Volume 3 Jul 19, 2010

Inside this issue:

Index Review:
Index View 2
CURRENT TECHNICAL SETUP

Intermediate support trend line: 16900 Sector Index 3

Analysis
200 dma level: 16635
Medium Term 4
Key swing levels : 18100 for resistance and for support 17300 Investments

Sensex Stocks above 200dma: 23 out of 30 (Up 1) Short Term 5

Investments
Gains/Loss for the week: 7557 Advances and 7277 Declines

Bullish views were indi-
cated in the last week let-
ter. And, to a good extent,
bullishness prevailed, al-
though it could not build
too much on it. The mar-
ket opened with a gap on
Monday last and man-
aged to hold that gap thru
the week– which is quite
creditable. Charging up-
ward on Wednesday, the
index managed to pip the
April top, creating a new
swing high for this ad-
vance and thereby reset-
ting the swing to up once
again. Pushing thru above
18K on the sensex and
5400 levels on the nifty
raised hopes and visions
of more gains but the
trend wilted under some
renewed bearish forces
from the US. Friday
showed positive trends in
our markets as short sell-
ers rushed to cover but
many have been dismayed by the weakness shown in the US
once again. This will now make for some nervous start to the
week as the short covering could have created a bit of hollow-
ness in the market.
The weekly candle is positive and negative at the same time. It Special points of
is positive because of the gap and that the close was better interest:
than the open. But it is also a bit bearish because the higher
levels of the week were not held and made for a top shadow. At • So readers who
are shorter
term inclined
should partici-
pate in the de-
cline with some
short futures or
even long puts
(as speed could
be an available
factor). Inves-
tors need to
give the first
couple of days
Break of support trendline a miss and wait
could be a problem for bulls. for the support
to be reached.

Source : ASA
Index review continued
market highs we dont want to see higher shadows. So, the market has its work cut out for itself. Starting Monday it
has to trade above the close and remain above it for the rest
of the week if the uptrend has to survive and build on it.
Now, given the way the global markets have fared, this does
appear to be a bit difficult.

But the thrust to new highs has also changed matters in an-
other way. We now need to have a fresh decline to be fol-
lowed by a lower top and then another decline before the
trend can change. Now, all that is going to take quite some
time. So, don’t consider major trend reversals for now on
any decline and look upon all drops as only intermediate
term declines.

The situation as far as the Dow charts are concerned are not
looking too good. We mention this especially here because
our trends appear to be so much influenced by what is hap-
pening there. We find that not only has the Dow triggered Top : The daily chart with Bollinger bands and stochastic. The rise
below prevous swing lows, it has also rallied to the nearest did not see much expansion in volatility. So there does not seem
resistance level and not been able to rally past it. So, over- like any nervousness is present. Stochastic indicates possibility of
some ranging ahead.
seas price action is certainly bearish. In that circumstance,
expecting big advances in our markets is also not on. So, Bottom: The RSI divergence at the recent top is clearly visible on
what we have here is a situation where our markets cannot the chart below.
drop big (because of the long term uptrend in force) but can-
not go up big either (because of overseas headwinds). This
can only make for some ranging action. Thus, the pattern of
intermediate term swings that has set in ever since the top in
Oct09 should probably continue.
Earnings season will ensure that we don’t drop too much ei-
ther. So moves will probably become very stock specific and
would need to be dealt with that way. On the lower side, a
break below 17800 will trip the short term support trendline
and this will lead to a test of the support near 17400/16900.
Rsi divergence because visible on the rise and a break of
support trendline would be a confirmation of the bearishness
being hinted by the Rsi.

Index View: Conclusion and Strategy

The bullishness of the last week seems to be spent as momentum has already run out. This is evidenced by the lack
of increase in volatility and the divergence patterns on the oscillator charts. Also, overseas market weakness could
result in the short term trendline being lost and this could lead to some short term declines at the very least. However
counteracting the bearish influence of these would be the earnings flow and if these are good enough, then we can
expect the market to drop a session or two this week and then slip into some sort of consolidation.

Thus initial portion of the week may be somewhat soft. However, one needs to watch the results flow and if there is
anything amiss there, it could be fuel to the fire and in that case we may have a decline on our hands. Since this is not
anticipated at the end of the week, chances are that it could suddenly turn a bit nasty. So readers are warned to be a
Page 2
bit on their guard in the coming week and curb adventurism.
Sector Index analysis: At resistances now…...
Despite some choppiness during the week, the indices managed to close the week on an affirmative note, thereby
maintaining the gains made during the week before last. Though compared to the earlier week the gains had reduced,
the market still managed to produce decent number of gainers for last week. The top mover was Realty that saw a
sharp rise. The sharp rally last couple of weeks is an attempt to bottom out from the prolonged fall and move up afresh.
Keep track of this sector for possible opportunities ahead.

