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Flavours of the week                                                            Oct 10, 2004

These are stocks that we expect to out-perform the markets. Cash and derivative strategies are advised thereon. Please stay online to enable loading of graphics from our servers. Please also read the trading tips section at the end of the newsletter.

Allahabad Bank - This banking PSU is in a major uptrend and is a re-structuring story. The balance sheet is undergoing a clean-up act and the financials are expected to improve substantially in the coming quarters. The same is showing on the price graph as the stock out-performs it's peers and the broader markets on the whole. The high relative strength is a major positive for this counter.    

Your call of action - .

• Investors / cash segment players - buy this counter on small declines upto the 45 - 47 levels and and hold with a stop loss at the 39 levels. Expect to book profits at the 58 - 60 levels atleast partially in the coming 3 months. Longer term players can expect significantly higher levels.

• Aggressive F&O traders - derivatives n/a.

• Derivatives contract size - derivatives n/a.

Allahabad Bank I Arvind Mills I Bajaj Auto I BHEL I Bank of Baroda I Dr Reddy I Escorts I G E Shipping I Glaxo I Infosys I IPCL I Tata Chem I Tisco I  Close window I Print page

Arvind Mills - this textiles / denim major has been recommended frequently and has lived upto our bullish expectations. The bumper cotton crop and depressed cotton prices are a positive for the company. The export prospects are improved and the scrip is reflecting the positive outlook by making higher bottoms. What is required is a breakout above the 88 levels, which will propel the scrip into a lower resistance area. We recommend a buy for the patient investor.

Your call of action - .

• Investors / cash segment players - Buy for delivery at the 82 / 83 levels and hold with a stop loss at the 78 levels. Expect to book profits at the 92 / 94 levels in 6-8 weeks time and possibly 100 levels in 3 months time.

• Aggressive F&O traders - Buy the October Futures above the 87 levels and hold with a stop loss at the 83 mark. Expect profit taking at the 90 - 92 levels by the expiry of this settlement in a conducive market. Options players can buy the Oct 90 calls at a suggested premium of Rs 1.75.

• Derivatives contract size - Market lot = 4,300 shares. F&O margin = approx Rs 58,000 (subject to change daily )

Allahabad Bank I Arvind Mills I Bajaj Auto I BHEL I Bank of Baroda I Dr Reddy I Escorts I G E Shipping I Glaxo I Infosys I IPCL I Tata Chem I Tisco I  Close window I Print page

Bajaj Auto - this 2 wheeler major remains a leading pick from our firm and we have bullish expectations as the company transforms it's business model. The company is fast emerging as the leading player in it's segment and the results are likely to be strong in line with the stock price which is discounting the results in advance. The price graph is suggestive of a breakout above a congestion level and the oscillators are pointing towards a strength in the undertone. The scrip is a strong market out-performer with very high relative strength. We re-iterate our buy recommendation on the counter for the patient investor.

Your call of action - .

• Investors / cash segment players - Buy for delivery at the 1,000 levels and hold with a stop loss at the 945 levels. Expect to book profits at the 1125 - 1150 levels in a quarter in a conducive market. Over a longer time frame, expect higher levels.

• Aggressive F&O traders - Buy the October futures at the 1015 levels and hold with a stop loss at the 965 levels. Expect to book profits at the 1075 levels by the end of this derivatives cycle. Options players cannot participate in this counter as there is a lack of liquidity on this scrip.

• Derivatives contract size - Market lot = 400 shares. F&O margin = approx Rs 65,000 (subject to change daily )

Allahabad Bank I Arvind Mills I Bajaj Auto I BHEL I Bank of Baroda I Dr Reddy I Escorts I G E Shipping I Glaxo I Infosys I IPCL I Tata Chem I Tisco I  Close window I Print page

BHEL - This power sector PSU major is in a major uptrend as the fundamentals are strong and the order book of this company is choc-a-bloc for many quarters. This company is one of the top ranking dividend payers to the Govt of India. The scrip is making higher tops and bottoms and derives good support at the upward sloping trendline which is poised at the 590 levels. The scrip is above it's short term congestion levels and shows the oscillators rising above their trigger lines. We recommend a buy on this counter for the short term traders.

Your call of action - .

• Investors / cash segment players - Buy the scrip as long as it stays above the 620 levels and hold with a stop loss at the 619 levels. Expect profit taking at the 640 - 645 levels in the short / medium term.

• Aggressive F&O traders - buy the October futures above the 625 levels and hold with a stop loss at the 619 levels. Expect profit taking at the 634 levels in the near term.

• Derivatives contract size - Market lot = 600 shares. F&O margin = approx Rs 63,000 (subject to change daily )

Allahabad Bank I Arvind Mills I Bajaj Auto I BHEL I Bank of Baroda I Dr Reddy I Escorts I G E Shipping I Glaxo I Infosys I IPCL I Tata Chem I Tisco I  Close window I Print page

Bank of Baroda - this PSU banking major is showing signs of fatigue as the scrip is unable to complete a breakout above it's 200 day SMA and is trading below it's short / medium term average. The oscillators are showing a downward pressure and the stochastics oscillator is showing a fall after making a lower tops formation. Should the scrip close below it's neckline of 170, we expect a steeper fall in the near term. A short sell is recommended in that scenario for the high risk / adventurous traders.

