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Friday, March 30, 2007
Edelweiss - Daily Market Outlook 30th March, 07
Market Snapshot
Despite yesterday's fall and overnight weakness in the US markets the indices managed to open in green. However the indices could not sustain with selling in banking stocks and slipped to a low of 12,833. Some short-covering towards the end saw the index rally to a high of 13,004. The Sensex finally settled with a gain of 95 points at 12,980. Nifty finally settled with a gain of 30 points to close at 3798.
The NSE cash volumes were higher compared to the previous day at INR 100 bn but BSE was lower at INR 36 bn. The F&O volumes were a higher at INR 513 bn.
Sentiment Indicators
The Implied Volatility (IV) across Nifty strikes has increased to 28% levels. The WPCR of Nifty Options decreased to 0.88 compared to the previous day while the 5 day average is 1.03.
Outlook
The markets are expected to have a tepid opening on account of VWAP adjustment of the expiry of the March series. Currently there are no major positive triggers in the market and we expect the Nifty to be rangebound before the weekend. IT sector can see some action taking cues from the INR USD movement.
Rollovers picked up momentum lately on the expiration day to 83% of the total D-5 positions in the Nifty and 82% in the broader market .
Pharma stocks can have good buying opportunities with stocks like Ranbaxy and AurobindoPharma as our top buy picks. With crude oil inching up again above levels of $66, OMC counters can see some selling pressure.
Technical charts indicate that the bearish tone in the market will continue. Any pullback will not be sustained beyond the opening session. The immediate supportfor the Nifty is at 3789 followed by 3757. On the upper side the next important resistance is 3808 and 3820.
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Anand Rathi - Daily Strategist
The NIFTY futures saw a rise in OI 16% with prices up by 0.25% indicating that both bulls and bears were aggressive in building their positions as market showing volatility and not giving clear directions. .We feel that till the market doesn't go above 3850 levels we may not see aggressive short covering in the nifty futures and longs building fresh positions in the market. The nifty futures showed a rollover of 70 % i.e. is below average rollover of 75 % indicating less positions built up in April contract as compared to previous contracts. The FIIs sold index futures marginally to the tune of 15.15 crs whereas heavy buyers in index options indicating hedged positions built up by them against their long positions and investments in cash market .The PCR has remained unchanged to 0.93 levels indicating some consolidation may take place here before any sharp movemtn in the market ..The volatility has come down from 32.95 to 29.30 levels indicating some buying support in the market.
Among the Big guns, ONGC saw rise in OI to the tune of 0.23% with prices positive to the tune of 1.18% indicating shorts covering there positions and fresh buying happening in the counter indicating strength in the counter . whereas RELIANCE saw drop of OI to the tune of 1.26 % with prices positive indicating short covering in the counter.
On the TECH front, TCS, SATYAMCOMP saw fall of OI with rise in prices indicating lot of short covering are seen in these counters indicating further short covering may result in rise in prices in these counters whereas INFOSYSTCH saw rise in OI with prices almost flat indicating that both bulls and bears are aggressive in the counter .WIPRO saw rise in OI with rise in price indicating fresh buying happening in the counter.
In the BANKING counters, BIN saw rise in OI with rise in prices indicating that longs are building positions in this counter , HDFCBANK, & ICICIBANK saw rise in OI with fall in price indicating selling pressure in these counters indicating weakness in these counters may prevail.
In the metal pack TATASTEEL, Saw fall in OI with price negative indicating longs liquidation in these counters whereas heavy short positions buit up in HINDALCO and STER indicating weakness in these counters.
Considering the overall scenario and the markets behavior the market may show some consolidation before taking any sharp movement on either side .Traders are advised not to go aggressively short on the market unless important support level of 3750 is breached and any position taken today should be with strict stop losses to be adhered too.
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Market may edge higher as mutual funds may provide support
The market may remain firm today as mutual funds are likely to support prices to prop up their year-end net asset values (NAVs). Today is last trading session of the financial year FY 2007 (year ending 31 March 2007).
The key data due today is the weekly inflation date which will be released at about 12:00 IST. Wholesale price inflation is forecast at 6.50 percent for the 12 months to March 17, little changed from an annual rise of 6.46 percent a week earlier. Annual inflation hit a peak of 6.73 percent in early February, its highest rate in more than 2 years.
Stock exchanges have clubbed settlement of trading done today with that of Monday (2 April)’s trading as banks remain closed on Monday for financial year closing.
The market-wide rollover of March futures to April was at 70-72%, as against 78-80% during the previous expiry. Rollover in Nifty March futures to April was at 65%, as against 74% in the previous expiry, according to estimates. A large portion of the rollover to April was short positions due to the existing weak investor sentiment.
Asian markets were mostly in the red on Friday (30 March 2007). Key benchmark indices in Hong Kong, China, Singapore, South Korea and Taiwan were down by between 0.03% to 0.15%. Japan’s Nikkei was up 0.07%.
