Market Mantra
Market outlook
Care to dare!
It is not because things are difficult that we do not dare; it is because we do not dare that they are difficult.
The difficulties seem to take a back seat as the market is slated to open in the green. US stocks took off well after a President’s Day break following better-than-expected quarterly results from Merck and Barclays. Commodity prices and shares got a boost from a weaker dollar.
A kind of suspense continues on the outcome of the budget which is keeping investors on tenterhooks. With LIC expecting to invest further ~Rs100bn in the equity markets by March-end, many hope to quickly ride past the 5000 mark around budget time.
The Dow Jones rose 170 points, its biggest daily gain since Nov. 9 ‘09. The S&P 500 was up 1.8% while the Nasdaq added 1.4%. Asian markets are all up ~2%.
With most of the major Asian markets back with a bang we expect a solid start. However, one must not forget possibilities of a partial and calibrated rollback of the fiscal stimulus. Another daunting task for the government is to cap inflation which is on the verge of crossing double digit.
Trading ideas (Time period: 1-3 days)
Century Textiles (BUY, CMP Rs496, Target Rs525): On the daily chart, the stock has given a bullish breakout. It suggests that its short-term trend has turned up. Over the last two weeks, the stock was consolidating in the range of Rs448-490. On Tuesday, the stock bounced back from the low of Rs475. The upmove was well 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 up to the levels of Rs490 for an initial target of Rs525. It is advisable to maintain a stop loss of Rs484.
Bharat Forge (BUY, CMP Rs257, Target Rs275): The stock has been on a downtrend since its
Derivative strategies (Time period: Till expiry)
± Long Noida Toll Bridge Feb Future @ Rs36 for the target price of Rs39 and stop loss placed at Rs34.50.
Lot size: 8,200
Remarks: Net maximum profit of Rs24,600 and net maximum loss Rs12,300.
± Long Mphasis Feb Future @ Rs742 for the target price of Rs770 and stop loss placed at Rs720.
Lot size: 800.
Remarks: Net maximum profit of Rs22,400 and net maximum loss Rs17,600.
Mutual funds
| Fund focus | |||||||
| ICICI Prudential Dynamic Plan | Invest | ||||||
| Fund manager | Sankaran Naren | | Min investment | Rs5,000 | |||
| Latest NAV | Rs89.9 | | Entry load | Nil | |||
| NAV 52 high/low | Rs94/44 | | Exit load | 1% <1 year | |||
| Latest AUM | Rs1,890cr | | Latest dividend (under dividend option) | 12% (19-Feb-10) | |||
| Type | Open-ended | | Benchmark | S&P Nifty | |||
| Class | Equity-diversified | | Asset allocation | Equity (83%), Debt (0%), Cash (17%) | |||
| Options | Growth & dividend | | Expense ratio | 1.9% | |||
| | | | | | | | |
Result Update: Tata Steel Ltd - MP
CMP Rs550, Target Price Rs548, Downside 0.4%
± Topline increased 3.2% qoq, led by strong steel realizations in Europe and Indian operations
± Tata Steel Europe managed to turn around due to higher realizations and lower raw material costs, registering an operating profit of US$142mn
± The company registered an operating income of Rs29.5bn against Rs3.7bn in Q2 FY10; higher tax outgo reduced the growth in PAT
± Tata Steel to partially mouthball Teeside’s blast furnace and Lackenby steelmaking by end of February ‘10
± European volumes to decline in Q4 FY10 due to mouthballing of Teeside plant and a 4 week planned shutdown of one of its blast furnace
± Upgrade to Market Performer with a revised target price of Rs548
What’s In, What’s Out – January 2010
Given below is the snapshot of mutual fund activity in Indian equities. The information includes performance of mutual funds, current cash levels and stocks which are in and out of flavour.
Key observations
± Mutual Fund industry began the year 2010 on a depressing note as weakness across global markets hurt the overall sentiment. The fall during the month was stepper than the previous month’s decline. Industry’s Average Asset under Management (AAUM) declined by 4.1% in January vis-à-vis 1.6% in December. The combined AAUM of all the fund houses stood at Rs7,627bn, down by Rs329bn.
± The top-10 fund houses’ AAUM declined more than the industry AAUM. It fell by 4.5% mom, 40bps more than industry’s average. Kotak Mahindra Mutual Fund underperformed the most among the top-10 AMCs, as its AAUM declined by 11.1% mom. It was followed by Birla Sun Life Mutual Fund and LIC Mutual Fund, who’s AAUMs fell by ~8% mom. The only fund house, in the top-10, to register a growth and outperform the industry was Franklin Templeton Mutual Fund. Its AAUM was up by 1.4% mom.
