Market Mantra: Technicals - JP Associates (Sell), BGR Energy (Buy); F&O - Yes Bank (Long), Cairn (Long); Report - Corporation Bank (Buy)

 

 

Market Mantra

 

Market outlook

Lackluster opening on the cards

                                                                                              

Experience teaches slowly and at the cost of mistakes.

 

Hopefully, the bulls will have learnt from past experience and will not go overboard with any sudden spurt. After a strong rally, we expect a subdued start as global markets have not extended this week’s spurt. However, the trading range could shift to 4900-5000 for the Nifty. A fall back to 4800 is not ruled out though and resistance is likely to kick in upwards of 5000. FII flows should turn positive, Budget should not disappoint and global situation must improve for a sustainable and meaningful advance above 5000.

 

Stocks in the budget-sensitive sectors could see action in the run-up to the big event. So, sectors like railways, power, infra, education, healthcare, fertilizers and textiles could hog the limelight. PSU oil marketing companies will gain in the wake of the reformist recommendations of the Kirit Parikh panel. The big question is will the Government bite the bullet on oil sector deregulation? The Government will also be hard pressed to return to the path of fiscal consolidation given the postponement of the 3G auction and expected shortfall in disinvestment proceeds.

 

Trading ideas (Time period: 1-3 days)

JP Associates (SELL, CMP Rs137, Target Rs127): On the weekly chart, the stock has broken below the small consolidation pattern. It presents great opportunity for the traders to jump in on the downtrend. An occurrence of this event indicates further selling and continuation of the downtrend. The stock has been moving in the range of Rs167-133 since last week of October 2009. A break below Rs133 could see the stock testing levels of Rs125 and below. We recommend traders to sell the stock for a target of Rs127. It is advisable to maintain a stop loss of Rs142 on all short positions.

 

BGR Energy (BUY, CMP Rs502, Target Rs540): On Wednesday, the stock bounced sharply on decent volumes from its support levels of Rs485-490. It now faces a resistance at Rs645 levels and should have a minimum upside till that level. If it breaks above the levels of Rs535, it could rise till Rs550 in the short term. Traders are advised to maintain a stop loss of Rs485 and go long. In our view, the stock has formed a medium term bottom and the pullback is likely to take the stock up to the levels of Rs540 and higher. The daily RSI is exhibiting positive divergences. Based on the above-mentioned evidences, we recommend a buy for traders with high risk appetite.

 

Derivative strategies (Time period: Till expiry)

±       Long Yes Bank Feb Future @ Rs251 for the target price of Rs265 and stop loss placed at Rs245.

Lot size: 2,200

Remarks: Net maximum profit of Rs30,800 and net maximum loss Rs13,200.

 

±       Long Cairn Feb Future @ Rs263 for the target price of Rs278 and stop loss placed at Rs255.

Lot size: 1,250.

Remarks: Net maximum profit of Rs18,750 and net maximum loss Rs10,000.

 

Commodities – Metals (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Gold - Apr	Sell	Below 16620	16570, 16530	16655
Silver - Mar	Sell	Below 25500	25350, 25215	25623
Copper - Feb	Sell	306-307	303, 300	309.3
Zinc - Feb	Sell	Around 97.5	96.2, 95	98.4
Lead - Feb	Sell	Below 92.8	91.5, 90.2	93.7
Aluminum - Feb	Sell	Below 95.2	94, 93	96.1
Nickel - Feb	Buy	831-834	845, 857	825.8
Crude Oil - Feb	Buy	At 3540	3560, 3580	3532
Natural Gas - Feb	H. Buy	251-252	255.5, 259	248.8

 

Commodities – Agro (Time period: Intra-day)

Trade recommendation

Commodity	Strategy	Levels	Target	Stop-Loss
Pepper - Feb	H. Buy	12570-12600	12735, 12860	12490
Jeera - Feb	Sell	Below 11850	11730, 11600	11940
Turmeric - Apr	Sell	Below 6880	6840, 6800	6910
COCUDAKL - Feb	H. Sell*	Below 1154	1140, 1126	1165.5
Chana - Feb	Buy	Above 2210	2240, 2265	2195
Guar seed - Feb	Sell	Below 2395	2360, 2330	2420
Soya bean - Feb	Buy	Above 2142	2165, 2180	2125
Soya oil - Feb	Buy	Above 460.5	464, 467	457.7
Mustard seed - Apr	Buy	493-494	497, 500	491.8
Mentha oil -  Feb	Buy	569-570	574, 577	568.2

