•Global LinkagesInter Market Technical’s: Bull Run Continues    

Global  Linkages• Market Outlook•Sector Preference •Stocks 

Subodh Gupta, CMTsubgupta@phillipcapital.in

15th Sept 2014

g p @p p p022‐66679762

Investment Thesis

Dollar is Expected to Outperform Euro while Japanese Yen.

Interest rates in America are expected to be steady in short term while in long term

the rates are expected to increase. The European Rates are expected to be stagnant.

Emerging Markets have come out of long consolidation while Developed markets

have been consolidatinghave been consolidating.

Equity markets are expected to continue to outperform gold .

Nifty continues to trade in an upward trend and is expected to head towards 8600‐

8800 levels in medium term.

Mid and Small Cap Indices will continue to outperform the Large Caps.

2

USDINR is expected to breakdown below its important support of 59.50 and head

towards 56‐55 levels.

GLOBAL LINKAGESGLOBAL LINKAGES

3

Yen vs Dollar Index

Synopsis: “ Dollar expected to Outperform”

• Yen has been the pick of the currenciesUSDJPY

• Yen has been the pick of the currencieswith USDJPY pair moving from 78 levels to102 levels

•Presently the pair has breached animportant trendline resistance connectingthe previous highs at 107the previous highs at 107

•From here the pair is expected to headtowards 130 levels

Dollar Index•Dollar Index on its part has breached thedownward sloping channel at 80 levels.

F h t D ll I d t

Dollar Index

• From here we expect Dollar Index tohead towards 85 and then towards 87levels.

4

Bond Yields

Synopsis: “Yields continue to remain stagnant”

• The U S 10 year yield has chart has given

US 10 year vs DJIA

• The U.S 10 year yield has chart has givena breakout from a downward slopingtrendline indicating a rising interest rates

iscenario.

•A rise in rates along with rise in equitiesindicates that the rally is not a Centralindicates that the rally is not a CentralBank fuelled rally a genuine one.

•Interest rates across Europe continue tok d d

US 10 YearJ 10 remain weak and we do not expect any

major change in coming days.

Japan 10 yearEuro Zone 10 yearGerman 10 YearFrance 10 yearIndia 10 year

5

Equity Markets on Cusp of Breakoutq y p

Synopsis: “ DJIA Breaks out, Nikkei follows”

DJIA Monthly Chart

•The rally of world equity markets whichstarted in 2013 continues to remainstrong

•DJIA has breached an importanttrendline resistance on monthly chartstrendline resistance on monthly chartswith prices expected to surge furtherahead.Nikkei Monthly Chart

•Nikkei has also breached its keyresistance level at 15900.

•These levels are excellent accumulationThese levels are excellent accumulationzones as markets are expected tocontinue their upside rally.

6

European Indices vs Europ

Synopsis: “Mixed Signals from EU” DAX vs FTSE vs CAC

• European Indices have lately shownsome weakness with breach of importantsupport trendlines on monthly charts.support trendlines on monthly charts.

•However the breakdowns were“Wipsaws” with the indices resumingh d f ll htheir uptrend in following months.

•Euro in turn has breached its crucialsupport levels and is headed towards 1.20

EUR/USDsupport levels and is headed towards 1.20levels.

7

BRC of BRICS

Synopsis: “Breakouts in Brazil and China” BRAZIL IBOVESPA vs Russian MICEX

• BRIC Indices which had been laggardshave seen renewed buying interest

•The Equity indices of Brazil and China has•The Equity indices of Brazil and China hasbreached out of their 4 year consolidationpattern as they seem poised for their nextupmove.

•Russian indices continues to showweakness with prices still in aSHANGHAI COMPOSITE weakness with prices still in aconsolidation phase.

8

Dow vs MSCI Emerging Market Indexg g

Synopsis: “Dow & MSCI EM Index- In Transition”

• Emerging markets have underperformed

DJIA / MSCI EM Index

MSCI EM Index vs DJIA

• Emerging markets have underperformedas compared to DJIA since 2010.However in past two months an

d f b i DMunderperformance can be seen in DM ascompared to EM’s.

•The Ratio Chart has turned latelyThe Ratio Chart has turned latelyindicating a change in trend.

• The MCSI EM Index has breached thel d d h d dimportant consolidating zone and headed

in upside direction while DJIA has been alaggard

•However Indian markets will continue tooutperform the MSCI EM Index

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Dow’s  Relative Performance

Synopsis: “Dow Outperforms Gold”

• The Ratio Chart of DJIA/Gold has been in

DJIA / Gold

• The Ratio Chart of DJIA/Gold has been ina consolidation for some time after breachof 10 years of underperformance of DJIA inl ti t G ldrelation to Gold.

