Derivatives Strategist 15th May 2013

Data Feeler: Nifty future after a sell off on Monday took support around 5980 levels and a small bounce back was seen towards 6040 levels intraday. Nifty future may continue its lackluster move till the time it trading in between the range of 5980-6050 levels. Nifty future for the day, if it sustains above 6050 levels then only rally may be seen towards 6100 levels whereas sustaining below 5980 levels may see selling pressure in the market towards 5950-5920 levels. Looking at the option concentration data for May series, maximum put OI is shifted at 5800 followed by 5700 strike prices whereas maximum call OI is placed at 6200 followed by 6000 strike prices. Bank Nifty for the day immediate support is at around 12400 levels whereas s trong hurdle is placed around 12750 area.

 

Put Call Ratio based on Open Interest of Nifty moved up from 1.16 to 1.19 levels. Historical Volatility of Nifty moved down from 19.24 to 18.67 levels and Implied Volatility also moved down from 16.93 to 16.87 levels.

 

Nifty future closed positive at 6006 levels. Nifty future saw increase in OI by 5.66% with a rise in price by 0.19%. Market witnessed marginal buying interest in HC, Tech, PSU, Power, Oil& Gas, IT and CG space whereas selling pressure was seen in CD, Realty, Auto and FMCG sector stocks. Nifty future closed at premium of 10 points as compared to premium of 14 points in previous trading session.

The market turnover decreased by 6.1% in terms of number of contracts traded vis-à-vis previous trading day whereas in terms of rupees decreased by 7.3%.

Derivative Calls: Buy on SUNTV & FEDERAL BANK

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News Views & Events 14th May 2013

News:

Ø  Ranbaxy has pleaded guilty to felony charges related to drug safety and will pay $500 m (about Rs.2740 Crs) in settlement.

Ø  Tata Steel has announced a $1.6-billion goodwill impairment charge for the loss of value of Tata Steel Europe (TSE), formerly Corus, and other overseas assets.

Ø  Bharti Airtel and Loop Mobile have moved the Delhi High Court seeking extension of their licences in metro areas

Ø  Cairn India plans to drill 48 wells at a cost of less than $100 million in the Mangala oilfield in the prolific Rajasthan block to extend the current production plateau

Ø  ONGC and energy major Shell are exploring the possibility of a strategic tie-up to jointly bid for global oil and gas assets,

Ø  Bank of India has planned a Qualified Institutional Placement offer in the second half (October-March) of this financial year, to raise equity capital for its growth. It has estimated a capital requirement of about Rs 6,000 Crs.

Ø  Syndicate Bank has set an ambitious target of 25 per cent growth in the overall business for 2013-14 as compared with 18.1 per cent growth it had achieved in the last financial year.

Ø  Reliance Communications expects its CDMA technology-based mobile business to stop bleeding and start contributing to company's growth within 12 to 18 months.

Ø  Directorate General of Central Excise Intelligence (DGCEI) has issued a show-cause-cum-demand notices to Vijay Mallya-owned firms United Breweries and United Spirits Ltd, for allegedly evading service tax of Rs 91 Crs. 

Ø  Punj Lloyd has bagged ONGC's Rs 730 Crs B-127 cluster pipeline project in Mumbai.

Ø  Vakrangee Holdings Private Limited bought 25,25,000 shares of Vakrangee Software at Rs.74.25/share.

Ø  Shriram EPC Limited has received Rs.126 Crs order from the Chennai Metropolitan Water Supply and Sewerage Board.

Ø  Petronet LNG Ltd has invited bids to build facilities at its proposed 5 million tonnes LNG terminal at Gangavaram in Andhra Pradesh.

Key events for the day:

Ø  Board Meeting for Q4 Results: DRL, Novartis India, Muthoot Finance, Pfizer, Reliance Infra, United Bank, Sun Pharma ADV, Bartronics, DCW, Dwarikesh Sugar, Elder Health, Elder Pharma, HT Media, Jindal Hotel, JSL Inds, Maharashtra Scooters, Mirc Elec, Munjal Auto, Plethico Pharma, Suven Life, Whirlpool

Ø  Release of WPI Inflation data in India.

Ø  Release of Industrial Production data in Euro Zone.

 

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First Morning Technical Call 14th May 2013

MARKET OUTLOOK

NIFTY (5980): CNX Nifty almost made a double top with 6111.80 on 29^th January ,2013 and 6114.55 on 11^th May,2013, Nifty has rallied substantially from 5477.20 to 6114.55 in 21 trading days which is important Turn date where profit booking was seen. Nifty's rally from 5477.20 to 6114.55 has already has retraced 23.6% and now 38.2% comes to 5871 and 50% comes to 5795. For the day Nifty holding 5960 and crossing 6040 to target 6080 & 6111, while Nifty below 5960 could have chances of correcting till 5871-5844 ,which cannot be ruled out. Multiple factors aide d market correction, Market talks of PM stepping down, weak trade data, Fed's exit strategy has been associated with market weakness and RBI probe into COBRA post expose, Banks suppressing alerts on suspect dealings. Exports from India up 1.6% even as trade deficit widens to USD 17.7 bn, Gold and silver imports during the month under review has increased by a staggering 138 per cent to USD 7.5 billion from USD 3.1 billion in April 2012.