± Out of the 37 fund houses, only 13 reported a monthly growth. The augmentations in AAUMs were mainly observed in the mid-sized and small-sized fund houses. The top three monthly gainers in the industry were Baroda Pioneer Mutual Fund (+23.8%), Sahara Mutual Fund (+21.9%) and Canara Robeco Mutual Fund (+8%).
± For the first time since the abolition of the entry load, equity funds witnessed a positive net inflow. Three funds, namely Axis Equity, Fidelity India Value and Sundaram BNPP Select PSU Fund, collectively garnered Rs15.9bn via new fund offerings. Income funds, after witnessing an outflow in December, saw a positive inflow of Rs1,061bn in January. Category-wise, income funds gained 800bps in January ‘10. However, Equity and ELSS category witnessed a decline in the total category share by 400bps and 100bps, respectively.
± Among the top-12 fund houses, top additions were made in the interest rate sensitive sectors like Real Estate, Banking and Cement. Lanco Infratech was among the top five additions made by HDFC Mutual Fund, IDFC Mutual Fund, SBI Mutual Fund and UTI Mutual Fund. However, top-12 fund houses reduced their exposure to Metals & Mining, Power and Telecommunications segments.
± Among the equity schemes, cash levels have relatively increased to 6.4% vis-à-vis 5.5% in December ‘09 on profits booked by fund managers. Out of 12 fund houses, nine increased their cash levels in real terms. Birla SL Mutual Fund, SBI Mutual Fund and UTI Mutual Fund were the top three to increase their cash allocation. Among the top-12 houses, Reliance Mutual Fund maintains the highest cash reserves in real terms at Rs30bn and second highest in percentage terms at 8.5% of the total equity corpus.
± After remaining net buyers for the past ten months, Foreign Institutional Investors (FII) turned net sellers in January, offloading Rs5bn worth of equities. Domestic Mutual Fund players joined their international counterparts, by selling Rs13bn worth of equities. However, on the debt front, Indian Mutual Funds and FIIs were buyers worth Rs313bn and Rs89bn, respectively.
Corporate Snippets
± Dutch firm Lyondell Basell Industries’ agreement with its creditors, that will help its emergence from Chapter11, could hit Reliance Industries plans. (FE)
± Government has demanded another US$2.7mn from Reliance Industries towards royalty and profit petroleum payments on gas produced from the Krishna-Godavari (KG) D6 for the six-month period from April-September 2009, arguing that the company did not take into account the marketing margin it levies while calculating the dues. (ET)
± Bharti Airtel said the acquisition of Zain Group's African assets would result in a total payout of US$9bn, which includes any loans payable by the operating companies to Zain Group. (BL)
± TCS said it will review salary increment plans by this month-end, as signs of revival of demand in the sector get stronger by the day. (ET)
± Entering the business of combat vehicles manufacturing for the defence sector, Tata Motors plans to bid to supply light bullet-proof vehicles to the Indian Army, with a possible order size of Rs3.5bn. (BS)
± Tata Motors said it has cut production by about 5-10% in its commercial vehicle business since January due to shortage of key components like trucks/bus radial tyres. (BL)
± Tata Motors plans to increase prices of its commercial vehicles by 1-2% from April when the new emission norms become effective. (ET)
± Tata Motors is looking to offload stake in its finance arm, Tata Motors Finance. (ET)
± Italian defence and aerospace manufacturer Finmeccanica unit AgustaWestland and Tata Sons signed a JV to assemble AW119 helicopters in Hyderabad. (BS)
± BHEL will sign a MoU with Japan's Toshiba Corp for a transmission and distribution joint venture to offer turnkey services in the country’s power transmission sector and set up focus on the distribution segment as well. (BL)
± The ground-breaking ceremony for the 4,000MW
± Tata Steel could face industrial action in the latest tragic twist to the ongoing saga at its British division, Corus. (BL)
± Wipro announced its tie up with Texas Instruments to offer services on Texas Instruments' OMAP processors. (FE)
± The ongoing strike by contract workers at the Durgapur Steel Plant of SAIL, if continues for a few more days, could affect the plant's normal production of 6,700 tons of hot metal/day. (BL)
± SAIL targets to commission its Rs150bn expanded production line at its Bhilai unit by the end of FY13. (ET)
± The Aditya Birla Group plans to set up Rs10bn aluminium downstream project near its existing smelter at Hirakud where it envisages setting up a rolling mill to manufacture high quality aluminium flat rolled products and cans. (BS)
± L&T announced that it has submitted a joint proposal with US defence technology firm Raytheon to upgrade India’s T-72 tanks. (BS)
