Market Mantra
Market outlook
Sensex may rise…inflation may spoil party
Aim at the sun, and you may not reach it; but your arrow will fly far higher than if aimed at an object on a level with yourself.
Don’t expect a flying performance from equities this year, as 2010 could turn out to be a year of consolidation. The market will also be pretty volatile, and could surprise on both the sides. So, it is time to be level headed and a bit cautious too. We are not saying that there will be a big fall. Just don’t expect a repeat of last year’s spectacular rally.
Today we see a firm start, thanks largely to stability in global markets. A good quarterly earnings season may have been discounted but that doesn't prevent companies like Infosys and Bajaj Auto from surprising the street on the upside. Also be prepared for a few nasty surprises.
Inflation, especially on the food front is a major concern. Even non-food items are beginning to see an uptick. Fuel prices may also inch up in the near term. The Government will announce the latest monthly inflation data today, along with the weekly food and fuel inflation.
Trading ideas (Time period: 1-3 days)
Biocon (BUY, CMP Rs299, Target Rs320): The stock has seen impressive volume expansion in yesterday’s session and also closed near to its 52-week high. The stock appears to have taken support between Rs286-287 range. It could bounce till somewhere between Rs320 levels in the near term. 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 Rs302, Any move above Rs132 could take the stock towards Rs320 and higher. Traders are advised to maintain a stop loss of Rs290 and go long. Book partial profit around Rs315.
Derivative strategies (Time period: Till expiry)
± Long Moser Baer Jan Future @ Rs92 for the target price of Rs99 and stop loss placed at Rs89.
Remarks: Net maximum profit of Rs17,325 and net maximum loss Rs7,425.
± Long NTPC Jan Future @ Rs230 for the target price of Rs242 and stop loss placed at Rs225.
Remarks: Net maximum profit of Rs19,500 and net maximum loss Rs8,125.
Commodities – Metals (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Gold - Feb | Buy | Above 16810 | 16850, 16890 | 16780 |
| Silver - Mar | Buy | Above 28300 | 28450, 28600 | 28170 |
| Copper - Feb | Buy | At 342 | 344, 346 | 340 |
| Zinc - | Buy | Above 114.5 | 115.8, 117 | 113.4 |
| Lead - | Buy | Above 113 | 114.25, 115.3 | 112.1 |
| Aluminum - | Sell | 104.5-104.8 | 103.2, 102 | 105.6 |
| Nickel - | Buy | Above 836 | 849, 860 | 825.4 |
| Crude Oil - | Sell | Around 3670 | 3635, 3600 | 3690 |
| Natural Gas - | Buy | Above 263.5 | 267, 270 | 260.7 |
| Steel long - Feb | Buy | Above 26200 | 26350, 26500 | 26060 |
Commodities – Agro (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Pepper - | Sell | Below 13500 | 13350, 13220 | 13580 |
| Jeera - Feb | Buy | Above 13250 | 13370, 13490 | 13140 |
| Turmeric - Apr | Sell | Below 7400 | 7365, 7335 | 7430 |
| COCUDAKL - Feb | H. Sell* | Around 1206 | 1293, 1280 | 1214 |
| Chana - Feb | Buy | Around 2460 | 2485, 2510 | 2440 |
| Guar seed - Feb | Buy | Above 2600 | 2635, 2665 | 2570 |
| Soya bean - Feb | Buy | Above 2271 | 2295, 2315 | 2253 |
| Soya oil - | Buy | Above 474 | 477.5, 480.5 | 471.4 |
| Mustard seed - Feb | Sell | 598-599 | 595, 593 | 600.7 |
| Mentha oil - | 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 | Rs93.2 | | 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% | |||
| | | | | | | | |
Sector Update: Banking – ‘Improving loan growth’
The system loan growth has started gaining momentum after moderating significantly during October-November 2009. The recently released RBI data revealed that system credit grew by 13.7% yoy for the fortnight ended January 01, 2010. This has taken Q3 FY10 disbursements to Rs1,477bn, a healthy 5.1% growth on sequential basis. Loan growth is expected to accelerate further in Q4 FY10 driven by improving credit demand and proactive lending by banks to meet their priority sector lending targets for the year. We estimate system loan growth at 16-17% yoy by the end of March 2010.
