Morning Calls

Short covering triggers rally

The market saw a technical pullback via short-covering ahead of a long weekend. The Nifty, which slid to a 2010 low of 4,675 points on Monday, closed at 4,826.85 for a week-on-week gain of 2.4 per cent. The Sensex closed at 16,152 for an identical gain. The Defty rose by 2.7 per cent as the rupee rallied from lower levels. Breadth was good with advances outnumbering declines for the week. However, volumes were low. The FIIs were heavy net sellers, counter-balanced to some degree by moderate domestic institutional buying. The BSE500 was up 2.4 per cent while Midcaps underperformed the major indices, rising only 1.8 per cent.

Outlook: The rally appears to have come on short-covering. There is significant resistance at 4,850 and if the FII attitude doesn’t reverse, there is every chance next week will open weak. On the downside, support between 4,650 and 4,700 remains crucial. On the upside, if 4,850 is broken, a rally till 5,000 is possible.

Rationale: A sharp jump on low volumes ahead of a weekend is characteristic of a short-covering rally. The market would need significant volume expansion to cross 4,850. If it does so, a move past 4,950 would suggest an end to the intermediate downtrend, which has lasted five weeks so far.

Counter-view: Most likely, shorts will be renewed and push the market down to the strong support in the 4,650-4,700 range, followed by range-trading between 4,650 and 4,850. But a dip below 4,650, and especially a close below 4,650, would be a serious danger signal. That would be a Southwards breach of the 200 Day Moving Average, which is between 4,660 (exponential) and 4,684 (simple), and perhaps, the beginning of a new bear market.

Bulls & Bears: The CNXIT index continued to outperform the overall market, gaining 3.6 per cent. The move here was sector-wide. The banking (and financials) sector underperformed, with the Bank Nifty gaining only 1.9 per cent.

Real estate saw a late rally, which could fizzle out soon. Metals saw short-covering, which may continue for a couple more sessions. Sugar and cement scrips also saw a rally as did auto-stocks and in all three cases, there could be a little upside. Oil production and exploration scrips saw speculative investments. In most cases, the rise came on low volumes and clearly seemed to be short-covering or buybacks following sales against delivery. However, a lot of stocks have consolidated at lower levels before moving up.

MICRO TECHNICALS

HIND OIL EXPLORATION
Current Price: Rs 269.95
Target Price: Rs 290

The stock jumped from Rs 229 to current levels in one session on massive volume expansion. This is an unusual, difficult to read pattern. On volumes alone, there should be an upside till Rs 290. Keep a stop at Rs 263 and go long. Raise the stop by 5 units for every 5-unit rise. Book at least 50 per cent profit at Rs 290.

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SESA GOA
Current Price: Rs 382.70
Target Price: Rs 405

The stock has rebounded from decent support between Rs 355 and Rs 365 to current levels. Volumes are average. If it can close above Rs 385, it has the potential to reach Rs 405. Keep a stop at Rs 375 and go long. Add to the position above Rs 385. Book profits at Rs 405.

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ORIENTAL BANK
Current Price: Rs 274
Target Price: Rs 255

The stock has shown volume expansion and a lot of volatility, while ranging between Rs 250 and Rs 290 in the past few sessions. It is likely to see a downside in the next week, till at least Rs 265 level and maybe till Rs 255. Keep a stop at Rs 280 and go short. Cover 50 per cent of the position at Rs 265 and reset the stop till Rs 270.

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JP ASSOCIATES
Current Price: Rs 132.65
Target Price: Rs 140

The stock has bottomed out close to the current levels and it may be set for another up move. A technical recovery to the Rs 140 level is possible. Keep a stop at Rs 130 and go long. Volumes are not great. So a move past resistance at Rs 140 is unlikely.

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UNITECH
Current Price: Rs 74.80
Target Price: Rs 70

Short-covering has pulled the stock up but this looks like temporary relief. Another selloff next week could push the stock back till support at Rs 70. Keep a stop at Rs 77 and short. Cover 50 per cent of the position at Rs 72 and clear the rest at Rs 70.

Analysts' corner 15-FEB-10 Educomp reported robust performance recording 37.2 per cent year-on-year growth in top-line in the December 2009 quarter.

Attractive risk-reward ratios 15-FEB-10 It appears that the current month premiums are under-estimating the likely volatility ahead of the Budget.

Short covering triggers rally 15-FEB-10 The market saw a technical pullback via short-covering ahead of a long weekend.

Risk and innovation 15-FEB-10 Capital market vision is important as it tells us where we want our markets to head tomorrow.

