Market Outlook 11 04 2011

Profit booking and winding up of positions saw the index slipping up in a slow and steady manner
throughout the day. The real damage came in the second half of the trading session when the key support level of 5870 of Nifty futures was broken. The weekend pressure and the truncated next trading week because of two trading holidays saw both investors and traders reducing the Exposure in the markets. Nifty now can slowly drop to its first strong support level of 5790-5800 and from there onwards the future course of action will be dictated by the first quarter results. Infosys comes out with its results on 15th and till then we are of the view that Nifty will be range bound between 5700 and 5900 with a slightly negative bias. Instead of buying and selling breakouts and breakdowns, one should make a strategy of buying supports and selling rallies. Lot of stock specific action will be seen as we now entering the quarterly results season. Since there will be a lot of volatility during this period we would very strongly advise to trade in lower volumes.

Nifty futures have strong support around 5808 and 5767 levels whereas it will face resistance at
5872 and 5899 levels.

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.