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WEEK AHEAD

www.GreatTipsIndia.com

Updated: Jan 30, 2010 at 16:00


WEEK AHEAD

Auto, cement stocks will be in focus on monthly sales data

With most earnings and the much-awaited RBI policy out of the way, the
market could attempt to claw its way back gradually after the recent
slump. So, there is a fair chance that Friday's late rebound could spill
over into Monday's session, at least early on. A reversal in FII selling
and improvement in the global sentiment will be crucial to sustain any
meaningful advance from here on. The market will also focus on the primary
market as the NTPC FPO opens next week. A slew of other issues - IPOs,
FPOs and QIPs - are also lined up over the next few weeks. One will have
to examine their fate as well.




NIFTY RANGE
4700-5000

CRUCIAL
SUPPORT 4780 & RESISTANCE 4960

APPROACH
Very careful of what one is buying in this space.

STRATEGY
One should enter Large-cap at every dip.

MARKET TREND
Overall inference remains Choppy & Volatile.

MARKET OUTLOOK
Range-Bound - Ahead of lack of trigger.

FACTOR
Monthly Auto Sales Numbers & Global Cues.

IMPORTANT
At this point in time our sense is that it will take a while for sentiment
to settle down.




• TECHNICALLY:

Nifty 4960 is what we are looking at as a very, very strong resistance. In
case if Nifty manages to stay above that, there is some semblance of
strength in the weekly charts and again we may see 5210. Otherwise if
selling persists at those levels and again the Nifty starts coming down,
market starts falling and the moment we break 4780, we are in to test 4520
and our worry is that 4520 is a very, very strong long-term support in the
monthly charts and if that is broken, then in terms of time the market
will take, it may not crack down from there much beyond 4310 but it will
take a lot of time to recover that and we hope that 4520 is not broken on
the downside, let's wait and watch.

• DERIVATIVE FRONT:

In the short run, February is knocking on the doors; we think derivative
indicators are the best indication of market mood and direction. What was
perturbing and disturbing on January expiry was that Nifty rollovers were
not even 60%, it was barely 58% to be precise and the put call ratio (PCR)
for the first time in the last six months, from what we recall, actually
breached one on the downside and stood at 0.86, which means not too much
of put writing is happening and whatever is happening is happening at 4800
levels. Interestingly, the volatility have jumped to 28 again this is
pretty much on the higher side given in the last six months the volatility
have been in the region of 20-25. It was only six months back that we last
saw volatility in the region of 28-30. That clearly indicates that there
is room for downside in the immediate term and markets more importantly
will be extremely volatile. You are likely to see these 500 points
gyrations and markets are not going to be stayed and sober and give you
100-200 point movement. So in the immediate terms, we think things are
looking slightly patchy and sticky.

• VOLATILITY:

Markets have broken the narrow range in which they were confined for the
last couple of months by a decisive move in the negative direction.
Financial experts, however, believe that encouraging corporate results and
expectations of good disinvestment of public sector entities and favorable
policy announcements in the forthcoming budget session may bring back
buoyancy in the markets soon. What ever is the case, investors are in a
dilemma whether to use their liquidity to buy into stocks at this stage
expecting a rebound soon or preserve cash and wait for a confirmation of
an uptrend. Either way markets will remain volatile as they usually remain
in the run-up to the budget. If investors wait for the uptrend to get
firmly entrenched, they risk losing out on a significant part of the
uptrend. On the other hand, if they invest a sizeable portion of their
investible surplus at this stage, they risk erosion of their capital
should the correction get deeper and sharper.

• MOMENTUM:

The old break out area, which is down at the 4700- 4600 area, is the key
support area in the short-term. What you see over the past three months is
the Nifty was making new highs, the Sensex making new highs, but you had
this momentum divergence, where momentum indicators weren’t confirming
those new highs and that created the vulnerability. And a sell off in
global markets over the past week has seen the short-term levels give way
and now it’s really set up for test of 4700-4600 area, which includes a
200-day moving average (DMA), a break below that level does open a way for
further losses then.

• SENTIMENTS:

We still believe that liquidity is ample both globally and domestically
given that real interest rates are still negative in large pockets of the
world barring Australia, which is a large country which raised rates by 50
bps in the last six months. We do not think anyone has indulged in any
form of tightening and we do not think despite all the talk of stimulus
being withdrawn globally people are willing to jump the gun because cues
from the US are still mixed. But we think it’s more of a sentiment factor
than anything else. How many of us know that in the last two days UK has
actually for the first time come out of recession after consecutive
quarters of decline, the fact that the German Business Confidence Index
was at 16 month high or the fact that consumer confidence index in the US
stood at 55.9, which was a 17 month high. We have chosen to ignore old
positives that have been filtering in because as they when things go bad
you want to give that much more weightage and credibility to the negative
bit of news that seems to be filtering in. So at this point in time our
sense is that it will take a while for sentiment to settle down.