Costly pipes 15-FEB-10 Lacklustre track record, competitive industry and stiff pricing render Texmo’s IPO unattractive.

Pitching for value 15-FEB-10 Tripling of its capacity and moving up the coal tar pitch value-chain should help Himadri Chemicals meet demand and maintain margins.

Firing on all cylinders 15-FEB-10 ITC’s cigarette business, its cash cow, has been doing well with volumes growing at a robust rate for three consecutive quarters.

Flying higher 15-FEB-10 If the sector is able to control costs and maintain higher load factors going ahead, then consistent profitability could become a reality.

"Be stock-specific, expect moderate returns in 2010" 15-FEB-10 In a new series of interviews, Ajay Parmar talks to Rex Cano about the outlook for 2010, review of corporate earnings, upcoming Union Budget and his approach to investments.

Markets at a glance 15-FEB-10 Volatility was order of the day, as investors were uncertain about global cues.

Value picks 15-FEB-10 Despite the run up in markets in the last one year, many good companies are still available at attractive valuations.

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'Frontline stocks can rise by up to 35 pc'

Top 5 stock picks | Mid-term picks | D-St's Budget expectations

Nifty resistance zone seen at 4900-5000

Idea Cellular

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Weekly Support and Resistance Levels - Feb 14 2010

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

FIIs cut exposure to India, shift to safer markets

FIIs cut exposure to India, shift to safer markets

MUMBAI: The Indian stock market has witnessed net foreign fund outflows of Rs 3,550 crore since the start of 2010, making it one of most badly hit markets among emerging markets. A desire to shift a part of their money to safer dollar-denominated assets in the wake of the recent credit turmoil in Europe, concerns over further weakening of the rupee and stretched equity valuations have led foreign portfolio investors to cut their exposure to domestic equities. With a net withdrawal of $754 million in 29 trading sessions (since January), India trails just behind Taiwan ($2,488 million) in terms of foreign outflows, according to Bloomberg. Indonesia and Thailand, with net outflows of $238 million $294 million respectively, are among the other Asian market that have seen foreign capital outflows since the beginning of this year. Around $3 billion has been redeemed from the entire emerging market cluster during the first week of February, say market experts. While much preferred Asian equity hubs witnessed a sell-off, dormant markets like Japan, Philippines, Vietnam and Pakistan witnessed investments flowing in from foreign portfolio investors. South Korea logged inflows to the tune of $290 million since January while the surprise package was Japan, which witnessed inflows worth a whopping $18,868 million. Even if one takes a shorter time-frame from February, Japanese funds were winners as they witnessed seven consecutive weeks of net inflows. Key benchmarks in Japan, Vietnam and Philippines currently trade at 6-12 times price-to-earnings (P/E). In India’s case, despite a near-10% correction, the local market still commands a premium valuation of 20 times trailing P/E, making it a fairly-valued zone for any class of investor. “Japan currently offers investors a chance to gain on currency arbitrage. Moreover, asset prices (especially equities) in Japan are cheap. Astute cross-border investors will try to make most of this situation by moving their investments into Japanese shares,” said Gopal Agarwal, equities head, Mirae Asset Global Investment. In India’s case, according to market experts, the sell-off has been more because of global factors and stretched stock valuations. The sell-off in key emerging markets like India started after US President Barack Obama decided to limit financial risk-taking by banks. The sell-off aggravated after the credit crisis in Greece and Portugal. The hardening of the dollar also resulted in foreign investors shifting their rupee-based investments to dollar denominated assets. A rise in (dollar) value (against the rupee) increases the borrowing cost for foreign investors who had borrowed dollars to invest in Indian market. They exit their rupee investment at higher levels, pocketing currency value differential along with portfolio gains, if any. “Investors will start coming back once the rupee moves up to 48 - 49 levels,” said Mr Agarwal. Echoing his views, Ambareesh Baliga, vice-president, Karvy Stock Broking said: “FIIs are likely to stay away from Indian shares until there is clarity in world markets. It may be 2-3 months before they start reinvesting in Indian shares,” he said. According to Mr Baliga, while the market may not see a deep fall from current levels; it probably will be locked in a narrow range at lower levels. Investors should be cautious while investing in these markets, he added.

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Src: ET, DP Blog and etc

Record industrial growth strengthens case for stimulus exit

Record industrial growth strengthens case for stimulus exit


With the Index of Industrial Production (IIP) rising 16.8 per cent on the back of record manufacturing growth, the pressure has increased on the government and the Reserve Bank of India (RBI) to consider an early exit from the stimulus measures of the past 15 months.

Manufacturing, with an almost 80 per cent weight in the index, grew 18.46 per cent compared to a 0.6 per cent decline in the same month in 2008.

