|
|||||||||||||||||
 |
 |
 |
 |
||||||||||||||||||||||
|
Updated: July 23, 2010 Fri at 17:00
WEEK AHEAD
Stress test results of European banks, RBI's rate hike to set the tone
The results of the stress test of European banks due late on Friday, 23 July 2010, will set the tone for global equity markets early next week. Closer home, investors will watch for any surprises in central bank's monetary policy review on Tuesday, 27 July 2010. The market has already discounted a 25 basis points rate hike in key short term rates by the Reserve Bank of India.
NIFTY RANGE 5200-5600
CRUCIAL SUPPORT 5320 & RESISTANCE 5520
APPROACH Be stock-specific
STRATEGY It is prudent to book profits now
MARKET TREND Based on Events – As lot of events coming week
MARKET OUTLOOK Range bound outlook with looking for stable direction
FACTORS Q-1 Earning, Monsoon, Global cues, Expiry & RBI Policy
IMPORTANT Big task ahead for the bulls is to sustain the momentum
Another sideways-to-range-bound week has gone by, though the main indices did manage to surpass key barriers. Our market was relatively quiet even as global markets witnessed lot of action. Economic reports coming out of Europe were the biggest positive surprise. Global earnings held up pretty well, but a few of them did miss the estimates. Back home, results were mostly in line with expectations and there has not been any major nasty surprise. The earnings outlook for the Indian companies remains bright in line with the prospects for the Indian economy. The PM's Economic Advisory Council has set a target of 8.5% and 9% for the next two years.
Inflation continues to be an issue and may take time to soften. The RBI is expected to continue its calibrated approach to monetary policy. Markets expect the RBI to announce another small hike of 25 basis points at next week's policy review. Volatility might increase slightly owing to the F&O expiry. What is heartening is that FIIs remain upbeat on India and have already pumped in close to US$9bn. So, the broad undertone is positive and the market could gain some more ground from here. But, global uncertainty and high valuations may play spoilsport. Monday's start will partially hinge on the outcome of the European banks' stress tests.
Rollover trend in the ensuing week will remain crucial
Roll-over trend in the ensuing week, some blue chip corporate results, RBI's monetary policy and global markets to dictate the trend; overall the market maintain its bullish momentum
Continued foreign buying in the domestic market, strong macroeconomic scenario backed by revival in monsoon and decent first quarterly earnings so far has enabled the domestic market to appreciate during the week ended 23rd July 2010. The market gained in 3 out of five trading sessions in the week under review. The S&P CNX nifty appreciated 55.20 points to close at 5449.10 during the week. The nifty July future however closed at a discount of 5.30 points on Friday. Several stock futures as well as the index futures in the July series shed open interest (OI) during the week under review while fresh OI was seen building up in the August series. For e.g. the F&O July series combined witnessed unwinding of 9.66 crore shares in OI on Friday while the August series experienced 11.44 crore shares addition in OI on the same day. The fresh buying in the august future segment was long build-up while the nifty option front indicated some uncertainty as out-of-the-money puts saw addition of OI due to buying. The average volume in the futures & option (F&O) segment during the week was also higher by 19% at Rs 90791.45 crore. The nifty July future shed 13.36 lakh shares in OI on Friday to take its total OI to 3.04 crore. On the other hand the nifty august series added 16.51 lakh shares in OI to take its total OI to 65.60 lakh shares. For the full week the nifty august future added 37.85 lakh shares in OI mostly on the long side. Similar was the case in most of the front-line stock futures as well as some of them added aggressive OI mostly on the long side in the august series. Reliance august future added 24.37 lakh shares in OI while Tata Steel, Tata Motors, Infosys, ICICI Bank and SBIN future of the same series added 67.43 lakh shares, 26.34 lakh shares, 7.39 lakh shares, 47.21 lakh shares and 12.62 lakh shares in OI during the week under review, while the July series of all the above mentioned stocks shed their OI. The complete rollover trend will be clear as the market enters the expiry week. Some of the companies that are yet to announce their results as well as the RBI monetary policy may set the tone going ahead. Overall the market wide OI on Friday increased by 1.99 crore shares to 267.15 crore shares as compared to the previous day primarily due to aggressive addition of OI in the stock futures and index option segment. The OI addition on Friday was benign due to simultaneous shedding of July series OI while the august series added OI.