• KEY EVENTS TO WATCH:

With most earnings and the much-awaited RBI policy out of the way, the
market could attempt to claw its way back gradually after the recent
slump. So, there is a fair chance that Friday's late rebound could spill
over into Monday's session, at least early on. A reversal in FII selling
and improvement in the global sentiment will be crucial to sustain any
meaningful advance from here on. The market will also focus on the primary
market as the NTPC FPO opens next week. A slew of other issues - IPOs,
FPOs and QIPs - are also lined up over the next few weeks. One will have
to examine their fate as well.

• LARGE-CAP A BET:

A way out of this dilemma may be to confine one’s investments strictly
with the large cap and blue chip universe. A portfolio of frontline stocks
provides downside protection to a large extent and can easily be hedged
using Nifty Futures and Options. We are of the opinion that this crack in
the indices will not last very long and should be used as a buying
opportunity. Well established companies should be preferred till the
sentiment and direction of the markets get better. The valuations in some
of the large caps are reasonable and are providing good risk-adjusted
returns for long-term investors, thus making a case for investing in large
caps.

• FPO:

Investors will also watch response to the mega follow-on public offer
(FPO) of state-run power generation major NTPC. The follow-on public offer
of state-run firm will be the first to adopt the ‘French Auction' route
for selling shares to qualified institutional buyers, which is expected to
bring better valuations. Under the French Auction model, institutional
buyers will be free to bid above a certain floor price. During allotment
of shares, the highest bidder will get preference based on the price bids
placed by them. NTPC's FPO opens for bidding on 3 February 2010 and closes
on 5 February 2010.
But the battering of NTPC's share price in the past few days in a weak
market has put the government in a quandary. The government is offloading
5% stake in NTPC through the FPO. While, initially there were plans to
raise anywhere between Rs 11,000-12,000 crore through a follow-on offer
(FPO) of 41.23 crore shares by selling 5% of the nation's biggest utility
NTPC. If we go by the current market price of Rs 214.25, it will fetch the
government not more than Rs 9,000 crore.

• ETFs:

Redemption pressure for global exchange traded funds (ETFs) may weigh on
global stocks. Strong inflows into emerging market ETFs have been a key
driver of rally in emerging market stocks over the past few months.

Meanwhile, as per latest data from global fund tracker EPFR Global,
emerging market equity funds posted first net outflow in 12 weeks on
concern that China will take further steps to curb inflation and the
global economic recovery will slow. Developing-nation equity funds lost
$608.50 million in the week ended 27 January 2010. Funds investing in
India pulled out money for the first time in 12 weeks.

• DIS-INVESTMENTS:

A lower-than-estimated collection from sale of stake in state-run firms
may upset the government's calculations on bridging the fiscal deficit
which is forecast at a 16-year high. It was estimated to raise as much as
Rs 30,000 crore in the fiscal ending March 2010 from sale of stake in
state-run firms.

While global liquidity remains quite ample, a concern for secondary market
investors is that a glut in share sales will soak liquidity from the
secondary markets. Indian firms may raise from $30 billion from share sale
in 2010, led by government stake sales and IPOs by power and property
firms. Indian firms raised about $20 billion from share sales in 2009.

• EARNINGS:

As regards corporate earnings, Q3 December 2009 corporate results, by and
large, have been good. Projections indicate a broad recovery with earnings
growing at over 25% in the next 12 months.

• ASIAN MARKETS:

It is quite interesting; in such a short space of time markets have given
a lot of the gains that we saw early in the year. Literally in three days,
the S&P 500 retraced what it had gained over a three month period. And if
you look at the Asian markets, the China and the Hong Kong markets are
back at their 200 DMA where they are finding some short-term support. So
looking at the Asian markets, looking at Taiwan and for instance we are
short-term support levels, and potentially we see some kind of oversold
rally. But with some key levels giving way, we probably still have more
downside in the coming months.

IN-A-NUTSHEL:

Monthly sales numbers will be announced by auto and cement companies. On
the whole, things might not get worse from here in the run up to the Union
Budget. Volatility is expected to prevail though as policymakers consider
exit from emergency crisis-fighting measures amid growing threat of
inflation and high fiscal deficit. The main indices could continue to be
range-bound and choppy. Technically, the Nifty is likely to trade in a
range of 4700-5000 in the near term. The broader market might also make a
comeback after losing the momentum in the recent drubbing. But, one has to
be very careful of what one is buying in this space.









