Market Mantra
Market outlook
Fine at Nine!
The beginning is the most important part of the work.
Happy New Year! The beginning just got earlier for the market and we hope it bears fruit. We expect a positive opening.
The market ended on a reasonably strong footing with the Nifty closing above 5200. The Sensex too made a new high for the year 2009.
Quarterly earnings, RBI’s policy moves and the Union Budget will be the key events that will drive the sentiment in the initial few weeks. Global economic data points and earnings will also have a bearing but to a lesser extent. Trends in fund flows and movement in other markets (currency and commodities) will be among the other key triggers.
Let’s hope that in 2010, the market does as well as it did in 2009.
Trading ideas (Time period: 1-3 days)
National Aluminum (BUY, CMP Rs418, Target Rs445): On the daily chart, the stock has given a trendline breakout after closing at its 52-week high. The stock has rallied sharply over the past few weeks holding on to its short-term support trendline. This week, we saw Nalco gaining fresh upside momentum after crossing over its stiff technical resistance levels of Rs404-407 accompanied by high volumes. On Thursday, the stock rallied by 7% in a rangebound market, confirming the bullish set up. The other supportive technical oscillators RSI and Stochastic are exhibiting positive divergence which signifies the up move may extend to the levels of Rs445. Based on above observations, we recommend high risk traders to buy the stock in the range of Rs414-422 for target of Rs440 and Rs445. It is advisable to maintain a stop loss of Rs406 on all long positions.
SBI (BUY, CMP Rs2,269, Target Rs2,350): SBI has been consolidating within the context of Symmetrical Triangle From second week of September 2009 between the levels of Rs1,900-2,500. On Thursday, the stock made an attempt to breakout from the downward sloping trendline of the triangle formation mentioned above. In addition, the gain in the stock price from a low of Rs2,207 in the last week has been on back of increasing volumes, indicating strong buying at the support levels. The daily RSI is already in strong buy mode. A move past the levels of Rs2,275 could take the stock towards the levels of Rs2,350 and Rs2,370 levels in the short-term. Keeping in mind the above-mentioned evidences, we recommend high risk traders to buy the stock between the range of Rs2,260-2,280 with a stop loss of Rs2,235.
Derivative strategies (Time period: Till expiry)
± Long IFCI Jan Future @ Rs54.50 for the target price of Rs59 and stop loss placed at Rs53.
Remarks: Net maximum profit of Rs35,460 and net maximum loss Rs11,820.
± Long Praj Industries Jan Future @ Rs105.80 for the target price of Rs112 and stop loss placed at Rs104.
Remarks: Net maximum profit of Rs13,640 and net maximum loss Rs3,960.
Commodities – Metals (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Gold - Feb | Sell | 16750-16760 | 16700, 16650 | 16782 |
| Silver - Mar | Sell | 26920-26950 | 26780, 26650 | 27030 |
| Copper - Feb | Buy | Above 344.5 | 347, 349 | 342.5 |
| Zinc - Jan | Buy | 118.2-118.5 | 119.65, 121 | 117.6 |
| Lead - Jan | Buy | At 113 | 114.1, 115 | 112.1 |
| Aluminum - Jan | Sell | Around 105 | 104, 103 | 105.9 |
| Nickel - Jan | Sell | 882-886 | 870, 860 | 893.6 |
| Crude Oil - Jan | Buy | Above 3735 | 3765, 3790 | 3710 |
| Natural Gas - Jan | Buy | Above 262 | 265.7, 268 | 259.8 |
Commodities – Agro (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Pepper - Jan | Sell | 14370-14400 | 14230, 14100 | 14470 |
| Jeera - Jan | Buy | 14630-14650 | 14775, 14900 | 14540 |
| Turmeric - Apr | Buy | Above 7700 | 7740, 7780 | 7670 |
| COCUDAKL - Jan | Sell | 1207-1210 | 1193, 1180 | 1217 |
| Chana - Jan | Sell | Around 2450 | 2420, 2400 | 2470 |
| Guar seed - Jan | Sell | Below 2765 | 2735, 2705 | 2790 |
| Soya bean - Jan | Buy | Above 2396 | 2415, 2440 | 2380 |
| Soya oil - Jan | Buy | Above 495 | 498, 501 | 492.7 |
| Mustard seed - Jan | Buy | 612-613 | 616.5, 619 | 610.2 |
| Mentha oil - Jan | Sell | Below 596.5 | 593, 590 | 599.5 |
**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 | Rs92.0 | | Entry load | Nil | |||
| NAV 52 high/low | Rs92/44 | | 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% | |||
| | | | | | | | |
Technical View: Nifty to scale 5,600
Now, the weekly chart of Nifty depicts a breakout from sideways trading band or a breakout from Rally and Retreat pattern. A close around 52-week high suggests that initial upside target is around 5,600. In December 2009, the Nifty penetrated key resistance at 5,180 after moving in a range between 4800-5180 for nine weeks. Breadth and volume expansion on the breakout are positives.
