Market Mantra: Technicals - Aptech (Buy), DLF (Buy); F&O - IDBI (Long), LIC Housing Finance (Short); Reports - Gujarat State Petronet, Bajaj Auto

Market Mantra

 

Market outlook

 

Subdued start, sideways trade likely

 

Trouble is only opportunity in work clothes.

 

Stock markets provide opportunities at all times. Last year’s crash was one of them. The current consolidation is no exception either. Today we expect a flat start due to subdued global markets. In the near-term, the key indices will continue to swing in a range, which is pegged at 4900-5200 on the Nifty. To ride out this volatility one needs to focus on one’s portfolio. Get rid of the laggards and bet on companies with good earnings visibility.

 

As far as the global markets go, concerns about Dubai's debt troubles appear to be easing. World trade in equities continues to be driven by the US dollar’s weakness. Risky assets such as emerging market equities and currencies are being lapped up. Commodities too have benefited. Gold is hitting new highs every day.

 

But, the rise in risk appetite is being tempered by some degree of caution after the spectacular rally from the lows of March. From here on, incremental ‘good news’ has to be really strong for the current momentum to sustain. A big worry is on how the ‘exit’ strategies unfold.

 

Trading ideas (Time period: 1-3 days)

Aptech (BUY, CMP Rs193, Target Rs210): On the daily charts, the stock gave an upside breakout in Wednesday’s trading session. It suggests that the sideways range is about to end. On Wednesday, the stock rallied by 11% confirming the bullish set up. The daily momentum oscillators i.e. RSI and MACD are suggesting strength in the upmove. A move above Rs194-195 zone could take the stock above Rs208 in the near term. Keeping in mind the above-mentioned observations, we suggest traders to buy the stock in the range of Rs190-195 with a stop loss placed at Rs185 levels for target of Rs210.

 

DLF (BUY, CMP Rs385, Target Rs410): The stock has rallied smartly from a low of Rs352 in last week to the present levels. On the daily 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. A sustained move past the Rs390 levels will see the stock heading towards the levels of Rs410-415 in the medium term. We recommend high risk traders to buy the stock between Rs381-390 levels for a target of Rs410 with a stop loss of Rs374.

 

Derivative strategies (Time period: Till expiry)

±       Long IDBI DEC Future @ Rs133 for the target price of Rs138 and stop loss placed at Rs131

Lot size: 2400.

Remarks: Net maximum profit of Rs12,000 and net maximum loss Rs4,800.

 

±       Short LIC Housing Finance Dec Future @ Rs855 for the target price of Rs838 and stop loss placed at Rs863.

Lot size: 425

Remarks: Net maximum profit of Rs7,225 and net maximum loss Rs3,400.

 

Commodities – Metals (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Gold - Feb	Buy	Above 18200	18245, 18290	18167
Silver - Mar	Buy	29470-29500	29650, 29800	29340
Copper - Feb	H. Buy	Above 330	333, 336	327.2
Zinc - Dec	Buy	110.1-110.4	111.7, 113	109.4
Lead - Dec	Buy	Around 113	114.3, 115.8	111.9
Aluminum - Dec	Buy	At 97	98.3, 99.5	96.1
Nickel - Dec	Sell	Below 758	743, 727	769.8
Crude Oil - Dec	Sell	Around 3590	3550, 3520	3613
Natural Gas - Dec	Sell	Below 209	205.7, 202.5	211.8

 

Commodities – Agro (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Pepper - Dec	Sell	15900-15930	15770, 15600	16040
Jeera - Dec	Sell	Below 15800	15675, 15550	15890
Turmeric - Dec	Sell	At 9830	9770, 9700	9865
COCUDCAKL - Dec	Buy	At 609	613.8, 618	606.4
Chana - Dec	Sell	2640-2645	2613, 2580	2655
Guar seed - Dec	Buy	Above 2840	2870, 2900	2815
Soya bean - Dec	Buy	2445-2450	2470, 2490	2430
Soya oil - Dec	Sell	Below 496.5	493, 490	498.6
Mustard seed - Dec	Buy	619-620	623.5, 627	616.8
Mentha oil -  Dec	Sell	Below 622	618, 615	625.3

 **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	Rs130.5		Entry load			Nil
NAV 52 high/low	Rs131/49		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%

 

 

Initiating Coverage: Gujarat State Petronet - BUY

CMP Rs103, Target Price Rs117, Upside 13.3%

 

±       Higher gas consumption to drive transmission volume growth

±       Expanding presence outside and within Gujarat

±       Jump in volumes to offset fall in tariffs

±       Recommend BUY with a target price of Rs117

 

Company Update: Bajaj Auto – BUY

CMP Rs1,691, Target Price Rs1,860, Upside 10.1%

 

±       Robust motorcycle sales in domestic market drive 2-W sales

±       Three wheeler volumes witness decent growth

±       Rising raw material costs to pressurize margins

±       Raise estimates and upgrade rating to BUY

 

Corporate Snippets

±      ONGC along with partners will invest US$10bn into Iran gas fields. (FE)

±      ABG Shipyard exits Great Offshore race, yet to withdraw open offer. (ET)

±      Tata Teleservices launches Photon TV – mobile TV on high speed broadband wireless services. (BS)

±      Over a tenth of Tata Motors’ Nano’s initial bookings are being cancelled mainly because of delivery delays. (BS)

±      Tata Steel owned Corus is preparing for major re-branding initiative resulting into replacement of the eleven year old Corus badge with the Tata brand. (BS)

±      DLF plans to list DLF Assets Ltd (DAL) in Singapore in June 201 to raise about US$1.2bn. (FE)

±      L&T looks to outsource power equipment manufacturing. (BL)

±      IOC may offload bonds worth Rs10-15bn. (BL)

±      Maruti exports 0.1mn A-Star in less than a year. (BS)

±      Gammon India bags orders worth Rs4.6bn. (FE)

±      Tata Teleservices added 3.9mn subscribers for November 2009. (BS)

±      BSNL not to join consortium to buy 46% stake in Kuwait’s Zain Telecom as of now. (ET)

±      REC to launch follow on issue in January 2010. (BS)

±      CIL pitches for 15% disinvestment in the company. (BS)

±      HCL BPO eyes buyouts UK and US in media and entertainment sector. (BS)

±      Pantaloon Retail is planning to invest Rs3.6bn this year to add up 2.4mn sq ft. (ET)

±      Wipro to hire 5,000 employees in next couple of months. (ET)

±      Solicitor General has withdrawn from an arbitration case between Sterlite and Government of India over valuation of 49% stake in BALCO. (ET)

±      Government eyes Rs140bn from stake sale in three PSUs – NTPC, Satluj Vidyut Nigam and REC. (ET)

±      PNB to cover 100,000 villages by 2013. (BL)

 

Economic snippets

±      Credit growth back in double digits, growing at 10.8% yoy for the fortnight ended November 23, 2009. (BS)

±      Sugar mills in Uttar Pradesh have raised the prices of sugarcane per quintal to Rs200-205. (BS)

±      Cabinet is expected to clear pension fund reforms bill today. (ET)

±      Government likely to set carbon intensity reduction target in Parliament today. (ET)

±      Fertilizer sector needs Rs350bn investments to augment capacity and meet demand, according to The Fertilizer Association of India. (BL)

±       Mandatory PF for salary up to Rs15,000 on cards. (FE)

 

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