Nifty forms Head & Shoulder pattern, weakness to persist for sometime

The Nifty50 dropped for the third session in a row on Wednesday to close a tad above the 9,900 level. The index started forming lower tops and lower bottoms, while it may have also formed a ‘Head & Shoulder’ pattern on the daily charts. This signals more correction ahead, probably towards the 9,800 mark in the near term. 

On Wednesday, the Nifty50 tumbled as soon as the opening bell rang. At no point during the session did the index enter the positive terrain. The 50-pack index closed the day at 9,908, down 70.50 points, or 0.71 %. 

Mazhar Mohammad, Chief Strategist for Technical Research & Trading Advisory, Chartviewindia.in, said any follow-through selloff on Thursday could eventually drag the index towards its 50-day moving average placed around the 9,768 level. 

Mazhar advised traders to avoid buying on dips for the time being as they would be better off waiting for some initial signs of strength. 

Sacchitanand Uttekar, AVP, Technicals (Equity), Tradebulls, said that a Head & Shoulder formation seems to have emerged on the daily charts. 

“The index registered consecutive firm close below its neckline. The pattern indicates a target up to 9,800. A follow-through move below 9,800 could amplify the bearish momentum. As we expect the seasonality effect to be sip in during the current series, participants are advised to book profit where possible and wait for this corrective wave to pass,” Utekar said. 

Sameet Chavan of Angel Broking advised investors to use any bounce back towards 9,960-9,990 zone to move out of existing positions. “This corrective move is likely to extend towards the 9,870-9,820 zone,” he said. 

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5 stocks which can give up to 14% return

New highs appear to be the flavour of the season across the global financial markets as Nifty50 also partook in it with a record high of 10,000 plus levels.

There are many sceptics surrounding the very nature of this bull market at every rise but it has nourished itself on the back of uncertain events like Brexit and demonetisation.

In the near term, based on long term charts, we expect Nifty50 to head towards critical resistance zone of 10,350 – 10,500 levels and certainly as of now there are no signs of big crashes or corrections.

Trade is clearly visible on the long side as there is no evidence for reversal even on lower time frame charts and bulls appears to have extended their life line further as Nifty50 comfortably trading above historical landmark of 10,000 levels on closing basis.

JSW Steel: BUY| Target Rs249| Stop Loss Rs220| Return 9%

Metals as a pack is looking quite interesting for some time and JSW appears to be leading this pack with new life time highs.

Hence, traders can look into this opportunity for a target of 249 with a stop below 220 on the closing basis.

IndusInd Bank: BUY|Target Rs1747|Stop Loss Rs1630| Return 5%

Two weeks back this counter registered a new life time with a channel breakout which has thrown up a new target placed around Rs750 levels.

Friday’s move, after 2 days of corrective swing, from the lows of Rs1,640 is suggesting that it might have resumed its upswing. Hence, traders can look into this opportunity for a target of Rs1,747 with a stop of Rs1,630.

Divis Laboratories: BUY|Target Rs760| Stop Loss Rs647| Return 11%

Surprisingly, this counter remained indifferent to the carnage witnessed in the largecap pharma space suggesting that it has decoupled itself with the negativity surrounding in the sector.

Hence there is a higher probability of it resuming its uptrend and target Rs760 kind of levels. Traders are advised to maintain a stop loss below Rs647.

PVR: BUY| Target Rs1465| Stop Loss Rs1367| Return 4%

The stock saw recent drubbing from the highs of Rs1,600 found this counter taking support around its 200-day moving averages (DMA) and it appears that it is placed at a recent low of Rs1,318. It has bottomed out and embarked on a short term uptrend.

Hence, should look into this opportunity for a target of Rs1465 with a stop of Rs1367.

Escorts: BUY|Target Rs767|Stop Loss Rs630| Return 14%

The rally from the recent low of Rs635 on high volumes on the back of decent result and double bottom kind of technical formation is signalling the end of the corrective swing which is in place from the highs of Rs767.

Hence, traders should make use of the current dips to create long positions for a target of Rs767 and a stop loss of Rs630.

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GST Council to discuss rates of agri services, e-way bill issues

The all-powerful Goods and Services Tax (GST) Council will take up representations from the industry regarding revision of rates, while focusing primarily on changing tax rate of agriculture and agricultural services such as warehousing and garment job works.

The Council, headed by Finance Minister Arun Jaitley, will meet on Saturday to take a stock of implementation the country’s biggest tax reform that was rolled out on July 1.

It will also iron out crucial issues related to electronic-way (e-way) bill, finalise a mechanism to operationalise anti-profiteering clause and revisit the demands of the textile as well as other sectors, a senior government official told Moneycontrol.

The rates of items such as ribbons and gas stove may also be taken up for discussion, with agriculture being the main focus of the government.

Cigarette and tobacco products may be taken up yet again by the Council, the official said.

"Area-based exemptions for Assam and other north-eastern states may also be discussed," the official said.

Sources said that rates of IT products, fly-ash bricks, bio-diesel and certain food items such as dried fish and vegetable blended edible oil is likely to be brought down.

The Centre and the State is divided on certain parameters related to the e-way bill. For instance, states are of the opinion that the bill should be obtained for intra-state movement of goods, while Centre feels that it should be generated only for inter-state movement, the official explained, adding that the Council is most likely to debate on these issues.

