Market Mantra: Technicals - Sesa Goa (Buy), Tata Chemical (Buy); F&O - REC Ltd (Long), United Spirits (Short); Report - Hotels - 'Expensive: Stay Away'

 

Market Mantra

 

Market outlook

Soft start, selling could set it!

 

Everything in the world may be endured except continual prosperity.

 

Bourses are unlikely to see fireworks of the kind Brabourne Stadium witnessed on Thursday where India posted its highest single-day score in Tests. Stock markets are not for just a day’s record anyways. After a strong pull-back from last week’s selloff, the momentum appears to have dipped a little. Every time, the bulls have tried to move towards the year’s peak, they have met with some resistance. Similarly, the market has found support after a small correction.

 

In short, we are in a volatile consolidation phase after the astounding rally from the troughs of March. This trend is likely to prevail at least this month, with the sentiment driven mainly by global cues. The market will continue to move in a range of 4800-5200.

 

Today, we expect a soft opening as global equities are mixed. A close above the year’s high (around 5182) for a few days is needed for a further advance. Till then, the key indices will remain sideways and mostly subdued. Support may kick in at 5030-50. Further selling is not ruled out at higher levels but the same is unlikely to be too savage.

 

Trading ideas (Time period: 1-3 days)

Sesa Goa (BUY, CMP Rs380, Target Rs400): The stock has been consolidating in a range between the levels of Rs380-360 from last two weeks. On Thursday, the stock attempted to break-out from the upper-end of this trading range. Moreover, on the daily chart, the stock has formed a Bullish Candlestick suggesting upside from the current levels. The daily RSI is already in strong buy mode. The stock has closed above all its key daily moving averages. A move past the levels of Rs385 could take the stock towards the levels of Rs400 in the short-term. Keeping in mind the above-mentioned evidences, we recommend high risk traders to buy the stock between the range of Rs376-385 with a stop loss of Rs370 for a target of Rs400.

 

Tata Chemical (BUY, CMP Rs315, Target Rs335): The stock has done pretty much nothing in last three weeks, besides moving in a trading band between Rs295-270. This week, after a long time, the stock made a move above the upper end of the trading range. The rangebound trading appears to be broken and the stock is all ready to surge higher. Our view is further validated after the stock gave a close above the cluster of moving averages placed around Rs299-300 levels. If the stock holds up above the levels of Rs325-326 today, it can post huge upside in the coming trading sessions. We recommend high risk traders to buy the stock in the range of Rs311-318 for target of Rs335. Maintain a strict stop loss of Rs303.

 

Derivative strategies (Time period: Till expiry)

±       Long REC Ltd DEC Future @ Rs264 for the target price of Rs270 and stop loss placed at Rs261

Lot size: 1950.

Remarks: Net maximum profit of Rs11,700 and net maximum loss Rs5,850.

 

±       Short United Spirits Dec Future between Rs1,410-1400 for the target price of Rs1,340 and stop loss placed at Rs1,425.

Lot size: 250

Remarks: Net maximum profit of Rs15,000 and net maximum loss Rs6,250.

 

Commodities – Metals (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Gold - Feb	Sell	Below 18160	18100, 18050	18190
Silver - Mar	Sell	Below 29220	29070, 28900	28330
Copper - Feb	Buy	328-329	332, 335	327
Zinc - Dec	H. Buy	110.1-110.4	111.7, 113	109.4
Lead - Dec	Sell	111.6-112	110.3, 109	112.8
Aluminum - Dec	Sell	Below 97	96, 95.4	97.8
Nickel - Dec	H. Sell	Below 758	743, 727	769.8
Crude Oil - Dec	Sell	At 3560	3525, 3490	3585
Natural Gas - Dec	H. 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	15620-15660	15450, 15300	15779
Jeera - Dec	Sell	Below 15200	15070, 14940	15290
Turmeric - Dec	Sell	Below 9450	9390, 9330	9480
COCUDCAKL - Dec	Sell	606-607	602, 598	609.8
Chana - Dec	Sell	Below 2570	2540, 2520	2593
Guar seed - Dec	Sell	Below 2740	2705, 2670	2765
Soya bean - Dec	Sell	Around 2430	2405, 2380	2451
Soya oil - Dec	Buy	Around 490	493.5, 497	488.5
Mustard seed - Dec	Buy	Above 627	630, 633	624.3
Mentha oil -  Dec	Buy	606-607	611, 615	603.7

