Market Mantra
Market outlook
Getting rational!
There is nothing so disastrous as a rational investment policy in an irrational world.
Markets have never been known to be rational. But there is some relief for households and corporates alike as sugar prices are getting rational. It remains to be seen if the Government manages to lower prices of other essential commodities as well. But, the relief may turn out to be temporary as ad-hoc measures can have only a limited impact on inflation. In any case, one should brace for a gradual and calibrated rise in interest rates.
We expect a flat start today after Monday’s advance. Overall, the market will be choppy and rangebound. Technically, 5300 continues to be a major hurdle for the Nifty. If it is breached convincingly, the Nifty could head for 5400-5420. Support is likely at 5180-5200. A spate of stock-specific action will persist so avoid taking a broader view for now. For some time, the market may seem to go nowhere but individual stocks could have their moments of glory.
Asian shares are flat in a quiet trade, as investors await key earnings from across the globe. Gains in commodity-sector firms, helped European stocks end higher. US markets were shut due to a holiday.
Trading ideas (Time period: 1-3 days)
Kotak Bank (BUY, CMP Rs852, Target Rs885): On the daily charts, the stock attempted an upside breakout in Monday’s trading session. It suggests that the rangebound trading is about to end and may led to a beginning of new uptrend. Yesterday, the stock rallied by 4% confirming the bullish set up. We continue to remain positive on the stock from technical perspective as the stock has managed to hold on to its short-term support trendline in ongoing market volatility. Any move past last week’s high of Rs862 could see the stock attempting levels of Rs890 in the short term. We recommend traders to buy the stock in the range of Rs847-857 with a stop loss of Rs837 on all long positions.
Sobha Developers (BUY, CMP Rs314, Target Rs335): A detailed study of weekly chart of Sobha shows a distinctive pattern emerging which signals a breakout from a 2- month consolidation zone. The overall base-like pattern created by Sobha during the past few weeks appears to be maturing now. In fact, the last couple of trading weeks represents a high level bullish congestion area between Rs278-310. We believe that the current bullish consolidation leads to a potential upside up to the levels of Rs335. We recommend traders to buy the stock in the range of Rs310-318 for a medium-term target of Rs335. We advise investors to maintain a stop loss of Rs302.
Derivative strategies (Time period: Till expiry)
± Long Reliance Capital Ltd Jan Future @ Rs917 for the target price of Rs970 and stop loss placed at Rs895.
Remarks: Net maximum profit of Rs14,628 and net maximum loss Rs6,072.
± Long Chennai Petroleum Corp Ltd. Jan Future @ Rs243 for the target price of Rs260 and stop loss placed at Rs233.
Remarks: Net maximum profit of Rs30,600 and net maximum loss Rs18,000.
Commodities – Metals (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Gold - Feb | H. Buy | 16810-16820 | 16865, 16910 | 16780 |
| Silver - Mar | Buy | Above 28500 | 28645, 28790 | 28370 |
| Copper - Feb | Sell | 345-346 | 342, 340 | 346.7 |
| Zinc - Jan | Sell | Below 111.7 | 110.7, 110 | 112.4 |
| Lead - Jan | H. Buy | 111.5-111.8 | 113, 114 | 110.8 |
| Aluminum - Jan | H. Buy | Above 105.1 | 106, 107 | 104.3 |
| Nickel - Jan | H. Buy | Above 856.5 | 870, 885 | 845.5 |
| Crude Oil - Jan | Sell | Around 3590 | 3560, 3530 | 3610 |
| Natural Gas - Jan | Sell | Below 254 | 251, 248 | 256.8 |
| Steel long - Feb | Sell | Below 25600 | 25400, 25200 | 26750 |
Commodities – Agro (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Pepper - Feb | Sell | Around 13300 | 13130, 12950 | 13427 |
| Jeera - Feb | Sell | Around 12500 | 12350, 12220 | 12610 |
| Turmeric - Apr | Sell | Below 6980 | 6940, 6910 | 7010 |
| COCUDAKL - Feb | H. Sell* | 1203-1207 | 1190, 1175 | 1214 |
| Chana - Feb | Sell | Below 2400 | 2370, 2345 | 2423 |
| Guar seed - Feb | Sell | 2580-2585 | 2550, 2520 | 2605 |
| Soya bean - Feb | Buy | Above 2250 | 2275, 2295 | 2230 |
| Soya oil - Feb | Sell | Below 466 | 463, 460 | 468.4 |
| Mustard seed - Jan | Buy | Above 595 | 598, 601 | 592.4 |
| Mentha oil - Jan | Buy | 599-600 | 603, 606 | 597.3 |
