Market Mantra
Market outlook
Quality gains unlikely soon!
Quality is never an accident. It represents the wise choice of many alternatives.
The bulls and bears seem to be running out of alternatives. Another lackluster start and an equally insipid day of trade could be in store for us. Fatigue seems to be taking a toll on the bulls. The key indices are attempting to break out of a range where the correction had set-in last month. The trouble is there are no great events in the near term that could trigger a big push towards new highs. Winter session of parliament begins today.
What is favouring the bulls so far is the relentless inflow of overseas money. This may continue as the dollar is unlikely to rebound sharply. But, as Christmas holidays approach there is likely to be some softening even in these flows. Local funds have already turned net sellers.
Add to this, the anxiety over the shape of the economic recovery and the market could see some cooling. Valuations for many of the leading stocks are not too compelling either. In the immediate future, the market will remain sideways and listless though action would be seen in the mid-cap counters.
Trading ideas (Time period: 1-3 days)
Bhushan Steel (BUY, CMP Rs1,365, Target Rs1,465): On the daily chart, the stock has made a tentative break of strong resistance line in the region of Rs1,370-1,380. The event has occurred after the price bounced up off a key support line yesterday. Moreover, cluster of moving averages are placed around Rs1,320 levels further validating our argument of a bullish congestion. Any move past the levels of Rs1,380 is likely to trigger an upside in the near term. The daily RSI has also given a positive divergence, indicating that price would start moving up. Keeping in mind the above-mentioned observations, we suggest traders to buy the stock in the range of Rs1,350-1,380 with a stop loss placed at Rs1,325 for a target of Rs1,465.
GE Ship (BUY, CMP Rs283, Target Rs300): The stock has rallied smartly from a low of Rs227 in first week of November 2009 to the present levels. On the weekly charts, it has formed a pattern of a higher bottom. It is considered as the initial sign of a bottoming out process in the short term. The daily RSI is already in strong buy mode, indicating that the prices are set to rally from the current levels. However, the upside has consistently faced resistance around the levels of Rs285-287. Any move past the levels of Rs287, could see the stock attempting the levels of Rs300 and above. We recommend a buy in the range of Rs280-287 with a stop loss of Rs274.
Derivative strategies (Time period: Till expiry)
± Long Bharat Electronics (BEL) Nov Future @ Rs1640 for the target price of Rs1685 and stop loss placed at Rs1618.
Remarks: Net maximum profit of Rs12,420 and net maximum loss Rs6,072.
± Short Mphasis Nov Future @ Rs741 for the target price of Rs718 and stop loss placed at Rs749.
Remarks: Net maximum profit of Rs18,400 and net maximum loss Rs6,400.
Commodities – Metals (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Gold - Dec | Buy | Around 17050 | 17120, 17170 | 17010 |
| Silver - Dec | Buy | Above 28250 | 28400, 28550 | 28130 |
| Copper - Nov | Buy | Above 317.5 | 320, 322 | 315.5 |
| Zinc - Nov | Sell | Below 102.5 | 101.3, 100.1 | 103.6 |
| Lead - Nov | Buy | 109-109.2 | 110.5, 111.5 | 108.4 |
| Aluminum - Nov | Buy | |||
| Nickel - Nov | Buy | 784-787 | 800, 810 | 777.3 |
| Crude Oil - Nov | Sell | Below 3640 | 3605, 3580 | 3663 |
| Natural Gas - Nov | Sell | Below 198 | 195, 192 | 200.7 |
Commodities – Agro (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Pepper - Dec | Buy | Above 15200 | 15350, 15500 | 15070 |
| Jeera - Dec | Buy | 14270-14300 | 14450, 14600 | 14170 |
| Turmeric - Dec | Sell | Below 10900 | 10850, 10800 | 10940 |
| COCUDCAKL - Dec | H. Buy | At 569 | 573, 576 | 566 |
| Chana - Dec | Buy | Above 2700 | 2730, 2750 | 2677 |
| Guar seed - Dec | Buy | Around 2710 | 2740, 2760 | 2687 |
| Soya bean - Dec | Buy | Above 2390 | 2420, 2445 | 2370 |
| Soya oil - Dec | Buy | Above 492 | 495, 498 | 489.5 |
| Mustard seed - Dec | Buy | Above 613 | 616.5, 619 | 610.4 |
| Mentha oil - Nov | Buy | Above 582.5 | 586, 589 | 579 |
**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 | Rs126.7 | | Entry load | Nil | |||
| NAV 52 high/low | Rs127/49 | | 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% | |||
| | | | | | | | |
Sector Update: Utilities – ‘Maintain discount to Sensex’
± NTPC’s P/B discount to Sensex is justified
± Tata Power - buoyant business, downside remains capped
± CESC - best growth visibility, top pick in generation space
± CESC is our top pick, offers highest earnings yield
Sector Update: Banking Fortnightly – November 06, 2009
The system credit growth for the fortnight ended November 06, 2009 decelerated further to 9.8% yoy as against 27.7% yoy in the corresponding period of the previous year. The high base effect of previous year has started to wear-off and we expect strong revival in credit demand in H2 FY10. Deposits growth has moderated to 18.6% yoy and investment growth has scaled down from highs of 40% yoy to current 27% yoy. The recent released RBI data reveal that Indian corporates have raised ~Rs900bn of funds from external sources and further Rs1402bn of funds from non-bank domestic source until September. While the central bank in its second quarter monetary review policy toned down the credit growth target to 18% yoy, we expect the full year loan growth at around 15% yoy levels.