± L&T has lined up an investment of more than US$400mn to expand its ship building capacity, especially for defence, by mid-2011. (BS)
± Tata Power and Korea East-West Power have entered into a pact to identify and execute operation and maintenance opportunities in power generation assets in Asia, the Gulf region and Africa. (BL)
± Reliance Communications has placed an order to buy close to 2mn CDMA handsets from Huawei Technologies of China for about Rs3.4bn. (BL)
± Jaiprakash Associates plans to invest Rs12.5bn in raising its clinker and cement manufacturing capacity at its existing facility in Himachal Pradesh. (BS)
± The Rajiv Gandhi International Airport at Shamshabad here, developed and operated by GMR Hyderabad International Airport Ltd, is expecting to post operating profits in a span of two years. (BS)
± REpower, in which Suzlon Energy holds a majority stake, bagged an order from Eole-Res SA of France to supply 26 wind turbines of 2MW each, generating a total capacity of 52MW. (FE)
± Essar Steel said it is looking at increasing prices of its products amid higher input costs and improved demand by April-May this year. (FE)
± Bharat Electronics Ltd has signed a follow-on contract with the Suriname Armed Forces for the delivery of Coastal Communication System Network server. (BL)
± United Breweries is eyeing a 20% growth in its beer sales in the current fiscal, to touch 100mn cases by March 2010. (BS)
± Jet Airways announced the commencement of its daily non-stop flights from Mumbai to Johannesburg from April 14. (BL)
± Chennai Petroleum hopes the government will hike prices of petrol and diesel sufficiently to pay back refiners' investments in auto fuel upgradation. (BL)
± JK Lakshmi Cement plans to set up a new plant in Gujarat with an investment of Rs10bn over the next 3-4 years to meet rising cement demand from the infrastructure sector. (ET)
± TVS Motor launched its 110cc clutch-less TVS Jive in Andhra Pradesh. (BL)
± Honda Motorcycle & Scooter India launched its first mass segment bike, CB Twister, in Hyderabad. (BL)
± Two major IT investors - MindTree Consulting and ICICI Bank, whose proposed projects in the city were put on the back burner for couple of years, seem to be gearing up to translate their plans into reality. (BS)
± Spice Jet plans to expand its capacity in the domestic market as it gets delivery of four new aircrafts by end of this year and three next year. (FE)
± MTNL plans to set aside 30% more capital expenditure for FY11, at Rs13bn. (FE)
± Balaji Telefilms has gone for a corporate image makeover, unveiling a brand new visual identity (Alt Entertainment), with plans to diversify into movie and new media production. (ET)
± Golden Tobacco said the board has approved an agreement with a builder to jointly develop its Vile Parle property in Mumbai. (ET)
± United Bank of India has received the final clearance from SEBI for its IPO which is expected to hit the market in the last week of February. (ET)
± Atlas Copco (India) Ltd, a subsidiary of Atlas Copco AB, plans to expand its product range in Construction & Mining segment. (BS)
± The country’s largest insurer LIC said it would pump in about Rs100bn in the stock markets by March, taking its annual equity investment to Rs600bn this financial year. (BS)
Economic snippets
± The Union petroleum ministry plans to take up the issue of revising the price of APM gas with the Union Cabinet, with a recommendation for 44% increase in price retrospectively from April 1, 2009. (BS)
± The Department of Telecommunications says it requires some time to decide on the 3G auction, while the Union law and finance ministries have cleared the way. (BS)
± The Indian Sugar Mills Association has urged the government to withdraw the 20% levy in the new season starting October 1 and also discontinue with its policy of exempting imported sugar from stock holding limits. (BS)
± The National Fibre Policy, aimed at restoring competitiveness of the domestic textile industry, is set to come into being early in the next financial year, 2010-11. (BS)
± The steel industry expects the Centre to increase import duty on cold rolled and galvanised steel to 7.5% from 5% and withdraw the 5% duty on ferro alloys as most of these are not produced in India. (BL)
± The Textile Ministry has sought Rs10.5bn additional allocation under the Technology Upgradation Fund in the Budget. (BL)
± India and the 10-nation South East Asian trading bloc ASEAN are expected to widen their trade engagement by signing in October, a free trade agreement (FTA) that will cover services and investment. (ET)
± SEBI has agreed to change the auction norms for follow on public offers to allow institutional bidders lower their bids in response to a request from the department of disinvestment. (ET)
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