Market Mantra
Market outlook
Crash at start!
Weak eyes are fondest of glittering objects.
Global markets are bleeding dismissing any hopes one may have had yesterday of a bounce back. Wall Street suffered its worst one-day decline in nearly three months.
No prices for guessing we will have a gap-down start on local bourses. The Nifty may find support at the crucial 5000 level, hopefully. Further selling may pull it down to 4950. In short, bears will have a field day today. A rebound will hinge on improvement in global sentiment and perhaps on surprisingly strong results from India Inc.
We expect RIL to register 63.7% yoy jump in net sales and 17.3% yoy growth in net profit. We expect Grasim to register 12.2% yoy growth in revenues and 69.1% yoy growth in net profit.
Trading ideas (Time period: 1-3 days)
Reliance Infra (SELL, CMP Rs1,074, Target Rs1,015): On the daily chart, the stock has been forming the pattern of lower high and lower lows since first week of January 2009. The downtrend is likely to continue in the near term. Daily chart suggest that the price movement has occurred in a well defined Channel formation. Thursday’s closing price is hovering close to the lower decending trendline of the channel. The share price has consistently closed below its key moving averages. The weekly RSI as well as the MACD continue to depict negative trend. In view of the above mentioned technical evidences, we recommend traders to sell the stock at current levels and on rallies to the levels of Rs1,085 for a target of Rs1,015 and Rs1,005. A stop loss of Rs1,110 is recommended on all trading short positions.
Century Textiles (SELL, CMP Rs546, Target Rs515): The stock has corrected sharply from the recent
Derivative strategies (Time period: Till expiry)
± Long GSPL Jan Future @ Rs96 for the target price of Rs102 and stop loss placed at Rs93.
Remarks: Net maximum profit of Rs36,600 and net maximum loss Rs18,300.
± Long Nagarjuna Fertilizer Jan Future @ Rs37.65 for the target price of Rs40 and stop loss placed at Rs36.
Remarks: Net maximum profit of Rs12,338 and net maximum loss Rs8,663.
Commodities – Metals (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Gold - Feb | Sell | Below 16520 | 16470, 16420 | 16555 |
| Silver - Mar | Sell | Below 27200 | 27060, 25900 | 27330 |
| Copper - Feb | Sell | Below 335 | 332, 330 | 337.4 |
| Zinc - Jan | Sell | 111-111.3 | 110, 109 | 112.2 |
| Lead - Jan | Sell | Around 106 | 104.5, 103 | 107.15 |
| Aluminum - Jan | Trade as per calls given during trading session. | |||
| Nickel - Jan | H. Buy | 864-867 | 880, 890 | 854.6 |
| Crude Oil - Feb | Sell | Around 3565 | 3530, 3500 | 3587 |
| Natural Gas - Jan | Sell | Around 262 | 258, 255 | 264.4 |
Commodities – Agro (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Pepper - Feb | H. Sell | Below 13450 | 13300, 13160 | 13545 |
| Jeera - Feb | Sell | Below 12000 | 11870, 11750 | 12090 |
| Turmeric - Apr | Sell | Below 6730 | 6690, 6650 | 6760 |
| COCUDAKL - Feb | H. Sell | Below 1190 | 1178, 1165 | 1196.5 |
| Chana - Feb | Sell | Below 2285 | 2250, 2220 | 2308 |
| Guar seed - Feb | Sell | Below 2375 | 2340, 2310 | 2397 |
| Soya bean - Feb | Sell | Below 2189 | 2165, 2140 | 2209 |
| Soya oil - Feb | Sell | Below 460 | 457, 454 | 462.8 |
| Mustard seed - Apr | Sell | Below 515 | 511, 507 | 517.8 |
| Mentha oil - Jan | Buy | Above 594 | 597.5, 601 | 591.3 |
**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 | Rs92.2 | | Entry load | Nil | |||
| NAV 52 high/low | Rs94/44 | | 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 (78%), Debt (0%), Cash (22%) | |||
| Options | Growth & dividend | | Expense ratio | 1.9% | |||
| | | | | | | | |
Result Update: Oil & Natural Gas Corp (Q3 FY10) – BUY
CMP Rs1,140, Target
± Net sales surge 23.7% yoy despite absence of MRPL trading activities primarily on account of 70.5% yoy jump in crude oil realizations (lower under recoveries)
± Sales volumes for crude oil and natural gas remained flat at 5.7mn tons and 5.25bcm respectively
± OPM expands 1,950bps yoy and 205bps qoq owing to a substantial fall in overheads as a percentage of sales
± PAT growth restricted by reversal of interest income from OVL and four fold jump in dry well write-offs
± Increase in production from JV fields and OVL would be key to earnings growth in near term
± We upgrade ONGC from SELL to BUY considering its steep discount to global E&P majors
Result Update: ICICI Bank (Q3 FY10) – BUY
CMP Rs853, Target Price Rs992, Upside 16.2%
± NII was up 1.1% qoq; net profit came in higher at 5.8% qoq.
