Market Mantra: Technicals - Grasim (Buy), Pantaloon (Buy); F&O - Hindustan Construction (Long), HDFC Bank (Long); Report - JSW Steel

 

 

Market Mantra

 

Market outlook

Hope is back, though not high!

 

Hope is the expectation that something outside of ourselves is going to come to our rescue and we will live happily ever after.

 

Looks like the stormy weather for world equity markets has eased a little amid speculation of an impending rescue of debt-laden Greece. Risk tolerance has improved just a tad as well. However, things remain murky and uncertain given a spate of concerns – local and global. We expect the Indian market to rise at start as global markets are mostly up. The Nifty may continue to swing in a range of 4700-4900 in the near term.

 

For the Nifty to cross 5000 again the global sentiment should remain positive on a consistent basis. FII selling too has to abate.

 

On the whole, the market will remain in a consolidation mode till we approach the Railway Budget and Union Budget. The main indices could remain sideways and choppy during the summer depending on what the Finance Minister says in the Budget. Thereafter, the monsoon factor could have a significant bearing on sentiment. Among the other factors to watch out for going forward will be earnings, valuations, fund flows, inflation, interest rates, policy announcements (if any) and of course the ever changing global events.

 

Trading ideas (Time period: 1-3 days)

Grasim (BUY, CMP Rs2,702, Target Rs2,900)

The stock has been in strong uptrend after correcting from the peak of Rs2900 it touched during the month of December. The strong up moves has been backed by sharp surge in volumes. The momentum indicator like RSI and MACD are exhibiting positive divergence. The stock has managed to hold the key support levels on a closing basis despite the widespread volatility. We believe the cross above its critical resistance zone Rs2,710 on a closing basis may see rally extending to Rs2,900 and above. We recommend traders to buy the stock at current levels for a 2-3 weeks target of Rs2900 with a strict stop loss placed at Rs2,640 

 

Pantaloon (BUY, CMP Rs420, Target Rs440)

Last few months for the stock has been moving in a range of Rs390-440. However, yesterday it broke above its downward sloping trend line and gave a close at Rs420 accompanied by smart surge in volumes. We expect momentum in the counter to continue till the levels of Rs440. The daily oscillators are also suggesting a positive formation further authenticating the argument. Also, the stock is trading well above its short-term moving averages. We recommend high risk traders to buy the stock at current levels and on decline to levels of Rs415 for a short term target of Rs440. It is advisable to maintain a stop loss of Rs411.

 

Derivative strategies (Time period: Till expiry)

±       Long Hindustan Construction Feb Future @ Rs135 for the target price of Rs142 and stop loss placed at Rs133.

Lot size: 2,100

Remarks: Net maximum profit of Rs14,700 and net maximum loss Rs4,200.

 

±       Long HDFC Bank Feb Future @ Rs1,591 for the target price of Rs1,630 and stop loss placed at Rs1,575.

Lot size: 200.

Remarks: Net maximum profit of Rs7,800 and net maximum loss Rs3,200.

 

Commodities – Metals (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Gold – Apr	H. Sell	16345	16210	16410
Silver - Mar	Sell	24370	24160	24480
Copper - Feb	Sell	311	305	314.2
Zinc – Feb	H. Sell	99.2	96.1	100.5
Lead - Feb	H. Sell	96.2	94.3	97.1
Aluminum - Feb	H. Sell	95.2	93.7	96.3
Nickel - Feb	Trade as per intraday calls
Crude Oil - Feb	Sell	3495	3450	3510
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	Rs170.9		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%

 

 

Company Update: JSW Steel - BUY

CMP Rs961, Target Price Rs1,357, Upside 41.3%

 

We met the management of JSW Steel to understand its strategy to offset the impact of rising raw material costs. The management was confident of maintaining its EBIDTA/ton of US$150/ton even though the increase in steel prices would be lower than that in raw material costs. It expects capacity utilization rates to remain high over the next two years and expects production to rise from 6mtpa in FY10 to 7mtpa in FY11. The impact of jump in raw material costs in FY11 would be partially negated by the commissioning of beneficiation plant and the HSM mill. The company has managed to increase steel prices by Rs2,500/ton since December ‘09. We expect JSW’s sales volume to witness 25% CAGR over the period FY10-12E. Robust volume growth coupled with increase in raw material integration will lead to earnings CAGR of 66.2% over FY10-12E. We maintain our BUY recommendation on the stock with a price target of Rs1,357.

 

 

Corporate Snippets

±      TCS to hire 21% more in FY11. (BS)

±      SAIL divestment plan to be presented to cabinet in 10 days. (ET)

±      Hindalco to raise Rs49bn via debt. (BS)

±      The dispute between Netherlands based Brakel Corporation and Reliance Infra for twin Hydro projects in Himachal Pradesh has reached the Supreme Court. (ET)

±      ONGC not to set up arm for Assam operations. (BL)

±      RIL plans to shift registered office to Jamnagar. (ET)

±      Government plans private placement of BSNL shares. (BS)

±      Telenor buys additional 7% stake in Unitech Wireless for more than Rs20bn. (ET)

±      Shree Cement is setting up a grinding unit at Roorkee and Suratgarh for an investment of Rs3.5bn. (ET)

±      IDBI hikes FD rates by 50bps. (ET)

±      Ranbaxy to market Daiichi products in Mexico. (ET)

±      Kingfisher Airlines plans to raise Rs4bn via 1:1 rights issue. (ET)

±      Tata Tea to enter mass packaged mineral water market. (BL)

±      Fortis to raise Rs12.5bn by issuing shares in domestic and international market. (ET)

±      Essar Steel plans to raise US$1bn from overseas markets to fund expansions. (ET)

±      Bombay Dyeing promoters’ eye to hike their stake by 5% by subscribing to convertible warrants. (ET)

±      Elder Pharma enters into injectable segment with a new manufacturing facility at Dehradun. (BL)

±      Zensar Technologies may go for acquisition by September. (BL)

±      NIIT Technologies bags order worth Rs2.3bn from Border Security Forces. (BL)

 

Economic snippets

±      FM to meet petroleum minister to discuss political feasible price rise in fuel prices. (ET)

±      RBI to introduce a new benchmark from April 2010 that will more accurately reflect movement in interest rates. (ET)

±      Centre plans to freeze F&O trade in companies opting for FPOs. (ET)

±      Government may remove anomaly in import duty structure, which is affecting the competitiveness of domestic firms. (ET)

±      Excise duties are likely to be raised by 2-4% in forthcoming budget. (BL)

±      Issuance of oil bonds are expected to be phased out as the first step towards containing fiscal deficit. (BL)

±      All India Tyre Dealer Federation has asked union finance and commerce minister to remove import curbs on tyres. (BL)

 

 

 

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