This past week we saw the market open at 5076 levels and rose till 5147 before ending at 5135. We also saw the markets make a low of 4961 in the week which makes volatility a very unwelcomed guest. The Nifty is trying to claw its way back up to the 5200 mark and based on the options chain and the FII activity it looks possible as well. However the global bad news inflow will be too much for our markets to with stand. FIIs have been buying since the 2nd day of June 2010 but in very small amounts (~Rs. 100cr. - ~Rs 200cr. daily) which adds to some sentimental boost but we will not be surprised if they start turning into heavy sellers in the markets.
For the Nifty on the downside if 5000 is broken, support comes in at 4850. So for us 4850 – 5000 will be the zone to watch out for on the Nifty. We have witnessed major put concentration from 4800 – 5000 as well which makes us believe that 4850 – 4900 should be strong support zones for the Nifty. However for an investor we advise to wait out for the second week of June to play out so that we know if 4800 is broken and the downside extends to 4300 – 4500 or if 4800 - 5000 level holds for the Nifty. I would slowly start buying in the markets if the FIIs are net buyers as of end of day on Monday the 7th of June 2010.
We believe that for Monday 5050 should be strong intraday support for the Nifty but if 5050 is breached and the Nifty stays below if for the first one hour of trade on Monday we might be in for some serious downside.
On the options side, the picture is not as bad as the global sentiment. Consecutive third trading session for overall activity in higher call options and at 4900 / 5000 put which signifies some support on the Nifty.
Call Writing: Call writing observed at the strike prices of 5300 / 5400. Major addition of open interest is at 5200 of 6.1 lakh contracts and then at 5300 / 5400. Currently, 5200 should act as major resistance for near term.
Put Writing: Strong fresh writing between 5000 & 4900 strike prices. 5000 added open interest of 7.4 lakh contracts and 6.8 lakh contracts at 4900. 4900 should act as a major support for the June series on account of concentration of 74.1 lakh contracts.
Current month PCR declined from 1.25 to 1.18. Profit booking would be viable strategy at current levels and go short above 5350 – 5400 levels.
In Fridays trading sessions, FIIs were net buyers of Rs 100 crore with Gross buyers of Rs 1,962 crore and Gross Sellers of Rs 1,862 crore. DIIs were net sellers of Rs 126 crore with Gross buyers of Rs 903 crore and Gross sellers of Rs 1030 crore.
Globally, we seem to be back to square one. US payrolls data fell short of expectations leading to a belief that the US economic recovery might be thrown of track amid fears of contagion of debt crisis in the EU region.
Seller’s reclaimed control of the US stock market after it had put together solid back-to-back gains. The change in tone came amid renewed concerns about contagion in Europe and disappointing nonfarm payrolls data.
Though Hungary uses the forint instead of the euro as its currency, the country's troubles make for a manifestation of the fears spawned by the tenuous fiscal and financial conditions throughout Europe. In turn, the euro dropped a precipitous 1.7% to set a new four-year low of $1.1956
The savings rate in the U.S. climbed to 3.6 percent in April, the highest level since January, from 3.1 percent in March as incomes increased and purchases cooled, according to Commerce Department figures released May 29, 2010. US Treasury Secretary Timothy Geithner too told his Group of 20 counterparts that the pace of the global recovery depends on domestic demand in Japan and Europe, and countries shouldn’t rely on spending by U.S. consumers which adds to global recovery concerns.
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.
Amidst the entire crisis we as Indian retail investors must not forget the India growth story. Corporate India's performance during the previous fiscal reflected better top line and bottom line growth. The top 25 major industrial houses (according to sales) posted a 17.4% rise in net profit during 2009-10. They had reported a decline of 5.3% in net profit during the previous fiscal. On the other hand, the top line growth of the companies decreased from 20.1% to 15.8% during 2009-10. This is a very simple reason to be buyers in the Indian markets on every dip with a long term perspective.
Also, with the new government policies of 25% public holding must for all listed Indian companies there might be some serious downside in certain specific stocks.
¬Commodity Market Overview
This week will continue to be bad for the commodities market. We believe that with demand fears 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 2% - 3% along with Lead. We still maintain that
We’ve been bullish on Gold since it was at $1000 and today it has reached $1200/ounce and is still inching higher. We believe that 2010 too will be the year to be invested in Gold. Our view which was in tandem with Jim rogers on crude too is falling into place with crude already entering the $65/bbl to $70/bb zone.
View on Indices - Weekly Outlook
1. Bank Nifty
a. This index just broke out of its 9400 zone and is now headed towards 9500. However with heavy global bad news inflow we believe that this index will get beaten down. We would be buyers in this index on every dip. On the downside if 9300 is broken then this index can go down to levels of 9000 where it should find some support. Upside for the moment is capped at 9550. There is a gap in this index at 9200 levels which could get filled on Monday itself.
2. CNX 100
a. This index is trading at 5105 and is trying to capture the 5150 mark but it might not happen this week. We believe that this index will fall down to fill its gap at 5000 levels which should be a decent point to enter in this index stocks. The gap should also act as support for this index and if broken below the 5000 levels we could see a renewed sell off in the markets.
3. CNX IT
a. This index too as its peers is trying to touch higher levels but due to global news flow will be beaten down. This index also has a gap at 5775 levels which should act as support and get filled on Monday morning. 5750 should be a good entry point in this index. TCS should be a hot favorite pick
4. Nifty Midcap 50
a. This index is trading at 2691 and is facing still resistance from 2720 -2750 levels. This index can test 2640 – 2650 on the downside and the upside is capped at 2700 / 2720.
5. S&P CNX Nifty
a. This index is trading at 5135 and we believe that the downside should find support at 4900/5050/5100. The upside for this index is capped at 5230 – 5300. High risk traders can short the Nifty at 5135 with a stop at 5160 and a target of 5040.
Trading Stocks Ideas
1. Federal Bank – CMP 341
a. Short for a target of 330 (3% return)
b. Stop loss at 350
2. Hind Copper – CMP 475
a. Short for a target of 457 (4% return)
b. Stop loss at 500
Speculative buy on open on Monday – Unitech around 65 – 68 levels for a target of 72 within the week.
Posted By:
KARTIK GALA
(BUSINESS DEVELOPMENT)
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