F Market Mantra: Technicals - Lanco Infra (Buy), Anant Raj Inds (Buy); F&O - Bharti Airtel (Long), Zee Entertainment (Long); Report - Colgate-Palmolive, Cement Sector Review

 

 

 

Market Mantra

 

Market outlook

Bull-bear may extend slugfest

 

A bland smile is like a green light at an intersection, it feels good when you get one, but you forget it the moment you're past it.

 

We now have statistical evidence to substantiate that the green shoots in India have blossomed further. Apart from the subdued credit growth and tepid tax receipts (partly owing to fiscal stimulus) most other economic indicators have improved substantially.

 

The ball is now in the Finance Minister’s court. In that context, Feb. 26 will be a crucial day. Pranab Mukherjee is likely to take a calibrated approach to unwinding the fiscal stimulus. He has his task cut out on the fiscal front. So, we expect him to articulate strategy to return to the path of fiscal prudence. Any deviation from this will be disappointing.

 

Today we expect a flat opening due to indecisive global cues. The Dow Jones has closed below 10,000. Stocks in Europe finished higher. Asia is pretty much mixed.

 

Derivative indicators are pointing to further weakness. Technically, 4700 could give near-term support to the Nifty while resistance might kick in at 4800. The 200 DMA of 4640 will continue to be a crucial level to watch.

 

Trading ideas (Time period: 1-3 days)

Lanco Infra (BUY, CMP Rs46, Target Rs50): In our view, the stock has completed its downfall and has created a medium term bottom around the levels of Rs40.50. 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. The stock was trading in a downward channel since first week of January 2009 with resistance at the downward sloping trendline. After creating a base around Rs40-42, the stock has moved up, breaking above the resistance line. Based on the above observations, we recommend traders to buy the stock at current levels and on declines up to the levels of Rs45 with the support of Rs43 for an initial target of Rs50 and Rs51.

 

Anant Raj Inds (BUY, CMP Rs132, Target Rs142): The stock has seen a severe correction from a high of Rs158 in January 2009 to a low of Rs121 last week. This was a panic bottom and the stock rallied up to the current levels without a retest of this low. On the daily charts, the price movements appear to have formed a higher bottom formation. On Monday, the stock broke out from a downward-sloping trendline. The bullish formation is confirmed after the stock gave a close above its short-term moving averages. Traders can buy the stock at current levels and on dips up to the levels of Rs129 with a stop loss of Rs126 for a short-term target of Rs142 in the coming trading sessions.

 

Derivative strategies (Time period: Till expiry)

±       Long Bharti Airtel Feb Future @ Rs309 for the target price of Rs325 and stop loss placed at Rs302.

Lot size: 500

Remarks: Net maximum profit of Rs7,000 and net maximum loss Rs3,500.

 

±       Long Zee Entertainment Feb Future @ Rs262 for the target price of Rs275 and stop loss placed at Rs258.

Lot size: 1,400.

Remarks: Net maximum profit of Rs18,200 and net maximum loss Rs5,600.

 

Commodities – Metals (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Gold – Apr	H. Sell	16310	16210	16345
Silver - Mar	Sell	24310	24060	24460
Copper - Feb	Sell	302.1	297	304.1
Zinc – Feb	Sell	94.8	93.1	95.2
Lead - Feb	H. Sell	93.2	90.2	94.6
Aluminum - Feb	Sell	93.6	92.2	94.2
Nickel - Feb	Trade as per intraday calls
Crude Oil - Feb	Sell	3365	3330	3384
Natural Gas - Feb	Trade as per intraday calls

 

Mutual funds

Fund focus
HDFC Top 200 Fund					Invest
Fund manager	Prashant Jain		Min investment				Rs5,000
Latest NAV	Rs170.0		Entry load				Nil
NAV 52 high/low	Rs183/78		Exit load				1% <1 year
Latest AUM	Rs6,066cr		Latest dividend (under dividend option)				30% (5-Mar-09)
Type	Open-ended		Benchmark				BSE200
Class	Equity-diversified		Asset allocation	Equity (98%), Debt (0%), Cash (2%)
Options	Growth & dividend		Expense ratio			1.8%

