Turbulence & transition

Investors and traders should invest cautiously this week, as there could be wild fluctuations in the market

The week gone by was extremely volatile and fairly depressing. We opened strong for the week but barely managed to close positive. Thank God, it reversed on Friday and changed the mood and sentiment of people at the markets.
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There was a sharp rally on Friday where the BSE Sensex after touching an intraday low of 17,295 points surged close to 17,728.61 points a weekly loss of 279.54 points or 1.58 per cent.

The NSE Nifty touched an intraday low of 5,177.70 points before turning around sharply and closing at 5,310 points, a weekly loss of 85.75 points or 1.61 per cent.

The broader indices like the BSE100, BSE200 and BSE500 lost 1.95per cent, 2.22 per cent and 2.42 per cent respectively while the BSE midcap lost 3.99per cent. The BSE smallcap was a big loser with a weekly loss of 6.69 per cent.

The BSE bankex actually managed to close just about positive.
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The big stocks which lost ground were Allied Digital which lost 50.95per cent to close at Rs 78.35, Parasvnath Developers lost 40.2 per cent to close at Rs 26.40 and BEML lost 24 per cent to close at Rs 616.55.

Unitech lost Rs 8.25or 23.67 per cent to close at Rs 34.85 while controversy ridden DB Realty after a volatile intraweek low of Rs 109.70 closed virtually flat at Rs 139.70.

UNEVENTFUL

There was one new listing last week of Omkar Speciality Chemicals Limited which was a complete disaster with the share losing Rs 59.80 or 61 per cent to close at Rs 38.20. There are no new issues currently planned and looking at the current market scenario it seems most unlikely that anything would happen in the next fortnight. It appears that in this market scenario the only issuer could be the government who comes out with issues of ONGC and SAIL.

SELLING SPREE

The Foreign Institutional Investors (FII) continue their selling spree and have sold close to Rs 2,000 crores in the last six days. So far in the current calendar year they have sold equities worth Rs 7,000 crores or $ 1.5 billion on a net basis. Domestic institutions have by and large been neutral so far during the week. In the current month Domestic Institutions have bought on net basis equity of approximately Rs 200 crores with Rs 600 crores invested in January 2011. During the last two days they have bought on a provisional basis Rs 1,150 crores.

RECOVERY

During the week the ADAG or Anil Ambani group of shares were under pressure and though there was some recovery at the end of the week the pack still looks vulnerable. There is a buyback of shares which has been announced in one of the group company but that is only a knee jerk recovery. The only way there can be a sustained recovery is if the controversy regarding the 2G and the group is resolved.

VIGILANCE

Coming to the week starting today, it would continue to be extremely volatile and the markets would be carefully observing political events unfolding in Delhi and on the 2G scam. Corporate developments could affect individual companies involved in the same. Markets are likely to continue to recover during the beginning of the week and then there could be selling pressure at higher levels. The market would in all probability close with small gains for the week and that would be a big event, as it would have shown consolidation and recovery in the market place.

CONCERN

The BSE Sensex has support at 17,431 points, then at 17,289 points, then at 16,975 points and then at 16,403 points. It has resistance at 17,888 points, then at 18,174 points, then at 18,345 points, then at 18,552 points, then at 18,763 points and finally at 19,059 points.
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The NSE Nifty has support at 5,218 points, then at 5,178 points, then at 5,115 points, then at 5,088 points and finally at 5,051 points. It has resistance at 5,359 points, then at 5,439 points, then at 5,521 points and finally at 5,626 points.

Investors and traders should be extremely cautious this week as there would be wild fluctuations during trading. Though the markets offer value buying at current prices the markets need to stabilise and certainly the market needs time to heal its wounds and wait for the vitiated political climate to normalise. In such a scenario only nimble footed traders/investors with strict stop losses would make money in the current scenario. Trade cautiously.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website https://ak57.in. Readers may contact him atu00a0 arunkejriwal@gmail.com

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever.
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All matter published here isu00a0 for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.

Market Radar Gloomy outlook

The markets fell heavily last week with a moderate gain on Friday. Finally the Nifty closed above the 5300 mark. This recovery cannot be considered a turn around until it moves above 5363, 5451 mark. In the coming days, if the market moves above these levels then a further climb is expected which could push the Nifty towards 5627.

Friday's strong recovery in Nifty VIX (NSE Volatility Index) by 5.5 per cent to 23.47 shows some more upswing in the market. The major support for the Nifty is at 5225. Aggressive traders can buy 5300 Nifty March call options for a holding period of two days.

Early in the week the Union Ministry of Environment and Forest notified the Plastic Waste Rules 2011, which bans the use of plastic materials in sachets for storing, packing or selling gutka, tobacco and pan-masala. This was a strong and bold move from the ministry, which is expected to affect the tobacco sales and manufactures of sachets.u00a0

Companies like Jindal Poly and Uflex over reacted to the Plastic Waste Rules 2011. We also saw the Telecom Regulatory Authority of India (TRAI) coming out strongly and submitting its recommendations to the Telecom ministry to raise the estimated value of spectrum beyond 6.2 Mhz, currently held by telecom companies. This could cost the telecom companies of Rs 16000 crores.

Last week, reports came in from EPFR Global, which said that the investors withdrew $7 billion from the emerging market equity funds, which justified the downside in the past few weeks.

The inflation numbers remained a concern, even though the food price index came down this week, the fuel index remained the same. High inflation numbers, further rise in interest rates is expected to affect the corporate cost of funds and profit margins of rate sensitive sector stocks. This will eventually lead to dismal Q4 earnings.

On the domestic economic data front, the food inflation eased to a seven week low of 13.07 per cent against 17.05 per cent while the fuel price index showed a minor increase to 11.61 per cent against 11.6 per cent previously.

But towards the end of the week, the index of industrial production (IIP) numbers came in, which were at 1.6 per cent in December 2010 against 2.7 per cent in the previous month.u00a0 L&T and SBI are in the oversold region and they offer value-buying opportunities.

China was increasing the interest rates to curb rising inflation. The US was showing some positivity with the unemployment declining to 383000 from 419000. The US consumer credit rose to $6.1 billion against $2 billion previously.u00a0

Mid-cap counters like Aurobindo Pharma, Bata and IDBI can move up from the current levels.

After China raised the interest rates, the commodities especially the metal pack slipped. But towards the end of the week, recovery was seen in gold and other precious metals. Even though the demands for base metals are high, an increase in interest rates by China will have some negative effect on them in the short run.

But the medium to long term remains strong. Gold moved up towards $ 1358 and is likely to test $1370 and $ 1378. It has support at $1350.u00a0 Silver too is looking very strong due to sustained demand from both industry and investors.u00a0 Decline in base metal prices can lift auto stocks especially stocks like M&M and Tata Motors which has completed its downward correction.

Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear Market Strategies published by Tata McGraw Hill. He is also the technical and derivatives research head of Geojit BNP Paribas Financial Services Ltd. The author may have a vested interest in investments he has recommended.

Feel free to e-mail him at alex@geojit.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange and the Bombay Stock Exchange

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here isu00a0 for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions.

Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.