Weekly Snippets

Research Desk – Stock Broking

July 23rd, 2016

MARKET ROUNDUP

NIFTY (8,541.20): Markets ended marginally higher on Friday, to end the week on a flat note. The markets underperformed in comparison to their global peers after domestic large corporate earnings disappointed the street. Axis Bank, Wipro and Hind Unilever has reported numbers below the street expectations while, HDFC Bank, Kotak Bank and ITC reported number in line with street expectation. Moreover, decent monsoon progress across the country is also likely to bring cheers to the farmers, and improve rural economy. On indices front, public sector enterprises, commodities and pharma outperformed Nifty, while, banking and Financials underperformed Nifty.

NIFTY.JPEG

On the global front, most of the indices are trading at 52-weeks highs indicating positive sentiments of risk on assets. Cooling of volatility index globally conveys that participants are not expecting any major surprises in the near term. Even on the money flows front, foreign players have bought equity securities worth 2221 crores during the week and are 85% long to their open interest on index futures front as on Friday, indicating bullishness on the index front for the near term.

Going forward for the next week, on the global front Central banks from Washington to Tokyo shall take centre stage and play the monetary policy orchestra to which global financial markets are likely to tune for the outcomes. However, policymakers are likely to remain cautious as they wait for the dust of UK’s vote to leave the EU still has to settle. US Fed Reserve is all but certain to keep interest rates on hold on Wednesday. Overall, we are expecting Fed might be limiting itself to a single or no hike for current year as US Elections are drawing closer. While we expect Bank of Japan might cut its inflation target, cut its key interest rates and increase its asset purchase program. On the domestic front, the discussions and outcome on current parliament sessions top priority GST bill shall be very crucial in deciding our markets near to medium term movement. Moreover, the 4th quarter performance card by index majors clubbed with July derivative series expiry shall induce volatility and stock specific movements. Index majors stocks like ACC, Ambuja Cement, Dr Reddy, Infratel, Maruti, Zee Ltd, Asian Paints, Bajaj Auto, Bharti Airtel, HDFC, YES Bank, Eicher Motors, ICICI, and L&T shall be announcing their numbers in the coming sessions.

Technically, Nifty is trading in the range of 8475-8595 over last few trading sessions, indicating the undercurrent short term to medium term up trend is still intact. While on the weekly charts, a feeble bearish counter attack line candle pattern is observed, but the same may be nullified if Nifty sustains above 8600. For now, Nifty has resistance at 8590-8620 and above it at 8730-8760 zones, while supports are placed at 8460-8490 zone followed by 8350-8400 zones. Any decisive move and close above 8600 can fuel the rally further upside till 8750. However, in case if Nifty does fail to sustain above 8460, a slide towards 8400 is possible. Therefore the week, we expect Nifty to trade in the range of 8400-8600 and breach of the same shall trigger 150 points move on the higher side.

Report Highlights

CORPORATE ACTIONS, ECONOMIC EVENTS, RESULTS CALENDAR

Pg. 2

TECHNICAL PICK : AUROPHARMA

Pg. 6

HYBRID STRATEGY & PAIR STRATEGY

Pg. 7

DID YOU KNOW??-  Sovereign Gold Bonds

Pg. 8

Index Strategy

BULL CALL SPREAD IN NIFTY

BUY one lot of NIFTY AUGUST 8600 CE @ 142 and SELL one lot of NIFTY AUGUST 8800 CE @ 63 | MAX PROFIT: 9075 | MAX LOSS: 5925| BEP: 8679 | SL: 8400 levels (Spot Levels).

STREET BUZZ...

RESULTS CALENDAR

 

·   India received USD 5.34 billion foreign direct investment in the first two months of the current financial year.

·   The Markit Flash US Manufacturing PMI came in at 52.9 in July of 2016, up from 51.3 in June and much better than market expectations of 51.6. It is the highest reading since October last year as output and new business growth accelerated and payrolls rose the most in 12 months.

·   The number of Americans filing for unemployment benefits decreased by 1,000 to 253,000 in the week ended July 16th compared with the previous week's unrevised level of 254,000. The figure came in way below market expectations of 265,000 and hit its lowest level since April

·   The ECB left its benchmark refinancing rate unchanged at 0% for the fourth straight month in July, as widely expected. Policymakers considered that European markets have weathered the uncertainty experienced in the days after the UK’s referendum with encouraging resilience and that the current monetary policy measures have helped keep market stress contained.

·   Consumer prices in the United Kingdom went up 0.5 percent year-on-year in June of 2016, accelerating from a 0.3 percent increase in the previous two months and higher than market expectations of a 0.4 percent gain. Cost of housing and utilities increased for the first time in three months and recreation and culture recorded the biggest gain since October of 2014.