US blue chips edged higher on Thursday after data showed the economy in the United States grew at a faster clip than previously thought in the final quarter of 2006. The Dow Jones Industrial Average rose 48.39 points, or 0.39 percent, to 12,348.75, rebounding after a three-day losing streak. The broader Standard & Poor's 500 index gained 5.30 points, or 0.37 percent, to 1,422.53. The Nasdaq Composite Index edged up 0.78 point, or 0.03 percent, to 2,417.88.
Oil rose nearly 1 percent, building on a 3 percent surge on Thursday, as a stand-off over the capture of British sailors and marines by Iran escalated and US naval exercises in the Gulf continued to ratchet up tension between Tehran and the West. Iran, the world's No. 4 oil exporter, had suspended an offer to release the only woman among the 15 British personnel it is holding. Their capture last week occurred just before the United Nations imposed new sanctions over Iran's nuclear programme. US oil rose 64 cents to $66.67 a barrel.
FIIs were net buyers to the tune of Rs 520 crore on Wednesday 28 March 2007, the day when Sensex had lost 240 points due to weak global markets. As per provisional data, FIIs were net sellers to the tune of Rs 172 crore on Thursday 29 March, the day when Sensex had risen 95 points tracking Asian recovery.
Intra-day Stock Ideas
NIFTY (3798) RES 3825 SUP 3778
BUY ORIENTBANK (185.6)
SL 181 T 193, 195
BUY TVTODAY (121.2)
SL 117 T 127, 129
SL 103 T 112, 114
SELL MANGLMCEM (137.90)
@ 140 SL 143 T 130, 128
SELL CUMMINSIND (256.15)
@ 258 SL 262 T 248, 246
Market Watch & Insider Trades
Insider Trades:
Gujarat Ambuja Cement Ltd: Shri P B Kulkarni, Director has sold in open market 70000 equity shares of Gujarat Ambuja Cement Ltd on 21st March and 22nd March, 2007.
Amara Raja Batteries Ltd: Franklin Templeton Mutual Fund (through its various schemes) has purchased from open market 51165 equity shares of Amara Raja Batteries Ltd on 26th March, 2007.
Market Volumes:
The turnover on NSE was up by 19.5% to Rs100bn. BSE FMCG index was the major gainer and gained 2.08%. BSE Consumer Durable index (up 1.45%), BSE Capital Good index (up 1.22%), BSE Pharma index (up 1.00%) and BSE Technology index (up 0.79%) were among the other major gainers.
Volume Toppers:
IFCI, Idea, ITC, IB Real estate, Sakhti Sugar, Gujarat Ambuja, TTML, IDFC, HLL, HCL Tech, Tata Motors, Bajaj Hindusthan, Arvind Mills, India Cement, Satyam Computer, NTPC and Infosys
Upper Circuit:
BPL, GMR Industries, Harrison Malyalam, Shah Alloys, KLG Systel, Goldstone Technology, BSEL Infrastructure, McLeod Russel, KEW Industries, Nirlon, Vypar Industries, IOL Broadband and BF Utilities.
Delivery Delight:
Amtek Auto, ACC, Bharti Airtel, CESC, Divis Laboratories, Gujarat Ambuja Cements, HCL Technologies, Hero Honda, India Cements, India Infoline, IPCL, IDFC, ITC, Jet Airways, Maruti, McDowell & Co, NDTV, Orchid Chemicals, Praj Industries, PNB, Reliance Capital, Reliance Industries, Sun Pharma and Tata Power.
Brokers Recommendations:
Dr Reddy’s Laboratories – Buy from Merrill Lynch
Aventis Pharma – Buy from Kotak.
Long Term investment:
TCS
Major News Headlines:
S&P affirms ratings on RIL at 'BBB'
Gitanjali Gems to foray into luxury retail market; to spend Rs1bn
i-flex wins order from First Bank Nigeria
Sterling Biotech Q4 net at Rs375.2mn (up 16%), sales at RS1.68bn (up 30%)
Aurobindo Pharma receives US FDA approval to sell Ceftriaxone
Ranbaxy to pay Rs6 per share as mid-year dividend
Man Industries gets Rs10bn order from USA
STRATEGY INPUTS FOR THE DAY
Marching ahead with less baggage!
It is the dull man who is always sure, and the sure man who is always dull.
As expected, short covering in the F&O segment on the settlement day led to a rally in the cash segment. A steep fall in the rupee against the dollar make bring some smiles to the IT counters. Volatile Asian markets and lack of conviction among the bulls could make the markets dull and choppy. The indices may manage to close in the green as fresh positions are taken.
Volume was up sharply yesterday due to the F&O expiry. The market breadth was positive. The last six reported figure by SEBI on FII inflows has been good. But, the NSE's provisional data for Thursday shows foreign funds being net sellers of Rs1.72bn in the cash segment on a day when the Sensex gained 95 points.
Another concern is the lower than usual rollover in the derivative segment and a high cost of carry. Having said that one should take these short-term indicators with a pinch of salt as they are not quite consistent and reliable. Given the fact that companies will soon come out with their latest quarterly numbers, we expect the market to remain lackluster with intra-day volatility. Watch out for the inflation data at noon as it might unnecessarily swing the mood.
