Market Mantra: Technicals - Tata Chemical (Buy), Shiv-Vani Oil (Sell); F&O - Divi's Laboratories (Long), Hotel Leela (Long); Report - Utilities - 'Fuel Check'; Mgmt Mantra - Opto Circuits India

 

 

 

Market Mantra

 

Market outlook

Have a nice time!

 

All that really belongs to us is time; even he who has nothing else has that.

 

The time has come for a spectacular year to draw to a close. Timing the start of the market has been the latest debate and time in the market is going to get longer after today. We hope 2010 brings in even better gains though that may seem asking for too much. World equities have had a phenomenal rally in 2009. Much will depend on how the economic recovery progresses. Among the events to watch out for will be the Fed’s policy actions and its fallout on the dollar and other markets. RBI moves should come as no surprise whenever it happens.

 

Though the Nifty has made a new high for 2009, the market has been pretty much in a holiday mood. We expect a dull start amid subdued global markets. Volatility will prevail due to the F&O expiry. The Nifty is likely to face resistance at 5180-5200. A decisive close above 5200 could see the Nifty shooting to 5300-5650. Support is placed at 5100 and below that at 5000. Take all the rest you can during this long weekend.

 

Trading ideas (Time period: 1-3 days)

Tata Chemical (BUY, CMP Rs333, Target Rs353): Daily chart suggests formation of higher bottom. The stock has been moving along with the support of its 20-DMA since first week of December 2009. On Wednesday, the stock broke out from its previous peak. The bullish formation will be confirmed above the levels of Rs334. Traders can buy the stock in the range of Rs330-335 with a stop loss of Rs325 for a short-term target of Rs353 in the coming trading sessions.

 

Shiv-Vani Oil (BUY, CMP Rs352, Target Rs375): On the daily chart, the stock has given an upside breakout. The above mentioned pattern has taken place after a consolidation between the range of Rs322-347 since December 2009. From the current levels, the stock is expected to move northwards. The momentum oscillators like the daily RSI has given a positive divergence, indicating that price would start moving up. On Wednesday, the stock gave a close above its key resistance levels of Rs345-347. We recommend traders to buy the stock between the levels of Rs348-354 with a stop loss of Rs338 for a target of Rs375 and Rs380.

 

Derivative strategies (Time period: Till expiry)

±       Long Divi's Laboratories Ltd Jan Future @ Rs677 for the target price of Rs695 and stop loss placed at Rs670.

Lot size: 620

Remarks: Net maximum profit of Rs11,160 and net maximum loss Rs4,340.

 

±       Long Hotel Leela Ventures Jan Future @ Rs48.70 for the target price of Rs52 and stop loss placed at Rs47.50.

Lot size: 7,500.

Remarks: Net maximum profit of Rs24,750 and net maximum loss Rs9,000.

 

Commodities – Metals (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Gold - Feb	Sell	Around 16700	16660, 16620	16740
Silver - Mar	Sell	Below 26600	26450, 26300	26730
Copper - Feb	Buy	At 345	347.8, 350	342.7
Zinc - Dec	Buy	At 119	120.3, 121.5	118.1
Lead - Dec	Buy	Around 111	112.5, 114	110.1
Aluminum - Dec	Buy	103-103.3	105	102.4
Nickel - Dec	H. Buy	890-893	905, 917.8	882.5
Crude Oil - Jan	Buy	Around 3700	3735, 3770	3677
Natural Gas - Jan	Sell	Below 269	266, 263	271.6

 

Commodities – Agro (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Pepper - Jan	Sell	Below 14100	13900, 13750	14175
Jeera - Jan	Buy	Above 14690	14825, 14950	14590
Turmeric - Apr	Buy	Above 7500	7545, 7580	7470
COCUDAKL - Jan	H. Sell	1225-1228	1205, 1190	1242
Chana - Jan	H. Sell*	Below 2495	2465, 2430	2515
Guar seed - Jan	Sell	2805-2810	2780, 2750	2825
Soya bean - Jan	Sell	Below 2372	2345, 2320	2390
Soya oil - Jan	Sell	485-486	481, 477	488.3
Mustard seed - Jan	Sell	Below 599	595, 592	602
Mentha oil -  Jan	Buy	Above 600	504, 607	597

 **Strict Stop-Loss  *Book Partial Profits               

 