**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 | Rs93.7 | | Entry load | Nil | |||
| NAV 52 high/low | Rs93/44 | | Exit load | 1% <1 year | |||
| Latest AUM | Rs1,822cr | | 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% | |||
| | | | | | | | |
Result Update:
CMP Rs442, Target Price Rs499, Upside 12.9%
± Net sales rise 6.7% yoy as higher transmission volumes and petrochemical realizations are offset by lower natural gas trading revenues
± OPM jumps 16ppts yoy on account of driven by 50% fall in subsidy burden and higher EBIT margins for petrochemicals and natural gas transmission segments
± Raise our earnings to factor in higher transmission volumes and higher margins
± Upgrade rating from Market Performer to BUY with a revised price target of Rs499
Result Update: Sesa Goa (Q3 FY10) – Market Performer
CMP Rs410, Target Price Rs423, Upside 3.2%
± Sesa’s volume growth of 24.9% yoy to 6.79mn tons was lower than our expectations
± Iron ore realisations increased a mere 3.3% qoq on account of higher proportion of sales of low grade
± Transportation cost per ton of iron ore declined sharply on a qoq basis as majority of the sales was from
± Both pig iron and coke making division results were weaker than expected
± Trading near fair value, maintain Market Performer
Result Update: Infotech Enterprises (Q3 FY10) – Market Performer
CMP Rs306, Target Price Rs325, Upside 6.2%
± 4.7% qoq dollar revenue growth marginally better than expectations; robust 5.5% qoq volume growth in EMI segment
± Company acquires a US-based engineering services provider
± OPM remains stable at 21.7% against our expectation of 120bps qoq decline; higher other income drives 7% qoq PAT growth
± Management expects continuation of growth and margin to come under pressure
± Revise earnings estimates but downgrade Infotech to Market Performer due to significant stock appreciation in recent past
Corporate Snippets
± Bharti Airtel plans to pick up stake in public sector telecom companies in
± GAIL will pick up 4% stake in the US$2bn Myanmar-China gas pipeline project, while OVL, the overseas arm of ONGC, will pick up another 8-8.5% stake in the pipeline project that will link two gas producing blocks A1 and A3 in
± Government has asked ONGC to adopt a consortium approach instead of a joint venture with the Hindujas to pick up participating interest in the US$12.5bn South Pars-12 gas projects in Iran that would ensure long-term supply of 6mn ton of LNG to India. (ET)
± L&T will invest around Rs250bn to build its thermal power business in the next five years. (ET)
± L&T may borrow US$4.4bn to build a power-generation business and is considering buying coal mines in
± TCS will complete the process of bringing on board freshers from the 2008-09 batch by March. (BL)
± TCS has decided to give salary increments to its 0.2mn employees during financial year ending March 2011. (ET)
± NTPC is betting on higher valuations for its upcoming FPO, thanks to the new `French auction' model slated to be tried out for the institutional portion of the proposed share sale. (BL)
± GAIL is keen to join NTPC in a new 2,000 MW power plant planned adjacent to the beleaguered Dabhol plant in
± Indian Hotels has decided not to subscribe to a public offer from the luxury hotel chain Orient Express Hotels. (ET)
± Reliance Capital is looking to sell up to 20% stake in Reliance Mutual Fund to a strategic foreign partner. (ET)
± M&M launched its recently-developed small commercial vehicle Gio in the South Indian market, beginning with
± Tata Tea, which had gradually increased its stake in Mount Everest Mineral Water over 10 months, has now acquired management control, with a 50.2% stake. (BS)
± ICICI Bank raised deposit rates on select maturities. (BS)
± State-owned IDBI Bank plans to acquire Kerala-based private sector lender Federal Bank. (BS)
± The Ministry of Petroleum and Natural Gas will try to provide gas to refineries such as MRPL as a cheaper alternative to process crude oil. (BL)
± Reliance Communications is learnt to have begun talks with strategic and financial investors for selling 5% stake in its tower unit prior to the planned initial public offering. (FE)
± Tata Communications said it has reached an agreement to acquire BT Group’s Mosaic business. (ET)
± Infotech Enterprises acquired US-based Daxcon Engineering Inc in an all-cash deal for an undisclosed sum. (BS)
