Weekly outlook on Indian Stocks Market

Weekly Outlook for Indian Stock Markets - 20th July to 24th July 2009

2009-07-19T17:37:00.000-07:00

Friday's Review
Indian stock markets had a great run on Friday with benchmark indices going up by yet another 3-4%. Among the sectors, Bank Nifty was up by 4.5%. Leading the pack was ICICI Bank which has again roared back to 750 Rs levels. Overall, the entire week has been a memorable one for the markets as it covered up all the losses that it had made during the last week. Further upside from hereon would largely dependent upon monsoon and the global factors.

Apple and Yahoo are due to announce their results on Tuesday which would impact our markets on Wednesday. Crude Inventories data is also due on Wednesday. Crude has again picked up on Friday and trading at around 63 USD per barrel. In domestic markets, no major cap will be announcing their results on Monday / Tuesday, so no major cues other than monsoon.
FII View
FIIs on Friday were net buyers, albeit not the drivers of the rally. In the cash segment, FIIs were net buyers by around 150 crores. The buying, though a positive one, but not so great in the current rally. It seems valuations are the ones that stopping them to participate.

In the Index Futures segment, FIIs made net purchases of 700 crores, adding about 25000 new contracts. In the Index Options segment, FIIs were net sellers by about 330 crores, adding 30000 new contracts. The Open Interest for 4300 Put has increased the maximum by 45% on day-to-day basis. Similarly, the Open Interest for 4300 Call has decreased by 20%, primarily on account of profit-booking.

The above cues indicate range bound markets for the first few days of the markets. Traders can go short on Nifty around 4425 with stop-losses @ 4460 and target levels of 4350.

Stocks Ideas
Satyam Computers and Jp Hydro hit their target prices on Friday, giving gains of around 15% from recommendation levels. The current level do not justify the new recommendations, except for one which is given below:

Scrip Name - Buy/Sell - Recommended Price - Target Price - Stop Loss Price
Infosys Tech - Buy - 1825 - 1930 - 1770

Wishing you a great trading day ahead!!

Weekly Outlook on Indian Stock Markets - 29th June to 3rd July 2009

2009-06-28T10:59:00.000-07:00

Last Week Highlights
The last week marked the expiry of June series. The June series was a lukewarm with indices remained range-bound and closing around May levels itself. During early June, indices once looked to break major psycological levels, but then later sucumbed to profit booking.

Now budget is just right at the corner, and markets are again gaining strength on hopes that new government would take positive measures towards reviving the growth. On Friday, we have seen strong buying by domestic and foreign institutions and this is likely to continue during the next week as well.

The sectors that really look promising is the Banking and Power. Banking stocks have been seeing good accumulation over the last few days, especially mid-sized PSUs like Andhra Bank, Central Bank, UCO Bank, etc. Similarly, Power stocks, except NTPC (as it is fighting legal battle with Reliance), are also seeing some good appreciation in last few days, including PTC, PFC, Power Grid and Reliance Power.

FII View
FII on Friday have been strong buyers in the derivatives segment. In the cash segment, Foreign Institutions purchased stocks worth 550 crores. Domestic Institutions, too, were net buyers by around 330 crores.

In the Index futures segment, FIIs were net buyers of about 1100 crores. Nifty and Bank Nifty have seen some long positions being created. In the Index Options segment, FIIs were again net buyers by 370 crores. Several out-of-money calls seen some good Open Interest build-up and premiums for those have also increased, indicating positive sentiments from the institutions.

In the stocks futures segment though, FIIs were net sellers by 285 crores. It might be done to hedge their index long positions.

The cues indicate further upside in the markets from the current levels, which can be considered as pre-budget rally. It is advised to the traders to keep booking profits at the higher levels and simultaneusly, buy out-of-money call options to hedge their positions on the long side. We might see profit booking coming in the markets after the budget.

Stock Views
On Friday, buy recommendations for Network18 and IVRCL Infra saw their target prices being hit. Those who have not booked profits in IVRCL can remain keep their positions open, by taking target price (364) as stop-loss. We expect this stock to remain bullish till budget.

Few new stock ideas for the week are:

Scrip Name - Buy/Sell - Recommended Price - Target Price - Stop Loss Price
M&M - Buy - 695 - 740 - 684
ABAN - Buy - 895 - 945 - 854
Moserbear - Buy - 93 - 102 - 86

Options Strategy
Buy Nifty 4200Put, 4700 Call and Sell two 3800Puts, 3600 Put - the combined strategy would give losses if Nifty remains range-bound between 4200 and 4600 levels. It will give unlimited profits, if Nifty goes above 4800. On the downside, it comes into losses, if Nifty goes below 3600.

The strategy can be viewed by clicking here...

Wishing you a great trading week ahead!!

Weekly Outlook for Indian Stock Markets - 15th - 19th June 2009

2009-06-14T11:40:00.000-07:00

Past Week Summary
The past week has again been a good one for the stock markets with benchmark indices gaining for the 14th consecutive week. It has been a total turnaround for the equities worldwide and Indian markets have been an out performer.

Among the stocks, IT and Pharmaceuticals sectors have outperformed, while, Banking sector has been a laggard one for the indices. At the current levels, valuations have become a major concern for various companies and hence, we have been seeing selling supply coming in various stocks at the upper levels.

Outlook for next week
The next week can again be a range-bound for the Indian stock markets due to roll-overs. We might see some marginal build up on short side, in the anticipation on budget in July, though, the traders it should not be a major one, after seeing the fate of shorters post elections outcome.

The next week might see some rally or consolidation happening in less volatile stocks / defensive like NTPC, Cipla, Sun Pharma, and Power Grid. These stocks have not seen a meteoritic rise in the bull run and it might be their time now to show some upsurge. Also, these stocks look reasonable in terms of valuations than the other stocks.

FII View
FIIs View have been a positive one for last few months while Domestic Institutions have been booking profits at the current levels. On Friday as well, FIIs were net buyers of around 470 crores in the cash segment.

In the derivatives space, FIIs were net sellers of around 230 crores in the Index Futures segment, reducing their positions by around 1700 contracts. In the July futures, we have seen some Open Interest build-up, which indicates that roll-over has started happening in July futures contract.

In the Index Options, FIIs were net sellers of mere 9 crores, adding around 17000 new contracts. If we break this figure in terms of amount, there has been a decline of around 42 crores, which indicates some positions build-up happened in higher strike price options. (The value calculated for Option contracts is equal to strike price * Lot Size).

In the stock futures segment, Foreign Institutional Investors have been net buyers of 340 crores, reducing their positions by around 5600 contracts. This figure again indicates some short-covering / roll over happening in this segment.

The overall trend indicates volatile sessions for the markets in the days ahead. Bulls might attempt to break psychological levels of 16000 on Sensex and 5000 on Nifty, but it might not be an easy task to do after seeing a strong supply coming in the markets at higher levels.

Hence, traders are advised to go short on Nifty around 4660 levels with a stop-loss at 4750 and cover their position around 4475. Similarly, traders can go long on Nifty around 4475 with stop-loss at 4400 and target of around 4600.

Stocks Ideas
Stocks Ideas discussed in last few days have remained intact. Two new stock ideas that look interesting are as follows:

Scrip Name - Buy/Sell - Recommended Price - Target Price - Stop Loss Price
GVKPIL - Buy - 40.15 - 44 - 36
HCC - Sell -108 - 96 - 115

Options Strategies
1) Buy IFCI 55 Call and Sell 2 IFCI 60 Calls - this strategy would give profit, if IFCI remains below 60. It is currently trading at 51 Rs. One may sell one 60 call immediately, if IFCI moves above 60 Rs. The maximum profit at Friday's closing price is around 90000 Rs. while maximum loss should not be more than 40000 Rs.

2) Buy Nifty 4700 Call and Sell 2 Nifty 4900 Calls and 2 Nifty 5000 Calls - this strategy will lead to maximum profit of around 10000 Rs according to Friday's closing prices. On the other side, it will start giving losses once Nifty crosses 5100 mark. One may move out of this strategy after booking losses, if Nifty crosses 5050 mark.

Wishing you a great week ahead!!

Weekly Outlook for Indian stock markets - 4th to 8th May 2009

2009-05-03T06:46:00.001-07:00

April Highlights
The April series has been exceptionally well for the Indian stock markets. The benchmark indices - Nifty and Sensex have risen up by more than 10% each during last month. Another encouraging indicator for the markets have been continuous buying by FIIs since last month. They have now become "Net Buyers" for 2009, which should be bring positive sentiments into Indian equities as of now.

The last week has been a truncated one for the Indian stock markets. We remained closed on Thursday and Friday and hence, have missed the rally that other Asian markets went through on Thursday. This might help the Indian stock markets in better opening on Monday than its Asian peers.

The next week outlook
Despite some encouraging cues, there are few worrying signs as well. DLF results, announced on Friday, have come as a shocker with its net profit declining by 93% year-on-year basis. This migh put pressure on other real-estate stocks as well.

Another worrying factor was the exports-imports data released on Friday. The exports shrank by 33%, while imports fell down by 32%. Though both exports and imports fall is syncronized, but it indicates the slow down in global trade. This might put pressure on IT and other export-oriented stocks.

Technically speaking, we may see a range-bound market in the coming days. Markets are likely to open gap-up on Monday, but may face its first resistance at around 3580. The next resistance level comes moderate at 3615-3630. Nifty then, face strong resistance at 3670, which could act as a show-stopper.

On the support side, the first support level comes at around 3360-3380. If this level is breached, the next support level comes at 3280-3300 which could provide strong support to the falling bourses.

FII View
Foreign Institutional Investors (FII) are trading heavily in derivatives markets since last few days, but are hedging their poitions quite well. If they are buying in Index futures, they are hedging their positions by selling Calls or buying Puts (to cover for the downside).

