NEWSLETTER

End of a bad year..? Tuesday, March 31, 2009

The outlook for the FY 10 looks good and first Sensex target of 15000 is achievable. This is irrespective of that economy could take some time to recover. In fact, I have storng perception that markets react ahead of actual recovery. The stimulus will help economy to recover in Q3 and Q4 of FY 10 but long investors require at least 12 quarters for phased buying.

The FII inflows are likely to rise substantially in FY 10 as India still ranks as the second best growth country in the world. In fact, the selling of FII over a period of 14 months from Jan 2008 to March 2009 resulted into outflow of over 14 bn usd in real terms. The majority of selling close to 5 bn usd had taken place in Oct alone which was the lowest level of Sensex in last 3 years.

Even post Oct another 3 bn USD stocks were sold off in real terms. Whereas in absolute terms the selling was close to 22 bn USD since most of the stocks were sold at 20% of the buying values in the post Oct period and 11 bn usd in pre Oct. Apart from India, the outflows from Emerging markets were over 1 tr usd.

Thus the liquidity which is gone out of equity will have to re enter only in markets which are outperforming. Going forward, India having absorbed majority of FII selling could easily outperform by another 25 pc to cross the 200 DMA of the Sensex post which the global funds will automatically get diverted to India.

Secondly the election years could be considered as the best year of any Govt which generally gets reflected in the stock markets.

In view of the same the target of 15000 looks very conservative. In fact, since March 17 FII have invested close to 500 mn usd in India which has seen Indian markets rising by 25%. This also means even 25% of the money which had traveled out re enters the capital market will surpass the 15000 mark.

This is the best period to enter the capital market. FII took 14 long months sell stocks worth 14 bn usd in real terms and just invested 500 mn usd in March 09. Long only funds needs at least 2 to 3 months even for investing 3 to 4 bn usd even if they go all out aggressively.

The law averages will work here. First buying comes in cheaper stocks in A gr till the time they find their correct values. DCHL we started at 32 and now is Rs 48 and very soon will cross Rs 100 and nobody will be in the stock. You will then probably have a look at Mid day. Similarly Voltas started at 36 now 47 after 100 we will search for alternative cheaper stocks.

The mid caps and smalls have definitely underperformed to the benchmark Sensex in this period. But historically when bear rallies get converted into Bull Run then this very sector outperforms the Sensex and hence smart investors should search value in small caps and mid caps only. However, it is very dangerous to buy stocks without proper research on any small cap and mid cap stocks due to lack of corporate governance and visibility issues.

At the same it should be considered to buy small cap and mid cap stocks with proper research input without any leveraging and wait for the smarts ones to shift their loyalty from costly stocks to cheaper stocks. When time comes these penny stocks only rocks…

Best stocks are Jeyswal Neco, Assam Co, MSP Steel, Sandur, SS Duncan, Network, Bajaj Steel, RDB, Vishnu Chemicals, VIP, CCL, Nelco, Astra Micro, Godrej, Thirumalai, Ceat, GOdavari Power, Raipur Alloys etc all with proven Balance Sheets and smart top lines or hidden valuations. Most of the co’s are debt free and carry huge potential with these stocks.

(Mika)

I had been shorting all night in Asia EUR-USD again, but it seems I am not only one, someone else shorted SPX 808 (50%) also. I like the EUR-USD combination of macd when all; 30, 15, 5 and 1 minutes confirms to short side all together and they do.

While earlier speculated 50% would be bottom, it really did (missed that one while was outside), then it stopped it right with 78.6% movement again, 1.3300 making another double top (=sideways zigzag). I did short it again with 1.3285 while oscillators made a rollover and I don´t think my triple zigzag is correct because when looking a 15 minute bigger chart it´s actually clearly missing W5 impulse wave down. If this 1.3230 (=same 50%) area fails to hold in here I would call this new impulse, besides I never buy same fib twice.

Well, we propably see tomorrow or the next day if I am right or wrong, but SPX is not far away anymore from 770 area, which I speculated on sunday evening to come to the tape during this week. If there´s W5 missing, this is only very first part of it.

We´ll see if we´ll live. I will not leave tonight any overnight positions. Which makes things a bit more tricky is that long lasting diagonal chart below, it won´t support an idea of new impulse.

Well, let´s take another look tomorrow. Well, closed my shorts now & time to go sleep, I will not leave today any overnight positions open, because b wave down in here should not be an impulse (if we consider zigzag scenario) and there´s no pattern available to trade either.

Good week, hopefully it stays like that !

(Mika)

Also reversed my postion from 1.3250, but exit it allready immediately after 38 pips pop-up. I think we have much larger correction on the tape, this is one minute chart of Eur-Usd. If this is the case, market works with yellow "D" wave and that E would end us to 50% level.

