Hi Friends,

Markets are following the Golden rule of Sell the Rumors,Buy the News.Yesterday markets reacted positively to the news of CRR hike and the fiscal policy of duty cuts on steel companies.One concern this time in the recovery rally is that the fundamentals dont support a runaway rally in most stocks,Ex-OIL&GAS.Majority of non oil and gas companies have reported lack luster growth.Capital goods companies have seen one of there worst quarters in last 3 years.Most of the companies have been hit by higher input costs.We saw the same concept being seen from Siemens,bhel,Abb nd yesterday alsthom power.

Coming back to Nifty next resistance for markets is now at 5227.Above 5227 in spot there is only one visible resistance level of 5281.Bears reside below 200dma and Bulls above that is another golden rule.But do remember its time to be cautious and not overly optimistic as Bear markets rally are strong but fall is stronger.

Reddy ??????

Will he, won’t he? The market is still divided over what action the RBI will take in today's annual policy meeting. A hike could well provide the bears a fresh opportunity to nail the bulls. On the other hand, a status quo (waiting for the Fed to act first) will perk up the mood on the street. The key indices lost ground yesterday as investors developed cold feet amid fears that the RBI may hike the repo rate by 25 bps to contain inflation. As a result, the Nifty failed to cross the 200 DMA of 5150 yesterday.
Meanwhile, a survey of professionals done by the RBI shows that the Indian economy will grow at a healthy 8.1% in FY09. If indeed GDP grows at 8% in the current fiscal it would not be a bad feat at all given the slew of headwinds that we are facing right now. The survey also reveals that corporate profits will clock a 25% growth in FY09, which again would be quite commendable. The central bank also believes that inflation will moderate in the second half, though high crude oil prices will continue to pose a risk.The market appears to have factored in most bad news, both local as well as global. As a result, the bulls may remain in command in the near term, especially if global markets too hold their nerve. Some more grim developments lurking somewhere could spark renewed sell-off. For today, we expect a cautious start and a lackluster trading till noon, when the RBI will announce its monetary policy for the year 2008-09. Select stock centric action will continue based on the results and other company specific announcements.
Key Results Today: Aban Offshore, Alstom Projects, Atlas Copco, Aurionpro Solutions, Bhushan Steel, Cadila Healthcare, Cairn India, Castrol India, CEAT, Esab India, Gateway Distriparks, Gayatri Projects, Grasim, Hanung Toys, IFCI, ING Vysya Bank, JK Tyre, Jyothy Labs, Maharashtra Seamless, Mirc Electronics, Nagarjuna Fertilizers, NALCO, Nestle, Patni, Pioneer Embroideries, Raymond, Reliance Capital, Subex, Taj GVK Hotels, Tata Sponge, UTV, Venus Remedies, Viceroy Hotels and Vishal Retail.
FIIs were net sellers of Rs383.3mn (provisional) in the cash segment yesterday while local institutions were net sellers of Rs1.67bn. In the F&O segment, foreign funds were net buyers of Rs4.55bn. On Friday, FIIs were net buyers of Rs3.49bn in the cash segment while Mutual Funds were net sellers of Rs734mn.
Asian markets were trading mixed this morning. The Hang Seng in Hong Kong was up 289 points or 1.1% at 25,955 while the Kospi in Seoul was down 6 points or 0.3% at 1817. The Straits Times in Singapore dropped 26 points or 0.8% at 3175 while the Shanghai Composite in China rose 46 points or 1.3% to 3521 and the Taiex in Taiwan was down 50 points or 0.6% at 9029.
Benchmarks elsewhere in Asia fell barring Malaysia, the Philippines and China. Japan's markets are closed for a public holiday.
US stocks closed almost unchanged on Monday as investors turned cautious ahead of Wednesday's Fed policy announcement. Stocks had risen earlier after billionaire Warren Buffett financed the $23bn takeover of Wm. Wrigley Jr. Co. and investor Kirk Kerkorian bought a stake in Ford Motor.
Wrigley, the world's biggest maker of chewing gum, jumped the most since at least 1980 after Mars agreed to acquire the company at a 28% premium to its closing price last week. Ford shares rallied after Kerkorian said he bought 4.7% of the second-largest US automaker and plans to buy more.
Microsoft shares slumped for a second day, helping drag the S &P 500 Index and Dow Jones Industrial Average lower, on speculation that the world's largest software company will have to increase its bid to acquire Yahoo.
The S&P 500 ended virtually flat at 1,396.37. The Dow dropped 20 points, or 0.2%, to 12,871.75. The Nasdaq Composite Index finished barely changed at 2,424.4. The Russell 2000 Index, an index of small-cap companies, gained 0.5% for its fourth consecutive advance.
Market breadth was positive. About five stocks gained for every four that fell on the New York Stock Exchange.
Stock gains were limited and tapered off by the close, as investors geared up for the two-day FOMC meeting starting Tuesday. The Fed is expected to cut interest rates again, and then perhaps signal that it is done for the time being.
US light crude oil for June delivery rose 23 cents to settle at $118.75 a barrel in New York after hitting a record $119.93 earlier in electronic trading. Meanwhile, the national average price for a gallon of regular unleaded gas hit an all-time record of $3.603, AAA reported.
COMEX gold for June delivery rose $5.80 to settle at $895.50 an ounce. The dollar gained versus the euro and yen. Treasury prices advanced, lowering the yield on the benchmark 10-year note to 3.82% from 3.87% late on Friday.
Candy maker Mars is buying gum maker Wrigley in an all-cash deal worth nearly $23bn. The deal will eventually make Wrigley a subsidiary of Mars. Warren Buffett's Berkshire Hathaway is making a minority equity investment in the new subsidiary. Wrigley shares surged 23%.
Kirk Kerkorian's Tracinda Corp. is offering $170mn to buy an additional 20mn shares of Ford. Tracinda already owns 100mn Ford shares. Shares of the US auto giant jumped 9.5%.
Continental said it wasn't interested in entering into a merger agreement with another company right now, surprising United Airlines' parent UAL, which had been in advanced talks with the carrier. However, reports say Continental has been in talks with American Airlines' parent AMR about an arrangement that would involve an alliance but not a merger.
Verizon Communications reported higher quarterly earnings that met analysts' estimates on higher revenue that was short of expectations. Shares gained 2.5%. RadioShack reported lower quarterly earnings and sales that nonetheless topped forecasts. Shares slumped 13.5%.
Across the Atlantic, banks helped European shares gain ground for the fourth session in a row. Oil companies and miners also performed well. The pan-European Dow Jones Stoxx 600 index rose 0.6% to 323.62, building on strong gains made on Friday when the index recaptured levels last seen in February.
Germany's DAX 30 rose 0.4% to 6,925.33 and the French CAC-40 advanced 0.7% to 5,012.75, while a poor performance from supermarket chains led the UK's FTSE 100 to close nearly unchanged at 6,090.40.
In the emerging markets, the Bovespa in Brazil gained 0.75% to 65,677 while the IPC index in Mexico was down 1.2% at 30,623. The RTS index in Russia rose 1% to 2150 while the ISE National 30 in Turkey finished flat at 54,167.

