Market Mantra
Market outlook
Seeking direction!
If you can find a path with no obstacles, it probably doesn't lead anywhere.
Though
The main indices have been stuck in a tight range amid concerns over fresh local as well as external headwinds. Even the broader market has been largely lackluster. FII flows have been erratic with a negative bias. Buying from local funds has been anything but tepid.
The NSE Nifty could meet resistance at around 4930. It has to sustain above 4950 convincingly to signal start of a fresh advance. Conversely, a break below 4800 might take it as low as 4650. We expect Nifty to remain in a range of 4800 to 4900 in the near-term. Of course, the budget could potentially alter the current market direction.
Global markets made a tentative start to the week as concerns about the speed of monetary tightening and worries over
Trading ideas (Time period: 1-3 days)
Kotak Bank (SELL, CMP Rs716, Target Rs690): On the daily 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 back and forth within the range of Rs713-804 from the first week of February. A break below Rs710 could see the stock testing levels of Rs690 and below. Bollinger band indicates that the stock has given negative breakout. We recommend traders to sell the stock between the range of Rs719-711 for target of Rs690 and Rs685. It is advisable to maintain a stop loss of Rs730 on all short positions.
IVRCL Infra (SELL, CMP Rs312, Target Rs295): Daily price movement of IVRCL Infra has formed a triangle consolidation pattern after falling sharply from a recent
Derivative strategies (Time period: Till expiry)
± Long BHEL Feb Future @ Rs2,348 for the target price of Rs2,400 and stop loss placed at Rs2,320
Lot size: 150
Remarks: Net maximum profit of Rs7,800 and net maximum loss Rs1,200.
± Long Jaiprakash Associates Feb Future @ Rs132 for the target price of Rs143 and stop loss placed at Rs129.
Lot size: 1688.
Remarks: Net maximum profit of Rs18,568 and net maximum loss Rs5,064.
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: Shree Renuka Sugars Ltd – BUY
CMP Rs187, Target Price Rs291, Upside 56.0%
Shree Renuka Sugars (SHRS) has made its second Brazilian acquisition in the past four months, as it scouts for assets to secure raw sugar supplies for its 9,000TPD (Mar’ 11) domestic refining capacity. The company would invest US$329mn and acquire a controlling stake in Equipav S.A (Equipav) which works to EV of ~Rs1.5mn/TCD, expensive than the Rs0.7mn/TCD paid for VDI. Equipav has two sugar/ethanol mills with a combined capacity of 44,400TCD and co-gen capacity of 203MW. Funding is likely to include proceeds from QIP ~Rs5bn + preferential issue to promoters ~Rs2bn and internal accruals. The deal is subject to approval of debt restructuring by creditors and could close in the next 40 days. We remain positive on sugar prices as inventories remain at half of historic holding in Sep’ 11 and retain BUY on SHRS on attractive 4.8x F9/11 EV/E.
IPO Note: United Bank of India – Not Rated
Price band Rs60-66
United Bank of India (UBoI) with dominant presence in Eastern and North-Eastern region plans to implement a pan-India presence. With sturdy loan growth (16% YTD as at H1 FY10), the current capital raising plan (~Rs3-3.3bn) would augment further growth while improving capital adequacy. With significant moderation in margin over past few years, the bank started increasing its exposure towards retail segment, especially housing loans. The geographical concentration (41% of loan book and 80% of deposits in East and North-East region) attributed for lower loan-deposit ratio while enabling healthy CASA ratio. The recent capital restructuring has enhanced book value to Rs94 (as at H1 FY10), translating into a valuation of 0.6x-0.7x trailing P/BV at the IPO price band. The change in management, however, remains a key risk to the bank’s medium term growth.
Corporate Snippets
± RIL has raised its offer for Lyondell Basell (LB) to US$14.5bn, US$1bn higher than its previous offer made in November. (BS)
± Power Grid Corp of India plans to raise Rs35bn by selling shares to fund an expansion of its grid to end blackouts. (BS)
± Religare Enterprises is close to buying a majority stake in US based venture capital and private equity investment firm Northgate for US$200m (ET)
± Tata Steel expects the arrival of equipment and machinery worth Rs5bn for the 6mtpa project at Kalinganagar by the end of FY10. (BS)
± The devastating fire at IOC’s Jaipur fuel depot has delayed commissioning of Cairn India’s pipeline for transporting crude from its Rajasthan oil fields. (BS)
± The Government is likely to approach state-owned banks and institutions, including the biggest local investor, Life Insurance Corporation (LIC), to bail out REC’s equity issue, if investors choose to stay away. (ET)
± Apollo Tyres plans to make Chennai its hub for both manufacturing and research and development (R&D) and is setting up a Rs20bn manufacturing facility. (BS)
± ITC plans to launch noodles under the ‘Sunfeast’ brand name. (BS)
± L&T will finalise plans to unlock value in its financial services arm in the next 12 months. (ET)
± US-based investor fund QVT has proposed an alternative debt restructuring plan to Wockhardt. (BS)
± Neyveli Lignite plans to set up a 4,000 mw UMPP at Cheyyur in Tamil Nadu's Kanchipuram district. (ET)
± Max India to raise Rs5.3bn via issue of convertible debentures to private equity arm of Goldman Sachs. (ET)
± MIC Electronics has bagged an order to supply video screens to Parramatta Eels National Rugby League Club in Australia. (BL)
± Elecon Engineering has bagged three orders worth Rs228.7mn from Birla Corporation, IFFCO Kalol and Anrak Aluminum. (BL)
± Tantia Constructions has received a Rs471.8mn order from Brahmaputra Cracker and Polymer. (BL)
± HCL Technologies has won an IT infrastructure management contract from Electrolux, a global home appliances company. (BL)
± PFC Consulting, a subsidiary of Power Finance Corporation, is believed to have formed two special purpose vehicles for executing two ultra mega power projects (UMPP) at Saakhi Gopal and Gogarpalli sites in Orissa. (ET)
± Emami Group has made a foray into food and beverage business by launching healthy & tasty brand of edible oil. (ET)
Economic snippets
± DoT is working on a new proposal to give incentives from the universal service obligation (USO) fund to support wireline services in rural areas. (BS)
± During April-January this fiscal, the private sector alone has commissioned 3,357MW of fresh capacity, as against 3,383MW added cumulatively by the Central and State sector projects. (BL)
± Banks with poor customer service standards may have to set aside more capital, according to RBI. The regulator has also asked banks not to discriminate in lending rates between old and new customers, if they fall in the same risk category. (ET)
± The RBI has decided to reduce the risk weight on loans to power sector projects guaranteed by state governments, unlocking funds worth Rs300bn for the sector. Lending to power projects currently attracts a risk weight of 100%, which is proposed to be lowered to 20% when such loans are guaranteed by state governments. (ET)
± India has imposed anti-dumping duty of up to US$2,254 per tonne on import of certain stainless steel products—used by consumer durables and auto industries—from the US, EU, China and other countries. (ET)
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