Market Mantra
Market outlook
Hope for a Firm Friday!
The Grand essentials of happiness are: something to do, something to love, and something to hope for.
A firm start is in the offing but there is not much to do immediately. Global markets are mostly up and will provide the necessary boost in the beginning. All eyes will now be on the IIP data. It is likely to be pretty strong and could further buttress the case for a hike in interest rates.
Inflation and its cascading effect continue to be among the biggest headaches for Indian policymakers. Food prices have shot through the roof, with inflation in this crucial category nearing staggering 20%. Don’t be surprised if the Government and/or the RBI unveil a few steps to combat this menace.
The big test for the Nifty will be 5180-5200. With a few days to go in 2009, we expect market to remain volatile and rangebound. Side counters will remain abuzz, but don’t get carried way.
The potential danger ahead for the global equities will be a recovery in the dollar and the unwinding of the carry trades. This could happen when the Fed begins to hike interest rates in the next 6-9 months.
Trading ideas (Time period: 1-3 days)
Andhra Bank (BUY, CMP Rs117, Target Rs125): The stock has been consolidating between the range of Rs100-119 within the context of Symmetrical Triangle since third week of October 2009. Yesterday, the stock attempted to cross the upper-end of this trading range. We expect the stock to rally above the levels of Rs119-120. The weekly RSI is already in strong buy mode. The stock has closed above all its key daily moving averages. Keeping in mind the above-mentioned evidences, we recommend high risk traders to buy the stock between the range of Rs115-118 with a stop loss of Rs112 for a target of Rs125.
Chambal Fertilizers (BUY, CMP Rs60.50, Target Rs66): On Thursday, the stock surged sharply on impressive volumes above its critical resistance levels of Rs58-59. It now faces a resistance at Rs65-66 levels and should have a minimum upside till that level. Our argument is further validated after the stock gave an upside breakout in yesterday’s session as the price broke through the top of a trading range. 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 Rs59-61 with a strict stop loss of Rs57 for a target of Rs66.
Derivative strategies (Time period: Till expiry)
± Long HPCL DEC Future @ Rs410 for the target price of Rs425 and stop loss placed at Rs404
Remarks: Net maximum profit of Rs9,750 and net maximum loss Rs3,900.
± Long Nagarjuna Fertilizer Dec Future between Rs34.8 for the target price of Rs37.50 and stop loss placed at Rs33.80.
Remarks: Net maximum profit of Rs14,175 and net maximum loss Rs5,250.
Commodities – Metals (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Gold - Feb | H. Buy | Above 17050 | 17110, 17160 | 17020 |
| Silver - Mar | Sell | Around 27400 | 27200, 27000 | 27510 |
| Copper - Feb | H. Sell | Below 321 | 318, 315 | 323.7 |
| Zinc - Dec | H. Sell | Below 106 | 104.7, 103.5 | 107.1 |
| Lead - Dec | Sell | At 106 | 105, 104 | 106.8 |
| Aluminum - Dec | Buy | 100.6-100.9 | 102, 103 | 99.9 |
| Nickel - Dec | H. Buy | 760-763 | 776, 790 | 749.2 |
| Crude Oil - Dec | Sell | Around 3300 | 3265, 3230 | 3327 |
| Natural Gas - Dec | Buy | 242-243 | 247, 250 | 239 |
Commodities – Agro (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Pepper - Jan | Sell | 14550-14580 | 14400, 14260 | 14710 |
| Jeera - Jan | Buy | Above 14630 | 14750, 14880 | 14540 |
| Turmeric - Dec | Buy | Above 10220 | 10280, 10320 | 10190 |
| COCUDCAKL - Jan | H. Buy | Above 1227 | 1242, 1255 | 1215.3 |
| Chana - Jan | sell | Below 2550 | 2520, 2500 | 2573 |
| Guar seed - Jan | Sell | 2760-2765 | 2725, 2700 | 2785 |
| Soya bean - Jan | Sell | Below 2410 | 2380, 2350 | 2430 |
| Soya oil - Jan | Sell | 487-488 | 483.5, 480 | 490.3 |
| Mustard seed - Jan | Sell | Below 627 | 623.5, 620 | 629.8 |
| Mentha oil - Dec | Buy | Above 597 | 600.5, 604 | 594.3 |
**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 | Rs133.0 | | Entry load | Nil | |||
| NAV 52 high/low | Rs133/49 | | Exit load | 1% <1 year | |||
| Latest AUM | Rs1,769cr | | 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% | |||
| | | | | | | | |
Company Update: Tata Communications Ltd - SELL
CMP Rs361, Target Price Rs313, Downside 13.2%
Tata Communications (TCOM) continues to struggle in its core wholesale voice business while growth opportunities outside of WiMax remain elusive. Even without considering WiMax bid, TCOM balance sheet is stretched, with D/E likely to rise to 2.1x in FY12 with little likelihood of free cash generation. Assuming a US$500mn bid (taken at 50% of an estimated US$1bn 3G bid) for pan-India BWA license, debt burden would be close to 3x, leading to surge in interest cost. On a positive note, data business is likely to grow at a steady annual rate of 18-20%, accounting for a third of consolidated revenues in FY11. While monetization of land bank can raise much needed cash, the issue seems to have stuck in a limbo. We pare TCOM’s core wholesale business value to Rs89/share (Rs98 earlier) and retain SELL with revised TP of Rs313.
