Market Mantra: Technicals - Jet Airways (Buy), Wipro (Sell); F&O - Voltas (Long), Moser-Baer (Long); Reports - Sesa Goa (MP), Oil Monthly (Dec '09)

 

 

Market Mantra

 

Market outlook

Melody in the Market

 

The end of a melody is not its goal, and yet if a melody has not reached its end, it has not reached its goal.

 

The year 2009 may be reaching its end but the market melody, which has been music to the bulls’ ears, doesn’t seem to be stopping. Most global equity benchmarks have in recent days either crossed or are on the verge of surpassing the annual peaks. For India, the Nifty has already made a new high for 2009, while the Sensex is within striking distance of doing so. The BSE benchmark may just achieve the goal with two trading sessions still to go, and momentum being positive.

 

However, global cues are pretty tepid. Tomorrow we will have the last F&O expiry of 2009. So, some more volatility is a given. We expect a flat to cautious start and yet another low volume day. Non-index counters may continue to hog the limelight but don’t get carried away by the momentum in these shares. The Nifty will find it tough to crack 5200. Support is likely to kick in at 5100. In case of a fresh bout of buying, the Nifty could reach 5350.

 

Trading ideas (Time period: 1-3 days)

Jet Airways (BUY, CMP Rs558, Target Rs575): On the daily chart, the stock has formed a bullish price channel. It is a continuation pattern that slopes up and is bound by an upper and lower trend line. On Tuesday, the momentum indicator RSI depicted a positive divergence. In addition the stock is trading above its key short-term moving averages. We recommend a buy at current levels and on declines up to Rs555 with a stop loss of Rs551 for a target of Rs575, 580.

 

Wipro (SELL, CMP Rs681, Target Rs666): The stock rallied smartly from a low of Rs180 in October-end 2008 to a recent peak of Rs700 in second week of December 2009. Since past two trading session, the stock has struggled to continue its momentum. The daily RSI as well as the daily MACD are exhibiting negative divergence, indicating weakness in the trend. On Tuesday, the stock gave a close below its 5 DMA which is likely to trigger immediate correction to an extent of 13DMA at Rs666. The fall on Tuesday’s session was accompanied by higher volumes. We recommend traders to sell the stock at current levels Rs685-680levels. A stop loss of Rs688 is recommended on all short positions.

 

Derivative strategies (Time period: Till expiry)

±       Long Voltas Jan Future @ Rs172 for the target price of Rs182 and stop loss placed at Rs168.

Lot size: 2,700

Remarks: Net maximum profit of Rs27,000 and net maximum loss Rs10,800.

 

±       Long Moser-Baer (I) Ltd Jan Future @ Rs86 for the target price of Rs92 and stop loss placed at Rs83.

Lot size: 2,475.

Remarks: Net maximum profit of Rs14,850 and net maximum loss Rs7,425.

 

Commodities – Metals (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Gold - Feb	Sell	Below 16730	16680, 16640	16760
Silver - Mar	Sell	Below 27000	26850, 26700	27129
Copper - Feb	H. Buy	339-339.5	342, 345	337.8
Zinc - Dec	Buy	117.7-118	119, 120	117.2
Lead - Dec	Buy	111.7-112	113.2, 114.5	110.9
Aluminum - Dec	Sell	At 105	103.5	105.6
Nickel - Dec	H. Buy	890-893	905, 917.8	882.5
Crude Oil - Jan	Buy	3665-3670	3695, 3720	3647
Natural Gas - Jan	Sell	Below 276	273, 270	278.6

 

Commodities – Agro (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Pepper - Jan	Sell	Below 14050	13900, 13750	14175
Jeera - Jan	Sell	Below 14280	14150, 14030	14375
Turmeric - Apr	Sell	Below 7310	7265, 7230	7340
COCUDAKL - Jan	H. Sell	1225-1228	1205, 1190	1242
Chana - Jan	H. Sell*	Below 2495	2465, 2430	2515
Guar seed - Jan	Sell	Below 2725	2695, 2665	2747
Soya bean - Jan	H. Sell	Below 2390	2367, 2345	2410
Soya oil - Jan	H. Sell	Below 484	480, 477	486.8
Mustard seed - Jan	Sell	Below 599	595, 592	602
Mentha oil -  Jan	Sell	Below 590	586.5, 583	592.8

 **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	Rs91.6		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: Sesa Goa – Market Performer

CMP Rs406, Target Price Rs423, Upside 4.2%

 

In a bid to curb iron ore exports, the Indian government has raised export duty on iron ore lumps to 10% from 5% and on iron ore fines to 5% from nil. The impact of higher export duty will be the highest for Sesa Goa among the domestic iron ore producers, as exports constitute ~90% of total sales. This would have a negative impact on EPS by 3.9% in FY10 and 10.6% in FY11.

