More rally ahead

The Nifty is likely to consolidate at current levels, with an upward bias.

The market shot up on Monday and range-traded for the rest of the week. The Nifty closed at 5932 points for a gain of 4.04 per cent, briefly crossing above the 6000-level. The Sensex was up 3.81 per cent at 19976 points after hitting 20,000 plus.

The Defty rose 4.38 per cent as the rupee strengthened yet again after the RBI announced a marginally tighter monetary policy. The Nifty Junior was up 3.2 per cent.

Breadth was positive and volumes were fairly high except on Friday. The CNX Midcap gained 1.79 per cent while the BSE 500 was ahead by 3.92 per cent.

FIIs were net buyers as they appeared to have absorbed the implications of clarified participatory notes policy but mutual funds remained net sellers.

The Bank Nifty delivered an extraordinary gain of 9.6 per cent on a relief rally after the credit policy. The CNX IT was about the only sectoral loser, down 1.65 per cent.

Outlook: Consolidation within the broad range of 5700-6000 seems to be the current pattern. Look for closes outside this zone to set the next trend. Friday's trading pattern ended strong so, there is some reason to presume an upside is more likely. But it may not come immediately.

Rationale: The market is swinging through an unusually high range of almost 200 Nifty points per day. Diwali usually tends to be bearish because retail and operator volumes dwindle but the FIIs are still net buyers and they have the resources to keep the market buoyant. The next upwards breakout would set a target of about 6300 Nifty.

Counter-view: Friday's trading session was open to several conflicting interpretations. Prices moved up through the session – that's bullish. Volumes were very low – bearish. The high-low range was wider than the immediate previous sessions – indicative of a potential breakout. Trading was spotty – many counters were "under-traded" (relatively low no. of trades as well as low volumes) – this suggests more range-trading.

Bulls & bears: The big gainers were banking stocks, which saw in a strong relief rally after the RBI held rates unchanged. Banking heavyweights SBI, HDFC Bank, Bank of Baroda and ICICI Bank contributed a lot to overall index gains. Other major gainers were L&T, ONGC, Tata Power, Biocon.

The big losers were telecom stocks with market leader Bharti Airtel taking a special hammering. Hero Honda also took a beating as did several other auto stocks. As mentioned above, IT stocks lost ground until Friday. However, Tata Motors and TCS both looked as though they had bottomed out.

MICRO TECHNICALS

BIOCON Current Price: 564 Target Price: 585

The stock has made a promising looking breakout on high volumes. Keep a stop at 545 and go long. The minimum target is 585 and the likelier target is 600. Book partial profits in the 580-plus zone and consider keeping a delivery position. The long-term trend may have changed for the better.

HDFC BANK Current Price: 1770 Target Price: 1850

The credit policy sparked a sector-wide rally but HDFC Bank was one of the most promising performers. Keep a stop at 1740 and go long. There is a significant downside risk due to the almost-vertical rise. The target is likely to be 1850.

ONGC Current Price: 1366 Target Price: 1435

There has been a breakout in the past three sessions with decent but not extraordinary volumes. The target would be a minimum 1435 and perhaps a great deal more. Consider booking partial profits at 1435 and holding a delivery position through the next eight-ten weeks. Keep a stop at 1330.

RNRL Current Price: 141.9 Target Price: NA

The stock shot up 40 per cent in a week on a sharp volume expansion. It's impossible to set a target with this formation. Set a trailing stop at 130 and go long. Move the stop up 5 units for every 5 unit move. Unfortunately the move has come so fast that there is a lack of support and you have to set a wide stop.

TATA POWER Current Price: 1304 Target Price: 1400

The stock has made an apparent breakout but this has come on low volumes, which makes it less likely to fulfil optimistic target projections. However there is a target of 1400-plus so and very good support at 1260 so it's worth going long. Keep a stop at 1250 and go long.

Sensex rallies 315 points

The market rallied during the week, as buying for index pivotals resumed, after a sharp fall on the back of a surprise hike in CRR announced on 8 December 2006, after completion of trading.

The BSE Sensex advanced 315.17 points for the week ended Friday (29 December 2006) to 13,786.91, while the S&P CNX Nifty rose 95.25 to settle at 3,966.40.

The market was closed on 25 December 2006 on account of Christmas.

The Sensex surged 236.60 points on 26 December 2006, to settle at 13,708.34, on strong buying in IT scrips anticipating robust December quarter results.

The Sensex gained a further 151.35 points to end at 13,859.69, on 27 December 2006, on account of short-covering ahead of the December futures contracts expiry (28 December 2006).

On 28 December 2006, the BSE Sensex slipped 13.35 points to 13,846.34, amid volatility at the close, due to expiry of December 2006 derivatives contracts.

The Sensex declined 59.43 points to 13,786.91, in late-trading on 29 December 2006, under selling pressure.

