Weekly Snippets

Research Desk – Stock Broking

8th October, 2016

MARKET ROUNDUP

NIFTY (8,697.60): Indian markets kick started the week on a strong note garnering profits of around one and a half percent on the maiden trading day, boosted by hopes of an interest rate cut by the Reserve Bank of India. The six-member Monetary Policy Committee led by newly-appointed RBI Governor Urjit Patel took the country's first collective interest-rate decision to cut the repo rate to a more than five-year low at 6.25%. But, later the stocks succumbed to pressure on account of profit booking from higher levels mainly led by Information Technology & Pharmaceuticals counters ahead of earnings of the IT major, Infosys coupled by nervousness ahead of the US presidential elections debates. On the other hand, Auto stocks ended in positive terrain on hopes of good sales ahead of the festive season followed by Energy and Metal counters which supported the markets at lower levels. In the coming truncated week, Nifty may take further cues from global markets which are expected to remain highly volatile amid uncertainties such as the Fed interest rate hikes and the US presidential elections. On the other hand, any news from across the border can create short-term knee-jerk reactions inducing further volatility for the near term. Also, the focus will now shift to the earnings season which is set to start next week, with IT majors TCS and Infosys lined up to announce their September quarterly results on October 13 and 14 respectively. It will also be a data heavy week for the markets as market participants will be eyeing the Index of industrial production (IIP) data which will be announced on Oct 10 followed by Consumer Price Index (CPI) data which will be announced on Oct 13.

NIFTY.JPEG

Technically, in the past two weeks Nifty has been struggling to move higher and in fact the strategy on the index seems to be changing from “buy on dips” to “sell on rally” for the near term. On the higher side, Nifty is facing stiff resistance to cross the psychological mark of 8800 levels where the unfilled gap (8820-8809.55) is placed which is also expected to act as a positional resistance for the markets in the near term. As per the recent price action, the index has been making lower lows and lower highs from the past three trading sessions trading just above its 50-DMA on the daily charts indicating signs of weakness.  On the flip side, 8500-8550 levels may be acting as crucial supports where the recent swing lows are placed breaching which may trigger further downside towards 8400 levels. On the derivative front, the data suggests that Nifty has immediate crucial support around 8600 levels, where highest put writing is witnessed followed by 8500 levels where second highest put writing is pegged with total open interest standing at 41 lakh shares. On the flip side, the immediate resistance for the index is pegged around 8800 levels, where the second highest call writing is witnessed around 3.90 lakh shares. Hence, in the coming truncated week, we expect Nifty to remain in the range of 8550-8800 levels where any rise towards the upper band may be used as selling opportunity in the market for the downside targets of 8550-8500 levels.

Report Highlights

CORPORATE ACTIONS, ECONOMIC EVENTS, RESULTS CALENDAR

Pg. 2

TECHNICAL PICK : KESORAMIND

Pg. 6

HYBRID STRATEGIES

Pg. 7

DID YOU KNOW??-  PUBLIC DEBT MANAGEMENT CELL

Pg. 8

Index Strategy

PROTECTIVE CALL IN NIFTY

SELL ONE LOT OF NIFTY OCT FUT @ 8750 AND BUY ONE LOT OF NIFTY OCT 8750 CE@ 95.MAX LOSS: 7125 MAX PROFIT: UNLIMITED BELOW BEP: BEP: 8655

STREET BUZZ...

RESULTS CALENDAR

·   In a probable addition to a slew of policies that the government is mulling over, it could enable pension funds along with insurance firms such as the LIC among other players to invest in start-ups boosting their opportunities to raise funds. The proposal is a result after the Employees' Provident Fund Organisation had recently taken steps to increase their exposure in stock markets.

·   Cotton traders driven by patriotism and factoring in the uncertainty over the supplies of the raw material, have put signing of new deals on hold bringing the $822 million-a-year trade in cotton to a juddering halt. Pakistan, the world's third-largest cotton consumer, usually starts importing from September, but three Indian exporters said the number of inquiries had slowed to a trickle in the last two weeks.

·   Domestic passenger vehicle sales grew at 19.92 per cent in September, touching highest volumes in over four-and-a-half years, led by record sales in the utility vehicles segment.

·   The US has expressed concern over Russian activities on the Baltic Sea and Sweden, Estonia and Latvia have also reported air violations. Russia's military has also been reported to be active near US aircraft and ships in the region.

