Weekly Equity Strategy
27 November 2011
The Indian markets declined for the fourth straight week on heavy selling by
India Equities Pg 1
foreign funds. Concerns over slowing growth, weak corporate earnings and a
India Sectoral Performance Pg 2
faltering rupee affected investor sentiment adversely. Fears of a global economic
India Economics Pg 3 slowdown also weighed on Indian stocks amid gloomy data from China and the
GWM Report Pg 4 United States. The market fell in three out of five trading sessions during the week
IER stock initiation Pg 5 Foreign institutional investors (FIIs) outflow totaled Rs 64.8bn in eight trading
Economic Calendar Pg 6 session.
India Equity Research Coverage List Pg 7-9
Global equities indicated by the MSCI All-World index were down 5.3% for the
Technical Focus Pg 10-11
week. U.S. stocks slumped for a seventh straight session. European Stocks and
other major exchanges also suffered their worst week in two months. Investors'
worries intensified after reports that Greece was demanding harsh conditions from
TABLE 1: KEY INDICES creditors on a proposed bond swap -- critical to reduce its debt and save the euro.
INDEX 25-Nov 18-Nov % Chg The euro hit a seven-week low against the dollar and looked set to weaken further
SENSEX 15695 16371 -4.1 as Italy's borrowing costs spiraled and Belgium's and Portugal’s credit rating was
BSE 500 6009 6214 -1.6 downgraded. Commodities also fell broadly, except for U.S. crude oil.
NIFTY 4710 4906 -1.6
NIFTY JUNIOR 9083 9268 -2.2 US stocks posted seven straight sessions of losses on Friday, ending the worst
CNX MIDCAP week in two months, as the lack of a credible solution to Europe's debt crisis kept
6598 6639 -1.8
investors away from risky assets. Initial gains were offset by headlines out of
Source: BSE and NSE
Europe that further dented market sentiment. High debt yields from major
economies in Europe such as Spain, France and Germany suggest investing in the
region is seen as being more risky. Adding to concerns, S&P downgraded
Belgium's credit rating to AA from AA+, citing concerns about funding and market
pressures. The S&P 500 fell 4.7%, giving back almost two-thirds of its gains in
October, the market's best month in 20 years. The Dow was off 4.8% for the week
and the Nasdaq fell 5.1%
European markets slumped and the euro hit a seven-week low on Friday, as
record borrowing costs for Italy stoked fears of lack of comprehensive policy
response to the spiraling euro zone debt crisis. Italy borrowed 10bn euros, paying a
euro-era high 6.5% to borrow over six months, almost double the yield at a similar
sale a month ago. Further the lukewarm response to the German 10 year bond
offering added to the concern. European stocks lost ground for the ninth time in 10
sessions and were on course to post their biggest weekly loss in two months. The
FTSE was down 0.7% and has lost about 13% since late October.
Asian stocks declined rounding out a losing week as statements by German and
French officials failed to convince investors that leaders were closer to a consensus
on how to contain the euro-zone debt crisis. The Nikkei after earlier falling to a fresh
two-and-a-half-year low closed 2.6% down for the week. Hang Seng fell 4.3%
posting their fourth straight weekly loss as investor cut their risks. Shanghai
Composite fell 1.5% its third straight weekly loss.
India Sectoral Performance
India's largest truck maker by sales Tata Motors rose 0.8%. Tata Motors
introduced a new version of the Nano minicar which is more powerful and fuel
efficient than the previous model. India's largest commercial vehicle maker by
sales said it will continue to sell the Nano at the same price. The Nano, sold
in three variants, is priced between Rs 1.4 lakh and Rs 1.96 lakh at
showrooms in New Delhi. Tata Motors said the new version of the Nano will
have a fuel efficiency of 25.4 kilometers per litre, compared with 23.6
kilometers per liter of the previous variant. The new Nano is powered by a
624 cubic centimeter gasoline engine that will deliver 38 horsepower,
compared with 35 horsepower in the previous variant.