 

CORPORATE ACTIONS DURING THE WEEK

Company Code

Ex Date

Record Date

Purpose

TCS

25/07/2016

26/07/2016

Interim Dividend - Rs 6.50/- Per Share

LUPIN

25/07/2016

-

Annual General Meeting/ Dividend -Rs 7.50/- Per Share

BHARATFORG

25/07/2016

-

Dividend - Re 0.50/- Per Share

BERGEPAINT

26/07/2016

-

Annual General Meeting/ Dividend - Re 1/- Per Share

ECONOMIC EVENTS DURING THE WEEK

Event

     Date

Prior

Survey

GB GDP Growth Rate YoY Prel Q2

27/07/2016

2.0%

1.80%

US Fed Interest Rate Decision

27/07/2016

0.50%

0.50%

IN Fiscal Deficit INR Crore

29/07/2016

91660.00

-

FR GDP Growth Rate YoY 1st Est Q2

29/07/2016

1.30%

1.10%

NIFTY 50 V/S GLOBAL INDICES

SECTOR SNAPSHOT

SECTORAL SNIPPETS

NIFTYBANK has underperformed Nifty 50 and generated -1.39% returns, whereas, Nifty50 ended on a flat note during the same period. AXISBANK, CANBK, BANKBARODA, PNB and KOTAKBANK underperformed Bank Nifty last week, whereas, INDUSIND, FEDERALBANK, HDFCBANK outperformed the index last week. Bank Nifty has closed above its 20- DMA suggesting strength in the index in short term with major support levels near 18460. Among the oscillators, 14 days RSI(62.90) trading between (60-74) levels which technically we can consider as bullish zone, also indicating an overall strength in  the index for short term. Going ahead, the index is expected to outperform the Nifty and may find support around 18450-18400 levels and resistance near 19000-19100 levels.

NIFTYREALTY index gained 0.59% in the last week. The index witnessed profit booking from 211.15 levels after given rally from 184.40 levels to 211.15 with minor throwbacks on the weekly chart. On the daily chart, the index is trading above its 20 day simple moving averages the index made “HAMMER CANDLESTICK PATTERN” at 20 –DMA which confirm the bullishness of the index, indicating buyers are still present in an index at lower levels. Technically, the index has tested its 20 day EMA (200.11) on the daily chart and also the index is making higher highs and higher lows. Among stocks, OBREROIRLTY, IBREALEST are looking week HDIL DLF, PRESTIGE and SOBHA are looking strong in near term. For the week, we are bullish in an index and we expect the range of the week may remain between 200-218 levels.

NIFTYIT index marginally gained 0.37% last week and witnessed sideways movement between 10800-10600 level. The index has taken support near 10600 levels and moved up after falling from 11586 levels to 10600 levels. On the weekly charts, the index has just breached its support from its 21- week EMA and trading in negative biased between the said levels. The index is expected to resume its down move from current levels of 10756 and may touch 10400-10350 levels in short term. On the other side, the index has resistance around 11000 levels and 11150 levels.

NIFTYENERGY index gained 1.13% which has also outperformed the broader index in the last week. Technically, the index is looking strong but currently trading near its support level of 9120, but still there is no sign of any reversal in the index. CAIRN, IOC, BPCL outperformed NIFTY ENERGY last week whereas ONGC, GAIL, RELIANCE, and RPOWER underperformed the index last week. For the week, we are expecting sideways to positive movement in an index. The index has support near 9100-9120 levels and resistance near 9400-9480 levels on closing basis.

FII ACTIVITY IN DERIVATIVES

During the week, FII’s on the index derivative front, for index futures long side they increased the number of contracts from 257243 contracts to 294744 contracts (W o W), while on the index futures shorts they have increased the number to 52971 contracts from 50951 contracts (W o W) making their net index futures longs exposure to 241773 contracts from 206292 contracts previous week. Even on the options front, for the week also, index call longs have increased to contracts from 256321 contracts, index puts longs have significantly increased from 354805 contracts to 401598 contracts, on the index calls shorts they have increased the number of contracts to 246413 from 216339 and on the index put shorts also they increased to 128005 contracts from 153056 contracts of the previous week. The above data indicates that FII’S might have increased their bullish stance ahead of GST bill.

While, on the stocks derivative specific front, stock futures long contracts have been reduced by 330631 contracts to 319634 contracts (W o W) and stock futures shorts contracts have been increased by 505259 contracts to 527596   contracts (W o W). While, on the options front, stock calls longs have been increased by 26021 contracts, stock put longs have been increased by 26090 contracts, stock call shorts have been increased by 34374 contracts, and stock put shorts have been increased by 28632 contracts.

