Market Mantra
Market outlook
Populism on track, prosperity could derail!
One who walks in another's tracks leaves no footprints.
Railway Minister Mamata Banerjee could be inspired to chart her on course when she presents Railway Budget today. She is unlikely to follow her predecessor though, who brought back glory to the Railways and earned plaudit for himself.
With an eye on
As for the markets, there is no peace or happiness at start. We expect a soft start owing to weak global markets. By itself, the Railway Budget is not expected to swing the mood on the bourses. That might happen when the Union Budget is out on Friday.
But, even that might not be able to do so, given the concerns on local as well as global front. In short, the choppy consolidation phase may prevail for a while before the market breaks out of the current rangebound activity. The best way to overcome near-term uncertainty is to stay put and not do anything adventurous.
Trading ideas (Time period: 1-3 days)
HDFC (BUY, CMP Rs2520, Target Rs2570): HDFC has been on an upswing for the past week and is pointing towards further upside as the stock has managed to crossover its 200 Day Moving Average (DMA). This move was accompanied by smart surge in volumes. The argument further gets confirmation as the stock has broken the short term downward trend line. The stock has corrected from the high of Rs2845 in December 2009 to touch a low of Rs2,300 forming a downward sloping channel. This bullish close above its long term moving average and the end of the short term downtrend signals a healthy upside. Momentum oscillators also indicate that the stock has formed an intermediate bottom. We recommend traders to buy the stock between the range of Rs2505-2520 with SL of Rs2490 for a target of Rs2570.
Mahindra & Mahindra (SELL, CMP Rs980, Target Rs955): On the Weekly chart, the stock has been under pressure for the past seven weeks. M&M has also broken its long term trend line on the weekly chart which it managed to hold on to for the past one year. On the daily charts, the stock looks to be forming a lower top lower bottom pattern, which signals further downside in the coming days. In addition offloading in the stock in the past few days was accompanied with rising volumes. Given the above technical evidence, we recommend traders to sell the stock between the levels of Rs980-985 with a stop loss of Rs994 for a target of Rs955.
Derivative strategies (Time period: Till expiry)
± Long Financial Technologies Feb Future @ Rs1,516 for the target price of Rs1,565 and stop loss placed at Rs1,500.
Remarks: Net maximum profit of Rs7,350 and net maximum loss Rs900.
± Long Hindalco Feb Future @ Rs154 for the target price of Rs164 and stop loss placed at Rs149.
Remarks: Net maximum profit of Rs35,180 and net maximum loss Rs17,590.
Mutual funds
| Fund focus | |||||||
| UTI Opportunities Fund | Invest | ||||||
| Fund manager | Harsha Upadhyaya | | Min investment | Rs5,000 | |||
| Latest NAV | Rs22.7 | | Entry load | Nil | |||
| NAV 52 high/low | Rs25/11 | | Exit load | 1% <1 year | |||
| Latest AUM | Rs1,200cr | | Latest dividend (under dividend option) | 15% (22-Jan-10) | |||
| Type | Open-ended | | Benchmark | BSE - 100 | |||
| Class | Equity-diversified | | Asset allocation | Equity (77%), Debt (0%), Cash (23%) | |||
| Options | Growth & dividend | | Expense ratio | 2.2% | |||
| | | | | | | | |
Company Update: Infotech Enterprises – Market Performer
CMP Rs333, Target Price Rs351, Upside 5.3%
Our recent interaction with Infotech’s management has increased our conviction in company’s earnings growth delivery over next two years. Infotech stands out in the mid-cap IT space due to its niche character, healthy revenue visibility, margin resilience, low attrition and strong balance sheet (C&E at ~40%). While maintaining revenue estimates, we increase margin assumptions for FY11 (by 50bps) and FY12 (by 120bps) materially. Resultantly, we upgrade earnings estimate by 2% for FY11 and 8% for FY12. Our 1-year target price based on 12x FY12 P/E (assigned above median mid-cap multiple) has been revised upwards by 8% to Rs351. However, the recent stock outerperformance limits any substantial absolute upside and therefore we retain MP on Infotech.