India's second largest software services exporter by revenue Infosys shed
5.0%. The company announced that it may miss the upper end of its sales
targets for Q3-FY11 and also for FY12 as the worsening global economic
situation has made large contracts hard to come by. At the time of
announcing Q2 FY11 results Infosys had forecasted 3.2% to 5.3% growth in
revenue at $1.802 to $1.84bn in Q3FY11 over Q2FY11. The company had
projected 17.1% to 19.1% growth in revenue at $7.08bn to $7.20bn for the
FY12 over the year ending FY11. In rupee terms Infosys had forecast 8.97%
to 11.2% growth in revenue at Rs 88.3bn to Rs 90.1bn in Q3FY11 over
Q2FY11. The company had projected 21.8% to 24% growth in revenue at Rs
335.0bn to Rs 340.9bn in FY 2012 over FY 2011.
Bharti Airtel fell 5.7%. The company announced that Akhil Gupta, a non-
executive director, sold 65,500 shares for Rs 26.1mn. Mr. Gupta is also the
deputy group chief executive and managing director of Bharti Enterprises, the
parent company of Bharti Airtel. Mr. Gupta now holds 2.4mn Bharti Airtel
shares along with his wife. Also, Manoj Kohli, chief executive of Bharti Airtel's
international business and the company's joint managing director, sold 50,000
shares for Rs 19.9mn on 18 November 2011. Mr. Kohli now owns 253,000
shares in Bharti Airtel.
Shares of organized retailers surged after the Union Cabinet cleared a
proposal to allow 51% foreign direct investment (FDI) in multi-brand retail and
increase in FDI in single brand retail to 100% from current 51%. Pantaloon
Retail India (up 18.0%), Shoppers Stop (up 11.2%), and Trent (up 2.5%),
surged. Currently, India allows 51% FDI in single brand retail and 100% FDI
in cash and carry format of the business. The move to liberalize FDI norm in
retail signals that the Indian government, after years of prevaricating over
allowing greater foreign investment in several sectors, is now serious about
attracting overseas funds.
CHART 1: FOOD INFLATION RISES India’s food inflation eased significantly for the third consecutive week,
raising expectations of a cool off in headline inflation. The wholesale price
index for food articles rose 9.01% from a year earlier, compared with a
10.63% gain in the previous week. On a week-on-week basis, the food
articles index fell 0.7% to 198.5 as prices of most commodities, including
protein-rich products, showed a modest decline. The sharp deceleration
reflects a much-anticipated downtrend in prices, which is expected to
become more pronounced by December when the statistical base would
turn favorable and food supplies will get a boost with the arrival of the
Food inflation has remained elevated for several months due to soaring
prices of protein-rich foods such as meat, fish and milk that have seen
Source: Newswire18 increased consumption amid growing prosperity in the country.
Global Market View – Concerted
policy action required
It has been another volatile and challenging month for asset
markets. Equities gave up earlier gains as policy makers failed to
come up with solutions to the debt challenges in the western world
and the growth outlook deteriorated, particularly in Europe.
Interestingly, global bond markets have failed to counter this
weakness as contagion spread to Italy and France. Commodity
markets were also lower, led by agricultural prices
In the West, we remain in the muddle through/mild recession environment
In Asia, a hard landing is still likely to be avoided
Quantitative easing likely in both the US and Europe in 2012
European policy makers need to step up to the plate given contagion to Italy,
France and now maybe Germany, and signals of tightening bank lending
standards going forward
Theme: Large capitalisation, high dividend yielding stocks with excellent
franchises, defensive business models, exposure to emerging market
growth and trading at attractive valuations
Retain underweight positioning on 3m and 12m basis
UW investment grade debt on both a 3m and 12m basis
OW corporate high yield on a 3m and 12m basis
Gold: We remain structurally bullish on gold, although we have been
highlighting the likelihood of a short-term correction to 1600-1650 area,
offering a buying opportunity
Oil: Likely to remain supported on geopolitical concerns
USD likely to remain strong near-term on heightened risk aversion
Delivering value through affordability and innovation
OUTPERFORM, BIOS IN, Price Target Rs370
Marquee partnerships with Pfizer and Mylan validate biotech strengths and
IER expects Research Services/licensing incomes to drive 15% revenue
CAGR and better profitability in services to stabilize core margins at 25-26%
despite increased R&D.
Domestic sales are likely to continue to drive biopharma sales with
increased formulation and Pfizer sales offsetting lower statin growth due to
continuing Lipitor genericization.