While GST rate for certain items may be revised, the government has time and again reiterated that change in rate is not something that the Council in keen on, until something has been left out or there has been an error in judgement by the fitment committee.

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BSE`s Q1 result consolidated net profit zooms to Rs 524 cr

BSE, Asia's oldest stock exchange, Yesterday reported a 12-fold jump in net profit to Rs 523.70 crore for the June quarter of the current financial year. 

In comparison, the exchange had a net profit of Rs 43.70 crore in the first quarter of last fiscal, 2016-17, BSE said in a statement. 

The total income rose by 11 per cent to Rs 158.38 crore in the first quarter of the current fiscal (2017-18), from Rs 142.73 crore in the year-ago period. 

The exchange has made a 'gain on sale of subsidiary' totalling Rs 461.75 crore. It has partially divested its stake in a subsidiary company, CDSLBSE 0.00 %, on June 29, 2017. 

"The divestment has resulted in a loss of control and therefore the profit on sale of the investment in the subsidiary amounting to Rs 451.18 crore has been credited to the consolidated financial results during the quarter ended June 30, 2017," BSE said 

The exchange witnessed 155 per cent growth in the average monthly number of order processed in mutual fund segment to 9.2 lakh orders during the period under review from 3.6 Lakh in the first quarter of the preceding fiscal. 

Further, average daily turnover in India International Exchange, BSE's subsidiary at GIFT City, for July stood at USD 57 million, growing at monthly compounded growth rate of 96 per cent since commencement of operations in January. 

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RBI allows overseas investors to bet more on Interest futures market

The RBI has created a separate limit for the foreign portfolio investors investing in the interest rate futures (IRF) market -- a market normally tapped by those holding government securities to hedge interest-rate risks. By doing so, the central bank has indirectly raised the bond holding limit of FPIs. 

"It is proposed to allocate FPIs a separate limit of Rs 5,000 crore for long position in IRFs," RBI said in the policy statement. "The limits prescribed for investment by FPIs in government securities will then be exclusively available for acquiring such securities." 

Interest rate futures (IRFs) are no different from stock and currency futures on which individuals and institutions bet either to trade or cover risks against bond investments. In IRF contracts, a trader will go long when he expects the price of the 10-year underlying bond to rise. 

"There are a few FPIs, who trade in interest rate futures," said Sandeep Bagla, associate director at Trust Capital Services. "With this separate limit, others too can join them. Overall the move will give more space for FPI participation." 

"RBI too does not need to worry about exchange rate risk as long as IRF trades are concerned," he said. 

Overseas investors have been aggressively investing in Indian debt securities. But they have exhausted 99.34 per cent of the total limit now at Rs 1,87,700 crore, shows data from National Securities Depository. They have nearly used up the full limit in corporate bonds pegged at Rs 2.26 lakh crore. 

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Govt to sell 4% in Hind Copper

The government will sell 3.70 crore equity shares in Hindustan Copper at a floor price of Rs 64.75 apiece through a two-day offer-for-sale (OFS) beginning today, with an option to issue a similar number of shares in case of over subscription.

The sale of 4 % stake or over 3.70 crore shares at Rs 64.75 apiece would fetch about Rs 240 crore to the exchequer.

In case, the government decides to issue additional up to 3.70 crore shares, the share sale can together fetch up to Rs 480 crore to the exchequer.

The government currently holds 82.88 %  stake in Hindustan Copper Ltd (HCL) and the stake sale with green shoe option would help the government meet the minimum public shareholding norm of market regulator Sebi. The floor price of Rs 64.75 a unit is at an 8.35 percent discount over today's closing price of Rs 70.65 on the BSE.

The two-day OFS would open for institutional investors tomorrow and retail investors would get to bid on August 3. Retail investor is defined as the one who place bids for shares not more than Rs 2 lakh.

The government has already raised over Rs 8,428 crore through disinvestment in five companies, and one share buy back. The government has budgeted to raise Rs 72,500 crore through stake sale in PSUs. This includes Rs 46,500 crore from minority stake sale, Rs 15,000 crore from strategic disinvestment and Rs 11,000 crore from listing of insurance companies.

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Commodity Market Update

Silver prices climbed Rs 100 to Rs 39,250 per kg at the bullion market today, tracking a firm trend overseas and increased offtake by consuming industries. 

Gold, however, remained flat at Rs 29,300 per 10 grams in scattered deals even as it strengthened overseas. 

Traders attributed the rise in silver prices to positive global cues amid pick-up in demand from industrial units and coin makers at the domestic spot market. 

Globally, silver rose 1.09 per cent to USD 16.74 an ounce and gold by 0.83 per cent to USD 1,269.10 an ounce in New York in yesterday's trade. 

In the national capital, silver ready went up by Rs 100 to Rs 39,250 per kg and weekly-based delivery by Rs 310 to Rs 38,460 per kg. 

Silver coins, however, remained steady at Rs 71,000 for buying and Rs 72,000 for selling of 100 pieces.

On the other hand, gold of 99.9 per cent and 99.5 per cent purity held steady at Rs 29,300 and Rs 29,150 per 10 grams, respectively. 

Sovereign too remained unaltered at Rs 24,400 per piece of eight grams. 

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