Market Mantra
Market outlook
Steady start likely
Two straight days of gains means that the NSE Nifty is yet again staring at 5,300. Global cues are supportive though not by a great deal. A positive start is what we are looking for. A slew of big results are lined up and could swing the sentiment either way though we don’t see any major nasty surprise.
It remains to be seen whether the Nifty manages to close above 5,300, which in recent past has proved to be a tough barrier to break. If it does that it could head for 5,350-5,400 in the near term. On the downside support is at 5,200. The bias remains cautiously optimistic but volatility will persist.
Inflation is a big worry and could play spoilsport. Though a CRR hike has already been discounted there are fears that the central bank may turn hawkish as far as policy rates are concerned. In the long run, the Government needs to overcome supply side constraints to contain prices.
We expect TCS to post 3.2% QoQ growth in PAT. HDFC Bank is projected to report ~19% jump in bottom-line YoY. Axis Bank is likely to report 2.3% YoY rise in PAT.
Trading ideas (Time period: 1-3 days)
Bharat Forge (BUY, CMP Rs298, Target Rs320): The stock had been consolidating in a narrow range between Rs285-255 since third week of November 2009. On Thursday, the stock attempted to break out from the upper-end of this trading range with higher-than-average volumes. From the current level, the stock can only move towards one direction, i.e. upwards. The daily RSI has also given a positive divergence, indicating that price would start moving up after facing stiff resistance around the levels of Rs282-285 zone. We recommend buy on the stock from the above mentioned technical observations. Maintain a stop loss of Rs287 and go long for a target of Rs320 in the coming trading sessions.
LIC Housing Finance (BUY, CMP Rs840, Target Rs880): On the weekly chart, the stock is trading around its crucial resistance zone. A move past the level of Rs849, would be considered to be an important bullish signal. The undertone is reasonably strong and is likely to push price higher. The share price has reversed after witnessing a decline for the past few trading sessions. We recommend traders to buy the stock for a target of Rs880 with a stop loss of Rs824.
Derivative strategies (Time period: Till expiry)
± Long Patel Engineering Jan Future @ Rs477 for the target price of Rs505 and stop loss placed at Rs465.
Remarks: Net maximum profit of Rs28,000 and net maximum loss Rs12,000.
± Long Noida Toll Bridge Jan Future @ Rs41 for the target price of Rs45 and stop loss placed at Rs39.50.
Remarks: Net maximum profit of Rs32,800 and net maximum loss Rs12,300.
Commodities – Metals (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Gold - Feb | Buy | Around 16850 | 16900, 16950 | 16820 |
| Silver - Mar | H. Buy | Above 28300 | 28450, 28600 | 28170 |
| Copper - Feb | Buy | Above 342 | 344, 346 | 340 |
| Zinc - Jan | Buy | Above 114 | 115, 116 | 113 |
| Lead - Jan | Buy | Around 112.5 | 113.8, 115 | 111.4 |
| Aluminum - Jan | Buy | 105.2-105.5 | 106.75, 107.9 | 104.4 |
| Nickel - Jan | Buy | At 835 | 850, 863 | 824.3 |
| Crude Oil - Jan | Sell | Around 3650 | 3620, 3600 | 3670 |
| Natural Gas - Jan | Sell | Below 251 | 248, 245 | 253.7 |
| Steel long - Feb | Buy | 26150-26200 | 26400, 26600 | 25970 |
Commodities – Agro (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Pepper - Jan | Sell | 13520-13550 | 13380, 13240 | 13640 |
| Jeera - Feb | Sell | Around 12900 | 12760, 12630 | 13015 |
| Turmeric - Apr | Sell | Below 7300 | 7260, 7225 | 7330 |
| COCUDAKL - Feb | H. Sell* | Around 1206 | 1293, 1280 | 1214 |
| Chana - Feb | Sell | Below 2414 | 2380, 2350 | 2435 |
