Pre Market Report, February 21, 2017 | Stocks and Commodities

February 21, 2017
Time: 8.15 am

Pre Market Report:

1. US markets were closed yesterday.
2. So there is no much action today in Asian markets.
3. But we are likely to out perform the Asian peers in the short term.
4. There are many local cues, first HDFC Bank which is firmly in the bull grip.
5. First, it was small cap index, that hit all time high.
6. Then midcap index hit all time high.
7. Then on Friday, due to HDFC Bank news, Bank Index hit all time high but fell thereafter.
8. Now the only major index that has not hit all time high is Nifty.
9. Now Nifty is just 2.5% to 3% away from all time high.
10. I have been saying that markets are in consolidation mode between 8700 and 8850.
11. Yesterday that range was broken and Nifty traded firmly above 8850.
12. I did not watch TV in the last one hour, by looking at the share price movements of TCS and Infy, I assume that TCS buyback announcement came at 3.15 pm.
13. That has fuelled the rally further after 3.15 pm.
14. TCS has announced buy back of shares at Rs 2850.
15. Though the price seems to be very good, if you analyse carefully, there is nothing big in it.
16. First, usually this kind of buy backs are announced to assure the investors that the worth of the shares is much more than the price at which it being traded due to bad sentiment.
17. So the buybacks are usually an opportunity given to existing retail share holders to get out at a higher price if he or she is not convinced about the future of the company.
18. But TCS has announced the buyback for all investors including the promoters.
19. This is an efficient way of taking their own money, (money will be flowing from TCS to Tata Sons) from one company to another company.
20. If a retail investor is holding 100 shares in TCS, then he will be able to sell not more than 3 shares in the buyback offer.
21. A retail investor holding 100 shaares would have invested Rs 2.5 lakhs (at current market price) and he will be able to sell only 3 shares at a premium of about Rs 300 plus and he will get additional of just Rs 1000.
22. That is not even half a percent of the investment made.
23. But the sentiment will turn in TCS and collateral effect will be seen in other IT stocks, particularly Infy.
24. WIPRO came out with buyback at Rs 600 per share and after many months, it is trading around 475.
25. So there is nothing big about TCS buyback materially.
26. Yesterday I mentioned that Nifty is likely to trade between 8700 and 9000.
27. Now we can expect a good expiry, may be around 9000 if the bullishness continue.
28. I sold 8700 Put and 9000 Call yesteraday.
29. DIIs are aggressively buying even at this level is surprising.
30. As long as DIIs are having such a faith in the markets, markets are not likely to correct significantly.
31. Reliance will also be in focus as Reliance JIO has a press meet today.
32. Now Nifty will find a strong support t 8820.
33. The support for Nifty is at 8820.
34. The resistance will be at 8920 and if there is any short covering rally, the next resitance will be at 8980.