• This is a sideways consolidation and weexpect the ratio line to breakout continuingthe trend of outperformance of DJIA againstGold

Synopsis: “S&P500 Outperforms DJIA” S&P500 / DJIA

y p p• The S&P 500 has been an outperformer ascompared to DJIA indicatingoutperformance of small and mid‐capsoutperformance of small and mid capsagainst large caps.

•However an important resistancei h i i h h l h

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connecting the previous tops might halt theupmove temporarily and may result inconsolidation.

Crude Oil Vs Natural Gas

Synopsis: “Crude & Nat Gas – Ready for the next move”

Brent Crude Oil Quarterly Chart

next move

• Energy Prices have been in a sidewaystrend since past 3 years.

•The prices of Natural Gas has breachedfrom the consolidation even as Crudecontinues to consolidate in the trianglecontinues to consolidate in the triangle.

• From here we see Natural Gas headingtowards $3‐2.5/mmbtu. A fall in prices of

Natural Gas Quarterly ChartNatural Gas will see fall in crude oil aswell. Presently has breached its importantsupport on long term charts and from

Natural Gas Quarterly Chart

pp ghere is headed towards $92 and$80/barrel.

11

LME Copper pp

Synopsis: “Industrial Commodities to Continue their consolidation”

LME Copper

• Contrary to the world equity indices,Industrial Commodities continue to tradein a downward sloping range.

•LME Copper has been trading in asideways consolidation trading betweensideways consolidation trading between$6500 to $7000

• A breakout in the commodity will onlyASX 200 (Australian Index)

be above $7000 levels which will see anew uptrend in copper

• The Australian Equity Index ASX 200 is• The Australian Equity Index ASX 200 isalso moving in a sideways fashionindicating weakness in commodities.

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Nifty View Nifty View 

13

Nifty  ‐ Breakout of Upward Sloping Channel y p p gSynopsis: “Nifty breached the resistance of Upward Sloping Channel”

f h b h d h f

Nifty Monthly Chart

•Nifty has breached the resistance of anupward sloping channel in which theindex traded for past 26 months.

•The breach of the channel at 6808 haslead to further bullishness in the index.

• A breach of resistance of upwardsloping channel generally has twice thetarget of length of the channel.

•The Channel length here is at around1000 points which brings the targettowards 8800 levelstowards 8800 levels.

14

Nifty  ‐ Symmetric Triangle Breakouty y g

Synopsis: “Triangle Breakout”

h l h f h

Nifty Quarterly Chart

• In the quarterly Charts, Nifty hasbreached a symmetric triangleformation.

•The index has been in this formation forpast 21 quarters and a breach above thishas started a new uptrend in the indexhas started a new uptrend in the index.

•The target of the breakout is either61.8% or 100% of the length of the baseof the triangle.

• The base is from 6363 to 2532 (4098points) Calculating it from the breakoutpoints). Calculating it from the breakoutlevel of 6344 the target comes to 8862(61.8% of the base length) and 10417(100% f th b l th)

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(100% of the base length)

Nifty  ‐ Applying Median Linesy pp y g

Synopsis: “Median Lines Indicate Further Bullishness”

Nifty Quarterly Chart

• The Pitchfork Analysis on NiftyQuarterly Charts indicates the pricesheading towards the Median Lineheading towards the Median Line.

•The Median Line Resistance lies at 8800levels where we expect markets topconsolidate.

•Post consolidation Nifty will resume itsf h it i t d tupmove from where it is expected to

head above 10000 levels.

16

BSE 500 vs NiftyySynopsis: “ Outperformance of Small & Mid Cap Stocks”

h f d f b ll h

BSE 500 monthly chart

• The foundation of any bull run is in theoutperformance of Mid Cap and SmallCap stocks as compared to the LargeCaps.

• The BSE 500 index has breached animportant trendline resistance andimportant trendline resistance andcontinues to be bullish along with Nifty.

•However the Relative Strength ChartBSE 500 / Nifty

(BSE500/Nifty) has bounced frommonthly 200 EMA and is trading at animportant trendline resistance.p

•A breach above the trendline isexpected to lead to further

t f f Mid d S ll

17

outperformance of Mid cap and SmallCap Vs Large Caps.

Indian Market Vs Global IndicesSynopsis: “ BSE500 outperforms Emerging Markets”

h f d

BSE 500 / MSCI EM INDEX

• BSE500 has outperformed its peers inemerging market.

•The monthly Ratio Chart ofThe monthly Ratio Chart ofBSE500/MSCI EM Index shows an upsidebreakout indicating outperformance ofNifty as compared to other EM’s toNifty as compared to other EM s tocontinue.