EW is really a good fun. I hope this is going to be something much more complex, triple zigzag or similiar to give a bit more challenge to breake it. Investing one dollar there and taking 200 away.

Logging out from the market, might join later for very last hours - if not then back to Asian market opening.

Azad

Sensex : (9708.50) Today Sensex face resistance at 9842, if cross 9842 then goes up to 9975 and 10108. Today Sensex find support at 9690, if 9690 break then fall up to 9560 and 9412.


Nifty : (3020.95) Today Nifty face resistance at 3063, if cross 3063 then goes up to 3104 and 3145. Nifty find support at 3010, if 3010 break then fall up to 2970 and 2923.

Nifty April Futures closed at 3015.25 (Rs 5.70 Discount) with a turnover of Rs 11792.30 crores.Adds 1510950 Shares (4.29 % ) in open interest, pushing the open interest to 36734800 Shares.

(Inder Bhatia)

The Indian market opened up with gap traded with choppy session and close on green zone. For coming session trading below 3000 it will test 2962 -2910 zone and cracking of lower trend line will give more confirmation .On other side trading above 3035 it will test 3050-3070levels.

(Nifty Bhaloo)

(Rajandran)

Here is an interesting information about the Historical Sensex Data extracted from icicidirect.com By Vivek Patil, India's foremost expert in Elliot Wave Analysis.

As per 8-year cycle, we saw three bear phases unfolding during the life-time of the Sensex so far. These three phases are as follows :

1. 1992 : Index dropped 57% from 4546 (Apr'92) to 1980 (Mar'93).
2. 2000 : Index dropped 58% from 6150 (Feb'00) to 2595 (Sep'01).
3. 2008 : Index dropped 63% from 21206 (Jan'08) to 7697 (Oct'08) [so far].

A study of these three bear phases throws up an interesting list of similar parameters :

1. Sensex lost about 60%.
2. It took 13 to 16 months to achieve lowest point of the phase.
3. There were 4 to 5 sell-offs.
4. There was a particular group of stocks that performed at the tops, "Old Economy" during '1992, "New Economy" during '2000 and "Property" during '2008.
5. Cycle heroes faced difficult times for 5-10 years.
6. Stock market Scam.
7. Scam related to cycle performing sector, "old economy" during '1992, "new economy" during '2000 and "property" during '2008.
8. The scam-tainted bull was taken to jail, Harshad, Ketan, Raju.
9. The phase ended with a higher bottom higher top with faster retracement of the last falling segment.
10. The lowest level of the phase was hit after a catastrophic event unfolded, "Bombay Bomb Blast", "WTC collapse", ????.

(Ilango)

Correctives are always difficult to anticipate as possibilities are many. Two distinct possibilities are listed below.
More time Nifty takes to do a correction upto 2900-2860 will open up the upsides or even a shallow correction and clearing the highs(???).
If swift fall is witnessed because of external influence, new lows may be possible. But the TA indications as of now do not point to such a possibility. Only a weekly "turning down" will open up that possibility.
Till then treat these moves as correction to the rise of 2539 to 3123 which should last till this Thursday and Monday might do a reversal. Follow the prices only.

Santy

Today market opened above yesterday close(2780), tested the low level again , went higher from 2980 to 3050 during the main trading session but at the end price closed at 3020(20 points above opening level). So overall, market closed with small gain. A further retracement can be seen before another good SELL signal bias. Tomorrow watch the price action at 3040 level, if no upward force is seen then SELL at 3040 with stop loss at 3065 for target at 3000/2980. But in the event of overnight support activities from US session, BUY above 3065 with stop loss at 3040 for target at 3085/3095. However down sentiment is more likely for tomorrow session.

RIL BUY 1534 S/L 1526 TGT 1538 - 1542 – 1553 – 1562 & SELL 1523 S/L 1531 TGT 1518 – 1513 – 1505 – 1497.

RELCAP BUY 356 S/L 349 TGT 360 – 365 – 372 – 380 & SELL 347 S/L 352 TGT 342.50 – 338 – 330 – 322

FINAN TECH BUY 624 S/L 617 TGT 636 – 648 – 663 – 678 & SELL 613 S/L 622 TGT 603 – 592 – 579 – 565

TATA STEEL BUY 207 S/L 204 TGT 210 - 213 – 216.50 – 220 & SELL 202 S/L 206 TGT 198 – 194 - 190

REL INFRA BUY 519 S/L 516 TGT 524 – 529 – 536 – 544 & SELL 515 S/L 518 TGT 509 – 503 – 497 – 491.

