Weekly Market Outlook - HPCL, Mphasis, Petronet, WelspunGujarat. - Disclaimer Post Applies !!

Indian and Global Markets - Overview

This past week we saw the market open at 5280 levels and rose till 5329 before ending at 5290. We witnessed decent buying in the market because of the capital inflows from the FIIs. However we believe that Nifty will find it difficult to surpass the 5300 – 5350 level for the current week. A break out above 5325 – 5350 could take the Nifty to 5375 – 5400 levels. For this week we believe that all investors and traders should cut their leveraged positions and rather than going short on the market wait for the right opportunity for a direction change. On the charts it looks as if the Nifty is facing pressures to cross 5300 and a move above 5320 on a closing basis could take it to 5333 – 5350.

We believe that the corrective trading action in the last couple of days is healthy for the ongoing uptrend. Even if the indices were to pullback further and move down to the immediate support of 5200/17350 it would not damage the set-up. After seven consecutive weeks of gains, a week or two of sideways action would help the markets build a higher base from where the next phase of the uptrend could begin. The daily oscillators remain in sell mode while the RSI study has witnessed a minor breakdown. The moving averages are safely place below the price action and would provide support in case of further downside. We continue to believe that the strength in the US markets will not allow the Indian markets to correct much. The Dow (DJIA) and S&P 500 are looking set to test our target of 11000 and 1200 respectively. Overall it looks to be a volatile end to the weak likely within the 5250-5350 zones.

Consecutive third trading session for overall activity in call higher than put which signifies further weakness till 5,200.

Call Writing: Call writing observed across the strike prices except 5,100. Major addition of open interest in 5,300 of 6.3 lacs shares. Currently, 5,300 to act as major resistance for near term and 5,400 for April series on account of major concentration and PCR less than 0.50.

Put Writing: Strong fresh writing between 5,100 to 5,300 strike prices. 5,200 added open interest of 12.6 lacs shares and 2.8 lacs shares at 5,300. 5,200 to act as a major support for the April series on account of concentration of 60.7 lacs shares and PCR at 2.36.

Increase in open interest of Put below 5,300 and premium moving from 12 to 14 points indicates long positions were built up at lower levels around 5100 levels. We expect the market losing its upside momentum at current level on account of lower put with higher call writing above 5,300 strike prices, current month PCR declining from 1.6 to 1.4.

Profit booking would be viable strategy at current levels and go short above 5350 – 5400 levels.

In Thursdays trading sessions, FIIs were net buyers of Rs 433 crore with Gross buyers of Rs 2,778 crore and Gross Sellers of Rs 2,345 crore. DIIs were net sellers of Rs 357 crore with Gross buyers of Rs 1,425 crore and Gross sellers of Rs 1,782 crore. This implies that there is a “Fresh Build of Long positions” in the market.

Globally, there is a lot of improvement in economies worldwide. We heard the CEO of AIG, Mr. Robert Benmosche say that AIG was now less reliant on the US government and that AIG was on its way to repay the complete bail out money that was provided to it. Goldman Sachs was on its way to buy out a minor stake in a $4bn. hedge fund. Home sales as well as retail sales were seen rising in the US due to Easter and better bargains. Home sales in Manhattan have doubled for the first time since 2009.

Asian stocks climbed to an 11-week high, emerging-market currencies rallied and bond risk fell on signs an economic recovery is gathering pace in the U.S. and Japan, the world’s two largest economies. U.S. indices too ended up higher by almost 0.7% post the March employment numbers. Car sales were seen higher too due to better deals available in the market.

­Commodity Market Overview

This week will be bad for the commodities market. We believe that since the dollar is rising a sell off is bound to occur in the commodities market. We have attached the inventor to price graphs for 4 of the leading commodities globally. Aluminum, Zinc, & Copper should fall this week by at least a 1% - 2% along with Lead. We still maintain that Gold might cool off in the short term but is offering the best time to start buying it since inflation is on the rise. Crude oil seems to be consolidating and is poised for a breakout either on the downside or the upside. We would like to believe that Mr. Jim Rogers is right and that crude oil will fall till $65/bbl.

View on Indices - Weekly Outlook

1. Bank Nifty

a. This index has started facing resistance since the past few days and is now showing the first signs of weakness. This currently trading at 9507 and the upside for the moment is capped at 9550 - 9575 and lower end supports are placed at 8800 – 8880.

2. CNX 100

a. This index is trading at 5226 which is again a highly overbought level for this index. We believe that now the index has entered its resistance zone and one can short this index for a target of 5200 / 5170 / 5150.

3. CNX IT

a. This index is trading at 5984 and has seen significant amount of sell off since the past 4 sessions. We believe that one can now go long on this index at 5294 for a target of 6030 / 6050 / 6100. High risk trades can short this index with a target of 5818 with a stop loss placed at 6000. Since this index is on the verge of a break out or a break down, we believe that one can actually go long on some of the stocks that comprise this index while shorting the index or but PUTs.

4. Nifty Midcap 50

a. This index is trading at 2712 and is facing still resistance from 2720 -2750 levels. This index can test 2730 on the upside but we believe that the downside stands at 2700 / 2670 / 2650.

5. S&P CNX Nifty

a. This index is trading at 5290 and we believe that it is highly overbought. The upside for this index is capped at 5320 – 5350 but the downside supports come in at 5250 – 5275. High risk traders can short the Nifty at 5310 with a stop at 5325 and a target of 5263. However it would be prudent to stay with the trend and long Nifty at 5290 for a target of 5350.

 

Trading Stocks Ideas

1. Bharat Forge

a. This stock can be bought at 256 for a target of 265.

2. Hindustan Petroleum

a. This stock can be bought at 316 for a target of 330.

3. Mphasis Ltd.

a. This stock can be bought at 640 for a target of 660.

4. Petronet LNG

a. This stock can be bought at 79 for a target of 83

Speculative buy on open on Monday – Welspun Gujarat at 277 for a weekly target of 285. Stop loss at 274.

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Thanks,
DENIP Consultants Pvt. LTd - Dewang K. Mehta & Nimesh P. Marfatia