± Non-interest income was down 8.3% qoq; fee income increased 2.5% qoq.
± Loan book declines 6.1% qoq and 16% yoy; NIM, however, improved sequentially aided by increase in CASA deposits.
± Concerns over asset quality waning; GNPL and NNPL decline 5.8% and 3.1% qoq.
± Adequately capitalized; lower returns ratio act as a caveat. Maintain BUY.
Result Update: Welspun Gujarat (Q3 FY10) – BUY
CMP Rs266, Target Price Rs314, Upside 18.1%
± Pipe sales volume declined 18.7% qoq due to deferred shipments, whereas plate external sales grew 8.7% qoq to 103,151 tons
± EBIDTA/ton for pipes increased from Rs11,000 in Q2 FY10 to Rs11,500 in Q3 FY10 and that of plates from Rs6,000 to Rs6,500
± Pipe sales from
± On a consolidated level, WGS registered a fall of 25% qoq in topline and 4% qoq in operating profit
± Order book at the end of Q3 FY10 shrinks from Rs78bn in Q2 FY10 to Rs66bn
± Maintain BUY with a target price of Rs314/share
Result Update: United Spirits (Q3 FY10) – BUY
CMP Rs1,223, Target
± Q3 revenues up a robust 30.5% yoy driven by 12.3% volume growth to 26.5mn cases along with with price increases
± OPM recovers from trough levels a year ago as spirit prices lower than peak of Oct-Nov’ 08
± Reported PAT jumps 3x on improved operational performance
± Sustained volume growth of at least 12-14% combined with OPM expansion prompt an upgrade to BUY with TP of Rs1,384
Result Update: Idea Cellular Ltd (Q3 FY10) – Market Performer
CMP Rs58, Target Price Rs55, Downside 5.2%
± Revenue growth of 5.9% qoq came in line with estimate despite fierce competition and new launches
± Tariff war slice rev/min to 51p vs. 56p in Q2 but MOU surprise leads to lower than expected drop in ARPU to Rs200
± OPM contracts as EBIDTA loss in new circles surges 55% qoq
± Reported PAT decline of 22.7% was better than expected mainly due to higher OPM and lower interest cost
± Reduce FY11 EPS estimates as we factor in rev/min of 40p next year but expect PAT revival in FY12; retain MP with TP of Rs55
Result Update: Indraprastha Gas (Q3 FY10) – Market Performer
CMP Rs199, Target Price Rs202, Upside 1.5%
± Revenues rise 29.9% yoy driven by 16.4% growth in PNG volumes and 15.2% increase in CNG volumes
± OPM increases 553bps yoy and driven by lower raw material costs and staff costs
± Volume growth to remain strong on back of increasing private cars conversion and higher interest of OEM players
± Downgrade rating to Market Performer from BUY following recent appreciation in stock price
Corporate Snippets
± IOC has sought government’s intervention to participate in US$12.5bn Iranian projects. (ET)
± Relinace Infra led consortium aims to achieve financial closure for the Rs110bn second phase of Mumbai Metro by October 2010. (BS)
± TCS has bagged a US$50mn deal in the platform-based BPO unit. (BS)
± Wipro is planning to reduce its headcount in
