Tech View: Get set for post-Budget breakout Business Standard 25th Feb 2008)
A lacklustre week ended with net losses across most sectors except for IT stocks, which saw a small recovery. The Nifty closed at 5,110.75, down 3.62 per cent while the Sensex was down 4.23 per cent at 17,349 points. The Defty was down 4.4 per cent and the Junior was down 3.71 per cent while the NSE Midcaps lost 1.69 per cent.
Background signals were poor. Volumes were low and advances were outnumbered by declines. The BSE500 was down 3.3 per cent. FIIs were net buyers, domestic institutions were net sellers.
Outlook: Next week is likely to see the continuation of range trading in the early stages with high intra-day volatility. Since the Nifty is on reasonable support, it is likely to move up a bit, hitting resistance at 5,350-5,400. The Budget next Friday could provoke a decisive breakout in either direction.
Rationale: This has been a low-key settlement with very low volumes. The market has remained stuck inside a broad trading range of 4,800-5,600. It is now sitting on decent support along the 200 DMA and an up-move seems slightly more likely than a continued downtrend.
The Budget is usually a big enough event to set a new trend. While possible post-Budget direction is difficult to read, it could easily cause a move of 10 per cent, especially if it brings volumes back into the equation. A volume expansion is again, somewhat more likely to lead to a rise than to a fall.
Counter-view: The market is hovering just above the 200 DMA. If it closes below that and then breaks the support at 4800, it could be a long-term bear market. One positive is that expectations from the Budget are not very high – the market is more likely to be pleased than disappointed if there is a better-than-average budget. Bulls & bears: IT stocks did well this week as mentioned earlier. Most majors across the futures and options (F&O) were however, stuck inside trading ranges and drifted down. The move in IT was well distributed with majors like Infosys, Satyam and TCS all recovering from recent lows. Non-ferrous metal stocks such as Sterlite, Hindalco and Nalco all saw a pullback and so did Sail among steel counters. More
Technical analysis on markets (The Economic Times 25th Feb 2008)A couple of rallies were not enough to prevent the BSE Sensex from finishing 4.23%, or 766 points, lower last week. The Nifty lost 3.62% and the CNX Midcap a relatively modest 1.68%. Cipla, 8%, was the biggest winner among Sensex stocks. Hindalco, Bajaj Auto, Ranbaxy Laboratories, Tata Consultancy Services, Hindustan Unilever and ACC followed with gains between 2% and 8%. HDFC, down 11.9%, was the biggest loser among Sensex stocks. Reliance Energy, Bhel, State Bank of India , ICICI Bank, Tata Motors and Reliance Industries followed, with losses between 6% and 9%. Gujarat NRE Coke was the biggest winner among the more heavily traded non-Sensex stocks with a 28% gain. Renuka Sugars, Centurion Bank Of Punjab, Videocon Industries, Reliance Power, SAIL, Bajaj Hindusthan, IVRCL Infrastructure and Hindalco followed with gains between 6% and 19%. Jaiprakash Associates, down 14%, was the biggest loser among the more heavily traded non-Sensex stocks. Other losers included Indiabulls Real Estate, ABB, HDFC, Lanco Infratech, Unitech, Indian Bank, IndusInd Bank, Canara Bank, Kotak Mahindra Bank and Bharat Petroleum, with losses falling between 9% and 13%. All the indices have remained in intermediate downtrends, with the sporadic rallies not doing enough to trigger a new uptrend. The downtrend began with the Sensex’s Februarry 4 high of 18895. The Sensex has to get past last Tuesday’s intra-day high of 18314 to start a new intermediate uptrend. The equivalent for the Nifty is 5368, and that for the CNX Midcap is 7378. These levels are the points from which last week’s decline began. More
Asian stocks gain; AMBAC rescue talk helps (The Economic Times 25th Feb 2008)Asian financial shares rallied on Monday, pushing up stocks and denting bonds across the region, with Tokyo's Nikkei up more than 2 per cent, after talk of a rescue plan for a US bond insurer eased worries about the outlook of global credit markets. But US recession fears lingered, continuing to pressure the dollar against other major currencies, while geopolitical concerns in Iran and Turkey lifted oil prices towards $99 a barrel. Some analysts said the fate of bond insurers, and the implications on global credit markets, could keep stock gains in Asia short-lived after suffering double digit losses this year. "It's impossible to call an end to it," said Eric Betts, equities strategist at Nomura Australia. "First, it was subprime and then different investment banks and now it's insurers. It has to go all the way through the food chain probably." Financial firms such as South Korea's Woori Financial Group and Japan's Millea Holdings gained after news on Friday of a rescue plan for Ambac Financial sparked hopes the bond insurer will maintain its top credit ratings, averting sell-downs of the debt it has guaranteed. Lenders including Citigroup and UBS may announce a rescue for Ambac by Monday or Tuesday, a person familiar with the matter told media. The MSCI's index of Asian stocks excluding Japan rose 1.2 per cent as of 0150 GMT, with stocks in Korea and Australia up around 1 per cent each. Taiwanese shares gained over 2 per cent. Japan's Nikkei rose more than 2 per cent, with shares getting an additional boost on a British media report that China's sovereign wealth fund planned to buy as much as $10 billion in Japanese stocks and may also purchase a large stake in oil and gas developer Inpex Holdings. Although Asian financial firms have so far avoided the extent of credit- and subprime-related writedowns at other US and European lenders, markets as a whole have suffered from a lack of investor confidence that has spread worldwide. More
Dalal Street to see subdued trading ahead of BudgetLong(The Hindu Business Line 25th Feb 2008)The stock market hardly had a chance to wake up to the opportunities before the Union Budget announcements for 2008-09.