Sector Update: Auto Monthly Update – December 2009
During December 2009, Indian auto industry witnessed a strong base effect translating into robust growth for most manufacturers on a yoy basis. On a sequential basis, most companies registered a decline in the volumes (except M&M) largely driven by the fading effect of festival season. In the two wheeler segment, Hero Honda outperformed TVS Motors by experiencing a growth of 74.1% yoy compared to that of 34.1% yoy for TVS Motors. Passenger car volumes registered a strong growth on yearly basis with Maruti experiencing the growth of 37.1% yoy and Tata Motors registering a surge of 53.7% yoy. M&M is the only player to witness a growth on sequential basis backed by the continued success of Xylo and Scorpio.
Sector Update: Insurance Monthly Update – November 2009
In November ‘09, Indian Life Insurance industry, second time in a row, sustained its double digit growth. The industry’s total Annual Premium Equivalent (APE) grew by 22.4% yoy vis-à-vis 35.4% in October ’09. LIC APE grew by 34.5% yoy and private players by 13.8% yoy. The growth among private players was largely contributed by big and medium sized players namely HDFC Standard Life, Birla Sun Life and Tata AIG Life. However, on a mom basis industry APE declined by 6%. The fall was mainly due to poor performance by the private players, which fell by 11.9% mom. LIC growth remained flat on a mom basis at 2%, it APE was only up by Rs402mn.
Weekly Update: Debt Market - week ended December 31, 2009
± Long tenure Government bonds were merely up by few basis points. The yields on 10-year benchmark bond rose by 3bps to 7.59% on a weekly basis. However, the shorter tenure G-sec yields fell by ~7-8bps this week.
± This week, the volumes were thin on account of lesser trading days. Only Rs414bn of G-Secs was traded vis-à-vis Rs450bn in the previous week.
± After a week gap, food inflation again surged by 19.83% yoy for the week ended Dec 19 vis-à-vis 18.65% a week ago. It was driven up by the prices of potatoes, pulses and vegetables.
± The total external financial assets increased by US$21bn to US$378.6bn over the previous quarter. The total external financial liabilities increased significantly by US$32.7bn over the previous quarter and stood at US$476.4bn as at September ‘09.
± Net capital flows were substantially higher at US$23.6bn vis-à-vis US$7.1bn in Q2 FY09. It was mainly due to huge net foreign investment inflows and special drawing rights allocations by the IMF.
