Market Mantra
Market outlook
Bounce back likely
There is bound to come some pain, surely as there are storms and falling rain; just believe that the one who holds the storms will bring the sun.
The bears seem to have found the perfect storm in the desert. For long they have been scouting for a reason to break the range-bound trade and the Dubai-debt issues seem to have done the trick. UAE authorities seem to be coming up with a solution; albeit temporary, and this could at least limit the collateral damage.
We expect a bounce back at start today. Some amount of domestic buying, especially in the large caps is likely after they were randomly beaten down last week. The GDP numbers expected later in the day could add to the sentiment if above expectations.
Investors too may have pondered enough over the weekend and decide that the situation is not that bad after all for the time being. The Asian markets are staging a comeback recording decent gains.
The primary fears include that a bailout in
Trading ideas (Time period: 1-3 days)
Reliance Capital (BUY, CMP Rs832, Target Rs870): Despite extreme volatility in the broader market, the stock managed to close above its 20-DM on Friday. On the upper side, it could face stiff resistance around the levels of Rs865-870. Any sort of short-covering above the levels of Rs870, could take the stock up to the levels of Rs900 in the medium term. Based on the above analysis, we recommend traders to buy the stock between the levels of Rs828-836 for an initial target of Rs870. Maintain a stop loss of Rs815 on all long positions. Increase the positions if it closes above Rs860.
Derivative strategies (Time period: Till expiry)
± Long GSPL Dec Future @ Rs95 for the target price of Rs99 and stop loss placed at Rs93.50.
Remarks: Net maximum profit of Rs24,400 and net maximum loss Rs9,150.
± Long Hotel Leela Dec Future @ Rs40 for the target price of Rs42 and stop loss placed at Rs39.50.
Remarks: Net maximum profit of Rs15,000 and net maximum loss Rs3,750.
Commodities – Metals (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Gold - Feb | Sell | Below 17700 | 17650, 17600 | 17737 |
| Silver - Mar | Buy | Above 28390 | 28530, 28650 | 27290 |
| Copper - Feb | Sell | Below 320.5 | 318, 315 | 322.3 |
| Zinc - Dec | Sell | Around 104 | 103, 102 | 104.9 |
| Lead - Dec | Sell | Below 107.5 | 106.3, 105 | 108.6 |
| Aluminum - Dec | Sell | 93.4-93.6 | 92.5, 91.6 | 93.9 |
| Nickel - Dec | Sell | 767-770 | 750, 730 | 781.8 |
| Crude Oil - Dec | Sell | Below 3540 | 3510, 3480 | 3560 |
| Natural Gas - Dec | Buy | Above 243.5 | 246.5, 249 | 241.2 |
Commodities – Agro (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Pepper - Dec | Sell | Below 15300 | 15150, 15000 | 15437 |
| Jeera - Dec | Sell | Below 16000 | 15865, 15720 | 16090 |
| Turmeric - Dec | Sell | Below 10250 | 10180, 10100 | 10295 |
| COCUDCAKL - Dec | Sell | 604-605 | 600, 595 | 608.3 |
| Chana - Dec | Buy | At 2590 | 2620, 2650 | 2570 |
| Guar seed - Dec | Sell | Below 2710 | 2680, 2650 | 2735 |
| Soya bean - Dec | Sell | 2400-2405 | 2370, 2350 | 2425 |
| Soya oil - Dec | Sell | Below 486.5 | 483, 480 | 489.3 |
| Mustard seed - Dec | Buy | Above 611 | 614.7, 618.5 | 608.4 |
| Mentha oil - Dec | Buy | 608-609 | 612.5, 617 | 605.5 |
**Strict Stop-Loss *Book Partial Profits
Mutual funds
| Fund focus | ||||||
| Sundaram BNP Paribas Select Midcap Fund | Invest | |||||
| Fund manager | S. Ramanathan | | Min investment | Rs5,000 | ||
| Latest NAV | Rs125.5 | | Entry load | Nil | ||
| NAV 52 high/low | Rs129/49 | | Exit load | 1% <1 year | ||
| Latest AUM | Rs1,690cr | | Latest dividend (under dividend option) | 15% (20-Nov-09) | ||
| Type | Open-ended | | Benchmark | BSE Midcap | ||
| Class | Equity-diversified | | Asset allocation Equity (89%), Debt (0%), Cash (12%) | |||
| Options | Growth & dividend | | Expense ratio | 2% | ||
| | | | | | | |
Technical View: Breakdown or just a small break?
