Bulls cross some crucial hurdles as Nifty nearly touches trendline resistance; 5,700-5,770 bottleneck remains

The Bulls have succeeded in warding off the bear threat. But as the market nears crucial resistance levels, we could see some profit taking that could result in the Nifty correcting

S&P Nifty close: 5,627.20

Market trend

SHORT term: Up; MEDIUM term: Sideways; LONG term: Up

The S&P Nifty gained (2.85%) this week as the Bulls succeeded in pushing the Nifty through some crucial resistance levels. The volumes were marginally better than the previous week. The sectoral indices which led the recovery were BSE FMCG (up 4.24%), BSE Reality (up 4%), BSE Metal (up 3.94%), BSE CGS (up 3.93%), BSE Bankex (up 3.71%) and Power (up 3.37%), while the laggards were BSE CDS (up 1.59%) and BSE Oil & Gas (down 0.05%).

One can see from the weekly chart (above) that the S&P Nifty has closed above the recent high of 5,605 points, thus putting an end to the short term decline, at least for the time being. Despite the smart recovery, the histogram MACD continues to be below the median line, implying that the intermediate trend is still down or at best may turn into a sideways trend. Though, it's a bit early at this stage to conclude this.

The sharp rise witnessed in the previous week due to desperate bear covering, saw the Nifty complete the 50% (5,570) and 61.8% (5,658) retracement levels of the fall from 5,944-5,195 points. Contrary to my expectations (of the Nifty retracing the decline from 5,944 points) the Nifty seems to be retracing either the fall from 6,181 or the entire decline from 6,338 points, which gives upside targets of 5,688 (50% of 6,181-5,195, already completed), 5,767 (50% of 6,338-5,195), 5,804 (61.8% of 6,181-5,195) and 5,902 (61.8% of 6,338-5,195).

We saw the Nifty close above the 20 wema pegged at 5,580 points, the first major hurdle for it to cross, but the trendline resistance (in purple) pegged at 5,725 points is the next hurdle to watch out for from an intermediate term perspective.

Here are some key levels to watch out for this week.

  •  As long as the S&P Nifty remains above 5,589 points (pivot) the Bulls hold the edge.
  • Support levels are pegged at 5,472 and 5,318 points.
  • As long as the S&P Nifty stays above the 5,589 points level at the close, it could reach 5,747 or 5,861 points.

The Bulls have succeeded in warding off the bear threat which was looming large a couple of weeks ago. However, as the market nears crucial resistance levels, we could see some profit taking by traders which could result in the Nifty correcting the recent rise from the low of 5,195 points.

We saw the Nifty exceed our maximum expectations of hitting 5,658 points (it reached 5,705 points), but fell marginally short of the trendline resistance mentioned. For the Bulls to maintain their advantage of the last two weeks they must defend 5,420 points (in lows), this week.

At this moment the Bulls certainly hold the edge, but traders should be cautious in the 5,700-5,770 points range, as this is an area of resistance where the Nifty could become overbought in the short term. For those looking for buying opportunities, wait for a dip to the gap area between 5,558-5,566, but a decline close to the 5,420-5,450 range would be the ideal entry point. One thing is certain, that the onus has now shifted on the Bears to defend their castle.

(Vidur Pendharkar works as a consultant technical analyst and chief strategist at www.trend4casting.com.)


Vodafone buys Essar's 33% stake for $5.46 billion

Essar, which had held 22% stake in the joint venture through its Mauritian arm and the remaining 11% through Indian subsidiary, will now receive $5.46 billion as against $5 billion decided earlier

New Delhi: Revising the deal, UK-based Vodafone today agreed to pay over $400 million more to its Indian partner Essar for buying its 33% stake in the joint venture (JV)Vodafone-Essar, reports PTI.

With this, Essar closed the deal to sell its 33% stake at $5.46 billion as against $5 billion decided earlier.

Essar had held 22% stake in the joint venture through its Mauritian arm and the remaining 11% through Indian subsidiary.

This means that Vodafone would take a further hit of over $400 million to buy out Essar's stake.

"Under the agreements signed in Port Louis, Mauritius, Vodafone has made a net payment of $3.32 billion, after deduction of withholding tax of $0.88 billion," Essar said in a statement.