Infosys Technologies rose 3.27% to Rs 2,243, after it scheduled a board meeting on 11 January 2007, to consider Q3 December 2006 results. It is also believed to be in talks with ten global banks for its banking software – Finacle. Reports speculate big deals are likely to materialise in a couple of months. The company foresees big opportunity in the software replacement market in the US and Europe, apart from plans to enter the Latin American market. The company announces its Q3 December 2006 results on 11 January 2007.

Reliance Industries (RIL) gained 0.43% to Rs 1,270. It is reportedly planning an investment of Rs 5,000 crore for gassification of lignite in south Gujarat. The project will be a joint venture between (RIL) and Gujarat Mineral Development Corporation (GMDC). The private sector oil refiner is said to be negotiating with GMDC, and scouting for lignite reserves in south Gujarat.

ITC jumped 4.87% to Rs 176.35, after the FMCG major said it had struck an agro-alliance with Marubeni Corp, a Japanese trading house. Under the alliance, both companies will consider joint exports of Indian-made soyabean cake and maize grains for livestock feed, Marubeni said in a statement. The tie-up is aimed at expanding the trade of food and other agricultural products between India and Japan.

Dr Reddy’s Lab gained 0.87% to Rs 811, after it received final approval from the U.S. Food and Drug Administration for cholesterol-lowering simvastatin tablets. Simvastatin is the generic equivalent of Merck & Co. Inc.'s blockbuster drug Zocor.

Reliance Communications (RCL) rose 0.48% to Rs 470.60. It is examining the opportunity in mobile operator Hutchison Essar and a potential combination could create compelling value for all shareholders. Chairman Anil Ambani also told a news conference the company had received commitments from global bankers for financial support for any potential bid. Ambani said there was no certainty on the timing of a bid and declined to say how much the firm will offer, saying it will remain within a conservative limit. Meanwhile, RCL plans to invest $1.5 billion to expand capacity of its Flag Telecom submarine cable network.

State Bank of India rose 2.47% to Rs 1,245.35. It executed a 50 bps hike in prime lending rate to 11.5% with immediate effect.

Indiabulls Financial Services surged 12.82% to Rs 652. The company announced 9 January 2007 as a record date for its demerged real estate business, now under Indiabulls Real Estate (IREL). The stock will stay in the no-delivery period on BSE from 2 January 2007 to 8 January 2007, for the demerger.

On 28 December 2006, Ess Dee Aluminium settled at a premium, at Rs 238.75, compared to its IPO price of Rs 225 per share. The stock listed at Rs 260 on BSE.

XL Telecom settled at a discount, at Rs 136, compared to the issue price of Rs 150 per share. The stock listed at 18.06% premium, at Rs 177.10, on 28 December 2006.

On 29 December 2006, Nissan Copper settled at a sharp 230.25% premium at Rs 128.80 on BSE on high total volumes of 6.11 crore shares. The shares were issued at Rs 39 per share in the recently concluded IPO. The stock debuted at Rs 40 on BSE and hit a high of Rs 135.70, and dipped to a low of Rs 40 for the day.

The Reserve Bank of India permitted foreign investment up to 49% in stock exchanges, paving the way for New York Stock Exchange (NYSE) to expand into Asia's best performer.

The Reserve Bank of India also said that foreigners could hold up to 49% in depositories and clearing corporations.

Under the new rules, foreign direct investment will be limited at 26%, while foreign portfolio investments will be capped at 23% in all such entities, the central bank said. It, however, said portfolio investments will be allowed only through the secondary market. The stock exchange also plans to list shares on its own trading floor.

Media reports indicate the New York Stock Exchange is eager to pick up a stake in BSE.

The wholesale price index rose 5.43% in 12 months to 16 December, higher than the previous week's annual rise of 5.32% due to an increase in manufactured product prices, data showed on Friday (29 December). The annual inflation rate was 4.62% during the corresponding week of the previous year.

The market has ended calendar 2006 on a strong note, with the Sensex gaining 46.7% to settle at 13,786.91, which a less than 200 points off its all-time closing high of 13,972.03 of 7 December 2006. It had struck an all-time high of 14,035.30 on 6 December 2006. The S&P CNX Nifty gained 39.8% for the calendar year 2006. The market settled with gains for the fifth straight year. Banking, telecom, IT and cement shares hogged the limelight in 2006.

The Nikkei 225 index finished just 0.01% higher, at 17,225.83, on 29 December 2006. That marked its highest close since early-May. The benchmark ended 2005 at 16,111.43.

Emkay - Weekly Notes

Weekly Technicals

Weekly Derivatives

The Week That Was - Sensex sheds 45 points

The market ended a loser during the week, the first time after six straight victorious weeks.

The BSE Sensex lost 45.29 points for the week ended Friday (8 December), to settle at 13,799.49. The Nifty lost 35.60 points, to settle at 3,962 during the week.

