=>> Oct Series ended on the bad note

Oct Series ended on the bad note dragging the Index down by almost 4%. Heavy sell in the current week dragged down the Index by 4.4% in the Oct Series. Nifty fell down by almost 4.7%. Smallcap Index lost 3.7% and Midcap closed down marginally by 0.25%. Some of the major lossers were Unitech 25.5%, Idea 27.25%, Punj 22%, Aptech 33%, Relcap 20%. In the gainers list ITC gained 11%, HUL 8.5% and JSPL gained 9%.

Inflation turned higher. Inflation for the week ended 1.51% v/s 1.21% (wow) comparison.

RIL Q2 numbers are down. PAT came at Rs. 3852 CR vs Rs. 4122 Cr (YoY) on Higher Sales.

Yesterday Nifty too good support at the 61.8% retracement levels. Nifty had closed marginally below the 50DMA. Prior opening of the Indian markets, SGX Nifty was trading below 4800 levels down by 75 points. Global markets were too in deep red. US Markets continued shelling out their earlier gains made in the month of Oct. As mentioned in the article dated 1st OCt, that the month of Oct has not been good for the Equity markets and the absurd rally in the Indian markets has to be come to and end. Nifty had come down from 5182 levels to 4749 levels down by 433 points. In the chart we can see that the Nifty have taken good support at the trendline but the RSI is still trending downwards signaling more weakness in the near future. NIfty have also broken down from the Head and Shoulder pattern.

Nifty witnessed huge selling on the expiry day and the closed below 4750 levels. Volumes were high in the markets. F&O turnover again remained above Rs.1 Lac Cr and the total market turnover was Rs 1.43 Lac Cr. F&O counters had a huge rush for the short rollovers. Markets opened in red. Post lunch Bulls tried to cover the markets lost points but in the last 1/2 hour wewap selling, again dragged down the markets. Sensex which was trading down by just 50 points again tanked down in the last hour to almost 250 points, and finally shut its shop at 16052.72 down 231 points. Nifty may fall down to 4679 levels.

In my last article I had given short call on Rel Capital with price tgt of 740 & Maruti of 1431.

Recored volumes in the markets drag down the Indian Equity markets. Hawkish Credit Policy announced by the Governor of RBI too helped the Bears to pull down the markets down by almost 2.00-2.50%. It kept CRR (cash reserve ratio), Repo and Reverse Repo rate unchanged while hiked SLR (statutory liquidity ratio) to 25% from 24%. Also revised the Inflation target to 6.50% from 5% for March 2010. Banks the Reality stocks tumbled down. SBi lost nearly 4.5% and ICICI Bank too lost near 6%. As per the analyst SBI may require additional provising of Rs.3800 CR and ICICI nearly Rs.1600 Cr as they have 50% coverage ratio.
Nifty closed below 4850 levels on the record volumes. Markets recorded the third highest total volumes of Rs1.46 Lakh Cr. And the F&O segment recorded the highest turnover ever. Global markets too turned negative.
Nifty closed below 4850 to make and intra day low of 4829 before closing at 4846.70 down by almost 2.5%. Sensex closed at 16353 down by 387 points or 2.31%. Nifty has fallen down almost 7% from its recent high. As mentioned in my earlier blogs also that the markets are looking week and can come down. nifty will have good support at 4800 levels. In the current session Nifty took support at its 50DMA.

Sell Maruti tgt 1431
Sell Rel Capital tgt 740

Highlights of RBI's Mid-term review of FY10 Annual Policy

KEY MEASURES

* Hikes banks' SLR to 25% of NDTL effective from Nov 7
* CRR, reverse repo, repo rate kept unchanged
* Ups Mar-end WPI inflation estimate to 6.5% with upside bias
* FY10 GDP growth projection unchanged at 6.0% with an upside bias
* Cuts FY10 credit growth projection to 18% from 20% Jul policy
* Cuts FY10 money supply growth estimate to 17% vs 18% earlier
* Cuts FY10 non-food credit growth estimate to 18% from 20%
* Banks' aggregate deposits likely to grow 18% FY10
* Not desirable to hike HTM as it is higher vs SLR
* Scraps refinance window for banks to fund MFs, NBFCs
* Scraps foreign exchange swap facility for banks
* Use of special refinance facilities low