SENSEX (19692): Sensex corrected 430 Points almost highest ever single day correction in last 14 months and in the process closing the gap of 19694 caused on 7^th May by making a low of 19667. Sensex rallied from 18144 to 20146 in 18 trading days for which 38.2% retracement comes to 19381 & 50% comes 19145. For the day Sensex has to cross 19840 to negate the corrective move, while below 19660 the index could witness support around 19550 & 19380 levels.

TECHNICAL CALLS

BUY CADILA Rs.805: CADILAHC has closed at its  63 trading days high after making good bottom formation, on weekly making a U-pattern which would complete near Rs.870. The company announces its result on 22^nd May,2013 and hopes are very high on good turn around results. The stock is trading above 50DMA Rs.757 and 100DMA Rs.801.

SELL CANBANK Rs.406: CANBANK is on the process of completing a Head & Shoulder pattern, below Rs.396 the stock would break the neckline, therefore expect a correction of 8-10% from current levels in the stock. CANBANK has closed below 200DMA Rs.422, 100DMA Rs.444 and 50DMA Rs.408.

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News Views & Events 13th May 2013

News:

Ø  Tata Motors is considering producing another car, possibly a new compact car, alongside the small car at the Sanand plant.

Ø  Mahindra & Mahindra plans to modify some of its vehicles to help them avoid a 3% additional excise duty on sports utility vehicles as its sales have come under pressure.

Ø  DLF has sold 32 acre of land in Hyderabad for about Rs.650 Cr to Suvarnabhoomi Developers as part of its strategy to exit from the non-core assets and reduce debt.

Ø  New US Visa Rules to Hit Cognizant & TCS Most.

Ø  Lupin expects to launch 20-25 products in the American market every year in the next couple of years.

Ø  Germany's DVB Bank is in advanced talks with private equity fund India Star to purchase a 29% stake in Global offshore (formerly Garware Offshore) for around Rs. 100 Cr.

Ø  Oberoi Realty to Tie Up with Ritz-Carlton for City Hotel.

Ø  Shriram City Union Finance may raise around Rs. 325 Cr capital through either an institutional placement of shares.

Ø  Reliance Industries has sold off its holdings in four banks, HDFC Bank, Axis Bank, Canara Bank and PNB, but has tanked up its holdings in two others - SBI and ICICI Bank. 

Ø  Canara Bank plans to raise up to $1 billion through bonds this month from the overseas market to fund global business expansion. 

Ø  L&T in race for Rs 2,000-cr howitzer tender.

Ø  Bharti Airtel breaks up with Servion, ties up with Genesys.

Ø  Ashok Leyland has gone in for an organisational revamp by which it will create three different divisions: truck, bus and power solutions.

Ø  In Elder Pharma Ratnakar Bank has sold 1.4 lakh shares on Saturday at Rs.320/share. Promoter pledge at 80%. The stock hit 20% lower circuit on post the deal.

Ø  Ashoka Buildcon  board approves bonus issue in ratio of 1:2

Ø  Blackstone is in talks Life Insurance Corporation (LIC) to buy its stake in Stock Holding Corporation of India (SHCIL). IDBI set to lose battle for SCHIL. (IFCI with 34% stake likely to oppose the merger).

Key events for the day:

Ø  Board Meeting for Q4 Results:  Bank of India, BoB, Rel Power, Eicher Motors, Nestle, Tata Coffee, TTML, Amara Raja, 3i Infotech, Amtek Auto, Aptech, Blue Star, ABC Bearings, Amtek India, HMVL, Mawana Sugars, Network 18, TV18 Broadcast, Praj Inds, Rain Commodities, RCF, Thomas Cook, Titagarh Wagon, Zydus Wellness, Sterling Tools.

Ø  Release of USD Retail Sales m/m.

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Weekly Derivatives Strategist 13th May 2013

Weekly Data Feeler

 

Ø  Open Interest of Nifty future increased by 22.40% with a rise in price by 2.69% from the previous week, indicating built up of long position as market continued its positive momentum towards 6100 levels.

Ø  Bank Nifty also witnessed built up of long position as OI increased by 16.19% with the rise in price by 3.14% from the previous week.

Ø  Put Call Ratio based on Open Interest of Nifty moved up from 1.12 to 1.23 levels with the support of Put writing at all lower strikes. Now if Put Call Ratio sustains above 1.20 levels then momentum may continue in the market otherwise a consolidation or profit booking dip may be seen in coming sessions.

Ø  HV (Historical Volatility) of Nifty moved down from 18.53 to 17.72 levels.

Ø  Implied Volatility of Nifty moved up from 14.74 to 16.44 levels.

