Index Trends & Stocks In Action For 26th June 2013

The Indian equity markets witnessed a relief rally yesterday on the back of short covering in banking stocks, a sharp recovery in the Shanghai Composite and strong European markets. However the markets failed to sustain these gains later yesterday and lost about 50 points from the day’s high and managed to close just above 5600. The Nifty 50 closed at 5609 with marginal gains of 0.34%.

In our last write-up, we mentioned if the Nifty sustains above 5630, we will see a good up-move in the Nifty. What we witnessed yesterday was similar to our view. The Nifty shot up 35 points as soon as it crossed 5630.

It formed a long-legged doji candlestick pattern on Tuesday along with a rise in volumes. A long-legged doji has long shadows indicating that the market rallied and sold-off significantly during the session. This is an indication of great uncertainty and a lack of direction. Going ahead, the Nifty has strong support at levels of around 5560-5535. On the other hand, the Nifty will face resistance at levels of around 5630-5670. We expect the markets to be volatile ahead of expiry.

The Tamil Nadu Government has offered to acquire the 5% stake to be divested by the Government of India in Neyveli Lignite Corporation. In a letter to the Prime Minister, Manmohan Singh, the Chief Minister J. Jayalalithaa said the shares could be offered to state public sector undertakings such as the Tamil Nadu Industrial Development Corporation (Tidco), State Industries Promotion Corporation (Sipcot) and the Tamil Nadu Industrial Investment Corporation (TIIC) at the approved rate. Stock prices of Neyveli Lignite Corporation are expected to see volatility today.

Bajaj Auto’s workmen at its Chakan plant have "stopped coming" to work thereby affecting production following the management's refusal to allot them shares at a discounted price. The company said the workers had earlier given a notice for a stoppage of work at the plant from the morning shift of June 28, 2013. Share prices of Bajaj Auto are likely to see some downward movement today.

Godrej Properties said it would utilize a sum of Rs 525 crore from its rights issue of Rs 700 crore to reduce its debt. In an effort to reduce its debt/equity ratio, the company would be repaying/pre-paying its debt based on the net proceeds of the rights issue in September 2013. Share prices of Godrej Properties are expected to see some upward movement today.

NMDC said it would ramp-up its capital expenditure by about 70% in this current fiscal to Rs 2720 crore. Major part of these funds (Rs 1880 crore) would be spent on its upcoming steel project in Chhattisgarh. The rest of the amount would be spent on modernization of its mining units and on doubling its railway line between Kirandul and Jagadalpur. Stock prices of NMDC are likely to see an up-tick today.