5 Weekly positional calls

The bulls may have brushed aside concerns of rising crude oil prices and inflation for the week. Short covering added to the joy and despite conviction, the bulls managed to notch up gains for the week.
But the coming week could turn out to be a different story. Much depends on what the central banks in India and US do. Both, the Fed and RBI are meeting next week (of course separately). Much will depend on the outcome of both these meets.
On the other hand, investors will also digest numbers from ICICI Bank, which declares its results on Saturday. With results season in, short term stock specific activity will continue depending on the numbers declared.
The India Infoline Weekly Wrap keeps you abreast of the markets and arms you for the markets in the coming week. To access the India Infoline Weekly Wrap, just Click Here
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Technical Outlook for the week starting on 28/04/2008

The Nifty witnessed positive momentum on the first and last trading day of the last week. The Nifty opened at the lowest level of 4955.90 and closed at 5117.70, near to the weekly high of 5117.70. The Nifty continued it's previous two-week's northward journey. The volume was comparatively better. The April month series expired smoothly. However, the roll over was not so enthusiastic in the sense that no aggressive build up position was seen.


In the daily charts, the Nifty formed a long white candle pattern on the last trading day of the last week. (Almost Marubozu pattern). The previous three days patterns are reputed to be a continuous pattern. The Nifty closed above 5,10,20 and 50 day SMA. The Nifty was able to close above 89 day EMA, since 18/01/2008. However, the Nifty is expected to face a good amount of resistance from the long-term averages of 100 and 200 day SMA. The sustainability of the close above one of the crucial EMA and long term SMA can need a minimum of three days closing. Any failure can make both the averages more stiff resistances.

The 5,3,3 stochastic reversed from the over bought zone. However, the 14,3,3 stochastic is about to give a fresh buy signal in the over bought zone. As both are being in over bought zone, after an upward move or some more day's range bound and volatile move, the possibility of weakness is there. To add strength to the short-term bullish trend, the RSI generated a fresh buy signal. The MACD and PSAR are in buy mode.

One can expect the continuation of the ensuing positive move upto 100 day SMA (5154) or slightly more than that with the increased volatility near to that level. The short-term trend may witness a pressure near to the above-mentioned level and further weakness can be expected.

