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WEEK AHEAD

Updated: Nov 15, 2009 at 14:30


www.GreatTipsIndia.com


WEEK AHEAD

Following the global market the Indian market continued to spiral up during the week ended 13th November 2009. The spiral-up during the previous week was mainly driven by the Foreign Institutional Investors (FII) as well as the Domestic Institutional Investors (DII) who were net buyers through-out the week while the participation by retail investors were irrelevant as far as the rise is concerned. They remained net sellers during the week. It shows evident signs of nervousness prevalent in the retail investors mind. Going ahead the market will closely watch any signs of unwinding of US Dollar carry trade. Many are borrowing the dollar and investing in high yielding risky asset, which has been a major factor behind the rally in the Indian market as well. Any rise in interest rate in the US besides US$ strengthening will reverse the carry trade trend and would hit the market severely. The hardening inflation in the domestic market besides policy tightening going ahead will have a significant bearing on the domestic market.

NIFTY RANGE
4800-5200

CRUCIAL
SUPPORT 4920 & RESISTANCE 5120

APPROACH
Avoid Buy Fresh, till next break-out.

STRATEGY
Be Stock specific and not Index specific.

MARKET TREND
Momentum is strong & Trend is bullish.

MARKET OUTLOOK
Less volatility with side way movements

FACTOR
Global Cues & Dollar

IMPORTANT
A deeper correction is likely if Global cues & liquidity reverses.


• FUNDAMENTALY:

We think we have had lower bottom in place or going by that logic we should have a higher bottom as well, which means that market should trade beyond the earlier highs of about 5170 or so. But that may take a few more days maybe two-three weeks or so considering that the news flow would remain light over the next few trading sessions and it does appear that even the rally, which was there in the overseas market that is also losing a bit a steam at this point of time.

We think for the next immediate short term, next two-three weeks or so, you could look at sideways movement and eventually a breakout on the upside. Hopefully there will be some positive triggers in the form of global news flow and these days a lot of action happening locally as well with the government taking small steps towards reforms. We saw the gas price increase and thereafter we also saw some further progress on the disinvestment side.

That could be an interesting trend if the government would come out with more such reforms or pragmatic steps, which end of the day are positive for the public sector undertaking (PSU) stocks or for large industries and a lot of them have been taken place.

We guess next week would be typically the same; less volatility is expected as well and maybe you could have some more sideways movement over the next four-five trading sessions and the week thereafter is the triple witching week and there you could see gain volatility pickup. But by and large lower volumes, lesser participation and more sideways movement is what the current assessment.

• TECHNICALLY:

With equity benchmarks poised at critical levels, a move in either direction will set the trend for the Indian stock market in the near term for which the performance of overseas markets holds key.

The market is critically poised; if a 50-100 point move on the Nifty persists in the coming week, then the index could scale up-to 5250-5400 in the near term. At the same time, if it slips 100 points, then there is a high possibility that the index could see a sharp correction. Therefore, 5120 (resistance) and 4920 (support) are crucial levels.

It is very necessary that Nifty manages to hold the 4900 level to keep this strong momentum live. Technically, if Nifty breaks the 4900 level in the near term which is the 50-day moving average then it’s quite possible that markets could drift lower to 4830- 4770, on the other hand if momentum remains Nifty may scale to 5300, where profit booking is expected.

• SENTIMENTALY:

With no major domestic trigger, the equity market is expected to move in tandem with the global markets. But upward momentum is likely to continue as sentiment in the market remains positive.

Sentiments in the Indian market are closely linked to the sentiment of the foreign investors as they have been large buyers in equities over the past few months and have been the main driver of the recent Bull Run. Foreign institutional investors (FIIs) inflow in November 2009 totaled Rs 2,727.10 crore, while the FII inflow in the calendar year 2009 totaled Rs 71,168.20 crore (till 11 November 2009).


• F&O SIDE:

In the F&O segment both the nifty future and some of the front-line stock future significantly added open interest (OI). For e.g. during the week the nifty added 7.92 lakh shares in OI and the total OI stood at 2.77 crore shares as on Friday. 9.71 lakh shares of OI were added during Friday.

Reliance added 55 thousand shares whereas Tata Steel and Tata Motors added 13.45 lakh shares and 24.81 lakh shares in OI respectively during the week ended 13th November 2009. Other major front-line stock futures viz- Infosys, ICICI Bank, DLF and Maruti added OI during the week under review, whereas Unitech, Sail and Rcom shed OI.

Overall the market wide OI on Friday stood at 173.67 crore shares, thus gaining by 2.04 crore shares as compared to the previous trading day. Index future added just 11 lakh shares in OI whereas the major addition was witnessed by the stock futures.

In the nifty option segment in-the-money strike nifty call witnessed unwinding of OI whereas at-the-money and out-of-the money nifty strikes witnessed addition of OI signifying fresh call buying at these strikes. However both out-of-the money and in-the-money nifty puts witnessed aggressive put writing signifying strong bullishness as far as the option indicators are concerned.

