s still between 6000 and 6200 and you wouldn’t be surprised in watching another 200-300 point up in a day because once the market starts moving in one direction everybody piles on. So we don’t think it’s a very trending market, it could remain very volatile but within a range.
  • RANGE:
For the coming week, the nifty has a base of 5810-5860. The markets will possibly hold on in this range at least till the Coal India IPO gets over. Post that there could be decent amount of selling coming in and we should possibly look at much lower levels because we feel that the markets are overvalued. So once it breaks that 5810-5860 we can change the view but at the same time during the next one week we will not be surprised if we again try to scale that 6200-6250 mark but that again should be utilized by people to sell.
Clearly a day where the turnover was very high. You saw the PCR moving down from 1.39 to 1.35. You saw unwinding happening anywhere between 6100 to 6400 put. On the Nifty front also there was premium maintained around the 30 level but we saw fresh shorts and unwinding happening on Friday. Also important was 6200 call which saw huge writing happening in. The premium actually came down by nearly Rs 25 – Rs 30 which will come on your screen. Also we saw huge build up happening in nearly 25% open interest build up happening on this strike price but it was all about IT on Friday. After Infosys results which were in line but it led disappointment because the price already factored in the numbers which came in. So you saw fresh shorts opening up in any large cap stock, whether it was Infosys, TCS, Wipro.
We will start with Infosys where you saw over 15% build up on the short side. The stock was down by nearly Rs 100 and also the turnover picked up so nearly Rs 110 gone on Infosys. TCS again people have been bullish on the stock but again factoring in that the results might come in, in line with expectations. So we saw fresh shorts opening there as well. The stock again saw build up of nearly 10% in open interest and was down by nearly 3% in the market. LIC housing finance, it is a trend which is happening in the market for the last few days. The companies come with good set of numbers but we see profit booking happening in Axis bank, LIC Housing finance are key examples. LIC for example the stock saw build up happening in on the short side and stock was down nearly Rs 79 in the market which is not a frequent case with this company.
But the fertilizers continue its rampant run up which they have seen in the last few days. Nagarjuna fertilizers surprised the markets again on Friday. We saw good build up happening on Nagarjuna fertilizers the stock did well today in the market and Orchid chemicals it has been surprising many people on the street. The stock has been moving from Rs 200 to Rs 320 to Rs 325 up nearly 8% - 9% in the market, came off from days high ended up nearly 5% but we saw huge build up of nearly 40% happening on the stock on Friday.
  • IPO:
The government plans to raise about Rs 15,000 crore from divestment of 10% stake in Coal India. The Coal India IPO is billed as the country's largest issue ever. The IPO of Coal India opens for bidding on Monday, 18 October 2010 and closes on Thursday, 21 October 2010. The government has set Rs 225-245 per share price band for the Coal India IPO. Retail investors will get shares at 5% discount on the final issue price to be discovered through the book-building route. The Indian government is selling roughly 63.16 crore Coal India shares, or 10% of the company.
The Coal India IPO is a part of a strong equity issuance pipeline over the next six months that could soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 36,000 crore from share sales over the next three to six months.
IT bellwether Infosys kick-started the Q2 results season on Friday, 15 October 2010, reporting a strong results and the company also raised its earnings as well revenue forecast for the year ending March 2011, in both dollar and rupee terms at the time of announcing the results.
Larsen & Toubro and HDFC will announce Q2 results on Monday, 18 October 2010. Bajaj Auto and HDFC Bank will announce Q2 results on Tuesday, 19 October 2010. Hindustan Zinc and HCL Technologies will announce results on Wednesday, 20 October 2010. ACC and Tata Consultancy Services (TCS) report earnings on Thursday, 21 October 2010. Bank of India and Wipro will be announcing Q2 results on Friday, 22 October 2010.
Foreign funds continue to aggressively mop up Indian stocks. Net equity inflow in 2010 now stands at a record $22.70 billion, above last year's $17.45 billion, as per data from the Securities & Exchange Board of India (Sebi). The Sebi data includes FII inflow through primary and secondary market route. A sizable chuck of FII inflow this year is from India-focused exchange traded funds as well as long-only funds.
Nifty is likely to take support around 5800 next week. In case, it bounces back, we advise some profit booking. One need to be stock specific at current levels. With India Inc entering into the result season, the Nifty is likely to trade in the range of 5900-6200. Any positive surprises in the results could enable the Nifty to test new highs as FIIs continue to pour in money. Also, the aggressive writing in ATM and OTM Calls could see covering in these Calls. If 6000 is breached, on the back of negative flows, then the indices may see another bout of sell-off.
Correction continues...Sensex slips 0.6% in the week
Nifty for the week slipped 0.7% for the week and Sensex closed lower by 0.6%.
The markets closed lower for the second consecutive week, despite a phenomenal attempt to take out its all time high of 6,357 on Thursday. Key indices digested the nasty IIP surprise, but succumbed to selling pressure later on in the week as Infosys FY11 guidance failed to cheer the street. Meanwhile, FII inflows jumped to the record levels ahead of the Coal India IPO. Nifty for the week slipped 0.7% for the week and Sensex closed lower by 0.6%.

Sensex intra-week high of 20,854 and low of 20,090 while, Nifty intra-week high of 6,284 and low of 6,050
Sensex top gainers: The top gainers in the Sensex were Tata Motors (up 4.8%), Wipro (up 2.4%), Tata Steel (up 1.5%), Maruti Suzuki (up 1.4%) and HDFC (up 1.4%).

Sensex top Losers: The top losers in the Sensex were Bharti Airtel (down 5.5%), NTPC (down 4.8%), Hero Honda (down 2.9%), Reliance Power (down 2.9%) and L&T (down 2.7%).
- The BSE IT Index (up 0.4%)
- The BSE Healthcare Index (down 0.2%)
- The BSE Banking Index (down 1%)
- The BSE Auto Index (up 0.5%)
- The BSE Oil & Gas Index (down 1%)
- The BSE Capital Goods Index (down 2.1%)
- The Realty Sector (down 0.3%)
- The Metals sector (up 0.6%)
§ Coal India IPO opens on Oct. 18
§ CIL issue suits long-term investors
§ CIL eyes R6,000-cr war chest from IPO proceeds
§ Global currency war heats up
§ India ranked 112 on Global gender gap rankings
§ Amitabh magic puts KBC rating on top
§ India's industrial output slows sharply in August
§ Inflation inches higher...Food inflation jumps
§ Rupee soars past 44 on heavy FII inflows
§ Indirect tax collections up 44% in April-Sept 2010
§ Govt offers 34 oil, gas blocks under NELP IX
§ Gold prices in India cross Rs. 20,000 mark
§ Cairn India open offer price final: Vedanta
§ RIL raises US$1.5bn via US arm
§ Infosys Q2 net profit up 17% QoQ
§ Nirma to delist shares from NSE and BSE
§ Suzlon Energy to buy IDFC PE shares in SE Forge
§ Tata Docomo to launch 3G services by Diwali
§ Maran hikes stake in SpiceJet to 53%
§ Tata Motors unveils MPV Aria
§ Fed ready for QE2 to prop up US economy
§ Three win Economics Nobel for work on labour market
§ China’s trade gap with US hits record
§ Singapore's economic growth slows
§ EU new car registrations down nearly 10%
§ Global PC shipments rise 7.6% in Q3
§ Stan Chart to raise US$5.3bn via rights issue
§ Pfizer to acquire King Pharma
§ OPEC leaves output quota steady
§ IEA raises oil demand forecast
§ Microsoft unleashes Windows Phone 7

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