Last few weeks have seen a sustained rally in Cons Durable, Small Cap, Mid Cap sector etc, with no signs of breather
on a weekly closing basis. The trend is getting a tad overstretched and may invite for some profit booking led dip. In that
case, dips can be viewed as a buying opportunity. Cap Goods and Banking witnessed a fine advance last week. Bank-
ing has moved out from a recent congestion whereas Cap Goods has used excellent prior congestion support and
turned around afresh. IT sector was in focus last week with Infosys numbers expected. However despite the disappoint-
ing results, the sector still managed to shrug off the negativity and closed near prior week highs. Check for follow thru
here. Oil sector seems to be struggling around a weekly resistance and has once again turned lower. Till a breakout
occurs here the sector will continue to be pressurized.

Sector Index Close Wkly Chng Pivot Support Resistance

BSE REALITY INDEX 3460.8 6.04 3426.8 3320.54 3567.05
BSE CONS.DURABL INDX 5182.83 3.91 5116.68 5005.89 5293.61
BSE BANKEX INDEX 11395.74 3.03 11326.09 11195.8 11526.03
BSE CAP.GOODS INDEX 15009.95 2.44 14944.75 14723.17 15231.53
BSE SMALL-CAP INDEX 9443.41 1.86 9403.25 9325.5 9521.17
BSE MID-CAP INDEX 7397.78 1.1 7387.58 7324.01 7461.34
BSE FMCG SECTOR INDX 3224.6 0.51 3210.84 3183.3 3252.14
BSE METAL INDEX 14910.06 0.49 14999.53 14710.7 15198.89
BSE I.T. SECTOR INDX 5459.44 -0.34 5443.52 5328.64 5574.31
BSE HEALTHCARE INDEX 5729.3 -0.35 5730.7 5687.87 5772.14
BSE AUTO INDEX 8336.87 -0.38 8366.92 8263.74 8440.04
BSE TECK INDEX 3394.33 -0.67 3391.82 3325.74 3460.41
BSE PSUS INDEX 9389.23 -0.84 9444.08 9306.01 9527.29
BSE OIL & GAS INDEX 10523.09 -1.03 10610.45 10407.85 10725.68

Page 3
Medium term view - FERTILIZER SECTOR
The stocks recommended under this section has a maturity period of around 6 months.
The Fertilizer sector has been generating a lot of buzz in recent times, with the sector stocks showing some fine
upmoves, reacting to favourable news.

After undergoing some tough times in recent years, with stagnant production, no fresh investment and poor financial
health of the units were accompanied by high level of import, imbalanced use of nutrients and deteriorating soil health.
Mounting subsidy bill posed a serious fiscal management problem to the government. However, after a lot of pursuing
with the government for appropriate reforms to ensure health and growth for both the farm and fertiliser sectors, there
has finally been a realisation in the government about the urgent need for significant reforms in the sector.

The industry has welcomed the bid to shift from product based subsidies to a nutrient-based subsidy (NBS) regime for
complex fertilisers. The change will encourage companies to develop more and more customised fertilisers, giving
them an edge over other manufacturers. The move has led to an increase in prices of di-ammonium phosphate and
muriate of potash by 6.4% and 13.5%, respectively. On the urea front too, increasing the prices by 10% has had a
positive effect on the cash flows of companies. (Source: DNA). With the sector getting a fresh boost and the trend
aided by favourable news, the outlook for this sector seems bright, espeically in the urea space. We are covering two
of the well performing counters from this sector.

DEEPAK FERTILISER (146.45)

This Fertiliser counter has been the best mover from this sector in recent times, forming nice fractal accumulation
patterns, which has been its characteristic right since its listing in 1986. In the attached weekly chart we can see that
prices have been on a sharp rally since March 09. During this run, prices have been forming a series of higher tops
and bottoms, around the Fib retracement levels. Having completed couple of accumulation patterns around 116 levels
(orange line) during Jan 10, prices finally managed to breach the same during June 10 and shifted into a rocketing
upward drive since then. Currently the steep rise has hit couple of resistances and witnessing some profit booking
there has closed on an indecisive note last two weeks. RSI has hit a strong resistance around 71. Hence this may give
rise to some profit booking led dip. However with this counter looking strong both fundamentally and technically buying
can be considered now or dips to 140-35 for target 203-05 / 250-51.