INDEX FUTURES

STOCK FUTURES

INSTITUTIONAL ACTIVITY IN CASH

For the week in the cash markets, FII were buyers while domestic institutional players were sellers. Foreign institutional players bought securities worth 2221.19 Crores. While for the month of July they bought securities worth 6403.05 Crores and for the current calendar year they bought securities worth 10563.51 Crores .

While on the domestic front, they were sellers to the tone of 1600.04 Crores worth equities during last week, while for the month of July, they remained as sellers to the tune of 4489.82 Crores but on the other side for the current calendar year they have bought more than 8198.25 Crores indicating their positive bias on equities in the near future.

Time Frame

FII/FPI

DII

 Month Till Date (July)

6,403.05

-4,489.82

Last Month (June)

3,957.95

-2,173.35

Year Till Date (01/01/16-22/07/16)

10,563.51

8,198.25

For the CY ended 2015

-17,512.09

67,412.64

Note: | Values in Rs Cr.                    Source: SEBI/NSE

OI CHANGES DURING THE WEEK - STOCKS

Top OI Gainers with increase in Price

Long Accumulation

Stock

OI (in lakhs)

OI Chg (%)

PRICE Chg (%)

ENGINERSIN

56.14

88.04

8.87

HAVELLS

88.46

83.22

4.52

TORNTPHARM

3.56

51.36

3.29

ACC

12.84

43.54

4.25

SUNTV

120.60

34.27

8.98

Top OI Closures with increase in Price

Short Closure

Stock

OI (in lakhs)

OI Chg (%)

PRICE Chg (%)

IGL

19.42

-15.27

2.85

CUMMINSIND

8.84

-13.24

8.49

BEML

13.37

-10.96

4.28

ADANIPORTS

293.78

-10.68

2.20

COALINDIA

127.43

-10.47

3.95

Top OI Gainers with decrease in Price

Short Accumulation

Stock

OI (in lakhs)

OI Chg (%)

PRICE Chg (%)

MINDTREE

29.96

121.34

-12.61

KSCL

52.25

27.49

-8.48

WIPRO

67.71

27.13

-3.02

SRTRANSFIN

31.82

25.27

-7.36

BANKBARODA

541.24

19.02

-8.25

Top OI Closures with decrease in Price

Long Closure

Stock

OI (in lakhs)

OI Chg (%)

PRICE Chg (%)

JINDALSTEL

427.77

-14.74

-4.76

CANBK

133.65

-11.41

-6.07

PNB

469.98

-8.23

-11.59

ORIENTBANK

149.10

-6.96

-8.93

BANKINDIA

242.88

-6.12

-7.33

NIFTY OPTIONS

NIFTY OPTIONS OI

On the options front, the data suggests that 8500 PE has significant open interest and 8400 PE options has highest put writing as witnessed with 58.75 lakh shares standing in open interest. On call options front  maximum writing is seen at 8600 strike with open interest of 61.76 lakh shares followed by 8700 strike where second highest call writing has been seen to the tone of 57.92 lakh shares. This indicates market range is seen between 8400-8700 for the week.

PCR OI V/S NIFTY

From the past few weeks PCR has been in the range of 1-1.20 levels signifying put writers having an upper edge above the call writers. During the last week PCR declined to 1.04 from 1.12 levels and currently trading at the lower end of the range indicating profit taking by the market participants.

 

PICK OF THE WEEK – BUY AUROPHARMA | CMP: RS. 798.55

ACT

Buy

ENTRY

790-795

SL

740

TGT

878-890

TIMEFRAME

4-6 Months

BOSCHLTD.JPEG

·         AUROPHARMA has witnessed a spectacular rally from a low of 69.18 in August ’2013, to its an all time high of 891.5 in December 2015 and corrected from there in the monthly chart to 582 which is nearly 38.2% retracement level of the said rally and bounced back from there to start a fresh leg of rally. The stock has given a breakout from an inverted head and shoulders pattern with an unfilled gap in daily chart and has given a strong uptick with jump in volumes indicating bullishness in the stock.

·         On the daily charts, the stock is trading above its 21/50/100/200 DEMA levels indicating strength in all major time frames. On the daily and weekly charts, the 14 period RSI is moving above the 9 period RSI and moving northwards indicating positive momentum in the counter.

·         On Bollinger bands daily charts, the price is moving up after touching the upper band with widening bands indicating strong positive momentum. Other leading indicators parabolic SAR and Heiken candlesticks suggest positive trend in the counter.

