PRUDENT MORNING MANTRA - 02.09.2014

NIFTY ON TRACK TO ACHIEVE 8150 TARGET; TRAIL STOP LOSS TO 7940

WORLD MARKETS

US markets were shut yesterday for the Labor Day holiday.

European markets ended mixed with modest changes as investors weighed worse-than-expected manufacturing data against tensions in Ukraine.

Eurozone manufacturing PMI fell to a 13-month low of 50.7 in August from 51.8 in July. Italy joined France in contraction, while German factories had their most sluggish month since September of last year. UK's manufacturing growth also slowed in August to 52.5 from 54.8 in July. German GDP contracted by 0.2% in the second quarter.

Tensions over Ukraine and Russia remain in focus. Media reports suggested that the European Union is working on contingencies if Moscow turns off the gas pipes in retaliation to additional sanctions. Separately, Ukraine began peace talks with pro-Russian separatists, who say they would be willing to remain as part of Ukraine if granted special status.

                                                             

AT HOME

After a gap up opening, benchmark indices added some more gains through the session to end higher by nine tenth of a percent, marking a fresh all-time high. Sensex surged 229 points to settle at 26868 while Nifty finished at 8028, up 73 points. BSE mid-cap and small-cap indices gained 1.6% and 1.3% respectively. Except a 0.7% cut in BSE FMCG index, all other sectoral indices closed in green with Metal and Capital Goods indices leading the tally, rising 2.8% each.

Maruti reported 27% y-o-y and 9% month-on-month rise in August sales at 1.11 lac units. Ashok Leyland saw 17% y-o-y and 6% m-o-m growth at 8331 units. TVS Motor saw a whopping 47% y-o-y rise at 2.27 lac units. On the flip side M & M reported 7.2% y-o-y dip at 35175 units.

During the hearing on the Coal block allocation case in the Supreme court, the Attorney General urged the court to leave 46 of the 218 coal blocks allocations the court declared illegal with companies that operate mines that are either producing or close to doing so. Adjourning the matter, the apex court asked all the parties including the central government, miners association and others to file affidavit stating their respective stand in light of its verdict by September 8 as it fixed September 9 as the next date of hearing.

FIIs net bought stocks, index futures and stock futures worth Rs 554 cr, 1972 cr and 136 cr respectively. DIIs were net sellers to the tune of Rs 562 cr.

Rupee depreciated 3 paise to close at 60.525/$.

                            

India's HSBC manufacturing PMI fell to 52.4 in August from July's 17-month high of 53.

Current account deficit for the April-June quarter stood at 1.7% of GDP, up from 1.2% in the Jan-March quarter but down from 4.8% in same quarter last year. Trade deficit widened to $34 bn from $30.6 in Jan-March quarter.

Core sector growth slowed to a three-month low of 2.7% in July from 7.3% in June, which was the fastest pace in nine months.

OUTLOOK

Today morning Asian markets are trading mixed with modest changes and SGX Nifty is suggesting a marginally lower start.

Just to reiterate, we have been bullish on Nifty ever since 7690 was taken out on 12th August and have been advising holding on to long positions with a trailing stop loss. In our latest weekly and yesterday's daily report, we had given a target of 8025, which was achieved yesterday itself.

In our “SAMVAT” report title “MAJOR UPTREND INTACT, MEGA BREAKOUT IN MAKING” published on 1^st November 2013, we had given first major target of 8150, which would be the next target to eye now.

Immediate support on the hourly chart has moved up to 7940, with the stop loss of which trading longs should be held on to.