Hence, my view is the range-bound market till outcome of elections. One can build long positions when Nifty comes down in 3300 range, with a stop-loss at around 3250. Similarly on the upside, one can build short-positions around 3570-3600 on Nifty, with a stop loss around 3670.

Stock Ideas
On friday, Renuka Sugars and Austral Coke have hit its stop-loss targets, while ABG Shipyard, Tata Elxsi and M&M hitting its target prices. Few more stock ideas are given below:

Scrip Name - Buy/Sell - Recommended Price - Target Price - Stop Loss Price
Dish TV - Buy - 32.5 - 35 - 29.65
Balaji Telefilms - Buy - 43.75 - 54 - 39.65
Adlabs Films - Sell - 225 - 212 - 238
Sterlite Industries - Buy - 415 - 450 - 375
Aban Offshore - Sell - 417 - 365 - 438
Allahabad Bank - Sell - 53 - 50.65 - 55.45
Aurobindo Pharma - Sell - 223 - 209 - 235
Ballarpur Industries - Sell - 16.2 - 15.25 - 16.75
Bank of India - Sell - 241 - 231 - 251

Wishing you a great trading week ahead!!

Weekly Outlook for Indian Stock Markets - 27th to 29th April 2009

2009-04-26T01:44:00.001-07:00

Strong Last Week
The last week has been a decent one for Indian equity markets with benchmark indices went up by around 3%. Psycologically, the indices are able to break through the key resistance levels, which provide encouragement to the bulls for further upside.

The results announced during last week were not so encouraging. While Wipro had pretty good set of numbers, Reliance disappointed. ICICI Bank also came up with poor set of numbers on Saturday. It's net profit down by more than 35% during the year. NPAs have also increased to 2.09% from 1.49% last year. These negative factors may put pressure on the markets during next week.

Expiry and Results might bring volatility during next week
Traders are advised to remain cautious during the next week, as April series is going to expire as well. On the technical side, Nifty may again attempt to test 3500-3515 levels on Monday / Tuesday. If Nifty actually able to breach this level on closing basis for atleast two trading days, then we might see further upside to 3670-3700 levels. Hence, one is advised to speculate on the up side, only if this level is breached on Nifty.

On the downside, markets are expected to test 3380 levels. If this level is breached, then the next strong support level comes at 3300.

Scored 3 Sixes but lost 1 wicket
Out of the stocks discussed, Adlabs Films, Kingfisher Airlines and Binani Cements are able to hit their target prices, while, Century Textiles hit its stop-loss level. Few more stocks ideas are given below:

Scrip Name - Buy / Sell - Recommended Price - Target Price - Stop Loss Price
IDBI - Buy - 68 - 60.5 - 76
Century Textiles - Sell - 247 - 218 - 264
Zee Limited - Sell - 115 - 106 - 123
Austral - Sell - 303 - 280 - 325
Karnataka Bank - Buy - 87 - 95 - 81
Rama Newsprint - Buy - 17 - 20.3 - 14.65
Aditya Birla Nuvo (Long Term)- Buy - 570 - 745 - 425
Dishman Pharma - Buy - 107.5 - 215 - 84

On the Options side, one can take the following strategy for this month's expiry:

Sell Nifty 3200 Call and 3600 Put - this is a strategy in which we are selling deep in-the-money call and put options. This strategy will give maximum profit of 750 Rs per pair if Nifty expires in 3200-3615 range. This strategy will start giving losses, if it breaches this range on either side. Ths strategy is for those who are willing to take risks.

Wishing you a great trading week ahead!!

Weekly Outlook for Indian Stock Markets - 20th April to 24th April 2009

2009-04-19T09:52:00.000-07:00

Last Week Roundup
The last week had been a pretty range-bound for the markets, with benchmark indices gaining just 1% each. The markets have been facing tough resistance around the current levels and hence, one needs to tread cautiously from now on. The traders need to follow strict target prices / stop-loss prices on the open positions.

Key events for next week
There would be flurry of results that are expected to be announced during next week. TCS and Axis Bank will be announcing their annual results on Monday. Tuesday will see HCL Tech, Hero Honda, Rolta and Ultratech coming up with their annual results. These results could bring about the next trigger for the stock markets, either on the upside or on the downside.

Globally, the next week will bring some key events from US. On 22^nd April, we will see Crude Inventories data coming from US. On 23^rd, we will see release of initial claims data and home sales data from US government.

Battle of Bs’ – Bulls and Bears
The next week could see a break-out, either on the upside or the downside. The momentum that markets had built over last few weeks is finally losing its steam. It can be seen from the trading behavior on Thursday and Friday when markets have seen some serious profit booking coming at higher levels. Also, elections are just around the corner and everyone might like to sit on some cash before the elections outcome, which means we may see the up-side remaining cap at around the current levels.

Though, the encouraging factor remains the strong institutional buying coming from foreign players, which indicates that they are hopeful about a possible turnaround in the Indian economy in next 6-12 months. Most of this buying is coming from Asia specific hedge funds, which pulled out the cash from the emerging economies, in the aftermath of Lehman collapse. These funds are now using the huge cash surplus to invest in the Asian economies and broken-down stocks and hence, chances do exist that these funds may actually able to bring about next wave of buying coming into the Indian stocks.

Stock Views
The banking sector has seen some good buying coming throughout the last week. The Bank Nifty index has given the returns of more than 5% during the last week, while the benchmark Nifty index has given the returns of mere 1%. This trend is likely to continue during the next week as well.

Some stocks from mid-cap IT space have also seen some good open-interest build-up, especially in HCL Infosys that has seen the rise in Open Interest of more than 450%. One can buy some mid-cap IT stocks with a trading perspective.

On the other side, we might see some profit booking coming in those stocks that have risen tremendously in last few weeks and hence, advise to stay out of such stocks for a while.

Some stock views that I would like to share are given below:

Scrip Name – Buy / Sell – Recommended Price – Target Price – Stop Loss Price
Core Projects – Sell – 101 – 90.5 – 108.65
Skumarsynf – Sell – 29.15 – 26.5 – 30.5
Patni – Buy – 163 – 175 – 152
Nav Bharat Ventures- Sell – 187 – 173 – 197.65
ABG Shipyard – Buy – 116.5 – 125 – 107.75
BEML – Sell – 480 – 455 – 506
Cummins India – Sell – 212 – 195 – 222
Dish TV – Buy – 29 – 31- 27
Federal Bank – Buy – 173 – 182 – 166
GDL – Buy – 73.5 – 79 – 68
HCL Infosys – Buy – 85 – 97 – 78.35
Hindustan Zinc – Sell – 505 – 477 – 527
Indian Bank – Buy – 115 – 123 – 106
SREINTFIN – Buy – 38.05 – 42 – 34

Wishing you a great week ahead!!

Weekly Outlook for Indian Stock Markets - 13th April to 17th April 2009

2009-04-12T08:05:00.000-07:00

Just few encouraging statements from US financial space and stock markets rallied as if nothing happened... The global markets, including Dalal Street have rallied almost 30% in last two months.

But the real test is just about to begin when the renewed optimism will be tested against the actual financial results due to be announced this month. US companies will see their first quarter results of this financial year, whilst, Indian companies will announce their annual results for 2007-08. These results will determine the financial health of the companies.

The changes in accounting standards in USA might also help companies in displaying healthier balance sheet than what it is actually at the moment. It is widely speculated that comanies may be allowed to defer the notional losses on the open liabilities / assets that they are carrying on the balance sheet for next few months.

Hence, on the backdrop of these events, we might see increase in volatility in the global week in the coming week(s). The coming week will see 1st quarter results announcements by GE (17th), Citi Group (17th), Intel (14th), Johnson and Johnson (14th) in US. The good and bad of these results will have an impact on the markets.

Similarly, in India, Infosys is due to announce the results on Wednesday (15th). The results will give an indication on how badly IT sector has been hit by the problems in US. Also, its guidance for the coming quarter / year will determine the prospects of IT sector in the coming quarters.

Hero Honda will announce its annual result on Friday and it is expected to announce the healthy results for this year. This company has been exception in Auto sector, due to its presence in robust rural sector.

The just concluded week has been a good one for us as well. Most of our stocks views have gone well. On Friday, SCI, Dish TV, have hit their target levels. The long term target for Jain Irrigation System has also hit its target price. Few new stock views are given below:

Scrip Name - Buy / Sell - Recommended Price - Target Price - Stop Loss Price
JP Hydro - Sell - 41.45 - 37 - 44.65
Yes Bank - Buy - 62 - 71 - 53
Meghmani Organics - Buy - 8.75 - 9.85 - 7.6
Jet Airways - Sell - 224 - 203 - 241.5
ABB - Sell - 463 - 438 - 480
Amtek Auto - Buy - 93 - 103 - 83
CESC - Buy - 248 - 264 - 229
GTL Infra - Sell - 31.3 - 29.55 - 32.55
IRB - Buy - 103.5 - 113.5 - 97

Few Options strategies for the coming week are as follows:
1. Sell Ashok Leyland 20 Call and Buy 22.5 Call - this is a bear spread strategy which is taken with a view that Ashok Leyland may trip on profit-booking this week.

2. Sell GVKPIL 27.5 Call and Buy 30 Call - this is again a bear spread strategy which is taken with a view that this stock may come down on account of profit booking.

3. Sell ICICI Bank 380 Put and 430 Call - this strategy is taken with a view that stock may move within a range in the coming days. This will be short term strategy in which one can move out, once you get 4-5 Rs. per pair. One can move out with loss if scrip able to cross 450 mark on downside / 350 Rs. on downside.

Wishing you a great trading week ahead!!!

Weekly Outlook for Indian Stock Markets - 06th April to 10th April, 2009

2009-04-05T17:28:00.000-07:00

The Indian Stock Markets along with global markets have performed reasonably well over the last few days. And if recent events to go by, the "feel-good" factor is expected to continue.

