Wednesday, July 30, 2014

PRUDENT MORNING MANTRA - 30.07.2014

NIFTY EXTENDS CONSOLIDATION

WORLD MARKETS

Dow and S & P 500 fell four tenth of a percent and Nasdaq ended marginally lower yesterday as geopolitical concerns overshadowed largely better-than-expected corporate results.

President Obama, in a statement said the US was expanding on measures announced two weeks ago, targeting Russian energy, defense and financial sectors as Russia has continued to support separatists in the Ukraine, and was still building up forces on its own border with Ukraine. Obama's statement followed European Union governments that announced sanctions earlier in the day to reduce Russia's ability to tap into bank financing and advanced technology.

Conference Board's measure of consumer confidence came in at 90.9 in July, the highest reading since October 2007. S & P/Case-Shiller home price index showed that home prices climbed more than expected in May, although the pace of monthly increases showed signs of slowing.

European markets gained between 0.3%-0.7%

Nymex crude fell 0.7% to $101 a barrel while gold dropped 0.4% to $1298 an ounce.
                                                             
AT HOME

On Monday, benchmark indices saw a sustained downward move after a flattish start to end lower by half a percent, extending the losing streak to second day. Sensex lost 135 points to settle at 25991 while Nifty finished at 7748, down 42 points. BSE mid-cap and small-cap indices lost 0.5% and 0.7% respectively. Realty index tumbled 2.7%, becoming top loser among the sectoral indices, followed by 1.5% cut in Metal index. Consumer Durable and FMCG indices gained 0.6% and 0.4% respectively.

FIIs net bought stocks and index futures worth Rs 75 cr and 32 cr respectively but net sold stock futures worth Rs 58 cr. DIIs were net buyers to the tune of Rs 56 cr.

Rupee depreciated 2 paise to close at 60.12/$.

L & T's consolidated net profit soared 111% to Rs 967 driven primarily by gain made on sale of assets. Consolidated sales rose 10% to Rs 18975 cr. Standalone performance however was moderate, reflecting the sluggish pace of growth in the infrastructure sector.

ITC reported 15.6% y-o-y growth in June quarter net profit at Rs 2186 cr which was lower than expectations but revenue growth in cigarette, agri and paper business was strong. Net sales rose 24.9% to Rs 9164 cr. Operating margins dropped 230 bps to 34.8%.

Bharti Airtel reported lower than estimated 15.3% q-o-q growth in consolidated net profit at Rs 1108.5 cr but rest of the numbers were strong supported by Indian operations. Consolidated revenues rose 3.35% to Rs 22962 cr. Margin expanded by 72 bps to 33.6%.

OUTLOOK

Today morning Asian markets are trading with modest gains and SGX Nifty is suggesting about 10 points higher opening for our market.

In Monday's report we had mentioned that 7740 is the immediate support on the hourly chart which should serve as the stop loss for trading longs. The benchmark, after touching a low of 7722, recovered to close at 7748.

We had earlier advised booking part profit at 7808 in trading longs initiated at 7600 and staying light as Nifty continues to consolidate in broad 400 point range.

A breach of 7722, which is also last week's low, can take Nifty further lower to around 7625, where the 34 DMA is placed. On the way up, 7800 is the immediate resistance on the hourly chart.

In the US, Fed's regular monetary policy announcement is due on today, with the central bank expected to cut monthly asset purchases by another $10 billion to $25 billion. U.S. second-quarter GDP figures will also be announced today and is expected to show a growth of 3%.

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