In the last week’s review we discussed about “harami” candlestick pattern and it could be a confusing signal unless confirmed by a green candle and positive close above 4530. For this to happen, the index had to gain about 128 points, preferably with a full upward gap or even a partial upward gap. I had also mentioned that it didn’t seem to be a possibility since bulls were losing momentum on Friday.
As expected, confirmation couldn’t be achieved on Monday, as the market lost 62.05 points. However the bulls were seen in action on Tuesday as the market gained 16.85 points. But it formed an “inverted hammer” meaning the index was brought back near its opening price due to sell off at higher levels. On Wednesday the bulls were in perfect control; the Nifty gained 105.75 points. Again, a “three inside up pattern” was formed. The index achieved a high of 4530 on Thursday before collapsing once again by 58.90 points. So 4530 has acted as a strong resistance for the index. On Friday the market was deep in red with the index losing 164 points at one stage. However, the afternoon session saw bulls coming back once again. Nifty had lost 69.85 points today. On weekly basis the index has lost 68.20 points or about 1.55%.
In the daily chart of Nifty, we can see the “Three inside up” pattern (“Harami” followed by a green candle and higher close). Since the bulls failed to cross 4530 and after yet another fall, we have to maintain 4218 as the next support level.
Now that the index has closed below 4363 on Monday/Tuesday as well as today this should act as a minor resistance when Nifty reverses. Let us discuss the Fibonacci retracements as shown below.
It can be seen that 4310 (61.8% retracement level) has not yet been breached on a close basis, though low went below it on a couple of occasions. A close below this level would mean that when index reverses, it may find difficult to break its resistances and the trend may not be strong.
The intraday chart of Nifty for Thursday is been shown below. On Thursday bulls lost control in the afternoon while today they were back in action after 2 pm. Thursday’s quick fall meant that the market had a strong negative opening today. The bulls have managed to break intraday resistance and this could be positive for next week.
Today’s intraday chart is given below:
Intraday charts courtesy: NSE
Forecast for next week:
In all probability the market should recover and reverse in the coming week. We saw a strong lower side volatility and intraday resistance breakout today. At market tops and bottoms, volatility will be very high. So the level of 4310 needs to be watched on a close basis. A close below this will make the index more sluggish during pullback rally. A close above 4530 will mark the return of bulls and the market will be ready for further uptrend.
Advance / Decline Ratio:
| Date | Adv. | Dec. | Unch. |
| 06-Aug-07 | 314 | 790 | 24 |
| 07-Aug-07 | 724 | 369 | 31 |
| 08-Aug-07 | 841 | 258 | 31 |
| 09-Aug-07 | 268 | 843 | 24 |
| 10-Aug-07 | 309 | 799 | 26 |
This leads to an overall advance % of 43.46, decline % of 54.13 and unchanged % of 2.41% for the week.
Top Gainers / Losers among Index stocks:
| Scrip | % Gain | Scrip | % Loss |
| HCLTECH | 6.82 | VSNL | 8.57 |
| GLAXO | 5.74 | HINDALC0 | 6.98 |
| TCS | 4.34 | STER | 5.86 |
| SUZLON | 4.28 | ICICIBANK | 5.61 |
| BPCL | 2.30 | GAIL | 5.10 |
Top Gainers / Losers in overall market:
| Scrip | % Gain | Scrip | % Loss |
| ETCNET | 92.71 | ABGSHIP | 17.63 |
| CONSOFINVT | 40.03 | LOKESHMACH | 11.45 |
| ORBITCORP | 37.79 | IBREALEST | 11.11 |
| RUCHIRA | 29.92 | RENUKA | 10.91 |
| JAICORPLTD | 27.63 | GREAVESCOT | 10.37 |
Please note that only ‘A’ group and ‘B1’ group stocks of Bombay Stock Exchange (BSE) are considered for the above table.
ETC Network is a case of bear trap. Orbit Corporation was The India Street short term pick. From 272.70 on June 29 it has appreciated to 504.30 today (85%). We discussed about Indiabulls Real Estate in “Technical review of select India stocks for medium term” and Shree Renuka Sugars in “How do IPO’s fare in Secondary Market?”.