STANCE

* Liquidity situation remained comfortable since Nov
* Hike in SLR not to impact liquidity position of banks
* Third quarter policy review scheduled on Jan 29
* To be prepared for swift, effective response to inflation
* Need to keep vigil on inflation trends
* Need to monitor liquidity situation closely, actively
* To maintain a rate regime supportive of growth process
* Mindful of fundamental commitment to price stability
* Will continue to monitor price situation in entirety
* Will take steps swiftly on evolving macroeconomic conditions
* Definitive indications of econ reverting to growth track
* Focus has shifted to managing recovery from crisis mgmt
* Policy dilemma differs in some aspects from other economies
* India actively confronted with upturn in inflation
* Confronted with rising WPI, "stubbornly" elevated CPI
* Reviving local consumption, investment demand a challenge
* Supply constraints may re-emerge, become "binding"
* India's current account deficit "modest"
* Need to make responsible, time bound fiscal adjustment
* Critical need to "downsize" govt borrow to sustain low rates
* Investment demand pick up crucial for long-term econ prospect
* "Exit" a central issue in "policy matrix"
* Need to reverse expansionary stance
* Current stance is not steady state
* India's Exit debate "qualitatively different" from other economies
* Challenge to support recovery without compromising price stability
* Need careful mgmt of trade-offs to support growth, stability
* Growth drivers "warrant a delayed exit"
* Inflation concerns "call for an early exit"
* "Premature exit will derail the fragile growth"
* "Delayed exit can potentially engender inflation expectation"
* Consulted wide array of stakeholders in policy review run up
* On FY basis, WPI has already risen 5.95%
* Dominant argument to reverse stance due to inflation worry
* Forceful argument for early reversal on liquidity worry
* Liquidity bulge may cause unsustainable asset price build-up
* Capital flows have resumed
* Evidence of excess liquidity feeding through asset prices
* Liquidity overhang could engender inflation expectation
* "Premature tightening will hurt the growth impulses"

GOVERNMENT BORROWING

* Feedback from market showed OMO gave "considerable comfort"
* Current liquidity situation should smoothen rest of govt borrow

INFLATION

* Metals' price fall accentuated gap in CPI-WPI inflation rate
* Interest rates in all markets declined significantly
* Low policy rates transmitted to credit market with a lag
* Rise in equity, easy global finances bode well for investment
* Rabi season critical for food inflation going forward
* Large food stocks may mitigate impact of supply constraint
* See greater volatility in global commodity prices coming yrs
* Extent of CPI inflation fall not as expected
* Inflation conditions not "adequately" reflected in WPI, CPI
* To anchor inflationary expectations, ensure price stability
* Policy conduct to continue to perceive 4.0-4.5% inflation

GROWTH

* Low rainfall to impact kharif season
* Farm output during rabi season critical for supply
* Farm output FY10 seen lower vs year ago
* Industrial output prospects more promising now vs Jul policy

BANKS

* Policy steps since Sep upped liquidity by 5.85 trln rupees
* Banks urged to step up efforts towards credit expansion
* Ups banks' provisioning for realty exposure to 1.0% vs 0.4%
* See wide gap among banks' provisioning coverage ratio
* Advises banks to augment provisioning for NPAs
* Banks must keep at least 70% provision coverage ratio
* Banks must keep 70% coverage ratio by Sep end
* 70% coverage ratio includes floating provisions
* Risk weight on banks exposure to infra NBFCs linked to NBFC rtg
* Banks must hold loans at least 1-yr before securitising
* Originators must retain 10% of securitised loans
* OKs banks to open branches in Tier-3 to Tier-6 cities
* Banks branches in Tier-1, Tier-2 need prior OK
* To issue norms on Basel-II enhancements by Nov end
* Norms on duration gap analysis for asset-liability management Nov
* To issue norms on private, foreign banks' compensation
* To issue draft norms on liquidity risk mgmt Dec end
* To issue norms on banks' stress testing by Jan end
* Panel report on micro, small companies credit guarantee by Dec end
* Reimbursed 64.7% of banks farm loans under debt waiver so far
* To consider BPLR panel recommendations post feedback
* Final norms on corporate bond repos by Nov end
* Cuts limit on export credit finance to 15% vs 50%

MARKET DEVELOPMENT

* To issue norms on NCDs below 1-yr by Nov end
* Norms on NCDs to be similar to commercial papers
* To start plain credit default swaps soon
* To finalise norms on credit swaps post market feedback
* To issue floating rate bonds FY10 as per market appetite
* OKs bourses to start futures in euro/rupee, Yen/rupee
* OKs bourses to start futures in pound sterling/rupee

The last few hours selling in the markets lead the Sensex close below 17000 mark. Nifty closed below its major support level of 5000. In the last few blog i have mentioned that the Markets will witness some selling pressure in the coming days. Nifty after making the recent high of 5181 closed below its 20DMA. Yesterday Nifty closed below its long term trendline marked with BLUE. MACD signal is also turned negative. European markets too fell down nearly 1.5%. Nifty will find good support at 4945 levels.

