Market Mantra
Market outlook
Happy start, take care!
It is only possible to live happily ever after on a day-to-day basis.
The gains made in Saturday’s special session may not hold much significance due to lack of adequate participation. Nevertheless, the bulls did get a chance to claw their way back after being battered and bruised in the previous two days. That snap-back advance may continue today, at least early in the morning. The rest of the day’s proceedings will hinge on how the external situation evolves.
Don’t be surprised if the market recovers some more ground. Use that pull-back as an exit opportunity as the market may fall further on a combination of local and global worries. On the whole, the market will be volatile with bouts of sharp rallies and declines. We remain cautious and advise you to stay on guard till the turbulence subsides.
The near-term support for the Nifty is around 4700. The crucial level to watch would be 4640, which represents 200 DMA. A sustained and decisive breach of this level could spell more trouble. On the higher side, the market will face resistance at around 4900-5000 levels.
Trading ideas (Time period: 1-3 days)
Century Textiles (BUY, CMP Rs478, Target Rs505): Century Textiles is pointing to continued strength in the sessions to come as it has broken a downward-sloping trend line since third week of January 2010. A detailed study of the daily chart shows that the stock has corrected from the high of Rs593 to touch a low of Rs449. The stock bounced back from the lower end of the trading range to close above downward-sloping trend line. Further, supportive technical oscillators such as ADX and RSI are also positive. We recommend traders to buy the stock between the range of Rs473-482 for a target of Rs505. It is advisable to maintain a stop loss of Rs465.
ONGC (SELL, CMP Rs1,092, Target Rs1,030): ONGC violated and closed convincingly below its 200-DMA after hovering around the important long-term average for an entire week. The last time, when ONGC moved below its 200-DMA was in October 2008. It resulted into a correction of ~93% and lasted for three weeks. This time we need to see how long it will remain below the 200-DMA. The above pattern is bearish in nature and suggests more weakness in the coming trading sessions. The daily oscillators are also indicating building up of the momentum on the downside. We recommend traders to sell the stock at current levels and on rallies to the levels of Rs1,100 for an initial target of Rs1,030. It is advisable to maintain a stop loss of Rs1,115 on all the short positions.
Derivative strategies (Time period: Till expiry)
± Long Essar Oil Feb Future @ Rs143 for the target price of Rs155 and stop loss placed at Rs138.
Remarks: Net maximum profit of Rs16,944 and net maximum loss Rs7,060.
± Long MCDowell Feb Future @ Rs1,265 for the target price of Rs1,310 and stop loss placed at Rs1,245.
Remarks: Net maximum profit of Rs11,250 and net maximum loss Rs5,000.
Commodities – Metals (Time period: Intra-day)
Trade recommendation
| Commodity | Strategy | Levels | Target | Stop-Loss |
| Gold – Apr | Sell | 16310 | 16210 | 16345 |
| Silver - Mar | Sell | 24420 | 24180 | 24530 |
| Copper - Feb | Buy | 298.4 | 302.1 | 296.1 |
| Zinc – Feb | Buy | 93.1 | 94.6 | 92.5 |
| Lead - Feb | Sell | 94.6-94.8 | 93.5, 92 | 95.4 |
| Aluminum - Feb | Buy | 93.1 | 94.3 | 92.5 |
| Nickel - Feb | Trade as per intraday calls | |||
| Crude Oil - Feb | Buy | 3350 | 3385 | 3332 |
| 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 | Rs168.4 | | 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% | |||
| | | | | | | | |
Sector Update: Cement Dealers’ Survey
We recently conducted a cement dealer survey across various Tier I and Tier II cities to get a handle of on-ground realities in the sector. On the consumption front, government related infrastructure activities, coupled with upbeat rural and private housing demand led to a double digit growth last year. According to dealers (sample size 20), growth will continue to be buoyant in the near term as 1) semi-government projects are expected to be in full swing (as they try to deploy allocated funds before the fiscal year end in a bid to get more allocations next year) and 2) Implementation of the Sixth Pay Commission recommendations will continue to boost demand for private housing. 56% of dealers believed that the cement demand will remain healthy during the peak construction season.
Cement prices have declined in Q3 FY10, resulting in a decline in average realisation sequentially for all the players. Since Jan’ 10, acceleration in infrastructure activity, strong housing demand, logistics issues and supply constraints have led to a sharp increase in cement prices in Northern and Eastern regions. However, prices in South and West have stabilized after a swift correction witnessed during the previous quarter. Prices in Central region are witnessing divergent trends with UP seeing a hike of Rs15-20 per 50kg bag in the last 45 days, while subdued demand resulted in a modest hike in Madhya Pradesh.
About 56% of the dealers surveyed expect prices to go up from the current levels by 5-10% in the near term. However, only 22% (mostly South-based) are worried about the current supply glut and thus expect the prices to decline in the next 2-3 months.
Mutual Funds Thermometer as on February 05, 2010
Given below is the summary of performance of the mutual fund industry in
Key observations
± Second time in a row, NAV of equity diversified funds declined sharply on a fortnightly basis. The fall was due to heavy sell-off in equity markets on account of weak global cues. Out of 190 equity diversified funds, 145 contained their downside well as compare to the benchmark S&P Nifty. The category average was down by 4.1%, whereas S&P Nifty was down by 4.9% this fortnight. Midcap funds continued to be in the top quartile. Fund which fell the least during the fortnight were Edelweiss Absolute Return Equity (-0.6%), HDFC Growth (-1.9%) and Religare Mid N Small Cap (-1.9%). Among the top losers were JM Mid Cap (-6.8%) and JM Core 11 (-6.9%).
