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!!

Weekly Outlook on Indian Stock Markets - 29th June to 3rd July 2009

Last Week Highlights
The last week marked the expiry of June series. The June series was a lukewarm with indices remained range-bound and closing around May levels itself. During early June, indices once looked to break major psycological levels, but then later sucumbed to profit booking.

Now budget is just right at the corner, and markets are again gaining strength on hopes that new government would take positive measures towards reviving the growth. On Friday, we have seen strong buying by domestic and foreign institutions and this is likely to continue during the next week as well.

The sectors that really look promising is the Banking and Power. Banking stocks have been seeing good accumulation over the last few days, especially mid-sized PSUs like Andhra Bank, Central Bank, UCO Bank, etc. Similarly, Power stocks, except NTPC (as it is fighting legal battle with Reliance), are also seeing some good appreciation in last few days, including PTC, PFC, Power Grid and Reliance Power.

FII View
FII on Friday have been strong buyers in the derivatives segment. In the cash segment, Foreign Institutions purchased stocks worth 550 crores. Domestic Institutions, too, were net buyers by around 330 crores.

In the Index futures segment, FIIs were net buyers of about 1100 crores. Nifty and Bank Nifty have seen some long positions being created. In the Index Options segment, FIIs were again net buyers by 370 crores. Several out-of-money calls seen some good Open Interest build-up and premiums for those have also increased, indicating positive sentiments from the institutions.

In the stocks futures segment though, FIIs were net sellers by 285 crores. It might be done to hedge their index long positions.

The cues indicate further upside in the markets from the current levels, which can be considered as pre-budget rally. It is advised to the traders to keep booking profits at the higher levels and simultaneusly, buy out-of-money call options to hedge their positions on the long side. We might see profit booking coming in the markets after the budget.

Stock Views
On Friday, buy recommendations for Network18 and IVRCL Infra saw their target prices being hit. Those who have not booked profits in IVRCL can remain keep their positions open, by taking target price (364) as stop-loss. We expect this stock to remain bullish till budget.

Few new stock ideas for the week are:

Scrip Name - Buy/Sell - Recommended Price - Target Price - Stop Loss Price
M&M - Buy - 695 - 740 - 684
ABAN - Buy - 895 - 945 - 854
Moserbear - Buy - 93 - 102 - 86

Options Strategy
Buy Nifty 4200Put, 4700 Call and Sell two 3800Puts, 3600 Put - the combined strategy would give losses if Nifty remains range-bound between 4200 and 4600 levels. It will give unlimited profits, if Nifty goes above 4800. On the downside, it comes into losses, if Nifty goes below 3600.

The strategy can be viewed by clicking here...

Wishing you a great trading week ahead!!