Incremental capex of US$450-500m over FY12-14 is fully funded by Pfizer
and internal accruals; option of strategic deployment of free cash.
IER initiates with Outperform and a PT of Rs370
Global partnerships validate biotech strengths. Biocon’s strength in
insulin and MAbs is paying dividends with marquee partnerships with Pfizer
(insulin) and Mylan (MAbs). Domestic insulin and potential ‘first in class’ EU
approvals in FY13 for insulin provide visibility to medium-term growth.
Research Services and licensing lead growth. We expect 15% revenue
CAGR over FY11-14E, led by Research Services (16% CAGR) and Pfizer
licensing (Rs10bn by FY14). Recent calibration in services to higher value
addition (eg, biologics) is paying off, and improved profitability should aid
core margins to stabilize at 25-26% despite increased R&D in multiple
projects (EU/US insulin, novel projects, Mylan).
Domestic segment drives growth. Biocon’s biopharma sales (74% of
sales) has been India-focussed (domestic revenue posted 23% CAGR over
FY06-11). Ex-licensing, we expect biopharma sales to post 12% CAGR over
FY11-14E, with lower growth in statins due to Lipitor generics offsetting
gains in domestic formulations and upside from Pfizer insulin supplies.
Fully funded for medium-term growth. Biocon’s incremental capex of
~US$450-500m over FY12-14 is fully funded mainly due to Pfizer
(US$350m) and internal accruals, giving the company options for strategic
deployment of its free cash.
Valuations. 12-month PT of Rs370 valuing Biocon at 20x P/E (10-20%
discount to larger peers like SUNP, CIPLA, DRRD), the average of the stock
in the past 18 months. Potential upside from out-licensing and potential
listing of Research Services businesses in 4-6 quarters provide upside to
Key risks. Higher R&D impacting short-term margins, potential lower
milestones, lower Research Services off-take.
◄ Oct 2011 Dec 2011 ►
~ November 2011 ~
Sunday Monday Tuesday Wednesday Thursday Friday Saturday
1 2 3 4 5
Bank deposits WMA and
and credit as forex
on Oct 21, by reserves
RBI as on Oct
28, by RBI
6 7 8 9 10 11 12
Automobile Major port Primary Cement
sales data traffic in articles production,
for October, by inflation rate dispatches
October, Indian Ports for week to in October,
by SIAM Association Oct 29, by by CMA
and industry Foreign
Index of Oct, by
Production for ministry
13 14 15 16 17 18 19
WPI inflation for Power CPI for rural,
Sep, by generation for urban areas
commerce and October, by and combined
industry ministry Central for October,
Electricity by CSO
20 21 22 23 24 25 26
CPI for rural GSM Crude,
and farm mobile refinery
labourers for subscribers output for
October, by data for Oct, from
Labour Aug, by petroleum
Ministry COAI ministry
27 28 29 30
Government Core sector
finances for growth for
Oct, Apr-Oct, October, by
by CGA commerce
estimate for Jul-
Sep, and Apr-
Sep, by CSO
INDIA EQUITY RESEARCH COVERAGE LIST
(Price Target is for 12-Month Investment Horizon)
Initiation Price as on IER fair % Up /downside
Sr. No. Country Stock Name BB code Sector Recommendation Price 25/11/2011 value to IER fair value