 

We upgrade our iron ore price realisations incorporating 1) 20% increase in contract iron ore prices in FY11E 2) spot prices to be 10% yoy higher in FY11E 3) 25% of volume sold on a contract basis in FY11E & FY12E 4) appreciation of rupee to 45 against the dollar in FY11E from 47.2 in FY10E. We expect the company to witness a volume CAGR of 23.4% over FY09-12E. We introduce our FY12 estimates and expect the company to register earnings CAGR of 18.2% over FY09-12 even after accounting for the rise in export duty. We revise our price target from Rs257 to Rs423 on account of the strong iron ore prices and roll over our price target to FY12 earnings. We upgrade the stock from SELL to Market Performer.

 

Sector Update: Oil Monthly Update – December 2009

 

±       Crude oil prices fall on a mom basis

±       Refining margins recover sequentially

±       Sequentially under recoveries fall for all products except LPG

±       OPEC and IEA continue to upgrade demand estimates

±       Upstream stocks outperform the broader markets

 

Corporate Snippets

±       ONGC and GAIL plan to take 12.5% stake in the US$2bn gas pipeline that China is building in Myanmar to transport natural gas from the Bay of Bengal. (BS)

±       Bharti Airtel is focusing more on the rural sector by offering various tailor made packages, as the segment contributed 50% of its new business. (BL)

±       Tata Motors commenced trial production of the first batch of the Nano at the new mother plant at the Sanand facility last week; commercial production of which will start from March onwards. (BS)

±       Ranbaxy Laboratories has exited its joint venture in China by selling its 83% stake in Ranbaxy (Guangzhou China) Ltd to HNG Chembio Pharmacy Co Ltd for an undisclosed sum. (BS)

±       NHPC has been allocated the job of preparing detailed project reports for the 670MW Chamkharchuu-I and 1,800MW Kuri-Gongri hydroelectric project in Bhutan. (FE)

±       HCL Infosystems bagged Rs1.1bn contract from the Gujarat government to install computer aided learning systems in 7,000 schools falling under tribal and education department in the state. (ET)

±       Coal supply to the captive power plant of NALCO was hit due to the outbreak of fire at the rapid loading system at the linked Bharatpur coal mine in Talcher Coalfields. (BS)

±       HDIL raised Rs4bn through allotment of debentures. (FE)

±       The NHAI has given a clean chit to Gammon India and Hyundai Engineering in the collapse of the Kota bridge over the Chambal river. (BS)

±       Tata Communications and China Telecom Corp will jointly build a 500km optical fiber cable network between India and China over the next 12 months. (BL)

±       Max New York Life Insurance is outsourcing customer service work to BPO firm Genpact, as part of an internal restructuring exercise. (ET)

±       The Maharashtra government is likely to intervene to settle the strike at the Aurangabad unit of Colgate-Palmolive. (BL)

±       The Diageo-Radico joint venture is likely to receive FIPB approval for inducting up to 100% FDI. (BL)

±       SCI plans to acquire three new container ships in 2010 and has set aside US$200-225mn to fund these purchases. (BS)

±       The government will sell 8.38% of its stake in the mining major NMDC before March 31, 2010, generating Rs14.1bn from the process. (BS)

±       The beleaguered Dabhol power project is set to achieve generation of 1,500MW by January ‘10 and a maximum generation of 1,950MW by April ‘10. (BS)

±       Vedanta group’s Sterlite Energy plans to commission the first phase of its Rs82bn Jharsuguda power plant in Orissa within three months, while the entire project is expected to be fully commissioned in the third quarter of the FY11. (BS)

±       Jindal Power Ltd, a part of Jindal Steel and Power Ltd, plans to raise Rs72bn from its IPO. (BS)

 

Economic snippets

±       Thirteenth Finance Commission which suggests the formula for sharing of taxes between the Centre and states will be submitted to the President today. (ET)

±       The power ministry and the CEA have projected a total investment of Rs20bn for renovation and modernisation as well as extending the life span of various old power plants during 11th and 12th Five-Year Plans. (BS)

±       The Orissa government is mulling a special package for the sugarcane growers to encourage cultivation of the crop in the state.  (BS)

±       CCEA gave more time to advance license holders, who imported duty-free raw sugar between September ‘04 and April ’08, till March 31, 2011 to meet their exports obligation. (ET)

±       Key central ministries that control the bulk of Plan expenditure have demanded from the Planning Commission an unprecedented 50-70% hike in outlays for 2010-11. (FE)

±       India and Japan agreed to wrap up talks on the proposed Comprehensive Economic Partnership Agreement by next year and simplify their visa regulations. (FE)

±       India and Russia plan to invest US$600mn to set up a joint venture to produce a medium lift transport aircraft for their armed forces. (FE)

 

 

 

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