Market Mantra
Market outlook
Enjoy the start!
Enjoy when you can, and endure when you must
The health of the Indian economy seems to be getting better by the day if the latest reports on manufacturing and foreign trade are any indication. Hopefully, the wealth will also follow likewise on the bourses. Auto sales remain on the fast track, underscoring a pick-up in consumer confidence. The only drag is a sub-par credit growth and dwindling tax receipts. Hopefully, they will also start improving in the coming months. That will partly hinge on the Government action or lack of it, if any. Budget should make things amply clear as far as the policy roadmap is concerned. Till then, the market may remain sideways and volatile.
Today we expect a healthy start on the back of firm global cues. The key indices may run out of steam if global markets fail to sustain Monday’s rise. The broader market resumed its out-performance of large caps and might extend the same. But, be extremely careful of what you are buying. With some improvement in sentiment, the Nifty may once again target 5000 but will face bumps along the way. Fresh selling is not ruled out at higher levels amid mounting external worries.
Trading ideas (Time period: 1-3 days)
Aurobindo Pharma (BUY, CMP Rs892, Target Rs940): The stock has seen impressive volume expansion in yesterday’s session and also closed near to its 5dma. The stock appears to have taken support between Rs800-940 range. 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 Rs900, could take the stock towards Rs940 levels. Traders are advised to maintain a stop loss of Rs880 and go long.
Jet Airways (BUY, CMP Rs508, Target Rs550): On the daily chart, the stock has given a bullish signal after staging a bounce back from its medium-term moving averages. It suggests that its short-term trend has turned up. Over the last four weeks, the stock was consolidating in the range of Rs450-520. The current bounce back from lows was supported by healthy volumes, which suggest accumulation. Further, supportive technical oscillators are also positive. We recommend traders to buy the stock at current levels and to the levels of Rs510 for an initial target of Rs550. It is advisable to maintain a stop loss of Rs495.
Derivative strategies (Time period: Till expiry)
± Long SAIL Feb Future @ Rs214 for the target price of Rs225 and stop loss placed at Rs210.
Remarks: Net maximum profit of Rs12,150 and net maximum loss Rs5,400.
± Long Ranbaxy Feb Future @ Rs459 for the target price of Rs480 and stop loss placed at Rs452.
Remarks: Net maximum profit of Rs16,800 and net maximum loss Rs5,600.
Commodities – Metals (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Gold - Apr | Buy | Above 16630 | 16670, 16710 | 16595 |
| Silver - Mar | Sell | 26200-26230 | 26020, 25850 | 26330 |
| Copper - Feb | Sell | 316-317 | 313.5, 311 | 318.3 |
| Zinc - Feb | Sell | 100.7-101 | 99.5, 98.2 | 101.4 |
| Lead - Feb | Buy | Above 96 | 96.9, 97.5 | 95.3 |
| Aluminum - Feb | H. Sell | 97-97.3 | 96, 95 | 98.2 |
| Nickel - Feb | Sell | Below 831 | 817, 805 | 842.8 |
| Crude Oil - Feb | Buy | Above 3440 | 3470, 3490 | 3417 |
| Natural Gas - Feb | Buy | Above 252 | 255.5, 259 | 249.7 |
Commodities – Agro (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Pepper - Feb | H. Sell | 13550-13580 | 13415, 13270 | 13660 |
