Market Mantra
Market outlook
Starting problem
If a problem has no solution, it may not be a problem, but a fact - not to be solved, but to be coped with over time.
There is no solution to the lack of clear direction in the market. The fact is we will remain at the mercy of global cues and foreign money. Any domestic booster is usually intra-day in nature. Don’t press the panic button in case of any fresh bad news. Stay alert and stick to a stock centric approach.
This week’s trend will hinge on what the Fed says at the end of its policy meeting on Wednesday. Till then, we expect the key indices to remain sideways. The Nifty will continue to trade in a 5000-5200 range.
There will surely be few more speed bumps ahead in some form or the other. The recovery in several parts of the world will be a ‘stop-and-go’ affair. It is taking different shapes across the globe. The crucial event to watch will be the Fed’s ‘exit’ strategy. This will then decide the fate of the dollar, whose weakness has been driving up the risk appetite.
Trading ideas (Time period: 1-3 days)
APIL (BUY, CMP Rs576, Target Rs610): APIL has displayed strength in last few trading sessions prior to Friday, trading in a narrow range amid volatility in the market. The stock had been consolidating in a range between the levels of Rs521-560 from last four weeks. On Friday, the stock broke-out from the upper-end of this trading range. Moreover, on the daily chart, the stock has formed a Bullish Candlestick suggesting upside from the current levels. The daily RSI is already in strong buy mode. The stock has closed above all its key daily moving averages. A move past the levels of Rs580-585 could take the stock towards the levels of Rs605-610 in the short-term. Keeping in mind the above-mentioned evidences, we recommend high risk traders to buy the stock between the range of Rs571-581 with a stop loss of Rs561 for a target of Rs610.
Indraprastha Gas (BUY, CMP Rs187, Target Rs203): The stock has seen impressive volume in yesterday’s trading session and appears to have taken support between Rs175-177 range. It could bounce till somewhere between Rs198-200 levels in the near term. The bullish formation is confirmed after the stock gave a close above its short-term moving averages with positive divergences in momentum oscillators. Any move above Rs190 could take the stock towards Rs200 and higher in the short-term. Traders are advised to maintain a stop loss of Rs181 and go long. Book partial profit around Rs198 and exit around the levels of Rs203.
Derivative strategies (Time period: Till expiry)
± Long ABB Dec Future @ Rs752 for the target price of Rs765 and stop loss placed at Rs745.
Remarks: Net maximum profit of Rs11,500 and net maximum loss Rs3,500.
± Long REC Ltd Dec Future @ Rs253 for the target price of Rs264 and stop loss placed at Rs249.
Remarks: Net maximum profit of Rs21,450 and net maximum loss Rs7,800.
Commodities – Metals (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Gold - Feb | Sell | Around 17030 | 16960, 16900 | 17066 |
| Silver - Mar | Buy | Above 27050 | 27200, 27330 | 26940 |
| Copper - Feb | Buy | Around 322 | 325, 328 | 319.5 |
| Zinc - Dec | Buy | 106.2-106.5 | 107.5, 108.4 | 105.4 |
| Lead - Dec | Buy | Around 106.3 | 107.5, 108.5 | 105.4 |
| Aluminum - Dec | Buy | Above 105.6 | 106.8, 108 | 104.6 |
| Nickel - Dec | Buy | 774-777 | 790, 800 | 764.3 |
| Crude Oil - Dec | Sell | Around 3280 | 3240, 3200 | 3310 |
| Natural Gas - Dec | Buy | Above 242 | 245, 248 | 240.7 |
Commodities – Agro (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Pepper - Jan | Sell | Below 14650 | 14500, 14360 | 14770 |
| Jeera - Jan | Sell | Below 14650 | 14523, 14390 | 14755 |
| Turmeric - Dec | Buy | Above 10830 | 10885, 10940 | 10790 |
| COCUDAKL - Jan | Sell | 1245-1250 | 1230, 1215 | 1257 |
| Chana - Jan | Sell | Below 2595 | 2560, 2530 | 2618 |
| Guar seed - Jan | Buy | Above 2800 | 2830, 2860 | 2780 |
| Soya bean - Jan | Buy | Above 2460 | 2490, 2510 | 2440 |
| Soya oil - Jan | Buy | 493-494 | 497.5, 501 | 491.5 |
| Mustard seed - Jan | Buy | Above 636 | 639.5, 642.5 | 633.2 |
| Mentha oil - Dec | Sell | Below 580.5 | 577, 573 | 583.5 |
**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 | Rs132.0 | | 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% | |||
| | | | | | | | |
Economy Update: IIP – October 2009
± IIP growth for Oct 2009 at 10.3%, lower than expectations