 **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	Rs132.1		Entry load			Nil
NAV 52 high/low	Rs132/49		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: Hotels - ‘Expensive: Stay Away’

Major business destinations have shown marked improvement in occupancies in Q2 FY10 which has continued in the first two months of H2. Although, as expected, room rates have not picked up in the busy H2 and are unlikely to improve materially on qoq basis in Q4. Moreover, companies we spoke to maintain that any hike in ARRs would be absorbed only if occupancy sustains at current levels. A robust domestic economy has contributed to increased room demand but, in our view, unless foreign arrivals improve, ARR growth would be difficult to come by. We tweak EPS estimates and raise target price on the back of improved occupancies and flat ARR assumption in FY11. The three coverage companies are trading above their respective 5-yr average EV/EBIDTA, which is unjustified in our view. SELL.

 

Corporate Snippets

±       Walmart has selected three IT vendors, Infosys, Cognizant and UST Global, for multi-year contracts worth over US$600mn. (BS) 

±       ICICI Bank plans to raise US$270mn through bond sale. (BL) 

±       HDFC plans to raise Rs5bn via bond issue. (BL)

±       IOC’s Paradip refinery likely to be completed by July 2012. (BL)

±       Infosys to hire 1,000 people in the US over the next 4-5 quarters, says CFO. (BL)

±       Cairn India in set to begin a 3D offshore seismic survey of its block in Andhra Pradesh. (BS)

±       ONGC Videsh to invest US$5.5bn in Farsi block in Iran. (DNA)

±       Piramal Healthcare approves raising of funds up to Rs10bn through the issue of securities. (ET)

±       Unitech to invest Rs40bn in construction of up to 30mn sq ft of residential and commercial spaces to be launched by next year. (ET)

±       Enforcement Directorate raided the offices of Emaar MGF in and around Delhi for alleged violation of foreign exchange rules. (ET)

±       Norway’s Telenor, has launched services in India under the brand Uninor with lower rates. (ET)

±       SBI has signed a MoU with Honda Siel to provide retail financing to prospective customers. (BL)

±       Bharti Airtel urges Trai to look into the business models of some rival telcos that offer rock-bottom tariffs. (ET)

±       Tata Group may use a large tract of land in suburban Mumbai as a sales and marketing hub for the conglomerates manufacturing operations. (ET)

±       Rolta ties up with Infoterra France, a leading provider of geoinformation products and services. (ET)

±       Essar Steel has asked the government to denotify a sector specific SEZ developed by it in Gujarat. (DNA)

±       JSW Steel’s crude steel production more than doubled in the month of November to 4.8 lakh tones. (BL)

±       Central Bank raises Rs10bn via 6-month COD at 4.75%. (BL)

±       Godrej Properties, the real estate arm promoted by Godrej Industries and Godrej & Boyce Manufacturing Company, to launch IPO on December 9. (BS)

±       Emami may join race to acquire Simple, one of the largest skin-care brands in UK. (BS)

±       Turner International is close to acquiring a controlling stake in NDTV Imagine, which runs three entertainment channels. (BS)

±       Bharat Forge has formed a JV with Alstom to manufacture power equipments. (BS)

±       Jindal Stainless and many other developers have approached Government for granting additional time to execute their SEZs. (BS)

±       Eicher Motors has bought-out 3.18% stake from Mitsubishi Motor Corporation. (BS)

±       OBC retains loan growth target at 22% for the current fiscal. (BS)

±      Hexaware’s back-office arm to set-up a centre in China. (BL)

 

Economic snippets

±       Food inflation surged to 17.47% for the week-ended November 21^st. (BS)

±       Net capital inflows into India to be about US$50bn in the current fiscal, says Dr Rangarajan, Chairman of PMEAC. (BS) 

±       India offers to cut carbon emissions 25% by 2020. (ET)

±       Government may do away with fin instruments rating. (ET)

±       The Indian pharmaceutical industry has become the third-largest in the world in terms of volume, valued at over US$20bn. (ET)

±       India’s iron ore exports more than doubled to 9.3mn tonnes in October this year, compared to 4.4mn tonnes in year ago period. (ET)

 

 

 

 

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