newsletter

(Inder Bhatia)

The Indian market opened on positive note and drift in red zone but close with handsome gains . After good inflation number market saw U turn and close near days high. For coming session we can witness momentum towards upside and nifty can test 3153-3170 zone .On the lower side 2929 will stop-loss closing base .

(raman)

SHORT SELL Reliance Industries Stop Loss 1402 Target 1208

SHORT SELL Suzlon Energy Stop Loss 58 Target 45

SHORT SELL Cairn India Stop Loss 176 Target 142

BUY HPCL Stop Loss 230 Target 278

(Rajandran)

Follow the trend and short only if nifty break and trade below 2950 for a couple of minutes

SHORT IRBINFRA AT 131-128 TGT - 124-122 SL - 134

admin

Nifty Major support 2985

Nifty Major Resistance 3167

TREND DECIDER -3041

NIFTY FUTURE DECEMBER ANALYSIS.

WATCH THE FOLLOWING LEVELS -2610,2751,2911,3122,3332,3594

As Nifty trades and closes above one level, buy and stop loss will be below that level and vice-versa.

Nifty future for the week 15-19 DEC

Buy above 2806 SL 2750 TGT 3045,3197

Nifty future for day trading: Buy above 3033 stop loss 2990 TGT 3106,3135

Asia has opened flat. Expect Indian markets to open flat to negative.

A bullish mode expected in NIFTY.

Inflation has cooled down from 8% to 6.84% in a single week change.

The support for the Sensex is 9800-9660 and the resistance to the up move is at 10350

Nifty: the support for the Nifty is at 2902-2883-2795 and the resistance to the up move is at 3240

Day Trading Ideas.

India Infoline

Buy above 53.70 for targets of 54.50 and 55.90

Sell below 50.35 for targets of 49.10 and 48.50

IDFC

Buy above 70.50 for targets of 71.90 and 71.60

Sell below 65.45 for targets of 63.25 and 62.50

(Dr. Krishna)

BSE Sensex crossed 10,000 as if fundamentals of the Indian economy had suddenly improved. Analysts are once talking about India growth story, de-coupling theory and domestic consumption which created “stock market traps” in the last 12 months. Indian companies are shutting down plants, auto companies are announcing layoffs, inflation is falling due to drastic fall in consumption and advance tax numbers are disappointing; still Sensex and Nifty are making smart gains. Is it a Stock Market trap or bear market rally?

I don’t know how stock markets will react in the coming days but economic fundamentals are moving from bad to worse. Many investors are asking me for stock recommendations but I will not recommend any stock for investment when so much bad news is floating around. Just utilise opportunities like “Satyam-Maytas” and “Sun TV-Karunanidhi” etc to make quick gains and exit them without going for greed.

How can investors fall in Stock Market traps?

Chart courtesy: Bloomberg.

Note: Just see at chart and notice how the "Fall-Bounce back-stability-fall" happnened over the last 11 months. Will it continue?

1. 21,000 trap:

Mortgage crisis was first noticed in August, 2007 when a French bank announced billions of losses in American Mortgage business. International stock markets reacted to the crisis after 2 months and crashed in October, 2007. But Indian Stock markets moved from 13,900 in September, 2007 to 21,300 in January, 2008 due to massive inflow of foreign funds and wonderful Q2 results. There was a sudden spurt in demand as India suddenly changed to American type of consumption economy from traditional savings economy. Bubble was created in the real estate sector. FIIs suddenly identified the bubble and exited on massive scale to make huge profits. But Indian mutual fund managers were still talking about India growth story and kept their positions. That is the power of Bubble.

Click here to read my article when Sensex was at around 21,000. I have not expected this kind of fall at that time but had clear idea about overvaluation.

Lesson: Future growth (next 3-6 months) is most important than past growth. Stock markets will definitely notice fundamentals but it will take some time especially in Bull Run. Blind long term investments will not work in the current volatile markets. You need to track them regularly when you think that price is at least 30% above the fundamental price, it is time for exit. Don’t bother about that stock if it moves further upwards. Believe in your research. Greed will make us fools.

Note: Base was formed around 15,200. It means markets will not fall below that level. What happened!

2. 15,200 trap:

BSE Sensex fell to 15,200 from 21,000 in just 1 week and traded between 15,400-17,000 levels for some time. That movement created hope in investors about strong bounce back. That hope was not due to good fundamentals but due to “Bull trap.” Investors were still believed in the “Decoupling theory” and “Indian consumption theme.” By that time, bear market was already set in across the world but consumption in China due to Olympics and real estate hysteria created hope among investors about strong bounce back. But Stock Market investors noticed the severity of American credit crisis and Sensex fell to 12,600 level. Then Sensex moved in between 12,600-15,200 levels and created hope for bounce back. But Inflation and high crude oil prices spoilt the business environment.


Note: Base was formed around 12,600. It means markets will not fall below that level. What happened!

Lesson: As long as Business fundamentals are week, temporary bounce backs will not save markets from major falls. It is just a matter of time. Now analysts talked about reasonable fundamentals and falling crude oil prices to create hope about bounce back.

