India Morning Report: Markets reach the 6300 mark, will it hold as the new bottom?

Knowledge market BW
Knowledge market BW (Photo credit: Wikipedia)

Eventually, 6300 may also hold as the bottom of the range and so armed with this knowledge market rangers on the Bull side may ordain the mark sooner this week and next but for now markets will trade it bullishly on Monday.  Pre Open saw a shard of pricing out in Bank of India again, sinking to a bottomless pit quote 30% down, bu tas of now the PSU banks remain the biggest risk on the downside ( esp if they catch our fancy as the markets go up, they would underline the lack of options in such a wide market with 3000 active quotes on NSE alone.

Deposits were finally ahead of loans in the report of week ended December 13, growing at 17% (INR 75 Tln) with Bank lending at 15%(INR 57 Tln). Non Food Credit stock is INR 56 Tln, making up most of the growth stock in lending (INR 320 bln out of INR 360 Bln)

As we mentioned at the cusp of the rally, infracos and IT remain sectors in which stocks have to be decided for the winners and losers , both right now moving in single file, IT moving together with a losing rupee and infra moving up together on good hope for policy day, like this week. However, IDFC for example has a much more bullish trade accumulation appealing to at least three class of investors including the passive institutionals and the active hedge traders in small infra hopes.

Traders continue to hope for the non obvious trades in each of their not so blue chip large trades which technically may no longer belong to the Midcap story either including Cairns, GMDC/NMDC, Hexaware/HCL Tech. Barclays did up the growth forecast of India Inc ahead of results season, but more on the lines of MSA’s war cry for an automatic upgrade to 6-7% growth for India Inc with positive Investment flows, because the deed is done, which sadly has still to unfold surprises with statistics belying the temporariness of this recovery without the requisite investment flows except the Net Exports as we wipe out the Current Deficit and markets cornered the shorts out again in December.

I could buy a few puts on HCL Tech just to wind them up and carry home some profits on the announcements as results start pouring in. That would be really the closest to a sure winner this quarter as the Ruee digs its heels in at 61-62 levels. Infy shorts will not bait the stock till 3600 probably and if you are bullish, the up move is unlikely at thse levels despite the oevrall atmosphere of continuing good news in the sector, and that will not extend the winning rallies of Mid Caps and Product companies like KPIT, Hexaware and Persistent either.

Glenmark and GAIL seem good additions for stock watching in 2014 to our already brilliant portfolio led by IDFC and YES Bank. Mining and Metals as also L&T are likely bad trades to start. Pharma remains the best sector for bulls in both Domestic and Exports stories despite the NPPA pricing policy implementation, a higher double digit CAGR growth assured in the domestic market, I’d say. Banks despite giving up the gains early on Monday, look like making up for the sobriety shown this quarter in 2014 too but stock selection has becom critically differentiating strategy between the sub par equals as well as the Private sector leaderboard.

India Morning Report: Banks react well under pressure, buy levels established at 5800

NSE Logo
NSE Logo (Photo credit: Wikipedia)

Banknifty shennanigans did not disturb the market breadth leading to a further decline in volatility and your short strangles are doing well. Shorts on ICICI may not pan out for traders but SBI will bear pain for continuing on bad debt downhill slopes even as the PSU crowd per se led by PNB and the private sector biggies improved their NPA score till FY2012-13 to 3.33% as discussed by PC yesterday. Private sector banks have done well to bring down the cost of Top 10 NPA accounts to less than 40% of the total and the Foreign banks continue to focus on Trade banking as is their success mantra in Asia overall with High NPAs in select accounts

IDFC and LIC Housing as expected did not yield new licenses but one should continue holding these investments as the current cut is unlikely to turn into a run. Unfortunately India Post also has to do a lot to convert its vault of small savings into a bank from the signs.

Banknifty may well not move down below current levels esp if one constructs an index of profitable banks from the current index and neglects SBI, United Bank of India , BoI, Vijaya Bank and a few other borderline red marks in the current BSE and NSE indices. I for one eagerly await new volume in the BSE 100 and even MCX to test options though Nifty remains a key barometer unlikely to lose significance.

India Morning Report: Markets ready for expiry Thursday

NSE Logo
NSE Logo (Photo credit: Wikipedia)

Markets have probably decided to test the 5650 mark for Thursday’s expiry and may well show a similar small positive move tomorrow and end up with a big play on expiry Thursday as rollovers would mean shorts have it bad with only index shorts by FIIs evidence of the downward move in the last week. Though by itself that does not mean that the put call ratio of 0.75 or the current 0.85 at open will result in a bullish candle to 5700, traders betting short if any left do not really have returns on the short end of the trade.

The Sensex is holding 18500 levels and even if the nifty drifts lower instead and there is an outward risk of a big short, no new shorts have been added in the last 7 days on the BSE or the NSE according to the network reviews Discounts on the June series are obvious and should not have been treated as informative for trend with June longs hoding a healthy enough 10 point premium for a market move in any direction and is unlikely to accumulate speculative long only interest in this market . The pull up might again weakly ensue in OTMs as without active shorts markets amy still make a feeble attempt at closing June closer to the starting point if not in positive territory which can easily be ruled out.

Bank Nifty is holding 11200 and July may well not shout for lower levels though there is still a definite probability of a deeper negative move purely n the extent of unidirectional momentum created by the Fed pronouncements for fund managers using it a s an opportunity to pare holdings in US bonds and thence global assets including EM debt and equity as that would avoid them frequent shocks when outflows continue as a result of the Fed prognostication of a complete recovery is roved wrong for the US and its trading partners.