Synopsis: “Nifty Outperforms DJIA” DJIA / NIFTY

• Nifty has outperformed DJIA in past oneyear

•The ratio Chart has given a breakout from•The ratio Chart has given a breakout fromthe consolidation it was trading since 2010

• We expect the outperformance to

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continue in coming months.

USDINRSynopsis: “USDINR at important Support Levels”

d d l

USDINR Monthly Charts

• USDINR is trading in an upward slopingchannel since 2011.

•After touching Rs.69/USD in July , theAfter touching Rs.69/USD in July , theRupee has strengthened to touch 59.50levels

•The pair is presently consolidating at thesupport of the channel

• A breach below 59 50 will lead to a newA breach below 59.50 will lead to a newdowntrend which will then take the pairtowards 56.00‐ 55.00 levels.

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Sector Indices Sector Indices 

20

Relative Strength Matrix of Various Indices Against BSE 200 UniverseAgainst BSE 200 Universe

BSE BANKEX OUT PERFORMER

CNX PSU BANK INDEX MARKET PERFORMER

BSE CAPITAL GOODS OUT PERFORMERBSE CAPITAL GOODS OUT PERFORMER

BSE HEALTHCARE  UNDER PERFORMER

BSE FMCG MARKET PERFORMER

BSE IT MARKET PERFORMER

BSE METAL OUT PERFORMER

BSE OIL & GAS OUT PERFORMER

21

BSE AUTO  MARKET PERFORMER

BSE BankexCMP: 18138 Support: 17000/16600 Resistance: 19000/19700pp / /

Synopsis: “Making a pole and Flag”

k f l d

BSE BANKEX

• BSE Bankex forming a pole and apennant pattern on monthly charts.

• A breach above the consolidation willA breach above the consolidation willlead to a new upside rally which will takethe index towards 19000 levels

•The Relative strength chart indicates theoutperformance of Banks to continuewith the ratio chart expected to headBSE BANKEX / BSE200

further up towards its previous top.

22

CNX PSU BANK CMP: 3617 Support: 3275 Resistance: 4000/4400pp /

Synopsis: “Resistance Aplenty”

f h f

CNX PSU BANK INDEX

• After 4 months of upmove CNX PSUBank is trading at an importantresistance level.

• A breach above this resistance will leadto a new uptrend in the index.

•The Relative strength chart is staringnear its important resistance and thebreach of the same will lead to its

CNX PSU BANK / BSE200

outperformance.

23

BSE CAPITAL GOODS INDEX CMP: 14600 Support: 12979 Resistance: 16821/19000pp /

BSE CAPITAL GOODSSynopsis: “Near critical breakout”

l d d h b• BSE Capital Goods index has beentrading in an uptrend for past 9 monthsrising from 6800 to 14600 levels.

• The index has halted at its importantresistance of 16821 and consolidatedthereafter A breach of the resistance willthereafter. A breach of the resistance willlead to another round of rally in theindex which will then take it towards19000 l l

BSE CAPITAL GOODS/ BSE200

19000 levels

•The Relative strength chart hasindicated outperformance for pastp pmonths. However we do not see anytrend change in the RS chart

24

BSE HEALTHCARE INDEX CMP: 13666 Support: 11500/10914 Resistance: 14500pp /

Synopsis: “Expect Underperformance to continue”

l h d

BSE HEALTHCARE

• BSE Healthcare index continues tomake new highs after breach ofconsolidation at 10898 levels.

• The next resistance for the index lies at14500 levels where it is expected to halt

•The Relative strength chart indicatesbreach of a crucial support and asubsequent pullback. However we expectBSE HEALTHCARE / BSE200

the index to underperform in comingdays in relation to broader markets.

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BSE FMCG INDEX CMP: 7431 Support: 6800 Resistance: 7800pp

Synopsis: “Trading in a consolidation”

d

BSE FMCG INDEX

• BSE FMCG Index is moving in asideways manner for past 13 monthsafter making new highs

• A breach above 7250 will lead to a newuptrend in the index which will see itthen heading towards 7800 levelsthen heading towards 7800 levels.

•The Relative strength chart indicatesunderperformance of FMCG sector.BSE FMCG / BSE200

However an important trendline supportis expected to stop theunderperformance of the sector inpcoming days.

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BSE IT INDEX CMP: 10211 Support: 9700 Resistance: 10500pp

Synopsis: “Consolidation in near term” BSE IT INDEX

• BSE IT is re‐testing its previous topearlier made in Feb

• The important resistance lies at 10100The important resistance lies at 10100levels which is the previous top. A breachabove this will lead to a new rally in theindexindex.

•The Relative strength chart indicatesthat the sector will be a market

BSE IT / BSE200

performer in coming days.

27

BSE METAL INDEX CMP: 12027 Support: 11800 Resistance: 13900 ‐15000pp

Synopsis: “Breakout of RS Chart”

l d d

BSE METAL

• BSE Metal Index is trading atimportant resistance levels.