The electricity sector, however, grew far more slowly at 5.4 per cent (up from 1.59 per cent a year ago), prompting analysts to suggest that the industrial recovery was not broad-based enough to merit an immediate withdrawal of stimulus measures.

The mining sector’s 9.5 per cent growth was below double-digit levels, recorded three times in the previous six months, but much higher than the 2.17 per cent growth achieved in December 2008.

Manufacturing growth was propelled by the robust performance of capital goods (38 per cent), consumer durables (46 per cent) and intermediate goods (21.7 per cent). In sharp contrast, consumer non-durables grew only 3.7 per cent, once again pointing to the narrow base of the industrial recovery.

	Mining	Mfg	Elcty	General
2008-09	2.6	2.8	2.8	2.8
2009-10	8.5	9	5.8	8.6
(Apr-Dec)

The low base effect — industrial output in December 2008 fell a quarter per cent — also contributed to the record December numbers. On a month-ago basis (with no seasonal adjustments), however, the December 2009 performance showed an industrial growth rate of 10.81 per cent, the highest since the industrial slowdown began in the third quarter of 2008.

On a month-ago basis (with no seasonal adjustments), however, the December 2009 performance showed an industrial growth rate of 10.81 per cent, the highest since the industrial slowdown began in the third quarter of 2008.

Finance Minister Pranab Mukherjee expressed satisfaction at the numbers and said the third-quarter GDP growth numbers would be strengthened by the IIP figures. “It is quite encouraging and I do hope that the third-quarter GDP figures will also be encouraging…It will get reflected in the overall GDP,” Mukherjee told reporters.

Mukherjee’s statement comes after several positive economic indicators were released during the week, all of which augured well for private investment prospects. These indicators included the sharp rise in the business confidence index to a two-year high, a 14 per cent growth in exports and a healthy flow of foreign investments estimated at over $20 billion in the first nine months of the current financial year (compared to $21 billion last year).

Exuding similar optimism, D K Joshi, Crisil India’s principal economist, said: “It is definitely better than any forecast. The high growth in manufacturing and consumer durables have been sustained and that is a big positive surprise”.

Joshi added a caveat, however, observing that “The data is getting more and more broad-based but it still continues to be quite narrow”. He also pointed out that the base effect had a role to play in the December numbers and sustaining the high level would be difficult even though the month-on-month growth would continue.

Jyotinder Kaur, economist with HDFC Bank, differed. “The numbers are encouraging because they clearly point to a sequential spurt and it is across the board. Considering the strong performance in the past few months the numbers have reached a level where they are not purely driven by stimulus measures. So the growth, even though not this high, can be sustained with a gradual pull back of the stimulus,” said Kaur.

Some analysts also suggested that the number might lead to a rise in policy rates by the RBI before the fourth quarter policy rates.

“With industrial production growing at a record pace, capital goods production surging, business confidence high and foreign direct investment rapidly returning, there are now a number of signs that private investment is set for strong growth. This should facilitate the RBI putting a greater focus on inflation. The current situation no longer necessitates a repo rate of 4.75 per cent and a cash reserve ratio of 5.75 per cent, which are low by historical standards and more appropriate for a slow recovery scenario,” said Nikhilesh Bhattacharyya, economist with Moody’s economy.com.

The cumulative growth rate for April-December of the current financial year stands at 8.6 per cent against a low 3.6 per cent during the corresponding period in the previous fiscal. Industrial growth, on a cumulative basis, for the third quarter of the current fiscal stands at 13 per cent,compared to one per cent in the comparable period last year.

Consumer durables led the growth in manufacturing by expanding at a significant rate of 46 per cent in December 2009. The sector had contracted 4.2 per cent in the corresponding period in 2008. Consumer non-durables also showed a marginal acceleration in growth rate at 3.7 per cent compared to 3.2 per cent last year.

Intermediate goods, which were the worst hit due to the downturn and had contracted 8.9 per cent in December 2008, also posted a robust growth of 21.7 per cent in December 2009.

Src: Business-Standard

Europe prepares to help Greece out of crisis

Europe prepares to help Greece out of crisis



BRUSSELS: EU leaders are under increasing pressure to lend support to cash-strapped Greece when they meet in Brussels on Thursday, with attention increasingly on offering financial guarantees to soothe the markets.

On Wednesday, finance ministers from the European single currency area planned phone talks with European Central Bank president Jean-Claude Trichet, a European Commission spokesman said, in an attempt to firm up a deal.

So sensitive are the markets that the news Trichet was leaving a central bankers' meeting in Sydney early to attend the EU summit on Thursday was enough to bolster speculation that a deal was in the works.