Your call of action - .

• Investors / cash segment players - n/a.

• Aggressive F&O traders - short the October futures once a close below the 170 levels is achieved and maintain a stop loss at the 174 levels. Expect profit booking at the 163 - 165 levels in the near term.

• Derivatives contract size - Market lot = 1,400 shares. F&O margin = approx Rs 49,000 (subject to change daily )

Allahabad Bank I Arvind Mills I Bajaj Auto I BHEL I Bank of Baroda I Dr Reddy I Escorts I G E Shipping I Glaxo I Infosys I IPCL I Tata Chem I Tisco I  Close window I Print page

Dr Reddy - this pharmaceuticals major is showing signs of bottoming out and the classic rounding bottoms are seen on the weekly charts. The traded volumes are perking up and the stock is likely to gain upward momentum in the coming days. A closing above the 784 levels will see a faster upmove and the scrip can test it's 200 day SMA in the coming quarter. We recommend a buy for the patient investor.

Your call of action - .

• Investors / cash segment players - Buy at the current levels and maintain a stop loss at the 725 levels. Expect to book profits at the 885 - 900 levels in the coming quarter in a conducive market.

• Aggressive F&O traders - Buy the October futures above the 772 levels and hold with a stop loss at the 744 levels. Expect profit taking at the 834 levels in the short term. Longer term investors may expect higher levels.

• Derivatives contract size - Market lot = 200 shares. F&O margin = approx Rs 26,000 (subject to change daily )

Allahabad Bank I Arvind Mills I Bajaj Auto I BHEL I Bank of Baroda I Dr Reddy I Escorts I G E Shipping I Glaxo I Infosys I IPCL I Tata Chem I Tisco I  Close window I Print page

Escorts - This tractors major is showing signs of a revival in the recent times as the scrip has surpassed it's 52 week SMA after almost 5 months and the oscillators are moving in tandem with the price graph. The stock is a market under-performer and is at best a trading buy.

Your call of action - .

• Investors / cash segment players - Buy as long as the scrip stays above the 70 levels and hold with a stop loss at the 64 levels. Expect profit taking at the 78 levels in the near term in a conducive market. Since this is a trading / speculative grade buy, traded quantities should be restricted.

• Aggressive F&O traders - derivatives n/a.

• Derivatives contract size - derivatives n/a.

Allahabad Bank I Arvind Mills I Bajaj Auto I BHEL I Bank of Baroda I Dr Reddy I Escorts I G E Shipping I Glaxo I Infosys I IPCL I Tata Chem I Tisco I  Close window I Print page

G.E. Shipping - This shipping major is showing signs of extreme strength as the company is a gainer from the recent budget which gave sops to the sector by way of the tonnage tax. The stock is a strong market out-performer as the relative strength comparative shows a reading of over 400. The oscillators show a higher bottoms formation and the scrip has given a breakout signal from a measuring move after closing above the 144 mark. A likely target of 200 should be expected in a conducive market in the short / medium term.

Your call of action - .

• Investors / cash segment players - Buy the scrip at slight declines of 175 levels and hold with a stop loss at the 161 levels. Expect to book profits at the 194 - 200 levels in the short / medium term in a firm market.

• Aggressive F&O traders - derivatives n/a.

• Derivatives contract size - derivatives n/a.

Allahabad Bank I Arvind Mills I Bajaj Auto I BHEL I Bank of Baroda I Dr Reddy I Escorts I G E Shipping I Glaxo I Infosys I IPCL I Tata Chem I Tisco I  Close window I Print page

Glaxo - This MNC pharma major is a frequent feature in our recommendations and is consolidating at the current levels after a steep run upwards. A breakout above the recent top will see the scrip cross the 700 mark. The recent announcement by the PM that the patent regime will be changed by the WTO schedule is a major trigger for the MNC pharmaceutical sector. We recommend a buy for the long term players.

Your call of action - .

• Investors / cash segment players - Buy for the medium term at the 640 levels and hold with a stop loss at the 610 levels and expect to book profits at the 690 partially. Longer term players can expect higher levels of 725 levels.

• Aggressive F&O traders - derivatives n/a.

• Derivatives contract size - derivatives n/a.

Allahabad Bank I Arvind Mills I Bajaj Auto I BHEL I Bank of Baroda I Dr Reddy I Escorts I G E Shipping I Glaxo I Infosys I IPCL I Tata Chem I Tisco I  Close window I Print page

Infosys - This software bell-weather is likely to determine the short term trend in the market as it announces it's numbers in the coming week. The scrip has signalled a breakout from a flag formation and is making higher tops and bottoms as the stock gets into stronger hands. The higher crude prices will see a weaker Rupee and in turn higher inflows for the technology companies. The uncertainty regarding the outsourcing of technology services will end with the elections in the USA by the end of this year. We retain a buy on the scrip on declines.