± Bharti Airtel has partnered with US-based Limelight Networks for content delivery network services in
± SBI says that it is not looking at acquisitions of any other bank outside the SBI group. (ET)
± GAIL expects work on the Dhabol-Bangalore gas pipeline project to be completed by March 2010. (ET)
± HCL Tech has appointed Mr. Satish Chadrashekharan to spearhead its global services delivery and retail vertical. (ET)
± Reliance Capital AMC is negotiating with
± Tata Teleservices has added 3.3mn subscribers in December 2009, becoming the No.1 operator in terms of subscriber addition for the fifth consecutive time. (ET)
± HCL BPO is planning to increase headcount in its media BPO division to 600 from present 300 in the next 12-18 months. (BL)
± Hindustan Zinc has reduced zinc prices by Rs900 a ton. (BL)
± The Shipping Secretary says that government has no plans to divest stakes in SCI and Dredging Corporation. (ET)
± Gammon Infra intends to buy stakes in international airports projects. (BS)
± Essel Group and Bhushan Steel are set to acquire 250 acre plot in Khargar for Rs15.3bn. (BS)
± Mercator Lines is looking at acquiring more coal mines in
± Jubilant Organosys is de-merging its non core business, agri and performance polymer, into a separate subsidiary. (ET)
±
± Triveni Engineering proposes to hive-off its steam turbines business into a separate company. (BL)
Economic snippets
± Spectrum usage fees go up by 20% from January 1, 2010. (ET)
± Government boosts PDS grain flow to fight against inflation. (ET)
± Decline in farm output may pull down GDP growth in Q3 FY10 to 6-6.5%, says Pronab Sen, the Chief Statistician of
± Food Inflation eased to 16.81% for the week ended January 9, 2010. (BL)
± Trai moots plan to charge operators for phone number allocations. (BL)
± Government to start 3G auction on February 25, 2010. (BS)
Results table
| Companies | Revenue | YoY growth | PAT | YoY growth |
| ONGC | 155,061 | 22.9 | 30,535 | 23.4 |
| L&T | 81,222 | (6.2) | 7,588 | (50.1) |
| BHEL | 71,003 | 17.9 | 10,726 | 35.7 |
| ICICI Bank | 60,896 | (22.3) | 11,009 | (13.5) |
| Idea | 31,358 | 14.9 | 1,701 | (22.5) |
| Petronet LNG | 22,446 | (9.2) | 832 | (20.8) |
| Welspun Gujarat | 16,400 | 12.6 | 1,670 | 271.1 |
| Kotak Bank | 11,847 | 5.1 | 3,314 | 153.2 |
| Shree Cement | 8,660 | 30.3 | 1,674 | 35.1 |
| JSW Energy | 7,041 | 72.6 | 2,371 | 54.1 |
| Biocon | 6,370 | 45.4 | 809 | 186.8 |
| Kirloskar Oil Eng | 5,582 | 17.2 | 611 | 511.0 |
| Ipca Labs | 3,939 | 26.6 | 586 | 152.6 |
| Rolta | 3,755 | 3.8 | 627 | 3.6 |
| Indraprastha Gas | 2,846 | 29.7 | 589 | 53.8 |
| Praj Inds | 1,473 | (29.9) | 292 | (38.3) |
| Sasken | 1,452 | (21.6) | 171 | 18.8 |
| ICRA | 421 | 28.7 | 146 | 60.6 |
| Indiabulls Real Estate | 374 | (3.9) | 28 | (75.6) |
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