G-20 meeting held last week was a positive one. The countries have pledged $1 trillion into the global financial system which has further assayued the fear of global recession. Also, most of the pain is now out in the street, including possible GM bankruptcy. Hence, the downside in the market looks limited.

But what about the upside? Will we see Dow able to conquer the 10,000 feet again or would we see Nifty pulling back to 4000 levels in the coming weeks? The answer is "doubtful". The journey ahead should not be easy. The way markets have discounted the bad news, it has also digested the good news coming in last few days. The markets will now require continuous flow of better economic data and some positive steps taken by the governments and central banks worldwide.

In India, the coming week is also a truncated one with exchanged closed on Tuesday and Friday. Hence, we are left with only three working days this week. We may see markets correcting a bit this week. It has almost been a up-side journey since last few weeks and hence, institutions may take some time to book profits during the coming week, especially before the scheduled general elections.

On the technical front, we may see Nifty facing stiff resistance at 3250-3275 on the upside. If Nifty manages to breach this level on closing basis, then next resistance comes at 3340-3350 levels. On the downside, we may see Nifty finding support at 3115-3125. The next support level would be in the range of 3060-3080.

The last day of previous week was full of triggers. Bajaj-Auto, Bank of India, Axis Bank, Aptech, Amtek Auto, Jain Irrigations Systems, ABG Shipyard have hit their target levels, while Bajaj Hindustan, Ashok Leyland, Alok Textiles and Balaji Telefilms have hit their stop losses.Two new stock views that I would like to share are:

Scrip Name - Buy / Sell - Recommended Rate - Target Price - Stop Loss Price
ABB - Sell - 452 - 415 - 467
Aditya Birla Nuvo - Sell - 470 - 440 - 481.

On the options side, one can take a collar strategy in Nifty. The strategy is as follows:

1. Buy Nifty 3100 Call and 3200 Put. Sell 3300 Call and 3000 Put - this strategy should be taken in such manner that Buy Premium should be greater than Sell Premium by 170 points. This strategy gives you a loss of Rs. 3750 if Nifty ends up between 3050-3250. Anything above 3250 or below 3050 would yield you profit of Rs. 1250. Here, the risk is greater than reward but the range of risk is only 200 points which should not be much seeing the volatility in the markets for last few days.

2. Sell Nifty 3100 Call and Buy Nifty 3200 Put - this strategy would give you a maximum profit of Rs. 5700 Rs. if Nifty ends up below 3100 on expiry. On the reverse side, it will give you maximum loss of Rs. 4200 if Nifty manages to close above 3300.

Wishing you a great trading week ahead!!

Weekly Outlook for Indian Stock Markets - 30th March to 3rd April 2009

2009-03-29T09:18:00.002-07:00

The Indian stock markets have shown tremendous surge during the last week. The benchmark indices have gained by more than 10%, taking cues from the global markets. Economic indicators, too played a crucial part. Inflation has come down to almost 0%. IIP data for the month of February is also encouraging which may boost the equity markets in the coming week.

Another positive indicator is FII data. FIIs have been net buyers throughout the last week, which indicates the increase in risk appetite among the FII fraternity. The next week could be range-bound with markets trying to consolidate during the current levels. Nifty may oscillate between 3000-3150 levels. Nifty has strong support at 2960 levels, which if breached, could take it down to 2850. On the upper side, Nifty may attempt to touch 3200 levels, but may find strong resistance at 3170.

Few stock views for next week is as follows:

Scrip Name - Buy / Sell - Recommendation Price - Target Price - Stop Loss Price
3iInfotech - Buy - 32 - 34 - 30.5
ABB - Sell - 420 - 390 - 437
ABG Shipyard - Buy - 80 - 86 - 77
Aptech - Buy - 82 - 87 - 77
Bajaj Hind - Sell - 48 - 43 - 50.25
Bata India - Sell - 103.5 - 95 - 108
Canara Bank - Sell - 168 - 161 - 172
Crompton Greaves - Sell - 118 - 111 -121
Escorts - Sell - 38 - 35 - 40
Indus Ind Bank - Sell - 34.5 - 32.5 - 35.5

Few Options trading strategies are given below:

1. Sell Bank Nifty for 4500 Call and 4000 Put for total premium at 11250 Rs. Maximum Profit of Rs. 11250 and maximum Loss will be unlimited. Both are out of the money options and ideal for those who expect markets to remain range-bound between 3800 to 4700 (Curr Value- 4406). The idea is to earn the time value of the contracts which will decrease in the coming days.

2. Sell Bharti Airtel 660 Call for premium of Rs. 7750. Maximum Profit of Rs. 7750 and maximum loss will be unlimited. It is an out-of-money call option, expecting Bharti to fall in the coming days. Stop Loss can be taken at 25 Rs. per lot, which could lead to maximum loss of s. 4500.

3. Buy Cairns India 180 Put for premium of Rs. 11250. Maximum Profit unlimited while maximum loss will be Rs. 11250. It is an out-of-money Put option, anticipating Cairns India to fall down in the coming week.

4. Buy ICICI Bank 380 Put and Sell 360 Put for total premium of Rs. 5600. Maximum profit will be Rs. 8560 while maximum loss will be Rs. 5500. It is a Bear Spread strategy by trading in both are out-of-money Put options, anticipating ICICI bank to come down in the coming week.

5. Buy IFCI 17.5 Put and 25 Call for total premium of Rs. 19700. Maximum Profit will be unlimited and maximum loss will be Rs. 19700. Both are deep out-of-money options, anticipating the stock to remain volatile in the coming days.

6. Sell Nifty 3400 Call and Buy Nifty 3500 Call - Maximum Profit will be Rs. 800 and maximum loss will be Rs. 5800. Again a bear spread by trading in both out-of-money call options. Doesn't expect Nifty to cross beyond 3400 levels in this expiry.

Wishing you a great week ahead!!

Weekly Outlook for Indian Equity markets - 23rd to 27th March 2009

2009-03-22T08:58:00.000-07:00

General Elections hold the key
The last week has been a good one for Indian equity markets. The benchmark indices have gained by more than 3% each, led primarily by Banking and Auto space. Mid-cap index too showed great deal of activity with many stocks gained by more than 50% within this week.

But the given rally is not due to any fundamental shift in the economy. It is primarily due to positive global cues in last fortnight and short-covering seen in the markets after re-testing the October lows.

The next fortnight could be critical for the equities worldwide. Whether the current rally consolidates around the current levels and then moves forward or it again fizzles out like what happen in the typical bear market, is to be seen.

Fundamentally, Indian stock markets are in disarray. General Elections are due in April and May, which might keep the markets within a range, even if global markets show some strength. On the contrary though, weakness in the global markets may actually accentuate the pain in the stock markets. Hence, investors may remain in sidelines till the time elections get over. The clean majority for either Congress or BJP would give strength to the markets, whilst third-front majority could be a troubling sign for the markets.

The coming week could be range-bound
The coming week may see Indian equity markets consolidating around the current levels. For Nifty, support again lies at 2680-2700, whilst it may show very strong resistance at 2950-3000 levels. Typically for Sensex, the support lies at 8500 levels whilst it may show resistance around 10000 levels. Also the expiry is due this week, which may further put markets under pressure.

Sector-wise, Finance and auto sectors may see some profit-booking coming during the week. One can pick some quality stocks in this space at lower-levels. HDFC Bank is always a pick at Rs. 800 levels. Maruti is also a good stock to buy around Rs. 680 with a long-term perspective.

Stocks Pick
Last week, Mcleod Russell, Akruti and Aptech Technologies have given us the maximum profit, whilst Aditya Birla Nuvo and PFC have given us the maximum loss.

Let’s look at some picks for the current week:

Scrip Name – Buy / Sell – Recommended Price – Target Price – Stop Loss Price
Canara Bank – Buy – 146 – 153 – 141
SREI Infrastructure Finance – Buy – 32 – 41 – 27
Jet Airways – Sell – 161 – 140 – 168

The coming week marks the expiry for the current month. Hence, it would be better to wait till Wednesday before discussing the Options segment.

Wishing you a great week ahead!!

Weekly Outlook for Indian Stock Markets - 16th to 20th March 2009

2009-03-15T07:45:00.001-07:00

The power of the powerful can be judged from one of the events occured last week. Just one statement by Citibank CEO Vikram Pandit stating that Citibank is profitable for last two months brought a rally in the stock markets worldwide.

Does it indicate the end of the problem that US or the entire world is facing? No, it only indicates that future might not be as bad as the present. The main culprit behind the current situation are the financial institutions based in USA. When one of these institutions have shown profits, it brings along the hope in the world fraternity that things may be coming into normal. But we must not forget that these are only hopes. Whether these contain some substance is yet to be seen.

Skeptical experts still see pain in the economy. The optimism in the economy is at all-time low throughout the world. The jobs have been lost, companies have been reeling under the pressure of over-leverage, consumers in any part of the world have been cutting their spendings and concentrating more on savings which has further stranded the global trade and hence health of the economies.

Another cause of concern is the worsening situation in Eastern Europe countries. Recent IMF report suggested that these countries are facing serious debt and have asked for immediate help from International Monetary Fund (IMF).

Anyways, lets come back to the coming week. The coming week may carry the momentum in the first part of the week, which can push the Indian bourses to previous support levels. Nifty may again attempt to breach 2800 which can provide tough resistance. This level would indicate whether the given rally has some substance or not.

One can buy 2700 Nifty Put along with 2750 Nifty Call. This would cost the premium of 95 Rs, which could be maximum loss of around 5000 Rs per pair. If Nifty actually breaches 2800 levels, then it would go up to 2900 and this would bring the profits of atleast 5000 Rs. On the contrary, if Nifty fails to cross 2800, then we may see Nifty again attempt to go below 2600 and it may bring the profit of around 4000 Rs.

