Morning Bells (11 Oct 12)

Good Morning Friends.

Instead of repeated errors you love yourself most, then why you hatred to someone just for a single mistake. Strange but true!

Great circus, this is the one of the great happenings in market through one can learn a lot. FII is playing with our market like football, it’s like passing the ball and retailers are just chasing the ball. In most of events I found DII on sell counter, why? I think they are under great fear and secondly may be they are getting chance to get exit after 3 years from long stuck positions would have been made in mid-caps around 2010 and in blue chip during first half of 2012.

In another great drama by world’s top economies was S&P’s downgrade of 7 Indian Banks. Global market were falling since past 3 days but instead of weak global cues our market was showing strength, in fact y’day global market closed deep RED while we closed in GREEN and that was a weak sign for world’s top two economy ahead of general election, so here was the point to put pressure on India market. S&P's Ratings agency said on Wednesday that it had affirmed its 'BBB-' long-term and 'A-3' short-term issuer credit ratings on seven PSU banks in India and outlook on all in long-term rating remain negative, great surprise, what has happened after current reforms which made S&P to downgrade PSU Banks is a subject of debate, so either Govt. did something wrong with reforms or is there something which PSU banks are hiding.

Well, the banks are:  

1. Bank of India (BOI; BBB-/Negative/A-3)

2. IDBI Bank Ltd. (IDBI; foreign currency BBB-/Negative/A-3)

3. Indian Overseas Bank (IOB; BBB-/Negative/A-3)

4. Indian Bank (BBB-/Negative/A-3)

5. State Bank of India (SBI; BBB-/Negative/A-3)

6. Syndicate Bank (BBB-/Negative/A-3)

7. Union Bank of India (UBI; BBB-/Negative/A-3)

And this wasn’t sufficient, S&P also told that India's rating downgrade is likely if growth prospects dim and there is a significant chance of cutting India's credit rating in the future. The International Monetary Fund (IMF) has already slashed its 2012 GDP growth forecast for India, to 4.9% in 2012 from 6.1% this week. 

S&P says that insurance and pension reforms will be challenging to push through in the Parliament amid stiff political resistance to those measures. Also, implementation of the recently announced reform initiatives is going to be crucial for the Indian government in a bid to lift growth, S&P says. (Report, IIFL.com)

Well market ended RED on Wednesday as market participants preferred to trim their positions on weak global cues and quarterly earning sessions ahead which seems jittery. Beside S&P, auto sector also seen dip as the auto industry body SIAM's decision to sharply cut domestic passenger car sales growth forecast also weighed on the sentiment. SIAM said y’day that car sales growth in India will remain miserable.

In realty & infra - DLF, IDFC, Reliance Infra were top looser. Realty shares tanked after Arvind Kejriwal released more evidence of links between DLF, Haryana government and Robert Vadra.

Another news on taxation - If the government accepts the recommendations of the Shome panel to tax indirect transfer of Indian assets prospectively, it may take a hit of roughly Rs. 400bn, reports said.

MARKET OUTLOOK –

So if all going wrong, and the way market is behaving seems this expiry seems difficult for F&O traders as next week seems very much tricky and highly volatile.

So now only hope with corporate earnings and on various growth no.s – GDP, Inflation, IIP, Monsoon etc. Some more expectations from Govt. for few more reforms coming in the next few weeks.

As expected market remained in 50 pts range and defended its strong support level 5640-5650. Now next big support seems at 5585 if Nifty fails to defend this level then 5500 & 5425 is on card.

So in short after great defeat for last 2 months now bears are teaming up for party. Short term trend remain sell on rise till 5754 is not taken out on closing basis.

NIFTY –

As told y’da 5640-5650 had good support Nifty tried to break but somehow it got defend.

Oct. series future OI stand on 2.56 Cr. Unwinding aprx 7 lacs meaning short did some profit booking. Now 5800CE has highest OI on long side while 5500PE has highest OI of 65 Lacs. So OI giving sense it may be difficult for bull to take out 5700 in short term if not taken out this week.

Vix has fell down to 16.83 and PCR comes to 0.94.

Resistance comes to 5676 – 5701 -5716 and Supports comes to 5640 – 5620 – 5597 - 5585.

So once again it’s giving sense for choppy market and range bound session of 50 pits. Opening seems muted one and market remains under pressure in first half, though what is happening (as mentioned football) then today also it could be game to reduce premium i.e. by showing some positive strength.

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. (Yes need to wait for Nifty settlement)

Steel - India is the 4th largest steel producer in the world and will soon be the second largest, said Union Steel Minister, Beni Prasad Verma on addressing the 46th Annual Conference of World Steel Association here y’day. The capacity is all set to increase further as Steel plants in both public and private sectors have taken up expansion and modernization programs, added Mr. Verma.

Tata Steel – Has achieved best ever quarterly saleable steel production at 1.87 million tonnes (MT) in the July-September period, in Q2 of the last fiscal, it had achieved 1.71 MT of the saleable steel output, official said in a report on Tuesday.

Power Sector - Another sign of reform has given by PM Mr. Singh in his inaugural address at the International Seminar on Energy Access in New Delhi y’dday, Mr. Singh said Govt has to provide 24x7 Electricity to all in 5 years.

Banks – PSU Banks may see some pressure but I don’t think they will have steep fall. After Nifty settlement they will regain its winning streak.

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 - is expected to post a 24.9 percent rise in profit in the quarter ended September 30 to Rs 2,380 crore, according to Thomson Reuters data, so mood is a bit upbeat now.

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 if Nifty shows strength)

TM 300CE - @3.75 for TG 4.5-5+ SL 2.25 (Made high 4.55, hope you would have booked profit)

DhanBank - @55 for TG 70 SL 45

Jindal Photo - @145 for TG 160+ SL 130

Today’s MG Mantra –

Market seems volatile on worry of global economy and remains under pressure. So in short term one can sell on rise and can sit with cash for right time to enter.

Have a Profitable day – MG

Disclaimer – I have shared my view as per my limited knowledge; please use your own skills to make a wise decision before execution of trade.