 

 

Company Update: Colgate-Palmolive (India) Ltd – BUY

CMP Rs695, Target Price Rs794, Upside 14.3%

 

Colgate-Palmolive (India) Ltd continues to dominate the oral care industry with a strong 46%+ market share. Despite stiff competition from players like Hindustan Unilever and Dabur, Colgate has been able to protect its market leadership and maintain a strong double-digit volume growth momentum. Colgate has introduced low price-point products of its brands for driving volume growth. The discount brand Cibaca has helped in driving penetration and consumption growth in rural areas. Colgate, currently, derives more than 35% of its revenues from the rural markets. This contribution is set to increase further with rising oral hygiene awareness. Low penetration levels across segments are expected to fuel further growth. With the strong volume growth momentum, market share gains and healthy margin expansion, we expect Colgate to witness a 19.4% CAGR in net profit over FY09-12. We maintain BUY with a target price of Rs794.

 

Q3 FY10 Sector Review: Cement

Our coverage companies reported a 7.5% yoy growth, beating our estimate for a 3.6% growth. Higher revenue growth (except for ACC) was primarily driven by increased volumes (up 1-23% yoy). Average realization dipped up to 20% yoy which lead to margin erosion at ACC, Ultratech and India Cements. Grasim revenues jumped 14% yoy driven by strong VSF performance. Aggregate PAT (except for Grasim) was down 14% due to margin contraction along with increased depreciation and higher effective tax rates.

 

Corporate Snippets

±      BHEL has secured Rs10bn contract from Punatsangchhu Hydroelectric Project Authority. (FE)

±      GMR Infrastructure plans to raise over Rs15bn via private equity route. (ET)

±      Mahindra & Mahindra and the UK’s BAE Systems to inject US$21.25mn over a three-year period into their joint venture company, Defence Land Systems India. (BS)

±      Pantaloon Retail plans to spin off at least five of its brands and merge them with Capital Foods. (ET)

±      Nagarjuna Construction secured five orders aggregating Rs5.8bn. (BL)

±      Jet Airways plans to raise US$200mn in the coming 3-4 weeks via QIP route. (FE)

±      Areva T&D India bagged two projects worth Rs2.8bn from Power Grid Corporation of India for installation of sub-stations in Punjab and Haryana. (BL)

±      Cipla maintained its top position in the domestic market for the 2009, with a market share of 5.38%.(BS)

±      JSW Steel group has brought forward the date for commencement of work on its steel project at Salboni in West Bengal by about a year. (BS)

±      Global private investment firm TPG has submitted a proposal to the corporate debt restructuring (CDR) cell to buy stake in the Vishal Retail. (BS)

±      Turkish Airlines to lease three Boeing 777 from Jet Airways. (BS)

±      PTC India Financial Services Ltd, an arm of power trading major PTC India, has raised Rs1bn by issuance of secured non-convertible debentures. (BL)

±      Wadia family of Bombay Dyeing is considering raising its stake through a preferential issue of warrants. (ET)

±      Lupin has received final approval from the US drug regulator for marketing Amlodipine-Benazepril capsules, used for treating high blood pressure, in America. (ET)

±      Inox Leisure has acquired a 43.28% stake in Fame India for an all-cash consideration of Rs664mn. (ET)

±       L&T Finance plans to raise upto Rs5bn through non-convertible debenture. (ET)

 

Economic snippets

±      Centre mulls domestic sugar ban for bulk users. (BS)

±      India Infrastructure Finance Company (IIFCL) has kicked off work on a US$1bn medium term note program to raise resources for funding power, road, port and airport projects. (BS)

±      Central Statistical Organisation (CSO) pegs 2009-10 growth at 7.2% on industrial progress. (BL)

±      With soaring asset prices, RBI has ruled out one more round of restructuring of real estate loans which may increase non-performing assets of banks. (ET)

±      The commerce department clarified that SEZs would continue to enjoy tax benefits in their current form even after the proposed Direct Tax Code is implemented. (ET)

±      The financial ministry officials noted that it has no plan to raise the limit on foreign institutional investment in debt. (FE)