Markets opened up strong, but the uptrend movement was disrupted. After opening up strong, markets slipped down the red zone. Major Indices remained volatile through the day. Markets witnessed some kind of consolidation. In the last 2 days the Major Indices have rallied almost 4%. Traders remained cautious in the trading day. Most of the heavyweights closed in green.
Global markets were trading in green in the early trades. Dow closed above 10000 marks for the first time since Oct 2008. Asian markets closed almost flat. Volumes in the markets were pretty good. NSE cash segment alone contributed Rs20000Cr.
Nifty closed at 5108 marginally down by 10 points or 0.18%, after making an intraday high of 5152 and low of 5077 levels. BSE closed at 17195, down by only 35 points. IT stocks remained under pressure as the Rupee appreciated to break the 46 level. Telecom stocks continued to be on the selling mode. Nifty took support at the trendline.

Life below 5000 levels???

Going back to the last week’s article., this writer had mentioned that the markets are heavy and will see some downward movement. It was also mentioned that the Nifty Index is finding it difficult to keep its afloat above the magical figure of 5000.

Since the 1st day of the month, markets continued to be choppy. As compared to the Mayhem witnessed in the same month last year, this year it’s not been so serious. But the October month started with a choppy session. The bloody effect continued to hurt the markets. Major Indices corrected nearly 3% on week on week basis. Last week’s liquidity drove Nifty cross 5000 mark and helped Sensex to close 17 months high. FII remained buyers to the tune of US $ 4141 mn during Sep. FII Net bought equities worth US$ 12.5bn on YTD basis compared to a selling of US$ 9.2bn in the same period last year.

Stocks of OIL made its debut on the brousers. Stock closed up positive. This week it was the turn of the Pipavav Shipyard to get listed on the brousers. But as OIL, this IPO listing did not impress the investors. Pipavav which was issued at Rs 58, opened up strong made high of 64.70 in BSE, slipped down to make an intraday low of 53.85 levels. Pipavav after its debut listing closed at 56.80 below its issue price.

This writer had mentioned in the last week’s article that the Markets are trading at a PE of 23, which is at the higher side and we might see some correction. Major Indices closed in red on wow basis. Sensex closed at 16642 down by 2.9% wow basis and Nifty closed down by 2.7% below 4950 mark. Nifty closed at 4945. Small Cap Indices too had the bad week. Indices slipped 2.6%. Midcap Indices continued to enjoy its bubbly time. Midcap managed to keep itself afloat buy closing in green. Tech, Telecom & Motor stocks lead the carnage in the market. After the derating of the telecom sector, stocks had their bad time in the week. Bharti Airtel after the closure of the MTN merger talks corrected 21.4% in the week. Rcom corrected 22%, while Idea slipped down 15% in a week. Telecom stocks could correct some more.

In search or alternative currency of Dollar, forced the Dollar depreciate as compared to other currencies. Rupee made a fresh 13-month high this week. On one side strengthening of the Rupee value to US dollar is good news, but the export and the IT companies fell the other way round. Exporters finding it hard. Rupee had appreciated almost 5-7 % from the levels of 49.2 to almost 46.30 levels. IT stocks faced the heat of the depreciating value of the Dollar, as major revenues are from the export business. IT Index closed down 7.2%. HCL slipped down 12%, while TCS closed down by 11%. Wipro and Infosys closed down by 9.3% & 6.9% respectively. Maruti closed down by 10.7% and Tata Motors 6.5%. FMCG sector outperformed the other Indices by closing higher at 5.8%. HUL had a blast of its time, rallying by 9% while ITC surged 7.3%.Some of the Midcap and the Smallcap stocks that shuttered in the week are Shree Ashtavinayak which tanked nearly 30% in the week. Austral Coke continued its journey down closed down 22%. Alkali Metal too closed 22% down. IT stocks like Satyam, Mindtree & Geodesic slipped down in the range of 9-11%. While Jet airways surged 29%, IRB by 15% and EIH by 14.5%.
After 12 months, RIL announces bonus of 1:1 and a divided of Rs 13 a share. It may be announced to keep the investors invested in the stock on back of the ongoing tussle between the two Ambani brothers. The company is fighting a legal battle over the sale of gas to RNRL. The Supreme Court is schedule to start final hearings in the lawsuit on Oct 20th. RIL stock flared up almost 4% in the opening of the session. But corrected in the latter half of the trading session.
Infosys declared its second Quarterly results. The result was in line with the market expectations. Net sales grew by 3%. Company’s net profit grew by 8%. But the same could not impress the market. Stock closed down almost 1.5% down on the day of the announcement and closed down 6.9% on wow basis.