 

CORPORATE ACTIONS DURING THE WEEK

Company Code

Ex Date

Record Date

Purpose

8KMILES

10-10-2016

13-10-2016

Bonus 1:3/Face Value Split (Sub-Division) - From Rs 10/- Per Share To Rs 5/- Per Share

GAL

13-10-2016

14-10-2016

Face Value Split From Rs 10 To Re 1

IOC

18-10-2016

19-10-2016

Bonus 1:1

-

-

-

-

ECONOMIC EVENTS DURING THE WEEK

Event

     Date

Prior

Survey

GER Balance of Trade

10-10-2016

€19.5B

€20B

CN Balance of Trade

13-10-2016

$52.05B

$53B

IN Inflation Rate YoY (Sep)

13-10-2016

5.05%

5.3%

IN WPI Inflation Rate YoY (Sep)

14-09-2016

3.74%

4.01%

NIFTY 50 V/S GLOBAL INDICES

 

 

 

 

SECTOR SNAPSHOT

 

 

SECTORAL SNIPPETS

NIFTYMETAL (2666.55) has outperformed NIFTY and generated 5.73% return, whereas NIFTY ended with a positive return of 1% during the last week. VEDL, NMDC, TATASTEEL, SAIL and HINDALCO were the top gainers from the index and looking very strong whereas COALINDIA closed in red during last week.  Adding to that, the index is trading well above all its major moving averages and also above the mean of the Bollinger Band, with positive price structure suggesting an overall strength in the index in the near term. 14-period RSI is trading above its 9-day signal line and poised with positive bias, indicating that index is likely to continue its positive momentum in the coming week as well. Going ahead, the index is expected to trade with positive bias and outperform the NIFTY in the coming week also. The index may find resistance around 2,700 levels and above it 2,750 levels and on the lower side support is at 2,500 levels.

NIFTYAUTO (10344.30) ended with a weekly gain of 3.14% and outperformed Nifty. Major gainers from the index were TATAMOTORS leading the pack along with MARUTI, HEROMOTOCO and BAJAJ-AUTO, whereas M&M was the top loser from auto space. Adding to that, the index is placed well above all its major moving averages and also above the mean of the Bollinger Band, with positive price structure, indicating uptrend in the index to continue in near term. On the indicator front, 14-period RSI is poised with positive bias, suggesting uptrend in the index. The immediate support for the NIFTYAUTO is pegged at 10,200 and below 10,100 levels. On the higher side, the index may face resistance around 10,450 levels and above it at 10,500 levels. Going forward, we expected the index to trade with positive bias and outperformed NIFTY in the coming week also. Stock specific action is expected to be seen in the sector during the next week.

BANKNIFTY (19400) closed positive for the week generating 0.59% return. Stocks that outperformed the index and closed in green for the week are CANBK PNB, SBIN, INDUSINDBK, FEDERALBNK, BANKINDIA and YESBANK. Index draggers for the week were ICICBANK, AXISBANK, and KOTAKBANK. BANKNIFTY is trading above all its near term moving averages on the weekly chart.  BANKNIFTY could be sideways for the coming week as 14-day RSI on the daily chart continues to be below 9-day exponential moving average. On the other hand, the index is trading above all its near term moving averages on the weekly chart. Further, the index has held on to its previous week low of 19285, giving closing above that. For the coming week, immediate support can be placed at 19300 and if it is broken, the index could fall further to test 19000 levels. Resistance for BANKNIFTY in the coming week can be pegged at 19500 followed by 19800.

NIFTYIT (10184.25) remained weak for yet another week shedding 1.05%, underperforming NIFTY. Stocks that carry maximum weight age such as TCS, INFY, and WIPRO pulled the index downwards. Other stocks that generated negative return for the week were TATAELXSI and TECHM. Stocks that closed in green for the week were JUSTDIAL, HCLTECH, MINDTREE, OFSS and KPIT. NIFTYIT is placed below its near term moving averages, not indicating any upside for the next week as well. The index has broken its crucial support of 10250-10230 on closing basis on the daily chart and closed below that on the second last day of the last week. On the daily chart, RSI has moved below the 9-day exponential moving average adding to the weakness of the index. For the coming week immediate support for the index is 10150. Immediate resistance for the index can be seen around 10450-10470. NIFTYIT is expected to remain in the bearish zone for the upcoming week.

FII ACTIVITY IN DERIVATIVES

In the week passed by FII’s continued to reduce their Index futures positions, they were sellers to the tune of Rs. 519.09 crore. Week on week basis they build marginal 844 long contracts from 223472 contracts earlier week to 224316 contracts last week, and also build 9547 short contracts, net stands at 44137 contracts. On options front, they build few longs and shorts but at this juncture it appears that to some extent they are negatively biased, as ratio of long puts and short calls are higher than long calls and short puts.