| Jeera - Feb | Buy | Around 11800 | 11950, 12100 | 11690 |
| Turmeric - Apr | Sell | Below 6850 | 6800, 6760 | 6880 |
| COCUDAKL - Feb | H. Sell | Below 1154 | 1140, 1126 | 1165.5 |
| Chana - Feb | Buy | Above 2210 | 2240, 2265 | 2185 |
| Guar seed - Feb | Sell | At 2370 | 2340, 2310 | 2390 |
| Soya bean - Feb | Buy | Above 2080 | 2105, 2127 | 2063 |
| Soya oil - Feb | Sell | 449-450 | 446, 442 | 452.2 |
| Mustard seed - Apr | Buy | Above 486 | 489.5, 492.5 | 483.2 |
| Mentha oil - Feb | Sell | Below 483 | 479, 476 | 486 |
**Strict Stop-Loss *Book Partial Profits
Mutual funds
| Fund focus | |||||||
| HDFC Top 200 Fund | Invest | ||||||
| Fund manager | Prashant Jain | | Min investment | Rs5,000 | |||
| Latest NAV | Rs173.9 | | 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% | |||
| | | | | | | | |
FPO Note: NTPC – ‘Subscribe to growth’ – Market Performer
Floor Price Rs201, Target Price Rs220, Upside 9.5%
Since NTPC operates in a regulated environment, its earnings are steady and secure. Capacity addition holds the key for future earnings growth. NTPC is already lagging its XI plan target and has placed equipment orders for 18GW. It plans to enhance its installed capacity to 75GW by 2017. With ordering for this capacity expected to happen over the next year, we believe majority of this capacity will come up by 2017. In addition to regulated returns, any merchant sale will aid earnings growth. NTPC’s RoE will continue to remain depressed owing to a large capex. However, merchant sales will boost its RoE and hence re-rate the stock. We value the stock at 2.5x FY12E book to arrive at a one year target price of Rs220. A holding period of ~2 years should offer investors with ~25% return, hence recommend Subscribe.
Result Update: Ashok Leyland (Q3 FY10) – Market Performer
CMP Rs52, Target Price Rs54, Upside 4.5%
± Net sales jump 81.4% yoy to Rs18.2bn on back of 101.4% yoy volume growth.
± Operating profit surged 148% yoy and OPM expanded by 305bps yoy to 11.4%
± Employee cost as a percentage of sales decline by 268bps yoy on back of benefits of operating leverage
± Upgrade the stock to Market Performer from SELL
Sector Update: Auto Monthly Update – January 2010
During January 2010, Indian auto industry witnessed a strong base effect (January 2009 plagued by financial crisis) translating into robust growth for most manufacturers on a yoy basis. Even on sequential basis companies reported robust growth in total volumes, trend which was not experienced in recent past. It was one of the best months for four wheelers with many segments reporting highest ever monthly volumes in January 2010. In passenger car segment Maruti and Tata Motors both clocked in record monthly sales in total volumes with growth of 21.2% and 47.4% on yoy basis. Among three wheelers M&M registered a surge of 158.6% yoy. Momentum in the commercial Vehicle (CV) sales continued lead by strong growth in M&HCV segment. Tata Motors witnessed a jump of 170.2% yoy, in M&HCV portfolio, while LCV segment for Tata Motors grew by 75.2% yoy. Xylo continues to witness strong demand translating into a strong growth of 71.2% in total volumes for M&M. In two wheelers space, Hero Honda volumes grew by 23.6% yoy, while TVS Motors sales increased 34% on yoy basis.