MY CHART

Nifty :: After an Engulfing bearish candle pattern Nifty hold yesterday low 2962..And made almost double bottom near 2962.. Now 2962 works as strong support..In Nifty watch strong resistance 3084 & in Sensex watch resistance 9913.. In one level above 2998 momentum seems up, below 2998 momentum down.. Our strategy for 1^st April up to 3084 sell at high (S.L 3125) buy on deep (S.L 2962).. Above 3084 avoid sell at high first watch next two strong resistance 3100/3125 then sell .. Resistance for up move at 3055/3084/3100/ 3125.. Supports at 2998/2962/2900/2880…

(NOORESH)

Sensex Technical View :

Sensex lows in the last two days is around 9520-9540 so this is should be a consideration for a short term trader. On the upside recent high at 10127 and the band of 10200-10500 are the levels to watch for. The broad range for Sensex would be 8850-10500 for the next few weeks.

Expect stock specific moves to be more prominent then index moves.

Stocks to watchout for :

remain bullish on SCI Ge shipp BEML ACC and Areva Tnd for short term. Siemens and ABB seem to be continuing the upmove.

GE shipping and BEML chart posted above.

Some day trading ideas but as always for risky day traders.

Rule - Keep a stop of 2.5-3% on buy and tgt 5-10% in the day.

Buy HCC above 41.2 or closer to 38-38.5 stop 37.5 tgt 43/45.

Larsen and Toubro above 695 tgt 710/724.

Buy Punj Lloyd above 95 tgt 99-102 or around 88.

MARKET OBSERVATIONS AND THOUGHTS :

This is a continuation with me trying to put in a projection of markets on time basis.

Earlier View 1

Earlier View 2

The view was about the correction should last around 8 or 13 months roughly and we expected a good bottom to be found around October which did much lower then our expectation of 10.5k-11k. The economic data did peak out in October with bankruptcies and skeletons were out !

After this the view was that we may see a re-test or new low around Feb/March and we may have seen a re-test at 8047 going by this viewpoint. We should ideally see a new though emerge in March-May and more confidence to build up by May.

I would still stick to the fundamental and time projection based on fibonacci time analysis which suggests important time zones around 8/13/21 months!

So if we have found a bottom around 8k levels and Sensex crosses 10.5k then we could expect the rally to stretch till April-May. This view is purely based on a personal thought irrespective of technical analysis but a guess work or projection :)

The next important time period comes around the 21st month which comes in November roughly where in we may see some uncertainty and loosing confidence also before we might get over the after effects of the bear run.

The strategy on this viewpoint would be to look towards investments in the broader market as index may not be a clear description of the larger market as at 10k many stocks are still quoting at levels corresponding to 6k or lower Sensex.

Investors can start to looking to deploy part of their cash in fundamentally sound and undervalued stocks with good track records in the next 2 months with a profit booking strategy to reduce cost of acquisition as sooner the potential for the next move might be up.

(NOORESH)

After a long time making a post on long term investment into small and mid cap stocks for long term investment. Have selected only a few stocks out here which have over-corrected and look reasonably valued.

Strategy would be to buy 25-40% quantity at 1st buy level and rest slowly at the lower buy zone or on a breakout over short term resistances.

Book partial profits on first tgt or on 30% gains to reduce acquisition cost.

DCB :

The stock made a high of 162 in the bull run and against an issue price of 26-28 the stock is now quoting around 18-19 bucks and 52 week low of 13.55.

So the stock is available at 10-12% of peak and is fundamentally decent and can give good returns in better times.

Buy around 18-19 initial quantity.

Add if crosses 22 zone or on dips to 13-16 zone in panics.

Tgts 28/35+

Short term resistance seen at 20 ( grey trendline) as per chart.

Some other stocks similarly

EMCO transformers.

The stock made a high of 330 in the previous bull run now quoting at 31 and a 52 week low of 26.

The stock is available at less then 10% of peak value as well as with a good visibility of earnings as order book is mainly govt based entities.

Buy arnd 31 initial quantity.

Add around 26-23 or above 34 levels.

Tgt 40/52 +.

FSL --- A high risk speculative trade.

As per the technical chart it can give a sharp move above 16.5-17 rs to a tgt of 24.

Investment buy on dips to 10-13 the inital quantity and rest at further dips or on breakout.

One of the stocks we recommended to clients similarly is PSL Limited which moved up from 65 to 85-90 where partial booking done and may re-enter on dips again.

Other stocks which am looking at in a similar manner :

STC India, Kirloskar Brothers, Patel Engg, Himadri Chemicals,Elecon Engg, city Union Bank,Mercator Lines and some more. Need to short list as options are many.