Morning Calls

Wait for a breakout

The market remained tightly range-bound with only nominal movements among the major indices. The Nifty was up 0.1 per cent at 5,252.2 points while the Sensex gained even less in closing at 17,554 points. The Defty gained 0.3 per cent as the rupee strengthened further.

Volumes were on the low side but advances outnumbered declines, so breadth indicators were not bad. Both FIIs and domestic institutions were net buyers in moderate quantities. The BSE 500 rose by about 0.7 per cent while the Midcaps rose 1.85 per cent. However, the standout performer was the CNXIT index, which was up by a startling 9 per cent.

Outlook: The Nifty stayed locked in the narrow range of 5,170-5,300 and predicting direction will be impossible unless it closes outside say 5,150-5,320. A breakout should trigger a move of around 150-200 points, as and when it comes. There is previous history of very heavy trading between 5,000-5,400, so it will take volume expansion to breakout and establish a trend.

Rationale: The long-term trend is firmly up. But the intermediate trend is difficult to read and the short term trend is neutral. Volatility has been very low for several weeks. Given previous congestion at the current price levels, major volume expansion is required to trigger breakouts. Right now, volume is just not there and direction cannot be established until it occurs.

Counter-view: Low volume is associated with range-trading but also with lack of demand. Hence, one may fear a downtrend. The intermediate trend has been up since late November and is now in week seven. Intermediate trends can mature any time between 4-12 weeks. If the market does slide below 4,950, it will hit the next support at 4,800. Below 4,800, the intermediate trend would be likely to reverse, since a pattern of lower lows will be established.

Bulls & bears: The CNXIT, as mentioned above, saw strong gains. This was driven by decent results and good advisories from Infosys and TCS. All the IT majors appear in bullish mode. Tech Mahindra, Wipro and Financial Technologies could be outperformers. However, further rupee strengthening could also retard the sector's momentum.

Balancing the CNXIT, the Bank Nifty lost nearly 2 per cent and few financial sector scrips looked capable of bucking fears of higher rates or CRR hikes. On Friday, it appeared however that a few scrips like Axis Bank and Federal Bank had weathered the bearishness. The real estate sector saw mixed trading with some sell offs but Purvankara and Brigade also did well. Metals including non-ferrous metals were also weak but cement did well with ACC and Ambuja finding buyers.

PSUs did well in general with counters such as REC, Neyveli, SCI, Engineers India, BEML, Concor, NTPC, all finding support as rumours of disinvestment abounded. Winners and losers were scattered randomly outside these sectors. Tata Motors and Power Grid were among the scrips that ended strong as did Lupin and Cipla.

MICRO TECHNICALS

AMBUJA CEMENT
Current Price: Rs 113.25
Target Price: Rs 120

The stock has made an upside breakout backed by strong volumes. It has the potential to run up till around the Rs 120 mark though it will hit strong resistance above Rs 118. Keep a stop at Rs 109 and go long. Start booking profits above Rs 118.

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FINANCIAL TECHNOLOGIES
Current Price: Rs 1,620
Target Price: N.A.

The stock is testing key resistance between Rs 1,625-1,645. If it closes above Rs 1,635, it could move till the Rs 1,750 level. Volumes are good. Keep a stop at Rs 1,600 and go long. Add to the position above Rs 1,635. Book partial profits at Rs 1,700.

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SCI
Current Price: Rs 172.70
Target Price: Rs 185

The stock is benefiting from a focus on PSUs as well as a bounce in the shipping sector. It has risen on volume expansion. There's very little resistance until around Rs 185 and that would be a potential target. Keep a stop at Rs 167 and go long.

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AXIS BANK
Current Price: Rs 1,078
Target Price: Rs 1,120

Axis shows signs of a breakout, which is against the trend in the banking sector. It has cleared resistance at Rs 1,055 and it could run up till somewhere between Rs 1,100-1,130. Keep a stop at Rs 1,065 and go long. Start booking profits above Rs 1,110.

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PURVANKARA PROJECTS
Current Price: Rs 115.75
Target Price: Rs 130

The stock has jumped on volume expansion. It's testing resistance at Rs 120 and will hit that level again, on intra-day basis at least. If it closes above Rs 120, it could run till the Rs 130 level or higher. Keep a stop at Rs 110 and go long. Add to this above Rs 120 and book profits at Rs 130.

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'Stick to bottom-up, buy on dips and hold strategy' 18-JAN-10 In the second series of interviews for Smart Portfolios, Amar Ambani talks about his expectations for 2010, reveals his strategy of sticking to mid-caps and suggests that investors look at individual stocks rather than sectors for the year.

Markets at a glance 18-JAN-10 The markets traded in a narrow range this week in spite of stellar numbers from Infosys.

Analysts' corner 18-JAN-10 The brokerage has revised earnings downwards and thus has cut the company’s 20010-12 EPS estimates by 8-11 per cent.

Premiums drop due to low volatility 18-JAN-10 The market saw practically no change in the major index levels in what is turning into an extended phase of very low volatility.

Wait for a breakout 18-JAN-10 The market remained tightly range-bound with only nominal movements among the major indices.

Alpha India updated 18-JAN-10 The January 4 yearly outlook carried numeric ranking for 50 Nifty Stocks.

Bharti: Looking out 18-JAN-10 India’s largest wireless service provider, Bharti Airtel is expanding its international operations by buying a majority stake in Bangladesh’s fourth largest wireless telephony service provider, Warid Telecom.

Bajaj: Motoring ahead 18-JAN-10 Buoyed by the demand for its Discover range of motorcycles, the country’s second largest two-wheeler maker, Bajaj Auto, posted healthy numbers for the second quarter in a row.

Green shoots are for real 18-JAN-10 Infosys Technologies’ December 2009 quarter results brought an air of optimism into the sector.

Pricey pizza 18-JAN-10 As the frequency of eating out or preference for fast food increases, players in the take-away or home-delivery space should benefit.

The PSU opportunity 18-JAN-10 Many would have reservations about investing in public sectors companies (PSUs) due to reasons such as government interference and so on.

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Weekly Newsletter - Jan 18 2010

Weekly Newsletter - Jan 17 2010

Top 5 picks of the day I Mid-term picks





Src:ET, Business-Standard and DP Blog and etc