Morning Bells (08 Oct 12)

Good Morning Friends.

Smile and Silence are two powerful tools. Smile is the way to solve many problems while silence is the way to avoid many problems.

The Govt.’s reforms drive has been powering the rally for the past few sessions and continued till this week except Friday when Nifty was crashed due to wrong order punching by Brokerage house Emkay Global. It has suffered a loss of Rs 51 crore because of the faulty trades executed by one of its dealers on Friday. The brokerage ended up selling Rs 650 crore of Nifty shares, and then had to undo the wrong trades by buying an equivalent amount of shares at higher prices. (Media Reports)

Come on home ground SEBI on Saturday proposed uniform guidelines for all classes of foreign investors, a step aimed at simplifying the investment process for overseas entities and strengthen surveillance over them. With effect from January 1, 2014, FIIs shall be allowed to re-invest during the calendar year to the extent of 50 percent of their debt holdings at the end of the previous calendar year. The utilisation period for government and corporate debt limits will be reduced to 30 days and 60 days, respectively, Sebi said, media reports.

But expert don’t see it as very enthuses because there is not much that will happen that will encourage foreign institutional investors (FIIs).

Well Govt. hadn’t stopped to hitting wickets, after limiting usage of Cooking gas (LPG) now price was today hiked by Rs 11.42 per cylinder following Govt. decision to raise commission paid to the dealers. Petrol and diesel prices too may go up marginally as the Oil Ministry considers raising dealers’ commission by at least 23 paisa and 10 paisa a litre respectively.

Many participant expecting correction for a long but market is driving on reform fuel. Now it’s time to react on corporate earnings and on various growth no.s – GDP, Inflation, IIP, Monsoon etc.

Once again I am not removing these lines on part of global watch since past few M Bells as to me these are most important. On Global front the Euro Zone debt crisis continues to act as a major overhang for the global economy. The US economy too seems to be losing some steam while China too is grappling with a deeper-than-anticipated slowdown

Spain is another worry on global front, Spanish Prime Minister Mariano Rajoy is desperately hoping that solution will emerge and save him from a Catch-22 situation - the pressures of the regional elections in his birthplace of Galicia on October 21 and accepting the bailout package from the ECB at the EU summit in Brussels on October 18. (Report MoneyControl.com)

So once again, October series is full of promises and various actions globally. This is also month of corporate earnings so market will remain full of thrill. On global front any move from China to support its economy will be an added positive, particularly for commodities.

So next stimulus could be from China, Markets are now focusing on whether China will inject more stimuli by way of more infrastructure spending or a rate cut.

MARKET OUTLOOK –

So called correction for which many market participants waiting, a small correction has just taken place on Friday. Now all eyes will be on further correction.

Therefore one needs to watch closely Nifty range of 5825-5850 which has an important resistance. If Nifty failed to close above 5825 in 2 or 3 days then it can go down to 5,650 or even lower on account of correction/profit booking. Well this correction will be good for market and then market can head for upward journey towards 5950 and 6150.

Nothing much to say, now its time to keep some cash on table to re-enter at good level before next move.

Market trend remain buy on dips, so small correction could be used to make fresh entry at lower levels till 5672 is not broken out.

NIFTY –

Nifty is just sustaining its gains, after having a look to OI which is above 2Crore in just first week of fresh series which is point of worry. So one need to be very careful with longs as anytime profit booking can wash out their earnings. So be with strict SL or even tighter SL here onward.

6000CE has highest OI of 67Lacs, while 5800CE is second highest of 64 lacs, interestingly 6100CE also seen addition of 4.5 lac shares. On PE side 57 & 56 both have OI 54 lacs with unwinding & increased OI.

Vix is 16.78 and Nifty PCR 1.08.

Resistance 5782 - 5825 – 5850 - 5868 and Supports 5706 – 5690 – 5672

Opening seems muted with slightly positive sentiment.

STOCK OUTLOOK -

(Stock outlook needs to watch stock movement carefully and then one can bet after having a look, I tried to put related info which can decide stock move either side.)

My top pick for next 3 months are – Cement, Infra & Banks – yes not blindly to any stock, in select good stocks only.

KFA - Troubled Kingfisher Airlines would have to submit a detailed plan to aviation regulator DGCA before they are allowed to resume flights, Civil Aviation Minister Ajit Singh said y'day. Kingfisher had declared a lockout on September 28 till Oct 04, now cancelling its entire flight schedule and extended lockout till Oct 12.

Brent crude - can clipped to 105$ and could remain in the range 105-111 for Oct. series.

Banks – Banks always follow trends on both side, so if market decline further bank will lead decline.

IT – Investors are entering to mid-cap IT industries on expectation that it will outperform in near future while large cap seen some pressure y’day while IT heavyweight seems under pressure.

Infy – will announce its QE3 no. on 12 th and all eye will be on Infy. Previous experience was under pressure breath but this time it can break those myth by remain in 100 pt range either side.

Insurance and Pharma – FII now eying on further reforms in sectors like insurance and pharma, so next big earnings can come into both sector.

OPEN CALLS –

(Be with strict SL and don’t hesitate to book profit)

TM 300CE - @3.75 for TG 4.5-5+ SL 2.25

DhanBank - @55 for TG 70 SL 45 (Mid Term bet)

Jindal Photo - @145 for TG 160+ SL 130 (Mid Term bet)

Nifty 5900CE - @31 for TG 55+ SL 15

Today’s MG Mantra –

Since all are talking for correction and big crocos can take advantage so it would be wise to keep strict SL for all your longs. Keep eye on 5825-5850 on upside while 5690 on downside.

Have a Profitable day – MG

Disclaimer – I have shared my view as per my limited knowledge; please use your own skills before making a wise decision.