Corporate Snippets
± RIL is planning to spend US$3bn for the new petrochemical complex at
± RIL plans to enter no-frills, low-cost housing business in 2010. (BS)
± ITC has increased prices of two of its brands,
± Ratan Tata, Chairman of Tata Group, has said that his successor may be an expatriate. (BS)
± ONGC to go solo in development of Satpayev oil block in
±
± JSW Steel is close to entering into a strategic alliance with a global steel company. (ET)
± Hero Honda may announce special dividend payout to its shareholders. (ET)
± Exide Industries to raise Rs5bn via QIP to fund R&D. (ET)
± Blackstone is planning to delist Bangalore-based textile exporter Gokaldas Exports, is in talks to launch the buyback offer. (ET)
± Gujarat State Petronet is set to bid for two pipeline projects. (ET)
± Union Bank of India is looking at raising US$500mn via bonds before March 2010 to expand its operations abroad. (BL)
± Suzlon Energy has officially opened Infigen Energy’s Capital wind farm, the largest wind farm in
± RCom has entered into a strategic tie-up with Atom Technologies, an m-commerce solutions provider from the Financial Technologies India Ltd group. (BL)
± OPaL, the petrochemicals SPV of ONGC, is exploring the option of a public issue to part-finance its Rs125bn petrochemical chemical complex being commissioned at Dahej,
± Petronet LNG is keen to acquire up to 10% stake in OPaL. (BS)
± SAIL has re-tendered the four-million-ton Tasra open-cast coking coal mine redevelopment project in Jharkhand. (BL)
± BHEL is scouting for a technology partner for its ambitious nuclear turbine and reactor project. (BS)
± Wockhardt and Sun Pharmaceutical have received final approval from the USFDA to market generic versions of Nicardipine, the hypertension drug. (BS)
± Bharati Shipyard and ABG Shipyard have got Sebi’s nod for their open offer bids to buy additional stake in Great Offshore. (BS)
± Pantaloon Retail is looking to acquire a fast-moving consumer goods company. (DNA)
± IOC is looking to invest up to Rs15bn in its maiden nuclear venture in partnership with Nuclear Power Corporation of India Ltd (NPCIL). (BL)
±
± EKC has decided to shelve plans of adding capacity at its
Economic snippets
± The Union Government may consider including Andhra Pradesh in the Chennai-Mumbai Industrial Development Corridor project. (BL)
± Bank credit for the fortnight ended November 6 increased by Rs231bn. (BL)
± The Empowered Group of Ministers on the auction of 3G spectrum will meet today to discuss the vacation of spectrum by defence forces. (BS)
± The Union Cabinet is expected to take up today a proposal for increasing the foreign direct investment limit in print media to 49%. (BL)
± The NHAI, having failed to meet the deadline for awarding 126 projects during FY10, has brought down the number of projects to be awarded in FY11 to 92. (BS)
± The government has appointed Subir Vithal Gokarn, Standard and Poor’s Asia-Pacific Chief Economist and a Business Standard columnist, as the fourth deputy governor of the RBI. (BS)
± The government is finalizing plans to auction corporate entitlements to borrow abroad. (ET)
± Centre is in talks with the Jharkhand and Orissa governments to facilitate the multi-billion dollar
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