± Being defensive in nature, both FMCG and pharma oriented funds delivered positive returns in a market with a bearish bias. SBI Magnum FMCG, Franklin Pharma and UTI Pharma & Healthcare were the only gainers this fortnight. They delivered a return of 2.9%, 1.3% and 0.4% respectively. NAVs of realty, infrastructure and technology oriented funds declined the most during the fortnight on account of heavy selling.
± Capital Protection balanced funds continued to outperform other funds in the balanced category. The average return of these funds was down by 0.4%, whereas the benchmark index Crisil Balanced index was down by 3.4% on a fortnightly basis. Funds with maximum equity exposure were the major losers’ viz. LICMF Balanced (-5.9%), Tata SIP (-5.5%) and Escorts Balanced (-4.6%).
± After the monetary policy announcement, bond funds ended flat this fortnight. The category average of gilt funds and income funds were -0.1% and +0.04% respectively. Among the large corpuses in the Gilt Fund category, UTI G-Sec-Invest, Templeton India G-Sec-Treasury and Tata Gilt SMF were the gainers. Among the income fund category, Templeton India Income Opportunities, Fortis Flexi Debt-Reg and Birla SL Medium Term-Reg delivered an average return of 0.26%.
± On ETF front, Gold ETFs’ NAV softened due to the strength seen in the dollar. On an average it delivered a return of 0.1% on a fortnightly basis. PSU Bank ETF’s continued its downward trend, falling the most in this fortnight. Major losers among the category were PSU Bank BeES and Kotak PSU Bank ETF, down by 5.6%.
Weekly Update: Debt Market - week ended February 05, 2010
± During the week, yields hardened across different tenures. Yield of the benchmark 10-year G-sec increased by 10bps on a weekly basis to 7.67% while the yield of 1-year G-Sec surged by 58bps.
± Last auction of the FY10 borrowing program of the Government worth Rs80bn was completed on Friday. The cut-off yield of bonds was higher than expected.
± The food inflation inched-up to 17.6% for the week ended Jan 23 vis-à-vis 17.4% for previous week. Primary articles index was up 14.56% on yoy basis.
± RBI withdrew the facility of short-term foreign currency borrowings provided to NBFCs and housing finance companies with immediate effect on Feb 03, 2010.
± The World Bank estimated 6% growth for Indian economy for FY10 and forecasted 7.5% growth for FY11.
± The Bank of England’s Monetary Policy Committee voted to maintain the official bank rate at 0.5% and its stock of purchases of government and corporate debt to be financed by issuance of central bank reserves at £200bn.
Corporate Snippets
± Tata Motors may reopen Nano bookings before December. (BS)
± Larsen & Toubro is gearing up to enter the general insurance business with no plans of a foray into the life insurance space. (BL)
± Reliance Industries gives a US$2bn acquisition proposal to Canadian oil-sand major Value Creation Inc. (BS)
± After an uncertain three days of the NTPC's FPO, the issue was subscribed 1.2x on its last day, according to NSE data. (BL)
± Tata Steel, Nippon Steel joint venture plans to invest US$400m to set up an automobile venture in
± Mahindra Satyam wins two multi-million dollar contracts in
± Indiabulls Group plans to develop a 2500 acre SEZ at Sinnar near Nashik in association with the Maharashtra Industrial Development Corporation. (BS)
± Maruti looks to export Ritz to SE Asia,
± DLF looks to start construction work of Rs10bn Infopark project in the city by April 1 this year. (BS)
± Tata Steel says steel sales from its Indian operations rose 9% in January to 0.6mn tons. (DNA)
± US FDA has rapped Ranbaxy's US-based subsidiary, Ohm Labs Inc, for manufacturing an old `unapproved drug'. (FE)
± NTPC plans to start on 500MW project in
± Maruti to produce over 1mn cars in 2009-10, says Suzuki. (FE)
± The Goa bench of the Bombay High Court orders a halt on any activity at DLF’s
± HUL may hike prices by mid-year. (TOI)
± Shree Renuka plans to put in final bid for
± McNally Bharat bags Rs 57-cr orders from Hindalco. (BS)
± Istithmar PJSC,
± TPG looks to acquire a majority stake in Vishal Retail for Rs2.5bn. (BS)
± Dishman Pharma receives USFDA nod for producing Active Pharmaceutical Ingredients (API) at its Naroda facility. (BS)
± ICICI Prudential investment arm set to buy 40% in residential project of the Ansal API group in
± BPCL plans to convert 60 ‘In&Out’ outlets into profit making ventures such as food courts and coffee shops by the next fiscal. (ET)
± Inox Leisure purchased an additional 7.21% stake in Fame India through a block deal for Rs127.7mn. (ET)
± Kingfisher Airlines hires Seabury Aviation & Aerospace, US to advise on its restructure plans. (BS)
± Reliance Media objects to Inox’s Fame acquisition at Rs 44 a share. (ET)
± Electrotherm India is looking at exporting its Yobykes to developed countries like the
± Graphite India has lined up investments of Rs4bn over the next one year for capacity expansions and setting up a thermal power plant in
± Eveready mulls Rs1.5bn acquisition of a FMCG firm. (FE)
± BSNL says that it has rolled out 3G services in 318 cities with 0.9mn subscribers. (BL)
Economic snippets
± Foreign exchange reserves fell US$1.98bn to US$280.95bn during the week ended January 29. (BS)
± PM signals further opening of retail trade to curb price rise. (BL)
± Government plans to set up an exclusive Rs30bn pharma fund to promote innovation, R&D in drug discovery. (BL)
± Cap on FDI needing cabinet nod raised. (TOI)
± The long awaited reform of
± The government has decided not to take any fresh initiatives to discuss mergers and acquisitions among public sector banks. (BS)
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