Sector Update: Commodity Monthly Update – January 2010
After an unprecedented run-up in base metals last year, the rally took a breather in January. Most of the base metals extended their gains in the first half of the month; however, ended in the red led by a sell off in the commodity markets in the second half. Base metal prices corrected sharply led by stronger US dollar and rise in expectations of monetary tightening measures globally. Central Banks of the countries like
Corporate Snippets
± ONGC will spend Rs260bn on capital expenditure in the next financial year against Rs240bn in this financial year. (ET)
± Government fixes the benchmark price for the proposed divestment of NTPC at Rs201/share, 5% discount to the last closing price of Rs211 on BSE. (ET)
± NTPC plans to add 4,150MW in FY11. (BL)
± Infosys Technologies said it will design and implement the research informatics system for Elan Pharmaceuticals, a biotechnology company. (FE)
± The country's top three IT services firms - TCS, Infosys and Wipro - are in the race for the Rs 1bn e-migrate project under the ministry of overseas Indian affairs. (FE)
± Tata Sons, the holding company of the US$71bn Tata Group, plans to raise Rs10bn by selling NCDs to shore up its stake in group firms. (ET)
± After selling just 50 units of its Hispano brand intercity buses in the country since it was introduced in late 2008, Tata Motors says it will re-focus on the sub-premium intercity segment next year. (FE)
± Jindal Steel & Power is in the race to acquire a majority stake in Zimbabwe Iron & Steel Company (Ziscosteel), the largest steelworks in the African country. (BS)
± A major fire which broke out at the Bhilai Steel Plant severely hit hot metal production at SAIL. (BS)
± Hindalco Industries plans to produce cans for beverages and food giants such as Coca-Cola and PepsiCo from its plant at Hirakud in Orissa. (BS)
± Renault plans to set up its own dealerships, the French automaker’s final act before terminating a 4-year-old alliance with M&M. (ET)
± L&T received two orders worth Rs21.5bn from National Fertilisers Ltd for converting the feedstock of ammonia plant to natural gas. (FE)
± Reliance Communications said it would spend around Rs30bn in the financial year 2010-11 on capital expenditure. (FE)
± Suzlon Energy plans to sell its entire 26% stake in Hansen Transmissions International, as it doesn’t see major benefits arising from retaining the shareholding in Hansen. (ET)
± Suzlon Energy said REpower Systems AG, in which it has a 90.71% stake, signed a contract to supply 295MW of offshore wind turbines for a wind farm in the North Sea East. (BL)
± GVK Power and Infrastructure has managed to arrange Rs24bn funding for its 540MW Goindwal Sahib power plant in
± ArcelorMittal acquired 29% stake in Uttam Galva Steels for Rs4.2bn through an open offer, taking its holding in the domestic firm to 34.42%. (FE)
± The diversified Hinduja Group is close to acquiring an Indian construction firm in a bid to secure a foothold in the country's fast growing infrastructure sector, especially roads, and also announced an investment of US$10bn in the power sector. (FE)
± Britannia Industries is looking at an upward price revision on a range of its products due to soaring commodity inflation. (FE)
± Parsvnath Developers plan to invest Rs70bn in the next five years in construction of its ongoing projects. (ET)
± Parsvnath Developers plans to raise Rs2-3bn in the present quarter through private equity (PE) deals. (BS)
± IVRCL bagged Rs11.3bn road project from the National Highways Authority of India. (BS)
± Fortis Healthcare and Religare Enterprises will keep looking out for acquisitions in order to be on the fast track in healthcare and financial services sectors. (FE)
± Areva T&D
± IDBI Bank has moved to a variable pay structure for its officers, who will now have a 70% fixed salary component. (BS)
± Aditya Birla Financial Services Group has inked a MoU with Woori Investment & Securities to raise up to US$500mn for the company’s various businesses. (ET)
± Mercator Lines plans to add four to five ships in the tanker segment over the next three months and also expand its dry bulk fleet by adding three ships over the next one year, besides augmenting its drilling capabilities. (ET)
± Wockhardt has informed its foreign lenders that it will not sell any assets as long as winding-up petitions filed by them are being heard by the Bombay High Court. (ET)
± Indoco Remedies has entered into a generics product development alliance with Watson Pharmaceuticals Inc to develop and manufacture a number of sterile products for the
± Zylog Systems has acquired Canadian-based engineering consultant firm, Brainhunter, for a consideration of Canadian $35mn (~Rs1.5bn). (FE)
± Ansal API plans to raise funds by diluting its stakes at project levels to fast-track the development of its housing and commercial projects. (FE)
Economic snippets
± RBI said it was unlikely to change its policy in between quarterly reviews unless there was an unanticipated event. (BS)
± RBI hints at curbs on capital inflows to avoid stark economic imbalances. (ET)
± On the back of rising crude oil prices, India’s imports turned positive after 11 months in December 2009 when it increased by 27.3% while exports grew for the second consecutive month by 9.3%. (BS)
± The World Bank said that
± The government said it will consider freeing of petrol and diesel prices after an expert panel chaired by Kirit Parikh gives its views this week. (FE)
± Banks want farm targets delinked from infra loans. (BS)
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