1 IN Ashok Leyland AL IN Equity Automobiles & Parts OUTPERFORM 72.0 24.7 34.0 37.7%
2 IN Bajaj Auto BJAUT IN Equity Automobiles & Parts OUTPERFORM 1390.0 1639.3 1630.0 -0.6%
3 IN Hero Motor Corp. HH IN Equity Automobiles & Parts UNDERPERFORM 1785.0 1756.9 1876.0 6.8%
4 IN Mahindra & Mahindra MM IN Equity Automobiles & Parts IN-LINE 611.0 706.3 700.0 -0.9%
5 IN Maruti Suzuki MSIL IN Equity Automobiles & Parts OUTPERFORM 1218.0 950.1 1485.0 56.3%
6 IN Tata Motors TTMT IN Equity Automobiles & Parts OUTPERFORM 198.2 171.9 253.8 47.7%
7 IN TVS Motor TVSL IN Equity Automobiles & Parts IN-LINE 71.5 60.9 68.0 11.8%
8 IN Apollo Tyres APTY IN Equity Automobiles & Parts OUTPERFORM 64.0 63.3 80.0 26.5%
9 IN Exide Industries EXID IN Equity Automobiles & Parts IN-LINE 163.0 114.9 160.0 39.3%
10 IN Amara Raja Batteries AMRJ IN Equity Automobiles & Parts IN-LINE 178.0 212.3 172.0 -19.0%
11 IN Motherson Sumi MSS IN Equity Automobiles & Parts OUTPERFORM 186.0 149.5 265.0 77.3%
12 IN Amtek Auto AMTK IN Equity Automobiles & Parts OUTPERFORM 128.0 121.3 210.0 73.1%
13 IN Bharat Forge BHFC IN Equity Automobiles & Parts OUTPERFORM 380.0 265.8 450.0 69.3%
14 IN Bosch BOS IN Equity Automobiles & Parts IN-LINE 6211.0 7030.7 6682.0 -5.0%
15 IN Coal India COAL IN Equity Basic Resources IN-LINE 318.9 308.8 338.0 9.5%
16 IN ACC ACC IN Equity Construction & Materials OUTPERFORM 971.0 1119.4 1170.0 4.5%
17 IN Ambuja Cement ACEM IN Equity Construction & Materials IN-LINE 136.0 146.7 159.0 8.4%
18 IN Grasim Industries GRASIM IN Equity Construction & Materials OUTPERFORM 2200.0 2262.4 2754.0 21.7%
19 IN India Cements ICEM IN Equity Construction & Materials OUTPERFORM 112.0 69.2 134.0 93.8%
20 IN Shree Cement SRCM IN Equity Construction & Materials OUTPERFORM 2096.0 2052.7 2280.0 11.1%
21 IN Ultra Tech UTCEM IN Equity Construction & Materials IN-LINE 1041.0 1117.7 1127.0 0.8%
22 IN Tata Steel TATA IN Equity Construction & Materials IN-LINE 635.0 374.1 506.0 35.3%
23 IN JSW Steel JSTL IN Equity Construction & Materials UNDERPERFORM 1205.0 556.8 1048.0 88.2%
24 IN SAIL SAIL IN Equity Construction & Materials OUTPERFORM 179.0 82.1 146.0 77.8%
25 IN Hindustan Zinc HZ IN Equity Construction & Materials OUTPERFORM 127.3 113.2 157.0 38.8%
26 IN Sterlite Industries STLT in Equity Construction & Materials OUTPERFORM 164.0 100.1 212.0 111.9%
27 IN Hindustan Aluminium HNDL IN Equity Construction & Materials OUTPERFORM 209.5 113.5 174.0 53.3%
28 IN National Aluminium NACL IN Equity Construction & Materials UNDERPERFORM 102.0 51.8 67.0 29.5%
29 IN Asian Paints APNT IN Equity Consumer OUTPERFORM 2726.0 2942.8 3350.0 13.8%
30 IN Kansai Nerolac KNPL IN Equity Consumer IN-LINE 900.0 872.0 922.0 5.7%
31 IN GAIL (India) GAIL IN Equity Oil & Gas OUTPERFORM 499.0 384.8 508.0 32.0%
32 IN Reliance Industries RIL IN Equity Oil & Gas OUTPERFORM 1069.0 753.8 969.0 28.5%
33 IN ONGC ONGC IN Equity Oil & Gas OUTPERFORM 329.0 251.9 355.0 41.0%
34 IN Oil India OINL IN Equity Oil & Gas OUTPERFORM 1417.0 1167.3 1602.0 37.2%
35 IN IOCL IOCL IN Equity Oil & Gas OUTPERFORM 399.0 265.8 364.0 37.0%