THE WEEK THAT WAS

Sensex slips for 2nd consecutive week

BSE Sensex lost 3.1% and NSE Nifty lost 3%.

Wall of worries seem to be mounting as the Indian markets extended losses
for second consecutive week. Benchmark indices witnessed a deeper cut led
by heavy offloading in interest rate sensitive stocks. Fear over China's
bid to cool down its economy coupled with US President Barack Obama's
decision to put restrictions on banks further hit trader’s and investors
mood. Also, expectations that RBI may tighten CRR for banks (which indeed
came on Friday, CRR was hiked by 75bps and reverse repo was untouched)
dampened the mood on Dalal Street. Finally, the BSE Sensex lost 3.1% and
NSE Nifty lost 3%.

Sensex intra-week high of 16,878 and low of 15,982

Nifty intra-week high of 5,035 and low of 4,766

The top gainers: The top losers in the Sensex were Tata Motors (down
10.8%), Tata Steel (down 8.9%), Hindalco Inds (down 8.7%), Wipro (down
7.4%) and Hindustan Unilever (down 6.1%).

The Top Losers: The top gainers in the Sensex were BHEL (up 1.1%) and ITC
(up 0.4%).


MEMORIES OF THE WEEK:

• TOP STORIES:

 RBI hikes CRR by 75 bps; policy rates left unchanged
 Food inflation climbs again: Govt data
 Fitch: Real estate sector stabilising but risk remain
 Global M&A market re-opens for business in 2010: KPMG

• DOMESTIC NEWS:

 Govt to miss April deadline on GST rollout
 Power Grid Corp Board clears FPO plan
 NMDC files Draft Red Herring Prospectus with SEBI
 Air India sees 25% rise in passenger carriage
 StanChart allowed to hike stake in capital market arm
 Govt revises ECB policy for 3G spectrum: reports
 Tata Steel forms JV with Nippon Steel
 SREI Infra to merge Quippo with self
 Jet airways Pick 26% In GMR's MRO JV
 ACC acquires Encore Cement
 McNally Bharat arm to buy Buildmet
 Gitanjali Gems acquires stake in Morellato India
 Jindal confirms Rocklands acquisition offer: report
 Aqua Logistics extends IPO period, prunes price band

• GLOBAL NEWS:

 Jobs, healthcare reforms remain top priority for Obama
 Bernanke weathers storm...gets 2nd term as Fed chief
 Fed leaves rates steady...offers no new guidance
 UK moves out of recession...but only just
 Greek bonds yields touch 10-year high
 Debt trouble...Greece seeks China's help
 Toyota's image takes beating on massive recalls
 Apple unveils much-awaited tablet PC – iPad
 GM gets new CEO in Ed Whitacre
 Rusal shares fall in HK debut


www.GreatTipsIndia.com

BHEL - Latest Price Update
Current Price	2440	Day's High	2461.75
Change	21.9	Day's Low	2420
% Change	0.89	Prev. Close	2461.9
GITANJALI - Latest Price Update
Current Price	164.6	Day's High	168.6
Change	4.7	Day's Low	159.5
% Change	2.94	Prev. Close	159.9
ITC - Latest Price Update
Current Price	307.85	Day's High	311.85
Change	2.25	Day's Low	306
% Change	0.73	Prev. Close	310.1
HINDALCO - Latest Price Update
Current Price	159.8	Day's High	162.9
Change	1.2	Day's Low	159.55
% Change	0.75	Prev. Close	161
ACC - Latest Price Update
Current Price	827.35	Day's High	849.5
Change	13.55	Day's Low	827.1
% Change	1.61	Prev. Close	840.9
NTPC - Latest Price Update
Current Price	198	Day's High	200
Change	-1.5	Day's Low	198
% Change	-0.75	Prev. Close	199.5
WIPRO - Latest Price Update
Current Price	412.05	Day's High	417
Change	4.6	Day's Low	408.5
% Change	1.1	Prev. Close	416.65
TAKE - Latest Price Update
Current Price	31.9	Day's High	33.2
Change	1.8	Day's Low	30.1
% Change	5.98	Prev. Close	30.1
NMDC - Latest Price Update
Current Price	262.5	Day's High	264.5
Change	1.4	Day's Low	260
% Change	0.54	Prev. Close	261.1
FACT - Latest Price Update
Current Price	49.5	Day's High	50.25
Change	0.15	Day's Low	49.05
% Change	0.3	Prev. Close	49.35