Market Mantra
Market outlook
Finally, Christmas gets Merry on the Street!
The earth has grown old with its burden of care, But at Christmas it always is young.
While the bulls are eating Christmas cakes, the bears seem to be eating humble pie as the Nifty ended well above 5100 and is now eyeing a new high for 2009. Wednesday’s sudden surge would have taken many by surprise. We reiterate that further short covering is not ruled out ahead of the F&O expiry. Also, some long build-up may take place amid signs that the economy and India Inc. may do better.
But clearly, any rise will not be sustainable in the absence of incremental good news – local as well as global. Rich valuations and concerns on an impending reversal in stimulus steps are among the major headwinds. One should not get carried away by any sharp swings in the near term as the market remains in a consolidation phase.
Today we expect a higher opening. Asian markets are mostly up.
Trading ideas (Time period: 1-3 days)
Bhushan Steel (BUY, CMP Rs1,374, Target Rs1,450):The stock had been consolidating in a narrow range between Rs1,378-1,310 since last two weeks alongwith the support of 50-DMA. On Wednesday, the stock attempted to break out from the upper-end of this trading range with higher-than-average volumes. From the current level, the stock can only move towards one direction, i.e. upwards. The daily RSI has also given a positive divergence, indicating that price would start moving up after facing stiff resistance around the levels of Rs1,375-1,378 zone. We recommend buy on the stock from the above mentioned technical observations. Maintain a stop loss of Rs1,340 and go long for a target of Rs1,450 in the coming trading sessions.
Oracle Financial (OFSS) (BUY, CMP Rs2,237, Target Rs2,335): On the weekly chart, the stock is trading around its crucial resistance zone. A move past the levels of Rs2,250-2,260, would be considered to be an important bullish signal. The undertone is reasonably strong and is likely to push price higher. The share price has reversed after witnessing a sharp decline for the past three trading sessions. The reversal from the intra-week low has resulted in the formation of a Bullish Engulfing Candle on the weekly chart. We recommend traders to buy the stock for a target of Rs2,330 with a stop loss of Rs2,190.
Derivative strategies (Time period: Till expiry)
± Long Andhra Bank Dec Future @ Rs106 for the target price of Rs115 and stop loss placed at Rs103.
Remarks: Net maximum profit of Rs20,700 and net maximum loss Rs6,900.
± Long United Spirits Ltd (McDowell) Dec Future @ Rs1,274 for the target price of Rs1310 and stop loss placed at Rs1,260
Remarks: Net maximum profit of Rs9,000 and net maximum loss Rs3,500.
Commodities – Metals (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Gold - Feb | Sell | 16680-16690 | 16620, 16550 | 16720 |
| Silver - Mar | Buy | Above 27100 | 27250, 27400 | 26970 |
| Copper - Feb | Buy | Above 330.5 | 333, 335 | 328.2 |
| Zinc - Dec | Buy | Above 117 | 118.3, 119.5 | 115.9 |
| Lead - Dec | Buy | 107.5-107.8 | 109, 110 | 106.7 |
| Aluminum - Dec | H. Buy | At 103.5 | 104.8, 106.3 | 102.7 |
| Nickel - Dec | Buy | 841-845 | 859.5, 874 | 829.3 |
| Crude Oil - Jan | Sell | At 3610 | 3550, 3500 | 3660 |
| Natural Gas - Dec | Buy | 269-270 | 274, 277.5 | 267.2 |
Commodities – Agro (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Pepper - Jan | Sell | 13820-13850 | 13680, 13540 | 13960 |
| Jeera - Jan | Sell | Belo w14690 | 14565, 14450 | 14790 |
| Turmeric - Apr | Buy | 7015-7020 | 7070, 7120 | 6980 |
| COCUDAKL - Jan | H. Sell* | Around 1210 | 1198, 1185 | 1219 |
| Chana - Jan | H. Sell* | Below 2485 | 2450, 2430 | 2508 |
| Guar seed - Jan | Sell | 2655-2660 | 2625, 2590 | 2680 |
| Soya bean - Jan | H. Sell | Below 2315 | 2285, 2260 | 2337 |
| Soya oil - Jan | H. Sell* | At 475 | 471.5, 468 | 477.6 |
| Mustard seed - Jan | H. Sell | Below 588.5 | 584.5, 581 | 590.8 |
| Mentha oil - Dec | Sell | 580-581 | 576, 572 | 583.6 |
**Strict Stop-Loss *Book Partial Profits
Mutual funds
| Fund focus | |||||||
| ICICI Prudential Dynamic Plan | Invest | ||||||
| Fund manager | Sankaran Naren | | Min investment | Rs5,000 | |||
| Latest NAV | Rs90.8 | | Entry load | Nil | |||
| NAV 52 high/low | Rs91/44 | | Exit load | 1% <1 year | |||
| Latest AUM | Rs1,753cr | | Latest dividend (under dividend option) | 12% (21-Aug-09) | |||
| Type | Open-ended | | Benchmark | S&P Nifty | |||
| Class | Equity-diversified | | Asset allocation | Equity (84%), Debt (0%), Cash (16%) | |||
| Options | Growth & dividend | | Expense ratio | 1.9% | |||
| | | | | | | | |
Company Update:
CMP Rs1,163, Target
HZL is set to become the world’s largest integrated zinc-lead producer by mid-2010. The company is fully integrated with captive mines and power plants which places it in the lower quartile of the global cost curve. We believe that HZL will be amongst the biggest beneficiaries of the strong commodity prices among the Indian metal companies. The have revised upwards our earnings estimate by 19% and 4.4% in FY10E and FY11E respectively incorporating the revision in commodity price estimate. We expect HZL to report earnings CAGR of 25.8% for FY09-12E and net cash per share to double from Rs236 to Rs460 during the same period. We feel that the stock should trade at par with its international peers on account of the size and the integrated operations of the company. We roll over our price target on FY12E basis and upgrade our target price from Rs960 to Rs1,319, maintaining BUY.
