Stock Market Outlook 14 July11

`Today, Asian markets are trading mixed while with modest changes while SGX Nifty is suggesting about 35 points lower opening for our market. After yesterday`s 1% bounce back, Nifty has retraced more than 38.2% of the 5,740-5,497 fall. Now is the low of 5,497 made on Tuesday was to break, a lower-top lower-bottom will get confirmed, which will obviously have bearish implications. On the upside, 5,601, the upper level of the gap created by the gap down opening on Tuesday, is the immediate resistance. Trading long positions should have a strict stop loss of 5,497,``

``Tech major TCS will announce its quarter earnings today. PAT is expected to fall 5.7% sequentially to Rs. 22.64 billion while dollar revenues are estimated to go up by 6.28% to USD 2,385 million. In rupee terms, revenue growth is likely to be 5.09% to Rs. 10674 cr. Bajaj Auto, DCB, South Indian Bank and Gruh Finance will also come out with their results.``

 

``Economic reports to watch out today include weekly inflation from India, June CPI from Euro-zone and June producer price index, advance retail sales and weekly jobless claims from the US.``

 

``US markets fell nearly a percent from the top of the day but managed to close higher by about a third of a percent, breaking 3-day losing streak. Markets opened on a positive note following a strong 9.5% quarterly GDP growth data from China. But the big fillip came from Bernanke`s semi-annual address to Congress where he indicated possibility of additional stimulus. Gold surged USD 23.30 to settle at a record USD 1,585.50 an ounce. After the markets closed, rating agency Moody`s said that it has placed its Aaa bond rating on the US government debt on review for possible downgrade, prompted by the possibility that the US debt limit may not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes.``

 

``Domestically, after 3 consecutive days of drubbing, markets bounced back with a vengeance as benchmark indices gained a full percent in yesterday`s trade. Nifty gained 59 points to end at 5,585. FIIs net bought Nifty futures and stocks worth Rs 3.57 billion and Rs. 3.15 billion. respectively. Open interest in Nifty futures however, went down by 11448 contracts, indicating short covering. DIIs net sold stocks worth Rs 3.69 billion.`

 

The indices have closed in the upper end of the intraday range as the bulls were able to offer follow up support at higher levels during session. The intraday range specified for the Nifty between the 5580 / 5475 was breached as the Nifty tested the 5596 levels, thereby exceeding our intraday levels on the upsides. The coming session is likely to witness resistance at the 5625 levels on advances above which the 5670 maybe seen. Support is likely at the 5550 levels below which the 5500 maybe tested. The bullish pivot for the session is likely at the 5575 levels above which the Nifty must stay throughout the session. The bearish pivot is at the 5560 levels below which declines may occur. Traders must watch these levels for signs of trend determination in the coming session.

 

The daily candle chart of the Nifty shows a bullish candle which attempted to close an open "window" (gap) unsuccessfully. The downward sloping trendline remains in the reckoning as a stiff resistance for the bulls. The Nifty (spot) must stay above the 5575 levels sustainably with volumes and open interest expansion to rally intraday on Thursday. On the flip side, sustaining below the 5560 levels may trigger a fresh bout of declines. We expect a muted retail participation whereas institutional activity will contribute to volumes.

 

 

The market internals indicate a lower turnover due to the lack of buying conviction. The number of trades were lower and the average ticket size per trade was lower, which indicates a lack of retail participation. The capitalisation of the market was higher in line with a bullish session. The put call ratios indicate the bears ramping up their shorts on advances.

 

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Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. And not soliciting any action based upon it. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon such. We or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report

 

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