For the full week under review the nifty 5000 and 5100 strike call added 4.58 lakh shares and 14.34 lakh shares in OI and the total OI of both these strikes as on Friday stood at 38.72 lakh shares and 33.22 lakh shares respectively. The 4800 and 4900 strike puts added 32.25 lakh shares and 43.19 lakh shares in OI respectively during the week under review. Further the 5000 and 5100 strike puts added 32.96 lakh shares and 7.26 lakh shares in OI. Such aggressive put writing of these strikes indicates bullishness as the market expects the nifty underlying to easily cross these strike levels

Although the market remained at high and the F&O indication are also suggesting bullishness, a lot will depend on the activity in the foreign market in the absence of any major domestic triggers. The market may continue its growth momentum citing global market. Also in the absence of any global or domestic triggers some sideway moment is expected during the proceeding days. The nervousness among retail investors still persists as evident from their lack of participation in the recent rally.

• DOLLAR CONCERN:

The market will also keep a close watch on the US dollar. Investors are borrowing money at cheap rates in US dollars and buying risky assets like emerging market stocks and commodities. Experts believe that a rebound in the US currency may possibly lead to outflows from the emerging equity markets like India.

The Dollar Index, which measures the currency's value against six major units including the euro, gained on Thursday, 12 November 2009, after a weekly jobless report triggered strength in the currency. The US Dollar Index rose as much as 0.8% to 75.743 on Thursday. The dollar index gained strength on the back of risk aversion that led to a decline in equities and higher demand for the safe-haven dollar.

• INFLATION:

However, market participants are expected to remain cautious of accelerating inflation which tends to put upward pressure on interest rates and undermine equities. The government will unveil monthly inflation data for October 2009 on Saturday, 14 November 2009.

Although the Reserve Bank of India (RBI) held its main policy rates unchanged, as widely expected, at its review last month, the central bank gave enough indications that monetary tightening was round the corner with the focus shifting to tackling inflationary pressures.

Officials are worried that this will feed into inflation expectations, which is a bigger danger in India compared to other economies, since public sector wages are inflation indexed. The problems of sluggish investment spending and uncomfortably high inflation put the RBI in a tough position.

• ECONOMY:

Chairman of the Prime Minister's economic advisory council C. Rangarajan said on Wednesday stimulus measures may need to be withdrawn next year. He said excise duties, which were lowered twice between December 2008 and February 2009, needed to be adjusted while the government's expenditure needed to be cut in 2010/11 to reduce the fiscal deficit by 1% to 1.5%.

Rangarajan, a former central bank governor, said the economy could grow 7-8% in 2010/11 (April-March), but Finance Secretary Ashok Chawla said on Wednesday the economy cannot return to the 8-9% growth trajectory until exports revive.

Exports declined 11.4% in October from a year earlier, their 13th drop in a row, and trade secretary Rahul Khullar said exports would start growing only from January.

India's industrial output rose 9.1% in September 2009 over September 2008, data released by the government on Thursday showed. The government revised upwards the industrial production growth for August 2009 to 11% from 10.4%.

Consumer durable goods output surged by an annual 22.2%, manufacturing production rose 9.3%, mining output was up 8.6% and power generation rose 7.9% in September 2009 over September 2008


IN-A-NUTSHEL:
Coming week the key question is whether global markets hold up, the dollar goes back from its mild retracement that we have seen over the last couple of days and that paves the way for the S&P to get back above 1100 which may coincide with a breakout decisively above that 5,000-5,050 mark for the Nifty.

So from a trading perspective we think you will still have to say that the shape is upward curving. It depends on global markets whether we can get, get close to that 5180-5200 mark next week in next week’s trade which was our intermediate high.

 Quote of the Week:

If you hear that everybody is buying a certain stock, ask who is selling.


THE WEEK THAT WAS

Sensex manages 2nd week of gains

BSE Sensex added 4.3% to close at 16,848 and the NSE Nifty rose 4.2% to 4,998

The bulls managed to sustain last week’s momentum, with the BSE Sensex adding 4.3% to close at 16,848 and the NSE Nifty rising 4.2% to 4,998. Better-than expected IIP numbers helped the market in maintaining the bullish tempo. However, the Nifty continued to witness resistance at 5,000 levels through the week.

The BSE Sensex hit an intra-week high of 16,910 and low of 16,147 while, NSE Nifty hit an intra-week high of 5,017 and low of 4,790.

The Foreign Institutional Investors (FIIs) bought shares worth Rs30.15bn during the week. The Domestic Institutions were net buyers to the tune of Rs4.90bn during the week.

The Top gainers: The top gainers in the Sensex were Tata Motors (up 8.8%), Reliance Industries (up 8.3%), TCS (up 7.7%), ICICI Bank (up 7.1%) and Infosys (up 6.4%).

The Top Losers: The top losers in the Sensex were Bharti Airtel (down 5.6%), DLF (down 3.1%), Hindustan Unilever (down 1%), Ranbaxy Labs (down 0.5%) and Reliance Power (down 0.2%).


www.GreatTipsIndia.com

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