During the week, FII’s were net buyers in the Stock futures for Rs. 387.43 crore. In compare to earlier week they build long position with 11497 contracts from earlier week of 275448 contracts to 286945 contracts, and also they took few short position by 7901 contracts from earlier week of 566649 contracts to 574550 contracts last week. On the options front they were building position in Calls as well Puts side for hedging the position.

INDEX FUTURES

STOCK FUTURES

INSTITUTIONAL ACTIVITY IN CASH

The Foreign institutional players were buyers of worth Rs. 1,031.4 Crore in the cash segment, and they were net buyers of Rs. 3,329.62 Crore in the month of Sept. For the year 2016 till date, the FII’s are net buyers to the tune of Rs. 27,422.43 Crore.

The Domestic Institutions were net buyers of securities worth Rs. 278.18 Crore for the just concluded week, and in the previous month Sept they were net buyers to the tune of Rs. 1,999.42 Crore. And year till date they are net buyers of Rs. 4,504.76 Crore.

Time Frame

FII/FPI

DII

 Month Till Date (Oct)

1,031.40

278.18

Last Month (Sep)

3,329.62

1,999.42

Year Till Date (01/01/16-07/10/16)

27,422.43

4,504.76

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 (%)

HINDZINC

58.27

59.32

7.99

OIL

12.58

57.11

3.81

SRF

4.99

50.60

6.54

AMARAJABAT

6.01

49.55

3.66

MCLEODRUSS

61.23

34.90

4.41

Top OI Closures with increase in Price

Short Closure

Stock

OI (in lakhs)

OI Chg (%)

PRICE Chg (%)

PIDILITIND

19.95

-26.55

5.44

DABUR

51.23

-17.41

4.96

UNIONBANK

112.12

-16.73

8.55

NMDC

138.54

-15.54

11.34

GAIL

74.57

-12.74

10.52

Top OI Gainers with decrease in Price

Short Accumulation

Stock

OI (in lakhs)

OI Chg (%)

PRICE Chg (%)

AJANTPHARM

4.92

40.41

-2.08

BANKBARODA

462.32

37.71

-2.12

AXISBANK

369.76

15.22

-1.39

COALINDIA

135.47

14.32

-1.09

ICIL

8.56

14.07

-2.67

Top OI Closures with decrease in Price

Long Closure

Stock

OI (in lakhs)

OI Chg (%)

PRICE Chg (%)

IBREALEST

385.30

-5.49

-5.75

NIITTECH

9.94

-5.15

-2.55

WIPRO

75.65

-4.24

-0.42

-

-

-

-

-

-

-

-

NIFTY OPTIONS

NIFTY OPTIONS OI

On the derivative front, the data suggests that Nifty has immediate crucial support around 8600 levels where highest put writing is witnessed followed by 8500 levels where second highest put writing is pegged with total open interest standing at 41 lakh shares.  On the flip side, immediate resistance for the index is pegged around 8800 levels where the second highest call writing is witnessed around 3.90 lakh shares. Hence, at current juncture, in a truncated week, we expect Nifty to remain in the range of 8550-8800 levels where any rise towards the upper band may be used as selling opportunity in the market for the downside targets of 8550-8500 levels.

PCR OI V/S NIFTY

In the last trading week, the PCR has been trading around 0.98 levels throughout the week indicating choppiness in the market with no aggressive directional move for the coming days. Any rise in the PCR ratio towards 1.25-1.30 levels may be used as a selling opportunity in the market as PCR towards 1.20-1.30 levels is considered as sign of caution, which may lead to round of profit booking in the market. On the other hand, any cool off in the PCR ratio 0.80-0.85 may be used as good opportunity for the bullish traders to enter the market for a positional point of view.

PICK OF THE WEEK – BUY KESORAMIND | CMP: 186.75

ACT

BUY

ENTRY

180

SL

150

TGT

220-225

TIMEFRAME

4-6 Months

BOSCHLTD.JPEG

·         Kesoram was founded in 1919 as a cotton textile mill in Calcutta under the name of Kesoram cotton Mills Ltd. Kesoram soon jump into the tyre and cement industries and change its name to Kesoram Industries Limited. The company is engaged in the manufacture of cement, tyres, tubes, rayon, paper, heavy chemicals and spun pipes.

·         The stock has resumed its up move after posting double bottom on weekly charts and closed the week with the positive return of 6.41%. The stock has given the breakout of above said double bottom around 125 levels. Thereafter, the stock has seen facing resistance near 152 levels. Where the stock has seen consolidation with average volume formation. Thereafter, the stock has given breakout with significant volume which enhances our bullish view in the counter.