The “irrational exuberance” of the third quarter of 2007-08 lost its steam early in January and the market is yet to recover fully from the wounds of the crash.
Easy money-driven rally is not on for Dalal Street now.
Apart from the consolation of remaining “technically” in a bull market, the equity street is still far from reflecting optimism.
Bulls have tenaciously kept the Sensex bound within a range for the past three weeks, but did not have the heart to step into another adventure, lest it might again turn sour.
This week, the last before the Budget, Dalal Street may remain sedate and let the chances of revaluations largely go by.No appetite
It is clear that the long-term investors have also lost appetite for aggressive factoring of forward earnings.
The Wall Street players, who are used to irrational exuberance, fostered by the US monetary and fiscal authorities, have not returned to Dalal Street yet.
Many of them are still “bullish” about the ‘India story’.
Strategically, it could have been ideal time to re-enter Indian equities at a much lower valuations than say in December.
But since the valuations in the developed markets, particularly the US, are ruling cheaper in terms of relative price-earnings ratio, global money has no compulsion to flow to the emerging markets.Miscalculation
In short-to-medium-term perspective, local bulls had miscalculated on the overseas money flow and its supposed role in sustaining the rally.
After all emerging markets are not market economies, where key assumptions guiding the investments may go awry because of unexpected policy interventions. So the risk-weighted returns are likely to remain relatively lower even though absolute returns are higher. More
A lacklustre week ended with net losses across most sectors except for IT stocks, which saw a small recovery. The Nifty closed at 5,110.75, down 3.62 per cent while the Sensex was down 4.23 per cent at 17,349 points. The Defty was down 4.4 per cent and the Junior was down 3.71 per cent while the NSE Midcaps lost 1.69 per cent.
Background signals were poor. Volumes were low and advances were outnumbered by declines. The BSE500 was down 3.3 per cent. FIIs were net buyers, domestic institutions were net sellers.
Outlook: Next week is likely to see the continuation of range trading in the early stages with high intra-day volatility. Since the Nifty is on reasonable support, it is likely to move up a bit, hitting resistance at 5,350-5,400. The Budget next Friday could provoke a decisive breakout in either direction.
Rationale: This has been a low-key settlement with very low volumes. The market has remained stuck inside a broad trading range of 4,800-5,600. It is now sitting on decent support along the 200 DMA and an up-move seems slightly more likely than a continued downtrend.
The Budget is usually a big enough event to set a new trend. While possible post-Budget direction is difficult to read, it could easily cause a move of 10 per cent, especially if it brings volumes back into the equation. A volume expansion is again, somewhat more likely to lead to a rise than to a fall.
