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Thursday, April 12, 2007

Edelweiss Daily Market Outlook 12th April, 07


Market Snapshot

The Sensex opened on a positive note with a gap of 33 points at 13,222 after a subdued day of trade on tuesday. Late in the day, the index slipped into red to touch a low of 13,161 - down 134 points from the day's high. The Sensex eventually ended nearly flat at 13,183 - down six points. Nifty closed 14 points higher at 3862.

The NSE and BSE cash volumes were lower compared to the previous day at INR 79 bn and INR 40 bn respectively. The F&O volumes were higher at INR 229 bn.

Sentiment Indicators

The Implied Volatility (IV) across Nifty strikes has decreased to 25-27% levels. The WPCR of Nifty Options has increased to 1.11 compared to the previous 5 day average which is 0.92.

Outlook

The markets are expected to open soft as the selling pressure seen in the last trading session yesterday can continue. The global markets were also marginally in red and the Nifty will continue to be in a range bound session with intra-day volatility within this range.

Over the last few days we have seen the market rally on low volumes due to lack of a clear direction. In the absence of any trigger from global markets, traders will look at Infosys guidance numbers to make some fresh bets. Prior to that, we recommend exercising restraint.

Banking sector will be market underperformer after the proposed RBI’s announcement to increase risk weight ages to unrated loans. With car sales numbers tumbling to 13 month low, the Auto sector should remain under pressure coupled with it’s sensitivity to interest rate hikes.

The Nifty has a resistance at 3877 followed by 3892 and the support levels are at 3842 followed by 3819. The Nifty has been rising for six consecutive days now and some correction can be expected at these levels. The momentum in the rise is decreasing and patterns such as the Doji which represents uncertainty has been formed a couple of days before and continue to prevail.

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