36 IN HPCL HPCL IN Equity Oil & Gas UNDERPERFORM 464.0 281.2 370.0 31.6%
37 IN BPCL BPCL IN Equity Oil & Gas IN-LINE 736.0 517.3 596.0 15.2%
38 IN Indraprastha Gas IGL IN Equity Oil & Gas OUTPERFORM 293.0 390.8 446.0 14.1%
39 IN Petronet LNG PLNG IN Equity Oil & Gas OUTPERFORM 113.0 154.7 184.0 19.0%
40 IN Infosys Technologies INFO IN Equity Technology OUTPERFORM 3203.0 2600.6 2290.0 -11.9%
Initiation Price as on IER fair % Up /downside
Sr. No. Country Stock Name BB code Sector Recommendation Price 25/11/2011 value to IER fair value
41 IN TCS TCS IN Equity Technology IN-LINE 1104.0 1063.0 1280.0 20.4%
42 IN Wipro WPRO IN Equity Technology OUTPERFORM 458.0 369.6 475.0 28.5%
43 IN HCL Technologies HCLT IN Equity Technology OUTPERFORM 448.0 386.6 620.0 60.4%
44 IN Patni Computers PATNI IN Equity Technology IN-LINE 483.0 444.9 480.0 7.9%
45 IN Mahindra Satyam SCS IN Equity Technology OUTPERFORM 74.0 65.0 87.0 33.9%
46 IN Tech Mahindra TECHM IN Equity Technology IN-LINE 667.0 559.5 720.0 28.7%
47 IN Bharti Airtel BHARTI IN Equity Telecommunications OUTPERFORM 340.0 375.2 465.0 24.0%
48 IN Idea Cellular IDEA IN Equity Telecommunications OUTPERFORM 72.0 95.7 106.0 10.8%
49 IN Reliance Communication RCOM IN Equity Telecommunications IN-LINE 125.0 69.6 89.0 28.0%
50 IN ITC ITC IN Equity Personal & Household Goods IN-LINE 171.0 192.3 210.0 9.2%
51 IN Hindustan Unilever HUVR IN Equity Personal & Household Goods OUTPERFORM 303.0 375.2 366.0 -2.5%
52 IN Nestle NEST IN Equity Personal & Household Goods IN-LINE 3726.0 4192.1 4280.0 2.1%
53 IN Colgate Palmolive India CLFT IN Equity Personal & Household Goods UNDERPERFORM 845.0 982.8 858.0 -12.7%
54 IN GSK Consumer SKB IN Equity Personal & Household Goods IN-LINE 2171.0 2495.0 2461.0 -1.4%
55 IN Marico MRCO IN Equity Personal & Household Goods IN-LINE 125.0 147.3 152.0 3.2%
56 IN P&G Hygiene & Healthcare PGHH IN Equity Personal & Household Goods UNDERPERFORM 1698.0 1860.9 1626.0 -12.6%
57 IN Britannia BRIT IN Equity Personal & Household Goods OUTPERFORM 368.0 474.7 512.0 7.9%
58 IN DLF DLFU IN Equity Real Estate OUTPERFORM 227.0 203.7 266.0 30.6%
59 IN Unitech UT IN Equity Real Estate IN-LINE 38.0 23.1 33.0 42.9%
60 IN Oberoi Realty OBER IN Equity Real Estate OUTPERFORM 238.0 220.0 300.0 36.4%
61 IN HDIL HDIL IN Equity Real Estate OUTPERFORM 160.0 65.1 250.0 284.0%
62 IN Indiabulls Real Estate IBREL IN Equity Real Estate OUTPERFORM 112.0 63.1 166.0 163.1%
63 IN Sobha Developers SOBHA IN Equity Real Estate OUTPERFORM 273.0 231.3 362.0 56.5%
64 IN Prestige Estates Projects PEPL IN Equity Real Estate OUTPERFORM 109.0 83.7 151.0 80.5%
65 IN Titan Industries TTAN IN Equity Retail OUTPERFORM 170.5 189.6 282.0 48.7%
66 IN Aurobindo Pharma ARBP IN Equity Healthcare OUTPERFORM 198.0 92.8 215.0 131.8%
67 IN Cadila Healthcare CDH IN Equity Healthcare IN-LINE 790.0 760.2 925.0 21.7%
68 IN Cipla CIPLA IN Equity Healthcare IN-LINE 324.0 316.0 315.0 -0.3%
69 IN Dr Reddy's Laboratories DRRD IN Equity Healthcare OUTPERFORM 1644.0 1539.8 1725.0 12.0%
70 IN Lupin LPC IN Equity Healthcare OUTPERFORM 417.0 469.7 515.0 9.7%