Counter-view: The market is hovering just above the 200 DMA. If it closes below that and then breaks the support at 4800, it could be a long-term bear market. One positive is that expectations from the Budget are not very high – the market is more likely to be pleased than disappointed if there is a better-than-average budget. Bulls & bears: IT stocks did well this week as mentioned earlier. Most majors across the futures and options (F&O) were however, stuck inside trading ranges and drifted down. The move in IT was well distributed with majors like Infosys, Satyam and TCS all recovering from recent lows. Non-ferrous metal stocks such as Sterlite, Hindalco and Nalco all saw a pullback and so did Sail among steel counters. More
Technical analysis on markets (The Economic Times 25th Feb 2008)A couple of rallies were not enough to prevent the BSE Sensex from finishing 4.23%, or 766 points, lower last week. The Nifty lost 3.62% and the CNX Midcap a relatively modest 1.68%. Cipla, 8%, was the biggest winner among Sensex stocks. Hindalco, Bajaj Auto, Ranbaxy Laboratories, Tata Consultancy Services, Hindustan Unilever and ACC followed with gains between 2% and 8%. HDFC, down 11.9%, was the biggest loser among Sensex stocks. Reliance Energy, Bhel, State Bank of India , ICICI Bank, Tata Motors and Reliance Industries followed, with losses between 6% and 9%. Gujarat NRE Coke was the biggest winner among the more heavily traded non-Sensex stocks with a 28% gain. Renuka Sugars, Centurion Bank Of Punjab, Videocon Industries, Reliance Power, SAIL, Bajaj Hindusthan, IVRCL Infrastructure and Hindalco followed with gains between 6% and 19%. Jaiprakash Associates, down 14%, was the biggest loser among the more heavily traded non-Sensex stocks. Other losers included Indiabulls Real Estate, ABB, HDFC, Lanco Infratech, Unitech, Indian Bank, IndusInd Bank, Canara Bank, Kotak Mahindra Bank and Bharat Petroleum, with losses falling between 9% and 13%. All the indices have remained in intermediate downtrends, with the sporadic rallies not doing enough to trigger a new uptrend. The downtrend began with the Sensex’s Februarry 4 high of 18895. The Sensex has to get past last Tuesday’s intra-day high of 18314 to start a new intermediate uptrend. The equivalent for the Nifty is 5368, and that for the CNX Midcap is 7378. These levels are the points from which last week’s decline began. More
Asian stocks gain; AMBAC rescue talk helps (The Economic Times 25th Feb 2008)Asian financial shares rallied on Monday, pushing up stocks and denting bonds across the region, with Tokyo's Nikkei up more than 2 per cent, after talk of a rescue plan for a US bond insurer eased worries about the outlook of global credit markets. But US recession fears lingered, continuing to pressure the dollar against other major currencies, while geopolitical concerns in Iran and Turkey lifted oil prices towards $99 a barrel. Some analysts said the fate of bond insurers, and the implications on global credit markets, could keep stock gains in Asia short-lived after suffering double digit losses this year. "It's impossible to call an end to it," said Eric Betts, equities strategist at Nomura Australia. "First, it was subprime and then different investment banks and now it's insurers. It has to go all the way through the food chain probably." Financial firms such as South Korea's Woori Financial Group and Japan's Millea Holdings gained after news on Friday of a rescue plan for Ambac Financial sparked hopes the bond insurer will maintain its top credit ratings, averting sell-downs of the debt it has guaranteed. Lenders including Citigroup and UBS may announce a rescue for Ambac by Monday or Tuesday, a person familiar with the matter told media. The MSCI's index of Asian stocks excluding Japan rose 1.2 per cent as of 0150 GMT, with stocks in Korea and Australia up around 1 per cent each. Taiwanese shares gained over 2 per cent. Japan's Nikkei rose more than 2 per cent, with shares getting an additional boost on a British media report that China's sovereign wealth fund planned to buy as much as $10 billion in Japanese stocks and may also purchase a large stake in oil and gas developer Inpex Holdings. Although Asian financial firms have so far avoided the extent of credit- and subprime-related writedowns at other US and European lenders, markets as a whole have suffered from a lack of investor confidence that has spread worldwide. More
Dalal Street to see subdued trading ahead of BudgetLong(The Hindu Business Line 25th Feb 2008)The stock market hardly had a chance to wake up to the opportunities before the Union Budget announcements for 2008-09.
The “irrational exuberance” of the third quarter of 2007-08 lost its steam early in January and the market is yet to recover fully from the wounds of the crash.
Easy money-driven rally is not on for Dalal Street now.
Apart from the consolation of remaining “technically” in a bull market, the equity street is still far from reflecting optimism.
Bulls have tenaciously kept the Sensex bound within a range for the past three weeks, but did not have the heart to step into another adventure, lest it might again turn sour.
This week, the last before the Budget, Dalal Street may remain sedate and let the chances of revaluations largely go by.No appetite
It is clear that the long-term investors have also lost appetite for aggressive factoring of forward earnings.
The Wall Street players, who are used to irrational exuberance, fostered by the US monetary and fiscal authorities, have not returned to Dalal Street yet.
Many of them are still “bullish” about the ‘India story’.
Strategically, it could have been ideal time to re-enter Indian equities at a much lower valuations than say in December.
But since the valuations in the developed markets, particularly the US, are ruling cheaper in terms of relative price-earnings ratio, global money has no compulsion to flow to the emerging markets.Miscalculation
In short-to-medium-term perspective, local bulls had miscalculated on the overseas money flow and its supposed role in sustaining the rally.
After all emerging markets are not market economies, where key assumptions guiding the investments may go awry because of unexpected policy interventions. So the risk-weighted returns are likely to remain relatively lower even though absolute returns are higher. More
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