Archives : SEASON OF FORCED MARR

SEASON OF FORCED MARRIGES, ACQUISITIONS & TAKEOVERS 17/04/2008.

 Inspite of being a very short & truncated week, there were enough ingredients in it, to make it thrilling and exciting. Major events that affected the week were Infosys results, and the Orchid- Ranbaxy drama. No wonder, IT and Pharma were the star sectors that led the rally this week.In this week, the momentum torch was passed by Infosys to Ranbaxy-Orchid combine and they gaily carried it before passing on to the inflation figure, which made the market rock and roll. 

  • Strong opening by Infosys.
  • Ranbaxy-Orchid carries the momentum TORCH forward.
  • Inflation dips, market cheers.
  • SENSEX.
  • NIFTY.
  • HOW TO TRADE?
  • LAST WEEK S RECOMMENDATIONS:
  • THIS WEEK S RECOMMENDATIONS:
  • STERLITE OPTICAL

Strong opening by Infosys.

 Infosys results were in line with expectation, with revenue growing by 21% and net profit grew over $1billion. This was the first time in its history that net profit crossed $1billion. Infosys led a sharp stock market recovery on Tuesday following its improved and better than expected guidance of 16% to 18%. As a result technology stocks and especially midcap IT stocks rallied smartly. 

Ranbaxy-Orchid carries the momentum

TORCH forward.

 

Companies started to put their plans into action and are trying to take maximum advantage in the present scenario of the market. Recently the top news was of the Orchid chemicals, Bharat forge, Novartis, Tata Motors in the Indian market. 
…MEGA SERIAL STARRING ORCHID…RANBAXY…SOLREX…
Why did share price of Orchid Chemicals crash?
Bear Stearns, on its way to bankruptcy offloaded one million shares of Orchid Chemicals. Due to this the share price of Orchid Chemicals crashed to 110. Promoters were forced to sell 7% of their holding in response to margin calls from Indiabulls and Religare (an arm of Ranbaxy).The promoter had raised money to buy warrants by pledging a large chunk of shares with Indiabulls and Religare.
What did Ranbaxy do?
On a very aggressive move Ranbaxy started increasing the stake in the Orchid chemicals via Solrex pharma from the secondary market. Ranbaxy has managed to acquire around 14.72% in Orchid Chemicals.
 What can be next the planned strategy of Ranbaxy?
It is now becoming clear that Ranbaxy is not raising its stake for the purpose of investment, it wants to get strategic control. Probably, we can expect some move of an Open Offer from Ranbaxy in the coming days.   
Why did Ranbaxy do this?
This action shows that Orchid Chemical was under the scanner of Ranbaxy for its product line. The acquisition will help Ranbaxy to increase its product line and market share through this short cut.It is thus a golden opportunity to Ranbaxy to buy stake in the Orchid Chemicals at cheap price.
  

Inflation dips, market cheers.

Inflation, for the week ended April 5th 2008, stood at 7.14% versus 7.41%. The market had estimated at 7.30%. This is the first weekly decline in inflation after 8 weeks of non-stop rise. Being an election year, government is fighting hard to control inflation. Normally the voting public is not very kind to Government in whose tenure inflation remains high. Inflation is thus a serious worry and is much above the RBI’s comfort level. So as a monetary tightening measure, the RBI may raise CRR by 50bps and may also think of tinkering with the Repo rate. Change in Repo rate is unlikely, though Dr Y.V.Reddy, being a cowboy of the finance market, is known to spring surprises when least expected.    

SENSEX.

Sensex opened the week at 15694, made a high of 16570, low of 15573 and closed the week at 16481. Result was net weekly gain of 674 points. The trendline resistance is at 16553-16832. The long term resistance is now falling at 16832. The trendline support is at 16128-16093-15765. The MACD has already given a buy signal and is crossing over to the positive side. The Price ROC is crossing over the zero line and is giving a fresh buy signal. The RSI is well placed at 56. The Sensex has formed a bullish pattern and the target for that falls at 16893-17030-17166. The Sensex will need to close above 16592 for the medium term trend to turn positive. There is a gap existing between 17227 and 17258. This gap is coinciding with the 200 DMA and hence with the confluence of resistances between 17200 to 17300, it will be difficult for the Sensex to close above 17300. For the week ahead the Resistance is at 16592-16683-16832-17227. Support is at 16093-15825-15765-15573.

NIFTY.

Nifty opened the week at 4779, made a high of 4984, low of 4708 and closed the week at 4958. Net result was a weekly gain of 181 points. The trendline resistance is at 5023. The long term trend line is falling at 4942, and the Nifty has managed to close above that and also above the 4951 which is the 50DMA. Nifty has thus managed to cross and close above the critical resistances and is showing signs of breakout. Now for every downfall there will be good support and hence will bounce back. It is advisable to go long on declines. The support at 4628 level is very critical as the two week low is the same and there is a double bottom formation. Nifty future has closed at a minor premium of 2 points. The trendline support is at 4904-4872-4784-4735. For the week ahead, Resistance is at 5019-5055-5071-5117. Support at 4904-4784-4708-4628.  

HOW TO TRADE?

 One can go long on Escorts (96) for a target of 108, and hedge by taking a short position on the Nifty.  

LAST WEEK S RECOMMENDATIONS:

Once again inspite of very volatile and uncertain market conditions, majority of our recommendations reached their targets with ease. Sasken is poised along with GDL to reach much higher levels this week.
  • DIVIS LAB 1433 TGT 1477 REACHED 1475.
  • GTL 268 TGT WAS 278 REACHED 279.
  • NIIT TECH TGT WAS137 REACHED 142.
  • TATA CHEM 329 TGT WAS 336 REACHED 347.
  • CAIRN IND 252 SL 245 TGT WAS 259 REACHED 262.
  • GATEWAY DIST TGT WAS 118 REACHED 116.
  • SASKEN COMM. Recommended at136 reached 146.
  THIS WEEK S RECOMMENDATIONS:
  • ESCORTS 96 SL 94 TGT 103-108.
  • STERLITE OPTIC 189 SL 184 TGT 202-219-223.
  • GUJ ALKALI 192 SL 184 TGT 204-217.
  • HIND ZINC 593 SL 567 TGT 615-655.
  • GUJ NRE COKE 156 SL 150 TGT 168-175-181.
  STERLITE OPTICAL:  

STERLITE OPTICAL 189 has closed above the 50 DMA and has given strong trendline breakout. So as long as it stays above 178, the targets will be 202-219-223.


Disclaimer : The recommendations made herein do not constitute an offer to sell or a solicitation to buy any of the securities mentioned. No representations can be made that the recommendations contained herein will be profitable or that they will not result in losses. Readers using the information contained herein are solely responsible for their actions. Information is obtained from sources deemed to be reliable but is not guaranteed as to accuracy and completeness.

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