Market outlook
Fears roll over!
Nothing is wasted, nothing is in vain, the seas roll over but the rocks remain.
A year has passed by after the tragedy in Mumbai. The city and the market have moved on in what is often summed up as the indomitable spirit. It’s Thanksgiving on every street for the bulls. November series has seen some good long positions. The Nifty December series is showing a long build-up after it closed at 12 points premium to the spot.
We expect a flat open with no clear signals from the global markets. The usual choppiness associated with the F&O expiry will be there though the bias remains mostly positive. Asian markets are mixed. A bigger-than-expected drop in weekly jobless claims added some cheer to US markets, which will remain closed today for Thanksgiving.
Stock exchanges may put their plans to extend trading hours on the back-burner following lack of consensus. The only consensus for now seems to be that indices will hit a new year-high in December series. Index heavyweights like Reliance will hog the limelight for the day. The rising market is also bringing in illiquid stocks back into trade, some after a decade. Avoid these counters.
Trading ideas (Time period: 1-3 days)
Orchid Chemical (BUY, CMP Rs190, Target Rs205): On the daily chart, the stock has broken out from a Ascending Triangle pattern. A breakout from the pattern indicates upside in the coming sessions. The stock price was consolidating within the triangle in the range from the first week of November. On Wednesday, the stock closed above the critical resistance zone of Rs185-186 and well above its short-term moving averages. The daily RSI is in buy mode. Our argument is further validated following an expansion of volumes, confirming the breakout. We recommend traders to buy the stock in the range of Rs186-192 for a target of Rs205. It is advised to maintain a stop loss of Rs182 on all the long positions.
Bharat Forge (BUY, CMP Rs274, Target Rs295): On Wednesday, the stock attempted to breakout past the top of a trading range between Rs282-260. A move above Rs282 levels could take the stock to a one-month high. If the volume pattern is maintained in the coming trading sessions, it could attempt Rs295 and above. Moreover, the stock has given a close above its short-term moving averages. We recommend traders with high risk appetite to buy the stock in the range of Rs270-277 with a strict stop loss of Rs265 for a target of Rs275.
Derivative strategies (Time period: Till expiry)
± Long Sesa Goa Dec Future @ Rs379for the target price of Rs397 and stop loss placed at Rs373.
Lot size: 1,500
Remarks: Net maximum profit of Rs27,000 and net maximum loss Rs9,000.
± Short DLF Dec Future @ Rs362 for the target price of Rs344 and stop loss placed at Rs370.
Lot size: 800.
Remarks: Net maximum profit of Rs14,560 and net maximum loss Rs6,240.
Commodities – Metals (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Gold - Dec | Buy | Above 17740 | 17780, 17820 | 17710 |
| Silver - Dec | Buy | Above 28640 | 28780, 28900 | 28530 |
| Copper - Nov | Buy | Around 320 | 323, 326 | 318 |
| Zinc - Nov | Buy | Above 105.5 | 106.5, 107.3 | 104.7 |
| Lead - Nov | Sell | 109.7-110 | 108.5, 107.5 | 110.6 |
| Aluminum - Nov | H. Buy | At 92.5 | 93.6, 94.8 | 91.9 |
| Nickel - Nov | Buy | Above 787 | 800, 810 | 775.2 |
| Crude Oil - Dec | Buy | Above 3580 | 3610, 3640 | 3555 |
| Natural Gas - Dec | Trade as per calls giving during trading session. | |||
Commodities – Agro (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Pepper - Dec | Buy | 15600-15640 | 15800, 15950 | 15490 |
| Jeera - Dec | Buy | Above 15640 | 15770, 15900 | 15540 |
| Turmeric - Dec | Sell | Below 9500 | 9425, 9350 | 9540 |
| COCUDCAKL - Dec | Buy | Above 612.5 | 615.7, 618.5 | 609.2 |
| Chana - Dec | Buy | Above 2660 | 2690, 2720 | 2635 |
| Guar seed - Dec | Sell | Below 2800 | 2775, 2755 | 2820 |
| Soya bean - Dec | H. Buy | Around 2420 | 2450, 2470 | 2403 |
| Soya oil - Dec | Sell | Below 503 | 500, 497 | 505.8 |
| Mustard seed - Dec | Buy | At 606 | 609, 612 | 603.7 |
| Mentha oil - Dec | Buy | Above 611 | 615, 618 | 608.3 |
**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 | Rs128.3 | | 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% | ||
Result Update: Balrampur Chini Mills (Q4 F9/09) – BUY
CMP Rs135, Target Price Rs159, Upside 17.8%
± Q4 revenues drop 8.8% as a 51% surge in sugar realization offset by lower sugar, distillery and co-gen volumes
± OPM improves 262bps despite a ~21% yoy jump in staff cost, nullified by lower adjusted RM and other expenses
± Tax write back and lower interest cost lead to nearly three-fold rise in PAT
± Remain positive on sugar prices on supply constraints in current season; raise F9/10 EPS estimate by 12% and retain BUY with a revised TP of Rs159
Company Update: Bajaj Hindusthan Ltd – Market Performer
CMP Rs223, Target Price Rs204, Downside 8.4%
Bajaj Hindusthan has announced plans to expand power capacity by 400MW by setting up 5x80MW each of coal based units. The total cost is pegged at Rs16bn, likely to be funded through a potential dilution to the tune of Rs20bn. About 50% of capacity would be sold as merchant power while the rest routed to the state grid. In a separate development, sugarcane price in UP has been reportedly fixed at Rs1,900-1,950/MT, slightly higher than our expectation. Sugar prices are likely to remain firm at least for the next 12-15 months as current year supply is limited to 14-16mn tonnes. We incorporate F9/11 numbers for the company and raise F9/10 EPS estimates. Upgrade the stock to MP with a revised TP of Rs204.