± Growth continued across all use based categories
± IIP growth for Sep 2009 revised from 9.1% to 9.6%
Initiating Coverage: JK Cement Ltd – BUY
CMP Rs145, Target Price Rs192, Upside 32.4%
JK Cement would witness 14% revenue CAGR over FY10-12 driven by a robust 16.6% volume CAGR over the same period as compared to FY08-10 CAGR of just 7%. JK Cement has put on hold its plan to build a 2.2mtpa cement plant in UAE. This would reduce capex and aid in re-payment of debt, which is likely to lower D/E to 0.4x against current 0.9x. The company trades at FY11 PER of 4.6x while large players such as ACC and Ambuja are trading at much higher valuation of ~11x. On an EV/ton basis, the company trades at US$50 for FY11, representing a 50% discount to the replacement cost. We forecast
Mutual Funds Thermometer as on December 11, 2009
Given below is the summary of performance of the mutual fund industry in
Key observations
Equity diversified NAVs ended higher with an advance: decline ratio of 289:1, as the markets remained positive during the fortnight (S&P Nifty was up by 2.6%). Midcap oriented funds conquered the top quartile this fortnight. Among the large corpus, Reliance Equity Opportunities Fund – Growth, UTI Master Value Fund - Growth and ICICI Prudential Discovery Fund – Growth delivered outstanding returns of 6.3%, 6.1% and 5.7% respectively on a fortnightly basis. The only fund which ended in red this fortnight was JM Core 11 Fund - Series 1 – Growth. Its NAV was down by 0.2% at Rs4.6.
After a gap of six fortnights, JM Telecom not only moved into positive zone but also topped the sectoral chart. It’s NAV appreciated by 14.7% on a fortnightly basis. Pharma oriented funds were also among the top-five funds on a fortnightly basis, on an average it delivered a return of 7.1%. Many FMCG and banking oriented funds underperformed the sectoral category namely ICICI Prudential FMCG – Growth (-0.8%), Religare Banking Fund - Reg – Growth (+1%) and Franklin FMCG Fund – Growth (+1%).
Among the tax-saving category, all funds’ NAVs ended in green on a fortnightly basis. Out of 41, 35 ELSS funds outperformed the benchmark index BSE Sensex. Among the large corpus, ICICI Prudential Taxplan (+4.9%), Birla Sun Life Tax Relief ‘96 – Dividend (+3.8%) and SBI Magnum Tax Gain Scheme ‘93 – Growth (+3.4%) were the top three gainers on a fortnightly basis. ICICI Prudential Taxplan is also topping the chart on a yearly basis, by delivering a significant return of 119%.
Balanced fund NAVs witnessed a steady growth across the category on a fortnightly basis. Its average category delivered 1.5% on a fortnightly basis. Top gainers were LIC Balanced - Plan C - Growth (+4.9%), Canara Robeco Balance – Growth (+2.8%) and ING Balanced Fund – Growth (+2.8%) whereas, the benchmark Crisil Balanced Fund Index was up by 1.7%. The only fund NAV ended in negative zone was Tata SIP Fund - Series I – Growth, down by (-0.03%).
After gaining positive momentum in last fortnight, most of gilt and income funds NAV ended in the negative territory. The 10-year G-sec yields hardened by 6bps, resulting a decline in G-Sec and corporate bond prices. The average return of gilt fund category declined by 0.5% and income fund average category declined by 0.3% on a fortnight basis.
After strong sessions in the past, Gold under performed on the weak global cues. Gold ETF NAV’s plunged down by ~3.9% on a fortnight basis and 6.5% on a weekly basis. Junior BeES have topped the ETF category chart on a fortnightly basis.
Weekly Update: Debt Market - week ended December 11, 2009
± G-Sec bonds yields softened after touching year high during the week. The 10-year G-Sec benchmark yield fell by 5bps at 7.57% vis-à-vis 7.61 last week.
± RBI conducted auction for Rs100bn including Rs40bn of 6.90% benchmark 2020 bond, which offered a cut-off yield of 7.39%. For the bonds of 7.02% 2016 and 8.28% 2032, cut-off was offered at 7.31% and 8.32% respectively.
± Indian states government is estimated to borrow Rs700bn in Q4 FY10.
± The food inflation index rose by 19.1% for the week ended Nov 28 vis-à-vis 17.47% in last week. It was mainly fuelled by higher price of onions. Primary articles index was up by 13.9% yoy.
± The petroleum ministry has sought oil bonds worth Rs208bn for state-run oil marketing companies to compensate losses incurred during first three quarters of FY10.