The India Street analyzed Puravankara Projects Limited IPO. The issue closed on August 8 after the price band was revised to Rs.400/- to Rs.450/- per share. It got oversubscribed by 1.91 times. Qualified Institutional buyers oversubscribed the issue by 2.69 times, high networth individuals by 0.99 times and retail investors by 0.64 times. Omaxe got listed on August 9. It was issued for Rs.310. It opened with a premium of Rs.100 at Rs.410. It reached a high of 448 after listing. However, it couldn’t sustain selling pressure at higher levels and closed today at 345.75.
Our short term pick India Glycols closed at 184.80 on August 8, gaining 12.55% since our analysis on July 18. Long term pick Nagarjuna Fertilizers gained about 13.20% this week. Apart from these there are no other major movers among our short, medium or long term picks.
In 1986 BSE introduced SENSEX (SENSitive indEX) comprising of 30 well established Indian companies with the base year 1978 – 79. It is one of the indices the financial world tracks regularly. Since September 2003, “free float market capitalization” methodology is followed. In full market capitalization methodology, the total market capitalization of a company, (including those held by promotors, government agencies etc.), is taken into consideration for computation of an index. But in free float methodology, market capitalization is computed as the proportion of total shares issued by the company, which are readily available for trading in the market. It normally excludes promoters' holding, central/state governments’ holding, strategic holding and other locked in shares, which cannot be traded in the market.
BSE has introduced several indices so far. These include:
BSE 100
BSE 200
BSE Dollex 200
BSE 500
BSE PSU
BSE Midcap
BSE Small cap
BSE Bankex
BSE Teck
BSE Auto
BSE Healthcare
BSE Fast Moving Consumer Goods
BSE Consumer Durables
BSE Metal
BSE 100 comprises of 100 major stocks listed at five major stock exchanges in India at Mumbai, Kolkata , Delhi , Ahmedabad and Chennai. The mid cap and small cap indices represent relatively smaller companies. The teck index includes IT, media and telecom stocks.
Real estate prices, both residential and commercial, have soared up in the last few years in India due to huge demand. Very strong growth has been witnessed in this sector. Many domestic and international investors have been attracted by the Indian real estate industry. More growth is anticipated in the sector since the real estate market capitalization in India is 4.2% where as global norm is 15%.
Several real estate companies have come up with IPOs. We analyzed DLF, HDIL IPOs and Indiabulls Real Estate stock in various articles.
On July 9, 2007 BSE had introduced yet another index – The BSE Realty Index comprising of real estate stocks.
The base year for the index is 2005 and base index value is 1000. Like the Sensex, this index is also computed using free float methodology. 11 scrips are included in the Realty Index, representing about 95% market capitalisation of real estate development companies in BSE - 500 index. On July 9, the index value was reported to be 7333.97.
The following table shows the list of 11 companies, their free float market capitalization and weightage in the Realty Index.
|
Company | Free float market capitalization (Rs. Crores) |
Weightage (%) |
| DLF Limited | 14,542.01 | 35.94 |
| Unitech Limited | 12,773.71 | 31.57 |
| Indiabulls Real Estate Limited | 5,639.65 | 13.94 |
| Parsvnath Developers Limited | 1,375.80 | 3.40 |
| Ansal Properties & Infrastructure Limited | 1,213.38 | 3.00 |
| Mahindra Gesco Developers Limited | 1,096.16 | 2.71 |
| Sobha Developers Limited | 1,011.35 | 2.50 |
| Anant Raj Industries Limited | 890.13 | 2.20 |
| Phoenix Mills Limited | 725.06 | 1.79 |
| Peninsula Land Limited | 707.12 | 1.75 |
| Akruti Nirman Limited | 489.84 | 1.21 |
Total free float market capitalization: Rs. 40,464.21 crores
Total market capitalization: Rs. 179,499.70 crores
The following table gives the yearly historical stock prices of the constituent stocks. (Source: BSE web site, www.bseindia.com)
| Company | 31/03/04 | 31/03/05 | 31/03/06 | 31/03/07 | Current |
| AKRUTI |
|
|
| 405.85 | 499.90 |
| ANANTRAJ |
| 15.82 | 693.50 | 1103.45 | 1299.00 |
| ANSALINFRA 1 | 19.70 | 111.95 | 721.30 | 527.50 | 311.45 |
| DLF |
|
|
|
| 590.45 |
| GESCOCORP | 21.05 | 122.45 | 462.20 | 568.30 | 558.20 |
| IBREALEST |
|
|
| 298.10 | 501.40 |
| PARSVNATH |
|
|
| 259.00 | 383.25 |
| PENINLAND | 34.25 | 132.40 | 661.25 | 371.70 | 484.75 |
| PHOENIXLTD 2 | 1134.15 | 6105.00 | 976.25 | 1603.50 | 2009.75 |
| SOBHA |
|
|
| 800.70 | 955.00 |
| UNITECH 3 | 85.05 | 337.35 | 2785.45 | 387.35 | 542.40 |
1 Price adjusted in November 2006 2 Price adjusted in December 2005
3 Price adjusted in June 2006
ANSALINFRA, GESCOCORP, PENINLAND and UNITECH have performed very well in the bull market. GESCOCORP touched a high of 1300 in May 2006 but has fallen considerably since then.
