Index Trends And Stocks In Action For 6th August 2013

India equities have snapped an eight-day losing streak and ended marginally higher amid a range-bound market yesterday. Gains were led by buying in metal shares and the index heavyweights of RIL and ITC. The Nifty gained 8 points to end the day at 5685. In our last write up we mentioned that the markets are attempting a pullback, however, gains are being wiped out as soon as some pullback happens.

In the current scenario the optimism behind the markets moving up is missing. The sheer scale of bearishness in the markets call for caution in near-term. This is necessary because sometimes with this kind of bearish positioning, one may witness a short rally for one-two days, which in a weak hand might get an investor stopped out quite easily.

On analysing the daily charts, we see that the Nifty has formed a doji candlestick pattern, which suggest we may see a minor pullback. Going ahead, the level of 5640-5650 continues to remain a crucial support on the downside. If we break this level, we can expect a waterfall decline in the Nifty with a target of 5550-5500. On the upside, 5725 continues to remain a stiff resistance.

Tech Mahindra has inked a five-year managed service agreement with BASE Company in Belgium for operations and network rollout. Tech Mahindra will be responsible for amongst others mobile site upgrades, maintenance, incident handling, site construction and data centre maintenance for multi-vendor 2G/3G and LTE networks. Some upward movement can be expected in the stock prices of Tech Mahindra.

Godrej Properties has entered into an agreement with Oasis Buildhome, which owns nearly 14 acres in Gurgaon, to develop a premium housing project. This would be the fourth project of Godrej Properties, which is part of Godrej Group, in the national capital region.

Jindal Steel and Power announced a robust set of numbers yesterday. Its net profit rose by 28% YoY at Rs 494 crore. But apart from the strong numbers, it said it will commission 2.5 million tonne electric arc furnace at its steel mill in Odisha. After stabilization of the furnace, its steel making capacity will increase to 6 MTPA (million tonne per annum). It also said it is increasing steel prices by Rs 1500 per tonne for the current month and that it is venturing into retail marketing of its products. On the back of strong profitability and announcements, stock prices of Jindal Steel and Power are likely to see some upward movement today.

Ambuja Cements said yesterday that it will reduce its logistic costs and increase efficiency as the demand for cement remains weak. This is likely to result in some support for the stock today.