±
± Russia’s GDP declined by 8.9% yoy in 3Q vis-à-vis a 10.9% yoy fall in 2Q of current financial year. The fall was mainly contributed by construction and manufacturing sectors which were down by 19.7% yoy and 14.6% yoy respectively.
Corporate Snippets
± Vodafone Group plans to offload its 4.39% indirect holding in Bharti Airtel. (ET)
± ONGC has sought levy of windfall tax on any crude oil price of over US$60 per barrel to pay for fuel subsidies. (BS)
± BHEL is in talks with L&T and Pipavav Shipyard to jointly build off-shore oil rigs. (BS)
± Reliance Infra bags Rs10bn Kandla-Mundra road project in Gujarat. (BS)
± Government has initiated the process of divesting a further 8.4% stake in NMDC through a fresh public offering. (BL)
± Tata Steel is in talks with international investors to raise at least Rs50bn through equity and an equivalent amount through debt. (DNA)
± ONGC lost a bid to acquire a large oilfield in
± Taro Pharmaceutical asked its shareholders to reject a takeover bid by Sun Pharmaceuticals ahead of its AGM on December 31. (ET)
± ACC plans to review its decision of scaling down the company's ready-mix concrete business and recommence the expansion plan by the middle of 2010. (BS)
± GAIL (
± Tata Power to commission first unit of Dagachhu in 2013. (BS)
± DLF is set to merge the real estate investment trust DLF Assets into itself. (FE)
± SAIL and Tata Steel have submitted to the government a joint proposal asking to be allocated Coal
± DLF, which was in talks with Brussels-based GDF Suez Energy International and Akuo Energy International for selling its wind mill business, is set to seal the deal by the month-end. (DNA)
± Aditya Birla Group to hive off financial services business. (FE)
± Procter & Gamble agreed to buy Sara Lee’s air-care brands, including Ambi Pur, for about US$700m. (ET)
± Apollo Tyres plans to increase tyre prices by up to 10% by this month end. (ET)
± Parsvnath Developers has raised Rs750mn by selling 50% stake in a housing project to US-based PE firm Sun Apollo. (ET)
± Jindal Power plans to invest Rs650bn in new power projects and part of the financing for these would be done through its up to Rs100bn IPO. (ET)
± The Tiruchi unit of BHEL plans to consider four-five companies as candidates for acquisition. (BS)
± Power Finance Corporation plans to raise US$300mn through external commercial borrowings. (ET)
± Shree Renuka Sugars in preliminary talks to acquire Balrampur Chini. (ET)
± Gujarat Power Corporation Ltd inks pact with Torrent Power to develop a 1000MW coal-based power plant at Pipavav in Amreli district of Saurashtra region. (BS)
± PNB plans to open 100,000 biometric ATMs by 2013. (BS)
± JK Lakshmi Cement plans to set up a cement factory at Jharli in Jhajjar district of Haryana. (BS)
± Vodafone Group plans to list its Indian arm and was open to acquisitions when opportunities are available in the country. (BS)
± VW-Suzuki plans to carry out hybrid car R&D in
± PTC to acquire coal assets abroad. (FE)
± ONGC plans to raise US$1bn to service Imperial loan. (BS)
± GlaxoSmithKline Consumer it temporarily suspended operations at its factory in the industrial estate of Dowlaiswaram in Andhra Pradesh, due to political unrest. (BS)
± Merck Inc said it had no immediate plans to delist its newly-acquired subsidiary, Fulford India. (BS)
± BSNL today became the first company in the country to start wireless broadband services and announced a tariff starting with Rs140 per month for rural areas. (DNA)
Economic snippets
± The government plans to work out a new subsidy formula to replace the current system of compensating the oil marketing companies for selling below cost through issue of oil bonds. (ET)
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± Import duty on equipments halved to 2.5% for mega power projects. (BS)
± Foreign exchange reserves rose by US$651mn to US$287bn, for the week ended December 4. (BL)
± Centre may allow private developers to use surplus land in housing projects under the Rajiv Awas Yojana for commercial activity, according to the Union Minister of State for Urban Development. (BL)
± Government says there is no proposal to tax capital inflows in to the stock markets. (BL)
± PSU oil marketing companies are projected to incur under recoveries of Rs455bn on the four petroleum products in 2009-10 based on the refinery gate prices of the first fortnight of December. (BL)
± Goods and services tax under the new tax regime, would have four slabs and these are likely to be unveiled within 15 days, says Chairman of empowered committee of state finance ministers. (BL)
± The government may delay its plans to introduce a uniform licence fee for mobile phone operators. (ET)
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