Though the up-trend appears broken, Nifty is not racing towards bottom. If it closes below 4,900, it is likely to drop till the 4,740 level (100-DMA) before it finds support. Last week, Nifty struggled to break past its previous top of 5,182 and in the process made a lower top of 5,138, suggesting that a short-term downtrend is in progress.
Result Update: Tata Motors (Q2 FY10) - SELL
CMP Rs630, Target Price Rs557, Downside 11.5%
± Consolidated net sales rose 28.7% qoq driven primarily by 33.4% qoq jump in Land Rover volumes and better realizations
± JLR turns around and reports an operating profit of £41mn vis-à-vis an operating loss of £35mn in Q1 FY10
± Inventory days for JLR improved from 102 days in June 2009 to 97 days in September 2009
± With impending launch of new Jaguar XJ in Q4 FY10, management expects Jaguar volumes to witness strong growth
± Substantial improvement in leverage position following fund raising and debt repayment through GDR issue
± Downgrade rating from Market Performer to SELL
Sector Update: Insurance Monthly Update – October 2009
In October ‘09, Indian Life Insurance Industry clocked a double digit growth (first time in last twelve months) of 35.7% yoy in the total Annual Premium Equivalent (APE)#. The growth was largely contributed by the strong inflows in the first year premium. Private players, for the first time in last six months, witnessed a strong growth of 29.6% yoy due to heavy inflows in the group premium category (up by 199% yoy). LIC continues to hold growth momentum as its APE grew 45% yoy. However, on YTD basis private players reported decline of 7.9%. Cumulatively all private players have mobilized Rs162bn in first year premium during 7M FY10 vis-à-vis Rs178bn during the same period in FY09.
Mutual Funds Thermometer as on November 27, 2009
Given below is the summary of performance of the mutual fund industry in
Key observations
± Indian equity markets remained positive during the fortnight. The equity diversified funds category performed in-line with markets, posting an average return of 0.6%. Out 189 funds, 115 were able to beat the benchmark index BSE 200. The top three gainers were SBI Magnum Comma Fund (+5%), DSP BlackRock Micro Cap Fund (+3.6%) and HDFC Core & Satellite Fund (+3.3%). However, funds belonging to JM Mutual Fund delivered negative returns and were among the major losers. JM Contra Fund (-1%), JM Emerging Leaders Fund (-1%) and JM Equity Fund (-1.2%).
± On a fortnightly basis, infrastructure funds exhibited better performance than other sectoral funds. Among the top-10 funds, four funds were infrastructure oriented funds. ICICI Prudential FMCG topped the fortnightly chart by delivering a return of 3.9%. However, JM Telecom Fund continued to be the worst performer on the sectoral chart. It’s NAV deprecated by 4.7% on a fortnightly basis.
± ELSS funds' performances were aligned with the equity diversified funds. On a fortnightly basis, the category average generated 1% returns. Out of 41, only three ELSS funds NAV ended in negative zone. Among the large corpuses, Principal Personal Taxsaver, ICICI Prudential Taxplan and UTI Long Term Advantage Fund topped the charts by delivering an absolute return of 2.2%, +2.2% and 1.8% respectively.
± Among the balanced funds, Sundaram BNP Paribas Balanced Fund, Kotak Dynamic Asset Allocation Fund and Reliance RSF - Balanced Fund were among the toppers with fortnightly returns of 2.6%, 2.2% and 1.8% respectively, whereas capital protection funds continued to underperform. On an average, capital protection funds posted a nominal return of 0.3%.
± The performance of gilt funds and income funds improved significantly during this fortnight. Yields of 10-year G-Sec and AAA softened by 16bps and 18bps this fortnight. Yields being inversely related, prices of bonds moved up significantly which was exactly imitated in the performance of the gilt and income funds. Major gainer were under the income funds category were JP Morgan India Active Bond Fund (+1.8%), Birla Sun Life Income Fund (+1.7%) and ICICI Prudential Income Fund (+1.6%). Among the gilt funds, Birla Sun Life GPRP Fund (1.9%), UTI Gilt Advantage Fund PF Plan (1.8%) and ICICI Prudential GFIP Fund (1.6%) were the top gainers.