| Guar seed - Feb | Sell | Below 2545 | 2520, 2500 | 2565 |
| Soya bean - Feb | Buy | At 2251 | 2270, 2285 | 2240 |
| Soya oil - Feb | Sell | Below 469.5 | 466, 463 | 471.8 |
| Mustard seed - Jan | Buy | Above 598.5 | 601.3, 603 | 596.2 |
| Mentha oil - Jan | Buy | Above 611 | 615, 618.5 | 608 |
**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 | Rs93.3 | | Entry load | Nil | |||
| NAV 52 high/low | Rs93/44 | | 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% | |||
| | | | | | | | |
Economy Update: Inflation – December 2009
± WPI basket continues to rise as it increases 7.31%
± Primary goods surges on back of higher prices of food articles
± Food products and chemicals push up manufactured products price index
± Fuel index rises 4.3% yoy but remains flat on mom basis
Result Update: Usha Martin (Q3 FY10) – BUY
CMP Rs89, Target Price Rs118, Upside 32.4%
± Topline declines 9.4% qoq to Rs4.4bn on account of slightly lower sales volume and realisations
± OPM expands 617bps to 22.3% led by higher consumption on captive sponge iron and power usage
± Realisations remained under pressure on account of lower realisations in the export market and for domestic long products
± Tax rate remained high at 53% on account deferred tax payments
± Maintain BUY with a revised price target of Rs118/share
Corporate Snippets
± Wipro is set to launch a sponsored ADR offering that could possibly see the promoters and promoter group led by Azim Premji offloading some of their stake in the company. (ET)
± BHEL has bagged Rs2bn order from PowerGrid for supplying insulators for setting up transmission lines. (ET)
± Reliance Entertainment is likely to put in a bid for the iconic film studio Metro-Goldwyn-Mayer or MGM. (ET)
± BPCL halts oil block buys, stresses on production. (FE)
± Era Infra bags Rs16.59cr orders from NHAI. (FE)
± Punj Llyod bags Rs5.74bn project in
± NTPC to add 6,000MW each year in the 12th plan. (BS)
± ITC’s stake in Hotel Leela rises to 7.37%. (BS)
± Essar Group is indirectly transferring part of its Indian holding in Vodafone Essar to its overseas investment company. (ET)
± Reliance Retail and partner Pearle Europe plan to open up to 700 stores of their eyewear retail chain 'Vision Express' across India in the next seven to eight years. (ET)
± Government to divest 10% stake in Engineers India. (ET)
± Holcim plans to invest US$1bn in setting up 2-3
± Promoters of Ansal Properties are going to buy out the public-listed companys education business subsidiary Knowledge Tree Infrastructure KTIL after hiving it off into a separate entity. (ET)
± PowerGrid gets board nod for
± Max India to issue Rs1.73bn warrants. (BS)
± IDBI Bank has approached the Government to rejig capital structure. (BS)
± Usha Martin to raise Rs5bn via QIP. (BS)
± Tantia Constructions to dilute 10% equity. (BS)
± Reliance Infratel IPO gets Sebi's nod. (FE)
± INOX to buy 44% stake in Fame India. (BS)
Economic snippets
± Government to allow only foreign GSM companies to bid for 3G play. (ET)
± Inflation rose the most in more than 12 months to 7.31% from a year earlier. (ET)
±
± Oil ministry rules out hike in auto and domestic fuel prices. (FE)
± Finance ministry is unwilling to pay the entire Rs317bn demanded as compensation by the petroleum ministry on behalf of the state-owned oil companies. (ET)
Results Table
| (Rs mn) | Sales | % yoy | PAT | % yoy |
| Jindal Saw Ltd | 13,710 | 541.0 | 1,701 | 530.9 |
| South India Bank | 5,309 | (65.7) | 625 | (27.9) |
| | 4,532 | (1.8) | 524 | (185.9) |
| Usha Martin | 4,399 | (9.9) | 184 | (66.0) |
| Tata Metaliks | 2,825 | (44.9) | 149 | (44.3) |
| CMC Ltd | 2,111 | 21.1 | 363 | (117.9) |
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