 

On the Option front, maximum Put OI is at 5800 followed by 5700 strike, whereas maximum Call OI is at 6200 followed 6100 strike. Fresh Put writing seen at 6000 strike which indicates that participants are expecting market to hold above 6000 levels. Fresh Call writing at 6200 strike may put pressure on the market on rise.

 

Nifty future moved well by more than 11% from 5480 to 6130 levels with the support of rising Put Call Ratio and also making higher high top - higher bottoms from last five consecutive weeks. Market has moved well and a small profit booking dip cannot be ruled out, but overall trend is positive and till it doesn't breach below 6080 levels positive momentum is likely to continue in the market.

 

Now if Nifty future sustains above 6080 levels then momentum may continue towards 6200 levels, longs can trail their position with the stop loss of 6080 levels. On downside if it sustains below 6080 levels then a profit booking dip may be seen towards 6020-5980 levels. Bank Nifty future is finding hurdle at around 12750 levels, if it sustains 12750 then it may head towards 13000-13300 levels. Bank Index has strong support at around 12500 levels.

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Weekly Wrap 13th May 2013

STOCK OF THE WEEK  - MAHINDRA & MAHINDRA

 

COMPANY BACKGROUND

 

o   Founded in 1945 as a steel trading company, M&M entered automotive manufacturing in 1947 to bring the iconic Willys Jeep onto Indian roads.  Over the years, they've diversified into many new businesses in order to   

o   better meet the needs of our customers.

 

o   M&M follows a unique business model of creating empowered companies that enjoy the best of entrepreneurial independence and Group-wide synergies.

 

o   This principle has led their growth into a US $15.9 billion multinational group with more than 155,000 employees in over 100 countries across the globe.

 

RATIONALE

 

 

o   M&M increased prices by around 3% over its UV portfolio after the govt announced an additional SUV tax in the FY14 Budget. With only the Quanto and the Verito outside the ambit of the SUV definition, the PV segment demand deteriorated in April. Mgmt has noted in press (Source: Economic Times) that the additional 3% tax burden will be significantly detrimental to the SUV segment. Mgmt's outlook is that of cautious optimism, with hopes of a positive impact from a possible interest rate cut by the RBI.

 

o   Mgmt has noted that the company could look into launching new variants / models that do not attract the additional tax i.e. lower than 1.5 liter engines, smaller than 4m in length and reducing the ground clearance to below 170mm.

 

o   Festival timing helps tractor volumes rise around38% YoY - With major festivals of Gudi Parwa and Navratras falling in April this year vs in March last year, April volumes for the tractor segment were robust. We think there could be a build-up of inventory on expectations of a strong monsoon and we should have more clarity over end May /early June.

 

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Fwd: First Morning Technical Call 13th May 2013

MARKET OUTLOOK

NIFTY (6107): CNX Nifty made a high above 6111.80, by marking its new  high for the CY2013 at 6114.55 which is also the highest level touched by the index in as many as 28months, and closed highest in 131 weeks too. Nifty  is in its lifetime high territory on Weekly closing basis ,where it has closed above 6100 for 6^th time which gives more reasons for 6357 all time high to be crossed and taken apart. For the day Nifty holding 6080 is important to target 6165 & 6200, while Nifty below 6080  could have chances of correcting below 6040 and can take support around 6020. DRREDDY R s.2091, has gapped-up(2029-2042) and made all time high Rs.2108 ahead of results on 14/May stock looks very good for 5-8% returns on higher side. YESBANK Rs.512 has closed highest in 59trading days and now all time high Rs.545 could be potential target in days to come. Market is on verge of major bull rally with political uncertainty being the only risk, so if fluid political conditions don't disturb the markets then Nifty crossing its all time high levels at 6357 in next few months could be possible once we see close above 6130.

SENSEX (20122): Sensex has closed highest in 123 weeks and 20203-20260 are important levels to be crossed with 19850 becoming very important support in short term. Today Sensex holding 20045 and crossing 20150 could possibly give an up move till 20203 & 20325 are possible levels on higher side while the index drifting below 19995 could open up gap levels on the down side and 19694 can be retested.

TECHNICAL CALLS

BUY ICICIBANK Rs.1168: ICICI BANK has made a pole and flag formation on daily charts, and within the flag the stock has formed an inverted head and shoulder pattern which suggests that there is more upside to be seen in the stock in the days to come, the stock's double top is at around Rs.1188 ,which if crossed could take the stock to its next levels on the upside at  Rs.1230 & Rs.1280 which could be potential targets for the stock. ICICI BANK is trading above 200DMA Rs.1067, 100DMA Rs.1119 and 50DMA Rs.1083.

BUY BAYERCROP Rs.1213: BAYERCROP after making all time high of Rs.1340 has corrected to low of Rs.1040 and has almost consolidated for 22weeks and now given triangle break-out and closed highest in 16weeks and all to cross all time high. The stock is trading above all major moving averages with the 200DMA at Rs.1108, 100DMA at Rs.1165 and 50DMA at Rs.1129.

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