Will INFY lead the market ??

INFY has significantly underperformed the market, ever since Nifty broke out to start a new bull market in March 2014, in effect impacting the market negatively.  The stock has fallen from the high of Rs. 3,844 in March 2014 to  Rs. 2,907 in May 2014, a correction of almost 25%,  pretty significant considering its weight in Nifty. Though technology as a pack has underperformed, the fall in INFY was more sever due to company specific developments.

Is the storm over for  INFY ??  In our update  Is the Worst Over for Tech Stocks ?? ,   dated June 25, 2014, we had indicated a possible trend reversal for the tech stocks. Since then the CNX IT index has moved up from 9,700 to 10,360 and may be moving ahead to the higher target.

The daily chart of INFY had a failed inverse H&S formation  earlier, but has been again forming a bigger inverse H&S. A cross over Rs. 3,430 with higher volumes  may take INFY to a new high of  Rs. 3,900 in the medium term. In the monthly chart, TTO is making bullish pattern formation with similar target.

Though INFY has promising chart formation, whether it will take its leadership position to propel  Nifty to new highs ?? We will have to wait and watch !!

Nifty Caution

The Nifty daily and hourly charts are developing  an uncomfortable pattern on TTO, which may lead to a rapid downtrend if not negated. The short and medium term trend oscillators have been in a downtrend which may weaken  the weekly trend.

The recent up trend may have achieved its target at 7720 for resumption of the downtrend. The trend line break may lead to Nifty falling  back to  7550 and if broken to 7430 levels.

REC & PFC Charts

The twin stocks : Rural Electrification Corporation and Power Finance Corporation  continue to be in medium term downtrend after their stellar performance in the month of May and June. Both the stocks have provided excellent shorting opportunities on the hourly charts for intraday trades.

There may be some more downside left for  both the stocks before the trend reverses.

Star Performers Drag the Market

Reliance and ONGC, the star performers a few weeks back continue to drag the Nifty ever since the gas price hike was deferred. The stocks had risen in the hope of windfall gains in the event the gas price hike was implemented, However, with the NDA government deferring the issue the stocks have slipped and continue to under perform the Nifty.

The spate of bad news continue unabated, especially for Reliance, with the government imposing a further fine of $ 579 mn or Rs. 3,474 crores for failing to meet the gas production target for the year 2013-14 from its Andhra offshore fields. Thus the total penalty for reliance for the period beginning April 1, 2010 would be $2.37 bn or Rs. 14,200 crores. Though the company is likely to contest the penalty, the news has dampened the investor sentiments in the stock.

The technical charts of Reliance and ONGC  have shown identical trend pattern in all time frames i.e. hourly-daily- weekly and the weakness is likely to continue for sometime which may keep Nifty subdued in near term.

Nifty Post Budget

The level of  7500 has proved to be a rock solid support base for Nifty  yet again, as the indices refused  to breach the support on the budget day and rebounded sharply on short covering. The short positions created earlier had no option but to cover them on a reasonably  market friendly budget.

Nifty is showing signs of divergence on the short term charts and may move sideways from hereon to complete  a sideways correction. The long term trend continues to be bullish with a brief pause till the budget is fully digested. Any new policy announcements may be a new trigger for the market to resume its upward journey.

ABAN Offshore - The Rise Continues

ABAN Offshore has turned out to be a good investment for those who invested in the scrip in the month of May at Rs. 500 levels as   crossed touched Rs. 900  today. In fact the stock has moved unabated from Rs. 250 levels in November 2013. See our earlier post The Meteoric Rise of ABAN Offshore dated  May 21, 2014.

The following  hourly and daily charts with TTO shows how ABAN has given superlative returns in such a short period.

Why China's Loss is India's Gain !!

India had benefited immensely from the poor performance of BRICS economies, especially China which hitherto was considered the engine of the world's economic growth. The advantage to  India has been two fold -   lower commodity prices and  disproportionate allocation of  funds among the emerging markets.

The following update published by Elliott Wave International indicates why an extended economic downtrend in China has investors scouting for other markets with domestic consumption story. 

While India has moved on post consolidation, China still lies low, but not long before it catches up.

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Should You Get Used to China's "New Normal" of Falling Stocks?
Elliott Wave International’s current Asian-Pacific Financial Forecast shows you key price levels that could dramatically shift the Shanghai Composite’s trend
By Nico Isaac
Tue, 01 Jul 2014 15:15:00 ET


If you're afraid of heights, I suggest NOT reading the July 1 MarketWatch story about how China's ultra rich opt to dine in "high" style: $1430 (per person) includes a feast of caviar and foie gras, to consume while strapped in a chair on a crane 165 feet above the earth.

How you hold down your food under the stomach-churning circumstance is beyond me. But the image does befit the increasingly perilous position that China's economy finds itself on the ground below.

Here, we cull from the recent pool of stats and show you how, one by one, the cables holding up the former economic superpower have snapped:

China's total bank debt has grown from $14 trillion in 2008 to $25 trillion today
Many analysts expect China's GDP to slow to a low of 5% in 2014
In May, China's home prices experienced their first month-over-month fall in two years

And China's own President Xi Jinping recently pushed his citizens to adapt to a "new normal" of slower economic growth.

The fundamental backdrop is brutally negative. The natural next step for those who say economic data drives the performance in equities is to get the heck out of Beijing. In June, a 4-Part Bloomberg series on China by a bearish economist advised doing exactly that: namely, "Shorting Chinese Stocks."

Should you heed the call?

Well, what if we told you that the same exact data cited now as proof of China's long-standing bear market was cited five years ago – but as proof of its long-standing bull market? Only THEN, all of those indicators were pointing UP. Now, it's DOWN.See for yourself. Here, a 2009 CNBC resets the scene:

"China is now experiencing what the United States did during the Industrial Revolution. It's like the only successful story in the global economy. It's like the locomotive pulling the globe..."

But before the year's end, China's locomotive slipped off its tracks and spiraled out of control. That July, the Shanghai Composite (ticker symbol: SSE) also peaked, turning down in a 40%-plus selloff to the 5-year lows we see today.

The month of the SSE's reversal, our July 2009 Asian-Pacific Financial Forecast identified ample evidence "in support for a top," including waning momentum, declining brokerage account openings, and above all, a key bearish Elliott wave pattern: A five-wave move coming to an end, which we labeled on this very chart: 

Should you heed the bearish call? We asked you this earlier. Now you know where not to look for the answer: amidst the economic data. Before the data was bullish – yet stocks peaked. Today, the data is bearish. And stocks, well --

http://www.elliottwave.com/freeupdates/archives/2014/07/01/Should-You-Get-Used-to-China-s--New-Normal--of-Falling-Stocks.aspx#axzz36Hv42z73