Dalal St Week Ahead: Infy earnings & guidance, Nov IIP nos to stay in spotlight

The opening week of 2012 was won by the bulls with the Nifty closing above the 4700-mark, notching over 2% gains for itself. However, the focus now shifts to the third quarter earnings and guidance from the Indian companies and the November IIP numbers.

The season will be kicked off by IT bellwether Infosys.  All this and much more events are lined up for the next week. Let’s analyse them and gear you up for trading.

There is no doubt that Indian markets have failed to decouple itself from global cues. So let’s take a look at list of global and domestic events first.

January 09: Chinese GDP, Chinese CPI

January 10:
IndusInd Bank, Amtek India Results

January 11: Europe GDP data

January 12: Germany, ECB Interest rate decision, US Retail sales, US Initial Jobless Claims, ECB President Draghi Speaks, Gruh, HDFC, Infosys, Geojit BNP, TTK Prestige, DCB results. IIP November (Expected 1.90%, Prior -5.10%)

January 13:
Canada, US Trade Balance Data, Michigan Consumer Sentiment Index, CMC, Sintex Results.

Chart Check

Back home, Nifty was trading in the range of 4700-4800. Edelweiss Securities is of the view, “In the medium term directional oscillator ADX is still trading very negative and the Nifty continues to form lower top and lower bottom. Thus the medium term trend is still negative. Nifty has support in the range of 4700-4645, and in the coming days if Nifty starts trading below the above mentioned support range then we can witness further downside till 4580/4530. Near term Nifty has resistance at 4800.”

Sectors to watch

When money talks, everyone listen. The key trigger for next week is going to be where the rupee heads and of course the corporate earnings forecast. In view of this, the sectors that are likely to see movement are IT and pharma. A couple of private banking stocks will announce the quarterly results which will set the tone for the entire banking sector. Capital goods, however, remains the laggard in the entire pack. The joker in the pack is sugar stocks.

Stock Pick

Edelweiss picks Dr Reddy’s Laboratories with a target price of Rs 1840. Time horizon is for 3 months. “Dr Reddy’s revenue guidance of USD 2.7 bn by FY13 offers 23% upsides (USD 300- 400 mn of potential sales) from consensus and our estimates at USD 2.2-2.3 bn. The guidance is based on fair visibility on base case, which implies 27% CAGR in revenue and 45%, 40%, and 15% incremental contribution to growth from US, EM & PSAI and EU, respectively. We believe, with improved operating performance and enhanced visibility of niche launches in US, there are strong possibilities for estimates upgrades across the Street.”

F&O Wrap

Futures data suggests long build up in Index futures were created by the FIIs last week. India VIX was down 6.09%, a positive sign. Nifty Open Interest Put Call Ratio is up at 1.18 compared to 1.06. Long build up was seen in banking, IT and pharma stocks. Short covering was seen in Capital Goods stocks.

Rupee Corner

Edelweiss Currency report says, “Indian rupee is expected to open slightly weak against the US dollar next week tracking multi months drop in higher beta currencies. However, in immediate short-term, 52.50 act as a major support – long-term trend line as well as 34-day moving average support, breach of it would form a lower top lower bottom amid opening a major move on the downside. On upside, 53.25-53.32 resistance area looks vulnerable on hourly chart targeting further up move to 53.58.

Commodity Outlook

“The rally from the lows has put gold in a much better near-term situation with a close above the 200-day moving average at $1634 signaling further upside potential. Only a weekly close below $1545 would shatter this projection and lead to a deeper correction. Crude Oil is taking resistance at $104, from last few days and is not able to sustain above it. But whenever it does, we will see price rally to $114.

Base metals will, despite a deteriorating outlook for new supply, continue to struggle through the early parts of 2012 on growing concern of a recession in developed markets, combined with emerging markets slowing down. The long-term prospect however remains positive as lower prices should meet restocking demand, especially from countries like China.” says Edelweiss Commodity report.

Strategies

-Buy MCX Gold (Feb) above 27950 SL 27450 TGT 28550.

-Buy MCX Crude Oil (Jan) above 5430 SL 5325 TGT 5560.

-Sell MCX Copper (Feb) around 405-406 SL 412 TGT 395.

(With inputs from Edelweiss Research Reports)

-Riken Mehta

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