Report ----- for Friday 23rd

Outlook for the day

The coming trading session is expected to trade with positive bias. Nifty witnessed short covering / buying from level of 5400 which may continue for the coming trading session. On the upside, Nifty may test 5570 – 5600 levels, further it may test 5630 – 5660 levels. The immediate support is at 5540 – 5500 levels. Short term investors are advised to exit on rally. The trend is likely to change if Nifty closes above 5680 – 5700 levels accompanied with higher volumes.

ICICI Bank - View - Positive Bias

The stock witnessed buying near to multiple support levels on Daily chart with rising volumes. This suggests that further upside is likely in the coming trading sessions if it trades above Rs. 1157.00 level. Stop-loss*: Rs.1148.30 Tgt: Rs. 1184.00

Derivative Comments

Open interest in Nifty futures has increased by 1.10% whereas the Nifty price has declined by 0.75% from 5561.05 to 5519.35.

• Nifty PCR-OI has dropped further from 0.97 levels to 0.94 levels.
• Nifty is once again trading at a premium. The current premium in Nifty is 16.85 points and the CoC is positive 15.92%.
• Nifty Futures annual volatility has risen from 43.02% to 41.71%.
• The maximum decline in OI was seen in the Aviation sector. AIRDECCAN which had earlier seen huge formation of positions has now observed significant unwinding.
• Stocks currently trading at a significant premium are BHUSANSTL, RPL, JINDALSTEL, SESAGOA and CUMMINSIND.

Derivative Views

• Amongst all options we have seen the most addition of OI in the 5600 strike price Call. The 5700 strike price Call which had previously added good OI is now showing unwinding of positions. In the Put option segment a fall in OI was witnessed in almost all strike prices.
• In yesterday’s session, though Nifty touched a low of 5400, it managed to close above the crucial level of 5500. The 5500 strike price still has the largest base amongst all Put options which indicates that, though there has been unwinding of positions; this level may continue to act as a support for Nifty on closing basis in today’s session as well.
• Once again most sectors have shown a decline in OI which indicates that the stocks are falling on account of long unwinding rather than formation of short positions. However, we have seen formation of short positions in Nifty. Today being the last trading session of the week participants could be wary of carrying these positions due to the prevailing volatility. Hence, we may see some short covering which could restrict the losses for the day.

Dealers Diary

The Market breadth was extremely weak on Thursday. The markets opened weak and traded in negative territory through major part of the day. However, in late trades towards close, the markets bounced back with the Banking and Auto stocks recovering major losses. Realty, Capital Goods and Power stocks were major losers yesterday. The markets ended with moderate losses. The Mid-Cap and Small-Cap indices underperformed the Sensex. Asian markets were mixed while the European markets traded in red. Among the frontliners, Maruti Suzuki, Bajaj Auto, ICICI Bank, ACC and SBI gained 2-4%, while ONGC, L&T, NTPC, Reliance Energy and DLF lost ground by 4-5%. In the Mid-cap segment, Redington, Bhushan Steel, Balaji Telefilms, EIH and Nucleus Software gained 5-9%, whereas Zee News, Atlas Copco, Anant Raj, Ispat and Wire & Wireless lost 7-8%.

Markets Today

The trend deciding level for the day is 5507 / 18485. If the NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally upto 5621-5722/18786-19046. However, if the NIFTY trades below 5507 / 18485 for the first half-an-hour of trade then it may correct upto 5406/18225.

Tata Chemicals - Initiate Coverage with Buy and Target Price of Rs387

Tata Chemicals (TCL) is a one of the leading players in inorganic chemicals and the largest soda ash player in India. With the Brunner Mond acquisition, it has now become the third largest soda ash player in the world with over 3.0mt capacity. Rising demand for soda ash and strong prices of the commodity thereof coupled with backward integration into phosphoric acid (through 33% stake in IMACID) augurs well for TCL going ahead. TCL has earmarked over Rs500cr capex to meet the rising demand for soda ash. We believe that going ahead a favourable business environment and capacity additions will sustain the company’s Earnings momentum. At the CMP of Rs303, the stock is available at 10.9x consolidated FY2008E EPS of Rs27.8 and 9.0x consolidated FY2009E EPS of Rs33.6. We Initiate Coverage on the stock with a Buy recommendation and Target Price of Rs387.

PVR to invest Rs400cr in 250 screens

Multiplex chain operator, PVR, plans to invest up to Rs400cr over the next three years to set up 250 screens across the country. The expansion would be funded through a mixture of debt, equity and internal accruals. Thecompany launched its premium multiplex brand, called ‘PVR Premiere’, which is targeted at consumers in metros. PVR aims to have 30-40 screens under this brand by 2010. PVR Premiere is projected to account for 15-20%of the company’s revenues. Six properties have been selected in Mumbai, Bangalore, Gurgaon and Kolkata for the new concept. The subsidiary PVR Pictures, which is into film production, would look for funding at the subsidiary level and the company in the future. At the CMP of Rs199, the stock trades at 12.4x FY2009E EPS of Rs16. We recommend a Hold on the stock, with a Target Price of Rs225.

-----With due apologies and full credits to Angel Broking Limited