·         On the technical setup, the 14-period RSI has given the positive cross over with signal line and pointing northward which reflects the strength in the up move. The MACD is trading above the equilibrium line in buy territory indicate strength in the counter. On the other side, Parabolic SAR is trading below the price which suggest up trend in the stock will remain intact.

·         The recent development in the stock suggests that the stock is well placed to take it up move. Hence, we suggest buying in the stock around on trading dip of around 180 levels keeping stop loss of 150 levels for the target of 220-225 levels in near term for the time frame of 4-6 months.

HYBRID STRATEGY

BEAR PUT RATIO IN BANKNIFTY (Weekly Expiry)

BANKNIFTY OCT FUT has a total Open Interest of 20 64 960 shares over the last trading session. BANKNIFTY 13OCT 19400 PE has a total Open Interest of 1 76 640 with an addition of 19 520 shares over the last trading session with IVs trading around 13.01 and BANKNIFTY 13OCT 19100 PE has a total Open Interest 1 33 520 with an addition of 64 240 shares over the last trading session with IVs trading at 15.40 levels. Technically, Bank Nifty is making lower lows and lower highs from highs of 20 400 levels and is trading near its 19 400 levels below which the stock could test lower levels and thus we recommend to build Put Ratio strategy.

BUY ONE LOT OF BANKNIFTY 13OCT 19400 PE @100-105.00 AND SELL TWO LOTS BANKNIFTY 13 OCT 19100 PE @ 38.00 -40.00.MAX PROFIT :10840 @ 19100|MAX LOSS :UNLIMITED BELOW LBEP AND 1160 ABOVE  19371 BEP:18971.00

HYBRID STRATEGY

BULL CALL SPREAD IN ZEEL

ZEEL OCT FUT has a total Open Interest of 72 60 500 with an addition of 29 900 shares over the last trading session an increase in 0.41 % over the last trading period. ZEEL OCT 570 CE has an Open Interest of 140 400 shares with IVs trading around 28.67 levels and ZEEL OCT 590CE has an OI of 102 700 shares with IVs trading at 30.24 levels. Technically, the stock is in uptrend making lower highs and lower lows and trading above 21,50,200 DEMA levels and the RSI is trading around 64 levels .We believe the stock will trade further higher in the near term  with resistance seen around 590 levels(previous swings high).Thus, we recommend to build Bull Call Strategy in ZEEL.

Buy one lot of ZEEL OCT 570 CE @ 17.50 and Sell One lot of ZEEL 590 CE @ 10.00. Max Profit: 16 250|Max Loss: 9 750 BEP: 577.50.

c

DID YOU KNOW?? – PUBLIC DEBT MANAGEMENT CELL

 

 

 

Union Finance Ministry unveiled Public Debt Management Cell (PDMC) on October 6th 2016. Ministry aims at streamlining the government borrowings and better usage of cash with the overall objective of deepening bond markets. PDMC will work under the supervision of The Joint Secretary (Budget), Department of Economic Affairs, Ministry of Finance. Under the interim arrangement, PDMC will function from the RBI‘s Delhi Office and two years from now the agency will be upgraded to Public Debt management agency.

          

 Highlights of PDMC

Ø  The PDMC would be staffed by 15 debt managers from Budget Division, RBI, current Middle Office and other government units.

Ø  Debt management functions will be performed by newly formed PDMC and RBI will gradually transfer the responsibility to the agency avoiding any market disruptions

Ø  PDMA will only has advisory functions in order to curb any possible conflict with the statutory function of RBI

Ø  The function of the agency will be to plan government borrowings, including market borrowings along with other borrowings and Sovereign Gold bond issuance

Ø  Further Public Debt management Cell will advise the Government on issues related to investment, capital market operations, administration of interest rates on small savings among others.

Ø  The middle office of the Budget Division will be integrated into PDMC with immediate effect

Public Debt management committee will be upgraded to Public debt management Agency by the Joint implementation committee which will be headed by Joint Secretary (Budget). Other members of Joint implementation committee will be from RBI and government. In a way PDMA will be an offshoot of PDMC. Finance Minister Arun jaitley proposed setting up of PDMA in his budget speech 2016-2017 to deepen the bond market and bring both India’s external borrowings and domestic debt under one roof. will be the offshoot of PDMC

 

 

 

 

 

 

 

 

 

 

 

KARVY RESEARCH DESK

QUERIES & FEEDBACK

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Toll-Free: 1800 419 8283

Head Research

Email ID: service@karvy.com

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