Market Mantra: Technicals - IndusInd Bank (Buy), Cambridge Solution (Buy); F&O - Dr. Reddy's Laboratories (Long), GTL Infrastructure (Long); Report - Pricing war - 'Vying for a share in the pie'

 

 

Market Mantra

 

Market outlook

Bulls out of form!

 

When you can't have what you want, it's time to start wanting what you have.

 

What we have is Dhoni & Co. in fine touch. What we want is bulls to be in better form. After hitting the year's high in mid-October, the market has turned turtle. Though the Nifty did make a new high recently, it has since retraced back to sub-5100 level. The broad range for the Nifty is expected to be 4900-5200 and the overall market trend will remain choppy.

 

Today again we expect a soft opening with US markets in the red and a flat finish in Europe. Asian markets are mixed. We don't expect any major move (on either side) till a big influential event takes place. So, keep your eyes and ears open.

 

The immediate event to keep track of is today's outcome of the Fed meeting. It's a no-brainer that the Fed will keep rates steady. What the markets are keenly awaiting is some hints on its 'exit' strategy. Back home, the RBI is expected to reverse its easy money policy, but the timing is uncertain. It may opt to do it earlier than its scheduled January-end meeting.

 

Trading ideas (Time period: 1-3 days)

IndusInd Bank (BUY, CMP Rs140, Target Rs152): On the weekly chart, IndusInd Bank has crossed over its previous high of Rs135 recorded during December 2007. Since past few weeks, the stock was moving in a range of Rs120-135. During the current week, the stock made an attempt to break out from the top of the above trading range. Moreover, cluster of moving averages are proving good support to the stock at current levels. We expect the stock to stage a smart rally in the near term. Traders can buy the stock with a strict stop loss of Rs134 for a target of Rs152. Medium term traders can hold onto the stock for a target of Rs160+.

 

Cambridge Solution (BUY, CMP Rs96, Target Rs104): The stock has shown impressive strength on Tuesday's. The bullish formation is confirmed after the stock gave a positive close (up 9%) despite a sell off in broader indices. In addition, momentum indicators like RSI are exhibiting strong divergence. We recommend traders with high risk appetite to buy the stock in the range of Rs94-97 for a short term target of Rs104. A stop loss of Rs92 should be maintained on all long positions.

 

Derivative strategies (Time period: Till expiry)

±       Long Dr. Reddy's Laboratories Dec Future @ Rs1,122 for the target price of Rs1,165 and stop loss placed at Rs1,105.

Lot size: 400

Remarks: Net maximum profit of Rs17,200 and net maximum loss Rs6,800.

 

±       Long GTL Infrastructure Dec Future @ Rs38 for the target price of Rs41 and stop loss placed at Rs36.

Lot size: 4,850.

Remarks: Net maximum profit of Rs14,550 and net maximum loss Rs9,700.

 

Commodities – Metals (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Gold - Feb	Sell	Around 17100	17050, 17000	17123
Silver - Mar	Sell	27500-27540	27350, 27200	27660
Copper - Feb	H. Buy	Around 322	325, 328	319.5
Zinc - Dec	H. Buy	107.3-107.6	108.8, 110	106.4
Lead - Dec	Buy	Around 108	109.3, 110.5	106.9
Aluminum - Dec	H. Sell	Below 103.8	102.7, 101.5	104.7
Nickel - Dec	H. Buy	774-777	790, 800	764.3
Crude Oil - Dec	Sell	3315-3320	3280, 3250	3342
Natural Gas - Dec	Buy	Above 256.5	259.7, 263	254.2

 

Commodities – Agro (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Pepper - Jan	Sell	Below 13950	13800, 13670	14070
Jeera - Jan	Sell	Below 14300	14150, 14000	14417
Turmeric - Apr	Sell	7030-7035	6980, 6830	7065
COCUDAKL - Jan	H. Sell*	1245-1250	1230, 1215	1257
Chana - Jan	Sell	2550-2555	2520, 2500	2570
Guar seed - Jan	Sell	Around 2730	2690, 2655	2755
Soya bean - Jan	Sell	Below 2420	2400, 2380	2435
Soya oil - Jan	H. Sell	Below 491	488, 485	493.6
Mustard seed - Jan	H. Sell	Below 628	624.5, 621	630.8
Mentha oil -  Dec	Sell	Below 577	573.5, 570	580.2

 **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	Rs129.1		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%

 

 

Sector Update: Pricing war – 'Vying for a share in the pie'

 

The ratio of mortgage to GDP in India has remained low at 7%, thus providing potential for further growth in the housing sector in the coming years. While the housing finance companies (HFC) were pre-dominantly catering to mortgage needs, over the past few years, banks too have started increasing their exposure to real estate, especially Home loans. The correction in the real estate prices in the initial period of the year and low interest rate schemes announced by the banks/HFCs have resulted in significant surge in real estate volumes over the past few months. The housing sector has witnessed significant surge in volumes especially in the "Affordable housing segment". 