In the weekly charts, the White Opening Marubozu formation was seen, which is normally a single candlestick pattern with low reliability. Normally, it is to be interpreted with other indicators, oscillators and the evidences. The Nifty is closed well above the 5 and 10-week SMA.

The "14,3,3" stochastic is out of the over bought zone. The "5,3,3 Stochastic" entered into the overbought zone. The medium term trend is still weak with possibility of reversal with or without one more fall.

In the monthly charts, the MACD is in a sell mode. However, the bottom of 4448 is becoming a strong support. Any decisive breach, will initiate a fresh down movement. The 20-month SMA is giving a good support since 30th May 2003 on a closing basis, which is currently placed at 4581.

In the quarterly charts, since October 2003, the Nifty is trading above PSAR. For this Quarter it is placed at 4448.50

Outlook for the Week

Possibility of facing resistance, but yet to get signs.

Based on the above rationale, the Nifty is expected to see some more initial positive move. On many fronts, the Nifty is near the resistance or over bought zone. Any failure to clear those resistances will lead to weakness. For this week, the Nifty has support at 5075,5056,4978-4994(short term trading support), 4916-4936(below a possibility of further weakness) and 4856 (a fall below fresh weakness may emerge) and 4556. The Nifty has resistance at 5154,5216,5343,5403 and 5480.
Strategy
Short-term traders can use any failure to clear the level of 5154 decisively, to exit long positions. Traders should use any declines to add long positions around 4856.

I shall be busy

This blog will not be updated regularly till 22 Apr 08.........

A Winning Stock Picking Strategy

When fundamental and technical factors coincide in a hot sector, the demand for the stock increases exponentially. Checking the following criteria for each stock pick is one of the most important steps in the stock-picking service.

Earning Per Share

Cash Flow

Annual Growth

Relative Price Strength

Profitability

Industry Leader

Financial Health

Debt Management

P/E Ratio

Competitive Advantage

Institutional Sponsorship

Direction of the Market Averages

Insiders trading

Industry/Sector

Psychology of Trading

Technical Indicators:

Support & Resistance

Earning Per Share (EPS):

Current quarterly earning per share.