US stocks managed to rebound on Thursday, with blue chips leading the pack at the end of a choppy session. A stronger-than-expected reading on fourth-quarter GDP growth offset a 3% spike in oil prices. The Dow Jones was up 48.39 at 12,348.75, and the broader S&P 500 gained 5.30 to 1,422.53. The Nasdaq Composite ended nearly unchanged, recovering after briefly dipping into negative territory for the year.
America's fourth-quarter GDP grew at a 2.5% annual rate, up from the previous estimate of 2.2% and a reading of 2% in the third quarter. Another encouraging report showed a surprise drop in the number of Americans filing new claims for unemployment last week.
US light crude oil for May delivery rose $1.95 to settle at $66.03 a barrel in New York. Prices have been on the rise recently amid worries about the conflict with Iran, the world's No. 4 exporter. The front-month contract was trading 61 cents higher at $66.64 a barrel in extended trading in Asia.
COMEX gold for April delivery fell $5.30 to settle at $667.60 an ounce. Treasury prices slipped, raising the yield on the 10-year note to about 4.64% from 4.61% on Wednesday. In currency trading, the dollar fell versus the euro and rose versus the yen.
European shares rose on Thursday. The pan-European Dow Jones Stoxx 600 index rose 1.1% to 374.29. The UK's FTSE 100 added 0.91% to 6,324.20, Germany's DAX Xetra 30 moved 1.15% higher to 6,895.27 and France's CAC-40 gained 1.42% to 5,131.53.
Stocks in Latin American finished higher, aided by a jump in international oil prices. Brazil's benchmark Ibovespa stocks index rose 871 points, or 2%, to 45,355.13. Mexican stocks rose on stronger than expected US fourth-quarter economic growth. The market's IPC index closed up 606 points, or 2.1%, at 28,704.24, breaking a three-session losing streak.
Asian markets are mixed this morning. The Nikkei in Tokyo was up 27 points at 17,291 while the Hang Seng in Hong Kong lost 93 points to 19,728. The Straits Times in Singapore declined 7 points to 3221 and the Kospi in Seoul was almost unchanged at 1449.
HOW MARKET FARED
Bulls roll over smoothly
The markets managed to make a come back after falling for three consecutive trading sessions as short covering towards the fag end lifted the key indices to close in green terrain. The FMCG index was the major gainer and gained 2.08%, others like Capital Good, Pharma and Technology followed suit. HLL, ITC and Suzlon were at the limelight. Finally, the 30-share benchmark Sensex advanced 95 points to close at 12979. NSE Nifty rose 37 points to close at 3798.
Ranbaxy gained by 1% to Rs341 after the company declared that they would pay Rs6 per share as mid-year dividend. The scrip has touched an intra-day high of Rs343 and a low of Rs336 and has recorded volumes of over 6,00,000 shares on NSE.
ONGC continued to trade firm as crude oil prices still hovers above $64 a barrel on the New York Mercantile Exchange. Prices have been on the rise amid worries about the conflict with Iran, the No. 4 oil exporter. The scrip gained by 1% to Rs874 touching an intra-day high of Rs881 and a low of Rs858 and recorded volumes of over 18,00,000 shares on NSE.
Man Industries was the star of the day although profit booking dragged it lower, however the scrip rallied by over 8% to Rs199 after the company secured Rs10bn order for Pipes. The scrip touched an intra-day high of Rs220 and a low of Rs192 and recorded volumes of over 1,00,000 shares on NSE.
FMCG stocks ended with smart gains. FMCG major HLL advanced over 3.5% to Rs205, ITC surged 2.5% to Rs146, Marico spurred 4.7% to Rs61, and McDowell was up 1.6% to Rs821.
Sugar stocks run was bought to an end in mid afternoon after following reports that government has stopped fresh sugar export permits under open license. Balrampur Chini dropped 2.9% to Rs64, Renuka Sugar declined 6% to Rs428, Dhampur Sugar slipped 1% to Rs71 and Bajaj Hindusthan edged lower 0.7% to Rs181. However, Sakhti Sugar rallied by over 12% to Rs88.
Pharma stocks were in the pink of health. Dr Reddy’s Lab advanced by 2.1% to Rs706, Ranbaxy was up by 1.8% to Rs345, Cipla gained by 1% to Rs236 and Sun Pharma added 1.5% to Rs1014.
Telecom stocks were a mixed bag. VSNL advanced 1.7% to Rs402 and Bharti Airtel recovered all its intra-day losses, the scrip gained 0.8% to Rs763. However, MTNL declined 1.7% to Rs146 and Reliance Communication edged lower by 0.3% to Rs418.
Select Auto stocks were in the reverse gear. Bajaj Auto declined 1.9% to Rs2421, TVS Motors declined over 3% to Rs59 and Tata Motors was down 0.5% to Rs716. However, Hero Honda advanced 2.8% to Rs676 and Maruti added 2% to Rs812
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