Trading screen turned red on the first day of the week after the recent pull back seen in the Indian markets to a multi month high. Indian markets swinged on the beats of the Global markets and the recent rally in the Indian equity market. Last weeks close appeared to continued to trend positive for some traders. But writer had informed that there will be correction in the India markets. The first day of the week opened with the bang. Sensex slipped nearly 270 points. Next day the markets slipped negative. Sensex made a low of 16622, but the buying in the late hours helped the Indices cover all its lost glory and the Indices closed in green. On Wednesday Sensex opened in green, but after the mid session slipped in the red territory. The Slipped continued for the rest if the week. Sensex closed down at 16642 down by 200 points of Friday. Nifty closed down 2.6% at 4942 levels well below the magical figure of 5000 levels.

Technically Nifty closed below the long term trendline no. 2. It was clear mentioned in the last article that the MACD indicator has registered a Negative Divergence on the daily chart. RSI had also broken down its long term support trendline. Nifty will continue to face resistance at 5013-5016-5046 levels. Nifty support is at 4905-4894-4856 levels.

FII’s which Net buyers were in the last week, turned out to be Net sellers in the current week. FII’s sold stocks worth Rs. 252 Cr. DII’s too remained sellers to the tune of Rs.970 Cr.

Yesterday Reliance Ind announced bonus 1:1. As expected Ril Ind stock opened up strong with a gain of nearly 3.50 - 4%. Sensex opened up strong nearly 170 points positive. Nifty opened above 5000 levels. Buying in the FMCG, OIL & banking supported the mkts, but the telecom sector continued to face the heat. Bharti Airtel tumbled 6.6%. Rcom slipped nearly 6%. Depreciation in the value of Dollar as compared to Indian Rupee continued. Rupee opened strong at 46.36 levels. Technology continued to be week for another day ahead of the Infosys Q2 numbers and the weakness in the dollar.

Markets remained choppy and volatile for most of the day after opening up strong in the green. Sensex at time was trading higher nearly 180 points, but slipped down in the late hours and closed marginally up by 37 points. Nifty closed at 5002.25 up by 16 points. As mentioned in my last blog that the markets are finding it difficult to sustain at the higher levels. Nifty attracts some selling pressure or profit booking above 5000 levels. RSI is also trending down. But either movement will be too fast as the signal given MACD is still not clear. Volumes have been pretty good in the current week. Yesterday the markets corrected. Nifty took support at the trendline at 4986 levels. Nifty took support at the red trendline.

As mentioned in my last blog that the Indian markets will have some correction in the future. On Monday markets opened in red and closed down nearly 250 points down. Global markets were flat on Tuesday. Indian markets opened in green, but in the early hours fell down to red zone. For most of the day the markets traded down, but the in late hours buying in the frontline stocks help lift the markets. Sensex closed at 16946 up 80 points Nifty closed at 5027 up 25 points. Nifty made in intraday low of 4921 levels. Nifty took support at the 20DMA. Again Nifty has taken support at the trendline. Markets may witness some bounce back from here but according to me the Nifty will again find it difficult to sustain above 5000 levels. FII buying in the Indian markets helped the yesterdays pull back rally. Volumes in the market crossed Rs.1L Cr.
Telecomm stocks had the bad day in the markets. Bharti Airtel fell down by almost 10%. Rcom & Idea too crashed. But buying were seen in the other frontline stocks.

The most terrifying period of the last year started from the month of Sep 2008.Global markets tumbled down like a dead pin, resulting crash in the equity markets. Indian markets too faced the heat. The major indices started falling the most in the month of Sep, after the crash in the month of Jan 2008. This year too was expected to feel some pressure too. But the Indian markets outperformed the other global markets. Markets continued to surge on back of inflow from the international funds. FII remained net buyers for the month.

Liquidity crunch could not find its way in the Indian markets. Money kept on pouring in the Indian markets. All the smart money is pouring to the emerging markets. Two of the Govt owned companies too also made their debut in the Indian stock markets. Companies like NHPC and OIL India raised nearly Rs.338bn ($7bn). NHPC listed above its issue price. But slipped below its issue price within days. After the NHPC’s lackluster listing, OIL India took the markets to give a great surprise by listing with premium of 10% over its issue price of Rs 1,050/-. OIL India closed at Rs.1168 on Thursday. FII mopped up close to $12bn. The markets have taken many traders by surprise as the rally has been accompanied by lower volumes. Retail participation was less.