71 IN Sun Pharmaceuticals SUNP IN Equity Healthcare IN-LINE 444.0 491.9 490.0 -0.4%
72 IN Torrent Pharmaceuticals TRP IN Equity Healthcare IN-LINE 583.0 552.8 630.0 14.0%
73 IN LIC Housing Finance LICHF IN Equity Finance IN-LINE 226.8 212.55 210.0 -1.2%
74 IN MGFL IN
Manappuram General Finance & LeasingEquity Finance OUTPERFORM 66.55 53.25 91.0 70.9%
75 IN Allahabad Bank ALBK IN Equity Finance IN-LINE 222.0 145.9 245.0 68.0%
76 IN Axis Bank AXSB IN Equity Finance OUTPERFORM 1424.0 967.3 1400.0 44.7%
77 IN Bank of Baroda BOB IN Equity Finance OUTPERFORM 983.0 724.7 1055.0 45.6%
78 IN Bank of India BOI IN Equity Finance UNDERPERFORM 487.0 329.4 395.0 19.9%
79 IN HDFC HDFC IN Equity Finance UNDERPERFORM 706.0 613.8 640.0 4.3%
80 IN HDFC Bank HDFCB IN Equity Finance OUTPERFORM 472.0 430.9 525.0 21.8%
Initiation Price as on IER fair % Up /downside
Sr. No. Country Stock Name BB code Sector Recommendation Price 25/11/2011 value to IER fair value
81 IN ICICI Bank ICICIBC IN Equity Finance OUTPERFORM 1101.0 718.2 1310.0 82.4%
82 IN IDFC IDFC IN Equity Finance IN-LINE 157.0 106.5 125.0 17.4%
83 IN IndusInd Bank IIB IN Equity Finance IN-LINE 280.0 260.5 315.0 20.9%
84 IN M&M Financial Services MMFS IN Equity Finance OUTPERFORM 795.0 614.3 825.0 34.3%
85 IN Punjab National Bank PNB IN Equity Finance OUTPERFORM 1188.0 880.4 1230.0 39.7%
86 IN State Bank of India SBIN IN Equity Finance IN-LINE 2425.0 1690.6 2650.0 56.7%
87 IN Shiram Transport SHTF IN Equity Finance OUTPERFORM 819.0 504.1 800.0 58.7%
88 IN Union Bank UNBK IN Equity Finance IN-LINE 342.0 217.4 330.0 51.8%
89 IN Yes Bank YES IN Equity Finance OUTPERFORM 330.0 274.1 310.0 13.1%
90 IN Escorts ESC IN Equity Automobiles & Parts OUTPERFORM 137.0 77.8 181.0 132.8
91 IN Gujarat State Petronet GUJS IN Equity Oil & Gas IN-LINE 104.0 84.8 105.0 23.8%
92 IN Mundra Ports and SEZ MSEZ IN Equity Infrastructure OUTPERFORM 152.0 123.4 201.0 63.0%
93 IN Essar Ports ESRS IN Equity Infrastructure OUTPERFORM 106.0 69.3 180.0 159.7%
94 IN Gujrat Pipavav Port GPPV IN Equity Infrastructure OUTPERFORM 64.0 60.0 71.0 18.3%
95 IN Marg MRGC IN Equity Infrastructure OUTPERFORM 96.0 81.2 163.0 100.7%
96 IN OFSS
Oracle Financial Services Software IN Equity Technology OUTPERFORM 2026.0 2005.9 2550.0 27.1%
97 IN Dabur India DABUR IN Equity Personal & Household Goods OUTPERFORM 105.2 96.0 120.0 25.0%
98 IN Glenmark Phatmaceutical GNP IN Equity Health Care OUTPERFORM 325.0 316.9 390.0 23.1%
99 IN Opto Circuits OPTC IN Equity Health Care Equipment & Services OUTPERFORM 231.6 212.0 310.0 46.2%
CHART 1: SENSEX DAILY CHART
On weekly basis, it was the fourth consecutive negative closing as Nifty and
Sensex ended the week with heavy fall of 4.1% and 4.2% respectively. Broader
market faced relentless selling pressure through out this week.
Sensex is almost trading near its lower band of the channel where it might find
some buying interest. 16000 - 15800 would be considered as an important support
zone for Sensex. We expect a technical pull back from the current level. Overall
Sensex would continue to trade in a range of 15800 – 18000 in medium term.