±
Corporate Snippets
± Maruti Suzuki posted a 50% yoy growth for December, clocking sales of 84,804 units. (BL)
± Tata Motors reported over 100% yoy growth in its sales during the month of December 2009. (DNA)
± Hero Honda clocks 0.38mn units in December and posted a 74% growth over the same month last year. (BL)
± Bajaj Auto sold 220,429 two-wheelers in December 2009, registering 85% growth in sales over the same month last year. (BS)
± TVS Motors' sales grew 34% in December to 0.12mn. (BL)
± NTPC is set to launch its FPO in the first week of February; it aims to raise Rs80-110bn through the process. (DNA)
± Shell, BP evinces interest in picking up Petrobas’ 15% stake in ONGC’s gas find off Andhra coast. (TOI)
± ONGC has lost an oilfield in
± SAIL increased the prices of flat and long products by Rs1,500, while Tata Steel hiked the rates of flat products by up to Rs1,500. (BS)
± Bhushan Steel hiked the prices of its long and flat products by up to Rs2,000 a ton. (BS)
± SAIL reported a 32% growth in sales at 1.3mn tons in December 2009. (BS)
± GVK Power and Infrastructure will take up a 400MW expansion project at Jegurupadu and an 800MW scheme at Gauthami, both in Andhra Pradesh. (BL)
± MTNL has asked government to shoulder pension burden in a bid to cut down on wage costs. (TOI)
± Air India is set to launch two separate subsidiaries - for maintenance, repair & overhaul and ground handling services - this year. (DNA)
± Bharti Airtel may get Warid Telecom for a bargain basement price of Rs4.5mn. (ET)
± Reliance Retail plans to open 45 stores of its books and music retailing business, Reliance TimeOut, across
± ONGC has doubled crude oil production at Imperial Energy, the Russia-focused oil firm it acquired recently, to 16,000bpd and is set to turn the company around next year. (ET)
± IOC, BPCL and HPCL cut the prices of jet fuel by 1.6% across airports. (ET)
± Sun Pharma has succeeded in preventing Taro’s founder family from appointing independent directors of their choice on the Taro Board. (BS)
± L&T bags orders worth Rs5.8bn from Powergen Infrastructure and Bangalore Water and Sewerage Board. (BS)
± ONGC Videsh, the overseas arm of ONGC, raises Rs3.5bn via bonds. (BS)
± Godrej Consumer is close to acquiring Megasari,
± TVS Motors to showcase hybrid range of vehicles at the Auto Expo slated to be held in
± Maharashtra Government offers 2,000 acres to Videocon Group for the development of a multi-purpose SEZ in Pune. (BS)
± REC is keen to pick up 26% stake in coal mines and merchant power plants. (ET)
± Shree Cement has bought about 90 acres of land in various states such as Karnataka, Chhattisgarh and also its home state of Rajasthan to set up new plants. (ET)
± Zydus Cadila has acquired the remaining 30% stake in its South Africa-based subsidiary Simayla for an undisclosed amount. (ET)
± Orchid Chemicals has bought-back FCCBs of aggregate face value of US$19.8mn. (BS)
± Sical Logistics has bagged an Rs1.6bn contract from Hindustan Copper for supplying port, train and road logistics products. (ET)
± Deep Industries’ contract with GACL for the compression of natural gas and delivery of compressed natural gas at specified outlets has been extended for a period of three years. (BS)
± Ashok
± IDFC’s project equity division is weighing investment in a
Economic snippets
± Foreign exchange reserves fall by US$144mn to US$283bn, for the week ended December 25. (BL)
± Food inflation for the week ended December 19 again surges to 19.83%. (ET)
± CPI for industrial workers rose to 13.5% in November 2009 as compared to 11.5% in October. (BS)
± Fiscal deficit rose by 73% to Rs3.1tn in the first eight months of the fiscal against Rs1.77tn a year ago. (BS)
±
± Government to raise Rs970bn in the last quarter of the fiscal through treasury bills. (ET)
± Oil marketing companies cut ATF prices by 1.6% across airports, the third straight reduction in the past one-and-half months. (ET)
± Domestic IT and IT-enabled services market is expected to grow at 15% in 2010, as per IDC. (BS)
± Farm sector growth in October-December 2009 quarter may be negative, according to the finance minister. (BS)
± Government’s port capacity expansion may miss 2012 target of 1bn tons. (BS)
± Provisional figures released by the Directorate-General of Commercial Intelligence and Statistics for November show exports at US$13.2bn, an increase of 18.2% after a long spell of negative growth. (BL)
± RBI’s deputy governor says credit growth is expected to touch 15-20%. (BL)
± Insurance regulator IRDA would come with IPO guidelines for the sector within a fortnight to allow companies to raise funds from capital market. (TOI)
± NHAI mulls changes in toll fee norms. (FE)
± FMCG firms may hike soap prices or cut pack size. (FE)
± In an attempt to ensure that big electricity projects achieve financial closure, the Union power ministry plans to cap the number of ultra mega power projects that can be awarded to a single developer. (Mint)
± Union government may update the current inflation series with an expanded basket of commodities and a new base year in April. (Mint)
± DoT says mobile number portability would be introduced across the country from March 31, 2010. (ET)
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