Meeting Note: Jyothy Laboratories – Not Rated
CMP Rs167
Jyothy Laboratories Ltd (JLL) is one of the fastest growing FMCG players in the household care segment with a diverse product portfolio, spread across segments like - fabric whiteners & stiffeners, mosquito repellants, laundry detergents, dishwash products and incense sticks. JLL continues to dominate the fabric whiteners segment with its flagship brand Ujala Supreme (72% market share) and has also garnered a strong market share in new categories like mosquito repellants (Maxo 21%) and dishwash products (Exo 20%).
JLL has recently entered into organized the laundry services business which is operated from its 75% owned subsidiary, Jyothy Fabricare Services Ltd (JFSL). Catering on three levels – retail, institutional and door-to-door, JFSL has acquired 55 institutional clients and a retail chain, Snoways. JLL expects this business to breakeven in FY11 and achieve gross margins of ~35-40% in FY12. The management targets to open 500 Fabric Spa outlets across
Sector Update: Telecom Monthly Update – November 2009
In Nov’ 09,
Fund Focus: ICICI Prudential Dynamic Plan – Invest
NAV Rs90.8
Since October ‘09, S&P Nifty has been hovering in the range of 4,900 – 5,180. Soaring food prices and fears over monetary contraction have been the catalyst for such anemic market. Furthermore, valuations no longer appear cheap when compared with other emerging markets. Though economic recovery is well underway, there is a lack of clear direction for the market. In such a milieu, we advise investors to play it safe. Hence, we recommend investing in ICICI Prudential Dynamic Plan (IPDP). The scheme is characterized with large-cap exposure, sector-diversification and steady returns.
Corporate Snippets
± ONGC issues Rs20bn bonds to refinance debt it took to acquire Imperial Energy. (ET)
± ONGC has suggested roping in refineries, including those operated by private players, to share petroleum subsidy burden and make the system more equitable. (FE)
± JSW Steel has abandoned its plan to raise funds through QIP after arranging a debt refinance. (ET)
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± Government rejects BSNL’s demand for Rs10bn MNP rollout. (ET)
± RCom to raise Rs63bn to scale up its wireless and enterprise business. (BS)
± ICICI Bank may sell 3i Infotech stake to US PE firm. (BS)
± Nalco to triple its production capacity in next six years. (BS)
± Maruti to unveil MPV concept at Delhi Auto show. (BL)
± Buoyed by high festival sales, lower interest rates and new models, Maruti has revised its sales target upward for FY10 from 10% earlier to about 20%. (FE)
± GTL Infra has agreed to buy
± BoI to launch 8% home loan plan on January 01, 2010. (BS)
± Adani Power wins 1,200MW bid in Rajasthan. (BL)
± Rural Electrification Corporation's follow-on public offer to raise Rs33bn is likely to open on February 11. (FE)
± Pantaloon Retail India will hive-off its value segments Big Bazaar and Food Bazaar into a separate company, Future Value Retail, from January 1. (FE)
± Shriram Transport Finance has acquired assets of GE Transportation financial Services for Rs12bn. (ET)
± KEC International wins Rs4bn order for transmission and dispatch from
±
± Citi Bank sells
± IDFC to invest Rs2.5bn in Adhunik Power and Natural Resources, a subsidiary of
± Madras Cements shelves plan to enter sugar business. (ET)
± Coal India disinvestment will not go beyond 15%, says coal minister. (ET)
± Hanung Textiles bags an order worth Rs2.8bn for home furnishing goods from US. (BS)
± Zee Entertainment to merge ETC Networks with itself. (BS)
± Union Bank of India has reduced interest rates on car loans by 100bps up to December 31, 2009. (BL)
± Indoco Remedies eyes
Economic snippets
± Government eyes to raise Rs325bn in next three months through its revived disinvestment program. (ET)
± Government may rejig export sops by withdrawing from sectors doing well and passing on additional benefits to sectors that are still in red. (ET)
± Sugar mills get time to meet export obligations as the priority now was to meet domestic demand. (ET)
± Government ruled out importing rice this year as they are comfortable with stock positions even after factoring in a strategic reserve requirement. (ET)
± GST will cut tax burden by 25-30%, says government. (ET)
± PM may deliberate on freeing auto fuel prices. (BS)
± IRDA has indicated that it would allow life insurers to hedge 5 to 10% of their exposure in equity portfolios through derivative instruments. (FE)
± The steel ministry has sought an amendment in the Mines and Minerals (Development & Regulation) Act, 1957 to bring iron ore, manganese ore and chrome ore under its purview. (FE)
± The mobile subscriber base in he country crossed the 500mn mark to touch 506mn in November 2009. (FE)
± In November 2009, total approvals received by India Inc to raise capital by way of external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) rose to US$2.35bn from US$1.7bn raised in November 2008. (FE)
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