± Gold continued to scale new highs in the domestic and international markets. It crossed US$1,180/oz internationally, while Rs18,000-mark in the domestic market. Mirroring the yellow metal performance, Gold ETFs were up by 5.4% this fortnight, outshined other ETFs. However, Bank ETF’s underperformed the ETF category was down by -0.1%.
Weekly Update: Debt Market - week ended November 27, 2009
± The yield of 10-year benchmark paper 6.90% G-Sec 2019 has further softened this week. It ended lower at 7.18% vis-à-vis 7.23%, down by 5bps wow. In line with G-sec, 10-year AAA corporate bond yield also ended lower by 2bps at 8.50% on a weekly basis.
± The primary articles index rose by 1.2% wow and 11.04% yoy. The food inflation inched-up further at 15.6% for the week ended November 14 on the back of higher potato prices.
± The yield on
± SAIL is to issue Rs3bn of 10-year bonds on 2 December. The company plans to sell bonds in two parts, one with exercisable options at 5th year, carrying a coupon of 7.75-8.00%. The other will have redemption at the end of tenure with a coupon of 8.25-8.50%.
±
Corporate Snippets
± Suzlon Energy's subsidiary REpower Systems receives an order from Saint-Laurent Énergies, Canada, for supply of 954MW of wind turbines ;deal size is estimated at about US$1bn. (BL)
± L&T is all set to ink a JV agreement with Nuclear Power Corp for setting up an Rs20bn project to make forgings for nuclear power plants. (BL)
± ONGC finds traces of a new oil reserve in
± Mahindra Satyam, Siemens and Patni Computers, are in the race for selection as IT implementing agencies for the government’s automation programme worth Rs100bn. (ET)
± Wockhardt and DBS Bank have agreed to an out-of-court settlement of a dispute over loans the drug manufacturer had taken from the Singapore-based lender. (BS)
± GMR Group is in talks with private equity funds 3i Investments and Macquarie-SBI Infrastructure to raise US$450mn in GMR Airport Holdings. (ET)
± Barclays Capital and Calyon have petitioned the High Court to liquidate the assets of Wockhardt and distribute its proceeds to lenders. (BS)
± Tatas, L&T in race for the 35-km high-speed rail transport between
± The US drug regulator has commenced inspection of Lupin’s upcoming plant at
± Gammon plans to make an yearly investment of up to Rs50bn for roads development projects and is looking to bid for 10 projects by fiscal end. (ET)
± Shriram EPC has signed a MoU with North West Electric Power Design Institute of China to form a consortium to undertake EPC contracts for thermal power projects in
± Marico and Godrej Consumer Products are in the race to buy British skincare brand Simple, one of the largest beauty product brands in the
± TCS has said that it will recruit about 25,000 people in 2010-11. (BL)
± Bajaj Auto to launch sub-150 cc Pulsar. (BL)
± Reliance Capital plans to acquire a controlling stake in Quant Capital. (BS)
± Reliance Communications cuts SMS charges, further heating up the ongoing tariff war in the Indian mobile telephony market. (BL)
± Aditya Birla Retail is considering an IPO and will time it as soon as the company starts spinning profits. (DNA)
± ABG Shipyard said its open offer for 32.1% stake in Great Offshore will now commence on December 3. (FE)
± Jay Shree Tea is close to announcing its first overseas acquisition, in
± Spice Group plans to enter mutual funds, stock broking and distribution and micro-finance businesses by March 2010. (BS)
± Spice Mobile plans to start a manufacturing unit for mobile devices in the country by next year, with an initial investment of Rs1bn. (BS)
Economic snippets
± Foreign exchange reserves fell by US$1bn to US$285bn, for the week ended November 20. (BL)
± Sufficient room for banks to cut lending rates further, says RBI governor. (BL)
± Six core infrastructure industries see 3.5% yoy growth in October, compared to 4.1% and 7.8% levels of the preceding two months and the 2% for Oct’ 08. (BL)
± The 46 operational airports in the country handled 42mn domestic passengers during April-Sept’ 2009-10, which is about the same as the numbers handled in 2007. (BL)
± FDI into
± Exports dip 6.6% yoy in October. (TOI)
± Finance Ministry says no to income tax holiday for first 7 NELP rounds. (FE)
± The government is assessing the needs of major export-oriented sectors hit by the economic slowdown to provide support for their fast recovery. (BS)
±
± Government plans ultra mega steel projects, to identify five locations adjacent to mining sites for developing UMSPS. (ET)