Earning per share is calculated by dividing a company's total after-tax profit by the number of common shares outstanding. The percentage change in earning per share is one of the most important factors in stock selection. The higher the percentage increase, the better. Always compare a company's earning per share to the same quarter a year earlier not to the prior quarter, to avoid any misrepresentation due to seasonality. Earning Per Share alone can not be the true measure of a company's financial performance. For a number of reasons, accounting-based earnings per share can be made to say just about whatever a company's management wants them to, but there are other valuation data that are much harder to swindle with. Cash Flow: The amount of cash a company generates and uses during a time period. Cash flow is calculated by adding non-cash charges to the net income after taxes. Cash flow can be used as an indication of a company's financial strength. Cash flow is critical to companies, having plenty of cash available will guarantee that employees, creditors, and others can get paid on time. The Statement of cash flows records all the cash that comes into a company and all that goes out. It can yield a ton of information about the true health of a business, and you can spot a lot of blowups relative to earnings. For example, if operating cash flow declines or disappears even as earnings grow, it's likely that something is not right. The cash flow statement is divided into three elements: cash flows from operating activities, from investing activities, and from financing activities. Annual Growth: Annual earning increase of a company. The growth of earning in the past few years confirms the financial strength and stability of a company. The higher the growth, the better. When you compare two different companies the company with higher growth percentage and lower P/E ratio would be a better selection. Concentrate on stocks with established records of considerable earnings growth in each of the recent years plus strong quarterly progress. Remember to find out what is the source of the growth. You can't just look at a chain of past growth rates and believe that they'll predict the future. If investing were that easy, money managers would be paid much less. There are four sources that cause healthy growth for a company: selling more products or services, raising prices, selling new products or services, and buying another company. Relative Price Strength: Relative price strength is a benchmark in which you can compare the price performance of different stocks. In order for a stock to be a leader in a particular industry its price action should outperform other stocks in that industry. When selecting a stock as a momentum play you should look for companies with high relative price strength. The absolute number one market leader is not the biggest company or the one with the most known brand name; it's the one with the best quarterly and annual growth and price action. In a bull market, strong stocks with higher RS usually decline the least in the market corrections. Profitability: profitability is theamount of profit that a company is generating relative to the amount of money invested in the business. This is the best way of separating great companies from average ones. Return on assets (ROA) and return on equity (ROE) are two tools that can be used to asses how efficient a company is. Industry Leader: The top two or three stocks in a strong industry group can have incredible growth, while others in the group may barely move. You should buy the best companies, the ones that lead their sectors and are number one in their particular field. The number one market leader is not the biggest one. It is the one with the highest annual growth, earning per share, and price relative strength. It's a company that has competitive advantage over its competitors. A company that is offering the best product. Financial Health (Company's Debt): Once you figure out how fast a company is growing and how profitable it is then you need to find out about its financial health. The bottom line about a company's financial health is its debt. If the company's debt is increasing and company is growing fast at the same time, the extremely high earning of the company is high enough to cover the fixed cost of debt repayments. When business is bad, however, the cost of debt pushes earnings even lower. You should asses the financial health of a company before buying its stock especially if the interest rate is increasing. Financial statements of a company provide the information about the amount of company's in comparison with the earlier quarters/years. Management: Great management can make a difference between an average business and an extraordinary one. Your goal as an investor is to find management teams that think like shareholders; executives who treat the company as if they own a piece of it. One way to find out about the management and how much they really care about share holders is to check the top executive's compensation plans. We review the compensation detail in a document called proxy statement. Big bonuses are always better than big base salaries. Bonuses mean a chunk of the income is always at risk and depends on the performance of the management. P/E Ratio (Price/Earning): Most popular valuation ratio, which can take you pretty far as long as you're aware of its boundaries. An easy way to use P/E is to compare it with a benchmark, like another company in the same industry, the entire sector, or the same company at a different point in time. A company that is trading at a lower P/E than its industry peers could be a good value, but remember that even companies in the same industry can have very different money structures, risk levels, and growth rates, all of which affect the P/E ratio. If a company has a P/E higher than the market or industry average, this means the market big expectation from the company over the next few months or years. A company with a high P/E ratio will eventually have to live up to the high rating by considerably increasing its earnings, or the stock price will need to fall. Competitive Advantage: Success attracts competition and eventually laggard companies come into competition and cause the stock price of a company that has been a leader for a while to drop. Generally, there are different ways that a company can create sustainable competitive advantage: 1. Creating a real different product (Apple iPod) 2. Creating a strong brand (Tiffany) 3. Keeping costs down (Dell) 4. Lockingin customers by creating high switching cost (Cisco) 5. Locking out competitors (Using patent for drug companies) Institutional Sponsorship: The key to know about the institutional sponsorship is the number of financial institutions that have bought or sold the stock in the recent months. Technically, it considered to be a good sign if a company has increasing number of institutional owners over several recent months. Financial institutions can not hide since they usually trade huge number of shares. By following the buy and sell volume in a daily chart you can notice if mutual funds and banks are buying a stock. Market Trend: Detecting the current trend of the market is the first and most important part of our stock pick system. More than 75% of your trades will end up in a loss if you fight the trend. As part of our stock pick strategy we constantly review the conditions of the market averages. Insiders Trading: It is always good if you monitor insider's transaction when you are picking a stock. You don't want to buy a stock when insiders of the company are selling a significant amount of the company's stocks. Insiders usually sell their shares for various reasons but when the number of shares and the frequency of unloading them are unusual you should be more careful. On the other hand, there can be only one reason when they buy their company's shares, they want to make money. Insider trading is a term that most investors have heard and usually relate with unlawful conduct. But the term actually includes both legal and illegal conduct. The legal version is when corporate insiders such asofficers, directors, and employees buy and sell stocks in their own companies. When corporate insiders trade in their own securities, they must report their trades to the SEC. Since insider trading weakens investor confidence in the fairness and integrity of the stock markets, the SEC has treated the detection and prosecution of insider trading violations as one of its enforcement priorities. Industry: Industry is a grouping used to describe a company's main business activity. It is generally determined by the major source of a company's income. A hot sector is a sector of the economy experiencing a higher than regular growth rate. If companies across an industry show solid earnings and revenue figures, that industry may be showing signs that it is in its growth phase. Our goal is to select securities that are a leader in a hot industry. (Sector's graphs) Psychology of Trading: By studying the psychology of the individual, as well as the psychology of the group, we can understand how educated traders can profit by investing against the crowd or by not following the crowd. A visionary trader should also look for a number of psychological reasons that can pushthe price of a stock higher in the future prior to buying it. Support Resistance: The price action of a stock over a period of time will create strength at certain price levels. These levels are recognized as resistance at the top and support at the bottom end of the trading range. This trading range may develop different time frames; it can take from weeks to years or a support and resistance level to develop. As the price of a stock breaks through the resistance level and moves to a higher level, the level of resistance now becomes the level of support. A new level of resistance will then be formed at some point in the future. On the other hand, as the price range falls below the support level, that level then becomes the new resistance level.