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Daily Stock Trader’s Guide
Bulls retreated their steps quickly on Friday. Traders dumped stocks on poor results clocked by Infosys
which fell by whopping 9.85% & Nifty by massive 1.5% or 87 points to close at 5824. Wholesale price
index of 9% gave the markets a rude jolt on Friday giving up most of the gains that it had notched up
during previous session. These wild swings are due to nervousness in both bulls & bears camps. This is
likely to continue this week too. FII’s who have bought equities worth around $1.5 billion this month
after buying $2 billion worth purchases in March, turned sellers on Friday. Nifty April futures closed at a
10-point premium to spot & saw profit booking. Importantly Nifty closed below 5895, the 61.8% Fibo-
nacci retracement of the Nov 2010-Feb 2011 decline. Nifty has not yet moved above the key resistance
at 5959. The future course of the market will be decided by 4Q earning results. It looks that Nifty is
heading towards 5800, 5724, 5677, 5332 or even 4954. We have to be cautious here. We will wait for
the Nifty to record a close below 5700 which will be the first alert of down move. If Nifty stops at 5722
(200 DMA), it can turn into another leg upward towards its former life-time peak 6357. Watch for rise
in volume as first indicator of a start of bullish move. Otherwise next support is at 5861, 5800 & 5724.
As we are above 200 & 100 DMA, trend is still positive. Presence of 200-DMA at 5724 also makes the
zone between 5700 & 5750 very important support this week. Go for fresh short only once Nifty closes
below 5700. Options traders covered short in 5800-5900 puts as they expect the Nifty may see some
more correction of 50-100 points. 5800-5900 call saw fresh short. This means the Nifty may not move
down sharply below 5724 & is likely to consolidate. Selling pressure is likely to continue today.
India is facing a double whammy - factory
output growth is slowing, while accelerating
inflation is increasing pressure on the RBI to
raise interest rates on 3rd May for the 9th
time in 14 months. This will leave a bad taste
for equity investors. Adding salt to the wound
is a disappointing start to the earnings sea-
son. Infosys reported on Friday a lower-than
-expected rise in quarterly profit & forecast
sales that were below the consensus esti-
mates. Infosys plunged almost 9.85% on
Friday after the earnings & guidance an-
nouncement posting its biggest fall in nearly
2 years. Infosys has traditionally beat market
estimates. So the result was a shocker. This
is bound to trigger a wave of earnings down-
grades by brokerages. The outlook for steel,
heavy engineering, automobiles & construc-
tion is also weighed down by slowing de-
mand. IIP data in February, released by the
government last week, grew at an unexpect-
edly slower annual pace of 3.6% compared
with economists' forecast of more than 5%.
This reinforces the effect of monetary tight-
ening on the industrial front. Business confi-
dence has taken a hit; the sharp fall in capi-
tal goods output portends a huge drop in
investment & this will dent the overall growth
in the coming months. However, despite the
slowing IIP inflation is picking up. Annual
inflation in March was almost 9%, well above
February's 8.31% &market expectations for
around 8.35%. The figure was more than an
upwardly revised 8% forecast by the RBI for
end-March, and RBI would be under greater
pressure to raise rates aggressively this
year. It is widely expected to increase key
short-term rates by at least 25 basis points
on May 3 when it is scheduled to release
policy. After extending March's 9.1% rally in
early April, Sensex fell last week for the first
time in nearly a month and there could be a
further downward move. Some of the ele-
ments which were causing worry on the
macro front are partly priced in, but earnings
downgrades are yet to come.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��Daily Stock Trader’s Guide
Bulls retreated their steps quickly on Friday. Traders dumped stocks on poor results clocked by Infosys
which fell by whopping 9.85% & Nifty by massive 1.5% or 87 points to close at 5824. Wholesale price
index of 9% gave the markets a rude jolt on Friday giving up most of the gains that it had notched up
during previous session. These wild swings are due to nervousness in both bulls & bears camps. This is
likely to continue this week too. FII’s who have bought equities worth around $1.5 billion this month
after buying $2 billion worth purchases in March, turned sellers on Friday. Nifty April futures closed at a
10-point premium to spot & saw profit booking. Importantly Nifty closed below 5895, the 61.8% Fibo-
nacci retracement of the Nov 2010-Feb 2011 decline. Nifty has not yet moved above the key resistance
at 5959. The future course of the market will be decided by 4Q earning results. It looks that Nifty is
heading towards 5800, 5724, 5677, 5332 or even 4954. We have to be cautious here. We will wait for
the Nifty to record a close below 5700 which will be the first alert of down move. If Nifty stops at 5722
(200 DMA), it can turn into another leg upward towards its former life-time peak 6357. Watch for rise
in volume as first indicator of a start of bullish move. Otherwise next support is at 5861, 5800 & 5724.
As we are above 200 & 100 DMA, trend is still positive. Presence of 200-DMA at 5724 also makes the
zone between 5700 & 5750 very important support this week. Go for fresh short only once Nifty closes
below 5700. Options traders covered short in 5800-5900 puts as they expect the Nifty may see some
more correction of 50-100 points. 5800-5900 call saw fresh short. This means the Nifty may not move
down sharply below 5724 & is likely to consolidate. Selling pressure is likely to continue today.
India is facing a double whammy - factory
output growth is slowing, while accelerating
inflation is increasing pressure on the RBI to
raise interest rates on 3rd May for the 9th
time in 14 months. This will leave a bad taste
for equity investors. Adding salt to the wound
is a disappointing start to the earnings sea-
son. Infosys reported on Friday a lower-than
-expected rise in quarterly profit & forecast
sales that were below the consensus esti-
mates. Infosys plunged almost 9.85% on
Friday after the earnings & guidance an-
nouncement posting its biggest fall in nearly
2 years. Infosys has traditionally beat market
estimates. So the result was a shocker. This
is bound to trigger a wave of earnings down-
grades by brokerages. The outlook for steel,
heavy engineering, automobiles & construc-
tion is also weighed down by slowing de-
mand. IIP data in February, released by the
government last week, grew at an unexpect-
edly slower annual pace of 3.6% compared
with economists' forecast of more than 5%.
This reinforces the effect of monetary tight-
ening on the industrial front. Business confi-
dence has taken a hit; the sharp fall in capi-
tal goods output portends a huge drop in
investment & this will dent the overall growth
in the coming months. However, despite the
slowing IIP inflation is picking up. Annual
inflation in March was almost 9%, well above
February's 8.31% &market expectations for
around 8.35%. The figure was more than an
upwardly revised 8% forecast by the RBI for
end-March, and RBI would be under greater
pressure to raise rates aggressively this
year. It is widely expected to increase key
short-term rates by at least 25 basis points
on May 3 when it is scheduled to release
policy. After extending March's 9.1% rally in
early April, Sensex fell last week for the first
time in nearly a month and there could be a
further downward move. Some of the ele-
ments which were causing worry on the
macro front are partly priced in, but earnings
downgrades are yet to come.
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