Few stock specific strategies for the coming week are given below:

Scrip - Buy / Sell - Target Price - Stop Loss Price
Indotech Transformers - Buy - 310 - 279
Kalindee Rail Nirmaan - Buy - 100 - 80
South Indian Bank - Buy - 50 - 42
Cummins India - Buy - 165 - 146
Hind Dorr Oliver - Buy - 38 - 31
Akruti City - Sell - 1025 - 1255 (One can also attempt to buy Akruti Options Put for 1100 for Rs. 10.)
LITL - Sell - 125 - 115
Jindal Irrigation Systems - Buy - 375 - 330

Wishing you a great week ahead!!!

Weekly Outlook for Indian Stock Markets - 24th Feb to 27th Feb, 2009

2009-02-22T19:06:00.000-08:00

Introspection
The past week has not been good for the Indian equity markets. First, the lukewarm interim budget and then the renewed concerns of recession in US pulled down the Indian bourses. Both Nifty and Sensex ended the week, down approximately 7%.

Now, how's the road ahead looking like… With elections coming by, the government may not take any major policy decisions, and hence we might not see any support coming from the diplomatic front. There are certain reports in the media regarding yet another fuel price cut, but it might not help the companies much as the prices have already reduced substantially from higher levels.

At the financial front, Reserve Bank of India (RBI) is expected to cut the benchmark rates by another 50 bps to 100 bps, as inflation is already down to less than 4%. RBI may also force the banks to reduce the lending rates which will further ease the pressure from the companies and may stimulate the consumption cycle.

Globally, things are bad, which we all have understood and know by now. It took us more than an year to accept this fact. Now, further negative news may only trigger immediate downside, but it seems limited now. Dow is already sitting at six year low. It may go another 500 points, but fear of further downside is a more of a pessimistic view.

The ailing financial institutions have already go bankrupt and the government in US will not allow further destruction at the economic front. It is now actively putting in the money in the companies, buying stakes in troubled companies and ensuring that conditions do not deteriorate much.

Hence, this is my personal view that we are now in second phase of bear market where we may see "consolidation" happening for sometime. After about 13 months of destruction, we may see another 6 months of consolidation where we may see some negative news flowing in form of recession / bankruptcies or some positive announcements coming from the governments and central banks to stimulate the economy. The stock markets too may follow these events and can remain range-bound.

Amidst such scenario, an investor must learn to be patient and remain invested for at least one year. The traders should trade with strict stop-losses and must book profits at regular intervals.

Sectors to look out for in long term…
In this year of stimulation, the focus will be on Infrastructure and related sectors. The government would be spending money to prop up the infrastructure and invite the global players to invest in Indian economy. In the just concluded Bull cycle, the foreign players often complained of poor infrastructure in the country. The government will surely have a look at this weakness and improve the same as well. Hence, one may see some buying coming in Infrastructure stocks like GMR Infra, Reliance Infrastructure, JP Associates, etc.

Also the related sectors like Infrastructure Finance, Cement, Steel, etc may also benefit from the same. Hence, one can also invest in stocks like IDFC, IFCI, Ambuja Cements, ACC, Tata Steel, etc.

Another sector which is to look out for is Energy and Power sectors, which has now become a priority for every government. Stocks like NTPC, Power Grid, and Reliance Power can also be bought with long term perspective.

The week ahead…
The coming week could again be a white-wash for the Indian stock markets, if provisional data is to go by. Derivative figures on Friday indicate a huge build up on sell-side by FIIs. There have been increase of Open Positions of more than 80000 in Index Futures side and net sell of more than 900 crores, which indicate that FIIs are anticipating further downside in the Indian stock markets.

The level of 2700 is crucial for Nifty. If Nifty closes below this level and remain there for 2-3 days, then we may see bear cycle coming in Indian markets with maximum upside of 2800 and downside of at least October lows of 2300. The chances of market bouncing back from these levels are also high.

Hence, one can safely adopt a strategy for buying 2600 Put and 2800 Call for March. The maximum risk according to Friday's closing will be around 8000 Rs. per lot-pair, whilst maximum gains are unlimited.

On the stocks side, stocks from Infra, Pharmaceuticals, and Cement looks strong. One can buy these sectors in the coming week.

Wishing you a great week ahead!!!!

Weekly Outlook for Indian stock Markets - 16th to 20th Feb, 2009

2009-02-15T17:17:00.000-08:00

Union Budget holds the key for next three months

After weeks of anticipation and speculation, the B-day has come. With elections coming by and economy facing global head winds, this budget holds the key. Almost every sector wants some favor from the government to help itself sustain in the current turbulent conditions, especially the real estate & infrastructure and export-oriented sectors. Another crucial aspect is that this will be the last chance for the government to encourage the economy. Once elections are announced in a weeks’ time, then the government might not be able to take any major policy decision / provide a stimulus package. All the other measures will be through RBI only till elections get over.

Amidst such scenario, this year’s Union Budget holds significance and may decide the movement of the markets for next 3-4 months. Hence, investors should attempt to resist the temptation that may come in near future and it is prudent to wait till the outcome of elections to invest. Traders should move with strict stop-losses and target prices to ensure they are able to book profits / losses at regular intervals.

Promising sectors for future
Some of the sectors that look promising are the infrastructure, cement, engineering and IT sector. These sectors have seen the worst and now available at attractive valuations. Also, these sectors could be the pillar of Indian economy on its revival course. Also, the successive governments will be emphasizing on spending the revenues in improving the Infrastructure, which would help Infrastructure, Engineering and Cement sector. Information Technology has been the sunshine sector of the Indian economy and expected to receive government’s continuous support. Hence, few stocks that can be picked from long term perspective are IDFC, Aditya Birla Nuvo, BHEL, Punj Lloyd, Infosys, Mphasis.

Short-term Views
Out of last few recommendations, Gujarat NRE Coke has hits its Stop Loss, whilst, Amtek Auto and Welspun Industries have hit their target levels. Few stock specific recommendations for the coming week is as follows.

Scrip Name – Buy / Sell – Target Price / Stop Loss
Kamat Hotel – Sell – 30 / 37
Hotel Leela – Buy – 23 / 17.5
Reliance Capital – Sell – 410/468
Sintex – Buy – 125 / 108
Sterlite – Buy – 205 / 265
Radico Khaitan – Buy – 74 / 68
Akruti – Sell – 1010 / 1085

Some Option based strategies are as follows. All are Buy specific strategies:

Sterlite 280 Call with Bharti Airtel 620 Put Or,
ICICI Bank 460 Call with Bharti Airtel 620 Put
Unitech 32.5 Call with Unitech 30 Put

Wishing you a great week ahead!

Weekly Outlook for Indian Stock Markets - 9th Feb to 13th Feb 2009

2009-02-08T07:45:00.000-08:00

Learning from the past
Let’s dwell the past see what happened in last one year… Since January 2008, the stock markets have seen one of its worst phases. Every month, we went down by few percentage points and finally October seen the worst when stock markets fell down by almost 50% in one month.

Since then, we have seen some kind of support levels coming in the markets worldwide. For instance, we have seen strong support levels between 7500-7800. We have seen Dow Jones rebounding from these levels at least 4 times since November. Similarly, we have seen strong institutional support coming in Sensex in 8000-9000 range. Even the worst quarterly results and Satyam fiasco failed to break these support levels.

Another trend that we have seen in Indian stock markets is the formation of upper support levels creating after every correction. During the first fall in October, we saw strong support coming in 2300 levels in Nifty and 7800 in Sensex. The next test came in November when markets after coming down to 2550, rebounded again to 2800. The next fall in December took markets down to 2650 and from those levels rebounded to 3100. In January when Satyam episode rocked the markets, markets went down to 2700 and from thereon, we again saw markets rebounded back.

This formation of upper levels at 2300 à 2550 à 2650 à 2700 are good indications for the markets… But these are only indications!!! As an investor / trader, we must watch these levels closely and one can safely go long till the time these indicators go false.

The purpose behind this discussion is to observe the institutional response in each correction and formulating a strategy. The above discussion indicates that we can go long as far as this trend remains true.

Last week indicators
The fag end of last week had seen markets again finding good support at around 2750-2800 Nifty levels. The hopes of Stimulus package in USA and possible RBI cuts have again given strength to the markets. This trend may continue during the next week and we may see Nifty again attempting to breach 3000 mark. Amidst such scenario, one can go long safely on Nifty with a Stop Loss of 2750. Option traders can buy 2800 Call and Sell 3000 Call with maximum profit of Rs. 8000 on each lot-pair and maximum loss of Rs. 4300.

Few Trading Strategies
Scrip – Buy / Sell –Target Price / Stop Loss
Syndicate Bank – Buy –70 / 56
Noida Toll – Buy – 26 / 22
GTL – Buy – 235 / 208
Indotech Transformers – Buy – 315 / 280
Mcleod Russell – Buy – 55 / 45
Ruchi Soya – Sell – 19.5 / 24.5
Finolex Cables – Sell – 18 / 22
KS Oils – Sell – 38 / 45
United Phosphorus – Buy – 105 / 89
GVK PIL – Buy – 21 / 17
Vijaya Bank – Buy – 31 / 27
Ashapur Minerals – Buy – 21.4 / 18.5
Dr Reddy – Buy – 469 / 427
Gujarat NRE Coke – Sell – 21.5 / 24

Wishing you a great week ahead!!!

Weekly Oulook for Indian Stock Markets - 2nd Feb to 6th Feb 2009

2009-02-01T08:08:00.000-08:00

The last week had seen January expiry, which ended rather smoothly. It was widely speculated that the month of January may see re-touching new lows, since the Q3 results were expected to come as worse for the companies.

Fundamentally though, the results announced by the companies were not bad. The companies are still reporting profits, though, not as good as the last quarter or year. The only real areas of concerns are those companies which have taken leverage on their balance sheet, for instance, Unitech and Tata Motors. Both the companies are facing serious credit crunch at the moment. Tata Motors has the strong backing of Tata group of companies but Unitech only hope of survival is the funding from PE firms which may help the company from the immediate cash crunch. But long-term scope of the company remains weak.