That in turn eased worries over Europe's debt troubles and brought most markets higher following a rally on Wall Street.

It's the kind of boost that the EU leaders are hoping to encourage.

"At the moment it's a vicious circle," one EU insider said. "You have the Greek crisis, then massive media coverage that then leads to market movements which makes the crisis worse, which leads to more media speculation."

The 27 heads of state and government will begin meeting at 10:15 (0915 GMT) Thursday for their emergency summit focussed on the economic crisis in Europe.

The meeting was called by new EU president Herman Van Rompuy, who is emerging from the self-imposed shadows where he has dwelt since his appointment to the post in December.

So far "there is no agreement" on a plan to help Greece, which is suffering under a massive budget deficit which is heightening fears that Athens will find borrowing increasingly difficult, one informed source said.

However the signs were multiplying that a support mechanism for Greece will emerge.

An official from the conservative party of German Chancellor Angela Merkel indicated that preparations were underway in Berlin for a support plan.

Germany is looking to lead an EU "firewall" to contain the Greek debt crisis, possibly by guaranteeing loans to calm fears of a government default, press reports said on Wednesday.

The Financial Times Deutschland said Finance Minister Wolfgang Schaeuble was working on both a bilateral basis and at the European level on putting together a package to help Athens.

A "standing facility" to show that money is available, a kind of cheque guarantee, is being considered to provide market confidence for Greece.

"If this can be done by providing some extra standing facility that may or may not in due course have to be used that would in itself be very helpful," one EU official said.

Athens is pressing on with efforts to slash expenditure and raise revenue to narrow its 12.7 percent deficit -- more than four times the eurozone limit of three percent of gross domestic product that a host of European countries are also flouting.

The Greek crisis has driven up borrowing costs for governments across Europe, with pressure mounting on a number of other heavily-indebted eurozone members, and sent the euro sliding against the dollar.

Royal Bank of Scotland economist Jacques Cailloux said a facility of 50 or 100 billion euros available to Greece would act as a useful riot shield.

Other forms of aid could also be considered.

Google gives Gmail a 'Buzz' to challenge Facebook, Twitter 10 Feb 2010, 0233 hrs IST, AGENCIES

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Topics: Internet Google Facebook social networking Orkut Twitter Buzz

SAN FRANCISCO: Google on Tuesday gave its free email service a "Buzz," adding Twitter and Facebook style social networking features. Significant China related cyber events Timeline: Google's China woes Google's new Wave Google Google Chrome Brain behind Google Chrome Google Buzz product manager Todd Jackson equated the enhanced offering to "an entirely new world in Gmail" during an unveiling presentation at the Internet giant's headquarters in Mountain View, California. Buzz began rolling out on Tuesday with Google Web-based email service getting updates about what friends are doing online and ways to share video, photos and other digitized snippets with others of one's choosing. As is the case with wildly popular microblogging service Twitter, Buzz lets users "follow" people that share updates with the world. Google also unveiled a handful of new products designed to make the new social networking features suited to mobile devices, like smartphones based on Google's Android operating system. Also Read → Google warns Chinese knock-off to stop using logo → Disney, Google eye deal with China bus media firm → Google warns Chinese copycat website: report → Google facing many risks in standoff with China → Google, NSA to team up in cyberattack probe Google's move comes as a direct challenge to social-networking stars Facebook and Twitter, which thrive on enabling people to share experiences, activities and thoughts as they go through their days. In addition to the Buzz features for Gmail, Google said it is launching a special mobile application for Buzz, as well as weaving Buzz technology into the mobile versions of its flagship Web site and its maps products. Google has tried to ride the social networking wave before, launching the Orkut social network in 2004. But while Orkut is big in certain overseas markets, like Brazil, it has failed to attract as many users as social giants like Facebook and MySpace in the United States. In building a social network on top of an email product, Google is following in the footsteps of Yahoo, which has taken a similar approach in efforts to keep up with Facebook. Yahoo! added a similar feature to its email program, Yahoo Mail, last year, allowing users to see whether friends have uploaded a photo to a photo-sharing site such as Flickr. In what could signal an escalating battle between Google and Facebook, the leading social-networking service celebrated its sixth birthday last week with changes that included a new message inbox that echoes the Gmail format. Gmail is the third most popular Web based email in the world, with 176.5 million unique visitors in December, according to comScore. Microsoft Corp's Windows Live Hotmail and Yahoo Inc's Mail were No 1 and No 2, with 369.2 million unique visitors and 303.7 million unique visitors respectively.

Src: ET