Today’s intraday chart of Realty Index is plotted below, with Sensex by its side as a comparison.
Source: BSE web site www.bseindia.com
Today, the sensex has lost 99 points or 0.66% whereas the realty index has gained 249 points or 3.38%. BSE Metal index was the next highest gainer with 162 points or 1.48%. The BSE IT index lost 168 points or 3.34%.
However, considering BSE Sensex with base year 1978 – 79 and base value of 100, it has appreciated nearly 150 times in 28 years. Realty index though, has appreciated nearly 7.6 times in just about 2.5 years. DLF has nearly 36% weightage, Unitech has 31.5%, Indiabulls Real Estate has about 14%. Unitech has appreciated considerably (more than 11 times) in the last 2.5 years. DLF and Indiabulls Real Estate are relatively new issues.
Conclusion:
Sectoral indices (like healthcare, auto, metal, IT, realty etc.) are useful in analyzing how a particular industry or sector has performed over a period of time. Since the constituent stocks are chosen from the same industry, it presents a clearer picture about the sector than the overall index. Real estate industry is being projected for further growth. We can anticipate that the realty index too performs well in future.
In the previous articles we have seen that overall index performance and the individual stocks’ performance are unrelated. Even as the indices are scaling to new highs, we find some stocks breaking supports and making new lows. Whatever be the index movement, some stocks will continue to be bullish for short term and medium term. Let us analyze few of these stocks and study the technical scenario as on 06.06.07.
Ind-Swift Laboratories Limited:
This was the so called ‘darling’ stock of the year 2004. Between September and December 2004 the stock appreciated more than 5 times, from 52 to 272. What happened after that of course, is history. It is all the way down to 51 and trying to climb up again.
Why would a person be interested in a stock like this?
Every time a stock goes up or down, the market players are different, crowd psychology is different, investor sentiment is different. A stock that performed so well few years ago may not necessarily perform again. There are a few exceptions too.
This stock has recorded 3 lows so far: 51.10 in June 2006, 51 in November 2006 and 51.15 in March 2007. 55.40 was the previous high before the huge uptrend in September – December 2004. So technically, we can think of a triple bottom at around 51. The short term trend for the stock is bullish and it has closed at 61.90, just 1.50 short of its previous high in the current trend which is 63.40. Once this level is breached on a closing basis, we can think of the next target at 85.20. A close above this would take this stock to 126.70. The strong resistance of course exists at 181, which will be difficult to penetrate.
Having said that, let us think of the other scenario: If the stock fails to close above 63.40, then what will happen?
However, one gets a feeling that 51 is a very strong support level and is unlikely to be breached. No assurances can be given though.
Omax Autos Limited:
The stock had fallen from a high of 171.60 to a low of 58 in June 2006. As displayed above, “inverse head and shoulder pattern” has been formed in the weekly charts which is a bullish sign. Strong support exists at around 82 and once a stock closes above 94.70 which is short term resistance, we can expect it to reach 133 level.
As on today, stock has closed at 93.95. Interestingly, yesterday it formed a “hammer” and today an “inverted hammer”. There is an upward gap of Re.0.50 in the daily chart and this indicates strong demand for the stock.
At least 3 leading indicators, Wilder’s DMI, Stochastics and On balance volume support the bullishness and current trend in both daily and weekly charts.
This is yet another stock which did not “participate” in the ongoing “rally”
Indiabulls Real Estate Limited:
With all kinds of talks going in town about whether real estate prices will top out or bottom out, this one is relatively a new issue. Though bullishness is still intact, one would like to watch for a close above 420. Indiabulls Securities Limited’s IPO, which got listed for Rs.16 in 2004, was a huge success with the scrip closing at 568.80 on 04.05.07. It is surely a stock to watch.