Nifty crossed the major resistance level of 4800. Nifty crossed the 61.8% retracement levels. Nifty has broken out the ascending triangle formation which indicated the bullish pattern in the markets. High liquidity inflow in the markets helped many Indian companies to raise money. RIL Ind, JP Associates & Suzlon raised money via selling their treasury stocks and promoters stock. These are not the only companies who have taken advantage of a surge in the equity markets. Realty companies have also lined up too raise nearly Rs.14,000 Cr via IPO push. Real Estate companies like, Lodha Developers, Sahara Prime, Emaar MGF, BPTP, Kumar Developers, Sriram properties, Oberoi Const & DB realty have either filled the DRHP with SEBI or planning to file.

These were all the good news, but someone should keep track of the PE levels on which the Indian markets are trading at. Major indices have almost doubled up from the lows that were made in the year 2008. Currently, the Nifty us trading at a PE of 23 times. When the Indices peaked in the year 2008, the PE was nearly 28 times. Looking at the past experience, we have seen that the markets had a healthy correction when the PE is above 20. Inflation too turned positive. Inflation will too be a major point of discussion in the near future.

There is still a mixed view about the revival of the US economy. Many thinks that the US economy is at the lower end of its downtrend while some thinks that there is no revival in the US economy and its on the much more bigger economic crisis ahead. Currently the prime lending rate at nearly 0%. The major problem will be when the Fed starts increasing the rates.

One of the shortest weeks in the Indian trading calendars had started with a Bang. For just only 3 days in the weeks for trading and the following long weekend ahead, most of traders did not wish to take much position at hand, resulting in minute correction in the market. On the first day of the month of Oct, markets closed marginally down in red. But the week on week performance was pretty good. Nifty & Sensex both closed up 2.5% higher than the last week close. Smallcap Index closed higher by 2.1%. Midcap Index closed 1.5% higher. The major contributors in the current weeks rally were the Banking stocks. Bank Index surged by almost 5.4%. Axis bank & ICICI bank were up 10.5%, while SBI closed 3% higher. TCS surged 7.3% after bagging some prestigious orders. Wipro was up 7.2% and Infosys up 4.4%. Over all IT index was up by 4.6%. Capital Goods and Metals surged nearly 2%. Midcap stocks like Chemplast closed higher by 25%. Shree Ashtavinayak after having some blocks in the counter surged 21%. ICICI sold its holding in 3I Infotech and the stock zoomed 17%. Fame after reporting the block deal in the last week continued to be locked in the upper circuit and surged almost 16% again in the current week. India Bulls Securities after raising money from the market surged 13% while Parsvnath was up 17%.

Markets opened up higher after the long week end. Bulls were back in action. FII again poured aggressively in the Indian markets. On the 1st day of the week i.e Tuesday, Nifty closed above its 5000 levels after facing resistance at 5017 levels as mentioned in my last article also and on my blog (www.technicalsvishaldangaich.blogspot.com) also. But the same was broken on the next day. Markets opened with a gap and continued to rise. High of 5087 was made in Nifty. On Wednesday, Nifty closed at 5083 levels. FII remained net buyers to the tune of Rs.1, 000 Cr. Being the last trading day of the week, traders did not wish to take too much position in the markets. Markets remained volatile for most of the day. Nifty closed down marginally by 8 points. Nifty made an intraday high of 5110 levels. As mentioned in my last blog that the Nifty will face resistance at 5117 levels. The Maximum level the Nifty can touch is 5167. Trading above that is very difficult. RSI is also trading in the overbought zone.

Nifty will face resistance at 5117-5137-5167 levels.

FII were net buyers for the week. FII were buyer to the tune of Rs .1700 Cr and DII’s too bought stocks worth Rs.570 Cr.

One of the shortest weeks in the year started with a bang. Markets closed in the green for the 2nd consecutive day. Last day of the month markets surged nearly 1.75%. Nifty crossed the resistance level of 5013 levels and closed above at 5077 up 71 points. Same period in the last year the Global markets meltdown started. Current year the global markets are witnessing sharp rally. US markets surged higher on back of better than expected housing data. FII were net buyers in the last 15 days. Today FII were net buyers for nearly Rs.1074Cr. Liquidity in the markets is driving up the markets.
Nifty will face resistance at 5092-5117-5137 and this trend may continue till maximum 5167 levels.