Mutual funds

Fund focus
ICICI Prudential Dynamic Plan					Invest
Fund manager	Sankaran Naren		Min investment				Rs5,000
Latest NAV	Rs91.7		Entry load				Nil
NAV 52 high/low	Rs92/44		Exit load				1% <1 year
Latest AUM	Rs1,753cr		Latest dividend (under dividend option)				12% (21-Aug-09)
Type	Open-ended		Benchmark				S&P Nifty
Class	Equity-diversified		Asset allocation	Equity (84%), Debt (0%), Cash (16%)
Options	Growth & dividend		Expense ratio			1.9%

 

 

Sector Update: Utilities – ‘Fuel Check’

During the XI plan the country targets to add 78GW of fresh generation capacity, of which thermal accounts for 76%. Of this 52.8GW will be coal based and 6.8GW gas based. Inorder to fuel this huge capacity addition program, India will require ~488mn tons of coal and 127mmscmd of gas by FY12. In addition to this imported coal based plants will require ~19mn tons by FY12. CEA anticipates indigenous coal availability to be at ~414mn by FY12, a shortfall of 74mn tons. Factoring in higher calorific value of imported coal, the country will need to import ~49mn tons to meet this shortage. As a result India will have to import ~68mn tons (19+49) by FY12. Moreover CEA anticipates the coal shortfall to increase to 150mn tons after all units stabilize in FY13. As for gas, the government will allocate ~65% of the KG-D6 gas to the power sector - 31mmscmd will be supplied to the existing projects, 12mmscmd on fall back basis and 10mmscmd to captive plants on fall back basis. This will allow the gas plants to operate at 70% PLF. As per CEA, 24GW of the existing coal capacity faces critical coal stock levels, i.e. seven days or less. This was due to either lesser receipt of coal, non-receipt of imported coal, evacuation and unloading constraints. Hence non-availability of desired quantity of fuel - coal and gas - will be detrimental for the sector.

 

Management Mantra: Vinod Ramnani, CMD, Opto Circuits India

Vinod Ramnani is the Chairman & Managing Director of Opto Circuits India Ltd. He is a Mechanical Engineer by profession. Mr Ramnani is the driving force behind Opto Circuits. Having worked with organizations in India and abroad, he had a wealth of experience to back him, when in 1990, he along with Thomas Dietiker (the American co-promoter of Opto Circuits) and others decided to establish Elekon Industries Pte. Ltd. in Singapore. Thereafter, Mr. Ramnani initiated a move to shift the manufacturing facilities to Bangalore and Opto Circuits was formed in 1992 with him as the Managing Director. He is very passionate and wants to see Opto Circuits scale new heights.

 

Corporate Snippets

±      NTPC is set to get nod from government to sell 10% of its power capacity at market determined prices. (ET)

±             Infosys to invest Rs3bn in Orissa project. (BL)

±      TCS to step up hiring as info-tech spending takes off. (BL)

±      DLF is taking up a major restructuring exercise that can see the company splitting into five verticals. (FE)

±      M&M to launch 1 ton LCV Maximo on January 5. (BS)

±      JSPL may raise offer for Australia’s Rocklands Richfield. (BS)

±      Bharti Airtel to enter wi-fi space by rolling ‘hotspots’ at several locations across the country. (ET)

±      The National Housing Bank is likely to give HDFC two more years to comply with capital market exposure norms. (BS)

±      HCL Infosystems has bagged Rs1bn radio network contract in partnership with Motorola from Delhi Government. (ET)

±      LIC has raised its equity holding in Canara Bank to 7.08%. (ET)

±      JSL plans to expand its stainless steel capacity to 2.5mtpa by 2014. (ET)

±      BSNL puts mega tender plan for 93mn lines on hold. (ET)

±      Nalco has decided to locate its proposed 0.5mn ton Indonesian aluminum smelter project in east Kalimantan province. (BL)

±             Godrej Consumer Products is aggressively looking at acquisition including the house-hold insecticide business of Sara Lee Corp. (BS)

±      HCC has bagged an order worth Rs3.75bn for construction related works in Karnataka. (BS)

±      Panacea Biotech plans a buyback up to Rs1.05bn. (BS)

±      Cox & Kings acquires Australian travel firm MyPlanet Australia Pty Ltd and Bentors International Pty Ltd. (ET)

