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Market Outlook

Friday, June 22, 2007

Markets may see volatility - Mohoni

European markets went through sharp falls last night, while the US indices finished higher after some initial selling. Asian markets are mixed this morning with the Hang Seng up and the Nikkei down, and there is no clear global short-term trend right now. We too may be in for two-way moves again today.
The market rallied on Thursday, with the Sensex up 87.29 points (0.61%) at 14,499.24, the Nifty 18.75 points (0.44%) at 4,267.40, and the CNX Midcap 49.50 points (0.86%) at 5,822.35. The biggest positive contributions to the Sensex came from Larsen & Toubro (31.5 points), BHEL (14.0), HDFC (13.9), Reliance Comm (12.7), State Bank (7.6), Hindalco (6.1) and Reliance Energy (5.6). The largest negative contribution was 6.7 points from Bharti Airtel.

The market's breadth was healthy, with advances outnumbering declines 1.27 times on the BSE, and 1.26 times on the NSE. The volume in advancing issues was 56.7% (70.2%) on the BSE, and 60.8% (71.6%) on the NSE, while that in declining ones was 38.6% (27.0%) on the BSE, and 35.1% (26.9%) on the NSE.

The number of Hotline stocks at 200-day highs fell from 28 to 22, while the number at 200-day lows remained zero. The number at 5-day highs fell from 111 to 96, while the number of at 5-day lows rose from 21 to 26. The 240 stocks averaged a gain of 0.61%.
The main indices opened higher and improved further until 1050, then declined slowly until 1420, and rallied again to close at their day’s best. The CNX Midcap opened higher and rose till its session high at 1145, then declined to hit its low at 1425 before rallying again to close a little under its best.

The indices had breached their intermediate downtrend triggers a few days back, but a downtrend did not develop.

For this reason the intermediate uptrend that started over a month ago is being treated as still on. The levels below which it would end remain unchanged at 14,057 for the Sensex, 4,136 for the Nifty, and 5,623 for CNX Midcap.

The CNX Midcap and the Nifty made fresh all-time highs during the current intermediate uptrend, while the Sensex has come within fifty points of doing so.

With two of the three main indices having hit all-time highs recently, it can be assumed that a bull market is in existence. Doubts arose in March, when the indices made lower intermediate bottoms.

The bull market would end if the Sensex were to close below its last intermediate bottom of 13,550. The equivalent triggers are 3,980 for the Nifty and 4,655 for the CNX Midcap.

There was no change in the major trend of any of the Hotline stocks yesterday.
A strong global rally was in progress, and almost all global markets are in intermediate uptrends now.

All global markets are in major (long-term) uptrends as well.

The MFs bought USD36.6 million of stocks on Wednesday, and are buying at an average daily rate of USD24.2 million over the last five sessions. The FII figure was not released. They were averaging daily purchases of USD25.2 million until Tuesday.

Meanwhile, all the major global indices are in intermediate uptrends, and all the indices’ major trends are still up.

The Dow rose 56.42 points (0.42%) to 13,545.84, and the NASDAQ composite went up 17.00 points (0.65%) to 2,616.96.



Market likely to see truncated risk appetite

The markets continued to extend the previous sessions gains yesterday as was advocated by me yesterday. The upsides did encounter profit taking as the impeding expiry of the June series witnessed some unwinding. The traded volumes were higher than the previous session, which is a positive indicator.

The market breadth was marginally positive as the BSE and NSE combined advance decline ratio stood at 2018 : 1590. The capitalisation of the breadth was also positive as the combined exchange figures stood at Rs 10681 crore : Rs 4945 crore. The F&O data for the previous session indicated a 1.85% increase in the net long positions amidst a marginal increase in the Nifty PCR.

The indices have closed at the upper end of the intraday range but the rate of ascent has tapered off as the upsides are witnessing some profit taking by the short term / weaker bulls who are providing overhead supply. The 4276 / 4222 range specified for the Nifty yesterday held as the Nifty retraced from the 4275 level and tested the 4220 mark. That validates our retracement / extension computations as the intraday range expands upwards.

The coming session will witness an intraday range of 4301 on advances and the 4233 mark on declines. Watch the combination of market breadth, volumes and open interest as a higher risk appetite on the weekend session will indicate a bullish week from Monday onwards.

The outlook for the markets today is that of cautious optimism as the weekend session is likely to see truncated risk appetite, though the overall outlook is positive. Should the overseas cues be positive, expect some more upsides though the overhang of profit taking will continue to hound the advances.



