Turn Around - Around the turn

                                                  Weekly Market analysis

                                                (4^th July to 9^th July 2011)

Dear Investors,

Markets celebrated the local and global positive events with a ‘Bang’ there was

A ‘Dramatic’ change in mood across the globe as far as Equity markets were

Concerned. European austerity news, fall in crude prices, no QE3 and

Better than expected data from US lifted the sentiments to which Indian

 Government added some fuel by……

Taking ‘Bold’ policy decisions like ‘Oil and Gas price hike and duty cuts,

Getting ‘Cairn Vedanta ‘deal conditionally through after long delay and

 making ONGC’s FPO road easy

In addition to that, drop in Food Inflation and better Monsoon in some parts

substantial rise in exports and increase in credit growth by 20% in 12 montha,

boosted the sentiments of FII and retail investors to lift the courage of Bull to drive

Nifty from weekly low of 5195 (nearer to 52 weekly low of 5177) to a significant

 level of 5600 and then to move towards, 5705, just short of  200DMA @5750

 Friday was the day of volatility, as markets moved from 5700 to 5600, a 100 point

move in days trade. Ultimately markets gave away some of the gains at the end

To close at 5627, the close above 5600 is definitely a positive one though some

news on IPM number, Auto numbers, RIL news  and profit booking

by short term investors spoiled the sport, to have a correction at the end of the day,

but the damage is not severe enough to get in to a bearish sentiment,still, I think

 there are certainly things that investors are going to have to overcome in the

second half of 2011, like ……..

-Global news flow

-US Data like, Job report on Friday

-Crude prices

-Earning season in next few days

-Greece austerity

-ECB rate hike Friday

-Monsoon progress

And last but not the least, movement in….

-S&P INDEX

-$ Index

-Crude

-Rupee/$

-Nifty technical data

The balancing between these factors will keep markets moving in some sort

Of narrow ‘trading zone’ for some more time before it makes a decisive move

 in next few days

The market soon enters the crucial period of corporate earnings.

Investors will closely watch the post Q1 June 2011 result management

 Commentary to judge the future earning out look

It has been a tough environment for India Inc,

 Which is facing cost pressure due to, rising interest rates and labor cost.

 Increased transportation cost for the goods and raw material is adding

 additional burden.

 All in all, one has to see how far all this affects the ‘Bottom line’ for

 Industries, which will have some effect on growth and markets

In general.

Technical data will give some directional clue for traders and speculators.

Technical view

Nifty has made a significant move during last week, Nifty had dropped

to 5196(17314) on Monday, which was closer to 52 weeks low of 5177 on

11th Feb 2011.

The on going correction is the, retracement of the high 5944(19811) on

6th April 2011 from the lower level of 5177(17296) of 11th Feb 2011.

Technically 61.8% retracement is @ 5651(18850)

                     50%   retracement is @ 5560(18553)

Now 5651(18850) will be acting a stiff resistance on closing basis for the

on going up move and 5560(18553) will be a strong support  while nifty

moves down after touching 5705(19153).

In coming week one has to keep these levels as guideline for

the trades

As long as Nifty is above the level 200 Day exponential average

at 5600(18700) it has all the chance to move towards 5710 and

then 5750(19180) which is the 200 DMA, ONCE WE ARE BEYOND

200DMA(5750) then the next target will be 5944(19811) from where Nifty has

Started retracing.

Watch 5560 as an immediate support level while

 any move below

5480 will be an indication of resumption of down move.

Market Strategy:

-Buy all the dips up to 5480

-Do not short as long as Nifty is above 5500

-All longs should have a stop loss at 5480

-Book part profits at every high above 5660

-5680-5710 should be treated as no trade zone.

-Close above 5751 for two/three trading sessions should

  Be used to buy aggressively

-Existing shorts should have a stop loss at 5710.

-No investment buying till NIFTY MOVES BEYOND 5750

Where to Buy:

FMCG: ITC, Dabur, Colgate,

BANKS: AXIS, CANARA,BOB

IT: TCS, HCL Tech

CAP GOODS: L&T, BHEL

OIL and GAS: RIL, GAIL, ONGC

Finance: PFC, REC, Shriram transport Fin

COSTRUCTION: DLF

Infra: Rel.Infra,Punj lloyed,Suzlon,Ramkey Infra

Metals: Hindalco, Sterlite,

Pharma: Dr. Reddy, Ranbaxy, Lupin

Telecom: Idea, R. Com

OTHERS

India Glycol            Hexawere

Banco Product       ACE

Elecon Engg.          Gati

Lanco                      Tecpro systems

Arvind                      Raymond

Hercules Hoist         GVK power

Pacific Ind.               Sharp Ind

Voltas                       Talwalkars

Ester Ind.                  SPIC

Loveble Lingeri         PAGE ind.

HDIL                         S. Kumar

Delat coro                 UCO Bank

GMDC

COMMENTS

Sensex and Nifty has moved beyond 19000 and 5600 respectively

after 8 weeks of  grinding in a range. Firm global markets and passage

of Greece Austerity package has changed the sentiment. It was Indian

governments actions on policy front which helped markets to move

towards significant high level.

Markets on Friday slipped below 5650 after touching high of 5700 on

the back of disappointing PMI(Purchasing Managers Index ) and Auto

numbers along with some news base fall in RIL.

Whether the rally will continue from here, is the main question one has

to answer. Economists and analysts are puzzled by the swift change in

the track by market and are trying to  find answers to…

Whether the last week’s move in the market is……………….

A…

-Breather  or Break out

-Out of Woods or It is temporary relief

-Change of Gear or Sentimental change

-Correction or Break through

-Turnaround or Around the turn

Because the rally has come with good amount of FII participation

And some retail purchasing.

This rally has come on Good Global cues like Greece Austerity and

US data

This rally has come on few Good events at local level like oil

And gas policy, slowing of food inflation etc.

Though all this suggest that the pressure on Global and Local

economy is easing, still the factors are not significant enough to

cause a turnaround, so fast and furious, because there are number of

hurdles to be crossed like,

-Earning down grades in next quarter, like Autos, Banks, Cap Goods

-Rate hike in July RBI policy

-Inability of Government to act on Infra spending

-ONGC FPO and other disinvestment program

-Deficient Monsoon

-Credit cost and labor cost increase to the industrials

-Greece is still not out of woods and may default

-US data though encouraging, jobless claim and

-Consumer index is still worrying. Crude though

-QE3 unlikely to come, US may slow down

-Rising $ Index

All this indicates that, markets will soon enter the crucial period

 of corporate earnings. First quarter June 2011 earnings will be

 a major trigger driving the sentiments. The result season will

 start kicking in from the second week of July 2011. Investors

 will continue to watch the progress of the monsoon rains.

 Global cues, crude oil prices. $ Index and FII flows

 so the answer to the above questions will be given by the time

 to come, till that time if markets remain in a ‘Upward Range’

 it will keep hopes of ‘Turn around, around the turn’ alive.

IMPRESSION

(Day) DREAMING

Read market for Monday as a separate blog

Thanks

Dr. Vasant Bele

All the views are personal, invest with caution and

After consulting experts