±      Hotel Leelaventures has bought back FCCBs worth US$25mn. (BS)

±      Diageo-Radico JV has received government approval for increasing foreign equity participation to 100%. (FE)

±      State Bank of Mysore to raise Rs6bn from rights issue. (BL)

±      United Bank of India has filed a DRHP for an IPO to raise Rs500mn. (BS)

±      Zylog to usher in low cost computing and has partnered with IBM and Canonical Ubuntu. (BL)

±       Foursoft has bagged a contract from a Canadian based Sheritt International Corporation for a logistic management system. (BS)

 

Economic snippets

±      Credit growth back in double digits, growing at 10.8% yoy for the fortnight ended November 23, 2009. (BS)

±      Kelkar led commission proposes hike in state’s share of tax revenues. (ET)

±      Banks reject RBI’s move to dump BPLR based norms. (ET)

±      Life Insurance Companies business grew 22% in first eight months of the current fiscal. (ET)

±      Bank lending in December has jumped nearly five-folds over the previous month. (ET)

±      Iron ore exports to slide by 6mn tons on duty hike. (ET)

±      Time not right to exit stimulus measures, says FM. (ET)

±      RBI has sought details from banks about their investments in mutual funds. (ET)

±      The government has cleared 9 FDI proposals worth Rs5.2bn. (BS)

±      Ban on sugar futures trade extended till September 2010. (BS)

±      3G spectrum auction likely from February 13. (BL)

±       Banks want CRR and SLR exemption for infrastructure bonds. (BL)

 

 

 

Confidentiality & Disclaimer: This message contains confidential information and is intended only for the individual named. If you are not the named addressee you should not disseminate, distribute or copy this e-mail. Please notify the sender immediately by e-mail if you have received this e-mail by mistake and delete this e-mail from your system. E-mails are not encrypted and cannot be guaranteed to be secured or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender, which includes India Infoline Limited and its group companies, will not be liable for any errors or omissions in the contents of this message which arise as a result of e-mail transmission. If verification is required please request a hard-copy version. This message is provided for informational purposes and should not be construed as a solicitation or offer to buy or sell any securities or related financial instruments.

Market Mantra: Technicals - Jet Airways (Buy), Wipro (Sell); F&O - Voltas (Long), Moser-Baer (Long); Reports - Sesa Goa (MP), Oil Monthly (Dec '09)

 

 

Market Mantra

 

Market outlook

Melody in the Market

 

The end of a melody is not its goal, and yet if a melody has not reached its end, it has not reached its goal.

 

The year 2009 may be reaching its end but the market melody, which has been music to the bulls’ ears, doesn’t seem to be stopping. Most global equity benchmarks have in recent days either crossed or are on the verge of surpassing the annual peaks. For India, the Nifty has already made a new high for 2009, while the Sensex is within striking distance of doing so. The BSE benchmark may just achieve the goal with two trading sessions still to go, and momentum being positive.

 

However, global cues are pretty tepid. Tomorrow we will have the last F&O expiry of 2009. So, some more volatility is a given. We expect a flat to cautious start and yet another low volume day. Non-index counters may continue to hog the limelight but don’t get carried away by the momentum in these shares. The Nifty will find it tough to crack 5200. Support is likely to kick in at 5100. In case of a fresh bout of buying, the Nifty could reach 5350.

 

Trading ideas (Time period: 1-3 days)

Jet Airways (BUY, CMP Rs558, Target Rs575): On the daily chart, the stock has formed a bullish price channel. It is a continuation pattern that slopes up and is bound by an upper and lower trend line. On Tuesday, the momentum indicator RSI depicted a positive divergence. In addition the stock is trading above its key short-term moving averages. We recommend a buy at current levels and on declines up to Rs555 with a stop loss of Rs551 for a target of Rs575, 580.

 

Wipro (SELL, CMP Rs681, Target Rs666): The stock rallied smartly from a low of Rs180 in October-end 2008 to a recent peak of Rs700 in second week of December 2009. Since past two trading session, the stock has struggled to continue its momentum. The daily RSI as well as the daily MACD are exhibiting negative divergence, indicating weakness in the trend. On Tuesday, the stock gave a close below its 5 DMA which is likely to trigger immediate correction to an extent of 13DMA at Rs666. The fall on Tuesday’s session was accompanied by higher volumes. We recommend traders to sell the stock at current levels Rs685-680levels. A stop loss of Rs688 is recommended on all short positions.