The February series is expected to do well. Though I may sound optimistic, but my view suggest that markets may touch new highs for last three months i.e. Nifty around 3250-3300. Similarly, for the Sensex, we may see the range of 10500-11000.

If we look at some of the previous data, strong delivery based buying is seen in Banking stocks, especially in PSU banks. The recent cut announced by SBI will trigger a fresh war in the banking sector. This will surely prop up the markets when they open on Monday. At this juncture, one can buy mid-sized PSU banks like Bank of India, Dena Bank, Allahabad Bank. The traders can hedge their positions by selling the Bankex or Bank Nifty future or buying their Puts of Strike Prices of around 10% lower than the spot price.

Another sector that looks interesting is the Information Technology space. HCL technologies has bounced back from 100-105 Rs twice. We may see an upside in this stock till around 130. One can put a stop-loss of around 105 Rs. One can also buy Infosys Technologies and TCS at the current levels.

The long-term investors with a horizon of around 1-2 years can buy frontline IT and Bank stocks. But they should not invest more than 30% of their intended portfolio. In IT sector, Infosys and TCS remain a good bet for long term. Whilst in the banking sector, SBI and HDFC Bank could be a better choice.

Among the last week recommendations, Era Infrastructure, MIC and State Bank have touched their targets. The other recommendations remain intact. Few recommendations for the coming week are mentioned below:

Scrip Name – Buy / Sell - Target price / Stop Loss
Ruchi Soya – Sell – 19.5/24.35
Axis Bank – Buy – 446/413
Finolex Cables – Sell – 18/22
KS Oils – Sell – 38/45
Rolta – Sell – 81/102
Nifty – Buy – 3110/2700
Nifty CA 3100 – Buy – 30 / No stop loss

Wishing you a great week ahead!!!

Weekly Outlook for Indian Stock Markets - 26th Jan to 30th Jan 2009

2009-01-26T07:54:00.001-08:00

The first month of the year 2009 is coming to an end. Technically though, the month looked set to close in a range bound territory, but fundamentally things have changed on ground, after Ramalinga Raju confessions about Satyam.

Stock markets, which were attempting to form a base, got the unexpected jolt and made the investors wary again. The situation is so grim that any investor doesn’t know whether the company where is putting his money is actually worth the same or not. Whether the results they have shown are authentic or not? Whether the auditors who stamped the balance sheets are paid beneath the table or not? Fundamentally, investors’ faith has been shaken pretty badly.

Some positive aspects of this problem are the steps taken by the SEBI. For instance, SEBI is now planning to put an independent auditor to verify the financial statements of any company listed on the bourses. Also, the regulator has made mandatory for the companies to disclose the promoters’ shares which are pledged with any financial institution. The shares of all such companies will surely be hammered by the investors. We have already seen one victim in the form of United Spirits.

Amidst such scenario, it is advised to remain prudent and stay away from the markets. The traders should strictly follow the “Stop-Loss and Target” method. The Long Term investors will now need to add another filter in their strategy called “Strong Corporate Governance’. For instance, companies like Infosys now emerge as the safer bet due to its strong operating margins and transparent way of working. It strengthens the faith of institutional and retail investors who think Information Technology (IT) is the sector to look out for in the future.

About the stocks that can be picked for trading purpose are from Infrastructure pack. These stocks are fundamentally better than real-estate stocks and look close to an intermediate bottom, especially in Mid cap space. One can pick “Era Infrastructure”, “GTL Infrastructure” “IRB Infrastructure”. Few other stocks that look strong are MIC, State Bank of India, Sterling Biotech, Mcleod Russell.

Given below are some trading strategies with their target price and stop loss:

Scrip Name – Buy / Sell - Target price / Stop Loss
Era Infra – Buy – 72/67
GTL – Buy – 235/208
IRB – Buy – 125/100
MIC – Buy – 25/19
Sterling Biotech – Buy - 167/152
Mcleod Russell – Buy – 55/45
State Bank – Buy-1100/1020
Indotech Transformers – Buy – 310/284

Long term investors can buy IRB, GTL, Indotech Transformers, out of the above lot.

Wishing you a great week ahead.

Weekly Outlook for Indian Stock Markets - 19th Jan to 23rd Jan 2009

2009-01-18T08:04:00.000-08:00

The last week has once again concluded un-conclusive. The markets were clearly lacking direction and slowly platform is getting set for another fierce battle between the bulls and the bears.

The quarterly results are so far good. The strong numbers posted by HDFC Bank and Infosys have re-ignited the faith among the bulls that things are not so bad at the fundamental level. Similarly, bears are closely watching the events occurring in fragile global economy. Filing of bankruptcy by Nortel Networks, splitting of Citi group were the major blows for the bulls in last one week. It is also widely speculated that once dust around Obama regime settle down, bears may again attempt to gain hold over the markets. Amidst such scenario, volatility is likely to increase in the coming days. Hence, traders must keep strict stop-losses to prevent sharp losses in their portfolio.

Long-term investors must keep a hold the temptation for a while. Obama hopes are yet to turn into a major action. He is having loads of problems in its kitty and how he deals with it, will decide the final outcome of the markets. Also, elections in India are round the corner as well, As of now, neither of the two parties hold the clear chance of attaining majority. The mixed government could further strain our growth. Hence, long term investors can wait for a while or invest partially. It is better to keep the cash for further downside, if problem in USA or India escalates.

Let’s look at some of the trading opportunities below:

Scrip – Buy/Sell – Recommended Price – Target / Stop Loss

WIPRO – Sell – 245 – 215/255
UNIPHOS - Buy – 107 -120/98
RECLTD – Buy – 77 – 83/73
STER – Buy – 261 – 295/245
SESAGOA – Buy – 73 – 83/68
INDIACEM – Buy – 105-115/97
RENUKA – Buy – 65 – 73/61
GTLINFRA – Buy – 29 – 32/28
ERAINFRA – Buy – 69 – 72/67
RADICO – Buy – 69 – 74/65
ASHOKLEY – Buy – 14.5 – 16/13.5
GAMMONIND – Buy – 77 – 83/74
BALRAMCHIN – Sell – 55 – 47/59
AMBUJACEM – Buy – 71 – 78/67

Wishing you a great week ahead!!

2009-01-18T07:57:00.001-08:00

The last week has once again concluded un-conclusive. The markets were clearly lacking direction and slowly platform is getting set for another fierce battle between the bulls and the bears.

The quarterly results are so far good. The strong numbers posted by HDFC Bank and Infosys have re-ignited the faith among the bulls that things are not so bad at the fundamental level. Similarly, bears are closely watching the events occurring in fragile global economy. Filing of bankruptcy by Nortel Networks, splitting of Citi group were the major blows for the bulls in last one week. It is also widely speculated that once dust around Obama regime settle down, bears may again attempt to gain hold over the markets. Amidst such scenario, volatility is likely to increase in the coming days. Hence, traders must keep strict stop-losses to prevent sharp losses in their portfolio.

Long-term investors must keep a hold the temptation for a while. Obama hopes are yet to turn into a major action. He is having loads of problems in its kitty and how he deals with it, will decide the final outcome of the markets. Also, elections in India are round the corner as well, As of now, neither of the two parties hold the clear chance of attaining majority. The mixed government could further strain our growth. Hence, long term investors can wait for a while or invest partially. It is better to keep the cash for further downside, if problem in USA or India escalates.

Let’s look at some of the trading opportunities below:

Scrip – Buy/Sell – Recommended Price – Target / Stop Loss
WIPRO – Sell – 245 – 215/255
UNIPHOS - Buy – 107 -120/98
RECLTD – Buy – 77 – 83/73
STER – Buy – 261 – 295/245
SESAGOA – Buy – 73 – 83/68
INDIACEM – Buy – 105-115/97
RENUKA – Buy – 65 – 73/61
GTLINFRA – Buy – 29 – 32/28
ERAINFRA – Buy – 69 – 72/67
RADICO – Buy – 69 – 74/65
ASHOKLEY – Buy – 14.5 – 16/13.5
GAMMONIND – Buy – 77 – 83/74
BALRAMCHIN – Sell – 55 – 47/59
AMBUJACEM – Buy – 71 – 78/67

Wishing you a great week ahead!!

2008-11-23T07:34:00.001-08:00

Weekly Introspection
The bloodbath on the Wall Street continues. First it was the turn of financial giants like AIG, Lehman Brothers, Washington Mutual, Merrill Lynch and many more that either became nationalized or were taken over by another financial institution. Now, it is the turn of Automobile players like General Motors, Ford, and Chrysler who are now knocking the doors of the Government and the Federal Reserve to bail them out of bankruptcy.

Amidst such uncertainty, financial markets could continue to remain volatile. Hence, investors should remain vigil and prepare to remain invested for long term in case markets behave contrary.

The markets look oversold at the moment. Almost every trader has taken position on the short-side on account of threats prevalent in the world markets. Similarly, the long-term investors remain on the sidelines, anticipating more fall in the equities during the days ahead. The combination of both the factors is making the market vulnerable and weak. Thus, even a marginal selling pressure results in complete collapse of markets during various days.

This has been happening for last two months and taken the markets on the over-sold territory. Hence, we may see a sudden buying in the markets, in the form of short-covering by FIIs, as we have seen late Friday in our Indian stock markets.

Trading Strategy
It is vitally important that as a trader don’t take one side view of the markets, say experts. Try to build positions on both sides of the markets and wait for the one-side movement to take place. The international factors will keep the markets volatile. Any bad news on General Motors / Citibank side could lead to free fall in the markets. On the contrary, policies actions in US and India will keep giving the markets hope on the recovery side. Markets have already started factoring in RBI rate cut, which can now come any time. Inflation figures also look encouraging in the coming weeks. Similarly, US government may announce some concrete steps to step up the confidence level in the financial system, which is badly shaken due to sudden collapse in the US banking system.