 **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	Rs174.5		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%

 

 

Initiating Coverage: Corporation Bank – BUY

CMP Rs438, Target Price Rs492, Upside 12.3%

 

Corporation Bank is a mid-sized PSU bank with a total asset base of ~Rs870bn (end FY09). The bank was established in 1906 and currently operates 1,094 branches and 1,057 ATM’s, ~75% of which are located in South & West India. Return ratios for the bank have remained attractive (RoE ~20% and RoA ~1.2%) on the back of steady rise in net profit and zero equity dilution. With loan growth running high at 26% yoy we expect the book to witness 20% CAGR over FY09-11E, translating into a 19% CAGR in net profit. Using our proprietary Bank 20 valuation model, we assign a multiple of 1.1x to Corporation Bank’s FY11 adjusted BV and arrive at 1-year price target of Rs492. Comfortable asset quality coupled with improvement in margins and CASA ratio is likely to command premium valuation. Maintain BUY.

 

Corporate Snippets

±       L&T has bagged orders worth Rs11bn. (ET)

±       Ultratech-Grasim combined will invest around Rs70bn on three greenfield facilities in the next three-four years. (ET)

±       Hemendra Kothari has bought 12% stake in ING Vyasa Life Insurance Company from Gujarat Ambuja. (ET)

±       Australia’s Rocklands Richfield has ended its takeover talks with Jindal Steel and Power. (ET)

±       SAIL has hiked flat product prices by Rs500/ton effective from February 1^st 2010. (ET)

±       Mahindra and Mahindra has launched a new version of its mini truck Maxximo. (ET)

±       Maruti Suzuki will not pass on the benefits of lower taxes for the new petrol variant of Swift. (ET)

±       National Power Exchange promoted by NTPC, NHPC and TCS to be operational by the end of December. (BS)

±       IOC wins legal battle against international oil trading company Trafigura. (BS)

±       SCI to raise the borrowing limit to Rs120bn from current Rs50bn. (BS)

±       IOC will commission projects worth Rs37bn at its Haldia refinery next week. (BL)

±       Bharat Electronics is likely to receive an order worth Rs48bn from the Akash anti-aircraft missile. (BL)

±       GE-Hitachi Nuclear plans to source special steel and forgings from L&T’s Hazira facility. (BL)

±       GMR group is considering exiting the sugar business to focus on the infrastructure sector. (BL)

±       Inox Leisure has acquired promoter’s 43% stake in Fame India for Rs665mn in cash. (ET)

±       Ashok Leyland has reported over three fold jump in commercial vehicle sales in January 2010. (ET)

±       Educomp Solution has acquired US based Zaptive Internet Services for US$1.3mn. (ET)

±       Dishman Pharma has begun restructuring its Swiss subsidiary Carbogen Amcis. (BS)

±       GMR Infra is planning to re-finance US$750mn of debt which it had taken for acquiring 50% Intergen NV. (BS)

±       Whirlpool India aims to grab 15% market share in the AC segment by 2012. (ET)

±       Indoco Remedies has formed an alliance with Watson Pharma of US to develop and manufacture generic sterile products for the US market. (BL)

±       Atlas Copco to step up global sourcing from India. (ET)

±       IPO of Satluj Jal Vidyut Nigam is unlikely in the current fiscal years says the Power Ministry. (ET)

±       Volkswagen AG plans to make its low cost car manufacturing hub. (ET)

 

Economic snippets

±       Kirit Parikh committee has suggested market linked rates for auto fuels and a sharp increase in LPG and Kersosine prices. (ET)

±       Pranob Sen, the country’s chief statistician has asked the government not to reverse fiscal stimulus till May. (ET)

±       Government will table the finance commission report on revenue sharing with states on February 25^th 2010. (ET)

±       Business activity in the service sector accelerated for the second consecutive month in January according to HSBC Markit survey. (BS)

±       Government may cut bulk sugar users norms to 10-day requirement from 15-day as of now. (BS)

±       Top banks of the country will review the future of teaser home loans scheme in March says SBI chairman. (BS)

±       RBI has withdrawn the short-term foreign currency borrowing facility for non-banking and housing finance companies. (BL)

 

 

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