On 4 December, the BSE Sensex rose 29.55 points, to 13,874.33, as shares from auto, metal and sugar sectors were bought. The 30-share BSE Sensex gained 63.32 points, to 13,937.65 on 5 December, as buying continued, shares from the metal and IT sector at forefront.

On 6 December, the BSE Sensex settled marginally higher by 11.35 points, to 13,937.65, after witnessing high volatility throughout the day’s trading session. It also surged to an all-time high of 14,035.30 on the same day.

The Sensex rose 23.03 points to 13,972.03 on 7 December, a record closing high amid a mixed trend in the Sensex's constituents. the BSE Sensex plunged 172.54 points, to 13,799.49 on 8 December, tracking weak global markets.

Bharti Airtel lost 0.29% to Rs 631.10. Reports state Vodafone Group is looking to hike stake in the telecom firm. Vodafone holds 10% stake in Bharti Airtel.

Tata Consultancy Services (TCS) lost 1.02% to Rs 1,175. As per reports, the company won a five-year outsourcing contract from Britain's United Biscuits. Reports add that the multi-million-pound deal involves IT support services such as application support, business analysis services and strategic IT programmes for Europe's second-largest biscuit maker.

Tata Steel rose 2.31% to Rs 479. It had signed an agreement with Nippon Yasen Kabushiki Kaisha for an equal shipping joint venture. The JV will cater to both dry and bulk cargo.

Reliance Industries rose 0.38% to Rs 1,265.90. It had struck a 52-week high of Rs 1,350, on 5 December. The company’s hydrotreater plant at Jamnagar refinery, which was partially damaged in a fire on 25 October, had been refurbished and started functioning from 1 December.

NTPC rose 2.02% to Rs 151. In a recent report dated 5 December 2006, Merrill Lynch has raised the price target on the scrip, to Rs 180. Its revised price target is based on a discounted cash flow (DCF) analysis. The brokerages have raised their earnings estimates for NTPC.

Reliance Communications rose 0.87% to Rs 445.85, amid reports that the company has invited bids for 90-100 million cellular lines, valued at $7-8 billion. It added 1.35 million new subscribers in November (CDMA plus GSM based).

Tata Motors rose 2.19% to Rs 861.50. Tata Motors’ vehicle sales rose 43% in November to 49,061 units compared with the same month a year ago. Sales of commercial vehicles rose 46% to 25,793, while sales of cars rose 48% to 19,475, helped by a surge in sales of its Indica model. Exports rose 9.6% to 3,793 units.

Shares from the sugar sector were in demand on speculation that the exports ban may be lifted shortly. Also, reports that Indonesia will buy as much as 2,00,000 tonnes of sugar by March 2007, to ensure supplies to keep a check on prices and control inflation. Indonesian sugar production is expected to reach 2.3 million tonnes this year, which is 7% lower than an initial target. Bajaj Hindustan (up 7.62% to Rs 253.75), Balrampur Chini Mills (up 9.64% to Rs 89.25), Dhampur Sugar Mills (up 10.46% to Rs 94), Shree Renuka Sugar (up 5.23% to Rs 523) and Sakthi Sugar (up 8.38% to Rs 111.40) surged.

Helicopter operator Global Vectra Helicorp advanced 9.57% to Rs 206.35, boosted by reports that the government proposes to raise FDI limit in helicopter firms and in non-scheduled airline operations from 49% to 74%.

Export house Adani Enterprises surged 9.76% to Rs 236.20, after data showed that Reliance Mutual Fund has purchased 43.3 lakh shares of the company on Wednesday (6 December), in a block deal, on BSE. Foreign fund Lotus Global Investment sold 52 lakh shares in the block deal, which was executed at a little over Rs 200 a piece.

Shreyas Shipping & Logistics jumped 37.25% to Rs 133.90, after the company disclosed plans to raise up to Rs 150 crore for buyouts in India or abroad, or for investments in logistics companies. The company's board will meet on 9 December, to consider these proposals.

i-flex solutions surged 21.98% to Rs 2,047, after Oracle Corp raised the open offer price for i-flex to Rs 2,100 per share. Oracle now intends to raise its stake in i-flex to 90% from the earlier plan of raising its holding to 75%, from existing 55%. In September 2006, Oracle had announced an open offer for 20% stake at Rs 1,475 per share.

India's wholesale price index rose 5.30% in the 12 months to 25 November, lower than previous week's annual rise of 5.45% due to a fall in food and energy prices, data showed on Friday. The annual inflation rate was 4.48% during the corresponding week of the previous year.

The European Central Bank raised its key interest rate a quarter of a point to 3.5% on Thursday (7 December), despite strength in the euro which some analysts expect could stunt economic growth and hurt the crucial export sector.

Emkay - Technicals - Weekly Perspective

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