 

Derivative strategies (Time period: Till expiry)

±       Long Voltas Jan Future @ Rs172 for the target price of Rs182 and stop loss placed at Rs168.

Lot size: 2,700

Remarks: Net maximum profit of Rs27,000 and net maximum loss Rs10,800.

 

±       Long Moser-Baer (I) Ltd Jan Future @ Rs86 for the target price of Rs92 and stop loss placed at Rs83.

Lot size: 2,475.

Remarks: Net maximum profit of Rs14,850 and net maximum loss Rs7,425.

 

Commodities – Metals (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Gold - Feb	Sell	Below 16730	16680, 16640	16760
Silver - Mar	Sell	Below 27000	26850, 26700	27129
Copper - Feb	H. Buy	339-339.5	342, 345	337.8
Zinc - Dec	Buy	117.7-118	119, 120	117.2
Lead - Dec	Buy	111.7-112	113.2, 114.5	110.9
Aluminum - Dec	Sell	At 105	103.5	105.6
Nickel - Dec	H. Buy	890-893	905, 917.8	882.5
Crude Oil - Jan	Buy	3665-3670	3695, 3720	3647
Natural Gas - Jan	Sell	Below 276	273, 270	278.6

 

Commodities – Agro (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Pepper - Jan	Sell	Below 14050	13900, 13750	14175
Jeera - Jan	Sell	Below 14280	14150, 14030	14375
Turmeric - Apr	Sell	Below 7310	7265, 7230	7340
COCUDAKL - Jan	H. Sell	1225-1228	1205, 1190	1242
Chana - Jan	H. Sell*	Below 2495	2465, 2430	2515
Guar seed - Jan	Sell	Below 2725	2695, 2665	2747
Soya bean - Jan	H. Sell	Below 2390	2367, 2345	2410
Soya oil - Jan	H. Sell	Below 484	480, 477	486.8
Mustard seed - Jan	Sell	Below 599	595, 592	602
Mentha oil -  Jan	Sell	Below 590	586.5, 583	592.8

 **Strict Stop-Loss  *Book Partial Profits               

 

Mutual funds

Fund focus
ICICI Prudential Dynamic Plan					Invest
Fund manager	Sankaran Naren		Min investment				Rs5,000
Latest NAV	Rs91.6		Entry load				Nil
NAV 52 high/low	Rs91/44		Exit load				1% <1 year
Latest AUM	Rs1,753cr		Latest dividend (under dividend option)				12% (21-Aug-09)
Type	Open-ended		Benchmark				S&P Nifty
Class	Equity-diversified		Asset allocation	Equity (84%), Debt (0%), Cash (16%)
Options	Growth & dividend		Expense ratio			1.9%

 

 

Company Update: Sesa Goa – Market Performer

CMP Rs406, Target Price Rs423, Upside 4.2%

 

In a bid to curb iron ore exports, the Indian government has raised export duty on iron ore lumps to 10% from 5% and on iron ore fines to 5% from nil. The impact of higher export duty will be the highest for Sesa Goa among the domestic iron ore producers, as exports constitute ~90% of total sales. This would have a negative impact on EPS by 3.9% in FY10 and 10.6% in FY11.

 

We upgrade our iron ore price realisations incorporating 1) 20% increase in contract iron ore prices in FY11E 2) spot prices to be 10% yoy higher in FY11E 3) 25% of volume sold on a contract basis in FY11E & FY12E 4) appreciation of rupee to 45 against the dollar in FY11E from 47.2 in FY10E. We expect the company to witness a volume CAGR of 23.4% over FY09-12E. We introduce our FY12 estimates and expect the company to register earnings CAGR of 18.2% over FY09-12 even after accounting for the rise in export duty. We revise our price target from Rs257 to Rs423 on account of the strong iron ore prices and roll over our price target to FY12 earnings. We upgrade the stock from SELL to Market Performer.