Vodafone and Essar have paid the tax even as both the parties continue to believe that no tax is due on this transfer. It was viewed as prudent to deduct and pay withholding tax on a without prejudice basis and they would claim a refund after following due process.

Vodafone also withdrew its tax dispute petition in the Authority for Advanced Ruling (AAR).

With this the 22% stake works out to be $4.2 billion as against $3.8 billion decided earlier. The shares have been transferred to Vodafone.

Similarly, the value for the 11% stake held by Essar through Essar Communications Holdings has now been revised to $1.26 billion compared to $1.20 billion decided earlier. The transfer of shares would be completed after obtaining all necessary approvals expectedly by 15 February 2012.

Commenting on the deal, which has given over $400 million dollars extra to the Ruias, Essar Group chairman Shashi Ruia said, "We were one of the early entrants in the telecom space in 1995 and we are really pleased that Vodafone-Essar has grown to become one of the premier telecom companies in the country with over 140 million subscribers."

"We have also enjoyed an extremely successful relationship with Vodafone and wish them success in the future."

Both the parties had recently witnesses a prolonged legal battle as Vodafone was against Essar going for reverse listing of its stake, while the Ruias had said that it was necessary to arrive at true value of its holdings in the JV.

Vodafone had entered the JV in 2007 after it bought majority stake of Hutchison and has been facing a tax liability of nearly $2.6 billion as the case proceedings are going on.


Bigadda to scale down social-networking services

While Google is renewing its focus on the social-networking space by creating Google+, the ADA group's initiative Bigadda.com is scaling down social networking services. Bigadda, the youth-oriented social platform, may remain as a celebrity blog and gaming site

Bigadda.com, the blog and Indian youth networking site, seems to have decided to focus more on its e-commerce initiatives rather than 'free' social networking services. This may have come as a real surprise to many Bigadda users; especially when other players are launching new applications or platforms on social network sites. However, according to market sources, the social networking services of Bigadda have suffered a loss of over Rs40 crore and hence may have decided to curtail it.

Just two days ago, in order to regain space in the social networking space from Facebook and others, Internet search giant Google, has launched Google+. According to the company, Google+ would let users to post photos, videos, messages and comments on 'real-world interactions' and 'real-life sharing' basis.

Coming back to the Indian social networking space, according to some tweets on the Internet, Bigadda, the Reliance Anil Dhirubhai Ambani (ADA) group's blogging and social networking initiative would close down its social networking service as soon as by 15th July. One of the tweets read, "From Bigadda: "We are scaling down our social networking services. Download your stuff now" As of frikking July 15, they're gone!"

While social networking sites, especially Facebook and micro-blogging site Twitter has been grabbing more subscribers, the same is not true for Indian social networking sites. Even Orkut from Google is finding it difficult to keep its users from migrating to Facebook.

However, in case of Bigadda, social networking was not its only identity. The ADA group launched Bigadda.com in 2007 with much fanfare with ambitions to gather a user base of 10 million by 2010. At that time, Rajesh Sawhney, president, Reliance Entertainment had said, "The number of Internet users has witnessed an upswing and so has their need to socialise online and gain acceptance in the virtual world. Virtual handout plays a key role, because it gives them the space to be amongst friends and peers, while sharing an image of their own, which they would like to project. Bigadda.com aims to evolve a youth community, and create a youth culture that will be cool and aspirational for them".

However, instead of creating this platform, Bigadda came out more as a blog space for celebrities than commonplace for socializing. Even in its initial days, Bigadda was more known for Bollywood superstar Amitabh Bachchan's blog than any other thing. Over the past few months, Bigadda also tried to concentrate more on gaming, instead of social networking services.

It was surprising but not unexpected as well. According to a study on social media usage by Nielsen and AbsolutData, nearly 30 million Indians who are online are members of social networking sites and about two-thirds of them spend time on these social networking sites daily.

More importantly, Indians spend more time on social media than they do using personal email; says the survey conducted in May 2011.

While social networking sites are attracting more eyeballs or hits, some sites, especially stereotyped Indian sites have become obsolete in terms of content and features compared with Facebook and others. Therefore, their end was written on the wall. Bigadda has just ratified the signals that its financial backing may not last long.


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