June series expiry may trigger volatility

The markets behaved along expected lines as the weekend factor spiked the upsides potential as well as the traded volumes. The 4233 support advocated for Friday held as the Nifty spot bounced from the 4242 mark.

Market breadth was marginally negative as the BSE & NSE combined advance decline ratio stood at 1766 : 1863. The capitalisation of the breadth was however positive as the combined exchange figures were Rs 7894 crs : Rs 6719 crs.

The F&O data for previous session indicated a 2.65 per cent increase in net long positions as the bulls ramped up fresh exposure even in the face of the June F&O expiry.

The indices have indicated a key reversal on the charts (the closing is lower than the opening) at a significant high (SiHi) of the current upmove. That the traded volumes on this key reversal day were lower can only be a minor relief as the intraday high at the 4278 levels will now be a hurdle for the bulls to overcome.

Unless the 4278 levels are overcome on high volumes and increased open interest, traders should lay off fresh purchases. The 4242 level will now act as a swing reversal and a consistent trade below this mark will act as a bearish trigger.

The outlook for the markets on Monday is that of caution as bulls are likely to witness some resistance from profit sales and possible short selling if the overseas cues are negative. The impending expiry of the June series will act as a catalyst for higher volatility. Lower risk appetite players are advised to cut back trading exposure in coming future.



Earnings hope cheers Street


Key share indices ended up nearly 1 per cent, charting gains for the third straight session, as capital goods shares climbed on expectations of robust earnings growth, analysts said.

“First quarter looks good for Indian companies, and we are expecting some good performance from the engineering and manufacturing sector,” Mukul K Gupta, chief executive officer, Birla Sun Life Asset Management, said.

Rebound in the Asian markets from early losses, also helped shares shrug off initial weakness. Key Asian markets ended up despite overnight slide in the US shares due to higher bond yields.

The Bombay Stock Exchange’s 30-share Sensex ended at 14499.24, up 87.29 points or 0.6 per cent from Wednesday. Intraday, it moved between 14406.67 and 14526.44.

The National Stock Exchange’s 50-share Nifty ended at 4267.40, up 18.75 points or 0.4 per cent. Intraday, it moved between 4220.10 and 4275.35.

Turnover on both the exchanges was roughly Rs 15,280 crore, almost in line with Tuesday’s figure of Rs 15,000 crore.

The CNX Midcap Index and S&P CNX 500 Index ended up nearly 1 per cent each.

Shares of oil retailers gained, helped by easing crude oil prices and robust outlook for Apr-Jun earnings, dealers said.

Crude oil prices fell 91 cents to $68.19 a barrel on Wednesday on a weekly report that showed a surprise rise in crude oil and gasoline inventories in the US.

Bharat Petroleum, up 4.3 per cent at Rs 347, was the top Nifty gainer.

Hindustan Petroleum gained 4 per cent to Rs 274 after the government approved LN Mittal Group’s 49 per cent stake buy in the company.

Larsen and Toubro was up 4 per cent at Rs 2,105 after the company bagged $94.95 million shipbuilding contract from a Dutch firm.

Bharat Heavy Electricals, up 4 per cent at Rs 1,483, was the other major Nifty gainer.

Jet Airways ended up 2 per cent at Rs 806 after the company said it has “no intimation” of any court order against Chairman Naresh Goyal.

Sugar shares gained after the government on Thursday raised the buffer stock for sugar to 5 million tonne from 2 million tonne in a bid to help sugar mills that are burdened with huge stocks.

Shree Renuka Sugars gained 2 per cent at Rs 617, while Simbhaoli Sugar Mills was up 2 per cent at Rs 40.

Dabur India, down 3 per cent at Rs 100, was the worst hit on Nifty on profit sales after having run-up last week on expectations of an overseas acquisition.

Sterlite Industries fell 2 per cent to Rs 598 on profit sales after rising 8 per cent in the previous session tracking gains in its American depositary shares.

Auto shares ended mixed as concerns about sales in coming months resurfaced, dealers said. Hero Honda and Maruti Udyog fell 1 per cent each, at Rs 663 and Rs 759, respectively.

Oil and Natural Gas Corp was down 1 per cent at Rs 914 on reports that the Directorate General of Hydrocarbons cut estimates of gas discovery by the company.

Technology shares fell as investors are awaiting Apr-Jun results to gauge impact of the strengthening rupee on dollar-denominated sales of companies, dealers said.

The BSE IT Index, down 0.1 per cent, was the sole laggard among BSE sectoral indices.

Satyam Computer Services and HCL Technologies ended down 1 per cent each, at Rs 467 and Rs 335, respectively.

Posted by FR at 11:59 PM  

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Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.