Dear Team member,
Strawberries and cream! Slow start on the bourses
The future will be better tomorrow. - Dan Quayle
The mid-cap mania is having mixed opinions with one school of thought considering it as a proxy to economic growth while others find reason for caution. The rise of over 60 mid-caps to 52-highs usually warrants caution. The Nifty seems set to hit a 52-week high as investors are betting on passage of the GST Bill in the monsoon session. For the day, the outlook is a flat start and the bias could remain slightly negative during initial trade. Oil prices have crashed over 4 per cent after US the drop in weekly crude stockpiles was less than the decline expected. Meanwhile, Italy's financial system is hanging by a thread and one of the world's oldest bank Monte dei Paschi di Siena has fallen around 99% since the financial crisis of 2008. Asian markets are on a weak footing. The Fed is unlikely to raise interest rates soon. Perhaps investors can take a break and pay attention to Fed-Head as Roger Federer looks to enjoy some strawberries and cream.
Express Idea
Gabriel India: Ready for a smooth ride - BUY
CMP Rs100, 3-mts Target Rs128, Upside 28%
Analysing the stock from Harmonics perspective, it is forming a bearish butterfly. Currently it is in the final leg of this process. Ideally, last leg (CD) of this pattern tends to retrace 1.27-1.618% of XA leg. So PRZ (Potential reversal Zone) of bearish butterfly is placed between Rs119-127. Current scenario presents an opportunity to enter the final leg of the pattern and also to ride the upmove following the triangle breakout from ~2-year long consolidation. We recommend a buy on Gabriel for target of Rs128. Maintain SL of Rs88.
Technical Acumen
Nifty has been struggling to maintain the momentum seen from the low of 7927 in last three sessions. It witnessed a choppy movement in Thursday's trade, as action continued in broader markets. Formation of doji candlestick pattern in yesterday's session, indicates indecisiveness among market participants. So, we advise traders to be stock specific. Risk reward ratio is not ideal around current levels as breadth indicator across multiple time frames indicate sign of exhaustion. Though, Nifty is in the final leg of ABCD pattern, it is imperative that it sustains above 8281 (gann support).
Derivatives Insight
² Nifty consolidating in tight range with narrow trading band. Midcaps focus area for traders currently.
² Global cues remained mixed. SGX Nifty indicating mild subdued opening down 26 points.
² Options front, maximum build up on puts seen at 8200 puts and call writers base to 8500 in July series. VIX stands below mean at 15.3 levels.
² Markets moving up even when institutional selling seen from DII & FII in cash, on futures FII's index futures positions remained moderated with long to short index future ratio at 4.34x.
Fixed Income Market Overview
The India bond market showed initial price rise with yields falling 3 basis points in yesterday's trading session, but by the end gave up most of the gains. The upcoming CPI Inflation data to be released on July 12, 2016 is expected to be higher as compared to 5.76% in May 2016.The bond yield made a low of 7.36% before finally closing at 7.38%. Gsec volume for the day stood at ~ Rs. 753Bn.
The demand at the fixed Repo window was Rs.16Bn, whereas supply from fixed Reverse Repo stood at Rs.32Bn indicating strong liquidity in the system. The Call WAR closed higher at 6.27% vs. 6.25%.
The benchmark five-year OIS and one-year OIS closed unchanged, with the one-year OIS closing at 6.51% vs. previous day's close of 6.51%; the five-year OIS closed at 6.56% vs. previous day's close of 6.56%.
Commodity & Currency Cues
Gold prices pared from the recent highs, however the overall trend still remains steady. There are various tailwinds which are contributing to the overall buoyancy in the precious pack. Needless to mention, central banks across the globe have their backs to the wall and they are desperately trying everything under the sun to combat slowing growth and deflationary trends. After Brexit, BOE is all set to stimulate the economy, while ECB will also not shy away from easing, rather re-easing! PBOC is also expected to move in a similar fashion, as Chinese economy has not been receptive to slew of measures taken by the regime. Meanwhile, minutes of recent US FOMC meeting and interest rate futures clearly indicate that Fed does not have the courage to hike rates for this entire year, in fact there is a possibility of rate cut as well. Effectively, investment demand in gold is building strong momentum, manifested by persistent hefty influx in ETFs. In this regard, SPDR Gold Trust holdings now stand at 978 tons, 330 tons higher than the levels at the onset of this year. Today, markets will be interested in US non-farm payroll numbers for June. Better private payroll number has set the expectations for an improvement in overall non-farm payroll numbers, after a dismal reading of 38,000 during May.
Crude oil futures plummeted, as focus is tilting back towards structural global oil supply/demand balance. Short term supply side issues, which provided substantial support to oil prices during past two months are restoring to normalcy.
Indian Rupee is relatively stable, deriving cues from falling sovereign bond yields and stable tone in domestic equities. However, volatility persists in major currencies, where Japanese Yen is on the verge of breaching 100 levels against the greenback, while Sterling hit an intraday low of 1.2878 and the talk on the street is that it can tumble further till 1.20 levels in relatively short time.
Corporate snippets
² Aurobindo Pharma Ltd has lined up about seven products for launch during the present quarter in the US market. (BL)
² Claris Lifesciences Ltd has received the Abbreviated New Drug Application (ANDA) approval for Tobramycin Injection USP, 80mg/2ml and 1,200mg/30ml multiple dose vials, in the US. (BL)
² Gujarat Industries Power Company Ltd (GIPCL) has received letters of intent (LoIs) from Solar Energy Corporation of India (SECI) for execution of a solar power project in Gujarat. (BL)
² Zydus Cadila has entered into a non-exclusive, royalty-free agreement with Medicines Patent Pool (MPP) for the generic production of Bristol-Myers Squibb's daclatasvir, a novel direct-acting antiviral (DAA), that is proven to help cure multiple genotypes of the Hepatitis C Virus (HCV). (BL)
² Havells India Ltd, has introduced an advanced range of water heaters that uses colour changing LED technology to communicate changing temperature levels. (BL)
² Larsen & Toubro said its construction arm has won orders worth Rs35.98bn across various business segments. (BL)
² BGR Energy Systems has bagged a Rs23bn contract for executing Balance of Plant systems and civil works for APGENCO's power project in Krishna district. (BL)
² Mold-Tek Packaging Ltd has received Letter of Intent (LOI) for setting up two new plants to supply pails to the upcoming new plants of Asian Paints Limited. (BL)
² The Foreign Investment Promotion Board (FIPB) has rejected a proposal of Flag Telecom Singapore, a wholly-owned unit of Reliance Communications (RCom), to set up a telecom subsidiary in India. (BS)
² Ballarpur Industries plan to sell its Malaysian arm, Sabah Forest Industries (SFI), to Pandawa Sakti (Sabah) for USD500mn (Rs33.68bn) has fallen through as the buyer ran out of cash. (ET)
² Lupin has secured a partial relief as the US Food and Drugs Administration (USFDA) has closed its July 2015 inspection of the pharma major's Goa plant. (ET)
² Kalpataru Power Transmission has bagged order worth over Rs19bn. (ET)
Economy snippets
² Nearly 3,000kg of the precious metal has been deposited under the gold monetisation scheme. (BL)
² The telecom department (DoT) is likely to soon send out demand notices to six carriers for a cumulative Rs124.88bn for under reporting of revenues to the tune of Rs460bn after the matter was highlighted by the Comptroller & Auditor General (CAG) in its report in February this year. (ET)
² The Cabinet Committee on Economic Affairs approved 9% increase in pension of 0.19mn BSNL employees who retired between 2007-13. (ET)
Happy Investing!
Amar Ambani
Head of Research
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