About weak IIP and strong Infy

The IIP number for November 2012 came in at a disappointing –0.1% compared to the 6% growth in November 2011. That means factory output shrank marginally from the year-ago month. The economy is still down, and only strong reform measures and a decent budget may shake it up from its somnolence.

For the Apr to Nov ‘12 period, IIP grew by a puny 1%, compared to a 3.8% growth during the same period in 2011. Mr Montek Singh Ahluwalia of the Planning Commission tried to put an interesting spin on the negative number – by saying that it was a statistical aberration because Diwali was celebrated in November in 2012.

That wasn’t the only bad news. Exports fell for the 8th straight month. However, the trade deficit reduced to $17.7 Billion in December from $19.3 Billion in November. Thanks to shrinking exports and the poor IIP figure, Rupee lost value despite strong FII inflows.

The poor IIP figure raised hopes of an interest rate cut by RBI later in the month. However, the inflation figure expected on Monday (Jan 14) will determine whether the RBI will cut rates. Even if it does, it is unlikely to be more than 25 bps – which may have very little effect on the market.

Surprisingly positive noises from Infosys management helped to prop up the stock market. Q3 revenues rose by 12% from the year-ago quarter, but net profit was down 0.1%. However, the full year and Q4 guidance were raised, which cheered the market no end.

After several quarters of disappointing results, which led to excessive selling of the Infosys stock, today’s euphoria was also a bit overdone. The stock opened up with a huge gap above its 200 day EMA, backed by a sharp increase in volumes, and rose nearly 17%.

Interestingly, the large gap in the Infosys chart formed on Apr 13 ‘12 – which was partly filled during Sep ‘12 – has not yet been fully filled. But that may be a moot point. The 2 years long down trend in the stock may be getting over.

Does that mean it is a good time to buy the Infy stock? If you missed buying on the break out today, you may get another chance if there is a pullback towards the 200 day EMA. Such pullbacks often follow sharp break outs. 

Stock Chart Pattern - Maharashtra Seamless

The stock chart pattern of Maharashtra Seamless will reveal that you can not keep a good stock down for too long. It is a market leader in its niche of seamless pipes used in gas and oil exploration in India and overseas.

With low debt, positive cash flows from operations (except a blip in '06), regular dividend payments and steady growth, Maharashtra Seamless should find a place on the buy list of mid-cap stocks for seasoned investors.

The headwinds of the global slowdown and the lower oil prices have curtailed investments and affected most players in the oil and gas segment. Maharashtra Seamless is no exception.

But its credibility in the export and domestic markets, overseas tie-ups coupled with a decent cash hoard will help it to ride out the downturn better than its competition. A recent repeat order from ONGC worth Rs 750 Crores will surely help its cause.

Enough about fundamentals. Now a look at the technicals:-

(Please right-click on the chart; open it in a new tab or window for a better view.)

The stock has broken upwards after making a bullish 'rounding bottom' pattern that indicates gradual accumulation by smart investors.  There are a couple of interesting things to note.

Both the RSI and slow stochastic moved out of their oversold zones and gave 'buy' signals even before the stock price moved above its 20 day EMA. By the time the 20 day EMA crossed above the 50 day EMA, confirming the bullishness, the stock had completed the 'rounding bottom' pattern.

The expected correction followed briefly and formed a 'cup-and-handle' pattern. The correction was well supported by the 20 day EMA as the stock continued to march upwards.

The lower volumes in Mar and Apr '09 were a concern. But the volume has picked up considerably in May '09, supporting the bullish move.

Is it a good time to enter the stock? Yes, if you are an investor with a 3-5 year outlook. If you have a 1-2 year outlook, you may want to wait for the next correction to enter. It is possible that the stock may drop to the 200-220 level to seek support again from its 20 day EMA.

The rise in May '09 has been too steep and the stock looks overbought. Both the RSI and slow stochastic have made lower highs while the stock has moved further up. This is a negative divergence and suggests caution.

Bottomline? If you like mid-caps and are looking for a fundamentally strong, profitable, low debt company with real cash in its books, look no further than the chart pattern of Maharashtra Seamless.

Stock Market News, Financial News - Feb 27, 2009

ANALYSIS - Insurers, drug makers take hit under Obama plan

By Susan Heavey

WASHINGTON (Reuters) - U.S. President Barack Obama's 2010 budget proposal takes direct aim at drug makers and health insurers to help fund an overhaul of the U.S. healthcare system.

His plan, outlined Thursday, calls for lowering Medicare payments to private insurers, allowing consumers to buy cheaper medicines from overseas and preventing drug companies from making deals that block generic competition.

Shares of U.S. health insurers suffered, with Humana Inc down 19 percent, Aetna Inc off 11 percent, Cigna Corp down 7 percent, UnitedHealth Group Inc off 12 percent and WellPoint Inc down 9 percent in afternoon trading.  (More ... )

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GLOBAL MARKETS - Asian shares flat in end to tough month

By Rafael Nam

HONG KONG (Reuters) - Asian shares were flat on Friday, ending the month with losses on continued investor concern over the world economy and the financial system, while safety bids such as dollar buying erased some of their recent gains.

The advances in stock markets at the start of the year unraveled further in February as the MSCI index of Asian shares outside Japan headed for a 5 percent monthly fall, having hit at one point their lowest since the five-year lows in late November.

Risk aversion in February was reflected in the surge of the dollar, which is on track to its biggest monthly gain against the yen since 1995, and a rally in gold that took it past the $1,000 an ounce barrier to approach a March 2008 record.  (More ... )

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ASEAN sends mixed signals on trade, rights

By Nopporn Wong-Anan

HUA HIN, Thailand (Reuters) - Southeast Asian foreign and trade ministers met in Thailand on Friday to start on the road to turning the 41-year old ASEAN grouping into an EU-style common market by 2015 and keeping their economies on a growth trajectory.

But leaders of the Association of South East Asian Nations sent mixed signals about free trade in the midst of the worst global financial crisis in decades as they gathered for an annual summit at Thailand's royal seaside resort of Hua Hin.  (More ... )

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Suzlon: U.S. wind growth slowing in '09

By Matt Daily

NEW YORK (Reuters) - Sales of new U.S. wind power generation in 2009 will probably be half the record 2008 level as the financial crisis paralyzed cash flows to new wind farms, the head of wind turbine maker Suzlon Energy Ltd's U.S. operations said on Thursday.

That contraction will reduce revenues for Suzlon in the world's largest wind power market from the nearly $1 billion the company posted in 2008, Andris Cukurs, chief executive of the Suzlon U.S. operations, said in an interview.

Development of new wind farms has slowed sharply in recent months as banks suffering from the global credit crisis shut off the flow of money for new projects.  (More ... )

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Indian exports to contract through March quarter

By Manoj Kumar and Rajesh Kumar Singh

NEW DELHI (Reuters) - India's exports in January contracted a sharp 16 percent and are expected to fall for the next two months, a senior official said, as a deepening global slump slashes away at demand for its goods and services.

Exports, which make up close a fifth of Asia's third-largest economy, will have fallen for four months in a row if the estimates of the Director General of Foreign Trade, R.S. Gujral, prove to be correct, after years of speedy growth.  (More ... )