WEEKLY MARKET OUT LOOK 30TH MAY 2011 TO 3RD JUNE 2011

MARKET OUTLOOK:FOR THE MONTH OF MAY TILL LAST FRIDAY, UNABATED SELLING BY FIIs(total MTD outflow of Rs.66.7 bn)HAS LEAD TO DECLINE IN NIFTY BY 4.8%. THE DECLINE WAS MAINLY DUE TO UNFAVORABLE MACRO FACTORS SUCH AS HIGH CRUDE OIL PRICES LEADING TO BALLOONING OF GOVERNMENT DEFICIT BILL AND INTEREST RATE HIKE BY RBI TO DOUSE HIGH INFLATION, WHICH MAY PUT BREAK ON THE PACE OF ECONOMIC GROWTH.THIS COUPLED WITH THE WHITEWASH OF DMK PARTY IN TAMIL NADU ELECTION AND ARREST OF KEY MEMBERS OF THE PARTY LEAD TO THE SPREAD OF FEAR THAT DMK MAY REMOVE SUPPORT AT THE CENTRE, WHICH MAY HAVE LEAD TO FALL OF GOVERNMENT. ALTHOUGH MARKET HAS SHOWN A BIT OF RECOVERY DURING THE TAIL END OF THE WEEK, ANALYSTS BELIEVE THAT THE OVERHANG OF THE MACRO HEADWINDS WILL CONTINUE TO REMAIN.GOVERNMENT IS EXPECTED TO HIKE PRICES OF DIESEL, KEROSENE AND LPG IN THE MONTH OF JUNE(EGoM MEETING ON 9TH JUNE) WHICH MAY FURTHER FUEL THE INFLATION RATE. IN ADDITION, ONGOING SCAM INVESTIGATION AND INDEFINITE DELAY IN KEY REFORMS(NOTE:THERE MAY BE A MEETING OF VARIOUS MINISTRIES IN JUNE ON KEY ECONOMIC REFORMS--- ANY MAJOR NEWS FLOW MAY COME SOON)  WILL FORCE INSTITUTIONAL INVESTORS TO REMAIN NERVOUS AND FOLLOW WAIT AND WATCH POLICY. FOR THIS WEEK, WITH GDP AND EXPORT IMPORT DATA ON THE CARDS, RETAIL INVESTORS SHOULD REMAIN CONFINED TO QUALITY STOCKS. THE NIFTY WILL FINS SUPPORT AT 5425 & 5350 AND WILL FIND RESISTANCE AT 5540 & 5600.


TECHNICALLY SPEAKING THERE IS A BULLISH HAMMER FORMATION IN THE NIFTY AND A DRAGON FLY DOJI IN THE SENSEX. THESE PATTERN SUGGEST A PRICE REVERSAL IN THE VERY SHORT TERM TIME FRAME. BUT THE QUESTION IS 


"WILL IT REVERSE THE TREND?" 
"WILL IT REVERSE THE TREND?"


FOR THE INTERMEDIATE TREND TO REVERSE,THE MARKET HAS TO CLOSE ABOVE SENSEX:19040 & NIFTY 5710 


AND 


THE LONG TERM TREND REVERSAL WILL HAPPEN ONLY IF THE MARKET CONTINUES TO STAY ABOVE SENSEX:19670 & NIFTY:5905


HENCE OBVIOUSLY TILL THE ABOVE LEVELS MINOR PRICE REVERSALS WILL BE TERMED AS PULL BACKS AND NOT TREND REVERSALS. THE PULL BACK LEVELS ARE PLACED AT 18560-18800-19040 FOR THE SENSEX AND AT 5564-5640-5710 FOR THE NIFTY.


THE MARKET IS WELL BELOW THE LONG TERM AVERAGE i.e 200DMA (SENSEX 19170, NIFTY 5754), MDEIUM TERM AVERAGE OF 50 DMA (SENSEX:18785 NIFTY:5640) AND SHORT TERM AVERAGE OF 20DMA (SENSEX:18340 NIFTY:5495) AS A RESULT,ALL THE THREE TRENDS THE SHORT TERM,THE MEDIUM TERM, AND THE LONG TERM TREND ARE DOWN. HENCE BOTH THE INDICES ARE BELOW 20DMA AND A SHORT TERM TREND REVERSAL WILL BE IN PLACE IF THE PRICES MANAGE A CLOSE ABOVE THE 20DMA, HENCE AS A RESULT, THEY WILL ACT AS A GOOD RESISTANCE GOING FORWARD.


FOLLOWING STOCKS ARE GOOD TO BUY FOR VERY SHORT/MEDIUM TERM:
RELIANCE(949.00): TARGET 970-80
BATA(460.00): TARGET 470-80
BEML(650.85): TARGET 670-80
YES BANK(296.20): TARGET 310-15
ITC(189.10): TARGET 198-205
CAMLIN(80.00): TARGET 88-90
INDIA INFO(77.00): TARGET 81-84


DELIVERY FOR MEDIUM TERM:
INGERSOLL RAND: BUY BUY BUY
KEC INTERNATIONAL: BUY BUY BUY
BGR ENERGY: BUY BUY BUY
SKUMAR NATION: BUY BUY BUY
TIMKEN:
PIPVAV SHIPYARD:
PIRAMAL GLASS:
ORCHID CHEMICAL:
M&M FINANCE:
V-GUARD:
VIP INDUSTRIES:
ARVIND:
SURAJ DIAMOND:

Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.Nothing in this article is, or should be construed as, investment advice.

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