Amidst the panic, stock markets enter strong support zone - 19th May 2010

ndian Stock Markets, after a stable gap down opening, slide steeply in the latter half of the day and end the day with losses of more than 3%. Provisional data for today indicates strong selling from FIIs @ 1300 Crores. Among the losers, high beta stocks in Nifty like ICICI bank, Sterlite Industries and Tata Motors have slid more than 7%. JP Associates hit its 52-week low of 120 Rs.

The current level augment that markets are now entering the panic phase now. Till the time, Nifty remained above 5000 levels, there seemed a hope that markets will gradually recover and some buying was seen around 5000-5100 levels. But once these levels have been breached, the only way markets finding themselves going is "DOWN".

Amidst such scenario, whats should a trader do now? If we think rationally, Nifty should find some strong support @ 4800-4850 levels. Till the time, markets remain above 4775, there are strong chances that markets can recover till 4950. Hence, traders can now go long on Nifty tomorrow (if markets have gap-down opening) at around 4850 with Stop-loss of 4775 and target of 4950.

Options traders can play on reverse-straddle tomorrow selling both 4800 Call and Put. This should fetch around Rs. 200. One may keep a stop-loss @ 4600 on downside and 5000 on the upper side.

Amongst the stocks, Maruti @ 1200-1210 levels. The stock is currently at its absolute base of last 9 months and should act as a strong support level. One may keep a stop-loss of 1140 and target price of 1350 on the stock. Fundamentally also, the stock has come to the decent levels.

Anyways, time is surely test the nerves of several traders and chances are ominous that short-sellers may find themselves stuck in no-win situation. So temptation to go short should be resisted as market enters its strong support zone of 4800-4850.

Nifty likely to consolidate around current levels till budget - Indian Stock Markets Bulletein for 2nd Feb to 5th Feb 2010

Indian Stock Markets have shown some strength in last few days, allying fears of double-dip recession and tightening monetary policies. Technically speaking, such correction was quite evident in the first half of this year, as we had seen a massive rally in 2009. Institutions who have been buying throughout the 2009 will surely like to book profits. The investors who were on the sidelines were waiting for such correction to invest their money into Indian equities.

Another thing that have helped markets worldwide is the clarity on the Obama's plan. Yesterday's announcement on 3 trillion $ spending in this fiscal will give markets a confidence that US economy will further improve this year. The GDP data that came on Friday was also good, albeit on lower base. But it has indicated that lower base is now almost created and things should only improve in the near future.

In such scenario, we might see some consistent rally, pre budget. My sense is that Budget will also be industry friendly this year. I feel that if FM can roll back some of fiscal incentive this year on one hand, then it will surely provide some other incentives that will help industries move forward.

Also government is under pressure on inflation front now and we have seen some major steps being taken in last few weeks to curb the inflation. Only Sharad Pawar needs to just "Shut up" its mouth to prevent further fuel the inflation.

Coming back to the markets, I feel that investors can buy "Domestic" theme at this juncture. Consumption based companies should be in demand. The government has also realized that in order to achieve 8-10% GDP, they must support consumption theme. Exports are more suspectible to shocks as global economy is still lagging behind and hence, might not able to contribute significantly in country's growth.

Few sectors that are worth mentioning is "Infrastructure", "Power", "Logistics", "FMCG', "Packaging" and "Auto". Banks can be avoided as tightening of monetary policies will only make things difficult to maintain their Net Profit Margins.

Technically, markets are likely to face some resistance at 4960-4980 levels. It is likely to drop from those levels at-least two times before it can further march to break these levels. On the downside, 4880-4900 becomes a strong base. Hence, for today, one may buy Nifty with target of 4960-4980 before one may go short on it. Please note that this level is likely to get breached and one may see markets again climbing 5100 levels.

Option traders can buy 4900 Nifty Call and Sell one 5100 Call and two 5200 Calls and one 5300 Call. This strategy will give profit till Nifty breaches 5300, which is a significant jump for this expiry.

Wishing you a great week of trading...

Correction to continue, but provides good buying opportunity - Indian Stock Markets bulletein for 27th Jan to 29th Jan 2010

The last week has been a pretty tough one for the Indian Stock Markets. First Barack Obama suprise announcement regarding curb on properitory trading and then, China's tightening norms hit the equities market badly. Indian benchmark indices fell by more than 5% after these announcements. Mid cap and Low cap stocks fell much deeper which indicates that correction is likely to continue.

The much needed correction is now on the cards and will give long term investors enough scope to invest into the Indian markets. The fundamentals remain strengthen, but one needs to remain cautious on the sector / company where one is putting its money. The domestic sectors like paper, media, FMCG, are fundamentally good one and less affected by global factors. Whilst the sectors like Information Technology, Oil, Pharma, should be avoided as these are more closely aligned with international events.

Technically also, NIFTY has break the major support levels. It is below 34 days exponential average which indicates that medium term outlook is not good. The next strong support is seen at 4700-4725 from where the markets can make annother attempt towards 5100.

Option traders can safely take bear spread strategy, buying 5000 Put and sell 4800 Put. One may also safely sell 5300 Nifty Calls Feb and keep 5250 as stop loss to move out of the strategy.

An interesting stock that is worth mentioning is "Valson Industries" It is a textile company with consistent profit records. Also, the company is giving 2.5 Rs dividend every year on Face value of Rs. 10. The stock is currently trading at 25 Rs which indicates dividend of 10% which is always more than bank rates. The stock is only traded in BSE.

Weekly Outlook for Indian Stock Markets - 20th July to 24th July 2009

Friday's Review
Indian stock markets had a great run on Friday with benchmark indices going up by yet another 3-4%. Among the sectors, Bank Nifty was up by 4.5%. Leading the pack was ICICI Bank which has again roared back to 750 Rs levels. Overall, the entire week has been a memorable one for the markets as it covered up all the losses that it had made during the last week. Further upside from hereon would largely dependent upon monsoon and the global factors.

Apple and Yahoo are due to announce their results on Tuesday which would impact our markets on Wednesday. Crude Inventories data is also due on Wednesday. Crude has again picked up on Friday and trading at around 63 USD per barrel. In domestic markets, no major cap will be announcing their results on Monday / Tuesday, so no major cues other than monsoon.
FII View
FIIs on Friday were net buyers, albeit not the drivers of the rally. In the cash segment, FIIs were net buyers by around 150 crores. The buying, though a positive one, but not so great in the current rally. It seems valuations are the ones that stopping them to participate.

In the Index Futures segment, FIIs made net purchases of 700 crores, adding about 25000 new contracts. In the Index Options segment, FIIs were net sellers by about 330 crores, adding 30000 new contracts. The Open Interest for 4300 Put has increased the maximum by 45% on day-to-day basis. Similarly, the Open Interest for 4300 Call has decreased by 20%, primarily on account of profit-booking.

The above cues indicate range bound markets for the first few days of the markets. Traders can go short on Nifty around 4425 with stop-losses @ 4460 and target levels of 4350.

Stocks Ideas
Satyam Computers and Jp Hydro hit their target prices on Friday, giving gains of around 15% from recommendation levels. The current level do not justify the new recommendations, except for one which is given below:

Scrip Name - Buy/Sell - Recommended Price - Target Price - Stop Loss Price
Infosys Tech - Buy - 1825 - 1930 - 1770

Wishing you a great trading day ahead!!