Pair trades with ICICI Bank on the buy side are doing well as also those who have chosen the bankNifty for the buy and shorted a PSU bank with negative prospects. Today’s move is well treated as a dead cat bounce till expiry is closed out.

India Morning Report: A tough act to follow!

The resilience of the markets is absolutely breath taking if you can let go of the greed of the trading tick and forget you could have created 10-15 more points in any move of the last 2-3 months. INVIX must be one of the most stable volatility indices needing some good data training over the next 2-3 years as it gets two distinct levels along 2012 and tries every other vol input inbetween except the limited market range, setting it independent of market levels which becomes counter intuitive after this length of time.

Business volumes on the NSE are holding and MCX equities seemingly will only add new volumes from its 300 registered members as and when they start with the same 1000 scrip universe ( NSE has 1600) . Chinese data was actually positive but the markets wanted to see a bigger difference and local shares continue to tank from 3 year lows in Shanghai /Shenzen.

The Thanksgiving anti trade in Asia and Europe will likely fade away till Monday when US markets open as traders await the big news from Europe and EC takes the weekend time to solve the big problems UK has with the budget. I ndia is now actively interested in these negotiations with its EU trade droppoing at the expense of others and its Trade GDP seriously affected by continued recession in Europe which it is hell bent on following up with large spending cuts on the EU Common budget and the slow dribbling away of the banking union while UK firmly in saddle strengthens its local EU trade in Spain, Porto and Italy

Bajaj Finserv morning interview on the networks was a great segueway into the stock but comes a little late even with new business premiums growing at 18% and Allianz interested in increasing its stake. after an almost 100% rise in the year. Like PSU Bank Capitalisation and Drug Price Control, Bill impact from  FDI increase in insurance is also likely to have been played out long before its actual play in the House and is unlikely to move the bulls or the bears sitting on selected positions.

The underpricing in Bajaj Auto continues to be a big surprise and Biocon is a good long term buy at these levels. Why are Orchid and Opto out of favor? One fervently hope it is not because promoters are hoping to be bailed out on their personal loans

 

Pre Closing Trading Strategies- October 18, 2012

The week has been good for those waiting for a clear trend to emerge as the road to 5850 looks swift and clear. It may easily target 6000 on the Nifty depending on the Rupee and the levels of the Sensex that can get the indices to a 6000 Nifty/20000 Sensex orbit before seriously considering a technical correction.

Interestingly the rise in EBITDA margins at Cement companies expected at Ambuja, Holcim and ACC has come in tandem with th jump in old textile scrips with Century and Raymond going up 4-6% in the session giving one quick shots to move into for Friday and for next week. The EBITDA was reported at 18.4% at ACC up 500 bps

Infra and Banks may not move together this time but older stock market favorites could turn up like a Shanghai surprise for investors and traders, with Raymond itself tipped for a 400 target ( Mitesh Thakkar, ET Now)

Cement scrips are a good pick as JP Associates finally gets a higher offer from Grasim (Aditya Birla) as well to 130 per tonne capacity for its 11 MTPA plants on Sale to reduce the group’s debt burden and synergise in construction services and Infrastructure/Power

Sun Pharma unfortunately could be a miss for Friday and Monday as the markets review the loss of its Lipidoc sales in the US as the original drug from JNJ is probably back in the mearket

ACC Net Profit of 2.42 B makes it a good pick but Axis and BOB are already up too much for a 30-5% move and I would prefer to go with PNB, SBI which at 821 and 227- are still underpriced and ICICIBANK and HDFCBANK. The isolation of CNXIT could infact augur well for Switching strategies later lengthening the move in the broader indices. A NSE 5850 target is obvious so F&O interest in Futures and Calls for the next two weeks are interesting but it is the latter half ogf the series and any carryforward positions are equally likely to bite overnight

IDFC could start the infraco bite on Monday or Tuesday for another 10% catch up to earlier stable levels from the current depressed prices including L&T and BHEL and not mid cap infra or DLF and construction biggies or IBREL.

 

 

Flash Crash on NSE: And the 59 trade “flash off” was the Pre Open session

 

Update: My attributions to pre-open were based on the similarities to this all frequent event every day when the pre open routines works to a variation of +/- 30% over the last closing price. Also as ET Now reports, the cancelation of these trades is again in question because of the uniquely wedded Day trading system in India whence those who closed the trades at 3 pm are  the main issue of why the flashed market trades cannot be closed and Emkay can be hung out to dry with these INR 650 Crores in trades. (INR 6.5 B) as it is adequately capitalised.

Image representing Infosys Technologies as dep...
Image via CrunchBase

The much publicised “flash crash” on the NSE in India was actually part of a daily phenomenon where proprietary desks of brokers with risk give exploratory trades without any circuit breakers and other exchange controls in play during the first 15 minutes and no trades are consummated.

The Flash crash literally happened half an hour after the normal session began and the canceled trades saved the markets $60 B before another Preopen session was imposed at 10.02 AM and session began at 10.05 The Nifty ended down barely 50 points with Bank Nifty resuming under pressure and HCL Technologies and Infy getting ready for Results season and the new rupee vs Q2 performance at the Rupee’s lowest

The broker Emkay involved in passing such “erroneous” 59 trades on behalf of institutions is likely just using the template to look for wa swaying trend to a correction in a more “macro” pr “global” use of technological failures than the high Frequency trading algorithms used for institutional advantage legally in the US. Hopefully, the broker will be investigated throughly and thence the pre open session per se which gives the Rupee a 15 minute headstart on the Equities in trading as it opens without a Pre Open session at 9 AM IST

 

 

 

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