• We expect Metal index to breach theWe expect Metal index to breach theimportant resistance and head towards15000 levels.

•The Relative strength chart indicatesmajor breakout from downward slopingchannel indicating outperformance of

BSE METAL / BSE200

the sector.

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BSE  OIL & GAS INDEX CMP: 10951 Support: 10000 Resistance: 14000pp

Synopsis: “At critical resistance”

l & d d

BSE OIL & GAS

• BSE Oil & Gas Index is trading near itsimportant resistance .

• The breakout is expected to take theThe breakout is expected to take theindex towards minimum of previous highof 14000 levels.

•The Relative strength chart of BSE OilIndex is trading in a wedge type offormation. We expect a positive breakout

BSE OIL&GAS / BSE200BSE OIL&GAS / BSE200

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BSE  AUTO INDEX CMP: 17568 Support: 15500 Resistance: 18000pp

Synopsis: “Uptrend Continues”

d h b h d

BSE AUTO

• BSE Auto index has breached itsupward sloping channel and is tradingnear the top .

• We expect the uptrend to continuewith the index expected to touch 16700levelslevels.

•The Relative strength chart BSE Autoindex indicates breach of a majorBSE AUTO / BSE200

resistance leading to further upside.

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Our Previously Recommended Portfolio (in March 2014)  y ( )Reco Target  CMP

ACC 1248 1550 1450

Adani Enterprises 318 550 Target Achieved

Ashoka Leyland 17.85 27 Target Achieved

Bajaj Finserve 725 950 Target AchievedBajaj Finserve 725 950 Target Achieved

BHEL 189 250 Target Achieved

Britannia 873 1200 1150

Crompton Greaves 147 220 Target Achieved

GAIL India 377 500 412 made a high of 470

Glaxo 4169 6000 47934793

Hero Motors 2013 2600 Target Achieved

ING Vyasa 590 900 610

I di O B k 48 95 70Indian Overseas Bank 48.95 70 Target Achieved

Karnataka Bank 111.7 160 130 Made a high of 155

Siemens India 663.7 1000 Target Achieved

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SAIL 57.85 75 Target Achieved

Tata Steel 347.8 550 Target Achieved

Portfolio   

CMP Target Buy Range % upsideCMP Target  Buy Range % upsideReliance 989 1550 940‐1050 57

Bharti Airtel  368 550 355‐680 49A i P i t 615 800 600 630 30Asian Paints 615 800 600‐630 30Petronet LNG 174 250 150‐180 44

SSLT 280 400 260‐290 43TTK Prestige 3734 5000 3650‐3800 34Tata Power 88.5 130 85‐92 47

ABB 1002 1350 970‐1020 35ACC 1447 1900 1400‐1470 31

Canara Bank 364 500 350‐375 37Kotak Mahindra Bank 956 1250 930‐970 31Kotak Mahindra Bank 956 1250 930 970 31

HDFC 1142 1450 1100‐1200 27

Piramal Enterprises 668 920 650‐675 38

32

Jubliant Food 1121 1550 1050‐1150 38Hindustan Zinc 158 220 145‐165 39

Yes Bank 542 730 520‐550 35

Portfolio – Mid Caps  p

CMP Target  Buy Range % upsidePidilite 368 550 350‐375 49

Glenmark Pharma 717 1100 700‐730 53Emami 592 850 570 610 44Emami 592 850 570‐610 44Essar Oil 120.5 180 115‐127 49

Exide Industries 164 240 157‐172 46

Hind Copper 86.15 120 83‐90 39

Bayer Cropscience 2204 3000 2100‐2300 3636

Abbot India 2418 3200 2300‐2470 32FDC Ltd 135 185 130‐142 37FDC Ltd 135 185 130 142 37

India Hotels 82 115 78‐87 40M&M Fin 261 350 250‐275 34

33

NCC 66.2 95 63‐70 44

Oracle Finance 3450 4600 3350‐3520 33

Portfolio ‐ New Ideas  

CMP Target  Buy Range % upside

H id lb C 10 6 8Heidelberg Cement 77 105 76‐78 36

Escorts 151 200 147‐154 32

Wyeth 1089 1400 1050‐1120 29

GE Shipping 423 580 410‐432 37

Aditya Birla Nuvo 1599 2100 1550‐1630 31

Apollo Hospital 1126 1450 1100‐1135 29

Asahi Glass 103 140 99‐105 36

Gillete 2695 3500 2640‐2730 3030

Polaris 233 320 229‐236 37

Shoppers Stop 527 700 520‐535 33

34

Shoppers Stop 527 700 520 535 33

Castrol 430 580 420‐445 35

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