The nifty option segment witnessed a mixed trend as most of the July strikes shed OI due to winding of positions. The July series call was sold while the put strikes were bought to cover the positions, while the august series nifty options witnessed addition of OI. The most active nifty call in the august series were 5500, 5600 and 5700 strikes while the out-of-the money puts added significant OI due to buying, The 5500 strike call in the august series added 3.31 lakh shares in OI while the 5600 and 5700 strike call added 2.98 lakh shares and 1.43 lakh shares in OI. The 5200 strike put in the same series added 8.25 lakh shares in OI while the 5300 and 5400 strike put in the august series added 7.61 lakh shares and 4.79 lakh shares in OI. The increase in OI in both the out-of-the-money call and the put options was due to buying, which indicated a mixed signal. Rather things will be clear in the proceeding week.
The rollover trend in the proceeding week will have to be closely watched. Besides some of the companies' result that are yet to be declared and also the central banks monetary policy will remain crucial for the market. Overall the market is expected to maintain its bullish momentum.
Investor sentiment is upbeat and the Dalal Street may see hitting new highs this week. Tracking positive global cues, the market is likely to start the week in the green on Monday. The coming week will be action-packed as the market will be closely watching the RBI policy announcement and the first quarter numbers of the Sensex heavyweight Reliance Industries, both of which are slated for Tuesday. So far, the earnings by most of the corporates have been in line with Street expectations, adding the market is expecting a good show by the country's largest corporate house on July 27.
Volatility may rise as traders roll over positions in the derivatives segment from the near-month July 2010 contracts to August 2010 contracts ahead of the expiry of the near-month July 2010 derivatives contracts on Thursday, 29 July 2010.
European Union regulators are examining the strength of 91 banks to determine if they can survive potential losses from both a recession and a decline in the value of their government- bond holdings. The tests are being used to reassure investors about the health of financial institutions from Germany's WestLB AG and Bayerische Landesbank to Spanish savings banks as the debt crisis pummels the bonds of Greece, Spain and Portugal.
How-ever we feel that though the stress test results will play their part in the Indian markets but as we have seen in the recent one or two months, if we have a positive news in the Indian markets we behave differently from the other markets.
It is an important week and there is a lot of event issue or event risk out in the markets later tonight. Therefore the market has just paused a day after what looked like a breakout, and there is no harm with that.
Generally there is a lot of scepticism about participation as well. So you can sense that with the breadth which was not convincing at all typically not associated with the kind of post breakout phases.
So despite a crossover above 5400, generally people seemed reluctant to buy at elevated levels and that's quite evident. That coupled with the fact that we have the stress test later tonight, the credit policy next week, big results like Reliance, Larsen, State Bank there is all the more reason for the market to just pause and take stock for a couple of days before moving out. There is an expiry next week as well. So it is pausing before events, not much more than that. But who knows what kind of cues we will be ahead.
It is prudent to book profits now. Traders are not focusing much on heavy weight or frontline stocks. Most of the traders still want to go with very stock specific ideas as they are seeing all the action in the mid-cap. Its not really a heavy weight or a frontline market where you can very comfortably go out and buy something like an SBI or a Reliance, some of these big names. It is advisable to be a little cautious and book profits especially in the heavy weights.
It has to be above the 5520-5560 levels. It is not just that the market has to touch those levels. A clear breakout would be if it trades at-least for a week above those levels and that could be a very point of inflexion from where you could go to the next trajectory. Because a lot of money waiting on the sidelines would get into action as we have always been saying that retail flows also will improve significantly once the market is closer 5560-5600 kind of a range. How-ever be cautions that we are venerable to that extent that if there is many negative news flow and there is going to be a lot of new flow starting from today all the way up to Wednesday So assuming that if the results by and large the news flow is negative or more or less in line does not suppress on the positive then you have to build into the fact that you could see a minor correction from these levels. Maybe the new levels, new high beyond 5500 would have to wait for another weeks or maybe even longer depending upon how the month, rest of the month and early next month pans out, So momentum seems to be strong and to an extent earnings are supporting the up move, especially in case of banks.
Among the key corporate results, Maruti Suzuki India will announce its Q1 result on Saturday, 24 July 2010. Sterlite Industries and NTPC will announce Q1 results on Monday, 26 July 2010. Larsen & Toubro, Reliance Industries and Hindustan Unilever's Q1 results are due on Tuesday 27 July 210. DLF, Mahindra & Mahindra and Jindal Steel & Power's Q1 results are due on 28 July 2010. Hero Honda Motors and ONGC will be announcing Q1 result on Thursday, 28 July 2010.
The first quarter results announced by the companies so far have been decent. The combined net profit of a total of 303 companies rose 25.5% to Rs 20510 crore on 17.7% rise in sales to Rs 133828 crore in Q1 June 2010 over Q1 June 2009.