If you are a trader who trade in Options, try to take a closer Call option and far Put Options for the current week. Chances of recovery are high in this week of expiry, after continuous downtrend seen in the week, passed by. One of the Options strategies that can be adopted is to buy Nifty 3000Call and 2300Put for December. 3000Call comes at the premium of about 100-110 Rs. 2300Put comes at the premium of about 80 Rs. Thus, the total outflow comes out to be Rs.200.

Now, let’s suppose bad news on Citibank comes during the week. In this scenario, markets may go down till 2300-2400 levels. In this scenario, 2300Put could trade at around 220-230 Rs. One can sell Put at that time and take Call premium as profit.

On the contrary, let’s suppose RBI announces rate cut. We have already seen short-covering coming into the markets. The combination of both these factors could take markets up to 3000-3100 levels. Under this scenario, 3000Call could give a premium of 220-250 Rs. One can sell Call and take Put premium as profit.

Investing Strategy
On the long-term play, there are many good stories that are available at take-away prices. The most attractive sector is “Power” sector. Stocks like Powergrid, Reliance Power, NTPC, and PTC are trading at attractive levels and can be bought by those who believe in India growth story. On the Infrastructure front, stocks like GMR Infra, IDFC (financial institution that lends to Infrastructure companies), IRB infra, and L&T look an attractive buy.

The base of future India growth story will be in the hands of Power and Infrastructure sectors. Without both of these, India can’t hope to become a developed nation in future and hence, we may see encouraging steps taken by coming government towards these sectors.

The third and fourth most attractive sectors are “Information Technology” and “Telecom”. IT companies have accumulated huge funds reserve in the past, thanks to robust demand for outsourcing. This will now help them roll over this rough patch and one may see many of them consolidating through various acquisitions.

Telecom sector is another sector which is based on India growth story. The telecom sector is going through the consolidation phase and is an ideal sector for long-term.

Wishing you a great week of investing!!!

Weekly Outlook for Indian Stock Markets - 24th to 28th November, 2008

2008-11-15T02:49:00.000-08:00

The sub-prime crisis is no less than Tsunami. It has swept every country, every continent, every company that dared to touch, left alone those who attempt to ride it.

The early victims were the financial institutions who were directly involved in the mortgages business in US. Then came those financial institutions across Europe and Asia who bought boxes of exotic sub-prime mortgages, pasted with AAA credit ratings on them.

And now, this tsunami is taking its toll on almost every sector- linked directly or indirectly with it. It seems the next on the target is Auto Industry. GM bankruptcy news is getting louder with each passing day. Ford is feared to follow soon as well. If these two companies go bankrupt, it will be a huge setback for the US economy and for the world as well.

Amidst such gloomy atmosphere, there are some positive news as well. Warren Buffet, the world’s greatest investor, has shown his faith in US economy. His company, Berkshire Hathaway, has bought stakes in various companies. The ongoing financial crisis has brought together every economy across West and East together to tacke it. Also, there are talks about making stringent guidelines and regulations which will be common across all countries and hence, in the long term will build a road path for global free trade.

Isn’t “Bright Day come after a Dark Night??”

Inflation close to RBI comfort levels
RBI, in its Aug Monetary policy, had talked about 5-6% inflation by March-end. The current financial crisis has helped RBI in this regard. The global slowdown, which pulled down the crude prices, has helped in cooling off the inflation. Good Kharif crop has also helped in taming the food product prices across country.

The provisional figures for Inflation for the first week of November came at 8.98%, down by almost 2% from the preceding week. This will now encourage RBI to shift its priority to growth. It is now expected to cut both CRR and Reverse Repo rates in the coming weeks to stimulate the growth.

But consistent FII outflows are a concern ...
The FIIs have been consistently pulling out money from the equities. After the October mayhem which saw indices tumbling more than 40%, November has so far sober. The selling continues but intensity is much less. Nonetheless, it remains a concern, since FIIs are still net sellers for this month as well. Thus, markets are expected to remain range-bound this month as well. At every rise, we may see FIIs selling to take cash out from equities.

And that will put pressure on Re ...
Rupee has been under severe pressure for last few months due to consistent FII outflows from the markets. RBI, at its end, is trying its best to stem the Re depreciation. It has cut the CRR rates by 250 bps, cut reverse repo rates, reduce SLR to 24%, which has released more than 1 lakh crores rupees into the financial system, yet the pressure on Re remains intact.

Long-term story is still buoyant
India’s concerns are largely external. The problems in global economy have restricted the tremendous inflows which it was enjoying until last year. Fiscal Deficit, which rose for the first two quarters on account of high crude prices, are now expected to reduce for the remaining quarters since crude has fallen down considerably since then.

The concern regarding high growth will remain, till the time global economic conditions revive. Yet, our economy is expected to grow by 5-6%, as compared to negative growth rates expected in Europe and US.

Stocks at attractive valuations...
The price-earnings ratio for Sensex companies has reached single-digits, which makes them a compelling buy for long-term. IT companies like Infosys, TCS, Wipro, Mphasis are at long-term buying levels.

Another sector that can be bought is the telecom sector. Telecom companies like Bharti, Idea, RCOM have high cash reserves ratios, which enables them continue with high CAPEX plans. Also, the sector is continue to enjoy favor among consumers as they move into rural pockets of India, which is seeing a bit of revival on the back of good monsoons and loan waiver this year.

But the coming week may see another meltdown...
The coming week is expected to see another meltdown, on account of concerns regarding GM bankruptcy. Another negative trigger could be lack of strong steps taken during G-20 nation summit, called upon in Washington to discuss the ongoing financial crisis.

If no concrete decisions come this week, then we might see another round of selling coming into the markets worldwide.

And providing opportunities to buy quality stocks...
As discussed above, IT stocks like Infosys, Wipro, Mphasis can be bought at every correction. Similarly, telecom stocks like Bharti, RCOM, Idea can also be accumulated. A mid-cap stock, worth mentioning, is Karuturi Networks. The stock has fallen down to Rs. 7 from Rs. 23 in September. Yet the stock has seen FII shareholding increased to 37% from 34% a quarter back.

An interesting trading strategy is to buy 2500 Put and 3000 Calls. The accumulated premium will be around 150 and has the potential to give you more, once it takes a definite turn.

Wishing you a great week of investing!!!

2008-11-03T08:24:00.000-08:00

Remote-controlled Indian markets
For last few weeks or months rather, we have seen a great deal of uncertainty and unexpectedness coming into the Indian stock markets. During the days, when markets across the world collapse, we usually see Indian markets outperforming. On the contrary though, during the good days in global markets, we see muted response from Indian stock markets.

The last week trading carried both the instances. Monday morning has seen markets across the globe collapsing one after another on account of recessionary fears. Asian markets, including India, were down by more than 10% at one point before we see a strong buying support coming into Indian markets at lower levels and markets finally closed down by just 2% down, while the peers closed down by more than 10%.

On the flip side, the Indian markets gave a muted response on Wednesday, when Asia made a strong recovery on the back of tremendous rally in US markets overnight. The Indian markets closed down just a percentage up, while the other Asian markets were up by more than 8%.

What are the reasons behind such behavior? Is our markets totally governed by few institutions, who at will, can change the direction at any given day or we have started to run ahead of the curve?

The former has a strong case, since FIIs have been ruling our markets for last few years. If they sell, the markets fall. During the days, they don’t sell or do cherry picking, the markets go up. Currently, our Domestic Institutions and Life Insurance companies are not strong enough to compete with Foreign Institutions. Hence, a long term policy must be envisaged by the government to promote the equity route through Mutual Funds route and life insurances. Also, the young generation which doesn’t have any financial cushion in the form of pension, can be encouraged to save for longer term through equity route, since the best returns that any mode of investments can provide is the equity, provided it is done with knowledge and with a long term horizon.

RBI Rate Cut
Let’s come back to the stock markets. RBI has announced three major policy decisions on Saturday which will bring cheers to the banks and the stock markets. First, it has reduced the CRR ratio by 100 bps to 6%. Thus, it has provided around additional liquidity of 40000 crores Rs into the financial system. Secondly, it has decreased the repo rate by 50 bps. This step would ensure that banks can now borrow from RBI at lower rates, hence relieving them from desperate liquidity crunch.

Third step is the reduction of SLR (Statutory Liquidity Ratio) by 100 bps to 24%. SLR is the percentage of total funds that banks need to keep in the form of liquid instruments like Cash, Government bonds, and other safe mode of investments. It is said that the high SLR ratio in Indian Banking System saved the domestic banks from the sub-prime mess, since they never left with enough funds to invest in exotic overseas instruments after fulfilling the domestic needs. Now, RBI has reduced the SLR ratio to help banks tide over the extra-ordinary liquidity crunch, which was evident from the fact that Call Money rates shot to 22% in Inter-bank lending on Friday.

Strengthened Global Markets
The bulls worldwide have shown tremendous come back during the last week. The Dow Jones and Nasdaq have seen the biggest weekly gains since 1974 during the last week bull run. This also helped the Indian markets making a recovery of more than 14% during last week, despite some disappointing quarterly numbers.

For Indian stock markets, this would come as a big relief, since the fear of global recession and redemption pressure on hedge funds were putting the selling pressure on stocks. The stronger global markets will help in rebuilding the investors’ faith in equities and one might see less selling pressure on the equities than before.

US Recession
The fear of US recession is now clear in sight. Earlier, there were only reports of forthcoming recession but now the data about jobs, consumer spending, Inflation has clearly suggested that recession has finally arrived on US shores.

And it seems like a long path of consolidation for US before it can really stand up and start spending. First, the US people need to clear their outstanding debts on credit cards, homes, personal loans, before they can again storm the markets and hence for spending, hence boosting the other economies. Thus, it would be good that US exporting economies must now learn to live in an era of lower growth and lower inflation as well.

