Market Mantra: Technicals - Pantaloon Retail (Buy), Jindal Saw (Buy); F&O - REC Ltd (Long), Punj Lloyd (Short); Report - Four Soft Ltd

 

Market Mantra

 

Market outlook

The elephant dances

 

...when you see an elephant, carrying its great weight effortlessly along on cushioned feet, the only possible response is: Of course. How could it be otherwise?"

 

The bulls are enjoying the GDP growth music as India does an elephant dance. Sure, the stimulus measures are showing the desired effect. When sentiment turns bad we will revisit the deficit figures. For now the question is when will the RBI step in to suck out surplus liquidity by tightening monetary policy? We reckon it would be in January.

 

The country's GDP expanded by 7.9% in Q2. The growth for the first six months now stands at an impressive 7%. Upward revision of GDP growth will be the order of the day now. Services grew by over 9%. Agriculture, showed some growth but next quarter is most certain to be negative.

 

The opening may be just about in the green. Thereafter, the indices are expected to weaken. Profit booking could be seen in counters which ran too fast on Monday. Global cues during the day will be watched closely for direction. For now, the global signals are mixed. Asian markets are weak.

 

Trading ideas (Time period: 1-3 days)

Pantaloon Retail (BUY, CMP Rs349, Target Rs375): The stock has seen impressive volume in yesterday’s trading session and appears to have taken support between Rs325-330 zone. It could bounce till somewhere between Rs375-380 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. We recommend traders with high risk appetite to buy the stock in the range of Rs346-353 for a target of Rs375. A stop loss of Rs338 should be maintained on all long positions.

 

Jindal Saw (BUY, CMP Rs929, Target Rs980): From the past three weeks, the stock has surged smartly from the support of its 13-DMA. The momentum oscillators like the daily RSI has given a positive divergence, indicating that price would start moving up. Moreover, on Monday, the stock broke out from the horizontal trendline, which had been preventing the price from heading higher with impressive volumes. Keeping in mind, the above mentioned evidence we expect the uptrend to continue in the near term. We recommend traders to buy the stock between the levels of Rs920-935 with a stop loss of Rs900 for a target of Rs980, 1,000.

 

Derivative strategies (Time period: Till expiry)

±       Long REC Ltd Dec Future @ Rs247 for the target price of Rs255 and stop loss placed at Rs243.50.

Lot size: 1950.

Remarks: Net maximum profit of Rs15,600 and net maximum loss Rs6,825.

 

±       Short Punj Lloyd Dec Future @ Rs199 for the target price of Rs187 and stop loss placed at Rs205.

Lot size: 1,500

Remarks: Net maximum profit of Rs18,000 and net maximum loss Rs9,000.

 

Commodities – Metals (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Gold - Feb	Sell	Below 17710	17670, 17630	17742
Silver - Mar	Sell	28500-28530	28350, 28200	28597
Copper - Feb	Buy	Around 322	325, 327	319.7
Zinc - Dec	Buy	At 105	106.3, 107.5	104.1
Lead - Dec	Sell	Below 107.5	106.3, 105	108.6
Aluminum - Dec	Buy	Above 95.5	96.7, 98	94.7
Nickel - Dec	Sell	770-773	750, 730	781.8
Crude Oil - Dec	Sell	3575-3582	3540, 3510	3605
Natural Gas - Dec	Sell	Below 225	221.5, 218.7	227.8

 

Commodities – Agro (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Pepper - Dec	Sell	Below 15520	15385, 15250	15655
Jeera - Dec	Buy	16350-16380	16500, 16537	16240
Turmeric - Dec	Buy	Above 10720	10785, 10830	10680
COCUDCAKL - Dec	Buy	Above 625	629, 633	621.5
Chana - Dec	Sell	2640-2645	2613, 2580	2655
Guar seed - Dec	Buy	Around 2800	2835, 2870	2777
Soya bean - Dec	Buy	Above 2450	2480, 2500	2430
Soya oil - Dec	Buy	Above 502.5	506, 508.7	500.2
Mustard seed - Dec	Sell	617-618	613, 610	620.1
Mentha oil -  Dec	Buy	620-621	625.5, 630	617.5

 **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	Rs127.1		Entry load			Nil
NAV 52 high/low	Rs129/49		Exit load			1% <1 year
Latest AUM	Rs1,690cr		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%

 

 

Meeting Note: Four Soft Ltd – Not Rated

CMP Rs23

 

Four-Soft Ltd (FSL), one of the larger logistics and supply chain products company globally, has been facing a rough weather. Company’s revenues have declined in each of the past three quarters impacted by a 15-20% reduction in key customers’ product customization budgets. OPM hit a multi-quarter low of ~6% in Q2 FY10 impacted by one-time redundancy charges and accelerated investment in sales and marketing. Revival in revenue growth is expected from Q1 FY11 with a pick-up in new product sales and reinstatement of customization budgets by customers. Margin would also start improving from then as company leverages S&M investments. FSL targets to achieve revenues of US$100mn, OPM of 30-35% and net profit of US$20mn by FY13.

 

Corporate Snippets

±      RIL is relocating a large part of its staff (around 2000) mainly from its human resources and finance departments to Navi Mumbai. (ET)

±      RIL topples ONGC as largest gas producer in the country. (BS)

±      Tata Motors may launch Nano Hybrid cars. (BS)

±      L&T and NPCIL tie-ups for atomic power components. (BS)

±      HDFC hikes stake in HDFC Bank through warrant conversion. (BS)

±      SAIL to cut flat steel prices. (DNA)

±      JSW Group has decided to revive two projects estimated to over Rs20bn together. (ET)

±      Mahindra Group will restructure its top management by inducting several fresh faces into its key decision-making body. ET)

±      Essar Oil has extended its exclusive talks to acquire three European refineries of Royal Dutch Shell beyond end of November. (ET)

±      Glenmark Pharma is planning to repay its debt of around Rs3bn by end of this fiscal. (ET)

±      European Patent Office has issued three patents to chemical entities of Suven Life Sciences, which are used in treating nerve disorders. (ET)

±      ACC to use municipal waste to fire its kilns as a substitute for coal. (BL)

±      M&M and British defence company BAE Systems on Monday singed an agreement to launch a joint venture company to focus on manufacturing land systems for security forces. (ET)

±      Wockhardt has reached an out-of-court settlement with DBS Bank, putting an end to its legal battle over repayment of loan taken two years ago. (ET)

±      PE firm New Silk Route has initiated talks with the Ruias-owned Essar Telecom Infrastructure for merger of tower arms. (ET)

±      Network 18 seeks nod for investing or providing loans worth Rs8bn to four subsidiaries. (BS)

±      Cairn India has produced and sold a million barrel of oil from its Mangala oil field in Rajasthan. (BS)

±      NTPC is eyeing to acquire coal blocks in Indonesia in a bid to meet the increasing shortfall in the domestic supply of dry fuel. (BS)

±      Consolidated Construction Consortium Ltd has bagged an order worth Rs4bn. (BL)

 

Economic snippets

±      India’s GDP expanded by 7.9% during the July-September second quarter, its fastest pace in a year and a half. (ET)

±      State run oil firms have cut jet fuel prices by little over 1%. (BS)

±       STPI exports up 10% to Rs834bn in the first half of current fiscal. (BS)