3. 12,600 trap:

Sensex stayed above 12,600 level for some months and created strong belief among investors about that support level. To intensify such beliefs, Sensex moved upwards every time it touched that level. Meanwhile, American crisis stunted global economy and commodities collapsed due to massive fall in consumption after the Olympics in China. Sensex fell to 7,800 levels due to failure of major investment banks like Bear Sterns and Lehman Brothers. Sensex is making smart gains every time it comes to 8,000 level. Investors now believe that Sensex will not fall from that level.

Note: Base was formed around 7,800. It means markets will not fall below that level. What will happen?

Lesson: Even experienced investment giants were shocked by the ferocity of the fall. That is the way stock markets work. 80% of movements will occur in 20% of sessions. Sensex is moving in between 8,500-10,500 despite further fall in business fundamentals.

4. 7,800 trap:

Sensex is now staying above 8,000 level. Are we in another trap? Will Sensex make another big fall due to weakness in fundamentals? Will past repeat and make another major fall after Q3 results?

Note: What is the next base? Is it just a matter of time? Do you still believe in the de-coupling theory?

Lesson: As long as business fundamentals remain weak, “traps” will not save you. Business prospects in the next 3-6 months are crucial for stock market movements. I strongly believe in the below 6,500 levels for Sensex in the next 2-3 months unless dramatic positive happenings occur in the next quarter.

Conclusion: As long as economical situation is weak, there is further chance for more downfall. Stability and bounce backs are only temporary phenomenon. Even great companies with good growth propsects will also fall.

Valuations: At 10,200, Sensex is trading at a P/E of 10 which is a reasonable value. When Q3 results will come out in January, 2009, can Sensex sustain these valuations? Advance tax numbers are disappointing means we may here more negative surprises in the Q3 results. Are we underestimating/overesimating the severe financial crisis? Are we underestimating the drastic fall in consumption? How stock markets will react to fall in profits and rise in defaults?

Please share your opinion on “7,800 is a base or another trap”. Am I disrupting your bullish mood?


Positive Stock Market news:

1. Satyam will consider buyback of shares on December 29 to regain the confidence of the investors. Good move but how will they save Maytas Infra?

2. Compact Disc India: Indian animation Company signed a deal with legendary footballer Pele to work on a football animation movie. The total budget of this project including feature film, multi-platform gaming and merchandising will be around Rs 300 crore.

3. Mobile VAS companies are still hiring despite recession as these companies are least effected by either slowdown or credit crunch.


Analysis of advance tax numbers:

1. Larsen and Toubro (73%), SBI (56%), Bank of India (76%), Central bank of India (120%) and Tata Chemicals (45%) declared positive advance tax numbers.

2. Mahindra (-93%), Ultratech (-53%), Tata Steel (-69%) and Tata Motors announced disappointing tax numbers.

3. Private Banks like ICICI Bank and HDFC Bank recorded fall in numbers.


Significant statements on American Economy in the TIME magazine special edition:

1. Barack Obama, TIME's Person of the year:

"It is not clear that the economy is bottomed out and so even if we take a whole host of the right steps in terms of the economy, two years from now it may not have fully recovered. Nobody trusts other people's books anymore. And people decide, 'Well, I'm just going to hold on to my cash for a while,'" he explains. "And that compounds the crisis. And all that results in a contraction in lending, in consumer spending, which then has a real impact on Main Street. And so what starts off as psychological is now very real."

2. Henry Paulson, US Treasury Secretary:

“We were on the brink of disaster in late September and early October. The alternative we were looking at was a cascade of failing institutions. We were looking at a downward spiral or a free fall. This fear was widely shared by economists and financial-market participants. What we've ended up with instead — an ailing financial system, a deep recession and a few trillion taxpayer dollars at risk — is vastly preferable to that.”


Good articles:

1. Why IBM, SAP and Sun will be in trouble?

2. World is heading for a long and deep recession: Canada bank.

3. 2009-10 will be a more challenging year than 2008-09: RBI Governor.

4. Q3 may become worst quarter for IT sector in 10 years.

5. Top 10 Worst Economic Myths of 2008.

Sensex Technical View :

If we see yesterdays chart and it was mentioned that 9600 is the lower channel line level which if intact the positive momentum continues to remain in place. Low made today was 9633 which is right around the line and then a bounce.

On the upside the channel line comes roughly around 10325-10450 zones which should see resistance ( this coincides tgt earlier 9900/10500 ) . And as before a sustained closing above 10500 for a few sessions would open up an extended rally.

Also in the previous posts i had mentioned the action would remain in specific stocks more.! The observation was very correct as index has moved 10 % frm 9300 but specific stocks 20-30-50 % also.

Stocks to watchout for :

Oil mfg cos have hinted a possible breakout on charts but need to sustain over the next few sessions to confirm a further move. Although the reasons on funda look weak as crude may not stay low for a long time it seems and a possible price cut could dampen the move. So watch is better or trade with stops on either side.


BHEl seems a breakout if sustains 1430 could tgt 1470/1520. stop below 1380

IDFC could see a quick 10 % move above 72.5 if stays.

NTPC is nearing resistance zone of 185-190 where profit booking is advised and maybe a short with stop of 194

Stocks to watchout for quick trades ranbaxy above 225 , Yes Bank above 81 , Sesa Goa 88.5, Zee above 143.

Small bounce backs possible in oversold stocks--- Bhushan Steel , Corp Bank , BEML.