Economies Delinking
Till now, USA was driving the economies worldwide through exhaustive consumer spending and almost every ship moved towards US shores. But housing bubble burst has put brakes on the relentless, rather reckless spending. This may now force emerging economies like India, China or Brazil to look out for alternative grounds to sustain their growth rate. The first target could be Europe, which will now see more attention in the Sales and marketing Division of big corporate residing in Asia.

Another scenario which is emerging out is the bilateral trade agreements between countries. Every country exports things that it carries and imports things that it lacks. For instance, India has IT expertise that no other country has. Similarly, India doesn’t have sufficient Oil. Now, India may try signing bilateral agreements with Middle-East countries to push their IT into their regions and in return, buy Oil from these countries. This will help both the economies to grow together. If this indeed happens, would end the US monopoly in global trade and will ensure, more sustainable and long term growth for various countries.

Nervous Stock Markets
The stock markets, though, have been trying to revive, may continue to remain nervous due to various uncertain factors like US recession, sub-prime impact, increased raw materials cost, etc. Hence, one may continue to see the volatility prevalent in the market for some more time.

In Indian stock markets, the sector that may outperform in the longer term is the Information Technology sector. The sector was among the early ones to get the beating due to rich valuations that the companies had been enjoying. But things have changed now and IT stocks look attractive now.

The biggest advantage with IT companies have been the strong business model, they carry. The companies like Infosys or TCS may face some quarters of slowdown but are most likely to recover from it. These companies are sitting rich on cash and also they have the required capability and the expertise to survive this slowdown.

Also, we have seen many IT companies diversifying themselves across regions as well as domains. The US is no longer an attractive destination to work with. Similarly, BFSI domain (Banking and Finance) is not the only domain to serve with. Undoubtly, it will take some time to diversify, but once it happens, we will see rich valuations coming back again into this sector.

Book Profits at regular Intervals
It is said that “Markets behave irrational before it becomes rational again. The only problem is that they remain irrational for days more than you can remain solvent”.

Hence, one is advised to book profits and losses at regular intervals. Do not try to emulate Warren Buffet or George Soros. These guys have ample money to remain sleepy for longer time duration that I or you can remain. Hence, if you bought something a week back when Nifty was at 2200, the time to book partial profits is today.

Wishing you a great period of investing!!!
Sayonara

Weekly Outlook for The Indian Stock Markets - 21st September to 26th September

2008-09-21T18:32:00.000-07:00

Volatile last week
The last week had been a phenomenal for the stocks markets worldwide including India. It would have been terrible, had not emergency steps taken by US government given a new lease of life to the stock markets. Otherwise, the remaining week saw just one side movement and that is downwards.

Though Indian markets looked resilient at times. Nifty which went down almost to 3799 on Thursday came back strongly to close the day at 4050 and then went up by another 200 points on Friday to close at 4250 mark.

But again the concerns for the markets are real and grave. Where would markets be drifting to in the future? Will US survive the financial turmoil created by its own? Will Indian economy, which has been otherwise quite resilient will be affected greatly by the global financial mess. And amidst such hazy atmosphere, what should investors like you and me do???

Come; let us review the events that have shaken the global financial space and its possible impact on the markets. Also, let’s look at the steps taken by the governments to overcome those events.

Collapse of Wall Street Giants
The fear of Lehman bankruptcy started surfacing after Bear Sterns collapse. But somehow everyone was silent about it on the street. And hence, when it happens, the fear changed to panic all across the Wall Street. Within hours of Lehman collapse, we have seen some of the quickest reactions by the companies on the Wall Street to prevent themselves of becoming the next victim– Merrill Lynch merger with Bank of America, AIG 88 Billion US$ bailout by the Fed, Morgan Stanley hectic searching for the soul mate to get itself merged.

The immediate impact of Lehman Brothers was felt on those stocks where it has direct and indirect investments. For instance, it has invested extensively in the projects of real-estate companies like DLF, Unitech, etc. The shares of both these companies have almost collapsed in last one week. Though, there has been no indication of any liquidation in investments by Merrill Lynch. But Morgan Stanley has sold the stake of around 3000 crore in last one week to other financial institutions, mostly to Deutsche Securities and Goldman Sachs.

The impact of this event could be felt on growth, since these companies have been the easy source of funds for many who are looking to expand themselves. Also, the boost in equities came due to extensive buying and selling by the Wall Street giants. After the collapse of many, merger by some and survival of few, the equities will continue to suffer in the near future, till the time new companies take over their place.

The party seems over on the Wall Street.

Liquidity Crunch
Aftermath of Lehman collapse, the banks refused to lend and borrow in the money market, fearing that who will collapse next. This led to severe dearth of funds and overnight bank rates increased exponentially. During these times, the central banks across the world had to intervene and open their treasuries to provide the liquidity that many banks have been craving for.

Few months back, every small and medium financial institution was looking to expand, hoping to become a financial giant in a few years. But the times have now changed and many of these financial institutions are exploring the options to merge themselves.

One can see several mergers and acquisitions happening in the near future. Morgan Stanley has few days left only. Washington Mutual is another institution that will be acquired soon. Federal Reserve will remain busy for some more months trying to broker several deals to prevent another chain of panic reactions on the Wall Street.

Its impact on the equities will be sizeable since equities have always deemed as high risk-high gain investments. Now with weaker balance sheets, the financial majors will be averse investing in equities and rather move to safer havens like Govt Bills, Gold, etc.

Oil and Inflation remains a threat
The Oil has subdued in the recent past due to slowdown in the US. Also China which heavily bought Oil at the time of Olympics has also slowed down now. Hence, Oil seemed like cool-off. But it is still not out of danger.

Any new threat of war in the Gulf will propel the Oil again. The developing economies like India, which import more than 50% of Oil from international markets, will suffer in the backdrop of High il prices. Also, High Oil prices will have an impact on the Inflation as well, which is already in 2-digits.

The future-tense
The future for the equities doesn’t look good. All the factors that were behind the great equity boom are now over. The interest rates have increased, thus making equities less attractive. The Financial Institutions, who were behind the boom, have either collapsed or merged with a bank. Oil is at all-time high, which is fuelling the inflation too and subduing the growth rate.

Amidst such tough times, who will invest in equities? Will you take a risk at times when you have money only for food, cloth and shelter? Similarly, the financial institutions who have weak balance sheets will not be investing in equities, for sure.

Coming Relief rally
The coming week could see some relief rally in the Indian markets. Also, announcements by the Reliance Industries on Sunday regarding the Oil discovery in Godavari basin will be a positive trigger for the battered Indian markets.

Hence, one can be geared to book some profits in the stocks during the week. The stocks that one may buy are the power stocks like NTPC, Ppower Grid, and Reliance Power. The signing of nuclear deal during Manmohan US visit could boost these stocks. Reliance Industries will also be a good stock to buy at the current levels. It is the only firm that looks rock solid in the aftermath of financial distress.

It is advised to keep booking profits. Do not anticipate the great boom so soon. Let the things start rolling out before taking a long-term call.

Wishing you a great week of investing!!!

Weekly Outloot for the Indian Stock Markets - 15th to 19th September, 2008

2008-09-14T18:38:00.000-07:00

Unforgettable last week
The last week has been a trying one for the Indian Stock Markets. After a tremendous surge on Monday on account of NSG deal, markets fell down like nine pins and closed beaten down to the weekly lows. Nifty, which surged to 4500 on Monday, fell down below 4300 mark at the time of close on Friday.

The current volatility provides ominous signs for the Indian equities. The most worrying factor for the markets is their inability to discount the good news. Low Inflation, Low Crude oil, NSG deal were strong enough signs for the markets to gain and make new higher levels. Yet the FIIs relentless selling pulled down the markets every time an attempt is being made to reach new highs.

Some reports have indicated that the current bout of selling is made by Lehman group and its associates to cash out their holdings in their final attempt to save themselves from bankruptcy. If this report has some strong base, then these must be worrying signs for Indian markets, since Lehman & Co. have substantial stake in various Indian companies. The investors must be hoping that Lehman Brothers sell their entire stakes in Indian equities along with other assets to the acquiring company because if it doesn’t happen and Lehman is forced to sell their stake in the open markets, then the share prices of these companies could touch new lows, which will further dent the bruised sentiments of the investors.

Let’s analyze and gauge various indicators that may influence the Indian markets in the days ahead…

Re-$ movement
Rupee has depreciated steeply against the dollar, which has neutralized the gains that oil marketing companies may have on lower Crude oil. The Greenback is currently trading at 45.60 Rs. Levels.

IT companies, which would have gained on account of higher dollar, are unable to do so because of worries that US based financial companies will be spending less on IT in the next 2-3 years. Though, the silver lining could be the BPO / ITES companies, which will stand to gain on higher dollar. There is a strong hope that Outsourcing concept will again come into shore as overseas companies will be transferring some of their non-critical tasks to India to further reduce their input costs.

Double-digit Inflation
Despite the low inflation numbers for last 3 weeks, the inflation is still in double-digits, which remains a worrying factor. Any novice can understand that equities will not perform, till the time; inflation goes below 10% mark.

We must also remember that inflation going down on account of higher base effect is not the solution of this problem since it will be the setting of a new benchmark of prices for the essential products. There should be a genuine effect to either reduce the demand or increase the supply of products. The government should also reduce the prices of fuel to stimulate the companies whose input costs have risen due to high oil prices.

Hence, the inflation should come down to 6-7% mark, before it can make a positive impact on the markets. Any hope of change in long-term view from “sell” to “buy” will only occur if inflation comes to 5-6% levels.

High Interest rates
Looking at the historical figures, equities never had a genuine long term rally in the shadow of high interest rates. Also, the companies debt cost will rise on account of high interest rates. The maximum hit was suffered by Finance and Real-Estate companies. Real-Estate companies, who received doubly-hit due to high material costs and interest rates, have depreciated maximum in every round of selling.

