Market Mantra: Technicals - SBI (Sell), Adlabs (Sell); F&O - India cement (Long), Nagarjuna Const (Short); Result Update (Q2 FY10): Tata Power (MP); Oil Monthly Update (November 2009)

 

Market Mantra

 

Market outlook

 

Dubious Dubai rattles Street!

 

Those who are satisfied to stand still should not complain when others pass them

 

It was the expiry of bullishness on every Street. That sinking feeling came yet again as debt problems in Dubai took its toll on financial markets world over. Safe-haven bonds rose and the rupee fell against the dollar.

 

US markets were closed for Thanksgiving and today is Black Friday, the day after Thanksgiving in the US. The day marks the beginning of the traditional Christmas shopping season. US investors would probably find discount sales during the truncated session.

 

The debate of whether we are out of the woods or not will gain momentum again. In what appears to be the biggest sovereign default since Argentina in 2001, Dubai has sought debt standstill agreement at its Dubai World holding company or in other words, a six-month reprieve on debt payments. 

 

The market is set to open in the red. Don’t expect too much of a bounce back soon as the Dubai debt issue could have a cascading impact as more clarity sets in. Stay light and reduce your exposure for the time being. Bargain hunting could wait till next week.

 

Trading ideas (Time period: 1-3 days)

SBI (SELL, CMP Rs2,255, Target Rs2,180): On the daily chart, the stock has been moving in a downward channel since second week of November 2009. On Thursday, the stock broke down below the support of lower trendline, confirming the downside. The daily MACD is in sell mode, whereas the daily RSI has generated a crossover sell signal indicating further weakness. We recommend traders to sell the stock up to the levels of Rs2,270 for target of Rs2,180. It is advisable to maintain a stop loss of Rs2,290 on all the short positions.

 

Adlabs (SELL, CMP Rs266, Target Rs250): On the daily chart, the stock has given a downside breakout after giving a close below the support zone of Rs271-272. From the lows of Rs234 in November 2009, the stock staged a smart rally towards the levels of Rs300, which has acted as a major resistance last week. The stock has been struggling to close above its critical resistance levels from the start of the month. The daily MACD has generated a crossover sell signal, suggesting build-up of momentum on the downside. Selling pressure could intensify in the counter below the levels of Rs263. We recommend traders to sell the stock at current levels and on rallies to the levels of Rs270 for target of Rs250. It is advisable to maintain a stop loss of Rs275 on all the short positions.

 

Derivative strategies (Time period: Till expiry)

±       Long India cement Dec Future @ Rs112 for the target price of Rs121 and stop loss placed at Rs106.

Lot size: 1450.

Remarks: Net maximum profit of Rs13,050 and net maximum loss Rs8,700.

 

±       Short Nagarjuna Const Dec Future @ Rs162for the target price of Rs152 and stop loss placed at Rs168.

Lot size: 2,000

Remarks: Net maximum profit of Rs20,000 and net maximum loss Rs12,000

 

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	15670-15700	15935, 16100	15570
Jeera - Dec	Buy	Above 16200	16300, 16400	16090
Turmeric - Dec	Buy	Above 9900	9950, 10000	9850
COCUDCAKL - Dec	Buy	Above 613	616, 619	610.2
Chana - Dec	Sell	Below 2640	2615, 2590	2660
Guar seed - Dec	H. Sell*	Below 2800	2775, 2755	2820
Soya bean - Dec	H. Buy	Around 2420	2450, 2470	2403
Soya oil - Dec	Sell	Below 495	492, 490	497.8
Mustard seed - Dec	Buy	At 607	610, 612	605.4
Mentha oil -  Dec	Buy	Above 622	626, 629.5	619

 **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	Rs127.0		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: Tata Power (Q2 FY10) – Market Performer

CMP Rs1,327, Target Price Rs1,307, Downside 1.5%

 

±       Consolidated revenues remain flat - degrowing by 1.3% yoy due to marginal degrowth in power division and 7% lower revenues in coal business

±       Power division’s EBIT margin expands by 416bps yoy to 13% while that of coal division contracts by 394bps yoy to 30%

±       Higher capacity translates into increased depreciation and interest expenditure

±       Adjusted profit falls 25% yoy to Rs3.4bn against Rs4.5bn last year

±       Upside risk remains from higher than expected earnings from merchant sales from Maharashtra, re-iterate Market Performer

 

Sector Update: Oil Monthly Update – November 2009

 

±       Crude oil prices on a rising trend

±       Refining margins fall further

±       Sequentially under recoveries increase for all four products

±       OPEC and IEA continue to upgrade demand estimates

±       BSE Oil and Gas index outperforms Sensex

 

Corporate Snippets

±       IOC to spend Rs46.5bn in crude oil and petroleum products pipelines over the next three years. (BS)

±       Wipro inaugurates its global delivery center in China to provide IT and BPO services to its customers. (BS)

±       ONGC eyes 20-25% stake in Iranian gas fields. (BS)

±       Tata Motors to roll-out hybrid buses for the domestic market in next few years. (BS)

±       Tata Group is in advanced stages of setting-up a centralized treasury management unit in Singapore. (ET)

±       ITC willing to up stake in EIH. (ET)

±       Mahindra Satyam to absorb around 1,000 freshers starting December. (BL)

±       Siemens to merge its two Indian public listed firms. (BS)     

±       Ranbaxy has launched a generic version of GSK’s medicine, Valtrex, in the US. (BS)

±       IDBI Bank hopes to receive Rs80bn of fresh capital from the government over the next three years. (BS) 

±       Essar Steel has sought de-notification of its 247-hectare steel-based SEZ in Gujarat. (FE)  

±       Mirc Electronics founder transfers half of his stake to two sons. (BS)

±       Varun Shipping puts fleet acquisition plan on hold. (BL)

±       Prakash Industries plans Rs30bn power capacity expansion. (BL)

±       Gati is exploring options to restructure its business. (BL)

±       Teva Pharmaceuticals has filed a petition with US FDA against Natco Pharma. (BL)

 

Economic snippets

±       Government will provide Rs50bn to PSU Banks for re-capitalization. (ET)

±       Food inflation rises to 15.6% for the week ended November 14 (ET)

±       Indian corporates raised close to US$2bn through FCCBs in October, the highest since February 2007. (ET)

±       Power tariffs hiked by 22% in Bengal. (BS)

±       PC sales in India grew by almost 24% yoy during Q2 FY10. (ET)