As we have been discussing for last two days, Indian Stock Markets have rebounded strongly from their support levels (Nifty: 4850) on Friday. From its lows of 4840, Nifty rebounded strongly to reach the target of 4925 comfortably and closing the day @4931.
Overnight closing on Dow Jones has been good and we may expect Indian Stock Markets to open at decent note on Monday morning. As it is expiry week, hence it is likely that we might see some degree of short covering coming into the markets which may take Nifty close to 5000 levels, where we may see some fresh short positions built in again. The important resistance levels come at 503-5070 range. If this range if breached on closing basis, we may see Nifty going till 5200. But the probability of this happening is unlikely as global factors are still competitive.
Fundamentally also the recession in Europe will likely to affect almost every major weight in Nifty, thus, valuations may not justify too much upside from the current levels.
Thus, it is advised that traders may go long on Nifty within the range 4920-4950 with a target level of 5040-5060 and stop-loss can be placed at 4870. Once Nifty breaches 5040, one may switch to "sell on rise" strategy where one may sell Nifty in 5040-5060 range with stop-loss at 5160 and target price of 4750. Hence, the risk-reward ratio becomes really lucrative in "Sell-on-rise" strategy.
We had advised traders to buy Maruti in 1190-1210 range on Wednesday with target of 1350 and stop-loss at 1140. The stock has rebounded strongly from 1170 to close on friday at 1240. Fundamentally also, the stock is currently trading at attractive levels and can be bought from long-term perspective.
Technically, Sterlite Industries has entered the strong support zone from where it is expected to take a short term bounce. One may buy Sterlite Industries in 620-640 range with target price of 680 and stop loss of 605. Similarly, one may buy Cipla in 316-318 range with target price of 330 and stop-loss of 305.
Options traders can sell Nifty 4400 Put and Nifty 5300 Call for June series with stop-loss at 5350 on the upside and 4350 on the downside.
Before I adieu, I would like to remind everyone that atleast Indian Stock Markets is still in structured bull phase. We are not as leverage as we were in 2007 that further accentuate the fall. We have come out better than the others from the grip of recession. Though the support drivers for the markets to go up are still not intact but downside too is limited. Henceforth, one may try to adopt stock specific approach and buy good quality stock during corrections.
Wishing you a great investing day and the coming week!!! Hopefully, we again meet with big smile on our faces.. He ha ha :)
Sunday, May 23, 2010
Thursday, May 20, 2010
Indian Stock Markets looked weak but entering the strong support zone - 20th May 2010
It seems yesterday's discussion seems more relevant for today's post. The support level of 4850-4800 on Nifty didn't tested today, but chances are omnious that it will surely be tested tomorrow when markets open. Dow Jones is currently trading more than 2% down (250 pts). If this weakness persists overnight, then we might see ateast 100 points gap down opening and put market in our set support-zone of 4850.
FIIs data doesn't give encouraging picture either. Foreign Institutional Investors have been net sellers of more than 600 Crores while Domestic Institutions were net buyers of Rs. 700 Crores. Amidst the Nifty, Public Oil Production companies like Oil India, ONGC were up by around 8-9% while IGL was down by 5%.
Over a longer term, investors have some good reasons to be cautious. The recession has gripped the European markets and hence, strategies of some Indian companies to move to Eurozone at the time of US recession seem backfired and hence, profitabilties are likely to hit for several front line companies in Nifty and Sensex. Similarly Asian economies have now been suffering from Inflationary problems which are the offshoots of loose monetary policies adopted by governments during the midst of global recession.
Hence, long term investors need to adopt a stock specific approach and try to concentrate on companies that work on domestic theme and away from inflatonary pressures. One such company is FDC. FDC is a pharmaceutical company that works in the field of Opthalmics and Oral rehydration salts. Electral that we all might have consumed at the time of dehydration is company's flagship product. Besides the company has expanded itself into other areas and pushing its growth plans steadily. The company's exposure to overseas markets is insignificant. The stock is currently trading for Rs. 90 and can be accumulated at around 83-85 Rs (25%), 78-80 Rs (25%) and 70-72 Rs. (50%).
Derivative traders may go long on Nifty around 4825 levels with stop-loss of 4780 and target of 4925. If it breaches 4775 on the downside, one may create fresh short positions with target of 4700 and Stop-loss of 4825.
One may also adopt Pair strategy wherein one may buy Nifty @ 4850 and sell Bank Nifty @ 8980 in te ratio 2:1 i.e., one may buy two lots of Nifty around 4850 and sell one lot of Bank Nifty @ 8980. The target levels for Bank Nifty is 8680 and for Nifty is 4925. If any of these breach, one may close both the positions and book their P/L. On the reverse side, one may close the position if Nifty breaches 4775 on the downside or Bank Nifty reaches 9400 on the upside.
Its a testing time for everyone related to stock market, but one should not drive its money on emotions and rather try to derive their decisions on price and valuations.
FIIs data doesn't give encouraging picture either. Foreign Institutional Investors have been net sellers of more than 600 Crores while Domestic Institutions were net buyers of Rs. 700 Crores. Amidst the Nifty, Public Oil Production companies like Oil India, ONGC were up by around 8-9% while IGL was down by 5%.
Over a longer term, investors have some good reasons to be cautious. The recession has gripped the European markets and hence, strategies of some Indian companies to move to Eurozone at the time of US recession seem backfired and hence, profitabilties are likely to hit for several front line companies in Nifty and Sensex. Similarly Asian economies have now been suffering from Inflationary problems which are the offshoots of loose monetary policies adopted by governments during the midst of global recession.
Hence, long term investors need to adopt a stock specific approach and try to concentrate on companies that work on domestic theme and away from inflatonary pressures. One such company is FDC. FDC is a pharmaceutical company that works in the field of Opthalmics and Oral rehydration salts. Electral that we all might have consumed at the time of dehydration is company's flagship product. Besides the company has expanded itself into other areas and pushing its growth plans steadily. The company's exposure to overseas markets is insignificant. The stock is currently trading for Rs. 90 and can be accumulated at around 83-85 Rs (25%), 78-80 Rs (25%) and 70-72 Rs. (50%).
Derivative traders may go long on Nifty around 4825 levels with stop-loss of 4780 and target of 4925. If it breaches 4775 on the downside, one may create fresh short positions with target of 4700 and Stop-loss of 4825.
One may also adopt Pair strategy wherein one may buy Nifty @ 4850 and sell Bank Nifty @ 8980 in te ratio 2:1 i.e., one may buy two lots of Nifty around 4850 and sell one lot of Bank Nifty @ 8980. The target levels for Bank Nifty is 8680 and for Nifty is 4925. If any of these breach, one may close both the positions and book their P/L. On the reverse side, one may close the position if Nifty breaches 4775 on the downside or Bank Nifty reaches 9400 on the upside.
Its a testing time for everyone related to stock market, but one should not drive its money on emotions and rather try to derive their decisions on price and valuations.
Wishing you a great trading day tomorrow!!!!
Wednesday, May 19, 2010
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.
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.
Monday, February 1, 2010
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.
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...
Wishing you a great week of trading...
Subscribe to:
Posts (Atom)