Stock To Trade 08 04 2011

• HDFC BANK ( 2354.00 ) NR7 pattern in HDFC Bank. Buy with stop loss below 2340.
• PIRHEALTH ( 441.90 ) TA Turtle breakout in PIRHEALTH 30 mins chart. Buy with stop loss below 435.

Consolidating in narrow range, waiting for next move

The Nifty today, did virtually nothing, consolidating in a narrow range. Today was an NR7 day (narrowest range in seven days). We can expect a trending move tomorrow. Traders should be on the alert. Nifty chart is given below. Note the NR7 days painted in blue. Trending moves emerge from these patterns. The Bank Nifty chart is also given below. The Bank did not make an NR7. The pattern for the Bank Nifty resembles a pennant (small, pointed triangle) which is usually made half way in an up trend. Traders should buy the bank Nifty above 11,900 and avoid buying if it breaks below 11,540.

Stock To Trade

GLODYNE TECHNOSERVE
Present Price – Rs.456, Buy Only Above – Rs.463, Projected price – Rs.487/510

Glodyne Technoserve is one of the few domestic focused IT players with core competency in Application software services and Technology IMS (Infrastructure Management Services). The company derives about 80% of its revenue from technology infrastructure management services (IMS), and rest comes from application development & other services. The company operates in India (75% of rev.) & USA (25% of rev.) geographies. Glodyne expects strong growth prospects for its Tech IMS space for next few years, together with strong traction seen in subsidiaries ensures strong growth visibility for FY12E and FY13E. As per various studies, while in general offshoring services have grown rapidly in past one decade, the services pertaining to remote management and maintenance of core IT infrastructure has been rather slow to gain popularity. As of now, only about 7 percent of the addressable market is being estimated to have been captured. Studies by Mckinsey have suggested that shifts in customer attitudes and economics could trigger rapid growth for these services.

The company presently has over 200 clients spread across India and USA. Approximately 75% of the clients are located in India. Top 20 clients contributes about 37% to the company’s topline.. As per the management, over 90% of the company’s business comes from renewal contracts. In India, the company operates over 100 service support centers with 10 sales and marketing offices spread over all regions. The government departments and public sector enterprises comprise the largest client segment. On the technical front, the stock will witness a strong breakout once it is able to cross the level of Rs.463. Buying is advised above this level for a target of Rs.487 and Rs.510. The time frame of the trade would be around 15-20 trading sessions.

DERIVATIVE PICK 08 04 2011

• FEDERAL BANK (CASH – Rs.420) : The stock is in a strong bull grip and once it is able to cross the crucial resistance level of Rs.425, it will gain further momentum. Buying is advised above Rs.425 for a target of Rs.432 and Rs.438. Higher target of Rs.422-444 is also possible. Stop Loss of Rs.417 should be kept.

Market Outlook 08 04 2011

Nothing much happened as far as Nifty movement was concerned as it traded around 5900 for most part of the session. It was almost a repeat of yesterday’s session as index heavyweights witnessed churning while momentum was concentrated within the non-index mid caps. Fertilizer stocks were in focus mid session as sudden burst of activity lifted most of these stocks. Chambal was up almost 9% on heavy volumes while others like NFCL, RCF and Tata Chem too gained significantly. The gainers list was almost completely made up of mid caps and included stocks like India Hotels, India Info, IVRCL Infra, Unitech, GMR Infra, ABG Ship, Tulip, Biocon, Hotel Leela, Triveni, Srei Infra, MLL, Aban and LITL. Cairn continued to lose ground as uncertainty hits its takeover by Vedanta. Sesa Goa too lost ground after gaining sharply over past 3 sessions. Some of the other losers for the day were Onmobile, NTPC, ONGC, OFSS, Bhushan Steel, TCS, Ultratech and APIL.

Overall, the undercurrent remained positive despite a minor negative tick in the frontline indices. Nifty continues to trade around 5900 and its been 4 sessions now that Nifty has remained in a tight range around 5900. We might see some movement either ways in a day or two as narrow range is most likely to be followed by expansion in this range. Dip below 5850 could mean a minor breakdown to around 5750-5770 while sustained trades past 5930-40 could mean a continuation of the uptrend to around 6050-6080. Meanwhile mid caps continue to make hay. GMR Infra broke out above Rs 42.50 and could be headed towards Rs 48-49. HPCL is showing positive technical pattern and could target Rs 385-390 over next few sessions. Tata Chem ( above 361) and HDFC could also seek higher levels. Sugar stocks are witnessing positive buildup and decent upside is likely in counters like Renuka, Balrampur and Baja Hind.

Nifty has support around 5840-50 and then around 5770 while fresh upside momentum is likely above 5935.