Source: ASA Page 4

Medium term view - FERTILIZER SECTOR
The stocks recommended under this section has a maturity period of around 6 months.
NATIONAL FERTILISER (116.30)

The company manufactures and markets a range of chemical fertilizers and a series of industrial chemicals.

The longer term chart of this Fert counter shows interesting readings. Firstly, this counter, like the one mentioned
above, sports excellent fractal accumulation patterns over the last several years. Secondly, the not-so-frequent bullish,
trend reversal pattern, Inverted Head and Shoulders (H&S) pattern was formed during 2008 to 2009. Interestingly, the
Head of this pattern and the right side shoulder also served as a nice accumulation pattern.

Prices with its sky rocketing advance during mid Jan 10, broke out from this multiple bullish pattern and in a matter of
2-3 weeks completed all the targets as well, reaching a life time peak of 149 by early Feb 10. Undergoing correction
since then, prices true to their nature shifted into another nice fractal formation and currently have been making good
upside progress. With this counter showing nice pattern formations and the trend backed by strong momentum
readings and volumes, buying can be considered now or dips to 117-15 for target 199-200 / 245.

Inverted H&S pattern

Page 5
Source: ASA
SHORT-TERM INVESTMENTS
The stocks recommended under this section has a maturity period of around 1-3 months.

Gujarat Fluorochemicals Ltd. : (184.55)

This industrial gases counter offered a fantastic
breakout during last week surpassing descending
Gann line (from April’08 high) suggesting that bulls
have gained control over this counter. From weekly
chart we observe that prices subsequent to taking
support of 40 week SMA have seen forming higher
bottoms signaling that dips are being utilized by
longs to initiate fresh buys. Nevertheless the stock
continue to face hurdle of 169 level (61.8% retrace-
ment of fall from 244 to 49).
On back of active buying participation prices
surpassed the crucial resistance convincingly
signaling positive trends ahead. Momentum has
been inching higher and with RSI in bullish zone,
signifies ability of bulls to capture higher grounds.
With overall setup looking positive, we recommend
a buy around 185 and on dips to 170 for target of
209 / 218, keeping a stop below 164.

Unitech Ltd. : (82.35)

Appended weekly chart reveals that this realty
counter has been discovering support around 67
levels from quite a long time, but was facing stiff
resistance to surpass level around 78 (23.6 %
retracement of Sept’09 high of 118 and May’10 low
of 65) indicating that the counter has been going
thru a tug-of-war between the bears and bulls. With
previous weeks’ nice rally stock surpassed the resis-
tance effortlessly emphasizing that bulls have finally
resolved the battle in their favor. This also led prices
to surpass barrier of an descending trend line
resistance and 40 week SMA confirming that bulls
are now very much active in this counter.

With this break-out assisted by volumes, it further

indicates some aggressive built-up of long position.
RSI also has been rising making higher tops and
higher bottoms, reaffirming bullish bias. As bulls are
now gripping this counter one can look to buy at
current level (82) and on dips to 75, keeping a stop
below 72 for targets around 94 / 99.
Source : ASA

Page 6
Disclaimer
This document has been sent by IDBI Capital Market Services Ltd (IDBI Capital) and is meant for the recipient
for use as intended and not for circulation. This document should not be reported or copied or made available
to others. The information contained herein is from the public domain or sources believed to be reliable. While
reasonable care has been taken to ensure that information given is at the time believed to be fair and correct
and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or
represented that it is accurate or complete and it should not be relied upon as such. IDBI Capital, its directors
and employees, will not in any way be responsible for the contents of this report. This is not an offer to sell or a
solicitation to buy any securities. The securities discussed in this report may not be suitable for all investors.
Investors must make their own investment decision based on their own investment objectives, goals and finan-
cial position and based on their own analysis. IDBI Capital, its directors or employees, may from time to time,
have positions in, or options on, and buy and sell securities referred to herein. IDBI Capital, during the normal
course of business, from time to time, may solicit from or perform investment banking or other services for any
company mentioned in this document.

IDBI Capital Market Services Ltd. (A wholly owned subsidiary of IDBI Ltd.)
Registered Office: 5th floor, Mafatlal Centre, Nariman Point, Mumbai - 400 021.
Phones (91-22) 6637 1212. Fax: (91-22) 2288 5850/60.

Page 7