Corporate Snippets
± ITC is rethinking with respect to its approach on equity in EIH, which would mean making a counter offer or selling its stake. (BS)
± In the face of alleged rupee kickback, which is being probed by CBI, the government is considering cancelling power PSU NTPC’s Rs20bn contract with a Russian equipment firm. (BS)
± The Bombay high court held that it will frame additional issues for the trial in a dispute for gas supply between NTPC and RIL. (ET)
± NTPC said it would take at least 6 years to set up proposed 4000MW plant envisaging an investment of about Rs180bn in Bundelkhand region. (BL)
± Brazil’s CSN and Tata Steel are set to become stakeholders in Australia’s Riversdale Mining. (BS)
± Infotech Enterprises is planning to acquire two companies in the US by the end of this financial year worth US$10mn to US$20mn each. (BS)
± IOC, which is setting up a 15mtpa refinery at Paradeep, has so far invested Rs22bn in the project, worth Rs298bn. (BS)
± Oman Oil (OCC) has paid 50% premium for re entry into the Rs114bn Bina refinery project of Bharat Petroleum. (ET)
± IDBI Bank has said that the bank has identified a potential merger target. (BS)
± Infosys to hire 20,000 people in FY11. (FE)
± TCS expects to clock Rs5bn revenue from the domestic banking business over the next one year. (FE)
± US based 3com corporation has entered into an agreement with TCS to build the Andhra Pradesh State Wide Area Network (APSWAN). (BL)
± Suzlon Energy Ltd. said the company’s arm, Suzlon Energy
± IRB said that it has received approval from company’s shareholders for raising funds up to Rs12bn from markets. (DNA)
± PNB plans to raise Rs5bn by issue of upper tier-II bonds and Rs2bn through issue of tier-I perpetual bonds. (FE)
± PNB joint venture bank in Bhutan is set to become operational on January 21, 2010. (BL)
± Coal India plans to form a JV for overseas exploration and mining operations. (ET)
± Mahindra Satyam will have to manage an additional burden of Rs12bn over and above its existing claims and pending law suits. (ET)
± TVS Motors launched
± Welspun Gujarat Stahl Rohren has raised US$250mn by the way of institutional placement of shares and bonds. (DNA)
± Bajaj Hindustan announced expansion of its power generation capacity by 400MW for Rs16bn. (ET)
± Shoppers Stop has shrunk its private label offering to prevent blockage of working capital during the current year. (BL)
± Surana Telecom said its board has approved demerger of the solar business of the company into another group company, Surana Ventures. (DNA)
Economic snippets
± The Government is exploring ways to improve the cash flow of funds to developers executing road projects by making funding of such projects attractive for financial institutions. (ET)
± The power ministry has sought assurance from petroleum ministry over the supply of domestic gas to new power projects. (ET)
± The Government has no plans to ban cotton exports as the country has sufficient stocks. (ET)
± The income tax department will recover close to Rs10bn from infrastructure development companies after a recent tax tribunal order clarified that the exemption available for infrastructure development cannot be extended to contractors or subcontractors. (ET)
± State Electricity Boards and power companies together owed Rs7bn to Indian Railways as on March 31, 2009. (BL)
± The Department of Economic Affairs, the Ministry of Commerce and Industry and RBI have come to a consensus that FII in a company should be monitored on a monthly or a quarterly basis. (BS)
± India has imposed anti-dumping duty of up to US$0.92/kg on imports of nylon tyre cord fabric from Belarus. (BS)
± The Centre may give sops to drug exporters for shipments to Africa and Latin America through a route that would avoid passing through Europe. (BS)
± Sugar Mills in Uttar Pradesh agree to pay Rs25 a quintal of sugarcane above the SAP as incentive. (BS)
± The 13th Finance Commission is understood to have arrived at a revenue-neutral rateof around12% for the proposed GST. (FE)
± The Planning Commission has set up a high-level committee headed by Arun Maira to assess the impact of power equipment imports from China and suggest action. (FE)
± 3-G spectrum auction to be on schedule. (FE)
± The Centre's plan to create country’s first strategic reserve for crude oil has run into a regulatory hurdle as the finance ministry has refused SEZ status to the project. (FE)
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