 

Sector Update: Oil Monthly Update – December 2009

 

±       Crude oil prices fall on a mom basis

±       Refining margins recover sequentially

±       Sequentially under recoveries fall for all products except LPG

±       OPEC and IEA continue to upgrade demand estimates

±       Upstream stocks outperform the broader markets

 

Corporate Snippets

±       ONGC and GAIL plan to take 12.5% stake in the US$2bn gas pipeline that China is building in Myanmar to transport natural gas from the Bay of Bengal. (BS)

±       Bharti Airtel is focusing more on the rural sector by offering various tailor made packages, as the segment contributed 50% of its new business. (BL)

±       Tata Motors commenced trial production of the first batch of the Nano at the new mother plant at the Sanand facility last week; commercial production of which will start from March onwards. (BS)

±       Ranbaxy Laboratories has exited its joint venture in China by selling its 83% stake in Ranbaxy (Guangzhou China) Ltd to HNG Chembio Pharmacy Co Ltd for an undisclosed sum. (BS)

±       NHPC has been allocated the job of preparing detailed project reports for the 670MW Chamkharchuu-I and 1,800MW Kuri-Gongri hydroelectric project in Bhutan. (FE)

±       HCL Infosystems bagged Rs1.1bn contract from the Gujarat government to install computer aided learning systems in 7,000 schools falling under tribal and education department in the state. (ET)

±       Coal supply to the captive power plant of NALCO was hit due to the outbreak of fire at the rapid loading system at the linked Bharatpur coal mine in Talcher Coalfields. (BS)

±       HDIL raised Rs4bn through allotment of debentures. (FE)

±       The NHAI has given a clean chit to Gammon India and Hyundai Engineering in the collapse of the Kota bridge over the Chambal river. (BS)

±       Tata Communications and China Telecom Corp will jointly build a 500km optical fiber cable network between India and China over the next 12 months. (BL)

±       Max New York Life Insurance is outsourcing customer service work to BPO firm Genpact, as part of an internal restructuring exercise. (ET)

±       The Maharashtra government is likely to intervene to settle the strike at the Aurangabad unit of Colgate-Palmolive. (BL)

±       The Diageo-Radico joint venture is likely to receive FIPB approval for inducting up to 100% FDI. (BL)

±       SCI plans to acquire three new container ships in 2010 and has set aside US$200-225mn to fund these purchases. (BS)

±       The government will sell 8.38% of its stake in the mining major NMDC before March 31, 2010, generating Rs14.1bn from the process. (BS)

±       The beleaguered Dabhol power project is set to achieve generation of 1,500MW by January ‘10 and a maximum generation of 1,950MW by April ‘10. (BS)

±       Vedanta group’s Sterlite Energy plans to commission the first phase of its Rs82bn Jharsuguda power plant in Orissa within three months, while the entire project is expected to be fully commissioned in the third quarter of the FY11. (BS)

±       Jindal Power Ltd, a part of Jindal Steel and Power Ltd, plans to raise Rs72bn from its IPO. (BS)

 

Economic snippets

±       Thirteenth Finance Commission which suggests the formula for sharing of taxes between the Centre and states will be submitted to the President today. (ET)

±       The power ministry and the CEA have projected a total investment of Rs20bn for renovation and modernisation as well as extending the life span of various old power plants during 11th and 12th Five-Year Plans. (BS)

±       The Orissa government is mulling a special package for the sugarcane growers to encourage cultivation of the crop in the state.  (BS)

±       CCEA gave more time to advance license holders, who imported duty-free raw sugar between September ‘04 and April ’08, till March 31, 2011 to meet their exports obligation. (ET)

±       Key central ministries that control the bulk of Plan expenditure have demanded from the Planning Commission an unprecedented 50-70% hike in outlays for 2010-11. (FE)

±       India and Japan agreed to wrap up talks on the proposed Comprehensive Economic Partnership Agreement by next year and simplify their visa regulations. (FE)

±       India and Russia plan to invest US$600mn to set up a joint venture to produce a medium lift transport aircraft for their armed forces. (FE)

 

 

 

Confidentiality & Disclaimer: This message contains confidential information and is intended only for the individual named. If you are not the named addressee you should not disseminate, distribute or copy this e-mail. Please notify the sender immediately by e-mail if you have received this e-mail by mistake and delete this e-mail from your system. E-mails are not encrypted and cannot be guaranteed to be secured or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender, which includes India Infoline Limited and its group companies, will not be liable for any errors or omissions in the contents of this message which arise as a result of e-mail transmission. If verification is required please request a hard-copy version. This message is provided for informational purposes and should not be construed as a solicitation or offer to buy or sell any securities or related financial instruments.