Investors are closely monitoring the progress of the monsoon rains. The annual monsoon rains were 17% below normal in the week to 21 July 2010, improving after a 24% deficit in the previous week, the India Meteorological Department said on Thursday, 22 July 2010. The seasonal monsoon rains during 1 June to 22 July 2010 were 12% below normal, the weather office added.
Southwest monsoon was vigorous over Sub-Himalayan West Bengal & Sikkim and active over Bihar, West Uttar Pradesh, Uttarakhand, Himachal Pradesh, Punjab, Konkan & Goa, Vidarbha, Telangana, Coastal & South Interior Karnataka and Kerala during past 24 hours, the weather office said in its daily report on Thursday 22 July 2010.
The south west monsoon is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector. The weather office expects this year's monsoon rains to be at 102% of the long-period average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.
Investors poured money into equity funds focused on India and China in the week ended 21 July 2010 as concern about economic growth spurred withdrawals from developed-market stocks, global fund tracker EPFR Global said. India funds received a net $187 million, the most in 51 weeks, while China money managers took in $138 million, EPFR said.
Foreign funds have bought Indian equities worth a net Rs 6053.03 crore this month so far, till 22 July 2010, as per data from the stock exchanges. Foreign funds had pumped in Rs 7713.97 crore in equities in June 2010.
Domestic funds have sold shares worth a net Rs 3539.31 crore this month so far, till 22 July 2010. They had sold equities worth a net Rs 4777.05 crore in June 2010.
IN-A-NUTSHEL:
Nifty futures crossed hurdle of 5400-5420 yesterday and triggered short coverings. Till the time Nifty it holds 5400 levels, we are in a safe zone and may move towards 5550 levels. Next week we are likely to see rise in volatility ahead of F&O expiry and key RBI meet. Advise caution for naked long positions
THE WEEK THAT WAS
The Indian markets extended their north-bound journey for a third straight week with the benchmark indices hitting new intermediate highs. The NSE Nifty could not breach 5500 as traders continued to be cautious amid the ongoing results season and nervousness linked to the global situation. The upcoming F&O expiry coupled with the RBI policy review and rich valuations also prompted investors to take a pause this week. A lot of stock-centric action was seen in the small-cap and mid-cap stocks but this space also witnessed some selling on Friday.
- The BSE IT Index (up 0.3%) - The BSE Healthcare Index (down 1.7%) - The BSE Banking Index (up 0.8%) - The BSE Auto Index (up 0.9%) - The BSE Capital Goods Index (up 2.1%) - The Realty Sector (up 0.7%) - The Metals sector (up 4.1%)
§ EAC sees India's FY11 GDP growth at 8.5% § GST...Centre agrees to dual rate structure for goods § Govt is killing telecom dream: Sunil B Mittal § Companies with higher IPO grades command higher P/E : CRISIL
§ Rupee pulls off a hat-trick as stocks gain § Food inflation lower, non-food inflation spikes § Inflation will slow to 6.5% by March: Dr. Rangarajan § Inflation to fall to 5-6% by year-end: Cabinet Secretary § CPI for Agricultural and Rural Labourers falls § Exports grow 30.4% in June: Commerce Secretary § SEBI panel suggests rewriting takeover rules § Allow customers to pick and choose channels: TRAI § Cabinet approves disinvestment in Power Grid Corp. § Govt approves 18 FDI proposals worth Rs22.45bn § Nikhil Gandhi enters education space with Everonn buy § Legrand offers to acquire Indo Asian Fusegear's Switchgear biz § IDBI Bank approves in-principle to merge IDBI Homefinance Ltd § RIL in talks to buy stake in Quicksilver: reports § Adani Enterprises raises US$850mn via QIP
§ Ben Bernanke cautious on US economy § US economic insecurity at 25-year high: study § Obama signs Wall Street reform bill into law § Euro rises above US$1.29 on strong data § German business confidence at three-year high § UK economy grows more than forecast § UK June retail sales up 0.7% in June § Moody's says it may downgrade Hungary's rating § Swiss National Bank suffers SFr14bn forex loss § Moody's downgrades Ireland ratings § ADB upgrades forecast for developing Asia § Time to unwind stimulus in Emerging East Asia: ADB § GM to buy AmeriCredit § Reckitt Benckiser to buy SSL for 2.54bn pound: report § Nokia Siemens to buy Motorola unit for US$1.2bn § Hewitt Associates to acquire EnnisKnupp § Airbus beats Boeing at Farnborough air show § BP to sell oil assets to Apache for US$7bn
Have a Great & Profitable Week Ahead……
|
||||||||||||||||||||||||
 |
||||||||||||||||||||||||
: YEARLY UPDATES:
By continuing to read or referring to material contained in our site, you have read and agreed to the disclosure & disclaimers mentioned & published.
| Site Map |