Hence, any investor who holds real-estate stocks need to be patient enough to earn something out of their investments. Any chance of averaging out could be as risky, as having a fresh purchase, since downside still exists in these stocks.

Crude Oil
Two months back, Crude was the major threatening factor. Sadly though, even after falling near to 30% from their all-time highs, the equities have not responded at all. The markets are still trading at the same levels or lower, as were of two months back.

Personally though, I still feel that Crude can provide a big impetus to the markets in the near-term, especially when it sustains below 100$ a barrel.

Financial Turmoil in US
It has been more than a year since the US financial problem has come into shore. We must not forget that the roots of these problems lie in Greenspan era and it will surely take more than 3-4 years to amend the mistakes. Bear Sterns and Lehman Brothers have been the victims of the problem. Various reports indicate that Merill Lynch could be the next victim. These US based financial institutions have a major stake in the Indian bourses. Hence, markets will remain under pressure till the time financial sky gets cleared.

Next Week could be volatile
The coming week will see a renewed attempt by Bulls to take the charge. Also FIIs, who have been selling consistently for last few days may pause a bit to gauge the situation. Though, any bad news from US, especially regarding Hurricane Ike or Lehman Brothers, may see another round of selling coming into bourses all over Asia including India as well.

Hence, traders can hedge by buying Nifty 4000 Puts and buy quality stocks that are in offing at low prices. For instance, ICICI Bank, REL, Ranbaxy are trading at interesting levels and can see gaining in the short term.

In the mid cap space, MIC Electronics, DCB, Axis Bank, Karuturi Networks, TTML can see making gains.

Another interesting strategy for the week is to buy Nifty 4000 Puts and 4400 Calls. Somehow, it seems that almost every bad news has been discounted by the bourses and any positive news will be welcome by the markets. If it doesn’t react to the good news and goes down, then 4000 Puts will put into play. Alternatively, any good news on Crude Oil front (below 100$), Lehman Sale out (finally!!), Low Inflation (around 11%) can give a stimulus to the market and it may re-attempt to touch 4400 /4500 levels on Nifty.

What are your views on the Indian stock markets, do you have any stocks that one can buy, do you agree / disagree to my views, then please feel free to write in your comments by clicking Comments below.

Wishing you a great week of investing!!

Weekly Outlook for Indian Stock Markets - 08th September to 12th September, 2008

2008-09-07T08:13:00.001-07:00

Better Late than Never
As discussed during last week as well, Indian Stock Markets have been celebrating too much about low inflation, rather than taking a rational outlook on the broader picture. The global cues have been weak, Europe has been slowing down, US is under pressure, the central banks all across the world have been raising interest rates to cushion their economies from inflation.

Amidst such negative cues, expectation of Indian Stock Markets outperforming others had been too much of asking? And this was reflected last week as well when Lower Oil, Lower Inflation failed to propel the markets.

Hence, the realistic view at the moment is to “stay caution”. It is better to wait till the clouds of financial turmoil gets clear before one can start investing because days have gone when markets used to give you chances to come out of wrong investments. Now, one wrong investment could be enough to wipe out everything that one has earned over the past few months or at worse, years…

Last Week suggest more pain
The last week started with whole host of positive triggers like Lower Inflation, no major impact of Gustav hurricane on US refineries and good GDP numbers from US. Asian indices traded higher on Monday and Tuesday. US markets which were closed on Monday, hoped to rise on Tuesday. But financial turmoil in US pulled the DOW and NASDAQ down, despite the lower crude. That fall was a clear evidence of the intensity of financial turmoil that US is having at the moment. For the past few times, we have seen that every positive sentiment is quickly wiped out by one of the problems that US financial sector is facing at the moment.

Indian Equities did get another chance on Friday to regain the lost ground on lower inflation numbers for two consecutive weeks. But weak global cues again played a spoilt sport and markets surrendered meekly in front of them. Bears had a great party on Friday pulling down the Sensex by 500 points and Nifty by over 100 points respectively. Technically though, Nifty had rebounded many a times from 4350 which now look like a strong support levels for the Nifty.

Hence, the last week has suggested that until the US financial sector comes under control, the chances of equities outperforming any other investment class look remote.

NSG Outcome
Nuclear Suppliers Group has finally given its consent to India, which could have a positive impact on Indian economy in a longer term. But its short-term benefit is second to none, hence markets which may rise on Monday on the outcome of the deal, may yet to find a strong base to consolidate. Those who have bought equities last week at lower levels could find Monday as an opportunity to move out with good profits.

Crude below 100$ could be a strong trigger
The crude oil, which is hovering around 105$ / barrel mark, could go further below 100$ in next 2 weeks. If this actually happens, the markets will have a strong relief rally for sure. Also, government may have a relook at the oil prices and could reduce it to further tame the inflation.

So, Lower Crude could have a positive multiplier effect on the economy, where it will reduce the operational costs of various industries, and will also help government in taming the inflation.

Trading Ideas of the Week
The next week may see a rally in Power and Infrastructure stocks like REL, NTPC, Reliance Power, DLF, Unitech, etc. Also, one may continue to see good rally in stocks of Oil Marketing companies like BPCL, HPCL, Indian Oil, etc.

An interesting idea for this week is to buy Nifty Put of 4500, if it goes above 4550. Also, one can buy 4700 Call to hedge the position, somewhat a bit.

Investing Ideas
A stock that currently looks at attractive levels is Vishal Retail. It is currently trading at 400 Rs levels. We must not forget that Vishal Retail is among very few stocks that did not touch their IPO levels, during the meltdown. The company is on expansion spree and plays in the segment that has huge potential i.e., lower and middle class sector of India. Hence, one can buy Vishal Retail around 400-420 levels for 1-2 years perspective.

Besides, some of my old favorites like Karuturi Networks (KNL), Vakrangee Software, DCHL, Balasore Alloys are also at buying levels. One can buy these stocks with 1-2 years perspective.

If you have any views or wish to share your thoughts on the stock market, please feel to write in your comments by clicking Comments link below.

Wishing you a great week of investing!!

Weekly Outlook for Indian Stock Markets - 01st Sept -5th Sept, 2008

2008-08-31T09:37:00.000-07:00

Surprising Last Week
The week gone by was full of surprises, especially the market sentiments on Friday. One occasional drop in Inflation numbers was enough for the investors to have a round of renewed buying in the markets. Even the significant drop in Q1 GDP growth looked a weak downside trigger for the markets, which rather make me thinking on what kind of mindsets are trading in the Indian stock markets.

Equally surprising is the Government reaction on inflation. It makes me wonder on why the Government needs to issue a statement every week regarding the inflation? A week back, when inflation touched 12.63% from 12.44%, Government issued a statement that it is disappointed. This week, a marginal fall of 0.23% to 12.40% made the same government optimistic enough to suggest a fall in the inflation in the coming days. Whether this is an anxiety on the Government part or any foul play behind it, one needs to find the answers for these questions surely.

Coming days would be volatile
Coming days will be more challenging than before, especially when a robust and emerging economy fights the battle with a host of negative cues like Inflation, Higher Commodities, Global slowdown, High Interest Rates regime, financial turmoil, etc. Till the time a winner is declared, we will see markets moving both ways and remain volatile.

The inflation is still a big worry, especially when the government looks defeated on this front. The failure of a government can be seen from the fact that it is praying for higher base effects to have a moderate inflation, rather than fighting the causes from the front.

The prices of commodities are troubling the economy to a great extent. The whole basket of commodities like Crude, Gold, Silver, Steel, Iron Ore, Edible Oil, etc is trading at highest prices ever, which is putting further pressure on the inflation.

To counter the inflation, the central banks across the world had to increase the interest rates, which in turn slow down the economy. If Fed Reserve follows the same steps and increase the interest rates, then the consumption demand from US will reduce and will further slowdown the Global Economy.

Hence amidst such scenario, one should not be over-bullish on the equities, since the stocks already factor the future earnings of the companies. One should have stock-specific approach and try to buy the stocks which are rich in cash.

More downside can be seen next week
Nifty at the moment is tentatively poised. It is exactly in the middle of the 3800-4600 range and chances are ominous that it may try to re-test one of the levels soon. There is a bullish undertone in the market. Tonnes of money are waiting in the sidelines to enter the markets, but everyone is skeptical about the impact of the Global Slowdown on the Indian economy. Hence, people are still finding the levels below to invest their money.

Hence, the best thing to do under these circumstances is to “invest partially”, much like SIP mode to ensure you get the average value over the next one year.

Trading Strategy - 2:1 Put to Call Ratio
Traders can be best advised to keep their positions hedge with more downside bias. The oil can show some upward bias due to hurricane over Gulf of Mexico. If it indeed stops the oil production, then one may see rise in Crude prices. Also, the inflation data will always be a trigger point of nervousness on Thursday and Friday. Hence, one can now buy 4600 Calls and 4200 Puts in proportion of 1:2.

The traders can buy pharma stocks like Ranbaxy, and Glenmark Pharmaceuticals. Ranbaxy has the potential to reach 540 in next one week, on account of open buy back. Both the stocks have seen good amount of consolidation in last few days.

Another stock that looks interesting is the “Karuturi Networks”. This company is discussed in almost every post of mine. The company is looking to acquire a company in US sub-continent and is competing with various hedge funds for the same. If it indeed able to scrape through acquisition, then the stock may see some renewed action. The stock is currently trading below Rs 23 levels and is the best price to buy for both short-term and long-term.

Follow the Logic and not the Market
The markets remain volatile for 11 months in an year, hence one must to accept it and take it in its stride. Build your own logic and follow it whole-heartedly. Chances of success increases by manifold. Be knowledgeable on the companies where you are putting your money. Do consistent research and one will always sure of how his /her investments stand to fare in the future.

Wish you all a profitable investing!!!