As per the Sensex Daily Chart, Sensex was unable to clear its resistance around
18000, formed by the trendline connecting the previous tops. The pullback rally
from 15700 onwards appears to have terminated closer to the 17900 mark which is
also the 61.8% Fibonacci retracement level of the last fall from 19100 to 15700.
However we might expect a technical pullback from 16000 level as short term
major momentum indicators are trading in an deeply oversold zone. Any bounced
CHART 2: SENSEX WEEKLY CHART back rally could be restricted to 17000 level where it might face fresh selling
pressure. As long as Sensex stays below 18000 level, we would continue to
maintain our negative view for medium term perspective.
As per the Sensex Weekly Chart, we observed the rally ended closer to the upper
band of the falling channel line drawn in chart 2. The chances of the Index
surpassing the 18000 mark look quite dim. It is likely to trade within the downward
channel with negative bias as trend remains down.
As per the Sensex Monthly Chart, the long term trend is expected to maintain the
pattern drawn in the chart. We currently have entered a phase of a broader
consolidation with the upper end at 20000 and lower end around 12700 to 10000.
The Index is expected to consolidate and base before the next leg of the rally
begins. With the longer term consolidation phase we are currently witnessing a
phase of correction as we may make lower highs and lower lows.
CHART 3: SENSEX MONTHLY CHART
As per the Sensex daily chart, RSI is trading near oversold region as seen in Chart
1. Weekly RSI found resistance from its trendline and is gradually falling. The RSI
momentum indicator on the Sensex Monthly Chart appears weak and has been
drifting lower towards the oversold band.
To conclude, Sensex might find some buying interest around its lower band of the
range of 16000 – 15800 level in the short term. Any pullback from this support level
could be restricted to 17000 level where it might witness selling pressure and might
serve as an opportunity to position for the another downside leg.
The BSE Auto Index was unable to hold on to it gains and once again it is heading
towards the lower band of the range. Index has strong support near 8100 level
CHART 4: BSE BANKEX
where we expect a technical bounce back. Within the Auto Index the two wheelers
would continue to outperform as compared to four wheeler segments.
The Bankex index is trading near it’s lower band of the downward channel. We
expect a technical bounce back from the current level. Within the Banking sector
the Private sector banks appear to relatively better off then their PSU counterparts.
The Capital Goods Index has underperformed the benchmark Indices. Though
we might see some technical pull back as going with the overall view on the
market, but Sector would continue to underperform in the medium term.
The Consumer Durables Index also appears to be consolidating within a broad
range of 7000 to 5500. The Index has corrected from the upper band of the range
and gradually heading towards lower band of the range as short term trends are
negative. We expect a technical bounce back from this lower band of the trading
The FMCG Index saw some profit booking on two consecutive weeks after
CHART 5: BSE OIL & GAS INDEX touching near all time high level. The trend remains positive however the risk
reward is unfavourable and declines would be safer bet to enter. 3800 will act as a
near term support level.
The Healthcare Index might continue to be a market performer in near term and
stock specific buying could be witnessed.
The IT Index faced selling pressure around its downward resistance line. The
sector would be a market out-performer and stock specific further buying could be
witnessed after technical correction.
The Metal Index has witnessed a sharp sell off and the Index is witnessing
significant momentum on the downside. Index might find support near the long
term upward trend line as seen in Chart 6. Sector would continue to underperform
in the short term.
The Oil & Gas Index is gradually drifting lower and is likely to see some technical
recovery in the near term. Supports lies around the 7500 mark. However the
medium term trend still remains down
Chart 6: BSE METAL INDEX
The Power Index will continue to underperform going forward.
The Realty Index has been gradually drifting lower and is at an all time low level
i.e. 1340. The index will continue to underperform in the near term.
The Technology Index appears to a defensive bet in these volatile times. It is
likely to out perform in the short term.
: Source: MetaStock
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Consumer Equity Strategy Disclaimer:
This document and/or trading calls are issued by Consumer Equity Strategy Team of Standard Chartered Securities (India) Limited, a registered broker regulated by the
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Data available as of 10:00 IST 26 November 2011
Nishit Sheregar –Strategist Sirshendu Basu – Head, Consumer Equity Strategy
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Soumen Das – Senior Technical Strategist