The system deposit growth has moderated to 17-18% yoy during the October-December quarter from 21-23% yoy in H1 FY10. As per the latest data, system deposits grew by 17.6% yoy or 11.3% YTD as at January 01, 2010. The growth is expected to remain in the current range with banks having already re-priced their high-cost deposits during Q3 FY10. The system loan-deposit ratio has increased to 71% on improving credit growth. Incremental LDR too has improved to 57%.
After an extended period of accommodative policy stance, we expect the central bank to start unwinding its easy monetary measures. The key compellers would be surging food inflation, increase in crude oil prices and excess liquidity in the system. We expect RBI to increase CRR by 50bps during the third quarter monetary policy review scheduled in the end of the month.
Corporate Snippets
±
± Maruti is planning to hike prices on rise in input costs. (ET)
± Maruti is planning to revamp production lines to overcome capacity constraints. (BL)
± HCL Technologies is in talks with Australian firm OLR for a possible acquisition. (BL)
± GTL Infrastructure has agreed to buy Aircel Cellulars tower business for Rs84bn in an all-cash deal. (ET)
± BSNL has entered the second round of bidding to acquire a majority stake in Zamtel. (BS)
± Unitech expects its share of sales from redeveloping Mumbai slums into luxury apartments to triple in three years. (BS)
± Over 500 farmers on Wednesday approached the district authorities seeking return of land sold to Reliance Power, but expressed inability to repay the compensation at one-go. (FE)
± Union Bank of India has initiated preliminary discussions with three-four small sized Indonesian banks for possible acquisition. (FE)
± Jaiprakash Power Venture is raising Rs15bn through QIP. (ET)
± ITC is open to overseas acquisitions in the hospitality sector, if there is a lucrative opportunity. (BL)
± Hotel Leela Venture to own, develop and operate five more luxury hotels with a total project cost of over Rs30bn by 2014. (BS)
± IVRCL Infrastructures bags an order worth Rs15.50bn from NHAI for construction of road. (BS)
± JSW Energy aims to commission and synchronise to the grid over 2,000 MW of power this calendar year. (BS)
± Dishman Pharmaceuticals plans to set up four new active pharmaceutical ingredient plants. (BS)
± McNally Bharat Engineering Company is set to acquire a Bangalore-based construction company specializing in building and erection of chimneys and silos for cement and power plants. (BL)
± UP government has filed police cases against several sugar mills in the state, including
± Ansal API is set to hive off its education business subsidiary, Knowledge Tree Infrastructure Ltd that runs the group's education business, into a separate entity. (FE)
Economic snippets
± Government may revert to pre-slowdown indirect tax rates in two phases beginning
± Supreme Court allows construction in some parts of Thane and Mulund where building activities had been barred because some tracts of land had been classified as forest. (ET)
± Domestic air traffic grows 7.8% in 2009. (ET)
±
± Government will make necessary changes in the new Companies Bill to facilitate convergence of the Indian accounting norms with the international financial reporting standards by 2011. (ET)
± The government has allowed duty-free import of white sugar without any quantitative cap up to December 31, 2010. (BL)
± The State Government of Andhra Pradesh has increased the VAT rate to 14.5% from 12.5%. (BL)
± The Finance Ministry has imposed definitive anti-dumping duty on ‘tyre curing presses' imported from
± Bank credit for the fortnight ended January 1, 2010 rose by Rs795bn to Rs30.2 trillion.
± Truck rentals soared to a two-year high, recording a double-digit growth during December 2009-January 2010. (BL)
± Listed and unlisted companies with a net worth of over Rs10bn, those in the elite Sensex and Nifty club and those listed on overseas stock exchanges will have to prepare their balance sheets according to international accounting standards for the financial year beginning April 1, 2011. (FE)
Results Table
| (Rs mn) | Sales | % yoy | | % yoy |
| | 8,478 | 3.4 | 724 | 2.3 |
| REC Ltd | 16,717 | 34.1 | 4,741 | 48.8 |
| JP Power Ventures | 1,142 | 106.7 | 169 | (61.7) |
| Bajaj Holdings | 1,328 | 830.9 | 2,622 | 343.3 |
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