Corporate Snippets
± Petroleum Minister said Reliance Industries need not club marketing margin with the gas sale price for the purpose of calculating royalty - a statement that overturns a suggestion by oil regulator, the Director General of Hydrocarbons. (BS)
± Infosys expects an increase in its patent filings on the back of new technologies like cloud computing, analytics and emerging information and communication technologies. (BS)
± Cairn India's 670km long crude carrier pipeline is nearing completion and will be commissioned next month. (BL)
± Maruti Suzuki admitted to recalling 100,000 A-Stars which were manufactured before August 22, 2009 to replace faulty components that could cause fuel leakages. (BS)
± HDFC has ruled out any immediate hike in its lending rates given the surplus liquidity in the system and low credit demand. (ET)
± The Punjab government has cleared the phase-I of
± Public sector banks and insurance majors step in to salvage the FPO of state-owned Rural Electrification Corporation which closed with the issue being oversubscribed 3x. (BS)
± Axis Bank’s private equity arm Axis Private Equity is mulling to separate itself from the parent company in the coming weeks - a move that is part of the group’s overall restructuring plan. (ET)
± UK-based GlaxoSmithKline’s plan to buy about 5% stake in Dr Reddy’s Laboratories for US$150-160mn is stuck and unlikely to happen. (ET)
± Reliance Media Works which is locked in a takeover battle for multiplex operator Fame with rival Inox, has challenged the sale of majority shares of Fame to Inox citing the existence of an undisclosed “preexisting financial arrangement” between the two. (ET)
± Religare Enterprises is acquiring a majority stake in Northgate Capital, an international private equity and venture capital firm. (ET)
± Havells India plans to acquire a company in
± Satyam Computer has filed a fresh lawsuit in a
± The 11-day-long strike by contractors' workers at SAIL’s Durgapur Steel Plant was called off last night. (BL)
± Kalpataru Power plans to raise up to US$125mn through issue of shares to institutional investors. (FE)
± Radico Khaitan is looking to ramp up its wine sales by introducing ‘Carlo Rossi’ brand in the Indian market. (ET)
± Shree Cement targets to earn Rs4.6bn by selling power next year as it looks to de-risk its income from the cyclical downturn of cement business. (ET)
± Tata Communications plans to invest US$200mn in the
± Infinite Convergence Solutions, a wholly-owned subsidiary of Infinite Computer Solutions, said it will further develop and support Motorola's software-enabled short message service and multi-media messaging service solutions. (BL)
± Texmaco Ltd, through a scheme of de-merger, will transfer its heavy engineering and steel foundry divisions, with all their assets and liabilities, to Texmaco Machines Ltd, its wholly-owned subsidiary. (BL)
± The Tamil Nadu government cleared JK Tyre’s proposal for setting up a new production facility in the state, which would attract around Rs16bn investment. (BS)
± The Shipping Corporation of India proposes to hike freight rate on the west-bound trade from
± The initial share sale offer of United Bank of India got fully subscribed on the first day of issue on Tuesday. (ET)
± Considering a proposal of asking IIFCL to follow the Reserve Bank of
± French cement company Lafarge is betting big on its Indian operations in 2010, with volume growth aimed at a high 11% against its average growth expectation for the world of only 5%. (BS)
Economic snippets
± The Andhra Pradesh government has pre-qualified all the eight bidders for issue of request for proposal and other documents for submission of financial bids for the development of the Rs121bn Hyderabad Metro Rail project. (BS)
± The government proposes to come out with standard input and output norms for service tax and excise. (BS)
± After NHAI banned companies with three road projects pending for financial closure from bidding any further, the industry has asked the government to relax the definition of financial closure. (BS)
± The commerce and industry ministry may withdraw incentives offered to certain export-oriented industries and reallocate these to sectors that are struggling for survival after a review in April. (BS)
± The Central Board of Excise and Customs has recommended amending the rules to widen the scope of levying service tax on the entertainment business. (BS)
± Foreign currency loans by Indian companies declined 15.3% to US$1.32bn in January 2010 from US$1.56bn a year ago, according to data released by the RBI. (BS)
± The tractor industry is hopeful that the zero excise duty levy on tractors will continue. (BL)
± Asian Development Bank is to provide, in first tranche, a sum of US$60.3mn to the Union Government for funding Assam Power Sector Enhancement Programme. (BL)
± The Government has imposed a moratorium on granting environmental clearances for mining proposals in
± UP government has revoked the ban imposed on raw sugar imports into the state end last year, thus making available an additional 1mn tons of sugar for the open market. (ET)
± The finance minister Pranab Mukherjee said that the proposed unified GST will not be introduced from April 1 this year as was originally planned. (FE)
± National Mission on Enhanced Energy Efficiency (NMEEE), a programme aimed at building a market worth Rs740bn for energy efficient products, may be taken up by the Cabinet in a month's time. (ET)
± Gems and jewellery exports surged 61.80% in January to US$2.6bn. (ET)
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