Your call of action - .

• Investors / cash segment players - Buy the scrip on declines if it falls, to the 1620 - 1630 levels and hold with a stop loss at the 1565 levels. Expect the 1750 levels as a partial profit mark in the near / medium term. Longer term investors may expect higher levels.

• Aggressive F&O traders - Buy the October futures at the 1630 levels and hold with a stop loss at the 1590 levels. Expect profit taking at the 1740 levels in a conducive market. Since the volatility is expected to be high, trade in small / minimal lots only.

• Derivatives contract size - Market lot = 200 shares. F&O margin = approx Rs 58,000 (subject to change daily )

Allahabad Bank I Arvind Mills I Bajaj Auto I BHEL I Bank of Baroda I Dr Reddy I Escorts I G E Shipping I Glaxo I Infosys I IPCL I Tata Chem I Tisco I  Close window I Print page

IPCL - This petrochem major was recommended in the recent past and has appreciated as per our expectations. The stock has signalled a breakout above it's short term resistance levels and is moving up with volumes higher than it's 10 day average. The continuous close above the 221 mark will be a positive trigger in the near term. We recommend a trading buy in the pre-result scenario.

Your call of action - .

• Investors / cash segment players - Buy as long as the scrip trades above the 221 levels and hold with a stop loss at the 216 mark. Expect to book profits at the 234 levels in a conducive market before the results are out.

• Aggressive F&O traders - Buy the October futures above the 222 mark and hold with a stop loss at the 217.50 levels. Expect to book profits at the 231 levels in the near term.

• Derivatives contract size - Market lot = 1,100 shares. F&O margin = approx Rs 42,000 (subject to change daily )

Allahabad Bank I Arvind Mills I Bajaj Auto I BHEL I Bank of Baroda I Dr Reddy I Escorts I G E Shipping I Glaxo I Infosys I IPCL I Tata Chem I Tisco I  Close window I Print page

Tata Chem - this Tata group major is moving higher as the scrip is gaining buying momentum. The scrip is trading above it's congestion levels of 135 levels and as long as it stays above this mark, expect accelerated upmoves. The relative strength indicator is showing the scrip getting to be a market performer and we recommend a buy on advances.

Your call of action - 

• Investors / cash segment players - Buy as long as the scrip remains above the 135 mark and hold with a stop loss at the 128 levels. Expect profit taking at the 145 - 150 levels in a firm market in the near term.

• Aggressive F&O traders - derivatives n/a.

• Derivatives contract size - derivatives n/a.

Allahabad Bank I Arvind Mills I Bajaj Auto I BHEL I Bank of Baroda I Dr Reddy I Escorts I G E Shipping I Glaxo I Infosys I IPCL I Tata Chem I Tisco I  Close window I Print page

Tisco - this scrip was accurately advocated as a buy in the pre-result scenario at the 285 levels and has rewarded traders and investors alike with high profits in the short term. The scrip has a very high relative strength and is a high risk / short term buy for aggressive traders till it announces it's quarterly numbers. The company has paid high advance tax and is likely to report higher than expected profit growth. A buy is recommended for traders.

Your call of action - .

• Investors / cash segment players - Buy at the 295 - 297 levels and hold with a stop loss at the 288 levels. Expect profit taking at the 307 - 310 levels in a conducive market in the near term

• Aggressive F&O traders - Buy the October futures at declines to the 298 levels and hold with a stop loss at the 294 mark. Expect profit taking at the 306 - 308 levels in the near term.

• Derivatives contract size - Market lot = 1,350 shares. F&O margin = approx Rs 69,000 (subject to change daily )

Allahabad Bank I Arvind Mills I Bajaj Auto I BHEL I Bank of Baroda I Dr Reddy I Escorts I G E Shipping I Glaxo I Infosys I IPCL I Tata Chem I Tisco I  Close window I Print page

Indices - domestic

BSE Sensex - The Sensex has stayed above it's bullish channel and is trading sideways with the 5824 as a likely short term resistance level. On the lower side, expect support at the 5714 levels in the coming week. Only above the specified resistance levels, will a new upmove be confirmed, till then, traders should refrain from buying.

Your  call  of  action - Since the Sensex futures are not very liquid, we suggest trading  the Nifty 50  instead.

Nifty 50 - this index is trading above it's channel too and is likely to get support at the 1792 levels. A breakout above the 1825 with high volumes is required as a confirmatory signal to indicate a fresh rally. The upmove will take the index to the 1840 - 44 levels, where selling pressure is expected to be witnessed.

Your  call of  action - Initiate short combinations by selling deeply out of money calls and puts in the near month series in minimal lots only. Await a breakout / breakdown before enhancing commitments.

Have a profitable week.

 

Vijay L Bhambwani

Ceo :- Bsplindia.com

The  author is a Mumbai  based investment consultant and  invites feedback at Vijay@BSPLindia.com and  ( 022 ) 23438482 / 23400345.

SEBI  disclosure :-  The  author has no positions in any securities mentioned  above.

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