Unicon Investment paves road to trade rupee, BHEL, Cairn

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Unicon Investment has come out with its report on global economic outlook.

The global economy in December showed a mixed picture. On one hand European economic crisis continued to be major concern & on the other US economic data showed signs of relief. To resolve the gridlock of European crisis Euro-area finance ministers approved enhancements to their bailout fund while backing off from a target for its firepower and seeking a greater role for the International Monetary Fund. A European proposal through the IMF may deliver as much as euros 200 bn (USD 270 bn) to fight the debt crisis. However, negative news flow continued from Euro zone like reduction in euro-region growth forecast for next year by more than half (1.5% this year and 0.5% in 2012) led to the fear of recession. In US, economic data showed positive picture, with increase in consumer spending, improvement in manufacturing and homebuilding numbers combined with fewer job losses.

On the domestic front, high and persistent inflation (over 9%), high interest rates, slower pace of investment related policy reforms and stiffness related to regulatory issue (mining & land acquisition) in combination with weak global economy has been putting pressure on domestic growth (6.9% in Q2FY12 from 7.7% in Q1FY12). Moreover, weakness in INR has resulted in a higher current account deficit making global investor more cautious.

During the month positive news came from week on week food inflation which fell to 1.8% and likely to drag down WPI next month substantially. Also services sector expanded in November as new business accelerated despite persistent inflationary pressures. The seasonally adjusted HSBC Markit Business Activity Index based on a survey of around 400 firms stood at 53.2 in November.

We believe higher interest rates (due to high persistent inflation) are near its peak levels. Moderation in demand (lower GDP) and commodity prices leveling off (declining primary articles & food inflation) is expected to ease inflation going forward. This is expected to reverse the interest rate cycle in 2012. Going forward RBI monetary policy, key reforms announced in the budget and gradual resolution of global concerns should move the economy towards stability. However, rupee dollar exchange rate is likely to move ~52-54 and emerge as a concern in the next few months. Going forward, we are likely to see some consolidation in both economy and markets.

The Indian rupee, which slumped 15.8 percent in 2011, fell in light New Year trading on January 2, 2012, with many global markets closed for a holiday. In 2011, the currency posted its biggest annual fall since 2008 as foreign funds pulled out on slowing growth, worsening current account deficit and an uncertain global economic outlook. The government's worsening fiscal deficit could weigh down the stock market and trigger more foreign fund withdrawals. One-month offshore nondeliverable forward contracts were quoted at 53.79 rupees, indicating more weakness was likely in the short term. The Indian rupee is expected to start the new year weaker on concerns the government's worsening fiscal deficit could weigh down the stock market and trigger foreign fund outflows.India's fiscal position has been deteriorating as economic growth slows. On Friday, the central bank said the government would borrow an additional 400 billion rupees ($7.53 billion) through bonds in the fiscal year that ends in March. The euro shed 3.1 percent against the dollar in 2011, and we expect the weakening trend to continue in 2012.

BHEL  LTP 246
View: Positive
Oscillators Analysis: Stocastics is positive crossover and the RSI is in oversold territory on weekly chart reading, which indicates positive sentiment in stock momentum with decent volume support.

Pattern Analysis: A clear double bottom pattern formation and price crossover above 5 week moving averages at 246 and resistance zone at 280-300, which indicates stock may upside till resistance level, is a confirmation of a trend in that direction.

Technical Analysis:
BHEL has positive sentiment on candle stick formation on weekly chart with decent volume support. Stock has uptrend till resistance 280-300 and support at 245-240 levels, which is support zone. Monthly RSI has shown oversold and positive crossovers into oversold territory. Stock has closed above 5 and 20 day moving averages, which shows short term trend remains positive. The next area of resistance is around 280-300, while 1st support hits at 248 and below there at 240. It is also heading towards resistance zone at 280-300.

We recommended the stock at 248-242 with stop loss at 232 (closing basis) for a target of Rs. 280-300.

Cairn India Ltd.

LTP 339.00

View: Positive

Oscillators Analysis: The RSI has highly over sold territory and positive crossover from lower levels on weekly chart reading, which indicates positive sentiment in stock momentum.

Pattern Analysis: A clear break out at 330 on weekly chart and supports at 330-325 levels in weekly chart, which indicates stock upside, is a confirmation of a trend in that direction with good volume support.

Technical Analysis:
On weekly chart Cairn India closed above 200 day moving average at 315, which is good support levels with decent volume support, which indicates positive sentiment in short term trading and strong buying support around at 330-325, we expect the momentum to continue till next resistance at 365 on the upside target. And any genuine correction should see in stock price around supports at 330, which should be used as a buying opportunity for the potential target 366.

We recommended the stock at 330-325 with stop loss below at 312(on closing basis) for a target of Rs. 366.

Non-Institutions holding more than 90% in Indian cos

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