What’s In, What’s Out – November 2009
Given below is the snapshot of mutual fund activity in Indian equities. The information includes performance of mutual funds, current cash levels and stocks which are in and out of flavour.
Key observations
± In November ‘09, the Indian Mutual Fund (MF) Industry grew for the second consecutive month. Industry assets crossed an all-time high of Rs 8trillion. On a mom basis, the industry posted a growth of 5.9% in average Asset Under Management (AUM). The growth in asset was mainly due to inflows into debt funds. The top-10 fund houses, which constitute 79.5% market share, grew in- line with the industry growth at 5.9% mom.
± Among the top-10 fund houses, LIC MF witnessed the highest growth in AUM, rising 15% mom. HDFC MF strongly held on to its second position posting an impressive growth of 9.7% mom, crossing the Rs1 lakh crore mark. Reliance MF, the top fund house in terms of corpus, underperformed the industry. It was up by 4.7% at Rs122,252cr. SBI MF posted a mere growth of 1.2% mom. Among 37 MF players, smaller fund houses posted impressive growth; namely Axis MF (+81.9% mom), Bharti AXA MF (+66.9% mom) and Taurus MF (+44.7% mom). However among all, only six fund houses reported a declined in their AUM numbers.
± After a dry October, new fund under equity category witnessed meager inflows in November ‘09 via Religare PSU Equity Fund. It was able to garner Rs229crs via new fund offering. However, income category under new offering witnessed a steep decline by 89% mom. It mobilized Rs690cr via seven income funds. Slowdown has also been observed in the existing income fund category. In November ‘09, it was able to garner Rs344,011cr vis-à-vis Rs225,979cr (down by 34%).
± Top fund houses like Reliance MF, HDFC MF and ICICI Prudential MF added stocks from automotive space in November. Tata Motors was among the top additions made by Franklin Templeton MF, ICICI Prudential MF and Kotak Mahindra MF. HDFC was also among the top added scrip by Birla Sun Life MF, ICICI Prudential MF and Tata MF. Many real estate and cement companies like DLF, Unitech and ACC were in the list of reductions by the top-12 fund houses.
± In November ‘09, the total cash available with top-12 stood at Rs11,313cr vis-à-vis Rs 12,389cr during the previous month. The highest level of cash holding, in percentage terms is held by IDFC MF at 13.3% while in monetary terms, Reliance MF continued to hold the maximum with Rs4,081cr cash in its equity schemes portfolio.
± Foreign Institutional Investors (FII) and MF were net buyers in the debt markets in November. They bought debt worth of Rs684cr and Rs 16,099cr respectively. Since September ‘09, Indian MF industry continues to be a net seller. They off-loaded equities worth Rs696cr. Though, FII were net buyers in the equity market but with decelerate pace. In November, they bought Rs5,497cr worth of equities vis-à-vis Rs9,077cr last month, down by 39.4%.
Corporate Snippets
± ONGC is working out a major revamp to create independent subsidiaries to tap the growing market of drilling, construction and logistics services consumed by oil companies. (ET)
± Group of global telecom and technology firms comprising, Reliance Globalcom and Bharti Airtel singed an agreement to build and operate a submarine cable system. (ET)
± DE Shaw sells 36% in DLF arm to promoters. (ET)
± RIL is in talks with IL&FS on Haryana SEZ. (BS)
± NTPC to be the official partner for the Commonwealth Games scheduled in the next year. (BS)
± Jindal Power Limited, a subsidiary of JSPL, plans to raise Rs100bn in this financial year via IPO. (BS)
± Cairn India plans to merge businesses of its group companies with itself. (BL)
± RCoM has bagged telecom infrastructure contracts from State Governments of Kerala, Mumbai and
± Pfizer sues Dr Reddy’s Labs over Lipitor patent. (BL)
± Ranbaxy expects to launch a generic version of Astellas Pharma’s Flowmax urinary drug in March next year. (BL)
± Reliance Infrastructure gets Rs10bn contract from
± Lupin is looking to acquire a company in the injectibles space in
± Aventis Pharma has launched a rural market division with 10 products and a sales team of 300 people. (ET)
± SREI Infra to raise upto US$200mn through ECBs. (BS)
± Bajaj Electricals to raise Rs1.61bn via QIP. (BS)
± Nagarjuna Agrichem to invest Rs2.5bn in two years to increase its annual production capacity by 80%. (ET)
Economic snippets
± Inflation in food articles climbed to 19.05% for the week-ended November 26. (ET)
± Petroleum Ministry has sought oil bonds worth ~Rs208bn to partially compensate PSU oil marketing companies for selling cooking fuel below market price in the current fiscal. (BL)
± Textile Ministry seeks Rs15bn for the TUF scheme. (ET)
± No plan to curb flows of foreign capital, says RBI (ET)
± EGoM backs fertilizer subsidy policy. (ET)
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