India Morning Report: Market takes a profit taker’s slice of pie at 6400

English: Juuso Pykälistö (FIN) in his Peugeot ...

English: Juuso Pykälistö (FIN) in his Peugeot 206 WRC during the 2003 Swedish Rally. Français : Juuso Pykälistö (Finlande) à bord de sa Peugeot 206 WRC au cours du Rallye de Suède édition 2003. Polski: Juuso Pykälistö (Finlandia) za kierownicą swojego Peugeota 206 WRC na trasie Rajdu Szwecji w 2003 roku. Português: Juuso Pykälistö (Finlândia) no seu Peugeot 206 WRC durante o Rali da Suécia de 2003. (Photo credit: Wikipedia)

The cake was of course due, it being the market anniversary at 6400, and the sharpness of the cut a reminder of the buyer knowing he was due a big hole when he exited. It is still a relatively recent add back to the Indian market equations, used to absorbing continuing profit taking without such a market wide reaction

Ofcourse, the hint was in the stock selection to the rally to 6400 (achieved) and 6500 (planned) with the markets still believing in Maruti and AllBank , parts of the rally not to move till further into the recovery. Needless to say the profit-taking candle worth a 100 points before 2 pm(250 sensex points), also wiped out any chance of a further downtick as 6200 presents a secular buying opportunity and 6220 is as good as 6180 would bring if there was another day of correction. However, the important thing to note was return of volumes even though it was in breakouts suspect to last the full weight of fundamentals testing strong fundamentally valid scrips. Tech Mahindra, M&M Financial services were up on buying and IDFC and bank candidate LIC Housing were indeed weaker instead of gaining strength yesterday,. Today might see the opposite as Powergrid continues up and to me even IDFC does not look like ready for a correction at 108, let alone 105 which should see buyers crawl back.

Cornered buyers of the rally looking to add Hero, Maruti and the PSU Banks like BOI an others may again cause a flutter once the markets reach 6350. If they decide to take up cudgels , investors and positional traders should move out of harm’s way gong to 6100 Puts, buying out their  6300 position in Puts. Also transaction costs should preclude move outs from 6500 and 6600 Calls especially as the longs have some more to look forward to , allowing them to expire such calls on the hope while buying more ATM calls if they wish to go long. The Rupee was the most hurt from the lack of new picks for the bull run, the breakdown at 64 finding bears waiting in the currency which immediately lost almost half a dollar to open at 62.40 on Friday. Fixed yields remaining at 8.8% instead of riding down to 8.5% probably signify a large shot interest even as the Taper passes by.

The unwinding in Bull Futures seem to be taking place a tick at a time so the new concentration has probably cottoned on to new interest in 6100 series as well as we can confirm after 2 pm. However if you have indeed exited (updated before 11 AM on Friday) Exits may also not reinvest in Defensives like Pharma and IT at current levels though those scrips are maintaining levels

The ICICI TAB campaign will indeed live up to its hype in 3-4 months as Banks come back to lean on retail deposits after cycling thru pressure updating on Salary and Corporate Savings accounts, as a loose ready reckoner for focus, with retail lending probably also going off a cliff in 2-3 months at the inflection in the Economy where Investment has to take over and the consumption uptick will slump hopefully without further rate hikes from the Central Bank Meanwhile with the PMI above 50 in December, Q3 looks like a good number for GDP ( having battled first seven months on negative IIP) and the IIP in January next week will still report for November which should fool no one .

The India Services MI follows on Monday likely to show an uptick as China battles another new slowdown in Export Orders which again is something India has skipped in this month’s report due Monday. We warned you on the Tata Motors trade, December sales underlining the company’s longer term woes and JLR eating up all the Cash flow for its design investments. Bullish trades will again focus on a new spine of infraco and telecom even as Voda pips the public Bharti in the battle for subscribers with a DoCoMo conversion Bharti’s 200 mln base could thus even rejuvenate flagging growth back to number 1 in a few and till then news of a recovery may have slowly trickled in to a mass of ‘hysteria’ buoyed by the coming bull earning reports

Given the continuing bottom up buying approach into the rally as it continues from 6150 levels at worst, this would be the widest base of new fundamental picks identified as winners and more of the traders’ favorites fall by the wayside, making Axis equal to ICICI Bank and HDFC Bank in the coming rallies for example and even Cadila and Glenmark correcting with the rest of the market till the new rush consolidates.

GAIL could be a great add to the defensives as well and should help if you are finally ready to rid yourself of the HCL Tech and All Bank, with me being a little uninformed on Idea and the new defensive volume breakouts TechM, M&M Financial(hopefully the information risk is not going to be staple for the market)

YES Bank and IDFC remain the continuing meme from the 2011 rallies while new fundamental picks could be bolstered by the gold bankers Muthoot and Manappuram mid-caps even as Gold does slide down in 2014 with Oil as a continuous shrinkage from the Fed bites the Gold and Oil trade. I’d still bet on LIC Hsg and Shriram

Hero’s December ‘comeback’ could be another harbinger for the goo pickup in rural trade as Bajaj Auto again underlines that Hero is the loser from the Honda sale with Honda having caught up to 300k in December at 60% of the Hero figure.

Zee could sill be a good pick in this term and Adani Ent and Adani Ports could be good shorts even as their fundamentals improve on a tiny, not just small base. Infy has tracked buyers after diping below 3500 but there isn not mor than 3-5% on the upside

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s