·         Therefore, we recommend short to medium term traders to buy the stock on around 790-795 levels with a strict stop loss placed below the level of Rs.740 for potential upside targets of Rs.878-890 over the next 4-6 months.

HYBRID STRATEGY

CALL LADDER IN BANKNIFTY

BANKNIFTY July Future has total open interest of  19,37,240 shares while BANKNIFTY July 18600 CE witnessed addition of 55,040 shares making a total OI of  73,680 shares and  BANKNIFTY July 18800 CE witnessed addition of 42,080 shares making a total OI of 2,13,640  shares and BANKNIFTY July 18900 CE witnessed addition of  6800 shares making a total OI of 2,39,920  shares during the last trading session. Technically, BankNifty is in the cycle of higher highs and higher lows on the daily basis & is trading above its major moving averages on the daily charts. Hence, we recommend building Call Ladder spread strategy in BANKNIFTY.

Buy one lot of BANKNIFTY JULY 18600 CE @ 228, Sell one lot of 18800 July CE @ 122 & Sell one lot of 18900 July CE @ 83..Max Profit: 7080, Max Loss: 920 Below LBEP & Unlimited Above UBEP, LBEP: 18623,UBEP: 19077

PAIR STRATEGY

BUY RELIANCE & SELL ONGC

RELIANCE and ONGC have shown 0.23 % co related price movement in the past 6 Month  data set and the pair is trading with -0.40 Standard deviations away from its mean and is 75 % Co-Integrated from last 6 Month data set. The pair is currently trading with a price ratio of 4.56 and its mean is at 4.64 we believe pair will divert from its mean in the near future. We will initiate pair trade between RELIANCE and ONGC

Buy one lot of RELIANCE JULY Future @ 1017.00-1017.50 and Sell one lot of ONGC JULY Future @ 222.50-223.00; Current price ratio is at 4.56 target would be 4.85 price ratio and Stop Loss would be placed at 4.45 of price ratio.

c

DIDI YOU KNOW???   Sovereign Gold Bonds

Sovereign Gold Bonds

The Government of India will be launching the Sovereign Gold Bonds Scheme. As investors will get returns that are linked to gold price, the scheme is expected to offer the same benefits as physical gold. They can be used as collateral for loans and can be sold or traded on stock exchanges

SGBs are to be linked to the price of gold, and issued by the central bank (Reserve Bank of India). It is proposed that banks, non-banking finance companies (NBFCs) and post offices will be able to collect money and redeem the bonds on behalf of the government. The bonds are to be issued in denominations of one to 500 grams of gold with a minimum tenor of five to eight years.

Benefits

 

  • The Sovereign Gold Bonds will be available both in demat and paper form
  • The tenor of the bond is for a minimum of 8 years with option to exit in 5th, 6th and 7th years
  • 2.75% assured interest per annum on the initial investment
  • Interest will be credited semi-annually to the investor and the last interest will be payable on maturity along with the principal
  • They will carry sovereign guarantee both on the capital invested and the interest
  • Bonds can be used as collateral for loans
  • Bonds would be allowed to be traded on exchanges to allow early exits for investors who may so desire
  • Assurance of Purity: RBI will announce the price before the issue date which will be fixed on the previous week's simple average of closing price of gold of 999 purity published by IBJA
  • Capital gain tax arising on redemption of SGB to an individual has been exempted. The indexation benefit will be provided to LTCG arising to any person on transfer of bonds. The department of revenue has said that they will consider indexation benefit if bond is transferred before maturity and complete capital gains tax exemption at the time of redemption.

 

Bond issuer

The Bonds are issued by the Reserve Bank of India on behalf of the Government of India. The bonds are distributed through banks and designated post offices. This should make subscribing to the bonds an easy affair. During redemption, "the price of gold may be taken from the reference rate, as decided, and the Rupee equivalent amount may be converted at the RBI Reference rate on issue and redemption".

Where to BUY?

Investors can apply for the bonds through scheduled commercial banks and designated post offices. NBFCs, National Saving Certificate (NSC) agents and others can act as agents. They would be authorised to collect the application form and submit in banks and post offices.

BSE and NSE are included as receiving offices, apart from the commercial banks, SHCIL, designated post offices.

 

KARVY RESEARCH DESK

QUERIES & FEEDBACK

JK Jain

Toll-Free: 1800 425 8283

Head Research

Email ID: service@karvy.com

KARVY STOCK BROKING LTD

KARVY STOCK BROKING LTD| Karvy Millenium | Plot No : 31| Financial District |Gachibowli | Hyderabad - 500 032

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