 

Due to the sluggish credit demand, banks have been diverted their funds towards housing loans. Subsidies have also been provided in the form of reduced processing fees and minimal/no penalty on early re-payment. The current soft interest rate regime has enabled HFCs to borrow at lower rates and thereby pass on the benefits to the customers.

 

Corporate Snippets

±      Hindustan Unilever has signed a trademark licence agreement with Unilever, under which it will pay one per cent of net sales on specific brands as royalty to its UK-based parent. (FE)

±      German drugmaker Boehringer Ingelheim has started discussions with Cipla for a supplying drug worth upto US$17bn. (ET)

±      US drug major Hospira will buy the injectable pharmaceuticals business of Orchid Chemicals for US$400mn. (BS)

±      Sun Pharma gets boost in Taro battle as second-largest shareholder Templeton seeks management change, to vote against directors. (BS)

±      M&M has forayed into the aerospace business by acquiring majority stakes in two Australian companies, Aerostaff Australia and Gippsland Aeronautics. (BS)

±      Comptroller & Auditor General would audit the product sharing contracts (PSC) of RIL's D6 gas block in the Krishna-Godavari basin for 2006-07 and 2007-08. (BS)

±      RIL's efforts to buy a controlling stake LyondellBasell has got a bit complicated, as the company has submitted a new reorganisation plan to a court in the US. (ET)

±      Renuka Sugars may buy stake in Balrampur Chini. (BS)

±      BHEL is planning to acquire Hungary-based boiler maker TGR to establish a manufacturing facility in Europe. (FE)

±      Kotak Investment Banking, a subsidiary of Kotak Mahindra Bank, has entered into an exclusive alliance with Renaissance Capital, Russia's biggest home-grown investment bank. (BS)

±      Tata Steel Europe (Corus) plans to invest €35mn at its rail production facility in Hayange, France to produce longer rails. (BL)

±      IVRCL to co-develop IOC's Paradip refinery through a SPV. (BL)

±      BSNL has started wireless broadband services and also announced a tariff starting with Rs140 per month for rural areas. (FE)

±      Powergrid Corporation to come up with its FPO for Rs20bn by March 2010. (ET)

±      Infosys has set up a wholly-owned subsidiary in Brazil. (ET)

±      Kingfisher Airlines to start air service between Nepal and India. (FE)

±      DLF has acquired Caraf Builders & Constructions, which owns DLF Assets Private (DAL), from promoter KP Singh's family. DLF's whollyowned subsidiary DLF Cyber City will acquire Caraf in a cashless transaction. After the transaction, the promoter stake in Cyber City will be 40%, while DLF's stake will come down to 60%. (ET)

±      Coal India is not willing to hand over any coking coal mines to SAIL and Tata Steel, but may explore opportunities to jointly develop such mines with the steel behemoths seeking to secure coking coal supplies. (FE)

±      Bharti Airtel is entering the teleport business, as it aims to expand its footprint in the media space. (ET)

±       Dhanalakshmi Bank is likely to entire a deal to acquire a medium-size existing asset management company. (ET)

 

Economic snippets

±      After falling continuously for 13 months, the country's merchandise exports registered a growth of 18% in November, at US$13.2bn against US$11.16bn in the same month last year. (BS)

±      Corporates shell out 36% more as advance tax in Q3 FY10. (BL)

±      The government has approved revival of 36 sick central public sector enterprises that will require Rs29bn of cash infusion, besides Rs123bn of other assistance.  (ET)

±      ATASK force on GST set up by the Thirteenth Finance Commission has recommended the tax on all goods and services be dropped to 5% at the Centre and 7% at the state level, and that all exemptions be scrapped. (ET)

±       The traffic earnings of Indian Railways went up by almost 18% in November against the corresponding period last fiscal. (BL)