± Infotech Enterprises won a major avionics contract from Hamilton Sundstrand Corporation, a subsidiary of US-based United Technologies Corp. (BL)
± Half of the group of banks led by SBI, have indicated of opting for a conversion of Wockhardt’s bonds into convertible preferential instruments of, with conversion to take place after 8-10 years. (BS)
± Shree Ashtavinayak Cine Vision, the film production company, plans to invest Rs4.6bn to expand its movie entertainment business. (BS)
± DLF has decided to exit its mutual fund joint venture with Prudential Financial Inc. (BL)
± Monsanto will gross roughly Rs3.4bn from licensing its proprietary Bollgard gene traits to Bt cotton hybrid seed firms in
± Leitner Shriram Manufacturing Ltd, a JV between Shriram EPC and Leitner Technologies of Europe, received orders for installing 45MW of wind turbines in Maharashtra and Tamil Nadu. (BL)
± Sakthi Sugars has allotted 1.1mn equity shares to two institutional investors following the conversion of US$4.7mn FCCBs. (ET)
± Moser Baer launched content-loaded
± Marg Ltd signed a project development agreement with the Karnataka Government to develop the
± Golden Tobacco received the shareholders’ permission at an EGM to develop property at Vile Parle in Mumbai and sell real estate assets in
± Following a recent directive from RBI to specify the end use of its Rs43bn bond issue, the Essar group said it has issued a new memorandum detailing the “potential” areas where the money would be utilized. (ET)
± The Mumbai-based Wadhwa Group bought 18.2 acres in Mumbai’s Ghatkopar suburb for Rs5.7bn from Hindustan Composites Ltd. (BS)
± Coal India Ltd plans to go to its board this month with specific “strategic partnership” proposals underlining overseas coal-offtake agreements and equity joint ventures with international majors. (BL)
± Strategic Energy Technology Systems, a JV between Tatas and
± Mumbai-based Oberoi Realty, which plans to raise Rs15bn, filed its draft red herring prospectus for an IPO of 39.6mn equity shares with a face value of Rs 10. (BL)
Economic snippets
± The government during the Budget 2010-11 may partially roll back tax cuts; raise service tax to 12% and increase excise duty marginally. (BS)
± Finance Minister has asked Communications Minister to complete the auction of the 3G spectrum within the agreed deadline, inorder to reflect the revenue from it in the Union Budget 2009-10. (BS)
± CERC announced renewable energy certificate norms in a bid to promote power generation from clean sources. (BS)
± Failure to comply with renewable purchase obligations will attract ‘regulatory charges', the nature of which will be laid by the respective State Electricity Regulatory Commissions, for entities in the renewable energy business. (BL)
± One of the most favoured duty reimbursement schemes among exporters - the Duty Entitlement Passbook scheme - is likely to be scrapped as the government gears up to introduce the Goods and Services Tax from April 1. (BS)
± The Centre has suggested setting up a common dispute resolution scheme for settlement of cases in the proposed goods and services tax. (BS)
± The Supreme Court today asked TRAI to fix tariffs for DTH services by June 30 and place the plan before it. (BS)
± The Andhra Pradesh Cabinet today approved Rs888mn Government guarantee for six co-operative sugar factories to meet their financial requirements during the current season. (BL)
± ATF will be kept out of the GST net even as the domestic airline industry is keen on its inclusion in the new tax system. (BL)
± The finance ministry has rejected a proposal from the department of industrial policy and promotion to drop the mandatory three-year lock-in for foreign direct investment in real estate.(ET)
± The Orissa High Court has directed CBI to investigate the alleged Rs310bn mark-to-market gains of leading banks from exotic foreign exchange derivative contracts that were made at the expense of customers. (FE)
Results Table
| (Rs mn) | Revenues | % yoy | PAT | % yoy |
| Infotech Enterprise | 2,391 | 2.7 | 354 | 205.3 |
| Sterlite Tech | 8,673 | 35.1 | 737 | 134.4 |
| State Bank of | 9,007 | 2.6 | 1,413 | (22.6) |
| GAIL ( | 62,057 | (0.3) | 8,600 | 20.6 |
| JP Associates | 29,638 | 56.9 | 1,030 | (88.2) |
| Shriram transport Finance | 11,553 | 8.5 | 2,368 | 14.2 |
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